FCharlie
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Posts posted by FCharlie
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On 9/7/2022 at 4:52 AM, MrPanda said:
Hi, some commentators like Ray Dalio and Charlie Munger are predicting that we are entering a "lost decade" for stocks, where returns on indices like the S&P 500 might return close to 0% over a period of 10 years or so (just like in the period from around 2000 - 2010). Do you think this prediction will turn out to be true, and if so , is it still possible to generate high returns on equity investments during this "lost decade" . How do you go about doing that ? Thanks alot ...
If you are an index investor who buys only once and never sells, it's easy to have a lost decade. But the term lost decade implies the market went nowhere, which is really misleading. From 2000-2002 the market dropped almost 50%. From 2002-2006 there was a really strong rally back to the highs of 2000, followed by the 2008-2009 crash which took us back down to the 2002 lows. Then it took until 2013 to recover from 2008-2009 back to the 2000 highs. Put it all together and an index investor saw no gains for thirteen years.
That said, however, this was a great time for value investors who bought things like tobacco and energy stocks. I had 30% of my money in Philip Morris/Altria from 2000-2010 and it blew away everything else I had. But that was starting from a point where it had about an 8% dividend yield and a mid single-digit PE. I believe RJ Reynolds Tobacco had a 15% dividend yield in the year 2000 and they kept raising the dividend year after year because there was nothing actually wrong with their core business. Rather it was just completely unpopular relative to things like Cisco, Qualcomm, and Wal Mart which were all trading at 50-100 times earnings. Today you could argue that we have a similar situation where popular stocks like Amazon, Microsoft, Tesla and others will go nowhere for a decade or longer, but you have other really profitable companies that trade for a fraction of their liquidation values like banks and real estate companies that could do extremely well going forward.
If you believe we are heading into a lost decade, you have to avoid indexes and pick individual stocks. And if you don't want to pick stocks and only feel comfortable buying indexes, then you have to buy or average down after they have significant drawdowns and be willing to cash out or lighten up when everything is going great. A decade is a long time. There will be plenty of opportunity.
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St Joe.
Decent volume at prices below their Q2 buyback price of $37.83.
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For what it's worth to the discussion, my dad just listed one of his rental properties for sale. Under contract in one day for just slightly ($500) over ask price. This is in North Carolina.
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2 hours ago, SharperDingaan said:
There are 3 more federal reserve settings through 2022 calendar year-end, and a market expectation of a 200bp raise across the 3 settings, or 75+75+50 ?.
What do you think happens if the expectation changes to 50+50+50 ?
And it happens at the next rate setting ??
SD
I don't believe the current consensus is for 75+75+50. More likely 50+25+25 and finished.
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
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13 minutes ago, changegonnacome said:
Hate those M2 charts with a passion...........please dont use them - the crypto people use them the whole time to fit their Zimbawe debasement narrative.....the money supply wasnt increased by 50% in the space of a couple of months.....the M2 figure going up and to the right looks unbelievable because it is.......the FED for the purposes of liquidity for banks/depositors allowed the reclassification of savings accounts as checking accounts in 2020 i.e more than six withdrawls from a savings/money market account per month......what your seeing in that chart is savings account (money that existed already) get pulled from M1 into the M2 accounting figure as a result of that reclassification.
Its one of my most hated charts on the internet.....spread the word that its TOTAL bullshit.....albeit I'm in agreement that we printed/borrowed too much money.
The chart above was showing M2. I believe what you are referencing with regards to savings accounts was on the M1 chart. M1 "tripled" in May of 2020 due to the reclassification you mention and a lot of people wrongly used that M1 chart to predict hyperinflation. M2 is indeed up almost 50% since 2020.
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1 hour ago, Parsad said:
My sister-in-law is a Notary and a lot of her business is real estate closings. For the last year, there have been a lot of cases where buyers are doing last-minute financing closures, as they are still pulling money together at the last minute. In many cases, they are posting multiple deposit checks as many don't have the full down payment themselves and are reaching out to family and friends. This has only worsened as interest rates have started rising. Renewals and refinancing's are also proving tricky now as the 5-year fixed rate has risen from below 3% to closing in on 5-5.5%. Cheers!
