Investment showdown -- beyond the Roth, SDP, & TSP

[arg]

46 minutes ago, ClearedHot said:

Clearly you are winning!

Yep, two more payments on that tractor and it's mine.

[FDNYOldGuy]

23 hours ago, Lord Ratner said:

Even some of the housing bears think we'll only see a 10-20% drop in home prices, but I think that's wildly optimistic.

I think this is the case, as well. I’m hard pressed to believe we don’t end up with much larger declines than that. 

Many houses in my neighborhood have flippers that have bought places 6-9 months ago and are now trying to sell them for 100% price increases. Ain’t no way they put that level of renovation work in over that short of time. Slapping a coat of wax, a new radio, and new tires doesn’t make a car worth double its value; people will realize the same when they’re not “forced” to buy whatever is available because what’s on the market is so sparse. 

That’s gonna be changing; interest rates continuing up or not. 

23 hours ago, Lord Ratner said:

To add to that, another thing we didn't have in 2008, the baby boomers retiring. Many of them are relying on their home price as a component of their retirement.

Spot on driver inbound that will be complimented by one other HUGE difference between now and ‘08: institutional investors and AirBnB investors. 

Institutional investors acquire/renovate a lot of these properties using lines of credit and shorter-term (5-12 year) commercial portfolio loans with balloon payments upon end of term. They’re staring down the barrel of refinancing at rates DRASTICALLY higher than they were in the past few years. Also affecting LoCs. 

AirBnB is the other = to ‘08 subprime issue inbound. I know there are some folks that said on this thread that they’re doing very well and have safely built their business; but there are certainly a lot of folks that haven’t that will quickly get in over their heads. 

The fundamental change AirBnB brought to the market has created an artificial housing supply constraint. *(BTW, they pay a metric fuckton of money to ensure they don’t get in the spotlight for this). These properties are rented short term for far more than they could be rented long term with a traditional renter and that higher potential income means those willing to take on the uncertainty are willing to pay a much higher than market price than a traditional buyer would. 

So, realistically, I don’t think we actually have a much-touted supply shortage of physical housing *(in most areas); we have a supply shortage of long term rental and owner-occupant purchase housing due to flippers and AirBnB investors. 

The very rapid and drastic (albeit brief) drop in housing/rental prices in March (until around July/Aug) of 2020 was a sign of these folks coming under strain. Having short-term rentals (STRs) when the world shut down scared the balls out of a lot of people into selling/longer-term rental offerings and flooded the market. A lot of these were rented at steep discounts that have since turned in non renewals (back to AirBnB) or massive rent increases at lease end. 

Are we likely to have another shutdown like that again? Probably not. But, what happens when the first few investor folks (AirBnB, flippers, or institutional) or Boomers that are not sure-footed/think they missed the boat start to break and unload properties? What about when the economy slows and we hit an actual recession? Or if (when) the stock market dips lower and 401k balances look less fortifying?

Will it create a stampede toward the door and a chain reaction collapse similar to the times around the Financial Crisis? 

I think yes, but that’s just my smooth-brain opinion. 
 

EDIT: just to clarify, I’m not trying to bag on any of the folks that run AirBnBs. It’s hard to justify renting long term when you can make that much more as an AirBnB. I’ve noticed folks advertising properties where I’m a slumlord at 2-3 times what I’m getting monthly for LTRs, so it makes complete sense for landlords and I’ve certainly considered it. 

That said, I don’t know if I can square AirBnB being good for the average person looking to buy a home or rent long-term. It inflates demand and price above what the market can/would normally pay (without massive salary increases).

But, it is here and a very profitable thing for many, so it’s hard to see it going away. It has likely just driven a fundamental shift in property demand that we haven’t adjusted to yet. How that plays out over booms and busts, I dunno. 

Edited September 16, 2022 by FDNYOldGuy
Not trying to lay hate on success

[FourFans]

FedEx takes a 24% hit.  Not a good sign.

https://www.cnbc.com/2022/09/15/stock-market-futures-open-to-close-news.html

[chris99]

On 9/14/2022 at 10:28 AM, ClearedHot said:

I own six homes, three are Airbnb's which gross a combined $15000 each month.

Who manages your AirBNBs?

[Lord Ratner]

22 hours ago, FDNYOldGuy said:

These properties are rented short term for far more than they could be rented long term with a traditional renter and that higher potential income means those willing to take on the uncertainty are willing to pay a much higher than market price than a traditional buyer would. 

True, but a recession will also bring down hotel prices, which are bananas right now. That's a direct hit to AirBNB.

 

22 hours ago, FDNYOldGuy said:

What about when the economy slows and we hit an actual recession? Or if (when) the stock market dips lower and 401k balances look less fortifying?

FedEx might be the canary that finally flips the narrative. Shipping is the cardiovascular system of the global economy. A sudden downward revision as drastic as the one FedEx just announced cannot exist in isolation. 

