Is The Bottom Almost Here?

[Spooky]

 

27 minutes ago, dealraker said:

Once the best selling market predictor ever, yet again Harry is making his case...which in my view is as relevant and likely as any:

 

https://news.bitcoin.com/economist-harry-dent-expects-biggest-crash-in-our-lifetime-to-hit-between-now-and-mid-june/

 

Damn, I better sell everything...

[james22]

Boat slip +40%.

[TwoCitiesCapital]

2 hours ago, Gregmal said:

The problem with broken clocking it is that it’s not really unique or insightful because it’s almost always occurring just in differing forms. Of things mentioned:

 

 Again, context…historical recessions…there is not really a precedent for what occurred during COVID. So historical recessions IMO don’t carry much weight.

 

Job losses? At 3.5% unemployment and still near 2:1 jobs for available person? This is bad if we go to 1.7:1? 1.5:1?

 

Declining earnings. Again, from historical highs? That everyone(minus punters of course) knew were influenced by one offs? So we get the headline “declining earnings” and revert to what? Still rather “historically” reasonable and healthy number which are now a base?
 

So then we take all these bad boogeyman words and phrases that could very well be true but not as impactful as advertised and then hit it over the head with the hammer of “I’m just making a valuation call” and voila everyone should bid things down 30-50% just cuz? 
 

The larger argument really I think involves the fact that this whole damn this has been so expected and orchestrated that it’s not exactly surprising anyone. Which to a degree hints at more being priced in than possibly a scenario where everyone is off in lalala land. In contrast to today where realistically the only relevant lala land I see is the one people fabricate as an excuse for the market trading at a valuation that “they” don’t agree with.

 

 

 

Not surprising anyone? I guess all of those companies who hired those workers expected to fire them within 12 months? Or the people who took those jobs expected to be jobless shortly thereafter?  

 

I suppose everyone who bought equities or bonds in 2022 expected to lose double digits, or more, as inflation climbed while nominal earnings fell? 

 

Surely everyone saw the banking crisis in liquidity/solvency coming which is why there was a bank panic that took down multiple banks, and nearly a few others, in a matter of days...

 

I guess all of our manufacturers are prepared a prolonged contraction? Or all of those companies that boosted inventories last year were/are prepared to liquidate them at losses?  

 

The fact is, you're talking with the benefit of hindsight. If people SAW this coming, they sure didn't behave that way. Recessions are ALWAYS a contraction back to some more reasonable baseline. Even 2008 was ONLY a 4% contraction in GDP - and yet it brought the global financial system to its knees. 

 

People extrapolate current conditions outwards, overextend and overspend expecting those conditions to continue, and then get surprised when there is a modest contraction back to normal levels. Covid and stimulus doesn't change that - if anything it suggests the contraction back to the base will be larger. 

 

And I still can't, for the life of me, understand how talking about it magically changes the impact of those contractions in spending/credit/asset values/etc on the economy. 

Edited April 13, 2023 by TwoCitiesCapital

[Gregmal]

21 minutes ago, james22 said:

Boat slip +40%.

Great example. Docks already built. Maybe some maintenance…insurance, sure. Otherwise? Where’s the costs, where’s the inflation? Nah it’s just an item those top 1-5% of the folks want and will pay for. 
 

Separately, I can’t really stand Jim, but he nails this. 
 

https://www.cnbc.com/2023/04/12/jim-cramer-the-feds-efforts-to-fight-housing-inflation-by-hiking-rates-has-backfired.html

 

There’s one answer…build more. Whoops. 
 

Moral of the story, be long shelter, and the prosperity of the top 1-5%.

[Gregmal]

11 minutes ago, TwoCitiesCapital said:

Not surprising anyone? I guess all of those companies who hired those workers expected to fire them within 12 months? Or the people who took those jobs expected to be jobless shortly thereafter?  

