changegonnacome

Crash to me is 50% peak to trough......I agree the data doesn't support this......I think the data potentially supports round tripping to January 2020 prices (but inflation adjusted upward revised Jan 2020 prices)...........how big your fall depends on how high you flew.......and again property is riddled with micro-markets so I'm not saying any particular area

Yep the Fed has had your back.......question is do they have your back right now with inflation where it is/going.....cutting rates and printing isn't the no brainer policy choice it was for the last 40 years.....I'm not saying they wont do it per se but highlighting with inflation prints above ~4% it isn't the no brainer solution Greenspan/Bernanke/Yellen had arms reach away at all time behind a glass door marked 'break in case of emergencies'. Agree and I think any nominal fall in system wide house prices are going to 'trigger' this group again such that they fail to act....and these folks, in the main, have the cash to act and they wont I think based on this PTSD phenomenon. Yes will be interesting to see how this cohorts reacts to potential nominal house price falls......isnt this 'generation rent' though?....dont buy a car...uber.....no holiday home... just airbnb.....no credit cards...BNPL........the narrative is they have an aversion to debt.....I've never looked at the data so could be BS.....I wonder do they demand mortgages in lower number than previous generations?

Got you - don't have the numbers so cant be precise...... but lets say your dream home dropped in value in the future (or your income rose and that future dream house price stayed flat) such that the equity required to secure it by you came down too...would something like that work?.......additionally your current home turned into a rental and rented out for a full tax year and producing cash flow/income and showing up in your in tax returns as such....creates an incremental income stream that would allow a bank underwriter to extend credit against this too........so without any employment pay increase.......your current home turned into a rental bumps up your income and by extension your borrowing capacity.......another year or two also should see some incremental equity being built up in your current home as you pay down the mortgage and it too could potentially be used via HELOC to port some equity to the your dream house (this of course is counter to what we've talked about earlier which is the possibility that nominal house prices fall but this would work in a world where nominal house prices stay flat, which I think is very likely, and inflation does the work of reducing their real cost over a number of years).

One addition to the above …..is the question of the RoE your going to get on this rental and if it’s attractive relative to other opportunities to deploy capital….this depends on the LTV etc.

IMO giving up a 2.85% mortgage on any financed cash flowing asset one owns would be an act of insanity……everybody’s situation is different….but given what you described and depending on your appetite for friction……I’d seriously consider renting out the home you don’t need now but has the 2.85% mortgage on it….create a cash flow stream there……which you then use to subsidize rent on an appropriately sized ‘bridge’ home, this income stream can be lent against in the future by a bank...…..this rental can be your ‘waiting in the long grass’ home which has a say 3-month break notice period built into the lease…….when the time is right and appropriate affordability has been restored to the market then you swoop in to buy.

Yeah it’ll be wash…..the folks who bought last year paid a high price for the property but a very low price for the mortgage……folks in a year or two will pay a lower price for the home but a higher price for the mortgage……both those households monthly mortgage payments for housing in the short to medium will probably converge at the same monthly outlay…...…it’s just the variables (rates / prices / incomes) that shifted around….but the most important variable in the long pull in housing is always income or more correctly net income after tax, food & energy….this number assuming system wide prudent lending drives aggregate house price levels over time….……with some oscillations around that trend line as lower or higher rates are in effect..….undoubtedly in my mind we’re in a period of falling or flat (but falling in inflation adjusted terms) aggregate house price levels such that ‘affordability’ is returned to the market reflecting higher overall rates & reduced net income after tax/food/energy. (The above describes aggregate prices…..the caveat to the above of course are micro or hot markets…..where migration flows from HNW locations to MNW locations distort the equation above for a while acting like an exogenous shock….case in point Manhattanites migrating to Florida. )

True until the alternative home gets cheaper.......no movement right now as you said cause the alternative is unattractive but you wait till house prices fall in nominal or real terms.........then the move makes sense again and you rent out your 2.85% mortgaged home and cash flows support that move.