 

And the mega cap stocks that are holding up the stock market, overwhelmingly in tech, are by no means more resilient. The very first thing that companies cut in a downturn is the marketing budget. Companies like Google and Facebook have made great progress in diversifying the sources of their income, but advertising revenue is still king.

 

 

[arg]

[ClearedHot]

On 9/16/2022 at 3:20 PM, chris99 said:

Who manages your AirBNBs?

I do.

[ClearedHot]

First member of the FED to capitulate on raising rates so quickly.

Finally!

[Lord Ratner]

23 hours ago, ClearedHot said:

First member of the FED to capitulate on raising rates so quickly.

Finally!

Won't matter. The Fed does not act proactively. They waited for intractable inflation to hike, they'll wait for a credit market collapse to stop. If they reverse course and cut rates down to nothing (and restart QE), we'll get another inflation roller coaster like the 70's.

 

Buckle up, kids. The bill has come due for a couple decades of debt-fueled good times.

[FourFans]

On 9/28/2022 at 6:27 AM, Lord Ratner said:

Won't matter. The Fed does not act proactively. They waited for intractable inflation to hike, they'll wait for a credit market collapse to stop. If they reverse course and cut rates down to nothing (and restart QE), we'll get another inflation roller coaster like the 70's.

 

Buckle up, kids. The bill has come due for a couple decades of debt-fueled good times.

So, your investment advice is to buy now?

Edited October 2, 2022 by FourFans130

[Lord Ratner]

5 hours ago, FourFans130 said:

So, your investment advice is to buy now?

I'm not good enough to give advice. But what I'm planning to do is buy once (if) the Fed pivots. Until then, their stated goal is demand destruction and increased unemployment, which will necessarily be recessionary, especially to the assets most effected by the last decade of Fed policy: homes and stocks.

 

My buying will be focused on the widespread lack of capital expenditure in the energy market, in particular nuclear, but also oil and gas. Gold and silver will *probably* wake up with a fed pivot because it will signal the acceptance of long-term high inflation, but that's not nearly as certain as the energy crisis we are barreling into.

 

I think long bonds will get crushed once the narrative shifts to expecting >3% average inflation over the next decade.

[ClearedHot]

Interesting two day bounce.

The market thinks the Fed has done enough.  Interestingly the next rate hike decision will be made four days before the mid-terms.

My prediction, potential for 10% rally into 3Q numbers but then a pullback as layoffs and earnings downgrades start.  I think there will be a huge bond market rally into next year.

Fortune favors the brave...unless you are investing in Crypto...

[VMFA187]

48 minutes ago, ClearedHot said:

...unless you are investing in Crypto...

No need for personal attacks. 

[FDNYOldGuy]

20 hours ago, ClearedHot said:

My prediction, potential for 10% rally into 3Q numbers but then a pullback as layoffs and earnings downgrades start.  I think there will be a huge bond market rally into next year.

I don’t think you’re wrong on the bump. These things (usually) also take much longer to shake  out than we think. Sept 2008 when Bear/Lehman collapse and bailouts started is when most believe was the GFC collapse. But, markets had actually peaked in late 07 and declined to their lowest point in March 09. It took a year and a half to shake out and head the other direction; with MANY crazy up and down swings in there. And it got better due to ~1.6T in stimulus.

Trump and Biden combined threw ~$4T at COVID and it’s collapse lasted a few months before those injections drove a huge boom that brought us to late last year.

I don’t think we politically have the stomach for those bailouts again, but who knows?

Pepper in some very high (for us) political discord, a war in Europe, their energy crisis, housing imploding, consumer debt getting pummeled by high interest, that same interest likely slowing the corporate-debt-funded stock buyback binge, and whatever “supply chain” BS companies use to gouge the shit out of us for higher profits hurting consumerism…well, I don’t feel too rosy going forward. 

But, what do I know? Best bet is to not try to time it and just keep plugging away in TSP/CIV job match and hang on for the ride. We could go back to 4500 S&P next; or below 2500. Or anything in between. 

[ClearedHot]

Job report shows a decrease in job....no shit when the Fed is raising rates.  Next earnings will be reduced and layoffs will begin.  OPEC cutting production means gas prices will go back up and inflation is here to stay.  One simple move, increasing U.S. energy production, would have a HUGE benefit to the market and the economy but that is a third rail issue to this administration, so lets just drain the SPR.  Thus, the pain will continue AND accelerate.

[Swizzle]

23 minutes ago, ClearedHot said:

Job report shows a decrease in job....no shit when the Fed is raising rates.  Next earnings will be reduced and layoffs will begin.  OPEC cutting production means gas prices will go back up and inflation is here to stay.  One simple move, increasing U.S. energy production, would have a HUGE benefit to the market and the economy but that is a third rail issue to this administration, so lets just drain the SPR.  Thus, the pain will continue AND accelerate.

I saw different this morning, unless Im missing something. The jobless rate went down, even though we were below expected qty of new jobs, which also doesn't bode well for interest rate hikes, the FED needs a recession and wealth destruction to stop this inflation. That mean sparking massive joblessness (thr pain the FED says). It might come at a horrible moment and convergence of many other unfortunate global factors. 

