Have We Hit The Top?

[Castanza]

29 minutes ago, Gregmal said:

Yea this is kinda emblematic of the decades old problem. Fortune 500 America has systematically ground employees down to where they just don’t have a real career path upward unless they move. Made them truly believe they are interchangeable and replaceable.
 

I’ve mentioned before my sister at Lockheed has a good job. But is probably paid 80% of the fair market rate for her job. If you go to management and ask for a raise they just tell you to wait til next annual review except even those never eclipse 3-5%.

 

My wife was super loyal to a similar large corporation because there was a decent work/life balance. She got offered 35% more from a headhunter with the catch being she had go in full time. So she went to HR and said she’d stay for a 15% raise as long as she could continue doing hybrid. They agreed and then 3 months later reneged and said everyone back to the office 4 days a week. See ya. She left.
 

Establishment corporate America is finally getting what it deserves. There’s reasons wages haven’t kept up with inflation now for 5 fuckin decades! It’s got nothing to do with anything occurring in the last 3 years. Hopefully the Fed isn’t fully able to stop the current momentum in favor of their lobbyist and corporate friends.

The last decade really amplified this too with big corps financing frivolous projects with billions in cheap capital; all while giving .25 cent raises and frozen turkeys at Thanksgiving. 
 

 

[tede02]

Just now, gfp said:

 

It doesn't get much better than that!  Hope you like your house and want to stay for a long time

 

Absolutely! My wife and I had our eye on a property which was literally across the road from our old house. Had a purchase agreement in Feb 2020 then the world started falling apart. OMG I was nervous. But things worked out and I'm basically living on what's as close to "the dream" property as I could imagine. 35 acres with a mix of woods and pasture and hay fields. Hope to be here for 40+ years as long as our health holds up. My oldest daughter (7) asked me one time, "Dad, when are we going to move." My answer...hopefully NEVER! LOL. 

[Gmthebeau]

27 minutes ago, tede02 said:

 

I agree that low inventory will put a floor on housing prices. Maybe they come down 10% but nothing like we experienced post GFC. I bought my first house in late 2008 and the situation was completely opposite, there were forclosures everywhere. Now there is nothing to pick from. 

 

I think I timed the mortgage market perfectly with a refi in Aug/Sept 2021. I noticed how low nominal rates were AND how tight spreads got. Locked in 2.375% on a 30 year with no points. In hindsight, I wish I would have paid a point and locked in at 2%! 

 

yea, 2.375 on a 30 year fixed is amazing.  We locked in 2.625 on a 30 year fixed rate for the house I planned to retire at.  I am now retired.  Can buy treasury bonds paying 5% to pay off the house and the difference is profit.  The banks will be eating losses on these loans for decades.

[Spooky]

36 minutes ago, tede02 said:

 

I agree that low inventory will put a floor on housing prices. Maybe they come down 10% but nothing like we experienced post GFC. I bought my first house in late 2008 and the situation was completely opposite, there were forclosures everywhere. Now there is nothing to pick from. 

 

I think I timed the mortgage market perfectly with a refi in Aug/Sept 2021. I noticed how low nominal rates were AND how tight spreads got. Locked in 2.375% on a 30 year with no points. In hindsight, I wish I would have paid a point and locked in at 2%! 

 

Congrats man, crushing it!

[TwoCitiesCapital]

1 hour ago, Castanza said:

The last decade really amplified this too with big corps financing frivolous projects with billions in cheap capital; all while giving .25 cent raises and frozen turkeys at Thanksgiving. 
 

 

 

Agreed. I have been patient for years thru conversations my higher ups that my salary was out of sync with the revenue/cost savings I drive. Also doesn't make sense when looking at the rest of the industry as I'm "below median" on comp while receiving "above expectations" on most performance reviews. The most recent conversation was how I'm actually making less now vs 6-years ago when I was hired because my salary/bonuses haven't kept up with inflation despite promotions and stellar reviews. 