Exactly right - income, interest rates, demand & lending standards determine aggregate house prices.........$20m beachfront trophy homes in Florida homes are determined by a whole other different set of variables IMO.................the school book says inflation is good for hard assets and housing is used as an example and your told you should be owning them RIGHT now....its half right but it hasn't got the all important timing caveat piece in there.........I think its good for housing exactly when we saw it be good for US housing at the very START of an inflationary cycle just as prices are starting to accelerate but interest rates remain low & household balance sheets & FCF are still in good shape, this is the goldilocks period of an inflationary cycle.....as expected this occurred in 2020/21 which was just monster for housing.....COVID of course was a unique accelerant given additional household formation and people looking to hold two properties simultaneously (NYC/Miami etc)......but high inflation is followed by higher interest rates in the mid-late part of the inflationary cycle (the Houston we have a problem part when the Fed starts to steps in)........ two things happen......the Fed raises rates (1) reducing the overall amount each buyer via a mortgage, at each income level is given to "shop" for a house & (2) the mortgage shopper themselves has strong headline income but begins to fail the underlying payment capacity tests banks (post-GFC) have to run to show debt servicing capacity......and as the average basket of goods feeding off that income has gone up more and more...... folks are failing this debt service test on the house they 'feel' or envisioned that they should be able to own based on their socio-economic strata. I have friends in the industry and this second part is becoming a big feature they tell me for why folks aren't qualifying for the mortgages "they want" for the types of houses '"they need" based on their income strata......and so you get what we potentially have emerging right now a "buyers strike"......I'm a bull on rents (own CLPR) as a buyers strikes = booming rental demand......I'm a bear on nominal/real house prices.......this is until inflation is brought under control, rates fall again, house prices fall or stay flat but fall in real terms such that affordability is restored & buyers call off the strike........over the long pull rents & house prices are usually fairly correlated, they are going to de-couple I think for the next while.

Interestingly some NYC metro folks I know........who have been simultaneously been renting/maintaining apartments in New York and Florida etc etc for the last couple of years as a result of COVID are seriously considering giving up one or the other and committing to one location.....wonder how many people out there right now are one bird occupying two nests and are exasperating/contributing to the rental shortage in New York/Sun Belt etc. Tightening financial conditions & negative wealth effects are working here.......I know one couple, heavily invested in a particular 'hot' stock and once we had the bear a couple of months ago very quickly jettisoned their NYC residence in response as they felt less wealthy cause their Shwaeb account balance went down. Its almost a perfect case study in tightening financial conditions, leading to negative wealth effects which results in a reduction in aggregate demand (in this case an empty NYC apartment was released)

Way OOM AAPL Puts March '23........stock practically back to ATH's, 30 P/E........juiciest M1 high volume products have been launched now Air, Pro 14...... 5G phone super-cycle kind of done with iPhone 12/13......5G hype is over and it was meh........end markets in Europe/China for new iPhone 14 are going to be very weak this winter.........think Apple has had a supercycle last two years across its phones/laptop portfolios triggered by M1/5G/WFH/Lockdowns/stimis.....going to have nightmare comps moving forward..October qtr possibly the last 'good one'........trading today at a ~3.8% FCF yield........then that damned discount rate is going to keep moving up!

