changegonnacome

As a pond to go fishing in - i totally agree.......I would add an extra kicker for the brave....probably braver than me........Small Emerging Market Value

Hostelworld (again) - remains ridiculously cheap relative to steady state FCF and prospective growth guided at capital markets day.... final leg of COVID re-opening of HSW regions with Oceania & Asia coming out of the traps in H1 2023 to make it an OTA finally back to running on all regions for the first time since 2019 with its most profitable customers (long haul) back with a vengeance.....+ the continuation of the companies differentiated solo system/social strategy.....the metrics of which are confirming business turnaround obscured by COVID carnage. Recession resistant - given core demographic & lowest cost provider of tourist accommodation across all types. Inflation beneficiary - given capital light nature and carry fee......plus a nice balance sheet/FCF catalyst in 2023 with re-financing/payoff of large high yield COVID loan with cash on-hand ( ~20% of current EV)

Up about 15% across accounts…… Biggest losers - Got killed by USD strength against GBP/EUR! Then MSGE, GLV, CDLX……some I’ve held on to through the pain (MSGE/GLV) knowing the underlying intrinsic value & willing to accept the lower mark to market……..I could have traded them around & considered doing so once I developed my Fed/liquidity view but moving in and out of names on macro/liquidity has not worked well for me in the past too many opportunities for psychological misjudgment in the future, better to sit and hold what you know and own even if market is throwing dumb prices at you….…I expect to be rewarded for the pain in these two names in the future……....others like CDLX i sucked up and dumped once Fed got serious and luckily saved myself a shit load of pain later on if I hadn’t pulled the plaster off…..truth be told when I was buying CDLX I deep down knew it didn’t make sense given their marginal advertising positioning, cash burn etc.. Should listen to little voices more in the future! Biggest winners - - Hostelworld by a mile pretty much up 90%+ on my cost basis - got aggressive on dips on this name this year and broke some self-imposed portfolio concentration rules in the process….breaking those rules & getting aggressive paid off. I listened to the little voice on this one - Bank of Ireland +69% - worked as I expected given interest rate environment - Various shorts, bearish options hedges, selling vol & merger arb……could have been more aggressive here of course and I would have had a 50%+ year……..but they were fundamentally always sized as hedges and for all my bearish talk on the “bottom” thread…….being positioned ultra ultra-bearish works 1 out of what every 10 years?…..this would have been one…..but making any real money on the short side is dangerous…..as you might be tempted to do it again and its usually the road to ruin over time! Reflecting on my positioning & thinking about alternative outcomes to this year……..I think I got it about right in terms of a posture/positioning….….the alternative universe where everything say rallied in H2 2022 would have worked out better for me on a performance basis……..the fact it didn’t and I still did acceptably well on a full year basis feels like I got the balance about right and wasn’t too skewed to any particular binary outcome.

Yep I was on the high side - doing post on the run.....it was dumb. Right to be called out. My bad. My point still stands though which is F&E is not an unimportant part of wallet share........food also has an outsized impact on inflation psychology........driving more aggressive future wage demands etc.

Haven't had time to dig around in these latest reads properly......but dont need to on one point.......those that exclude Food and Energy have no idea about real life..........and that F&E makes up about 70-80% wallet share of those less well off than they are....housing the rest.....and that is not a small amount of people out of the total population.......inflation pressure is the difference between running out of money on the 27th of month and running out of money on the 20th of the month. Only a tenured professor at an Ivy league business school would say something so dumb with a straight face as in - price inflation data excluding food to stay alive and energy to stay warm/cool apart from that for everything else is awesome. Quick read so far - as predicted the trip from 9% down to 5% is kind of a mathematical certainty......this journey 9 to 5 is indeed the COVID inflation/supply chain/Ukraine stuff going away..........its the trip from 5% to 2% that will be the bitch.....that 3% is god damn monetary inflation.......and its pain in the A to get rid off.

