Are there two sets of rules?

[Spekulatius]

29 minutes ago, Gregmal said:

The number of job openings indicates people are not bothered and they are comfortable. Gig economy is also a huge lever for people to make more money. I’d challenge anyone to find a job that’s only increased pay 6% since December 2020….it’s academic crap the same way the CPI last year said inflation was only 8%. It was probably closer to 20%.

Very simple. My job. I know a lot of others in the same boat, including my colleagues. Yes, I could job hop and find a different job for more, but likely would have to move, which creates a significant hurdle as far as family is concerned.

[Viking]

54 minutes ago, Gregmal said:

I mean in another thread Viking you listed the home equity appreciation and what it equates to. That’s just one angle. Then there’s job market leverage at the workers hands. Now here you’re saying gas and grocery bills negates all that….seriously? I’ll take it ones home and primary income  are bigger components of value to than their discretionary grocery bills and gas costs..but hey, just say inflation, inflation, inflation. It’s the new bogeyman now that people stopped falling for COVID. 

I have been saying for years that crazy low interest rates resulted in asset bubbles in stocks, bonds and real estate (in Canada for this last one). Anyone who owns assets have made out like bandits. Anyone who does’t own assets is screwed (falling much, much further behind). Who wins in this scenario? The rich. Big time. 
 

The problem with bubbles is they ALWAYS pop. And when they do pop it usually gets very ugly. Think economic recession. Not good for ‘average workers’. 
 

Inflation is also a big problem. And IF it gets entrenched into the economy and you get a wage/price spiral then we are screwed. There is one solution for that: Volker type increase in interest rates. And a brutal recession(s). Except THIS TIME the world is swimming in debt. Once again ‘average workers’ get screwed. 
 

High inflation/asset bubbles are a terrible set up for ‘average families’. 

Edited June 10, 2022 by Viking

[Gregmal]

6 minutes ago, Spekulatius said:

Very simple. My job. I know a lot of others in the same boat, including my colleagues. Yes, I could job hop and find a different job for more, but likely would have to move, which creates a significant hurdle as far as family is concerned.

Exactly. You’re comfortable and don’t need it. If you did, you would.

[Gregmal]

12 minutes ago, Viking said:

I have been saying for years that crazy low interest rates resulted in asset bubbles in stocks, bonds and real estate (in Canada for this last one). Anyone who owns assets have made out like bandits. Anyone who does’t own assets is screwed (falling much, much further behind). Who wins in this scenario? The rich. Big time. 
 

The problem with bubbles is they ALWAYS pop. And when they do pop it usually gets very ugly. Think economic recession. Not good for ‘average workers’. 
 

Inflation is also a big problem. And IF it gets entrenched into the economy and you get a wage/price spiral then we are screwed. There is one solution for that: Volker type increase in interest rates. And a brutal recession(s). Except THIS TIME the world is swimming in debt. Once again ‘average workers’ get screwed. 
 

High inflation/asset bubbles are a terrible set up for ‘average families’. 

What are the number of millionaires over the past 1/3/5/10 years? I’d say that’s more so normal hardworking people benefitting than just a “rich” benefit. At some point everyone needs to get “rich” or they spend the rest of their lives a servant in the hamster wheel. So despite all the popular banter and Fed bash…you could say they did their job. Now folks think it’s beneficial(to whom lol?) to undo it…why? So as @widenthemoat mentioned earlier…people with more than they need get better investment opportunities? Blackstone can buy more residential space in cash? 

[SharperDingaan]

There are multiple sets of rules, and always have been; they are simply what an enterprising lad exploits. Thing is - everyone has to live somewhere, and wherever they live, those are the rules they accept. If you have the means/ability to emigrate you get to choose between rules.

 

Smuggling/sanctions breaking is one such exploitation. Our London RE will be leased by some friends, with whom we share a partial train load of Beluga Vodka in a western warehouse. Our gain, their loss ....

 

SD

  

 

 

[Viking]

How is the ‘average family’ feeling these days? Terrible. Why? High inflation. Not rocket science…

 

The crazy thing is the inflation story is still in the early innings. If people think things are bad right now just wait another 3 or 4 months $150 oil will help… food shortages too… And this is all good for the ‘average family’? Nuts.
—————

The Michigan consumer sentiment in the US fell sharply to a record low of 50.2 in June of 2022, well below market forecasts of 58, preliminary figures showed. The current economic conditions subindex sank to an all-time low of 55.4 (vs 63.3 in May) and the expectations gauge plunged to 46.8, the lowest since May of 1980. Consumers' assessments of their personal financial situation worsened about 20%. 46% of consumers attributed their negative views to inflation, the biggest share since 1981, during the Great Recession. Inflation expectations for the year ahead went up to 5.4% from 5.3% and the 5-year outlook to 3.3%, the highest since June of 2008. Consumers expect gas prices to continue to rise a median of 25 cents over the next year, more than double the May reading.