Hey, Parsad,
Do you, or perhaps your sister, know whether Americans are allowed to buy real estate in Canada currently? There was a lot of talk about a two-year ban on foreign buyers but I never really heard any specifics about it and am not sure if it was ever implemented or not. Thanks.
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GTE- 50% Free Cash Flow yield at current prices.
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10 hours ago, Viking said:
I voted yes, inflation will start to come down. Why? I expect global economic growth will continue to slow in 2H (it is already happening). Now my guess is also that we see inflation come down only a little - from +8% to 6%. So still a big problem. And where inflation goes from there will depend on the Fed. My guess is they capitulate (and pivot). And that, of course, will likely result in inflation picking up again later in 2023. Bottom line, i think inflation likely remains uncomfortably high for years (with low interest rates). Financial repression like the late 1940’s - that is how you solve a too much debt problem. Which might actually be the Feds end game.
I very much agree with you Viking. I think the long-term plan is financial repression, even if the short-term plan is to kinda sorta fight inflation. Nominal GDP grew by 6.5% in Q1 even though the headline number says GDP contracted 1.5%. The Fed needs nominal GDP to grow faster than federal debt grows, which means they need consistent, elevated inflation and they also need to avoid a severe recession which would crush tax receipts, increase deficits, and drive debt/GDP even higher. We're probably not that far off from a technical recession and/or a Fed pivot/pause at interest rates that are still below the rate of inflation. If they pause, I'm not sure what happens. If they actually go back to QE, or "Not QE", I think it's look out above for gold and real estate prices.
It's worth noting that nominal GDP grew from $1 trillion to $2.7 trillion throughout the 1970s in spite of the multiple recessions that took place during that decade, and debt as a percentage of GDP actually declined during that time to just 30%, which was a level that was low enough that it allowed the Fed to genuinely attack inflation.
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When I was a kid I remember my grandmother telling me they paid $8,500 for their house back in the 1940s. I'm not sure why she told me that but I was blown away by how low the price was. So of course I asked my dad what he paid for the house we lived in in the 1980s, and the answer was $50,000. Those properties are $250,000-$300,000 today. There's nothing special about either one. They are average houses in average cities in North Carolina. But there's nothing average about the ability for real estate to act as an inflation hedge and to build wealth. There's nothing like it in the world actually. You get to borrow 75%-95% of the purchase price at interest rates that are probably going to be below inflation. The icing on the cake for rentals/vacation rentals is that you can borrow as many millions of dollars as you want and other people will happily repay it for you.
I have 19 single-family properties today. Not only is there no chance in hell I'd sell any of them, I'm still looking for more. Especially vacation rentals. Those things are cash machines and you get to use them for free. I guess that's the long way of saying I voted no to all three categories in the above poll.
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Hey guys I really appreciate you all bringing this to my attention. I opened an account for my LLC as a place to hold a portion of my cash reserves. It makes absolutely no sense to keep excessive amounts of cash sitting in checking accounts earning 0.02% with this as an alternative.....
But as nice as it feels to get paid 7% or 9% on reserves, I must say, all I can think about is that I'm not actually gaining wealth, this is just the amount that everyone who's holding cash is actually losing via decreased purchasing power. Wow.
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9 hours ago, ERICOPOLY said:
The strange thing about the apartment REIT market and the well publicized jump in rents is that the REIT stocks discussed on this board have not responded. They have snapped back from their covid lows but look at their stock prices 24 months ago vs today.
Makes me wonder why there aren't institutions simply bidding on REITs at this point.
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48 minutes ago, LounginMKL said:
Her general thesis: Tremendous amount of institutional capital has been raised to be deployed into SFH build-to-rent and multifamily markets (she specifically called out the Phoenix market). Much optimism has been built into the underwriting process such as the ability to raise rent. Couple that with the slowest household formation in the past decade, we will be looking at an oversupply and not a housing deficit. This will lead to many dissappointed investors who are expecting double digit lever returns.
Yes a tremendous amount of capital has been redirected into rentals, but think about the displacement created by the Fed's balance sheet. They displaced trillions of dollars of institutional capital and I don't know anyone who genuinely feels they will actually unwind their balance sheet. We are clearly in a housing deficit today. Maybe we have an oversupply in the future but that's likely many years away.