 

Now they think my attitude is "combative" and "toxic" because I've refused to operate up to the level they've grown accustomed to since my pay doesn't reflect it and all I've heard for 6-years is "we're working on it" instead of seeing any results . 

 

 If I'm being exploited like this in a high paying, professional industry, that requires specific credentials for the job - how much more so people less competitive in the labor market? Makes you angry to think about

 

Perhaps Marx was right about capitalism just devolving into exploitation and regulatory capture

 

 

39 minutes ago, Gmthebeau said:

 

yea, 2.375 on a 30 year fixed is amazing.  We locked in 2.625 on a 30 year fixed rate for the house I planned to retire at.  I am now retired.  Can buy treasury bonds paying 5% to pay off the house and the difference is profit.  The banks will be eating losses on these loans for decades.

 

I also refi'd in 2021 and locked in 2.75. Dropped my mortgage payment by nearly $600/month. 

 

Have definitely been thinking about a portion of my fixed income allocation like this. I've basically been short a 30-year treasury for the last 3-years. Lock in some of that profit by buying mortgages/fixed income against that liability stream now that rates are 2-3x higher. 

Edited October 6, 2023 by TwoCitiesCapital

[Spekulatius]

39 minutes ago, Gmthebeau said:

 

yea, 2.375 on a 30 year fixed is amazing.  We locked in 2.625 on a 30 year fixed rate for the house I planned to retire at.  I am now retired.  Can buy treasury bonds paying 5% to pay off the house and the difference is profit.  The banks will be eating losses on these loans for decades.

Yes, I got 2.75% on a low / no cost refinance. I am a serial refinancer - every 0.5% down I would refinance with a no cost (or low cost refinance). Missed the 2021 low as my last refinance was in late 2020 (before that was spring 2020).

 

I am only about 40% LTV (maybe even less) though so in the end, the mortgage would not prevent me from moving if I decide to downsize.

 

The problem really is that I could hardly afford my own house with an 8% mortgage, if I had to finance 80%  LTV. So, I am not sure who is going to be a buyer of houses like mine will be, unless interest rates come down.

 

I think newbuilds sell because builders can offer teaser rates which they roll into the purchase price. Those homes may be hard to resell too because they do seem priced above market, partly to pay for the discounted mortgage.

[Gregmal]

4 minutes ago, Spekulatius said:

think newbuilds sell because builders can offer teaser rates which they roll into the purchase price. Those homes may be hard to resell too because they do seem priced above market, partly to pay for the discounted mortgage.

Kinda but not all teaser. Toll is offering 5.5% fixed on a lot of inventory homes. There’s again this recurring theme that the big will just get bigger. How does a local builder compete with that?

[Castanza]

1 hour ago, TwoCitiesCapital said:

 

Agreed. I have been patient for years thru conversations my higher ups that my salary was out of sync with the revenue/cost savings I drive. Also doesn't make sense when looking at the rest of the industry as I'm "below median" on comp while receiving "above expectations" on most performance reviews. The most recent conversation was how I'm actually making less now vs 6-years ago when I was hired because my salary/bonuses haven't kept up with inflation despite promotions and stellar reviews. 

 

Now they think my attitude is "combative" and "toxic" because I've refused to operate up to the level they've grown accustomed to since my pay doesn't reflect it and all I've heard for 6-years is "we're working on it" instead of seeing any results . 

 

 If I'm being exploited like this in a high paying, professional industry, that requires specific credentials for the job - how much more so people less competitive in the labor market? Makes you angry to think about

Frustrating indeed….Any options to leave? 
 

My FIL works for West Pharmaceuticals and works on plastic presses, injection moulds etc. pretty much indispensable to the company and more useful than the majority of the plastics engineers. He’s saved their bacon and come big contracts more than a handful of times. What do they pay him? Like $28/hr with one weekend shift a month. 
 

The so called “bottom rung” as described by the egg heads are often more valuable than they are described. 

[TwoCitiesCapital]

8 minutes ago, Castanza said:

Frustrating indeed….Any options to leave? 
 