 

- https://tradingeconomics.com/united-states/consumer-confidence

 

Edited June 10, 2022 by Viking

[Gregmal]

Well if certain folks have their way I’m sure those folks will feel even better down the line when their retirement plans that are invested in index funds get walloped. Or when they lose their jobs cuz we have room again to boost profit margins…but hey, it ain’t that bad, an institutional investor will be happy to pay you a 10% premium to 2021 prices for your home…

 

So again, maybe stuff isn’t perfect, but screaming and scaring everyone about how bad it is when the proposed solution is miles worse….it’s not like we haven’t seen this game before. Hasn’t even been 2 years since the last one. 

[Gregmal]

Essentially the argument I’m hearing over and over again is that in order to solve the problem that some things, mainly little daily life things, like grocery prices, many of which are supply chain related, being more expensive, we need to whack everyone’s jobs and net worth? If oil goes to $150(I think that’s actually conservative) you’ll pay another $25 a week for gas. Solution? Let’s whack $50k off your net worth! Makes sense. Got it. 
 

I mean if $150 oil is a problem, won’t that naturally slow things down on its own?

 

How is the answer to high housing prices to make housing more unaffordable. If folks have too much debt(this is thrown around a lot but not true at all) make debt more expensive? Folks like my wife, and @Spekulatius might pass up higher paying jobs because they don’t need them, but is the solution to take that option off the table for folks who do? 

[Viking]

Bubble returns are not reality. Investing is not a Disney movie. 
 

When interest rates went to zero the returns from bonds went to the moon. With the 10 year bond near zero (the discount rate) returns from stocks also went to the moon. With mortgage rates crazy low house prices spiked (up 50% in Canada over 2 years). Investment portfolios and paper value of net worth spiked.  But it was an illusion (unless you liquidated and moved to cash… but we all know what a dumb decision that is…).

Interest rates are normalizing. Bond values are getting torched. 10 year bond is over 3%, stock values are getting torched. Mortgage rates have popped higher; in Canada a chill is in the air of the housing market. It appears US housing market is slowing. Easy come… easy go.

Edited June 10, 2022 by Viking

[Viking]

11 minutes ago, Gregmal said:

Essentially the argument I’m hearing over and over again is that in order to solve the problem that some things, mainly little daily life things, like grocery prices, many of which are supply chain related, being more expensive, we need to whack everyone’s jobs and net worth? If oil goes to $150(I think that’s actually conservative) you’ll pay another $25 a week for gas. Solution? Let’s whack $50k off your net worth! Makes sense. Got it. 
 

I mean if $150 oil is a problem, won’t that naturally slow things down on its own?

 

How is the answer to high housing prices to make housing more unaffordable. If folks have too much debt(this is thrown around a lot but not true at all) make debt more expensive? Folks like my wife, and @Spekulatius might pass up higher paying jobs because they don’t need them, but is the solution to take that option off the table for folks who do? 

Your baseline is a fiction. The ‘prosperity’ you imagine that was created the past +2 years was an illusion. Yes i know, reality sucks. 

[Gregmal]

You aren’t addressing any of the points. You’re just stating in a roundabout way:
 

-everything is a bubble and the Fed accidentally crafted a recovery from GFC and those that sat in cash poo pooing the restoration of the economy and missing the lions share of the gains now deserve to get interest?

 

I won’t even touch on the insanity of screaming inflation but holding cash either. Unless of course again the goal is to simply worry about what the market will do tomorrow. Didn’t someone say speculators vs investors earlier? 

[Gregmal]

1 minute ago, Viking said:

Your baseline is a fiction. The ‘prosperity’ you imagine that was created the past +2 years was an illusion. Yes i know, reality sucks. 

Two years? Did you miss the entire decade?

[Gregmal]

I recall hearing how savvy some of you guys were holding all that cash to go and buy SHOP at $700 or those GOOG shares I made 6x my money on and sold to you guys at 2600. Don’t confuse all this with simply not investing wisely.
 

