changegonnacome

Aren’t earnings & record high profit margins the next thing to drop & with fairly high certainty………companies that can push price first in an inflationary environment display earnings & profit margin growth in the first instance..…this is the Wile E. Coyote phase of an inflationary environment, your off the cliff but everything seems fine….however, and this goes back to inflation expectations, those firms employees in the last round of wage negotiations in late 2021 had a transitory mind frame approach to inflation and so sought modest increases……the next round of wage negotiations in late 22 married to incremental new hires that are happening now, the inflation narrative has changed….such that a wall of real incremental labor + capex costs will be hitting SPY/QQQ firms starting now (this assumes that unemployment remains low & employees retain leverage). Anecdotally I’m aware of many firms where new 2022 hires are sitting beside legacy employees in the same role where a massive wage differential has opened up, that will be addressed by legacy staff in the next performance review or else they walk.

Interesting graph....from a quick eyeball, tell me if my eyeballs are seeing things.....would it be fair to say that drawdowns in the past having reached this -19% point .....materially ALL went on to smash the bear (20% line) by at least another 5% for a total peak to trough of 25%.......with the majority actually exhausting out in the high negative twenties level......but not an insignificant amount of this -19 sample set went on to pass the 30% drawdown mark modestly.....and only three biggies went & smashed 40%. That about right?

Agree he can't solve supply side issues but he has to deliver on what is actually in his control to restore price stability.....and I don't think anyone can argue that the man who controls the price of money, can control aggregate demand in an economy & what he certainly won't do in the short term is anything which might make inflation worse (cutting rates/QE). Hence the fed put being gone under the market with any CPI prints above a 4-handle remaining....which I think pretty much covers the rest of this year. It's been a long time since investors toes couldn't touch the bottom & the vol is going to be wild.

I’m coming around to the idea of secular Western inflationary thesis (de-globalization, bifurcated geopolitical East/west reducing available global labor pools, on-shoring, costs of green transition, falling fertility in the West leading to poor demographics)…..which all point to structurally higher price inflation = higher rates = lower asset prices. The next decades successful strategy, might be characterized not by buy the dip, but rather sell the rip….as asset prices Re-price to something more akin to multiples seen in the 70’s. Above is all hardcore macro….& one for the too hard pile. What’s not too hard, IMO, is in the short term the Fed put is gone….and equites are floating on only fundamentals & sentiment for the first time in over a decade. Inflation needs to be killed in the crib before it gets to crawl & walk as it did in 70’s…...Powell wants to be Volcker…….nobody remembers the Fed Chair before Volcker right? So don’t be that guy, be the guy that did the right thing in the face overwhelming pressure & purged inflation from your society and restored price stability. Given the pernicious effects of inflation on the poorest in society, it’s the moral thing to do. Let’s see if he has the stomach. I sense he does.

Yep the termites are inside the house and they are heading for the family jewels..........trying to game plan this and the only thing I'm doing today I think is selling long dated calls on the COVID darling companies using their ATH's as my strike price........so selling volatility when vol is high & creating a synthetic short positions in the future at what I consider to be bubble strike prices.......I dont think any of these darlings are going back anywhere near those ATH for years......even so I'm modestly selling vol such that none of these things could be even close to carrying me out.

Posted this at end of last year……and continue to watch the China situation closely…….maybe the CCP have everything in hand or maybe we are watching the beginning of something unravel. Whats happening in Shanghai is very very curious and I haven’t seen a satisfactory answer anywhere why they are doing what they are doing. I’ve heard all the various explanations and they just dont stack up fully for me. The most compelling is dumb pride as @Spekulatius says & not being willing to admit that for alls China’s copying of the trappings of modernity, the West is still 20 years ahead in terms of fundamental technological innovation in life sciences (clearly) and semiconductors to name two areas.

True - it’s become a proxy fight now between the US & Russia……how can the US save face if the most logical Ukrainian-Russia ‘peace deal’ is one where Russia clearly achieved its stated strategic aim > i.e. no NATO expansion into Ukraine…..funnily enough Finland & Sweden’s accession into NATO might be an ‘out’ for everybody…..the US can say it back fired on Russia as NATO has two new members one on Russia’s doorstep, we in the West actually ‘won’….Russia can say who’s cares about Finland/Sweden wedged up in the Nordics, Russian security is predicated on the Eastern front from continental Europe going through Belarus & Ukraine, remaining either neutral or in the case Belarus a vassal state. Russia says it won.

