[gzz]

“ The Fed more than doubling their balance sheet by printing 5 trillion dollars during Covid is not a “corner case”. If you can’t figure out that this money is the source of all this new found “wealth” you see lately, then you sir are living in the alternate reality.”

Dz, I think talking about “money printing” is really stupid. It isn’t happening in a literal sense, and it is misleading as a metaphor for what the Fed does.

That said, seems like the right move was to buy hard assets that would be protected from inflation, and finance them with long term fixed rate debt that would be eroded away by inflation.

[gzz]

Not a good day for oil, but my DocuSign short paid off well.

I shorted it when I realized that it is expensive to use and a bunch of other companies do the same thing for free. My business uses PandaDoc which works perfectly. Even if we went paid, which we won’t, we’d likely use Adobe.

DOCU has a forward P/S of 7, and its net loss is growing much faster than revenue.

These are such dangerous stocks to own. There’s really no reason they shouldn’t be 70-95% less than they are now. Value investors won’t touch them, so there’s no floor for when they go ex-growth but still lose money.

[gzz]

DZ, there’s simply no RE bubble here unless you are also predicting a crash in rents. Right now buying a property here yields about 5% while long bonds yield 3%. That’s just not a bubble valuation.

This was not the situation in 2006, when bonds paid 2x or more local rental yields. The house I actually rented back in 2006 yielded about 2.5% based on a similar sale. $1200/mo and $400k.

[gzz]

Flu it is a good thing home buyers usually can outbid investors.

Inventory seasonally increases April through June.

It is still very low.

A deceleration from ~25% YoY increases to 10% increases is going to be bumpy and involve a lot of mispriced listings.

[gzz]

I keep looking for the bear case on oil and oil stocks, and I can’t see it.

The most credible one is oil drops as part of a global recession.

But (1) the economy is still strong (2) any recession is going to be caused by central bank tightening that can be reversed (3) it is far from clear any downturn would reduce oil demand more than supply.

Excluding the effect of Russian investment one-time writeoffs, BP had a PE of about 4, and is planning on buying back about 9.5% of its shares over the next year, and it will still have huge cash flow to pay dividends and reduce debt.

There is some justification for this low valuation: futures markets suggest a long term oil price of about $65. While I think that is certainly possible, my base case is that it will be more than double this amount.

And the $65 oil in 2030 the futures market suggests would require oil companies to invest in new production when they are reluctant to do so at $120 oil, and also end user oil expenditures as a percentage of GDP be a very low historical levels.

In 2016 Apple had a PE of 10.6, and 6 if you backed out its large net cash position. That didn’t make much sense, Warren Buffet started buying in, and the stock went up 7-fold.

[gzz]

Most OPEC and Opec+ members are producing below their production quota every month.

https://bisoninterests.com/content/f/opec-spare-capacity-is-insufficient-amid-global-energy-crisis

That’s quite the change from when I was in college and OPEC was used as an example of how members of cartels cheat by overproducing.

There’s just no reason for a small exporter like Angola to produce below OPEC quota month after month, except for the fact that they can’t produce more.

Russia will soon have to start shutting down production as its storage is getting full and there is simply no capacity to replace short ocean distance and pipeline exports to Europe with long distance shipping to India and China.

I wonder if we end up diverting some corn from ethanol gasoline blending into humanitarian aid to nations impacted by lost Ukraine grain imports. That would further increase demand for oil.

[gzz]

SDR I don’t see how to pick an arbitrary start date like 1/1/20, but I am up a 63% according to fidelity since account opening on 7/31/15 thru 5/31/22, compared with 284% for SPY and 18% for Bloomberg bond index.

June is looking great so far too.

The oil equities and calls have been paying off big. I sold a few of my XOM calls today for a 3x gain in less than a month. I also closed a short put I wrote for $75 that was $360 when I wrote it, and probably will continue to write XOM puts in little bits.

My best straight oilco purchase is MRO, up 31% in less than a month and SU, up 50% since February 2022.

My worst performing oil stock is Total, TTE. It is still up, but badly lagging the rest of the major oilcos before I purchased, and still lagging. I read their last annual and quarterly report and can see no good reason for their extreme underperformance. They are only up about 50% from their 52 week low when most others are up at least 100%.

