Have We Hit The Top?

[Gregmal]

1 minute ago, crs223 said:

 

How do low rates help the lower class?

 

How do low rates help the upper class?

 

I imagine you could make a career out of trying to answer those questions... in a system as complex as our economy it would probably require A/B testing in parallel otherwise-identical universes to get the true answer.

 

 

 

 

 

 

I think part of the equation is realizing the wealthy folks are always gonna do well. Like we discussed in the JOE thread, $1.5M 5,000 sq/ft lots are still moving as are the mansions. Taking financing away from the folks without resources is the absolute worst thing you could do. To his credit, a lot of the Obama programs with regard to housing and especially homebuyer credits changed lives. Ive watched literally every GFC related documentary or show ever made because I like the housing stuff. You could say they should have known better, or whatever, but the majority of the folks who got hurt were all lower income in marginal neighborhoods who basically just said, "I want to make it. I wanted the American dream. I was willing to take the upfront risk because if I could get into the house I would do everything to make sure I paid my mortgage"...and well, that largely worked for a while, but those folks didnt read the fine print and got blasted on the rate resets. But by and large, lower interest rates benefit normal people. Gates and Bezos will over course outpace them in terms of what they have in absolute terms, but for most people...just getting something is very meaningful. 

[Gregmal]

The same bs argument folks made about gas and grocery greatly effecting the lower folks....is it or more, or less? than 200-300 bps being added to the monthly payment on a $250-300k mortgage loan? Whereas whats more important to that person in terms of their future? The $40 gas that goes in the tank that burns and is gone or the home that solidifies your future stability and grows your net worth? Theres been no good argument that raising rates does anything but helps rich people and savers. Savers of course saving because they have more than they need. 

[crs223]

29 minutes ago, Gregmal said:

Taking financing away from the folks without resources is the absolute worst thing you could do. 

In your model, when is raising rates is not “absolute worst thing to do”?

 

If I am going to base my rate hike decision only on home prices, I would be more likely to raise at an all time high.  I would think that raising rates in a housing depression would be “absolute worst”.

[Gregmal]

I would evaluate everything. All time high is just a relative term. It’s kind of irrelevant. One days all time high is another persons dip buying opportunity. I mean look at all the FANG stuff lol. Stocks went up 100% as they continued to be “too expensive” and at “all time highs”….and then they pull back 10-20% and everyone piles in cuz they’re cheap. At prices still representing large premiums to previous “too expensive, all time highs”.

 

Would you take away financing when that segment of employment is strong and workers have leverage for higher wages? Isn’t that kind of when they need it? So you can turn it into something? Let’s face it, none of these folks will likely EVER be able to pay cash for a house. Getting a down payment in the bank is hard enough. 
 

None of these people are buying homes or making big purchases when they’re unemployed or the economy is in the shitter are they? 
 

The icing on the cake that solidifies all this is Powell even admitting on several occasions that raising rates has nothing to do with many of the inflation issues they’re trying to tackle. That the Fed is helpless. Perhaps their biggest weapon, which he is to his credit effectively using, is talking the talk which can lead to stuff like my buddy contractor mentioned. Folks reacting to the idea of it all, and maybe driving the narrative. 

[crs223]

I feel no sympathy for the folks who have to buy a home with CPI at 11% and FF rate at 2%.

[Gregmal]

I mean sure, most of us are good. Ive got 6 houses already with tons of 30 year fixed locked and equity over 50% in most of them and it seems half this board has cash earmarked for a pending housing crash so they can scoop up more. My main point is to highlight how ridiculous a notion it is, largely one peddled by rich folks, that raising rates is helpful to the middle and lower classes. Its like, yea...ok. Philip Morris once said cigarettes were good for you. 

[Spekulatius]

2 hours ago, changegonnacome said:

Watched Powell testify to congress......i standby my earlier comments in this thread.....which is we might disagree on inflation & its sources, its future trajectory, the Fed's ability to moderate it with their toolkit. We can & have disagreed on its effects on lower income folks & whether they 'deserve' it or not.

 

But watch Powell's testimony and two things come through loud and clear in his characterization of what happens next:

(1) Powell & the Fed believe inflation regardless of its source is insidious & pernicious and waiting for it to moderate might allow it to ingrain in inflation expectations making it even harder to solve later

(2) Powell indicated a moral imperative to act to help the poor...stating clearly his "Why?" This is because he/they believe inflation hurts the poor disproportionally and if the cost to help them is the re-pricing of financial assets & in the case of housing real estate assets then this is the price that must be paid for the greater good and he/the Fed are willing to watch that happen and ignore the squeals from market particpants. 

 

We've argued over many pages here whether these views are right or wrong...what I'm saying here is that the view above, right or wrong, is the only 'view' that matters as this is the view of the people driving the bus here with rate hikes. I happen to agree with him but it doesnt matter what I think...its what he/FOMC think that matters.

Whether right or wrong doesn't matter. Politicians on both sides believe it and so does Powel. He has the mandate so squash inflation, so we are going to see a Mini Volker 1981 playing out.

[mcliu]

1 hour ago, Gregmal said:

I mean sure, most of us are good. Ive got 6 houses already with tons of 30 year fixed locked and equity over 50% in most of them and it seems half this board has cash earmarked for a pending housing crash so they can scoop up more. My main point is to highlight how ridiculous a notion it is, largely one peddled by rich folks, that raising rates is helpful to the middle and lower classes. Its like, yea...ok. Philip Morris once said cigarettes were good for you. 

Inflation also harms the middle/lower classes far more than the rich.

Raising rates to reduce demand is one way of lower inflation.

Reducing fiscal spending would also help but is much less politically palatable.

