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gzz
ParticipantI have a new 71yo neighbor who just moved to OB from a hobby farm in Ramona to reduce chores and be close to her daughter in OB.
I may switch with her. Such great values there compared to closer suburbs. Same for Lakeside places on 2-3 acres.
Scaredy, your size 32 forever plan is partly defeated by vanity sizing. I have a collection of vintage clothing that I purchased new with tags. I wear a 2022 size 32 or 33 right now. My 1970s Sears PermaPrest 32 pants would burst the snap if I tried to close them. The 34 fits, but very snugly.
T-shirt sizing is up about a half size, my Hanes L Pocket Ts from the 70s and 80s fit halfway between a modern M and L.
ParticipantMortgage rates now down 0.75% from their mid-June peak.
https://www.mortgagenewsdaily.com/markets/mortgage-rates-07012022
6.25 to 5.5.
Will we look back at June 2022 as a great time to buy, a brief respite in the relentless rise in the increasingly scarce, secure, upscale, amenitied, lightly-taxed, high-and-growing yielding trophy investment known as the San Diego Single Family Home?
I can’t say for sure, but I do feel good about my future here as a gentleman-rentier.
ParticipantThis new home in suburban Boise looks a whole lot nicer than the typical place in Boise on Zillow at the same 600k price.
They even offer a special 5% mortgage promo as an incentive.
ParticipantMy comment on St George also applies to most of these cities.
There’s no shortage of developable land so existing RE is always competing with newer and better developments, and RE prices will trend toward new home construction cost.
They can still be OK investments, especially with cheap financing or tax benefits, but they are too risky IMO for outside investors when their prices run up to levels higher than new construction. They’ll head back down as soon as developers catch up with the surprise demand that drove prices up.
Boise typical SFH looks like they are at 2.5x 2015 prices. I doubt construction prices rose that much. I’d be worried about nominal price declines of 20% there.
ParticipantThanks Myriad, that’s interesting.
Are you able to provide any more details?
What really led me to pull the trigger on my short sale was seeing how costs went up even more than inflation, but rent was basically flat.
Makes me suspect that these companies have long term leases that don’t provide for substantial rent increases.
Perhaps it has changed because of their loss of market share, but a few years ago I read Netflix was 30% of Internet traffic, and it could spike to more than half. Netflix is now doing poorly lately and cutting back spending and raising prices.
Perhaps the second biggest customer is Amazon. But supposedly AWS growth is slowing and the startup valuations that help fuel it are down 75%+.
Moreover, Amazon is hardly allergic to low margin business lines, or getting into capital intensive RE development. The fact that they often outsource data centers makes me think they are offering Amazon very sweet and unsustainable deals. I assume Amazon is the smart money in these transactions, not the REITs.
The commentator who turned me onto shorting data center REITs, a finance professor at Yale, made the point that if you are a cloud / internet traffic bull, better to just buy amzn and goog, which have declined to the point they have better valuations than the data center reits.
ParticipantFlu, I don’t eat rice, except maybe a bite or two with curry on rare occasions.
When I lived in Thailand I said “no rice please” an average of twice a day. Probably low carb diets have spread over there by now, but not in 2005. Thais gave me shocked, unbelieving faces. “It comes with rice!” About a third of the time they ignored me and gave me the rice anyway.
I visited rice farms, shrimp farms, and palm oil plantations, all interesting. Other than the heat and tropical plants, it wasn’t too different than rural Ohio: pick up trucks, manure smells, and giant bigbox stores.
ParticipantHas inflation and rates peaked already?
Certainly looks possible.
On the benchmark 10Y treasury rate front, as of right now we are down more than half a point from the recent high of 3.48, down to 2.94 now.
For inflation, lots of price spikes seems to be receding. The first was actually lumbar, which peaked first in 2021 and is now down more than half.
Used cars appear to be on their way down after at one point being up 40% YoY.
Graphics cards are back to MSRP after selling for 2.5x MSRP for a while. Graphics cards are about 1/3 the cost of video game consoles and upper-midrange PCs, so these too will lose inflation pressure.
As I noted here, I got lucky and purchased a card for $300 right before the spike. The used value of that card peaked around $850 on ebay, probably ~$1000 new. I ended up getting a new PC on ebay that a bitcoin miner purchased solely for its graphics card, which he removed from the PC and then resold without the card. I combined the stripped grey marketish new PC with my existing card and am happy with the result.
While rents and energy will continue to rise in my view, I highly doubt their increases will be as fast as in 2021, though as a landlord with a lot of oil stocks, this is a real statement against interest.
Also relevant to inflation are retail margins. Retailers keep reporting they are completely overstuffed with inventory, having over-ordered in reaction to supply chain disruption shortages they had in 2020 and early 2021. They will be discounting much more than normal going forward. Consumer spending is dropping too.
So retailers will have to lower prices, and will be more selective and stingy in purchasing new inventory. Sounds deflationary!
