changegonnacome

The biggest benefit of a mortgage is that it allows the common man to 'get short' the US dollar with nine times leverage or even more in some cases*......and given you were going to have housing costs anyway.....you pretty much also get to live inside the trade for an incrementally small amount, if anything....while the outcome over the 30yr trade is assured (~2% inflation target that is likely to be missed to upside).....IBKR is very generous to me but it has never provided me a place to stay while I hold a short or long trade! * Fannie/Freddie loans with 3% down/97% LTV are just the best slow moving train ticket out of poverty for folks that I'm aware.

for sure - I think lots of success (and failure) in life can be explained by how far out in the future folks think…. This lady lived moment to moment, immediate gratification etc…. Your father/grandmother and family thought not in moments but in generations…..the results speak for themselves…..what I would say in slight defense of the destructively immediate gratification folks is that modern technology grafted on to finely tuned consumer capitalism in the US in particular does an unbelievably efficient job of extracting every last penny of consumption (& more) from the dopamine addicted poor (or soon to be poor)…….push notifications for fast food, micro targeting on instagram, influencers driving envy, sub-prime credit card lending, payday loans, lease deals etc I could go on ..….combined together its a real lollapalooza effect for the folks born with a tendency towards to immediate gratification…..no country comes close to US in offering a ubiquitous suite of various products and services required to wreck one’s finances…I was shocked when I first came here….and so I’m unshocked by this stat in a way.

Yep thats what i taught thanks - absolute numbers are at a record, relative numbers not so much....

So Berkshire is headed to $200bn cash........I know bears love to get Warren on their side......but for those that follow Berkshire's idle cash reserves over time relative to what Warren ordinarily likes to keep around for black swan insurance events.......is this cash position totally totally out of whack on a historical basis? Obviously one should expect Berkshire to over time hold more cash as its investable universe shrinks and the opportunities to deploy cash at scale get smaller....so for sure there is an element here of the numbers getting bigger. But for those who read the BRK tea leaves more than me....is cash on hand now relative to say total assets or book..or insurance liabilities.......really in some kind of 1999 outlier position? TIKR hasn't got Q1 2024 in there yet....but here's the cash to BV chart back to 2003....I mean as the business gets bigger he holds more cash but on a relative basis its relatively inline with book value growth and certainly in line with the shrinking opportunity set that comes with the level of cash they need to deploy.

Yeah the P/E investor of the past in GM got taken to the woodshed....because although GM was generating earnings......they were required to then take those earnings & dump it back into the business just to standstill.....these were not 'owner earnings' they were business accounting earnings.......those earnings needed to be reinvested in the business to simply be a business five ten years out. GM seems to be at inflection point....sufficient investment has occurred in its EV and autonomy portfolio such that they now have extinction insurance......and it appears that the transition to EVs & autonomy are going to be gentler incline which bodes well for the capital intensity here for the next few years. A new metric in the auto industry should "EV FREE Cash flow".......Tesla's headwinds are good news for the owner earnings of OEM shareholders....hats off ultimately to Toyota who stuck to their guns on BEV adoption They are however simply terrible businesses and any time I've made money owning a car company (FCA & GM for me) I try to forget about in case I might tempted to do it again...

Yep - nominal number haven't been whacked but the real ones have....but nobody really cares cause everybody hasn't inflation adjusted anything in like 40yrs so they forgot...it's why somebody, for example, in major US metros will tell you their home value hasn't gone down while cumulative inflation over the last two years would tell you that house prices have fallen (inflation adjusted) relative to their 2021 peak ...and then to the extent that Mag7 numbers are levitating the overall EPS picture......I mean when you have monopoly or monopoly adjacent market power as a subset of Mag7 have.....you are deciding your EPS growth in the boardroom YoY and not out on the street (excepting deep economic headwinds ala 2008 when even the mighty get crushed). The GDP/inflation picture is interesting - what I would say is that on the road to 'fixing' an inflationary bout one should expect a short-ish period of stagflationary numbers like we are getting now......it's kind of an expected waypoint on the road back to 2%.