Exactly, over time, when amateurs step into a competitive arena with professionals the outcome is inevitable....sometimes it just takes more time than you think for the advantage to churn through the amateur population.........stories of windfalls perpetrate the madness......but overtime you literally run out of people who haven't incurred serious losses such that they wont play 'the game' anymore. Who likes to lose, over and over again. This recent meme stock rally feels to me like the last flailing twitches of a kind of stock market mania that books will be written about.......we are in the midst of an EPIC bear market rally right now, old buy the dip habits die hard....there is still some but lessening healthy household balance sheets around & cheap capital...........the Casino players have still got chips in their pockets.............but Jay & the Fed for the rest of the year are going to strangle liquidity.....earnings are going to deteriorate....at the same time the discount rate is rising. Not a good recipe for index pricing & broad meme liquidity flows. The OP asked whether the world needs a market crash..........put another way the question is should young folks in US markets, yet to invest, be able to buy SPY in their 401k at level that might deliver an expected return in line with historical norms? Where that say 8-9% return is being delivered by EPS growth & dividends (not just multiple expansion & corporate tax cuts). If the answer is YES, then yeah SPY needs to come down by more than alot........given that multiple expansion literally cant go on forever as driver of returns (as it has for the last decade) and I've spoken ad nasuem in other threads how 2021 was quite clearly, IMO, peak % net margins for SPY. There will need to be a reset of index price levels downwards reflecting what I've just said on earnings/multiples to get future Johnny Jnr. into an SPY 401k investment where he can expect a CAGR of 8-9%.......and he can hope to reach his financial goals.

Off the top of my head: RVCapital Chuck Akre Greenlight Giverney Baupost Bronte Now lets differentiate between whether I think those managers are good or not...or worth following not gonna get into it......what I'm really pointing is that at least their 13F's are basis for gaining some insights to what they believe will do well over say 5 years.......they are thoughtful about what they own, they tend to own it in concentration and they dont churn the portfolio too much such that positions remain in their 13F over time.......but YOU have to figure out whether you think they are 'good' and whether you agree with their company choice.......the biggest mistake in 13F diving is buying into something based on a filing of a hot manager, doing little DD yourself....then the stock falls and the next 13F filing comes out & your guru has sold out of the position..........its a recipe for buying high and selling low IMO.

for sure but selling everything and leaving only that on the 13F filing day returns is kind of a laugh for him…..designed to do exactly what this thread is doing….get attention and get people talking. I assume also there’s an element of if things turn out as he’s predicted he can point back to a contemporaneous 13F filing but I think that’s kind of a nice bonus. This is a 13F played for laughs and folks should see it that way. when I saw it reported in financial media - I laughed out loud….he knew exactly what he was doing the 13F filing thing is a joke and anybody who clones them too closely wants their head examined. The only 13F’s worth paying attention too are from managers who adhere to and have track records of running relatively concentrated portfolios and holding positions long term. The most extreme of the opposite of this is David Tepper….if your following his 13F well you’ve officially lost the plot.

I have simple theory on Burry’s latest 13F filing….it’s a 13F played for laughs( and attention) using the imperfect filing date moment in time snapshot…..it’s kind of joke to him to liquidate his positions on the day previous to 13F reporting…. bar a prison stock for effect of course….there’s a message in there too clearly regarding his bearishness….which was previously expressed with puts that DID show up in previous 13F but are gone now….I’m sure he loaded all these bearish positions up again the very next day.

Totally get you on the no rational and no actionable info from some of these guys...its bear clickbait....whats the old joke with predictions if asked......give the level but never the timing or if you give the timing don't give a level. Listen I'll just hang it out there one last time........ my US market bear case is a simple reversion to the mean over the next 2-3 years that has been trouted around in 2010's to ill results (I ignored it then it wasnt compelling argument at all, the US was clearly in better shape than the rest of the world post-GFC)..........but if we go back in the US to mortgage rates (~6-7%) and inflation averaging ~3%+.....and we are genuinely short people such that labor starts winning against capital again (BLS data suggests thats the case) & maybe US governments have to dial up corporate tax to pay for all the old people (15% minimum is start of reversing Trump cuts I think)....well first (because of inflation & higher discounts rates) your market multiple reverts back to more average levels not 20x like we have today on SPY but closer to ~15x.......while profit margins (through corp. taxation & increased labor costs) get squeezed back to more historical levels (I maintain 2021/early 22 will be a cyclical record high for US corporate profit margins) so your E is contracting too .....and one amplifies the others cause its a ratio........ put em all together I think you could grind down over time to 2,900 - 3,100 on the SPY in the next 24-36 months and then build out from that base....or your just desperately range bound between 3000-4000 for years...result in aggregate is the same.......growth stocks get even more crushed ..........lsiten I don't a fuck about the indices, they are zero fun....& I do this for fun........but the issue for stock pickers in the US market making a journey from 4100 down to 2900....... is you pick good companies but you just get crushed by the beta no matter how better YOUR companys are versus the indices. Its tough sledding. I'm choosing to step more into markets where I think the beta moving forward is better....I like the wind at my back type thing, but I definitely don't want it at my front........& its why for the first time in a long time I've been grabbing my investing passport and going international stock picking. Your dollar goes a lot further & if I'm right-ish the beta won't be kicking you in the balls so aggressively & I'll have better results. Lets see....time will reveal all.