Then there's also policies to increase supply.

Problem with energy-driven inflation in the current political environment is that raising rates is really the only viable option.

[ERICOPOLY]

On 6/23/2022 at 11:57 AM, Gregmal said:

Philip Morris once said cigarettes were good for you. 

 

But Juul is being pulled from shelves.  Go figure.

[Spekulatius]

Seems like for this fund (Saga partners) , the top is in. 56% loss in one quarter. Oof.

[zzzyx]

WTF kind of garbage were they in?  LOL, I guess the 2020 performance provided some foreshadowing.

Edited August 31, 2022 by zzzyx
grammar

[Spekulatius]

After a performance like in 2020, they should have asked themselves a question:

 

 

[maplevalue]

https://www.gmo.com/americas/research-library/entering-the-superbubbles-final-act/

[LC]

7 minutes ago, maplevalue said:

https://www.gmo.com/americas/research-library/entering-the-superbubbles-final-act/

 

Grantham is tough to like...I mean, the gall to post an article a week after a bear rally deflates and says,

 

Only a few market events in an investor’s career really matter, and among the most important of all are superbubbles. ¹ These superbubbles are events unlike any others: while there are only a few in history for investors to study, they have clear features in common.

One of those features is the bear market rally after the initial derating stage of the decline but before the economy has clearly begun to deteriorate, as it always has when superbubbles burst."

 

I too can write about last week's news and call it prescient...

 

 

Edited August 31, 2022 by LC

[Gregmal]

Grantham is the kinda guy who rather make 20% once a decade shorting something than 2-3x his money just being quiet and long Berkshire or an index. 

[Gregmal]

I mean its literally clockwork how predictable these guys are. Quiet for a while and then the first 3-5% pullback start cranking up the rhetoric about caution and chaos and doom and all that other stuff. 

[CorpRaider]

Ahh I like him.  First, he has a British accent. Second, c'mon he was on thuh investors podcast end of July and said the same stuff. (He was also like bitcoin is total bullshit and horrible for the planet even after host tried to work him into a favorable opinion like 6 times).  He's not a grifter like _____ or something.  Even though he's kind of retired, GMO is legit.  He's usually quite nuanced (I mean his headlines grab you by the ballsack, but when you get into it's alright, like "the risks are x versus y and historically you get absolutely gutted, so here's something cheaper, do as much as you can stomach."  But yeah he's been wrong about over allocating to emerging for a long time.  Third, he made a shit ton on a battery tech SPAC and called it out as total bubble/bullshit real time.

Edited August 31, 2022 by CorpRaider

[Gregmal]

You must love Faber then. That guy is a true character. 

[ERICOPOLY]

On 6/23/2022 at 10:35 AM, Gregmal said:

The same bs argument folks made about gas and grocery greatly effecting the lower folks

 

Lunch:  $1.50 for hotdog and refillable 20oz soda at Costco food court.

Dinner:  18" fresh-baked pepperoni pizza is $9.95 at Costco food court (easily 6 meals here at $1.66 each meal)

 

 

 

Edited August 31, 2022 by ERICOPOLY

[LC]

I joke with my girlfriend that we are going on costco dates where we buy $1.50 hot dogs/pizzas, get some ice cream, $5 rotisserie chickens, 1.5L of french vodka for <$20, etc. etc.

 

She laughs but secretly I can't wait to do it. 

[ERICOPOLY]

My wife tells me the food court at the Costco in San Luis Obispo is on the outside of the building so you don't even need a Costco membership to eat there.

[Gregmal]

Yea there really isnt an affordability crisis in most of the places wealthy WS folks are claiming. Everyone just wants more in perpetuity. Including the plebs. $30 increases in gas and grocery for the week shouldn't really be a valid excuse to destroy the economy and take away peoples jobs. I think I mentioned earlier, but one of the most bizarre things Ive heard of in my life was my friend who does home improvements and contracting in Bergen County, NJ. For those that dont know, Bergen County is basically the wealthy suburban place most NYC high earners live if theyre in NJ. And he said sometime around May business went from booming to just quiet, overnight. Folks, mostly white collar finance, legal, media type people all basically said the same thing.."the big reset is about to happen"...LOL its like theres a memo that goes around to the have's so they can prep in advance, get over to cash and long some puts, pad the savings accounts, and the pee ons who are busy really working dont get the notice until the pink slip comes in. 

[Spekulatius]

52 minutes ago, ERICOPOLY said:

 

Lunch:  $1.50 for hotdog and refillable 20oz soda at Costco food court.

Dinner:  18" fresh-baked pepperoni pizza is $9.95 at Costco food court (easily 6 meals here at $1.66 each meal)

 

 

 

Ikea works too. Food is actually decent at their cafeteria, but I think you need to smuggle the booze in. Wednesday is best, they have free kids meals, so you got to eat the meals for your pretend kids too for free. Then take a nap at one of these couches while hopefully no one is watching.

 

Thats how you beat inflation.

Edited September 1, 2022 by Spekulatius

[ERICOPOLY]

And the other thing you do is put your house on AirBNB and learn how to go camping for free whenever your house is occupied:

 

"Dispersed camping is generally allowed on public land for a period not to exceed 14 days within a 28 consecutive day period. "

 

https://www.blm.gov/programs/recreation/camping

[dealraker]

3 hours ago, Gregmal said:

Grantham is the kinda guy who rather make 20% once a decade shorting something than 2-3x his money just being quiet and long Berkshire or an index. 

Grantham's investing isn't anywhere as drama oriented as his writing.   His writing disorients me completely and I quit reading it.  

Edited September 1, 2022 by dealraker