One of the key questions investors have asked themselves re:China is what do you own in the context of the CCP coming in one day, overriding shareholder ownerships principles and compelling these companies to do XYZ that hurts the shareholders returns by making them do something uneconomic....which the story goes is "your fault"....because you bought a company in a communist country that doesn't care about the free market. Well as the US congress, senate and now WH are signing a law to force a US firm with foreign parent into a forced sales process from its overseas parent...the question a Chinese domiciled investor should be asking ( ironically in the context of the above) is can you trust an investment in a firm with a large United States domiciled component cause the US government might come in and force that company to do something uneconomic....like force it to sell a business in a fire sale.

It can be all circular......so you can start anywhere you like in the circle of inputs and get to where you want to go......big picture, outside the circular micro micro micro stuff....haircuts are going up because the economy is demanding more haircuts than can be supplied given the availability of workers to provide those haircuts against the level of haircuts being demanded

And surprise surprise Jay has to dash hopes on the impending cuts forecasts..... cause you know like the facts (ex-housing ex-energy) dont support it yet. So we aren't talk past each other here - if you want to talk about why the 2% inflation target is dumb....and 3% is Ok thats like a totally different discussion........and a valid one......the facts here are consistent with what J-Pow says in his talk today....the Fed isnt done, cause inflation isnt quite done (yet). Inside these inflation discussions one interesting thing I've observed is that the group of folks who are convinced inflation is done and that it is now some kind of hoax........are also (usually) the same folks who subscribe to the self-servingness of those in power and the government to spin facts and narratives to serve their own ends......high inflation serves nobody currently in power.......taking the next step out from that....those same folks should then be surmising (to be logically consistent) that inflation numbers being released by government are actually consistently UNDERSTATING inflation and not over-stating it. Anyway just an aside

I'm sorry this is dumb from JPM. The Fed is fully aware that itself is 'inflating' car payments and 'inflating' mortgage payments..eh its called tighnting monetary policy guys!!......so no JPM......the Fed is not measuring the "inflation" itself is creating it strips all that out as it can turn around tomorrow and makes everybodys car payment 20% less....what it cant do tomorrow is turn around and drop the price of haricuts 20%!....you dont get a PHD and do something as dumb as this (you do other dumb stuff but not this dumb)...so rightly the Fed is concerned over the inflation figures for which it itself has only tangential influence over via financial conditions.....put another way the Fed is concerned with the inflation occurring in sectors of the economy (mainly services) which are persisting at 3.x%+ levels and that have nothing to do with covid supply chains , have nothing to do with the fed funds itself and have nothing to do with energy and have nothing do with OER....namely SuperCore. SuperCore (ex-energy! ex-housing! ex-interest rates increases the Fed is doing itself!) just keeps trucking on MoM basis, on a 3m basis, on a 6m basis and YoY at levels completely inconsistent with 2% inflation........now if you think 3.5% inflation is whatever thats a completley different conversation......but if you take the narrow aim of price stability.....the FACTS say we arent headed for 2% sustainbly.

Listen housing was inaccessible and unaffordable when rates were at zero.....there is fundamentally a housing shortage post GFC....what seems to be the bottle neck in housing is really fetishization of bachlor degress versus doing stuff with your hands...meaning the US is short like a bazillion plumbers...and the avg age of skilled trades construction just keeps rising....suspect AI is gonna lay waste to that shortage...and the moms and dads of America might wake up and realize that the road to a happy life for their kids doesn't have to involve $200k in student debt and swivelling on an office chair all day hoping that you get Bob from accountings job one day if do 60hr weeks for a decade.......

Kind of agree with this article....however blaming somebody else when things don't work out for you is ironically a very leftist liberal thing to do......surprised to see a conservative blaming others and not taking personal responsibility......the Tea party movement failed....because it failed capture the hearts and minds......blaming Obama is the cowards way out.........Trump captured hearts and minds.........the problem is I'm not sure he believes in anything at all except his ego and his need to be paid attention too.