Tech layoffs are gearing up and should put a lid on tech salaries.
In terms of market expectations, amazing the long-term market expectations of inflation via TIPS is about 2.5% going far into the future. That’s not a bad guess in my view. I think we’ll be above that for a couple years, but very long term I see Japan-style demographic changes in the USA leading to Japan-style 0-1.5% long term inflation.
ParticipantINTC was not a good buy, I am indeed averaged at 50. But it is my 22nd largest long position. My largest is XOM, which I am up on in a down market. And INTC did well for a tech stock.
I have good results shorting tech stocks, but not buying them. I often have good tech stock entry points at bear market lows, but I tend to sell when I am up 50-100%, and never let them ride way up.
The same post I said I was going long INTC I said I was buying puts on Coinbase. One of them I purchased was deeply out of the money and cost like $1.20, but went up to $60 as COIN crashed. I sold for a 5x profit rather than hold for a 50x.
Short RE stocks is something that I find hard to do, but also the better option to hedge a RE downturn than selling any of my appreciated RE and paying a ton of capital gains tax.
My worst tech stock investment was iRobot. The idea is they are the only public company making profitable consumer robots, which will eventually be a big thing, and also they have a bunch of patents. I still believe that thesis, but I rode them from 30 to 100 and now back to the 30s, and unfortunately I averaged up a few times above my low initial entry point.
ParticipantThe problem with investing in St George RE isn’t any lack of water. This is such a tiresome worry. Western states waste most of their water on low-value agricultural in a bizarre system where wasteful farms pay far less than residential or industrial users.
Any real water shortage would result in residential users who are a large majority of the population outbidding agricultural users. But we actually won’t have any water shortages, this is just Chicken Little propaganda by major water users eager for even more state subsidies.
In a free market for water, Western state residential water bills would decrease substantially. The “cost” would be, e.g., on Chinese consumers who wouldn’t get our almond exports quite so cheaply, and the ultrarich owners of farms that get water subsidies.
St George’s issue is low density small metro suburban housing in middle America deprecates over time and trends downscale, and there’s always ample developable land to build newer and nicer housing. I don’t think his Utah RE is going to be a disaster for EP, but it will probably return over a 20 year period roughly inflation minus 1%.
ParticipantGoldman Sachs now estimates used car inflation will be -7% for the end of 2022 and -18% in 12/23.
Probably lots of similar stories of supply-chain-disruption inflation going into reverse.
My graphics card that I got for $280 in 2020 on Amazon was selling used on ebay for $700 a year later. Should have flipped it!
June 14, 2022 at 5:48 PM in reply to: Yes, the Fed matters a lot; nobody disagrees with that. #826140ParticipantI want to be short some housing stocks too as a hedge against my RE portfolio.
It isn’t easy, because RE stocks are mostly at very low valuations.
My RE shorts, in order of size, are AVB, BXP, and SPG.
I don’t think any of them are overpriced. Just relatively expensive, and the best hedges I can think of.
That DZ is short RE stocks without owning any RE is nuts. He should buy DR Horton and Invitation Homes.
Again and again I look at a RE stock as a potential short, and come away thinking instead it is undervalued. SPG is in awful business for the long term, shopping malls, but is well run and attractively valued.
ParticipantOPEC May production dropped again despite soaring prices.
Nigeria’s production is the lowest since S&P started recording.
Nigeria also happens to make the highest quality crude (Bonny Light) of any of the 40 or so standard grades.
When the Ukraine war started, OPEC increased production quotas, but other than the gulf states, there’s no spare capacity.
My projection is if oil and gas prices stay where they are, TTE will make about 18/share. At a P/E of only 6, that suggests it will go above 120.
While certainly prices could drop or taxes could unexpectedly rise, I think this is offset by a higher chance prices just keep going up and investors start piling into oil, so $150+ seems quite possible too.
ParticipantDown 2.04% v -3.88% for the SPY. Win!
I keep buying more oil stocks and calls every trading day.
Here’s an article about how on top of crude oil soaring, refining margins are also exploding.
Even as the market crashed today, crude oil still went up another $1. Even more bullish news:
– Last week was the largest release from the Strategic Petroleum Reserve in history.
– Libya’s civil war is causing a complete shutdown of all oil exports.
– US diesel fuel stocks are at a 17-year low.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WDISTUS1&f=WJune 13, 2022 at 10:38 AM in reply to: Yes, the Fed matters a lot; nobody disagrees with that. #826083Participant“ What I am curious about is how a bank would fund a mortgage at 6% when inflation is at 9%.”
They borrow at 0% in checking and 3% in savings accounts, loan at 6%.
There’s no human right to get a return on your savings above inflation. China has had inflation that is double savings account rates for about 30 years now.
All the recent drama is making people forget the long term worldwide trend is aging demographics and a glut of savings.
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