There’s COVID fad stocks which I guess are the only thing to fit your description of “2 year wealth event”….but those were a clear bubble, not the rest of the country, economy, and world. I mean even simply enough, you seem to know oil is going to $150…you rather own cash than oil futures? Rates rising pushes people to rent, private market for MF has barely budged, and rents are soaring, rather own cash? 
 

None of this stuff logically, makes very much sense outside of the short term narrative.

[Viking]

10 minutes ago, Gregmal said:

You aren’t addressing any of the points. You’re just stating in a roundabout way:
 

-everything is a bubble and the Fed accidentally crafted a recovery from GFC and those that sat in cash poo pooing the restoration of the economy and missing the lions share of the gains now deserve to get interest?

 

I won’t even touch on the insanity of screaming inflation but holding cash either. Unless of course again the goal is to simply worry about what the market will do tomorrow. Didn’t someone say speculators vs investors earlier? 

I am addressing your points. We just disagree.

 

I am trying to simplify the discussion. Zero interest rates (negative interest rates in Europe and Japan) are the central issue. You think they are great. I think they are terrible. So we reach different conclusions about what is appropriate today. 
 

In terms of investing strategy, i love all the different perspectives on the board. I hope EVERYONE makes a shit load of money in the coming years. What i also know is there is no one way. Each investor needs to figure out what works for them. As Druckenmiller says… be inquisitive… and be open minded… Especially important given the current set up.

Edited June 10, 2022 by Viking

[Gregmal]

3 minutes ago, Viking said:

am trying to simplify the discussion. Zero interest rates (negative interest rates in Europe and Japan) are the central issue. You think they are great. I think they are terrible. So we reach different conclusions about what is appropriate today. 

Japan has had zero rates for decades. The issue is that you think the Fed can solve the inflation problem and they can’t. Rates have nothing to do with it. The issue larger scale, is that others know they can’t but are pitching it as a solution, for their own benefit. Cough, Bill Ackman.

[Gregmal]

You have no better look through as to what the issue and what the solution is than how COVID was handled. The government thought(or wanted) to try to control something it has no control over. And just messed things up even more, especially in certain states/areas. The current inflation is a byproduct of that.
 

The answer isn’t to take more measures that just create other, bigger problems and don’t have any bearing on the inflation problem…it’s to back off and let it play it’s course. If people can’t afford things, prices will come down on their own. Purposely making them unaffordable? Eh that’s pretty diabolical. 
 

Now imagine doing all this knowing the end beneficiaries are big corporations and people with excess capital to deploy? 

[Spekulatius]

We can simplify the whole thread and argument and just blame the Fed.

 

[Gregmal]

To be fair, the Fed hasn’t really done anything yet. But again, it’s COVID hysteria playbook all over again. Folks take their positions, start screaming and yelling, the media makes the stories unavoidable and makes terrifying people it’s objective, and before you know it some guy will be crying on TV about how his father couldn’t afford Manischewitz Grape juice this Passover while his minions are liquidating the rate swaps.

 

The big question IMO is does the Fed buy the bs and overreact, or does common sense prevail and some acknowledgement that their tools don’t solve the problems occur?

Edited June 10, 2022 by Gregmal

[cubsfan]

Certainly would be bad news to see the Fed clobber the housing market, which is a huge bright spot in addition to the US jobs market. I've never seen such a strong job market in America in my entire life.

Jobs are everywhere - for anyone that cares to work. 

[Gregmal]

16 minutes ago, cubsfan said:

Certainly would be bad news to see the Fed clobber the housing market, which is a huge bright spot in addition to the US jobs market. I've never seen such a strong job market in America in my entire life.

Jobs are everywhere - for anyone that cares to work. 

Exactly. This notion that we need to stop everything for the lower dung rung that can’t get it right no matter what, is ludicrous. Same as how teachers in school need to teach to the middle core of the class that’s interested, hard working, and capable. Don’t worry about the ends of the bell curve. Especially not the dopes sitting in the back refusing to pay attention or incapable of showing up to class. As someone who fell into the later category, there was nothing anyone could do to force me to be interested in stuff I just didn’t want to do. Same goes for much of the population when it comes to providing for themselves. The focus should be on those who want it, and are willing to put in the work. And for these folks, the economic situation is about as good as it can get. Would be awfully shameful if the Fed attempted to solve a problem it doesn’t have the tools to handle, because a bunch of loud mouths with more resources than they need want higher interest or better investment returns….