My FIL works for West Pharmaceuticals and works on plastic presses, injection moulds etc. pretty much indispensable to the company and more useful than the majority of the plastics engineers. He’s saved their bacon and come big contracts more than a handful of times. What do they pay him? Like $28/hr with one weekend shift a month. 
 

The so called “bottom rung” as described by the egg heads are often more valuable than they are described. 

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. 

Edited October 6, 2023 by TwoCitiesCapital

[gfp]

35 minutes ago, TwoCitiesCapital said:

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. 

 

 

Just curious as this relates to the job openings figures vs. actual hires - are these non-responses listed job openings that make it look like they are interested in filling an open position?

[Gregmal]

That dynamic is pretty much what Kuppy was referring to. The banks and Wall Street stuff, much of the tech world too slammed on the brakes last year and are cutting jobs. Even around the NYC area, the headhunters are all basically in famine mode as there is not much high end white collar hiring. Try firing a bartender or electrician though. Teacher, pilot, plumber? Best of luck. 

[changegonnacome]

4 hours ago, Gregmal said:

I wouldn’t be shocked to see a bit of a flare up, but then you turn around and apparently $10 a barrel fell off the past week. Gas prices at the pump are coming down. Rents are solid but not moving anywhere really. 

 

Well in an economy with genuine inflation - when somethings price isn't going anywhere for years....its actually going down in real terms...inflation compounds like anything else...rents become more affordable by staying flat while folks get 4% pay increases....before you know it rents in real terms are 8-12% below peak relative to incomes.

 

Take house prices - OK no major house price falls except in frothy markets......but in reality relative to their 2021 peaks and in real terms lots of properties I was looking at have remained flat or slightly down vs. 2021 in nominal terms.......in practise given two years of solid inflation prints their price to me in real terms have actually fallen as they've failed to match inflation (assuming cash purchase, not mortgage obvs!)

 

In some respects the question of affordability in US housing can be fixed with a little time and inflation.....that acts a little like a pull back in housing but has a minor wealth effect as everybody gets to hang on to their nominal ATH so they sleep well at night and still go to Ruth Chris's steakhouse on Friday nights.

[TwoCitiesCapital]

29 minutes ago, gfp said:

 

 

Just curious as this relates to the job openings figures vs. actual hires - are these non-responses listed job openings that make it look like they are interested in filling an open position?

 

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. 

[brobro777]

Well it finally happened, egg prices came back down to pre Covid price of $2.99 per dozen at Ralph's on Western Ave here in Los Angeles.

 

It only took 3 years! 

[gfp]

29 minutes ago, brobro777 said:

Well it finally happened, egg prices came back down to pre Covid price of $2.99 per dozen at Ralph's on Western Ave here in Los Angeles.

 

It only took 3 years! 

 

And check out the price at my gas fill up this afternoon

 

[brobro777]

18 minutes ago, gfp said:

 

And check out the price at my gas fill up this afternoon

 

 

Wow, $3> gas prices. I think I saw that once at the ARCO gas station on Olympic Blvd. 

 

Once. 

 

 

 

 

[Spekulatius]

5 hours ago, TwoCitiesCapital said:

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. 

Depends on circumstances. I just saw a colleague (engineer) leave after being more than 30 years with the company. He got a huge pay bump - I think at least 35% based on what he indicated. For engineers the job market still looks strong. The job he is going to be doing is pretty much equivalent to his old job (his new employer is much smaller in size).

 

You get the pay bumps by changing jobs not by hanging around. Almost everyone who is at his job for more than 5 years is very likely underpaid currently.

Edited October 7, 2023 by Spekulatius

[fareastwarriors]

7 hours ago, brobro777 said:

Well it finally happened, egg prices came back down to pre Covid price of $2.99 per dozen at Ralph's on Western Ave here in Los Angeles.

 

It only took 3 years! 

 

2.49 at the smart and finals. 

[UK]

https://www.bloomberg.com/news/articles/2023-10-08/bond-market-pain-is-a-sign-of-interest-rates-returning-to-normal?leadSource=uverify wall

 

 Bondageddon:)

[mattee2264]

5%+ bond yields = PAIN seems to be the consensus in the financial media at the moment. 