Not quite yet……but it is getting there….…..taking control of Mariupol then further West into Southern Ukraine all the way to the port of Odessa seems to be Plan B…..Russia takes & controls these key parts of the Ukrainian economy and effectively its a country in name only. Forcing Zelensky & even the Ukranian far right to tell NATO/US to go to hell with more arms shipments….& to just let them sign a deal which as I keep reminding people Zelensky has already outlined whereby almost all Russia’s demands prior to the invasion are met.

In all honesty I just don't see this happening…….if Russia escalates even with large fire bombs that literally destroy neighborhoods of Ukrainian cities killing civilians indiscriminately & flagrantly, a true horror filled escalation…….i think NATO stands by and watches, maybe then the NG & oil bans come in from EU (maybe)…but a NATO country actually entering the fray with boots on the ground or missles in the sky isn’t happening, I think were kidding ourselves that its even a possibility ……..Ukraine just doesn’t matter that much strategically for NATO, if it did, it would already be in NATO wouldn’t it? Seen as ‘we’ won the Cold War and all. The big problem now thats emerged is the USA’s rhetoric around Putin being a war criminal & terrorist and given the scale of US arms into Ukraine & how this is fundamentally sustaining the Ukrainian side…….its very very clear at this stage this is classic Cold War-esque proxy war between the US & Russia being fought with Ukranian soldiers instead of American ones……where whats best for the Ukrainian people is now secondary consideration versus broader US domestic politics & foreign policy considerations & pride…....the US aka Joe Biden just ‘lost’ in Afghanistan to the Taliban, his administration aren’t about to ‘lose’ to Russia in Ukraine not till after 2024 anyway……..what Zelensky has already conceded to publicly in term of a peace deal is too close in its outline to a Russian victory…..and so the US decides to push on with arms supplies to them and will do so till every Ukranian male aged 16 - 60 is dead. Be very clear here, that the US could broker a peaceful settlement tomorrow exactly as Zelensky has conceded too…..but is choosing not too because of the wider foreign policy considerations. “Waist deep in the big muddy & the big fool says to push on” - so the old Peter Seeger song goes.

Its a simple equation here I think - strategically who cares more about this piece of land called Ukraine…….the West (EU/NATO/USA) or Russia? Russia has demonstrated it cares a hell of a lot about it……it has sent its blood & treasure there to fight & die……deaths now numbering in the 10’s of 1000’s of its own people. Its sacrificed its domestic economy & prosperity & Putin has risked the wrath of his people. I think we can agree that Putin has risked alot and therefore we can agree he cares alot about Ukraine and its strategic importance to Russia? The West has surprised me with its level of coordination in regards to economic sanctions & military hardware donations and these have had costs for the West but these have, to date, been relatively minor. The West cares but so far hasn’t demonstrated that it cares a lot….….and certainly not enough to do what it actually could do that would be really really material…..and thats to stop sending billions of Euros to Russia every day for NG & oil. Military conflicts are not always decided by military might……they are over time actually decided by perseverance (See Taliban vs. USA). The question is not who is the strongest but rather who cares more. In a proxy battle, as Ukraine is now, between the West & Russia….who has the greater perseverance & strongest stomach for this fight? I’m fairly convinced on my thoughts on the matter and i think Zelensky is too, given that he has already publicly conceded to Russian demands. The problem now for Zelensky & Ukraine is will the USA & those on the Ukrainian right allow him to sign a deal which effectively amounts to a Russian victory - a neutralized and neutered Ukraine……….or will he be made wait until the whole country is in ruins. Finally in regards to a game of escalatory military maneuvers in 3rd countries - weak hands & stomachs get revealed very quickly in these situations, as @Viking has alluded too….if/when Putin escalates with chemical weapons or tactical nukes we’ll see the West’s response ……but as I’ve posited i think we’ll find that our level of support for the situation in Ukraine has a very very low pain/risk threshold…even the vague possibility of ballistic nuclear weapons winging their way anywhere to the West will be enough to collapse domestic support for any further escalatory moves. Helping far off Ukraine in this battle of democracy & freedom vs. autocracy & tyranny can be stomached when it amounts to an extra few bucks filling up your gas tank………..but if the spectre of any real danger coming to YOUR doorstep & YOUR family raises it heads…the question of strategic importance or how much we really care about Ukraine becomes the defining algebra. In this game of up the ante Putin almost certainly has the West beat.

