[davelj]

[quote=XBoxBoy] I’m looking for a stronger analysis to be convinced.
[/quote]

Ok, imagine that economic output is represented by a bucket of sand. A recession comes along and some of that sand disappears. The Fed reduces interest rates and expands its balance sheet thereby…

Apologies, in my old age I’ve just lost the patience to explain things to people.

You’ll figure it out. Or not. Best of luck.

[davelj]

[quote=XBoxBoy]

Yes, and while that chart is certainly concerning, I don’t share the belief that that chart proves the fed caused all the inflation we are seeing.

[/quote]

I agree that the Fed has not caused ALL of the inflation we’re seeing. I’m not sure anyone believes that. But it has surely caused a lot and almost certainly most of it. If you look at the expansion of all Central Bank balance sheets since the pandemic began, that expansion (alone!) is roughly 1/3 of global GDP. It doesn’t take an Economics PhD to see how that would cause a fvck-load of inflation. Yes, fiscal policies, Putin’s douchebaggery, etc have all contributed to the inflation we’re seeing, but the Big Source is… the Fed and the other Central Banks. It’s math. (Paul Volcker turns over in his grave.)

[davelj]

The graph is mis-labeled (always read the fine print). It should read “Debt SERVICE to income” which is, in fact, near record lows. Household Debt-to-GDP is at 80%, which is below the 2008 record of 96% but well above the historical average of ~50%.

Obviously, the reason the HH debt SERVICE ratio is low is because many folks locked into low-rate fixed-rate mortgages. Inflated housing prices aside, that’s a good thing for the borrowers; obviously bad for the lenders. Rates on all of the variable rate debt, however – of which there is a fair amount – are moving up as I type.

There’s over $300 trillion of debt repricing over the next 5 years globally. Absent some miracle, most of the interest rates on that debt will be doubling. These are big numbers.

Just something to think about.

[davelj]

[quote=sdrealtor]
Sure! I’ve admitted to not foreseeing the rise in real estate over the last few years many times. It caught me completely off guard [/quote]

Your admission of a “mistake” is that your previous clients/buyers have done much better than you thought they would do with respect to their purchases? I’m not the last word, obviously, but I’m not certain that rises to the level of a material mistake. I’ve managed partnerships that did far better than I thought they would… but I didn’t classify my underestimation as a mistake (although we generally exited too soon, which could be viewed as mistakes, I suppose). Now, if you didn’t see the oughties bubble bursting, that would’ve been a mistake… but I can’t remember where individual posters stood on that issue… too long ago.

[quote=sdrealtor]
Heck just this past weekend I thought why not take a drive up north to pick up some wine, catch a concert, grab a drink with a friend and drive back the next day. Five hundred miles each way. I’m too old for that. Now I’ve got a cyst in my left knee the size of a marble I’m gonna need to get cut out. I’m such a dumbass sometimes[/quote]

I’m not sure this is a mistake that rises to the level of being worth mentioning, but… reasonable people can disagree. (I forgot my keys in the house the other day… had to go back and get them. Almost didn’t forgive myself.)

Five hundred miles… each way… that is one hell of a drive, though. I’m surprised that driving – even a long distance – would result in a cyst in your left knee (of all places), but… I’m no doctor and stranger things have happened. Good luck with the surgery.

[davelj]

[quote=sdrealtor]
As for the “totally wrong” you followed it with a litany of excuses. You were wrong, dead wrong, not close by a long shot. I don’t understand why people can’t just take their lumps and move on. We all make mistakes[/quote]

Mistakes unaccompanied by some form of explanation – good or bad – are pretty much nonexistant. Reasons, excuses, tomatoes, tomahtoes… where you stand generally depends upon where you sit.

Indeed, we all make mistakes. I’m sure, for example, you’ve made many mistakes over the last 15 years… could you point to a single one you’ve acknowledged here? Just curious… enquiring minds and all. You raised the issue after all.

[davelj]

[quote=sdrealtor]The passage of time is what allows for those interventions.[/quote]
Agreed but that’s not what you wrote so I assume it’s not what you meant. Without the intervention the passage of time alone is helpful but generally not sufficient (over any reasonable time horizon). [See: the Great Depression and Japan 1989-present.] Interestingly, in the case of Japan, despite decades of massive ongoing intervention, the Nikkei is still down 25% from it’s peak… in 1989. But what’s 32 years between friends…

[quote=sdrealtor]
Saying I’ve been totally wrong would’ve been enough;)[/quote]
That’s what I said in my previous post, verbatim. This last post was in response to your “passage of time” comment.

Just to clarify, of course.

[davelj]

[quote=sdrealtor]
Never underestimate the power of the passage of time.

Maybe it’s time to consider marriage as well[/quote]

I’d say this has very little to do with time, and everything to do with unprecedented market intervention… even in the context of four decades of pretty extensive market intervention. I expected to see 2-sigma central bank madness… but not 4-sigma. But, hey, such is life. To quote Vincent in Collateral… “Now we gotta make the best of it, improvise, adapt to the environment, Darwin, sh!t happens, I Ching, whatever man, we gotta roll with it.”

Marriage? Methinks not. I’m having too much fun – no reason to ruin it now. There are two events I won’t attend: marriages and funerals. In each case, someone’s lost a life.

[davelj]

[Sorry, just getting back to this thread…]

I have one word for investors: BUYYYYYYYYYYYYYYYYY!!!

Kidding, of course. I think. Actually, I’m not sure, maybe folks should be buying. I have no idea.

I’ve been totally wrong about this incredible, amazing rally so really no one should listen to me. After almost 25 years of having a pretty good understanding of how financial markets work, I have come to the conclusion that my views are no longer relevant and possibly counterproductive… I simply don’t understand how markets work; today’s prices tell me so. Ha!

