TwoCitiesCapital

On the flip side, the benefits to owning funds are daily liquidity (not a guarantee for individual bonds - especially when getting outside of things like treasuries). Other benefit is fills at, or near, NAV. I'm sure treasuries are more liquid, but moving outside of those to munis, TIPS, mortgages, IG etc then you really have to start sizing up buys to 50-100k type lots OR you tend to get really wide bid/asks that eat 1-2% of your return before considering commissions.

All I see is performance chasing and hindsight justification. He's chasing prices down and chasing them up instead of leading them down and leading them up. Following his piece targets is no different then looking at a chart of what has already happened it seems.

My general view is they will either fall or stagnate. Either way, if they underperform reported inflation over the next few years, then any gains after inflation weren't ultimately real and it just took a few years for that to be evident - just like it took a few years for people buying houses in 2004/2005 to realize that the gains weren't ultimately real. It doesn't shock me that people's net worths went up when the government literally mailed everyone and their mother checks for thousands upon thousands of dollars. It's what's been happening afterwards that I don't think is as rosy as everyone makes it.

Transferred ~$800 of $1+ billion to Coinbase (or similar exchange with identity attached) Can't make this ish up. Also, approaching investigators and cops for a marginal theft of a tiny increment of that $1 billion?!?! The f*ck was he thinking?!?!

+1 I've got a small amount of fixed income left in money market. Most of it has been moved to short-term core plus type funds. I want spread, but not spread duration. My intermediate stuff is all treasuries/mortgages and a little IG via funds and is now where the bulk of my fixed income assets are. I have a handful of speculative positions in discount CEFs and ZROZ/TLT. Very small part of the portfolio, but growing .

I have two scenarios and I don't know which ones is more likely: 1) We get a recession and rates go dramatically lower which buys us time before we have to face the next option or 2) we avoid recession, rates remain high, but there just isn't enough demand for the massively increased issuance of treasuries to fund an ever growing deficit/interest bill. The Fed implements yield curve control with a yield cap of 3 or 4% on the 10-year treasury. Either the Fed buys bonds directly or banking/insurance/pension regulations are adjusted to force them to buy more to implement the buying needed. Real assets and gold soar. Stocks will go up too, but probably by less. Bonds get an initial pop, but are then dead money for a decade -plus. The US is definitely heading towards and end-game of #2. Just a question of if we're there yet or if it'll be the next time or the time after. I'm still leaning on the recessionary scenario of #1 with an expected pop in bonds and drop in stocks.

I think real household net worth hasn't gone anywhere nominally from Q1 2022 from the same data. Which means for the last 2+ years the average household has LOST net worth in real terms. And that's before any real damage has been done to housing which is MOST households' largest asset and won't remain at these "most unaffordable" levels for much longer IMO. Lastly, most of us can't spend our networth. Say my house price goes up 50% and my 401k doubles. What does that matter if groceries, insurance, healthcare, children's education/day care, car repairs/replacement, utilities, gasoline, travel, etc is up 20-30% while my wages are up only 5-6%? Cuts have to be made. Quality of living is going down regardless of what my 401k says. Sell assets to fund the gap? Sure, but then I'm gonna take a penalty on early 401k withdrawals OR a hit against my equity paying selling/closing costs AND be able to afford something significant less nice. And spending those gains reduces the net worth a long with any penalties or fees paid. I don't care what aggregate net worth is on paper because it doesn't reflect anything real. Many people can't maintain their current quality of living without spending those net worth gains - and then spending them results in the reversal of those gains. If you have to spend the gains to run in place, were the gains ever really there? I'm sure many people saw their networths rose by investing in real estate in 2005. But was any of it real?

This is right. We can debate the efficacy of the lag, but it's intentional because people's rent don't go up overnight simply because home prices rose. It takes time to filter through to rents and then time to filter through to tenants who tend to be on fixed leases for 1+ years. The lag is intended to reflect increasing prices for a small percentage of the population each month whose leases are renewing a d etc instead of pricing in the inflation that almost no one sees the month it occurs. It makes it a more useful "average", but a less useful indicator of what is actually happening as it will lag actual inflation and is why inflation typically peaks inside of the recession instead of before it.

It's all narrative driven. The high valuations of yester-years was all TINA, negative real rates are bullish for stocks, and "look at all that growth in a 0% rate world". Now there ARE alternatives, real rates are decidedly positive, and many of these names aren't really growing (like Apple) while many are shrinking (falling index earnings), but you can't own bonds because of inflation? And equities don't have to correct because they are always a better bet than bonds? Seems like real fuzzy math and rationalizing hindsight as opposed to any honest thoughts given to what the risks are and what stocks SHOULD actually trade for relative to lower risk bonds.