Thanks for the charts. Interesting. The important factor with comparing 1945 to today and when thinking about debt, inflation and the money supply is that in 1945 the US was sitting in the middle of the golden age of its productivity growth curve that was sloping upwards with high YoY real (not nominal ) GDP/income gains the period ~1920 - 1970......the US through immigration, industrialization, innovation, increases in female labor force participation (& post-world war boom where it wasn't wrecked! like Europe) was making more and more 'stuff' each year in effect its REAL income was rising.....the incremental goods and services that you could sell to the world and each other meant in effect the nation was getting wealthier for real & more able to support its federal debt (which was falling as percentage of growing GDP).....real wages were rising as a result too....as discussed in other threads money is just a claim check on goods & services changing the amount of money doesn't change the amount of goods & services......in effect you don't get rich by printing more money or indeed borrowing money (which are claims on future productivity)....you actually get wealthier/increase real incomes by producing more & more goods and services over time....but also by under spending your income and investing in your productive capacity (infrastructure etc.) Today but really since 2015 the US has been in the opposite of the above - a productivity trap....over spending incomes, borrowing, not investing in infrastructure/productive capacity......its been lousy, it was good for financial assets but the underlying economy didnt perform quite as well as SPY would suggest......and so when both the fiscal and monetary authorities opened up the flood gates in 2020 with direct stimulus to consumers they did too much, in an economy which in 2018/19 was already operating at historically low unemployment (in effect the US was already at full output)......the incremental nominal increases in incomes (via stimulus/credit creation) couldn't change the amount of goods and services being produced only their quoted price so we got monetary inflation (mixed with supply shock/energy inflation)....real output & productivity growth have remained lousy since....who by 2021 was left to entice off the couch? Didnt help that the boomers started quitting in droves. The incremental nominal income/spending just resulted in higher prices.....real output/productivity growth remained lousy. Whats knowable is whats actually required to bring inflation down.....its productivity growth and nominal spending/income growth converging with one another.....we know productivity growth is stuck & aint going higher YoY......so I'm afraid its income/spending that needs to adjust downwards to bring back price stability....how get there via a 'one and done' recession next year.....or double dipping recessions across the next 24 -36 months is the question IMO. Lets see.

Answer: BAD I think its clear that the US consumer is going to hit a wall sometime in H1 2023 - various money centre bank CEOs (Jamie Dimon et al) have alluded to what they can see in their proprietary data and I can see it in public data......consumers are running down cash balances, driving up credit card/loan balances and the other metric I came across recently is that emergency 'hardship' withdrawals/loans from 401k/IRA's have increased to levels last seen before the GFC. Its also clear that the Fed is prepared in 2023 to prioritize its inflation mandate over its employment mandate (for a time), and certainly in the early stages of demonstrable weakness in the economy/labor market/stock market, to do something it hasn't done in perhaps 30+yrs.......absolutely NOTHING. Zilch. This moment of 'why aren't they doing something?' will be the point of maximum opportunity in markets I believe. Things will get hairy and its why I think we'll break the lows seen in 2022. The two unknowns are the actual level of pain required to quell inflation & the other unknown is the intestinal fortitude the Fed will show. I don't envy their job....its hard/impossible to know how much disinflationary momentum is required to 'get back to 2' sustainably and while your unsure how much is required all your stakeholders & constituents are screaming at you to STOP and STIMULATE. It's why my base case now is that they likely stimulate too early, inflation re-emerges and they have to go back again later and do another hiking cycle possibly in 2024. In this respect then a double dip recession is very possible if past is prologue....obviously better if its one and done.

Genuine goods news on how inflation gets fixed - that doesn't involve tanking the economy & jobs market I'm not saying its enough - but surprises to the upside on productivity growth is what we need. Democrats and Republicans doing comprehensive immigration reform in Q1 2023 would also be another.......I included that wish however in my letter to Santa

Inflation left unchecked in some respects will indeed burn itself out.......because spending/incomes having been hurt by diminished purchasing power will induce recession type consumer behavior - increased savings, lower nominal spending growth, rising unemployment which left to play out will indeed stabilize prices....problem here is a dimwitted Central Bank trying to 'help' then stimulates too early and starts the whole inflationary cycle off again which is what happened in the 70's and to some extent is what you would expect a dimwitted Fed to do in 2023 once the pressure mounts to 'rescue' the economy/politicians....look at the calls already to 'pivot' & look at the macro-conditions driving those calls......SPY is off only 16% YTD, unemployment hasn't budged an inch & at records lows & the economy has slowed but is still growing....imagine the squeals in 23 with unemployment inching towards 5%, SPY off 30%, economy/companies printing negative numbers...it aint easy being a Central Banker once your predecessors have used up all the easy choices on you.....JP curses Greenspan, Bernanke, Yellen every day....they got to be heroes, he has to be a villain (or does he?? )..........but back on the point - the difference between this option (non-intervention) and Fed tightening...is kind of the difference between knowingly letting a random bomb go off in Times Sq. or having a controlled explosion of a discovered device. One is chaos, the other is prudence.