Hoax is a very strong word which suggests a hell of lot of certainty in a macro prediction which I'd suggest, given the complexity involved, folks stay a little more humble on it. Let's see 40 years of falling inflation & interest rates say the trend is your friend & you fellas are right.........but you know trends don't go on forever and at some point there's is a secular inflection point (interest rates move in big decade long cycles) and there's a reasonable macro case to say thats exactly where we are right now.......a global pandemic followed by unprecedented FISCAL transfers (unlike money printing bank reserves in GFC) and the first war in Europe in decades + ramping up of a real life Cold War 2.0 with China all thrown in the pot.........these are the stuff secular shifts are made off. The pandemic though is the doozy....it really really has changed mindsets and approachs in every company I speak too, how could it not. I didnt listen to Hussman and his elk for the last decade and made plenty of money not doing so......I am not a perma-bear and I'm not even advocating for going all in on the inflation & fed funds @ 6% trade........I'm not, I'm hedging my bets.........but I look around and I think about the big picture drivers and I try to polk holes in the secular shift talk on higher rates/inflation.......and I'm finding it hard to polk holes in it and I'm usually pretty damn good at polking holes in things and when I cant........ i start wondering if there are any holes there at all! So when presented with something like that I try do sensible things that work in different macro versions of the world that seem possible/plausible...........while remaining FULLY invested....and where things will work out wether we transition to a new secular period of higher rates and higher inflation or not. Sure one will do better for me.....but the other will do just fine for my financial goals. Think on internet forums just given the format your always somehow labeled as vehemently for or against something. Macro forecasting is hard, almost impossible but sometimes a macro trend is screaming out at you so loud you'd be dumb to completely dismiss it and so you've got adjust a bit. I think this has real real merit in it and why I repeat it here ad nauseam for the benefit of whom ever might value a different opinion on the consensus doing the rounds right now..... which to be clear is "its going back to the 2010's, get on the bull train". The contrarian case isn't welcome and I get that > it to speaks to a fundamentally much more challenging investing climate for the next decade versus the last which is unpleasant to think about it.....but given its unpleasantness it's exactly why you should be thinking about it! Ignore it if you wish but marinate on it for a while before you dismiss.....be careful of ideas your so in a rush to dismiss. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so. “ – Mark Twain I think COBF participants are gonna do fine with higher inflation & higher rates....... as these conditions favor more value orientated strategies/shorter duration assets & actual 'jam today' cash flow type enterprises than whats been in vogue. But you know step back and these are some of the things below that just scream common sense to me and I find hard to ignore re:higher rates/inflation moving forward........which lets be clear is a minority contrarian opinion......inflation expectations & consensus as @matthew2129 say that we are going back 2.3% inflation & the Fed is gonna start cutting in early 2023......I'm saying based on my read that in THIS instance there's a better than descent chance that the consensus has got this DEAD wrong. You know frame this post or whatever and come back in 18 months and laugh at me but like think about the below drivers: Inflation Drivers: Deglobalization> inflationary Re-shoring/friend shoring > inflationary World/China/the West "short people", immigration hot button political issue in the West UK/USA/EU making sensible immigration solve short people impossible > inflationary Demand-Supply shift for Capital = structurally higher interest rates Higher inflation (as per above) = higher rates Degloblization/re-shoring of industry> potentially hugely capital intensive activity versus the previous capital light services economy we've had in the West for the last 20-30 years (Google et al)....... leading to increasing demand for capital to build these industries/factories up again (Chips act etc.) = higher rates Greening of the economy (Federal EV tax credit in recent 'Inflation reduction Act' with its demands for in USA-battery production is a hint at the future) > huge capital investments required here = higher demand for capital = higher rates Solar/Wind/Grid - unbelievably levels of capital to be deployed here = structurally higher rates Anyhow for better minds to ponder than me.........some might call the above a laundry list of another 'bear boy' who cried wolf.....but this cry I'm heeding which is rare for me I'v ignored similar for the last decade............so I'm heeding the call more than normal and adjusting my portfolio posture......I'm not going ALL in or out......I'm adjusting my portfolio posture........... MACRO is hard/impossible.......but there's something brewing call it a gut feeling or not but I'm positioning for it. I'll take a break on the interest rate/inflation threads for while....folks are getting sick of me and I'm getting sick of listening to myself..........the next few CPI prints are going to be filled with confirmation bias for those looking for inflation back to 2.3% narratives as energy/supply chain CPI base effects start rolling off......I dont propose to jump in on each thread cheering it lower (I will cheer it lower myself too, i hate inflation!) but lets see what happen when it gets down to 4.5% and STOPS moving down......well we aren't in Kansas anymore then I'll tell you. Chow for now inflation friends.......see you in 12 months time............but I will see you over on the investment ideas threads......where I'll be looking for short duration > low p/e companies with inflation linked pricing power > that can grow FCF streams ~5-6% sustainably & predictably even in a US printing 4.x% inflation & Fed Funds at 5% . We'll get an answer to our little inflation conundrum soon enough. I'll be watching with my lips sealed on it for a while, my lets call it hunch has been splashed across these pages enough for now. I'll haunt you no more.

