Gregmal

If one modest and run of the mill business input makes the entire thing unviable, that sounds like a bad business to begin with. Does it matter if it is wages, or freight costs or taxes that went up to erode that margin? What does a bad or unenviable business have to do with inflation? I mean stepping back it’s highly simple and logical. You lock people in their homes and…there’s gonna be a huge short term boost for goods. Let them out….huge short term boost in demand for services. The former fell off a cliff already like 3-6 months ago when even NY/CA said go be free, and now we re hung up on the later, but it’s because of…..the whole 2014 money printing inflation thesis?

Inflation should not really exist for extended periods of time in developed first world countries where there is a capitalist economy. Everyone keeps blindly quoting the 70s bc it’s the only thing they know where inflation existed but there is virtually nothing in common with the two periods. Japan is proof of this as is the decade prior to COVID here, something that always seems to stump and bewilder the inflation crowd. Governments created the current problem with their COVID response and only time will fix it. Claiming there is a problem when people get raises or have better job opportunities available is basically advocating for communism. You are what you are and don’t deserve to ever get beyond that place. If too many people do, we need to stop it! WTF? It’s an elitist ruling class perspective.

Billy Ackman is always a good barometer. In Spring he was saying the market was tanking because the Fed was refusing to raise rates. Now he’s saying the market needs them to stop to go up! Obviously his agenda is shifting. So are his core inflation predictions which not surprisingly have now come way down.

Of course, everyone does. But some of them actually have it right. Relying on old data and determining that jobs are bad and the answer is to destroy everything just isn’t very logical. If 4% FF rate is the end game that’s no biggie. If they buy into much of this academic nonsense and decide to go higher it’s obviously going to be problematic. You saw the same sort of nonsense which actually exacerbated the GFC in the sense that the academics, who were paid by the hedge funds and banks, pushed theories to the Fed and legislators, aka derivative deregulation stabilized the economy, things that were preposterous, while simultaneously taking positions betting against that…only to flip the narrative once convenient and in a position to profit off screaming fire…same exact shit happening now. No one is playing the inflation trade anymore, it’s all economic collapse. And they’re betting on it by hoping the chumps at the Fed follow the academics. I mean people were screaming this week for an emergency Fed meeting and a 100-200 point hike bc of ONE cpi release LOL. End or the day I don’t think the Fed is that stupid. The fact that they have to continue to take action while seeing the potential damage they may do inclines me to believe there would be a point where they see how dumb and counterproductive it all is.

This is a replay of COVID where everyone sits around hanging in the balance for every little data release and then makes bombastic extrapolations in perpetuity based off it. This weeks CPI just being the latest example. The overall trend will be lower, much lower, but if you expect it to happen overnight, there’s just nothing that’s gonna make that happen because of the way all this stuff ebs and flows.

The notion that higher wages = inflation is academic and unsubstantiated. It’s also a fallacy that companies need to raise prices or go out of business. Homebuilders for instance represent the holes in this argument well. If all the commodity inputs revert back to normal pricing ranges, the margins expand on existing contracted sales. Going forward, new ones are negotiated based on prevailing rates and inventories. If there’s real, widespread inflation like there was all of last year, that’s problematic without saying. But scenarios where all the inputs go down and labor goes up, is hardly a big deal. Bigger than all of this, is the ramifications that may occur if for instance folks that don’t understand how much of this is just related to supply chains and will resolve on its own over the next few months, and subscribe to the idea that job strength alone = inflation, take actions that permanently impair demand. It’s like the whole idea that someone should lose 100% of their purchasing power due to layoffs rather than 1-2% because of inflation. It’s all twilight zone shit.

Well I also think we ve mentioned before that when you are basing your idea of TODAYS inflation on what happened months or a year ago, you’re constantly going to be behind the 8 ball and out of touch with reality. Sternlicht had a decent take earlier this week on that. Ask Scots Miracle if the wage price spiral is moving fertilizer. Too much bs academic input here.