Cryptos (including “joke” currencies with multi-billion dollar valuations), NFTs, $30 trillion in “free” money via the Global Powers That Be, 6% (alleged) inflation vs 3% 30-year treasury rates (might be the weirdest of them all), Price/Whatever ratios (further and further) in the stratosphere… none of it makes any sense to me. But it appears to be the new reality. No amount of negative news about anything appears to crack these markets – in fact, the opposite. So, there you have it.

I wish everyone the best of luck in these strange – sorry, new normal – times.

[davelj]

[quote=svelte]

To really be making an insightful prediction, one would need to add a time frame “in the next 6 months…”[/quote]

I agree. Although this is not the time frame anyone would like from a prediction, I’ll say before the end of 2021 or it’s unlikely to pass. My crystal ball is generally a bit hazy.

[davelj]

[quote=sdrealtor]So Im curious if the recent events change anything about the position of the OP or Rich on a sell now call? Or does it still stand?[/quote]

My position hasn’t changed. The fundamentals remain awful. I talk to bankers on a regular basis and their balance sheets are filled with land mines that don’t have to be revealed until well into 2021. These folks live in the real economy, and they know they’re getting propped up big time.

Since Covid cropped up I’ve always thought that the real market disaster was going to occur after the vaccine was widely available because until then, market participants can fantasize about how great things will be afterward (the tech bubble version of “sure, they lose money now, but who knows how much they’ll earn one day!!??”). Once the vaccine is available and reality sets in – that things are in Turdville and that although there will be some improvement at the margins, they’re not going to improve sufficiently quickly to justify current valuations… then it’s look out below. Having said that, if this doesn’t happen before the end of next year, then it likely won’t happen… and we’re looking at a decade of sideways-ish low single-digit returns for stocks just based on valuations. Either way – epic crash or crap returns for a decade – it’s not good from current levels. In this elegant chaos, I choose not to participate in this particular brand of silliness. Although, full disclosure, in a bout of pure underserved serendipity, I’m actually participating in my most successful investment ever, as the craziness has allowed one of my VC investments to go public (STTK) and I’m up 32x over ~2.5 years. Problem is… it could all go in the toilet as I’m locked up for another two months… so, I’m not counting any coin from that one (yet). So, how much can I really complain about this insanity.

Anyhow, I think the thing to always keep in mind is that the prices we see each day in the public markets are set by the marginal buyers and sellers. And this group isn’t “investing” as we think of it; they are trading, guessing what the other guessers are going to guess a couple of weeks (or hours or minutes) into the future. High or low or in-between, don’t trust that price – it’s probably lying to you.

[davelj]

[quote=sdrealtor]Oops he did it again! Attacking the poster instead of addressing the point. That’s not the point at all. The point would be addressing that the Geo political risk in Columbia are lower than the risks here. oh I did it again too. I know the proper spelling of the country I just dictate voice text many of my posts these days while out on my daily 5 to 10 mile walk. I’m on one right now. Such a beautiful day

So when you find the time and the inclination how about explaining how the Geo political risks in California outweigh boats in Columbia. Oops I did it again[/quote]

Well, you already know everything so there’s no point in explaining it, right? No idea whether the boats in California outweigh those in Columbia or Colombia. Your iPhone might know the answer.

[davelj]

[quote=sdrealtor]Nice, attack the poster and iPhone typo not the point. Duly noted.[/quote]

C’mon now… that wasn’t a typo. You just didn’t know how to spell the country Colombia. It’s no coincidence that the “o” rhymes with the “u”. No biggee – these things happen. In such cases, however, it’s best to just acknowledge the limits of your knowledge on the subject. I don’t know much about Ghana, for example. So, I don’t offer up my opinions on investing in Ghana. And that, really, is the point.

[davelj]

[quote=sdrealtor]I dont think we at least not I were questioning risk related to tenants. The risk there is geopolitical and far beyond anyting that exists here[/quote]

So, you feel like you have a good grasp of the geopolitical risk of a country that you can’t spell properly, and by extension we can presume you know virtually nothing about? Duly noted.

[davelj]

I think Biden will win for one simple reason. Let’s cut through the mountain of BS and analysis.

40%+ of folks are going to vote just as they did last election because they’re loyal to their party. Only the undecided folks in the middle really matter – that’s like 10%-20% of voters (probably closer to 10%). This is not news.

Very few of that “middle group” of voters who voted for Trump are sitting around thinking, “Wow, I’m glad I voted for Trump – he turned out to be really good.” So, of that middle group that voted democrat last time, almost all of them will do the same this time. But… a large percentage of that group that voted for Trump last time aren’t going to do so this time. And that will be the difference. It’s not that complicated. As with everything in economics, everything important in politics occurs at the margin.

I don’t know how close the election will be, but I think the odds of Trump winning are extraordinarily low – it will take a miracle (eg, massive Russian interference).

[davelj]

I don’t short. Ever. My bet against overvaluation in the stock market is just to own safer and/or cheaper assets. Although, truth be told, I don’t invest much in stocks anyhow, so there’s that. I generally find the major indices to be useful only as signals – I don’t give them much thought outside of the extremes (eg, now). Right now, I have a lot of cash, some outstanding RE loans in Texas (1st trust deeds), some foreign RE, a few private bank investments, some emerging markets equity funds (hey, there are some stocks!), and some venture capital. It’s just a hodgepodge of stuff I like and am comfortable with.

I’m generally early (re: wrong) regarding bubbles… but my bet is this one pops sooner (say, within the next year) rather than later. But, alas, the exact timing is always precarious and rather pointless in trying to predict…

[Author]

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