True - I never underestimate the ability of people/societies to clutch defeat from the jaws of victory. My point is/was that if you could choose a set of strategic cards to be dealt with as a country/economy in geopolitics........the USA has just about the best set of cards out there, hands down not even close.......now could the USA f-it up........for sure it could .....and maybe its in the process of doing so.....hard to know.....hit me up in 40 years and we'll see

You know Greg i've been clear that 9% forever is not my base case later this year or next......as I've said a billion times but will say one more time......energy/supply chain inflation data will start coming out of the numbers over the next two/three quarters due to base effects....irrefutable and clearly it will.............but what will be revealed will be late 4's - 5%'s underlying stubborn domestically produced, cant blame China/Russia, monetary inflation......you can see it in the non-farm payroll data, its right there and its happening right now even as energy prices deflate.......in a world where you can borrow very easily at 3.x% & inflation is running at ~5%..........the monetary math is still deeply deeply broken if thats the case and if it is your running a highly highly accommodative monetary regime in an overheating economy at likely what is way beyond its natural full employment rate......good things dont happen in that world and Fed will be forced to act aggressively ....but you know maybe the non-farm payroll data in response to energy/supply chain inflation data moderates super quickly....that is possible, lets see.

Perhaps - but it all flows from my little math equation which is kind of irrefutable in its conclusion which is borrowing to invest or borrowing to speculate (short stocks) or indeed borrowing to consume a fancy dinner/holiday/boat/bike/car..........is currently a no brainer, they're begging you do it........you'd be plain dumb not to do it.....get out there and spend the shit out of it the math says Whats the math > Inflation @ 9%.....credit lending at ~3%......negative ~6% real cost of money.........its the kind of real cost of capital one should see after a major economic shock that has decimated investment confidence in your economy and where the monetary authority desperately needs to coax folks out from the sidelines to participate in the economy again. Is that the current climate in the US?