I have long learned and accepted that giant European companies usually trade at a large discount to similar American companies, but that doesn’t explain it.

I have now dropped the idea for now of buying oil futures directly and think more TTE calls are the best bang for buck.

My worst long position right now are warrants in the Trump SPAC, down about 40%. I continue to think it will be a insane meme stock once the deal closes. If you want a crazy bet that could easily 5x, it is DWACW.

[gzz]

Beekeeper with a charming Australian accent came on time and removed 90% of them. The rest will fly away on their own in 2-3 days.

They are Africanized hybrid honeybees.

The beekeeping company normally removes the queen and replace her with a non Africanized queen. In my case, the queen had died already.

Despite reports of a bee shortage I’ve read, he says they have all they need.

I showed him the “mother nest” in Robb Field in a sprinkler system control box, and he said they love those.

[gzz]

Flu, the 2/2 for 550k would yield about 28k a year after HOA, ins and property tax, 5.1% yield on purchase price. That beats treasuries and CDs.

The condo’s rent will also go up with inflation. If you want that feature in a treasury, you’ll get a lower TIPS rate.

So not a bad deal for an investor IMO.

[gzz]

So what is DZ’s investment thesis exactly? Short RE and lose about 7% if it merely is flat after inflation?

Profitless tech at 10-50 P/S ratio was an amazing short opportunity last year, but I don’t recall him mentioning it.

I added a second small RE short last month, BXP. Nothing wrong with BosWash and SF class A office towers, but I think WFH and urban crime are going to make them underperform and I want to hedge more.

Also still short SPG, the mall owner. They are well run, but in the wrong business.

[gzz]

Nominal GDP growth is running about 10%. Rents are growing far faster than that. Local wages I assume are growing somewhat in between.

SD Median income rose from 70,700 in 2016 to 87,200 in 2020, quite an increase when inflation was still very low. I don’t think BLS has anything newer than 2020.

Total wages paid in San Diego region increased by 14% YoY as of Q3-2021, the most recent release.

[gzz]

My 92107 zip has an MLS inventory of 16, but 5 listings go pending (ie accept offers) so far in June.

Inventory could double and the market will still go up.

[gzz]

I am looking into buying oil future options, which will require me to upgrade my brokerage account type.

I thought I could just get options on the USO etf, but they seem too expensive. USO is also high fees and I don’t trust it based on prior problems it had.

Calls on oil companies that are short dated and only a bit out of the money seem like a good deal still. If WTI, now at 120, hits 150+ in late summer, wouldn’t exxon go up from 99 now to 120-130? Yet September calls at 105 and 115 are still cheap. I think even if oil stays at 120 and gas at 8.50, XOM is worth 140.

Even cheaper are calls on TTE, the biggest french oil company. There’s a risk in Europe of windfall profits taxes. However, I don’t think it is particularly high.

If you adjust for inflation, oil peaked at $143 in 1979 and 167 in 2008. JP Morgan in late 2021 predicted $125 oil this year and 150 in 2023.

Real per capita GDP has doubled in the USA since 1979 and much more than doubled in China. I believe that unlike in the 1970s, the demand impact of 150-200 oil would be quite small.

[gzz]

You will probably get a better rate on your primary residence.

Zillow mortgage will give you an idea of what the cheapest online lenders are offering. You can then apply through zillow or just contact the company directly you find on Zillow through their separate website.

It sounds like a HELOC that is used as needed rather than a cash-out 500k mortgage may suit you better.

Double check this, but I believe keeping the loan 100% for renovations and other housing related expenses allows the interest to be deductible.

Rate increases mean refi activity is down like 80%, so it should be a smooth process with the lenders being slow.

[gzz]

Esco, I don’t know if SF city is even higher than SD now.

Spend 10 minutes browsing Zillow, they seem about the same now for condos.

Us going up 50-70% when SF is flat will do that.

SF outperformed us in the prior 2010-2017 period however.

I also spent a few minutes looking Manhattan. Lots of co-op listings below 2017-2018 prior sale prices. Some down 25% from prior sales. I was just randomly browsing the 1 to 1.5 submarket. Giant inventory too.

[Author]

Posts