I honestly don’t know what to make of this datapoint. I’m with you on it, but we re still sitting at 3.5% with 2:1 ratio. I leaned the way you just described but it’s failed to produce meaningful and actionable anything. For all the job cuts we are hearing of, the numbers keep coming in strong.

 

11 minutes ago, TwoCitiesCapital said:

guess all of our manufacturers are prepared a prolonged contraction? Or all of those companies that boosted inventories last year were/are prepared to liquidate them at losses?  

This Id use homebuilders as a good proxy. Prepared? Probably better than ever before. Ran through backlogs, managed inventory, and adjusted.
 

We ve now had 18 months of warning and time to shore up balance sheets, raise cash, do whatever. Who’s oblivious to a possible recession. Or slowdown at this point? Answer is probably the average middle class person, and that’s it. Anyone with money I’m sure has had their financial guidance screamed at them since last winter. Companies have been doing the same, hence job cuts. I think the odds of a slowdown, especially some drama around the debt ceiling too have rocketed up, mainly because of politicians and Fed incompetence, but it’s still not worth betting on all that heavily IMO.

Edited April 13, 2023 by Gregmal

[Paarslaars]

7 hours ago, dealraker said:

Once the best selling market predictor ever, yet again Harry is making his case...which in my view is as relevant and likely as any:

 

https://news.bitcoin.com/economist-harry-dent-expects-biggest-crash-in-our-lifetime-to-hit-between-now-and-mid-june/

 

86% decline in S&P... You will need many of the mastodon companies with huge balance sheets to go bankrupt for that to happen. This is just fear mongering. 

[dealraker]

4 hours ago, Paarslaars said:

 

86% decline in S&P... You will need many of the mastodon companies with huge balance sheets to go bankrupt for that to happen. This is just fear mongering. 

Harry will get some CNBC time as soon as we get a downturn in prices.  Harvard number 2 in his class...and this is what came of it!

[dealraker]

So my interest in this topic may be off-topic but given we are small investors and those fearing lower quotes are out-and-about on other threads stating bargains are  being bought...

 

In the last couple or few months I have in typically slow pattern put 2/3rds of a $500k trust that we are assigned to manage into stuff, the averaged prices:  Berkshire B $300; Lowe's $180; AJ Gallager $185; Meta $150; Google $95; XLE $80...these seem at least to me to be likely to equal bond performace at what was the comparison when bought.

 

And each time the market falls the postings as to bad outcomes gets stronger.  Is it rational for small investors to obsess over general market prices?

 

I don't do bonds, somehow survived not doing so.

 

Whoops: Markel $1215 and got close on some of those US railroads run by CEO's that make some really questionable decisions.

Edited April 13, 2023 by dealraker
Grammar

[Valuebo]

+++ dealraker and Gregmal.

 

The endless and excessive worrying about the macro environment, exact CPI numbers, banking stability, next rate hike, ... must be so exhausting. Can't imagine it EVER being an edge over longer time periods. 

 

Put some family members in mainly European stuff back in October/November and it's been booming to say the least. Haven't cared about those macro things then and I won't now. While people obsess over a possible (earnings) recession and what exactly is and isn't sticky inflation, many companies like LVMH and Delta are still able to surprise with stellar numbers. Maybe we aren't all doomed yet?

[Spekulatius]

OT -

On the matter of inflation, here is one datapoint regarding HVAC (replacement of an existing condenser with a new one) 16 SEER rating 3 ton unit.

 

2020 quote -$4560

2022 quote - $5552

2023 quote - $8296

Again same contractor, same exact unit, same scope of work.

 

I am aghast about the 2023 quote and hence got quotes from different contractors, but the price is in a similar ballpark (I can get it a few hundred $ cheaper around $8k).

 

Hitting myself now for not replacing it in 2020 when it had a minor issue (rotor). Now the unit went (is loosing refrigerant and leaking water in the water exchanger, so it has do be done.

 

Probably should have bought CARR and WSO....