I'd describe it more like this - its the moment in the casino, when you've lost all your money at the tables and decide to go back to your hotel room and call it quits.......& you head for the room elevators........but just out of the corner of your eye you see an ATM machine and think hang on a second........if I just take out what I lost and put it ALL on RED, I'll make it all back! Two thoughts on meme mania return..........It's the last gasp of the truly degenerate gamblers........and there' still lots of liquidity/cash lying around in checking accounts. For how much longer I wonder......the stock market is a wealth generating and destroying machine......and while the Fed will never come out and say it.......positive wealth effects work when the economy is on its knees, but negative wealth effects work as equally well an in economy thats overheating & needs cooling.

+++++ AMC, Bed, bath & beyond....memes stock going to the moon again today........4% cap retail.........is this what monetary tightening via stricter financial conditions looks like? Or does it look like excess liquidity is still in the system fueling the continuation of speculative investment? .......because in reality actual financial conditions are far from neutral and are actually still VERY accommodative relative to the actual inflation rate..........& that the correct posture for a person in a 9% inflationary economy where you can still borrow pretty easily at ~3.x% rates....... is to borrow as much as they can and put the borrowed cash into real assets yielding 4% like your retail unit........and then play the spread on the asset itself....while also playing the time value of money arb opportunity where your paying back the loan next year in future 6-9% depreciated dollars.....& where your real cost of capital inflation adjusted is something like negative 5% People are in for such a wake-up call in September when the Fed has to come out with another 0.75% hike & some very tough talk and guidance on the future direction of rates into 2023. See they have to break the math equation of what I've just described above to reduce aggregate demand. The math can change a number of ways via the inflation rate/interest rate/multiple on the asset but the equation I just described is highly STIMULATIVE and something you'd expect to see in an economy with 6% unemployment where the Fed is trying to resuscitate business investment....not a 9% inflationary economy with full employment & two job openings for every job seeker......its nuts.

For sure it does, completely agree the Americans, the Japanese……the CCP feeds Chinese society the constant hum of xenophobic diatribes through state media - but sometimes its useful for a regime to turn the volume up or down depending on their needs…..the Pelosi trip, in a different set of domestic circumstances, would have been dialed up to a 7……..this time they choose to dial the volume all the way up to 11……that tells you something very interesting about China domestically in 2022

Yep my read too - China has lots of problems going on right now...........an external enemy to direct attention to is a useful distraction.......I think the level of noise made around Pelosi visit should be seen not as a show of strength by the Chinese but rather a sign of internal domestic weaknesses bedeviling the Xi administration.

Correct….Jamie Dimon nailed it not so long ago in some speech I saw and I’ve never forgot and never will…..the USA has the best hand of cards ever dealt a nation ever. Period. .…..…..energy and food independent…the best economic system..….wonderfully friendly neighbors to the North (Canada) & South ( Mexico)……the big blue Pacific Ocean protecting to the West……the massive cold Atlantic Ocean to the East…you wanna talk about MOATS now that’s a maot!....the worlds best and most technologically advanced army and nuclear arsenal…….the best and brightest research universities and access to worlds best and brightest people…..the worlds reserve currency…..not terrible demographics…I could go on…..I literally laugh every time I hear someone peddling the impending end of US global dominance..…..especially the talk about China …take what I just listed above and apply that filter to China’s set of cards……..ok have you done that yet USA doom talkers and China pumpers!…..shut the F up and start singing the national anthem right now or get outa of here

I hope your right and I’m very very wrong…….I really do……I may have larger than usual short US stock exposure & an international long book in my investment account…..but I’m a USA salary resident cheerleader with my best earning years ahead of me..……big big big picture ‘Changegonnacome Inc’ is unbelievably long a thriving US economy. A 1970’s style stagflation, followed by a Volcker-esque recession is not good for my family or anybody I give a shit about. I hope I’ve got this very wrong but I’ve yet to see much disconfirming data based evidence that I am & it’s why I value your pushback…what you describe is exactly how I will be wrong…..so appreciate your strong views on the matter. Even if we fundamentally disagree.