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United Rentals went up 45X between 2009 and 2018. They survived the last downturn by selling underutilized equipment to bring in cash flow. Prior to the last month or so, EPS estimates were for $25/share next year so if we as a society ever get back to any kind of normal (which I think we will) the earnings power should still be there. May take years to get back there but URI should do well.
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Hello.
If anyone out there has any experience owning rental property with partners inside of an LLC or a corporation, how do you value the business in the event that one partner wants to exit, dies, or is forced to exit due to divorce?
I am setting up an LLC with two other people and we need to create language in the operating agreement to handle this possibility.
Obviously it could be valued at cost in the beginning, and perhaps for a few years. Going forward, the two scenarios that come to mind are
1) Paying for BPO's (Broker Price Opinions) on properties to account for market value of property instead of cost of property.
2) Having a predetermined valuation, such as X times cash flow or net operating income.
Any thoughts would be appreciated here.
Thanks
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Hi,
I own residential rental property 50/50 with a partner. If we sold the property, is there a rule about how it gets reported on taxes? Could either of us choose to report the sale and capital gain to the IRS or do we have to split it 50/50? This property is in the United States.
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I've been using ML for the past year. One, everyone's recommendation to appear aggressive is right. The evaluation is a black box and ultimately, you're responsible for any trading.. if you're on too much margin, they will sell your positions to cover... But, two, ML/MLEdge's processes are draconian and CS are really difficult to work with. The bureaucracy will kill you. I've run into them 3 times.. and it's always painful. If you're lucky, you'll find someone willing to help and invest time with you. Otherwise, you'll get the run around.
I got the Platinum Rewards tier and they're not really helpful for their preferred clients. For TDAmeritrade APEX, they get a special number and they work with you... With ML, I've realized they could care less. Try moving to another brokerage.
So if I resubmit the application, appearing as aggressive as possible, wouldn't they notice that I just applied and wasn't aggressive on the prior applications?
I hate to switch brokers, Merrill Lynch gives you free trades once you have $50,000 in your accounts, Plus they give you a 50% bonus on your credit card cash rewards. It's so lucrative to be there, I'd hate to leave over this.
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Should I just keep applying until I am accepted?
I answered "18 years" to my experience with stocks. "10 years" experience with options.
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I have been rejected by Merrill Lynch after attempting to change my cash brokerage account to a margin account. They won't tell me specifically why, but they hinted that one time it was because I checked a box for "seldom" regarding my trading activity. Then, I resubmitted a new one with "active" and they rejected it again, saying they were skeptical of my net worth. I followed up by explaining the sources of my net worth, to which they replied that I would qualify. Then the next day, they call and say I was rejected again and they won't tell me why.
Has anyone had difficulty obtaining a margin account with Merrill Lynch? I'm not even attempting to trade on margin, I simply want to take a margin loan out to buy real estate, which they said I was free to do.
I haven't ever heard of anyone rejecting margin loans. After all, they are secured by the securities in the account. What gives?
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WHat about trusts like Weyerhauser and Plum Creek?
Weyerhaeuser is, in my opinion, the best way to play a rebound in timber and home building.
Plum Creek is cheaper on a price per acre of land but has no where near the upside that WY has simply because Plum Creek is much more of a pure play land holder and Weyerhaeuser, in addition to having millions of acres of land, has a huge amount of lumber mills, pulp and cellulose fibers plants, a newspaper joint venture, and they also are one of the largest home builders in the country.
Weyerhaeuser's net income benefits about $4.5 million monthly pre tax for every $10 increase in the price of lumber and OSB. This is just in their lumber business. So, if lumber were $100 higher and holds for a year at that price, the pre tax income benefit to WY's wood products division would be about $540 million annually. In the old days of a strong housing market, WY was generating huge amounts of cash in lumber, pulp, home building, and timber.
The land value alone on WY is about $18/share. If you go back and look at even the worst of times, WY's share price didn't fall much further than $16-18 per share. At that point you would essentially be buying timber at liquidation value and getting everything else for free.
