Gregmal

So for 4-5 months ish, all the smart guys on the street can’t figure out how to put on the same inflation trades that worked for 18 months prior? I don’t buy that. Everything is pointing toward recession and deflation. Again, check WM today. I don’t think folks are married to 3% FCF yields, in aggregate, over 4 months, and driving the markets. If you have real inflation, you’d see inflation beneficiaries getting bid up like you did all last year. The Fed is basically blindfolded and swinging at a piñata that doesn’t exist.

Shorting the index also works with deflation or a recession. Agree on the bond subs. But that’s where I think since May and June we ve been getting a signal that the inflation trade is over. I believe markets are highly inefficient but also believe in aggregate they signal to you what’s going on. First, unrelated, Tesla is just bonkers unbreakable. But the quality high multiple stuff hasn’t really gotten hit. The recession and deflation plays are if anything where there’s some leadership. What you’re going for is a pure valuation short with inflation the catalyst. Good risk reward because I think upside is pretty mute. But if everything is that clear and down in the weeds it’s obvious, I would just imagine there’s significantly lower hanging fruit where you can make money with inflation playing out. But I’ve seen nothing resembling that for months now.

I was kidding about using some margin.

https://nypost.com/2022/09/20/record-number-of-new-yorkers-swap-to-florida-licenses/ LOL. Migration has been happening for half a century. Affordability issues along with safety and mask fetishes only making it worse.

Ok so let’s go with that. Tell me what pro inflation trades are or have been working? Rates sure. But that’s like level one. Everything else, energy, commodities etc, has been printing deflation? Why? Or if you disagree then what? Utilities or WM for instance. Why?

And on the rental front with 95-98% occupancy rates you’d need a COVID type event to get landlords anywhere near the point of considering dropping price to any meaningful degree. It’s a Chinese finger trap where the more you twist and turn the harder it is to get out.

For example, my first primary home I bought in 2013 with 10 year rates at 2.95 and a 4.25 mortgage. Which I cash out refi d in April 2020 at 3.25. Whereas an investment property I bought in January 2020 for 1/3 of the value of my primary and cashed out in December at 3.875 currently has market value rent 15% greater than the mortgage on my primary and 55% higher than the carry cost. Rates don’t mean jack if you’re in. If you’re not in you’re kinda just walking by the store browsing and hoping/praying.

The mistake in the above logic is that people are day trading homes. While certainly are some, it represents a very small and almost irrelevant piece of the market. I don’t think it’s going out on a limb saying those people are looking at some issues. Rates here or higher by and large creates a stalemate. If builders with new supply blink, then there’s some relief which I do concur is most likely a situation that occurs but builders trade volume for price all day. But what happens if they stop building? Further institutionalization of housing.

This is nothing new. In 2013 people could afford houses. In 2021 they started not being able to afford them because of a decade of under building and a pandemic that made them reevaluate where and how they wanted to live. The Fed has stated their goal is among other things to make housing more affordable, so by your own acknowledgement, how is spiking all those who got left behinds mortgage or if not mortgage, subsequently their rents, doing anything to fix that? Basically everyone who got into a primary home before June 22 is set and those homes are not coming to market for ages. Renters underwrite to rental figures. They’re set too. Only supply left is second/vacation homes…usually secured by rich people at low rates anyway…not much there. Only answer is encourage more building. Not 10% mortgage lol.

All that what’s been done has accomplished is really allowing wealthier folks and institutions to transact with less competition and with all the commodity inputs plummeting, fattening up the builders bottom line which de facto encourages them to wait out on price longer instead of building at lower prices.

I agree prices need to come down for volume. But this whole rate thing certainly isn’t solving or helping anyone. What’s being totally ignored is how that same seller doesn’t need to sell, and why would they drop their price to account for a problem that is not theirs and really only the buyers? You know how far rents have to fall in order for selling to be the most economically rational decision for existing owners? And is removing large swaths of would be buyers and forcing them to rent helping or hurting that? Again, the answer is to build more single and multifamily. MF is “kinda” capable of getting there bc it’s an institutional asset, but SFH builders had plenty of time to prepare for higher rates and have already started adjusting their rate of build. So the only one really getting fucked is that would be home buyer who’s losing 1/2/3 years of building equity by staying in the rental pool. One of my tenants is in this exact boat. Signed a one year lease Feb 2020 cuz they were gonna buy a home. Chose not to be scumbags and skip out on rent despite both losing their jobs thanks to Phil Murphy. Paid it out of savings. Then home prices went up. Both were employed again last year and started saving. Housing kept going up. They were right there and in January this year asked for a month to month lease so they could buy in the spring. I said sure you guys are great, no biggie. They’re still renting.