[Gregmal]

14 minutes ago, Spekulatius said:

OT -

On the matter of inflation, here is one datapoint regarding HVAC (replacement of an existing condenser with a new one) 16 SEER rating 3 ton unit.

 

2020 quote -$4560

2022 quote - $5552

2023 quote - $8296

Again same contractor, same exact unit, same scope of work.

 

I am aghast about the 2023 quote and hence got quotes from different contractors, but the price is in a similar ballpark (I can get it a few hundred $ cheaper around $8k).

 

Hitting myself now for not replacing it in 2020 when it had a minor issue (rotor). Now the unit went (is loosing refrigerant and leaking water in the water exchanger, so it has do be done.

 

Probably should have bought CARR and WSO....

Look at hvac direct and you’ll get an idea what the actual equipment cost is. I had a 1.5 ton go in a rental last year. Got a crazy quote. Told them I’d buy a Goodman and pay them $200 an hour labor on the install. They magically found an Armstrong Air they could install for $4500. 

[gfp]

16 minutes ago, Spekulatius said:

OT -

On the matter of inflation, here is one datapoint regarding HVAC (replacement of an existing condenser with a new one) 16 SEER rating 3 ton unit.

 

2020 quote -$4560

2022 quote - $5552

2023 quote - $8296

Again same contractor, same exact unit, same scope of work.

 

I am aghast about the 2023 quote and hence got quotes from different contractors, but the price is in a similar ballpark (I can get it a few hundred $ cheaper around $8k).

 

Hitting myself now for not replacing it in 2020 when it had a minor issue (rotor). Now the unit went (is loosing refrigerant and leaking water in the water exchanger, so it has do be done.

 

Probably should have bought CARR and WSO....

 

I assume those quotes are for the indoor air handler and the condensing unit together (or a package unit that includes both in one box).  If that is just the outdoor condensing unit and not also an air handler/coil install those prices are real bad.

[Castanza]

18 minutes ago, Spekulatius said:

OT -

On the matter of inflation, here is one datapoint regarding HVAC (replacement of an existing condenser with a new one) 16 SEER rating 3 ton unit.

 

2020 quote -$4560

2022 quote - $5552

2023 quote - $8296

Again same contractor, same exact unit, same scope of work.

 

I am aghast about the 2023 quote and hence got quotes from different contractors, but the price is in a similar ballpark (I can get it a few hundred $ cheaper around $8k).

 

Hitting myself now for not replacing it in 2020 when it had a minor issue (rotor). Now the unit went (is loosing refrigerant and leaking water in the water exchanger, so it has do be done.

 

Probably should have bought CARR and WSO....

 

Eh this stuff is hit or miss. I got a quote on a new roof March 2022 and March 2023. Average price was 6-7k cheaper in 2023. 

[Spekulatius]

18 minutes ago, gfp said:

 

I assume those quotes are for the indoor air handler and the condensing unit together (or a package unit that includes both in one box).  If that is just the outdoor condensing unit and not also an air handler/coil install those prices are real bad.

It's for both, the condenser and the coil at the heating unit (which seems to be leaking water or there is an issue with the pan holding the condensed water). I think one issue that there has been some code change pertaining to the vent duct work that needs to be replaced (PVC not allowed any more) even though that particular  quote is fuzzy on this matter. This  might explain some of the jump  in price from 2022 to 2023.

Edited April 13, 2023 by Spekulatius

[TwoCitiesCapital]

Fed minutes show Fed officials base case appears to be a mild recession this year. 

They're still hiking and talking about more if you listen to Bullard. 

 

A Fed that expects a recession and is still hiking into it seems like the type of Fed who will hold higher for longer before cutting and isn't exactly concern with capital markets at this time. 

 

The longer they hold, the more economic pain there will be and the longer the recession will last IMO. My guess is it may not be so mild and will last more than a year.  

[LC]

Every year the FRB manages the CCAR process, including publishing stress macro scenarios, under which the banks estimate their potential losses (and therefore capital needs).