I'm looking to add JLS. Nuveen's mortgage strategy. Yielding 9-10% w/ a duration of 2. Discount is currently 10-11% to NAV. I like mortgages here. Obviously leveraged so still risk of damage to principal even with low duration, but is an interesting way to lever up what is a relatively safe credit spread at very attractive levels without taking a ton of duration risk. Have had success, and positive returns, buying credit CEFs at large discounts earlier this year (yields more than made up for price depreciation with additional hikes). I like mortgages risk more than corporate credit at this point. The low duration and 50% of portfolio in floating rate notes differentiates this from my other fixed income holdings. Similar to my holdings in JSCP, primary focus is short-duration spread with this while I take my duration exposure elsewhere.

It's not doom and gloom. It's factual. Aggregate statistics suggest that the average/median person's in this society are worse off financially than they were 3-years ago. I'm willing to bet the damage didn't stop @ the median and willing to extend the statement to 'most' people. I'm not saying the economy is going into a depression. There is no 'doom and gloom's prognostication above. It's simply recognizing what was/is true - most people are worse off today than 3-years ago. Higher rates/inflation HASN'T been stimulative and most people have been hurt by them /\/\ the only point I was making in response to Gamecocks post.

Losses in fixed income markets exceeds that of the 2008 global financial crisis. Real incomes, on average, are less than what they were 3-5 years ago? Real returns on nearly everyone's investment assets (savings accounts, retirement accounts, pensions, taxable stocks/bonds) are exceptionally negative. How is that 'no damage'? Rates are attractive on a forward looking basis, yes! I've been screaming that as nauseum in other threads. But it's going to take a long time for new monies invested at those rates to offset the damage to everything that was invested before those rates came to be. And it was the inflation/raising of rates that did most of that damage. As far as your twitter poll? There is NO way the average person's net worth is up 2.5x - even nominally - over the last 4 years. Your chart off household net worth doesn't support it either reflecting a ~40% rise from 2019 levels - much of which is attributed to housing which can't be tapped to improve quality of life. Maybe Twitter isn't lying - but if they're not then that just paints a bleaker picture for everyone who didn't answer you poll as we know what the average was.

That's all true nominally, but not true in "real" terms. Real incomes have been eroding, on average, since 2021 (and only grew in 2020 due to transfer payments). I'm making the most nominally I ever have. In real terms it's less than what I made in 2018. I'm in the top 5% of incomes in this country, with no kids, and even I can feel that pinch over time. Wealth might be at nominal highs, but was higher in real terms in 2019/2020. Also, that's on paper too. A 10% dip in 2024 would erase much of the current bounce just like the 2022 dip did. Homeowners? They are doing well on a relative basis - but even many of them are suffering with rising costs of carry. Despite refinancing my condo in 2021 for 2.75% and saving ~$500/month, my total carry on my condo hasn't reduced much from those levels. Taxes have gone up, the insurance has gone up, HOAs have gone up, and my monthly utilities are up. I got that $500/benefit for 12-18 months and now I'm basically back to here I started at in 2021. On a real basis I'm "winning" because I'm basically up 0% while inflation has been higher than that, but I no longer have a nominal benefit from the refinance and that will continue to get worse as costs continue to rise. Sure - on paper my net worth is up due to rising condo values. But I can't tap that to pay any of these higher living expenses. With a HELOC, high rates become a cash drain. Selling? Lose a chunk to closing costs and can only afford something way smaller/less nice due to higher rates on mortgages. So what is that "gain" in net worth reflective of ? Nothing. It essentially basically exists solely on paper and cannot be translated to an improved quality of life. It's reflective of 'not losing more' like renters have - not an actual improvement of my absolute position. Point is, inflation is what caused rates to go to these levels this quickly. Considering the impact of that inflation, very few people are better off today than versus 2-3 years. If we stay at a place where rates significantly exceed inflation for 3-5 years, we might get to the point where rates will be beneficial. Over time compounding at higher rates that exceed inflation will offset the losses from prior assets invested @ negative real rates, but it takes time and we've only just gotten there in the last few months. I don't think we're going to to stay there for the # of years required to make people whole on the upfront damage.

Another way to think about this - Interest rates go to 100% tomorrow. You can double your money every year. But that means all current assets are gonna lose ~99% of their value in comparison. How long does it take you to come out ahead and "benefit" from 100% interest rates. Probably year sometime in year 6-7 pending inflation. Also depends on what happens to your job in that environment, if you need to tap those savings that are now down 99%, and how much additional you can contribute. But in a vacuum - 7 years to come out ahead doubling your money every year.

What losses am I talking about? Exactly the ones you listed. Made worse by the fact that cumulative inflation has been like 10-15% over that time making nominal losses even worse. People bought stocks/bonds/commodities/whatever in 2021 and 2022 and are currently in loss status on most of it. They weren't sitting in cash. They're not benefitting from higher rates until the reinvested income from current investments offsets those prior losses on the reset higher. Even at 5-6% rates, we're a long climb out of that hole nominally (and even longer on inflation adjusted basis). Money markets/and treasuries? Cool. Basically every Treasury bond thats ever been issued is in an unrealized loss status at the moment. Doesn't count as benefitting quite yet. Money market assets? Sure. Those are doing well. But a good portion of those are in retirement accounts that aren't going to circulate for the multiplier effect on the economy and the remainder is so small in proportion to what is owed on cars, houses, revolving credit, durable goods orders, etc as to make little to no difference. So yes, consumers might be benefitting from higher rates on like 2% of their total net worth, but everything else is hurting against that at the moment Is this really debatable?