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I think you're focusing too much on the "balanced budget" part. But you do have a point that persistently running a deficit and financing it via increasing the money supply is going to be inflationary. Let's say the economy gets heated up, why don't you feel the Fed can drain liquidity? The fed has such a huge balance sheet right now that releasing these (liquid) assets would do a lot in addition to adjusting rates. (Fed can also sell its gold holdings if inflation rises too much).
Basically my opinion is that the Fed has a much easier time of fighting inflation than fighting deflation.
Perhaps you are correct and they can drain Trillions without an issue. I hope that's what happens. I do not wish for economic chaos or a currency collapse. I just don't see how we get out of the situation we are in without a crisis. The Fed can move rates up, but what would that do to the Treasury when they can't borrow at 1% anymore? I'm young and don't remember the early 1980's so I don't know how it played out when Fed Funds were in the mid teens. The national debt back then was much much smaller. Look how quickly the banks failed when small percentages of Trillion dollar balance sheets moved against them.
And in the event that we simply end up with moderate inflation, then commodities should simply rise with that.
All of this gets back to my point that I don't see many reasons for silver to fall significantly. The investment legends are quick to point out that if you cover the downside, the upside takes care of itself. That's all I'm thinking here.
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Historically, all sorts of fiat currencies has had problems and have ended badly. Yet the adoption of fiat currencies has steadily been increasing. There aren't a lot of people using seashell, cattle, gold coins, silver coins, etc. for trade.
2- Historically, gold and silver have had 50%+ corrections.
3- I'm not sure if silver is scarce. Production has increased more than gold even though the price of gold has gone up more than silver. It's not as hard to find as gold.
4- Some macro trades are incredibly hard to make. Suppose you foresaw the collapse of investment banks, homebuilders, etc. Timing is so crucial!!! These stocks took a very long time to collapse.
There aren't a lot of people using gold or silver coins for trade, but gold and silver coins will always be accepted and valued in the world. They could be sold for a currency that hasn't been devalued.
Bank of America has served me with a couple of 50% corrections since it became my largest position! That didn't deter me.
Gold is recycled. Silver is often trashed. You can find miniscule amounts of silver in soap, bandages, on catheters, in medicine, in cell phones, in computers, in mirrors. These things end up in the garbage. Gold ends up at the refinery.
It could be many years, next year, or never when the U.S. has a crisis. If it's many years or next year, the opportunity to buy silver or gold at today's prices would evaporate so quickly that people wouldn't be able to buy enough to make a difference. If it never happens, GREAT! All my other investments, stocks and real estate will be just fine.
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I honestly have no idea what the inflation impact would be from being dropped as the reserve currency of the world.
The main concern I have is that we cannot, under any circumstances I can see, balance our budget. I don't even think we could get close. I can't see how the Fed drains liquidity fast enough to stop inflation once the economy gets heated up. Yes the easy answer is to say they raise rates through open market operations, but 3 or 4% higher interest rates would be a disaster to the budget when your debt is $20 Trillion. Once that disaster becomes reality, I go back to my original question, which is how does the Fed drain Trillions in liquidity without a crisis.
Combine that boondoggle with the scarcity of silver, the underinvestment in precious metals, the reality that in a crisis people tend to throw money directly at precious metals, and I *think* a strong case can be made to own silver.
I do appreciate all the responses so far.
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I recognize there is minimal inflation today.
How does the Federal Reserve drain Trillions of liquidity when things turn around? Is it possible to do this without creating a crisis?
Who's the bidder for mortgage backed securities with 3% mortgages behind them if the Fed becomes a seller?
How many years can the United States run a $1 Trillion deficit without anyone questioning the $US Dollar as a reserve currency?
I'm looking for information as opposed to presenting a case for buying silver so feel free to expand on any reasons why it wouldn't work out over a period of say, eight, nine or ten years.
Energy Sector
in General Discussion
Posted
Chevron's $75 billion buyback is a massive wake up call to anyone who's sitting on the fence undecided about whether these oil companies are serious about returning cash. I expect 10%-20% buyback announcements across much of the sector.
Specific to Chevron, however, I did a little looking in 10Qs and Ks after the announcement and found that Chevron's shares outstanding between June 2021 and Sept 2022 were unchanged. This is in spite of them repurchasing 61 million shares during that time!! They do have a note in their 10Q that they don't expect that level of stock option issuance going forward but wow that's some serious stock compensation.