 

Well if I recall, the Fed didn't include their own massive interest rate hikes in their own stress scenarios.

 

So you'll have to excuse me if I don't give a hot damn about FRB expectations. 

[TwoCitiesCapital]

14 minutes ago, LC said:

Every year the FRB manages the CCAR process, including publishing stress macro scenarios, under which the banks estimate their potential losses (and therefore capital needs).

 

Well if I recall, the Fed didn't include their own massive interest rate hikes in their own stress scenarios.

 

So you'll have to excuse me if I don't give a hot damn about FRB expectations. 

 

I get it. I don't really trust their long term judgement either, but they are the ones in the driver seat here with rate hikes and I think it's notable that they've now stated that it's the base case. When have they ever done that before? 

 

Regardless of the accurate, I think it gives important signalling on their view of rates and trajectory given their willingness to continue to hike despite that being the outlook - not coming down for at least a few months. 

Edited April 14, 2023 by TwoCitiesCapital

[Gregmal]

Yea lol I don’t know why but the highlight of my year was seeing Powell make a total joke of himself and the FRB a month ago. The fact that they’re still talking about inflation too is just icing on the cake. There should be job cuts at the Fed. 

[Spekulatius]

Nobody knows anything. Everyone just makes it up as they go along and that's about the only realistic way to be approximately correct and precisely wrong.

[TwoCitiesCapital]

56 minutes ago, Gregmal said:

Yea lol I don’t know why but the highlight of my year was seeing Powell make a total joke of himself and the FRB a month ago. The fact that they’re still talking about inflation too is just icing on the cake. There should be job cuts at the Fed. 

 

I don't disagree. If they'd go back to being a lender of last resort to banks in crisis, I'm ok with it - but f*cking with interest rates and money supply hasn't proven to be their strong point. 

 

Definitely in camp Gundlach that you can basically just follow the two-year Treasury and save all of the noise. 

[Valuebo]

 

I can't read this as basically 95% of surveyed peeps thinking we end the year lower or around this level at best, right? Cause choosing '3500 - ...' means you are still technically right with YE at 4400 for example. Rather enticing too to choose it over any other option with far lower odds.

 

Kind of a weird way to set up a poll. Makes it look more bearish than it might be.

[Gregmal]

20 minutes ago, Valuebo said:

 

I can't read this as basically 95% of surveyed peeps thinking we end the year lower or around this level at best, right? Cause choosing '3500 - ...' means you are still technically right with YE at 4400 for example. Rather enticing too to choose it over any other option with far lower odds.

 

Kind of a weird way to set up a poll. Makes it look more bearish than it might be.

Bbbbut everyone is high on hopium!

[Paarslaars]

4 hours ago, Valuebo said:

 

I can't read this as basically 95% of surveyed peeps thinking we end the year lower or around this level at best, right? Cause choosing '3500 - ...' means you are still technically right with YE at 4400 for example. Rather enticing too to choose it over any other option with far lower odds.

 

Kind of a weird way to set up a poll. Makes it look more bearish than it might be.

Lets assume:

3500 - ... = 3500 - 3999

4000 - ... = 4000 - 4249

4250 - ... = 4250 - 4499

Edited April 18, 2023 by Paarslaars

[Valuebo]

1 hour ago, Paarslaars said:

Lets assume:

3500 - ... = 3500 - 3999

4000 - ... = 4000 - 4249

4250 - ... = 4250 - 4499

 

Yeah but that would mean 95% think we exit the year below 4250. Which is bearishness you'd expect when things are way worse.

[Valuebo]

6 hours ago, Gregmal said:

Bbbbut everyone is high on hopium!

 

Oh Yeah, for sure! 

 

https://www.bloomberg.com/news/articles/2023-04-10/hedge-funds-boost-s-p-shorts-to-decade-high-before-cpi-earnings?leadSource=uverify wall