Think the point being made is a simple one.....in a fiat currency system, where confidence in your monetary regime is key...... you pick an inflation target that is low enough to be imperceptible to the population & of little concern for those making forward investment decisions in any 12-24 month period......2 is a good number, so would 2.5, so would 1.5%. However the whole point of having a target like that is to STICK to it & more importantly hit it so you can demonstrate some level of competence at the monetary authority level........and this is why this debate is so stupid......to move the inflation target now when your missing it.....is to admit you are no longer fully in control of your monetary regime......and when your monetary regime is backed by nothing but the confidence in it.....well you can see how retarded this type of talk is.....but its exactly what you would expect at this point in a tightening cycle.......lets call it a version of the.....no pain, all gain workout dream......the 6 minutes ab infomercial......the "is there not any easier/shortcut way to do this that involves no work and no sacrifice" idea.....have your cake and eat too thinking.

Doubly so I might add that a low 2% inflation target is the 'right' number in a 'mature' economy like the USA where real growth at best is perhaps 2ish%........this is an economy where its days of big YoY productivity & output growth are well behind it. I think we all accept that a good/exceptional outcome for the USA would be to have its economy grow perhaps 3-ish%....reality is more 2ish......this type of growth would be exceptional for a country this developed, this size and this technologically advanced. Well you take that 2-3ish%.....you've 1-2% real growth and 2% nominal growth and its about right.....I personally think of a country's inflation target as being actually constrained by your underlying real output/growth ability. Its less of a choice and more an acceptance around the reality of where you are in your economic development cycle. An emerging economy - one where large productivity and output gains in a single year could be 8-10%.......well you've got a little more latitude inside there to run inflation hotter. Why? Simple - the pizza pie is getting bigger, so much quicker, because your making such large strides in growing real output & by extension real incomes. Infrastructure, P&E investments in these economy's have high incremental marginal output returns you can take a little higher inflation as there is less harm being done by inflation destroying incomes, cause incomes are growing so much faster in real terms.....the problem as I've talked about before in my USA Widget World Inc examples earlier in the thread......is that this is not the case here.....the pie (output) is growing slowly, much slower than nominal income/spending is right now hence why we have inflation.....so changing the amount of money moving around doesn't change the amount pizza to be eaten....it simply changes the quoted price per slice while hurting those most unable to bargain for nominal pay increases to maintain their purchasing power or their share of the pie. In this respect one can think of an economy & its monetary base.... a little like a stock split....which everybody here gets implicitly I think....issuing more stock doesn't change the underlying aggregate economic value being created by an enterprise....it simply divides it up into smaller chunks/claim checks, there is no extra pizza, only extra claim checks on the pizza....well an economy is no different its REAL aggregate output that matters most....you can increase nominal income all you want with 8-10% pay increases........but its chasing the same number of REAL domestic goods/services.

It’s not a target if you keep changing it when the going gets tough……talking about changing it upwards at some point in the future is a worthy debate…….but doing so now is just not the time IMO….show resolve, get back to 2-ish, hold it there for a year or two THEN have the debate ….anyway think about what a 2.5% target rate would do to long duration treasuries…I mean if you want to help stonks go up it just immediately wouldn’t be a good for them as 10/30yr would shift upwards incorporating higher ‘acceptable’ inflation

It’s one thing to change the target rate in the context of achieving said target…….quite another to change it when you’ve failed so objectively at your stated aim…..if you think Central Bank credibility matters in a fiat currency system ( and I do) then it’s not quite as simple as it might seem to change the goalposts