We talked about this one before - SuperCore or Made in America inflation as I've referred to it for a couple of years now is where the problem is and remains. Its this prints that accelerating. Its this foundational inflation that has us 'stuck' at something that looks like a persistent 3-handle on headline CPI. To be clear again - this measure which is the problem here......completely & utterly removes the housing distortions from lagged covid rents AND the increased mortgage servicing costs because of higher rates.....this is not just 'going away' ......I know the instinct here is to just throw out the inflation 'hoax'....the reality however is this monetary domestic inflation is sticking around way after supply chains have healed.

Anyway back to inflation - think the Fed’s problem is what we are seeing now with the Middle East stuff and I describe it as the….”if you can see the line, your too close to the line problem”…3.5% is at the upper upper upper limits of an inflation rate that is playing very close to inflation being a ‘thing’ again….inflation is best when it becomes small enough to be imperceptible to Joe Sixpack…it is not a topic of conversation at the bar or dinner table…..3ish is probably invisible enough too don’t get me wrong…..the issue with 3ish is that an exogenous event like the Middle East blowing up means your a modest supply shock away from a trip back to 4 or 5%…where inflation most certainly becomes a thing again......so you know there's a descent rational to get it down to low 2ish.....but I agree with the general view out there now.....Powell looks like his too chicken to do the right thing....and instead is doing the easy thing.....he's a dove that pretended to be a hawk for a while.......it will be interesting to see, if this hotter numbers keep rolling in, if he has enough mental flexibility to course correct on the cuts he's signalled.

Yep give me Romney or some Romney Jnr. all day long…..my dream is a fiscally conservative and socially centrist candidate for president. Yep Trump gets too much credit sometimes…he’s a lighting rod for what was already happening…basically the atomization of news into smaller and smaller audiences that required over time, to keep that audience captive , feeding them tribal confirmation bias narratives masquerading as news…..all fundamentally designed to sell more “talk to your doctor about XYX for XYZ” ad slots.

Contribution? A coherent society is one based on shared values....shared values can only come from a shared view of the world which involves some consensus around what is true or not....a shared set of 'facts'......we've always had differences of opinion on how to move forward as country...liberal/conservative.....but we at least agreed up until relatively recently where we were on fundamental foundational facts (like who won the last election)...on top of those facts there was competition of ideas about how to move forward adjudicated by voters at elections. Trump's great contribution, seems to me, is a chipping away at the foundations of what makes a coherent society......his contribution was to take a kernel of truth (that the media, reporters, editors, even federal agencies had biases or were outright dishonest at times) and exaggerated and contorted it beyond all proportions such that nobody believes in some common subset of facts anymore in fact he's convinced a whole cohort that everything is rigged top to bottom......... he didn't open up peoples minds as you seem to think....he closed their minds and sent them into an echo chamber that wasn't just biased (like old media) but rather media or his own pronouncements that propagated and promoted a version of reality that simply didn't and doesn't exist. His great contribution is that he gaslit the whole country......sending liberals into the arms of leftist crackpot theories around wokism & the various news outlets that cater to it......and conservatives into the arms of Newsmax, Quanon, deep state and replacement theory....he took a cultural disagreement/debate and turned it into a culture war for his own political ambition......Trump's great contribution is destroying the centre ground in American political life while populating the extremists at both ends of the political divide...it is not a good legacy turning people into tribal lunatics.......Joe Biden has serious serious flaws in his thinking and approach to many things....been wrong more than he's been right on a tonne of issues over decades.....but blowing up the centre ground where all the progress has been made over decades is not one of his follys.

Wow much kudos to Israel….best I can tell from reports their missile defense systems pretty much bested these attacks . It’s embarrassing for Iran how little by way of damage they were able to inflict here…..and quite foolish in a way to reveal how weak they are relative to Israel’s military capability….hopefully this reality seeps through to the Iranian people so that they might constrain their leaders….it would be insane for that countries leadership to pursue a straight out conflict with Israel….but these sectarian regimes don’t live in anything approximating the real world…they hear god whispering in their ear.