I’m sorry but this is an insane statement. Rates were 3-4% for almost a decade. Going to 2.75 from 3 didn’t change the game for anyone. Neither did going from 3-4. Going from 4-6(which in a lot of areas is actually 7-8%), in 2 months is what seemed to.

Stuff like this is always horrible to hear of. No one gets more time, make the most of it. Especially when in good health.

What memo do they need to get? Most homeowners have at least one, some two, and many of the following three things going for them. 1) equity 2) strong rental options 3) super low, fixed rate financing The Fed isn’t solving anything with housing, they’re making it worse. Wouldn’t the obvious answer just be the same one that’s solved every other housing shortage? Building more?

Yea FFH has like a 50% look through earnings yield at interactive, wink wink. Especially right now, you don’t wanna be wasting time with brokers who aren’t accommodative.

If inflation is real, sure the discount rates move. But hard assets with real earning and net cash should at some point call bullshit on the stock market. Or we deteriorate into an economic depression and then I just wallow with my semi illiquid land, energy, and sports teams. Still trying to figure it all out. PCYO and CKX have big chunk of cash that even if not put to a more aggressive use can now collect interest. FRPH too.

Way better. I know Mark and he hates the idea of debt or levering up, but cash build could reach $40m by year end with no debt and minor future spending obligation. Lot deliveries have largely been satisfied. Tap fees are freebies from here. If they wanted a LOC and bank facility liquidity probably would stand around $80-100m. When the market tanks I’d prefer this trade a little more like FRPH, when it rebounds I’m glad it doesn’t lol. Just how it goes I guess.

Posted in wrong thread but added a bit more PCYO in last hour of trading. Here’s hoping Harding wakes the heck up.

Look at it like this. After a decade of being pissy, underperforming and living on the sidelines whining, we ve basically reinforced with the savers(which include a lot of the financial world folks), over the last 9 months, that all they need to do to get more interest is to scream inflation as loud as they can. And if they keep it up, they’ll possibly get some cheap real estate too, which is the second favorite asset class for many of them, outside cash. And we wonder why the noise is deafening?

Haven’t checked cuz I’ve had friends and family up the past month and have don’t a lot of work but on the to do list is evaluating whether it makes sense to short some OTM tlt puts. Given the noise I’d have to imagine there’s some premium to be had

You’d have to be on the very short duration side then though. Longer duration will get blasted if there’s real inflation. Rate increases or not.

Took some of these off and split the proceeds into Fairfax and some Novembers.

The GFC 2.0 narrative was and is very popular and I guess I took it at face value and saw how preposterous that was fundamentally. But maybe I missed it. What was one of the underlying mechanism the propelled GFC….banks, hedge funds, academics telling the Fed and treasury… “bubbles are regional, defaults are rare. Housing only goes up. Derivatives don’t need to be regulated, they only stabilize the economy”. Just as they bet on the exact opposite. Same stuff seems to be going on here and while I don’t think it’s occurred yet in the real world, we are seemingly getting close to seeing some real destruction. What a shame it would be if we killed one of the greatest economies we ve had, because the jobs market was so good folks were telling Howard Hughes to fuck off at their $25 an hour waitstaff positions…

You see it all over. Folks who says they believe in inflation sitting on cash and buying bonds lol. My guy I just shared the email from…”in the 80s they had to raise to double digit so they have to do that again. Inflation is 8%. Buy me 5% bonds!” LOL obviously you either don’t understand inflation or don’t believe you’re really losing 3% purchasing power.

Exactly and if you look at the positioning that’s exactly what everyone lobbying the inflation narrative is really betting on. It’s remarkable how rigged this stuff can be once you step back. They’ve got Powell thinking he s saving the poor people who are both too dumb to ask for raises but simultaneously getting massive raises and driving a non existent wage price spiral lol.