https://www.reuters.com/markets/us/us-job-growth-beats-expectations-unemployment-rate-steady-37-2022-12-02/ That god damn labor market just wont crack.........and without it cracking in some meaningful way you're just not IMO going to get reductions in the level of aggregate spending growth needed to bring prices back into alignment with current maximum aggregate output + expected 2023 productivity growth of sub-2%. The delta between those number (2% productivity growth against maybe ~6-8% nominal spending growth in 2023) is just too big not to have an inflation number with easily a 4-handle, maybe 5-handle in front of it for much of 2023. We've got some easy YoY mathematically certain falls in inflation coming (goods/energy).....the journey from 8% down to 5% is a cake walk for the Fed and markets just die-ing to proclaim inflation 'fixed'.......the journey as I've said for many months now from 5% to 2.5% is gonna be a bitch. I mean the counter argument to why the labor market and by extension the economy doesn't need to crack this time to fix inflation is that somehow a reduction in the level of job openings alone, noticed by current or prospective employees would be enough to instill recession like spending behavior i.e. cutting spending, increasing savings....for that famous rainy day. Of course I've spoke about the paradox of thrift here before which is really how people by saving for that rainy day, actually make it rain but thats another story. But back to my point above.........how many times have you heard your significant other come home and say "hey honey, I noticed the jobs available section in the newspaper is looking a little thin lately, I think this year we'll stay at your cousins house on the Jersey Shore instead of that cool W Hotel, best to just pull in the spending a bit so were in good shape & lets hang on to F150 another year, its a great car I love it we dont need a new one"........basically........never..... What I just described above by the way is the soft landing scenario that J-P & others seem to be dreaming off, funny uh?........but this type of 'pulling the horns in' conversation is the one the Fed is currently trying to engineer to moderate spending/income growth & stabilize prices.......we all know the real conversation that actually triggers the required mindset/behavior......& its this one........"hey honey, my friend Jeanie's husband just got let go, they were doing great, better than us, now theyre not so sure they can keep their second car Jeanie is wondering if we'd like to buy it?......honey I was thinking that maybe we'll tighten things up for a while, cancel that vacay & do a staycay and if there's any extra shifts going you should take them and eh we should have your boss Tom over for dinner in the next couple of weeks, OK?" Thats the conversation that shrinks nominal spending growth and boosts productivity and kills inflation.......not job openings getting a little light on indeed.com or whatever. Anyway enough ramblings - I remain firmly & deeply skeptical of both this rally and that the bottoms reached in 2022 represent the lows that signal we have moved back into a new expansionary period for the economy/markets. I say this not to say sell everything & go hide under a mattress......I say this to say that this is not a time IMO to be aggressive, I say this to say that one might hold little more cash than normal in anticipation of higher return options in the future that it would justify the opportunity cost of holding said cash, I say this to say that one should demand a little higher expected FCF returns with higher confidence intervals on the FCF showing up than one might normally demand from a security. I say this to say that one might choose a security where only a few things need only go right for the investment to succeed rather than one that requires a lot to go right. This is what I'm saying.

Not a REIT guy - but this strikes me as a very very important insight.....that as @Gregmal points out gives you an edge versus Brad, Chad & Tad doing excel backflips eating their Sweetgreen salads in their cubicles waiting for their boss to leave so they can go home

I think they are determined and have learned the history lesson that you cant back off at the first sign of inflation coming down.........that you need to preserve longer than you would like to and see it through beyond any reasonable doubt.....because if you don't you'll have to go back again and do a tightening cycle all over.....causing more aggregate pain to get to the same end point......J-P talks a good game on this.....hope he backs it up.

Yep I agree - my bearish-ness isnt some cassandra complex.....its I want these same things that you and I agree on at even lower prices than today......I'm greedy, very greedy........and just feel there is a one more leg down left before inflation is truly 'fixed' and the moment of maximum opportunity is when genuine weakness shows up in the economy, in unemployment numbers and the Fed sits on its hands and doesnt stimulate as it has done for the last 40yrs....I kind of call it the....."somebody should do something" moment.....it'll be around the time when the folks on CNBC are screaming that the Fed needs to step in to help the markets/economy, that this is crazy.....& the Fed doesnt step in....because their job right now is to actually stand back and allow weakness to permeate the economy such that inflation gets dead and buried. Like you have to admit the madness right now out there in the media - around a Fed pivot with CPE at 6%+ and the economy with historically unprecedented low unemployment number & job openings. Its delusional.

Fair enough.....but it sure doesn't feel like this market is priced as if everyone is bear-ish and convinced inflation is a problem and were heading for a recession to fix it.......it feels like the opposite and IMO is priced, at indices level at least, feels like the Fed has pulled off the unimaginable........a soft landing.....inflation is definitely transitory THIS time for SURE Yep the market agrees with you.