Not all bridges automatically increase productivity and certainly not by the same amount over time.......the first bridge, airport or interstate highway linking say two economic regions leads to outstanding productivity increases and so has an excellent IRR for the economy and by extension the fiscal authority....the interstate highway system etc......the second bridge or fourth lane on the existing highway is subject to quite severe diminishing returns....it isnt a fiscal deficit creating no brainer like it was when there was just fields there. So the problem in the US running 7% budget deficits....and assuming somehow those deficits being created are headed to productivity enhancing 'growth' infrastructure (they aren't to be clear but lets pretend they are)..........in a developed nation with established capital base, high productivity per capita and lots of output....its hard, almost impossible to grow output at that same 7% clip such that the governments tax base (income) is expanding along with its debt pile servicing costs (debts).

You are taking future consumption and shifting it to the present day.......the price of time shifting this consumption is interest. The question of wealth is a question of whether your GDP growth is outstripping your present day deficit fueled consumption over time. In the past the US could shift such consumption to the present day as it could credibly claim that it was a nation on the march and that 3% deficits in a economy growing 6% meant the future consumption prospects for the next generation was still mostly brighter than the consumption levels you presently enjoyed (even with the borrowing). The current version of US borrowing is just the opposite - as I don't think anybody credibly believes the US economy can grow at levels that exceed the current annual deficit of ~7%.......2-3% seems the consensus......so when the spread goes so positively negative like it is today (potential % annual GDP growth minus actual % deficit) you are with great certainty stealing future consumption from your kids.....your time shifting their potential consumption into your present.

It’s the currentl impediment….the REAL impediment is that it just doesn’t matter that much to the US strategically and US voters politically. It therefore will remain a political football and if the fiscal situation ever became a problem it’s clear it would become an easy budget cut for the party of the day (assuming a funding package ever gets done) The mistake in Ukraine was to get into a fight with an opponent who’d happily lose an eye to win (Russia)…..when deep down we knew we’d bail after breaking a nail. You just don’t win fights or proxy flights like this even if your the global superpower…..resolve & persistence are the most underrated military hardware….before you start counting tanks and artillery of your opponent…asking the simple question around for whom this matters more is an excellent go/no go…..I’d posit that unless a strategic victory of some sort can be swiftly swiftly achieved…any great power should not enter a conflict for ten minutes that they wouldn’t be happy to be involved in for 10yrs (to mangle a buffetism)…that simple rule would have saved the US from countless misadventures since WWII.

Are we officially 'stuck' yet? (I dont think so....3 months doesnt make a year but we've most certainly hit the stubborn stuff and progress from here is likely not to come so easily) Issue I'm starting to see more of in 'real life' is contracts, SLA's starting to have inflation escalators built-in to protect suppliers/service providers on multiyear contracts......when inflation becomes a 'thing' again.....stubborness is a feature not a bug....lots of folks got caught out in the 2021/22......fool me once and all that.......the next newly inked contract going out the door explicitly calls out CPI......hence the transmission beta of inflation increasing in a post-inflationary period.....its ability to replicate itself across time increases. We are playing a dangerous game with the general population's inflation expectations.......all the surveys showed folks expecting inflation to 'go away' by about now thinking as they did that all of it was really covid supply chain related.......covid is in the rear view mirror, supply chains have 'healed'.....folks are gonna start realizing that maybe this 3-4% inflation stuff is the way its gonna be......anecdotally, so completely worthless, folks around me backs are back up talking about how stuff is still going up. The hive mind is beginning to smell an inflation rat!

He's right - but the exception that would break the rule....is that sometimes and very rarely in an emergency you really want them to blow out the deficit....wars, pandemics, natural disasters, financial catastrophes.....forgetting all the Monday morning quarterbacking on COVID and its severity.....and assuming a pandemic with a confirmed fatality rate of 30% & aerial transmission........you want the folks in D.C. to print 15% budget deficits to bridge the society from potential mad max chaos to a vaccine....so no perfect solution. The hard money folks - gold, BTC - forget the secret sauce of FIAT, for all its failings and there are many, it acts like a shock absorber in times of crisis and allows the fiscal/monetary authorities to flood the system with liquidity....fiat money becomes an almost instantaneous redistribution mechanism. The hard money Satoshi Nakamoto folks would choose to literally watch Rome burn instead.