Completely agree & the people of Georgia would attest to that idea too…….those hollow NATO declarations, post the Budapest summit in 2008, with zero material follow-up setup a chain reaction of events were seeing today. Finland & Sweden should take note…….the period of time between openly aspiring to join NATO and actually joining NATO should be as close to zero as possible.

Maybe my sample size is too small........but from all the employers I know in terms of their RTO plans even those that are historically conservative with a strong preference for an office based culture, its going to be very unusual, in a two person working family, not to have at least one of those two people in situation where they are doing 3/2 pattern in the future IMO.....3 days in the office, 2 Remote.......this will be the norm I think....and in this scenario the outer burbs/ex-burbs are less of comprise product than they were in the past.......layer on top of this millennial's expressed preference for being less indebted than previous generations & I think LGIH has a product thats way less likely to be substituted for as it was in the past. Complex equation to figure out but thats my feeling at the moment re: outer burbs/ex-burbs.

Yes and No........selling to 'real' people who are buying a house cause they need a house (age, kids etc.) in a world where household formation & demographics are meeting severe decade long undersupply should be a winning formula.......& where LGIH is the lowest cost supplier of those homes while maintaining industry leading gross margins points to a business that has leaned into its niche in a meaningful way & has built genuine economies of scale from what I can see........there is something going on at LGIH that I like....I won't go as far to say that LGIH is the Costco of homebuilders but I sure as hell like the idea of how they take folks out of rentals & deliver home ownership that in the main reduces peoples monthly housing cost outgoings signficantly while giving them equity ownership. I'm a big believer in a home owning democracy & how it builds communities/societies (but that's for another thread). It was mentioned previously that LGIH speculates on land in the outer suburbs / ex-burbs of urban areas.....and in the past this would mean its products would be the most sensitive to declining house prices & then LGIH itself would come under more severe pressure than other builders as people substituted for more centrally located product in a declining market......put another way LGIH's inventory land & WIP had a high beta......and this was true....back before C19........building on the edges of cities where folks used to reach for 'value' in exchange for tougher commutes used to display this high beta characteristic as when they could people dumped LGIH solutions for more central commutable solutions......I'd posit that post-COVID & remote/hybrid becoming the norm the high beta on outer burbs / ex-burbs in major cities has changed completley.....sludging into wherever 5 days a week on a horrible 2-3 hour commute was/is soul destroying, end of story...........3 days a week in the office with a bunch of PTO & sick days taking that average down to 2.x a week.......well what's just happened to major cities outer burbs & ex-burbs is their TAM just increased significantly & therefore I believe LGIH's historical inventory & WIP beta just dropped a bunch. While their potential customer base just went up a hell of lot, cause it isn't the burden it was being a little further away from Downtown. I need to do way more work on this but this is my initial thoughts on why LGIH's model might actually be the most anti-fragile of all the builders, when outwardly it may appear to be the opposite.

All i could think of during that trailer, was that their North Korean produced wristwatches must have been giving them trouble they were looking at them so much On a more serious note - North Korea has got the memo a long time ago.......get inter-continental nuclear capability & you go from the little leagues to the top table in one jump. Ukraine has taught any nation, with an existing nuclear capability, don't get taken in by nuclear non-proliferation peaceniks coming knocking on your door promising you security guarantees in exchange for disarmament.......tell them to go do one.........dont be a moron, dont give up your nukes

Closure IMO will involve further destruction of the major cities...........I made a comment up thread that you should think of the Russian army as not an invading force or an occupying one........you should think of them like a demolition crew..........the question then with this framework is what level of destruction will Putin deem sufficient such that Ukraine is crippled & hobbled for a generation.