Yes - YTD that's the case. And GLD kicked the S&Ps ass in 2022 with or without dividends. The S&P total return is ahead by 2-3% per annum at this point, but was behind as recently as June. Compared to the S&P 500 equal weight, MSCI ACWI, EFA, EM, small cap, mid cap, etc....gold has killed them all over the preceding 5-years and basically matched the equal weight S&P 500. Not obvious that gold was/is a bad call if the only asset class to outperform it was basically the Nasdaq...

Most stocks and bonds are down over that period. Isn't limited the ones I named. It wouldn't have been the mania that it was if MOST people weren't participating by buying something and most of those somethings today are significantly off their 2021 highs. Point is very few people were sitting on loads of cash, and still hold it, to benefit from the higher rates.

That's assuming the cash wasn't used for share repurchases 15-20% ago, refinancing prior loans, or used to actually invest/grow the business. I'm going to assume very few companies issued tons of debt and then just sat on it for 2-3 years paying a small amount of interest waiting for rates to rise and have it to collect the spread today. Some companies carry higher cash balances naturally. It's those companies that benefit from the rates the most. Some companies make gobs of cash. They benefit too, but less so. Investors aren't giving those companies 25-30x multiples to sit on 5% t-bills. These companies probably use the gobs of cash for buybacks or acquisitions instead of continuing to compound the benefit of higher rates, but they get paid a little while they wait. Everyone else? Probably not a large beneficiary of higher rates at this time. Over time, higher rates COULD benefit savers and potentially flow through to spending - but it'll be 1-3 years of pain before that occurs because most savers weren't sitting in cash but we're invested in the mania that was 0% rates and Pelotons/Rivian's/GameStop/crypto/etc that was all been severely punished.

Perhaps. I tend to think Bitcoin MAY displace gold, but given it's perfect inelasticity, its possible it remains TOO volatile to be the asset counted upon in risk-off type moves. Gold may retain an important place in people's portfolios despite my expectations for Bitcoin. I own way more Bitcoin than I do gold. But have been recently been buying gold miners that are now significantly off 2021 highs. I expect a high probability gold will do significantly better than equities in the 2020s - perhaps miners with exposure to it won't be half bad either.

I mean...the 5-year return for GLD isn't that far off from the 5-year return on SPY. Relative to value stocks, small- and mid-cal, and int'l, GLD is kicking ass. Can we really say that a positive view towards gold is wrong if it's outperforming MOST global equities over a 5-year period?

Debt, for any entity, is inflationary upon issuance and deflationary upon servicing/maturity.

I don't think the S-curve is quite as valid here given the constraints on supplies and the need for infrastructure investment. In a vacuum, demand for EV might follow the S-curve. In reality? Probably going to run into supply chain issues with shortages of key components OR problems at the utility level as they run into issues producing the power necessary to charge vehicles day/night. As far as Tesla prices coming down? Sure - some of that is probably economies of scale and reductions in commodity costs. The other piece to that is competition. Pre-2020, basically nobody in the Western world was competing with them. Now you have Rivian and Lucid with EV-only platforms (Rivian's truck looks 1000x better than the cybertruck btw). Porsche has a high end Taycan that's getting rave reviews. All the major manufacturers of Ford, GM, Chrysler, VW, etc are developing EV product lines. Tesla is becoming a commodity product - the price changes reflect that loss of market share.

Yes. Job listings on CFA website, on job aggregation sites, and their own company websites. Non responses have been largely across the board. Have only heard back from one company. Received an immediate canned rejection email from HR like 4 hours after applying, but then was called by HR a few weeks later for some "clarifying questions" and was told they're still absolutely interested, and then never heard back again. That was over a month ago. The jobs numbers today reflect declining full time jobs and exploding part time jobs. Underneath the surface, it doesn't seem like all is well.

Yup. No immediate catalyst to close NAV gap. Both VW and P911 have turned down recently which seems to be driving the sell off here too. It doesn't rally when it's assets rally, but sells off in sympathy when they drop Not a huge position for me - but I love Porsche cars and feel good owning the company at a sizable discount.

Have been applying to other places for the last 18 months. Mostly non-responses. Not rejections. Not scheduling interviews/phone screens. Just silence. Seems like much of the financial industry is on hold for hiring. Not sure how it is back in NYC (where I left for this job), but my options here are quite a bit more limited unless if I want to move to Chicago (~3-4 hours away). Just biding my time and slacking off since I don't get paid for the effort in the meantime. But it does give me an appreciation for the plight of the middle-class worker as j can't imagine they're doing any better as a collective.