But isnt the market indices (the crowd), at its current multiple of earnings, assuming inflation is effectively fixed and is coming down in a kind of predictable slope in the next 6-12 months with rate cuts in there too and it will ALL happen without a recession in between effecting SPY earnings? Isn't that what the crowd is saying and what the current market multiple suggests? The much fabled soft landing? I'm just curious. On days like today I certainly dont feel like part of the crowd as QQQ rallies 6%......and SPY rallies 3%......I feel quite contrarian with lots of red ink to prove it! I thought its meant to feel comfortable in the crowd at least

Didn't have any comment on educational inflation figures....I have no idea, havent looked - i was simply pointing out the various misc. things that fall in this services (ex-home services) inflation bucket.....and how these items are the next leg of inflation.....the category that, ya know, isn't mathematically guaranteed to come down like energy/supply chain is.

Short term intra-day macro is a fool game.....I agree...but a little longer term view lets call a view which sits 6-12 months out there is an opportunity in marco.....an opportunity to hedge, an opportunity to build dry powder....in truth I dont think its that long away H1 2023 is really going to be so interesting....what this move shows, relative to what J-P said today, is how Pavlovian the 'Fed put' psyche has permeated the markets......which also tells you how badly the markets might/will break when that assumption evaporates in face of actual evidence........the last couple of months have been characterized by, without almost any evidence, that somehow the Fed pivot was coming soon..........IMO a 2023 Fed pivot is priced in........whats not priced in is that there will be no pivot by the Fed in 2023 as the economy + unemployment rolls over & folks begin to squeal in pain. Let's see. I was glad to see him speak about the where the problem is moving forward which is services (ex-home)......or as I've been banging on about domestically produced goods and services sector.........every other category will come down with predictability & is a mathematical certainty.....this important sub-catergory (50% of core PCE)....speaks to an economy operating at the pin of its collar to produce what it currently can....and all increased wages will do is move the quoted prices of these finite goods and services upwards, it wont change the actual amount of goods/services being produced one iota (beyond measly productivity gains)

One thing thats consistent with my thoughts is Jay-P is very focused on is Services (ex-home services) which is 50% of core PCE.....this is exactly what I speak about and where the problem is....everything else is coming down as we know everything that comes on shipping containers and tanker......these are haircuts, educations services for example & lots of other things but things that are domestically produced in nature and ultimately constrained by labor availability......and as he said today the scale of wages increases today are not consistent with inflation moderating back to 2% by itself. "Finally, we come to core services other than housing. This spending category covers a wide range of services from health care and education to haircuts and hospitality. This is the largest of our three categories, constituting more than half of the core PCE index. Thus, this may be the most important category for understanding the future evolution of core inflation. Because wages make up the largest cost in delivering these services, the labor market holds the key to understanding inflation in this category. In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time.3 Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market. Signs of elevated labor market tightness emerged suddenly in mid-2021. The unemployment rate at the time was much higher than the 3.5 percent that had prevailed without major signs of tightness before the pandemic. Employment was still millions below its level on the eve of the pandemic. Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic—a shortfall that appears unlikely to fully close anytime soon."

He's wearing his light blue tie today......everybody knows what that means.......SPY 3000 is now a cert

Yeah i appreciate your pushback..always......being bullish is the correct posture like 80% of the times....which means probabilistically one should just be bullish by default always..........& I want to get aggressive.....i want to be greedy.....but we aint done with this yet......as Bridgewater report i linked too points out.....equity markets in an inflation/raising rates cycle dont really bottom until at least unemployment starts to crack and we just haven't really had anything close to a crack.....which makes sense rates act with a lag....9-12 months....we are only now starting to feel the raising rates earlier this year about now....H1 2023 is gonna be a doozy.......folks will be running for the exits then.....I'll be rushing past them

Right.......and this is not an issue in an economy growing domestic goods and services output by 8.7% per year or even 6.7%.....8.7%-6.7% = 2% inflation....fine thats what we want.............the issue is that this an economy with NO workers on the sidelines ready to be hired off the couch, no obvious productivity enhancing P&E investments that haven't already been made in the last decade...........increases in domestic goods and services output can only come from grinding out modest productivity gains lets call optimistically 2% a year.........but your dumping ~8% nominal pay increases into this economy.......as I've said nominal pay increases by themselves do NOT produce MORE domestic goods and services, they simply increase the quoted price of those domestic goods and services i.e. inflation.