Think Ferguson nailed it and wrapped it up well in his summary: "Ukraine is not Afghanistan in the 1980s, and even if it were, this war isn’t going to last 10 years — more like 10 weeks. Allowing Ukraine to be bombed to rubble by Putin is not smart; it creates the chance for him to achieve his goal of rendering Ukrainian independence unviable. Putin, like most Russian leaders in history, will most likely die of natural causes." I disagree......unless the West has plans to 'put boots on the ground' it is prolonging the inevitable defeat while Ukraine's major cities are turned to rubble and its economy returned to 1940's. Ukraine one way or the other will end up at the negotiating table the junior crippled defeated party.......the most likely 'peace deal' available now with Russia versus what may be available in 10 weeks time is about the same in my estimation. Between now and 10 weeks ungodly amounts of misery will be inflicted on the Ukrainian people & damage done to its cities/infrastructure. I'm from Ireland and we had a conflict in Northern Ireland (part of the UK) that older folks here might remember........the history of that conflict is that 'help' by way of donations from well meaning Irish-American's fueled the conflict way past the point of when it might have ended naturally.....some historians estimate the violence may have ended a full decade earlier if it weren't for the 'help' sent by good intentioned people helping with the fight against the British imperialists but who had no real sense of the complexity on the ground...........interventionism has unintended consequences (hasnt the USA learned this lesson yet?). Zelensky's social media savvy & communications skills in influencing & engaging the West, while admirable, may prolong the inevitable while in reality greatly increasing the cost to 'his' nation. He has no good choices that I can see..........choosing the least worst option & explaining it to his people is what great leaders do & he should use his considerable & superior communication skills to sell a comprise solution to his people while ensuring the West is a party to or guarantor of whatever is agreed with Russia.

Repeating one or other version of the consensus is what gets you a slot on CNBC, Bloomberg, Fox, NY Times, speaking engagements, consultancy gigs etc. etc. These people aren't thought leaders they are providers of a confirmation bias product.

Nailed it @TwoCitiesCapital - hadn't thought of this historical linkage..........but your right......Putin has plans & schemes but those schemes don't escape his evil little mind until oil/gas prices get high enough.......if only, if only the USA was the worlds energy swing producer it could actually do something to stop this...........Oh wait......oh dear.

Yep agree thats the other explanation.......but the unlikely one IMO.....the plebe year in West Point (freshman intake) could tell you 190k men isn't enough to occupy a city the size of Kiev let alone the country of Ukraine. Now maybe Putin has scared his Generals so much that nobody had the courage to point this out to him and therefore all his Generals knew this but Putin was oblivious to first year level military math, so yeah thats possible but again unlikely i think. I do think the Ukranian resistance surprised them & for sure has slowed progress.......but lets also be clear that from reports Ukraine is in the negotiating room right now essentially conceding to the demands Putin had BEFORE the invasion & really his demands have been pretty consistent for the last decade (Annexxed regions + No NATO) . So yes slower progress for the Russians, an element of under estimation of Ukrainian resistance for sure & the economic cost I think is way higher than Putin probably estimated.........however he will get his demands IMO. The question then is whether the exercise cost too much economically, militarily & politically......but if you ascribe to my view, that NATO/EU/USA encroachment into Ukraine was an existential threat to Russia, then Putin would argue no cost is too high when mother Russia faced an existential threat. The same way JFK would argue almost bringing the world to the brink of a nuclear fallout in 1962 to get Russian missiles out of Cuba was also 'worth it' because this was an existential threat to America. You can argue Russia had nothing to fear from NATO/EU expansion & therefore Putin's existentialist threat fears are unfounded but you know he is the undisputed autocrat of that country so his opinion right or wrong matters.