 

And FWIW I still don’t see a scenario where the US housing market falters. From day one of COVID the path forward was going to be rents and housing prices taking turns supporting each other and buoying the residential real estate space. If the answer right now is to price normal people out of the housing market, rents have to go higher. To the degree housing continues to be productized the way it is, there’s going to be a ridiculous supply and demand imbalance on the institutional side…as there has been. Everyone worries that the public market reacts first and then the private….and maybe that’s true. But it’s not really that relevant because it always reacts hastily first. Like some investors, if you panic and sell shit down at the first sign of trouble, you may look good in that one instance, but if you do that all the time who cares because for everyone one time the public market leads, there were 19 other times where it “lead” and was wrong, so why give it credit for 1/20? Private market for residential real estate is still white hot.

[aws]

I'm finding this discussion rather confusing. I think we all understand how high inflation can be detrimental to those with a lot of capital. And so the contention is that if it's bad for the wealthy it must automatically be good for the average worker, or just because of the specific aspects of this cycle of inflation?

 

And whether it's true in general or just in this case, what group would want to stop that outcome? I'm sure the democrats are terrified of going into an election with $5+ gas and high inflation, so it obviously wouldn't make sense for them to be spreading fear that will get them kicked out of office. Republicans are running on the platform that this economy is a disaster for the workers. While it does seem like pandering when a multimillionaire congressman complains on social media about the cost of filling up their tank, it still doesn't come across as part of some conspiracy to get in power to crush the workers. Rather it's just keeping what is painful at the front of people's minds for when they go to vote.

 

 

[cubsfan]

^^ Well, it is confusing. Inflation is not good, but wages are rising and the job market is very

hot for the middle & working class. It's tough to get anyone to paint a house, construction, landscaping, etc.  Even here in Illinois - where the economy has been stagnant for many 

years - jobs are all over the place - and houses are flying off the shelves.  Wages have to

move up for the working class.

 

Why would we want to kill the only thing that is working well?

 

You'd think an easy move would be to lower energy prices to insure a stronger economy, but

that's not happening either. Makes no sense.

[Gregmal]

11 minutes ago, aws said:

I'm finding this discussion rather confusing. I think we all understand how high inflation can be detrimental to those with a lot of capital. And so the contention is that if it's bad for the wealthy it must automatically be good for the average worker, or just because of the specific aspects of this cycle of inflation?

 

And whether it's true in general or just in this case, what group would want to stop that outcome? I'm sure the democrats are terrified of going into an election with $5+ gas and high inflation, so it obviously wouldn't make sense for them to be spreading fear that will get them kicked out of office. Republicans are running on the platform that this economy is a disaster for the workers. While it does seem like pandering when a multimillionaire congressman complains on social media about the cost of filling up their tank, it still doesn't come across as part of some conspiracy to get in power to crush the workers. Rather it's just keeping what is painful at the front of people's minds for when they go to vote.

 

 

The specific aspects are that workers have tremendous leverage because of all the help wanted signs. This is bad for big corporations and bad for shareholders. The solution many are proposing is to eliminate the need for all those jobs. Who benefits from that?

 

Energy and housing issues are not solvable in a constructive way through rate hikes. Most else is simply supply chain related. So again, not really much rates are gonna do. Yet people keep lobbying for rate hikes? Why? Again who benefits? Is bringing rates to 10% gonna produce more oil or wheat?
 

Some things just have need to play out on their own. The more you mess with them, the more problems get created. 

[Gregmal]

It’s all the equivalent of having a hang nail and being told the right thing to do is to cut your hand off. Only to find out the doctor advising you makes a shit ton of money when that happens, and that other guy found a way to take out an insurance policy on your hand, and the third guy you got an opinion from is just an idiot who listens to the first two. 
 

Higher prices suck but they happen for many reasons. Not all bad and some because of government stupidity. I’m not sure how the solution to squeezing someone at the pump or at the grocery store is to take their retirement money, home equity and their job security….seems sketchy. I am not aware of any middle class folks who bought vacation homes in 2010.

Edited June 10, 2022 by Gregmal

[aws]

It would be great if the workers could bank all their extra income. Take advantage of the labor market to find higher paying jobs and at the same time become more price sensitive even as their income goes up. That way businesses cannot create a wage price spiral as they will be unable to pass the higher labor costs on to consumers, but how can you make that happen?

 

There are incongruous factors in play right now. We have wage growth, but record low consumer confidence. Personal savings rates are plummetting so people are spending more and driving up inflation, but why would they be so scared and spending at such a high rate?