No doubt we are in an economic war and worsening in its intensity globally. My question is will it trigger QoL entitlement demands and war in other arenas?  Aka everyone fighting to “get theirs”. If yes, then all hell will break loose, liquid assets are king (maybe not fiat cash), and opportunities will be abound but at the expense of others since the money supply isn’t changing much. What side of the equation you’ll/we’ll land on is the real question

https://www.cnbc.com/amp/2022/10/07/jobs-report-september-2022.html

[ClearedHot]

Yes unemployment rate went down (3.5%), but the number of new jobs (usually an indicator of the economy), saw a huge decrease to 263,000 per month from the average so far in 2022 of 420,000 per month.  As a frame of reference in 2021 new jobs were being produced at 562,000 per month.  Eight months later the rate of new jobs has been cut in HALF...the boat is slowing rapidly as reflected in our negative GDP.

As I read the tea leaves the interest rate hikes are biting and the economy is slowing but inflation remains high.  With gas prices back on the rise inflation will likely remain high.   The next indicator to watch for will be a reduction in earnings from major corporations. 

[Swizzle]

1 hour ago, ClearedHot said:

Yes unemployment rate went down (3.5%), but the number of new jobs (usually an indicator of the economy), saw a huge decrease to 263,000 per month from the average so far in 2022 of 420,000 per month.  As a frame of reference in 2021 new jobs were being produced at 562,000 per month.  Eight months later the rate of new jobs has been cut in HALF...the boat is slowing rapidly as reflected in our negative GDP.

As I read the tea leaves the interest rate hikes are biting and the economy is slowing but inflation remains high.  With gas prices back on the rise inflation will likely remain high.   The next indicator to watch for will be a reduction in earnings from major corporations. 

I agree that they’re finding the line of economic balance and politics, however the economics quickly catches up and appears more dire than politicians desire. I think it is a game of depression hot potato.

Edited October 7, 2022 by Swizzle

[ClearedHot]

Another 600 points off the DOW and 3% off the NASDAQ.  UFB.

[FourFans]

On 10/7/2022 at 3:21 PM, ClearedHot said:

Another 600 points off the DOW and 3% off the NASDAQ.  UFB.

[ClearedHot]

Raised rates AGAIN today...and we are running out of Diesel.

Another 500 off the DOW and 350 off the NASDAQ

I am cashing out for gold, grabbing my hit back and heading for my bug out site...I wonder if they have Ice Cream Cones at the compound.

[FDNYOldGuy]

46 minutes ago, ClearedHot said:

Raised rates AGAIN today...and we are running out of Diesel.

Another 500 off the DOW and 350 off the NASDAQ

I am cashing out for gold, grabbing my hit back and heading for my bug out site...I wonder if they have Ice Cream Cones at the compound.

I know these rates seem crazy, but we're still below normal for any time prior to 9/11. This chart showing rates since the late 50s and, besides for a ~3 year stretch in the early 90s, rates weren't below the 4% they currently are for any real sustained period from 1965-2001. The chart is also a little misleading, as the way rates have been established has changed a few times and they've gotten tighter (sts) on the range rates are in and frequency they're changed. (This is a good writeup about the recent history.)

Rates just seem high because, like a junkie, we're addicted to low rates we've had post 9/11 and require them to continue to grow as we have. The low rates have made us feel rich; corporations borrowed a lot of money to spend on growth and stock buybacks to push up stock prices, mortgages were cheap and allowed housing prices to turn into investments and grow at rates not seen in the ~75 years proceeding, and consumer debt just kept growing because it didn't cost much.

Our new normal wasn't sustainable and, yes, this is a pretty abrupt raise pattern that's gonna hurt, but we've been at new-pilot-on-final levels of throttle-rowing for the past couple decades in regards to interest rates and it's just not sustainable. It spans parties/administrations/Fed talking heads/etc.; no one wanted to take away the punch bowl and have things correct on their watch.    

[HeloDude]

3 hours ago, ClearedHot said:

Raised rates AGAIN today...and we are running out of Diesel.

Another 500 off the DOW and 350 off the NASDAQ

I am cashing out for gold, grabbing my hit back and heading for my bug out site...I wonder if they have Ice Cream Cones at the compound.

Powell also said that inflation is the same today as is was last year at this time, and to also expect more rate increases in the future.

[SurelySerious]

Powell also said that inflation is the same today as is was last year at this time, and to also expect more rate increases in the future.

I enjoyed that he essentially told people to stop obsessing over the rate of increase in rates, and just to focus on the final rate without at all hinting what that final rate could be.

[HeloDude]

2 minutes ago, SurelySerious said:

I enjoyed that he essentially told people to stop obsessing over the rate of increase in rates, and just to focus on the final rate without at all hinting what that final rate could be.

Oh it was great hearing the Q&A and him going off script.  He basically said they’re nowhere close to stopping the rate hikes.