Yep its a capital allocation thing (like any corporate). Fiscal deficit spending on infrastructure which over time increases the productivity and output potential of your economy has a positive ROIC. This is good deficit spending if done correctly - interstate highways, the railroads, the internet etc. Inside Biden's giveaways to his credit there is some of this spending but it feels more like much needed maintenance capex as opposed to growth capex...... Fiscal deficits for transfer payments that get sent to people who then spend it on say shitcoins or crappolla made in china....well the money just basically evaporates....and what's left is only the debt.....and a trade deficit which in effect comes back as non-US entities individuals owning a piece of America.....I mean I see stories about Chinese folks owning farm land in the Midwest or CRE in Manhattan......I mean what do you expect?!?!?!....we send them dollars printed on paper......and they recycle those $$$ into owning assets in the USA......trade deficits are like taking a sliver of the American pizza pie and an annualized basis giving it to somebody so we can continue to consume more than we produce....sure its a small sliver but over a 100yrs of trade deficits one should expect to frequently find that assets all around them (farm land, CRE etc. ) is owned by non-US persons.....this isn't to say that one day the USA will be 'sold' overseas....that isnt how it works.....cause the 'book' value of the USA just keeps increasing.

yep exactly right - the Fed never bought a car/home in the real economy in its life....its why the QE games of the early 2010's were so disappointing in terms of their ability to kick start economic growth post-GFC........and why the helicopter money of 2020 lit the economy literally on fire in a matter of weeks....one (QE) is an accounting game that can through financial conditions (interest rates) have an effect on the economy.....fiscal hits the economy right in the guts. Put another way QE is like thinking about doing heroin.......fiscal spending is mainlining heroin......I couldn't care less what JPow does with the balance sheet.....but if you tell me that the budget deficit is getting cut next year from 7% to 3% I'm all ears.

Don't agree with the view that 3-4% inflation as some kind of new normal is a nothing burger......if it's the new normal going forward you should probably get short the trillions of assets that are pricing in a return to sustainable low 2's inflation......if the Fed throws in the towel and just implicitly or explicitly says hey 3.x% is a pretty good inflation number if we can keep unemployment below 5%....you've got a tonne stuff out there which has to incorporate that inflation drag on the future returns demanded. One thing I do agree with @Gregmal on.....is that Powell has somewhat shown his cards.......he was pretending to be Volker....but he's really Alan Greenspan....cause with relatively limited forward visibility on his actual 2% target being achieved......he started hitching up his skirt and talking about rate cuts....and so he's going to use his dual employment mandate as a reason, at any sign of trouble, to start cutting I think.......and he might get away with it...in some respects the dual mandate has codified the Fed put...the progress on inflation has been impressive without a weakening in economic fundamentals to achieve it.........I fundamentally misjudged productivity....both underlying innovation productivity and the secret productivity gains that came post COVID from illegal & legal immigration ramping up again which have been the hidden secret of the domestic deflationary wins we've had....that and China's economic woes exporting large disinflationary forces to the rest of the world but the USA most strongly helping on the import side. Not sure if its enough to get us to two.....but getting to mid-3's with this little economic should be something to be thankful for. It's kind of upside down world.....turn on the TV.......and its the crisis at the southern border....Crisis? You mean the one that keeps sending industrious young people North who want to have families and are lining up to work on construction sites, clean drains, bus tables and generally work like three jobs in an economy/country thats sparsely populated, resource rich and fundamentally short labor while the rest of the world is facing demographic collapse & a kind of endemic laziness & lack of industriousness.....or maybe its Cold War 2.0 'crisis' with our enemy China?......the enemy that is exporting a tonne of goods disinflation to us now and accepting printed dollars in exchange for those very real goods they send....all from a sovereign fiscal authority that is printing 7% annual budget deficits in economic good times with a debt to gdp of 120%.....I mean lots of countries would love to a couple of crisis like that going on simultaneously.