I’m not saying they aren’t there bombing these places in ‘core’ Ukraine and reigning terror down but the purpose of this is to bend Ukraine to Russia’s demands not to occupy ……so let’s be clear what I’m saying….… I’m saying that a military force of 190,000 men is just not structurally capable of invading AND capturing AND then occupying & holding on a permanent basis a country the size of Ukraine or even the city the size of Kiev. You can perhaps do one and half of those three with 190,000 men but you can’t get number three done, not by a long shot. So what do we do with this fact, in light of the media narrative that he wants the “whole” of Ukraine back into mother USSR and he’s going to take over the whole country and make it Russia again ……well as I’ve said….you have to completely throw out that theory that Putin/Russia ever intended to take over the whole of Ukraine and occupy it on a long term basis because that idea doesn’t stand up to the evidence or the facts. The evidence of course being provided by US military intelligence which is where the 190,000 figure comes from.

Yeah I agree the contested territories (Crimea etc.), the ones where effectively a war has been going on since 2014 will be annexed and officially handed over (or shared) in the peace deal being negotiated right now. I would also say just from a domestic Russian PR perspective, the mothers of Russia in exchange for their sons coming back in body bags, need to see some land won in exchange. So were in agreement here and I said the same some threads back. However the idea that Putin is attempting to invade, capture & occupy the other 95% of Ukraine is the part I disagree with strongly and just isn't the case & for which I see the media constantly spin the narrative about invasion, caputure & occupation as if this is Poland in 1945 or something. It isnt. I cant remember the name of the General who was on CNN who spoke exactly to this point, that Putin's army amassed as it was around Ukraine is/was too small to be an occupying force......it is effectively a demolition crew.....his example he gave was when he was in Afghanistan he took a city with 100,000 men at his command, occupied the local government buildings and called his commander to tell him - "hey listen we took the city with 100k men, thats the good news, to occupy & hold the city we'll need 300,000 more men". This is the kind of military math that anyone who studies these things can see. The generals point is my one too - 190,000 Russian troops amassed as they were tell you by military math the fact that Putin/Russia never intended to invade, capture & occupy the whole of Ukraine...........but this idea floating around in the media and on this board that he was heading to Kiev to occupy government buildings and stay there forever forever is just flat out wrong & the facts back it up. But alas the facts don't fit the narrative & that gets a-lot of peoples backs up, which I understand.

You nailed tribalism here @cubsfan with this line - an almost case study expression of tribalistic thinking devoid of any sense of putting yourself in the other tribes shoes, admitting to some agency about how 'we got here' to this moment even for a second, to try and understand the other sides motivations/reasoning/actions/concerns...........in tribal thinking the other sides reasons don't matter, 'we' can only be right & 'they' can only be wrong. Which I think you've perfectly captured in the above post & for that reason (incl. your "full of yourself" jibe) not really interested in conversing further on this subject with you & we'll leave it there i think.

This is a nonsensical sentence. Firstly he doesnt want Ukraine.....he's currently bombing the shit out of it precisely because he doesn't want it after. Secondly and I dont think you get the dynamic here............Europe is NATO, NATO is Europe......I'm sorry your showing a lack of understanding here of geography, political & military alliances .......get a map of the member states of the EU out and then a map of geographic Europe & then a map of NATO members.....they are for all intensive purposes the same thing when you look at it from a Russia threat assessment & national security basis. But hey who am I stop you from your tribal urges to say "the other team" fucked up despite ALL the factual evidence to the contrary....which is spread across mine and lots of other peoples posts on this thread

I think you've missed my point completely - which is whether you believe something or not & that something has got to do with Russian security your opinion or thoughts are immaterial & pointless........Putin the all powerful ruler of Russia gets to decide what he considers to be an existential threat or not to his country, he thinks it, therefore it is so (re: Russian sovereignty/security). The USA/NATO/EU/the West doesn't get to decide but they sure do have to deal with consequences of his assessment as we're seeing now. This was my point which you exaggerated to absurdity while using an analogy completely divorced from the context in which my point was made.

I disagree but does it matter? - if Putin believes it to be so, then it is and the world needs to optimize for his/Russia's perception I'm not sure what country your from - but do a thought experiment.......North Korea builds ties with your neighboring country.....those ties result in North Korea being allowed to construct a missles silo 15 miles from your countries borders and within 15 minute striking distance of your countries largest city.......North Korea & partner says they are not a threat to you and have no expansionary aspirations and your country would be crazy to think that would be possible............but tell me how would you and your family & your countries leadership FEEL about that???