I don’t really worry about fundamentally sound core positions with respect to upturns or downturns. Cycles are part of investing. You’ll never make real money worrying about mark to market fluctuation. I can give you like a dozen examples here just in the past 12 months. JOE for instance I stayed disciplined on with regard to purchase. The volatility makes sense with respect to the overall nature of the company and its trading. It’s volatile and surface wise a great target for speculators who still live in 2007 and ignore anything but certain academically taught notions of PE multiples and cycle monitoring. Nice Rolex, is it for sale? No? Must be worthless then! I’m still in the accumulation phase and happy to go way bigger at lower prices. Much of my thoughts are detailed throughout the thread going back several years now. Folks right now are mistaking widespread stock market price action with fundamental victories just look at how some Homebuilders or stuff like HHC have done…garbage; a classic and common mistake of novice investors. See AIV. As recently as this week I’ve been on the ground getting info and macro wise the Fed isn’t solving the housing issue by making it more unaffordable; they’re making it worse. MSG stuff too. I don’t own much that isn’t in the unbreakable camp. For broader market, I’ve just been rotating October and November IWM puts. You want to be vigilant and when the system is manipulated the way it is, take those dollars when you can get them. Right now everyone is looking backwards for inflation because it’s en vogue. Everything seems to be deflating and sorry but a strong jobs market isn’t bad. At some point we turn and then it’s off to the races.

Gas prices have come down to pre Russia levels. Off 30% from June. Rents as mentioned a couple months ago are hitting the August comp and moderating. Most groceries too are in that category as the transport and production costs come down. The average family will still focus on what is in the news the same way they do with everything. COVID a good example. Forward looking with the market though, it’s hard seeing much evidence in anything but rates that there is much prep or positioning for higher inflation. Inventories everywhere are bloated. That said I don’t really see a whole lot of truly actionable events other than big time positioning for a big economic downturn. Which IMO now really does come down to how much the more “demand destruction” needs to be seen. Gundlach had good commentary on a deflationary setup. FedEx was also very enlightening. At the moment I lean towards the current situation setting up a regular old run of the mill recession. One with a strong jobs market isn’t anything that is gonna be too painful, but at the same time, the academics and the economists and policymakers should play a decent role in shaping what the course of action is. The troubling trend of changing the definition of inflation and attacking any economic strength is certainly troubling, but at some point it should become clear that the trade offs aren’t worth it. I posted in another thread watching Inside Job again recently and it’s just so devious how interrelated the academics, hedge funds, and policy makers are. Larry Summers has been mentioned in some of these threads. Talk about a totally corrupted scumbag! So the situation is ever evolving but if the Fed wants moderating data they’re certainly going to see it. My take of the Fed is they’re well meaning but way too academic and often a few steps behind the ball. So in some respects, as Kuppy has mentioned, it’s about timing the pivot. I wouldn’t be shocked at 50 points next week, but 75 is fine too. What they do from there is probably the main thing of importance. They’ve already successfully created a lot of problems that didn’t exist a few months ago.

Rewatched Inside Job recently. First, reinforced how todays risks are absolutely nothing like what occurred back then. Second, noticed how the financial firms and hedge fund guys, very similar to today, did their best to manipulate the narrative until positioned to benefit from the situation. Third, how utterly clueless the Fed was, much like today. Interesting but different times for sure.

Yup. Across the board it seems. What happens with easily producible commodity products….well you get as much of them as you want. It seems to be getting clearer that no one really believes the inflation story, except maybe the Fed….look at price action in everything inflation protected/related…especially gold, instead it’s the R word.

I’ve seen a lot of different variations of the OPM stuff and there’s just always headaches. If you are too prudent or cautious, folks get tired of not seeing things go anywhere. Some even wonder why you didn’t buy those tech stocks that do nothing but go up. If you’re too aggressive it is great but then how come we pulled back more than the market? If you balance things it is generally like why don’t we own more of what is doing well? I had a friend who last November lost one of his largest HNW clients despite returning over 50% ytd because the guy said he could make more trading options on his own. So you see a lot and to pupils point, the only way that works is on your own terms and with a hardline on that. But with all of this, you certainly learn to understand and respect the psychological element that is in the market. When you see dozens of investors and hear their thoughts throughout the cycle you learn a ton about what moves markets.

Institutions are buying what the public market pikers are selling.

Notha 20% add to JOE

https://www.cnbc.com/2022/09/15/the-economy-is-braking-hard-says-billionaire-barry-sternlicht-.html lotta good points in here. Remember, 2% inflation is great, 3% is not, and 4% calls for blowing everything up! Yes that’s really the approach some are taking.