 

Not really sure I completely buy it.

 

Equity risk premium has almost been wiped out. But if investors are confident in long term growth prospects for the market and especially Big Tech then they can get their margin of safety in growth (something bonds can't offer). And the US economy is still growing. 

 

Difficult to imagine another financial crisis and the Fed is fairly adept at bail outs so the rate sensitive sector should hold up reasonably OK and a housing market correction is going to be fairly mild so long as unemployment rates stay low.

 

While borrowing is more expensive companies and consumers are getting more interest on their cash balances which is a partial offset. And a lot of consumers and companies have locked in low rates of borrowing in recent years which will increase their staying power and buy them time to prepare for any required refinancing at higher rates and also will stagger the required adjustment for consumers and companies as a whole.

 

And of course market psychology is such that as soon as there are signs things are breaking or the economy is slowing down there will be market bets on a pivot which will send stocks higher.

 

I think the only thing that could sink markets is going to be if there is a proper corporate earnings recession. Because if it does turn out that Big Tech is cyclical then bonds become a more attractive safe haven. But right now Big Tech is the hiding place of choice for institutional investors because they've been the big winners over the last decade, showed their resilience during the COVID recession, have a new lease of life with AI, and so far they have managed to maintain elevated earnings in spite of weak revenue growth through cost cutting initiatives. There would be a rude awakening however if we went into a proper recession and Tech earnings fell significantly and in a proper recession cyclicals would also head lower so there would be a synchronised and probably quite significant market decline

 

 

 

 

[thepupil]

for me the biggest questions is how will the economy handle a (inevitable/already happening ?) slowdown in everything that's financed (cars, housing, appliances) by the bottom 80%-99% (in case of housing) of people and the jobs that are connected to those and will we start to see actual real bankruptcies which affect employment of the 12 million people in the U.S employed by private equity backed companies. 

 

these companies can't handle the current cost of financing. if there was a stock index of these companies and they were treated like the public market, they'd be down 60%. Leveraged loans have gone from costing 5% to 10% and that's the index. worse off than index borrowers will be more. for me the biggest quesiton is will those companies change significanlty in operations (fewer people / job losses / closures of locations) or will they just have new capital structures. I don't know answer to that. 

 

Edited October 9, 2023 by thepupil

[Spekulatius]

5 minutes ago, thepupil said:

for me the biggest questions is how will the economy handle a (inevitable/already happening ?) slowdown in everything that's financed (cars, housing, appliances) by the bottom 80%-99% (in case of housing) of people and the jobs that are connected to those and will we start to see actual real bankruptcies which affect employment of the 12 million people in the U.S employed by private equity backed companies. 

I am surprised private equity has held up that well. All except Brookfield entities and CG are close to their highs and up bigly this year. Makes no sense to me, the higher cost of capital ought to make their business much harder.

[sleepydragon]

1 minute ago, Spekulatius said:

I am surprised private equity has held up that well. All except Brookfield entities and CG are close to their highs and up bigly this year. Makes no sense to me, the higher cost of capital ought to make their business much harder.

Brookfield just closed a hedge fund in July they started a couple years ago. 

[thepupil]

2 minutes ago, Spekulatius said:

I am surprised private equity has held up that well. All except Brookfield entities and CG are close to their highs and up bigly this year. Makes no sense to me, the higher cost of capital ought to make their business much harder.

 

I'm not. It will take 3 bad fund cycles (15 years ish) to kill PE. Right now we only know 2020-2021 PE vintages will be bad. same guys all have more uncalled capital and private credit funds to sweep up their own mess. LPs impairing their capital or making really bad returns on 1-2 vintages won't kill (most) PE / alts.

[Spekulatius]

@thepupil I don’t expect PE to get destroyed as a business model, but a couple of bad vintages will filter through their income statement over time and typically stocks react to a couple of bad earnings years. In this case, the PE stocks have generally been bullish this year, do people already look beyond the cycle?