Bought some more XLE. We now have the Biden put at $80 a barrel. Joe thinks he's gonna keep the price from crashing and replenish the reserves. Little does he know he's already accomplished that, in spades.

I used to manage money for others. Now, primarily just my own. Still have a few legacy guys that are great people and low maintenance so I dont mind it. But basically its totally different. I take wayyyy more risk with my own money. If I lose it its on me. With OPM, unless they explicitly tell me they dont care if they lose it all, I generally try to stay within the lanes of conventional approaches. For OPM Ill heavily concentrate, or do things similar to what I do with my own money, but scaled down. You cant rely on someone else to act the way you need them to every time theres an actionable market situation. People are people. They get scared. They fall for convention WS wisdom. They dont understand the difference between a business and a stock. They succumb to greed. etc. Its impossible not to have better results on my own funds simply because I can do what I need to and stick to a long term gameplan. Cant tell you how many times I had shit during my career where a random client would be like "yea I need 25% of the account for a home renovation"....its like dude you are currently 1.3x levered, we are in the middle of a pullback...sit the fuck down. If you pull money now you increase your leverage and reduce your buying ability and just in general fuck yourself. Even without leverage, you sell here and you're just throwing money out the window. Dont know how many friends and acquaintances I have collected over the years who do the OPM stuff and shit ranges from short term thinking to unreliable investors/clients, to an inability to pivot from previous strategies do to the confines of ego and salesmanship. So basically when you manage OPM, you are stuck managing way more than just their money.

I’ve had Sprint since 2006 and the same plan that was $170 then is $155 now. Overall there’s a double whammy of selling. Stuff that’s inflation resistant seems to be getting whacked on recession worries. Stuff that’s recession proof is getting hit on inflation worries. Only WM stands alone lol. Sooner or later something gives.

This I was actually thinking about this the other day. A while back, like a year or two ago before everyone got obsessed with inflation there was some talk about prepping for higher rates and I think it was @LearningMachine who looked at Verizon as one of the ideal positioned companies where you wanna have a huge debt load but fixed rate and some pricing lower. Maybe it was someone else or a different company but the gist was that those type of high FCF generators whom regularly also happened to have lots of debt would do well. Nevertheless the current market is more or less a baby with the bath water market. Those names especially, look at Comcast, have gotten raped. If you believe in efficient market…there’s nothing that can help you. But if you don’t, you’d have to imagine the stock quote and the business value have diverged and it’s probably a decent long term opportunity.

Small add to Uber.

Shit so good they’re partying at the White House! https://nypost.com/2022/09/13/gop-slams-biden-for-out-of-touch-inflation-celebration/ November will be fun for sure.

Ya so is their residential markets. But don’t feel bad for them, they’ve had two decades like few will ever see. It’s a result of their wokeness. Tech, aka them, drives work from home. All the new age mantra they embrace will be their undoing. I’d be much more comfortable in Boston which is a life science and financial hub, or NY which is heavily old school financial machismo and a good mix of everything else. Chicago is dead and SF is not dead but due for a major correction.

In 2020 there were people 100% convinced covid killed retail. Then retail rose like a Phoenix from the ashes. Now these people marvel at 4-5 cap rates on grocery anchors. Office I always thought was different because people like shopping way more than they like going into the office. Its also unpopular to push folks back during a "pandemic". But it seems, especially in fun places like NYC or whatever, that theres not only a market for it, but also now with the "kill the economy" cult lobbying like there's no tomorrow, likely a future scenario where workers no longer have a choice.

Same as before. Probably 3-4% on 10 year as a longer term stable place. Short term? Who knows? It’s just a matter of the pace of data and the degree to which folks buy into the drama. We re at a place where some claim anything good is bad. So if we wanna run a mock just cuz jobs are strong and shit like that? Anything can happen. Holidays should be interesting. I expect record demand for labor, good wages for workers, and a glut of cheap product related shit. None of this is problematic, but if folks wanna take a run at 6% 10 years…have at it. Don’t think Fed gets above low 4s before data becomes undeniable. You even have Ackman giving 3 handles a yea out. If we settles at 3/4/5…life goes on. I remember getting 5% on my savings account in the 90s. Tech and real estate bubbles and all…imagine that?

Leasing activity seems to be stronger than otherwise expected lately. NY area especially.