[antzcrashing]

Originally Posted by 2008M36MT

Agree with the demand remaining strong thesis generally, but believe it is speculative demand in particular that will continue account for and drive most of the demand. It isn't Main Street that's buying homes at this point, but institutional investors, which is inherently speculative. Low supply notwithstanding, Main Street is depleting savings and relying on credit at record levels, qualifying for mortgages is as hard as ever. Folks don't have $100K sitting in their accounts for down payments, can't pay 2x monthly payment since inflation has outpaced wage growth, so on and so forth. I'm a capitalist at heart but something stinks to high heaven, this type of speculation needs to be regulated and regulated quickly.

That said, I want to buy a second house, hoping the San Diego market drops by 20% then I'm in.

The problem is you have a ton of people wanting to buy in on housing when something like "prices drop 20 percent" but that very fact is the very reason that it isn't happening yet, because there is demand at lower prices. You aren't going to have price drops of 20 percent in housing with low supply until people start saying "I dont care if the prices drop 20 percent I aint touching housing (or I cant afford to)". And for that you need unemployment to increase. So much that some of the people who had the capital to buy no longer can, or the temporary employment search times keep homes for sale

[antzcrashing]

Originally Posted by Chick Webb

Not directly, of course; the Fed's not out building houses or apartments. But driving up the cost of capital by raising rates has already begun to affect the market and prices. It's a blunt instrument, but it does work.

Mortgage interest rates have more than doubled in a year. That is a big shock and it's put a halt to the bidding wars and %5-over-asking offers we were seeing just last fall. Prices have started to drop a little, but it will be a while before that merd really hits the fan. That'll happen when people have to sell b/c they are moving to take a new job, or they can't afford the mortgage b/c they lost one, or some other circumstance that makes them desperate to sell. The pool of potential buyers at last year's price has shrunk dramatically, so prices will have to come down to the buyer's ability to pay.

Plus, the fed is taking $90 Billion a month out of the economy now (called Quantitative Tightening or QT). That is going to further tighten credit availabilty for everyone. Builders need loans to buy land, materials, pay laborers, etc., in order to build new homes. Even municipalities will be affected, as they typically issue bonds for improvements such as the new roads, sewers, schools, etc., that are needed for new housing development. All will be paying more to borrow, and will likely borrow less, which will slow the economy and reduce demand in a broad context.

Frankly it's the QT that worries me more than the interest rates. That has a tendency to cause these "Lehman moments", when hidden credit risks and complex cross-party leveraged positions suddenly become untenable and major portions of the economy threaten to cease functioning, literally overnight, without intervention from a Central Bank. That's what happened in the UK, and something like it could certainly happen here. It's why I'm not 100% in cash. If the Fed really breaks something and has to turn around and start pumping liquidity into the economy again, the markets are going to rally big in moments, and I don't want to miss it. Well, not all of it, anyway.

Surprised that you say you are holding some equities in case fed has to pivot. I've hear this thinking recently, but if we are in a recession and that causes the pivot, shouldn't you have real pause? Couldn't worse times be ahead from that point, despite rates having to retreat?

[Tyga11]

Originally Posted by antzcrashing

Surprised that you say you are holding some equities in case fed has to pivot. I've hear this thinking recently, but if we are in a recession and that causes the pivot, shouldn't you have real pause? Couldn't worse times be ahead from that point, despite rates having to retreat?

The market always bottoms out 6-12 months before the recession so while we are in the recession we will go to the moon

[Chick Webb]

Originally Posted by Tyga11

The market always bottoms out 6-12 months before the recession so while we are in the recession we will go to the moon

This. And, the biggest rallies are in the early days of a new bull market. Which is why, if you're an investor (as opposed to a trader) they say that the key is "time in the market" and not "timing the market".

[tgrundke]

I would caution against using past performance/trade strategies in the current market. The fundamentals today are wildly different:

1. We're transitioning from a 30 year period of declining interest rates to increasing rates
2. Credit is contracting
3. Governments are beginning to compete for cash
4. Offshoring is beginning to reverse
5. # of boomers leaving the workforce has not yet peaked
6. Shortage of workers / aging of the population
7. Decrease in productivity, especially amongst the young
8. Decoupling from Asia (China) and Saudi Arabia
9. Madness of strict "Green" policies upon energy markets
10. General geopolitical instability

Add in a generalized revolt against an "elite" viewed as completely out of touch (painting with a broad brush), and we've got a powder keg that is going to make the markets much more volatile and difficult to trade moving forward.

I don't bet against America and I'm positive about the future, but the times, they are a'changin' faster than we can keep up.

[floridaorange]

So buy low and sell high?

[chassis]

Originally Posted by tgrundke

I would caution against using past performance/trade strategies in the current market. The fundamentals today are wildly different:

1. We're transitioning from a 30 year period of declining interest rates to increasing rates
2. Credit is contracting
3. Governments are beginning to compete for cash
4. Offshoring is beginning to reverse
5. # of boomers leaving the workforce has not yet peaked
6. Shortage of workers / aging of the population
7. Decrease in productivity, especially amongst the young
8. Decoupling from Asia (China) and Saudi Arabia
9. Madness of strict "Green" policies upon energy markets
10. General geopolitical instability

Add in a generalized revolt against an "elite" viewed as completely out of touch (painting with a broad brush), and we've got a powder keg that is going to make the markets much more volatile and difficult to trade moving forward.

I don't bet against America and I'm positive about the future, but the times, they are a'changin' faster than we can keep up.

tgrundke Thanks. Are you retired, or working? What investments are receiving your new money? What do you recommend?

[floridaorange]

If you have been trading at all like you were during the Trump admin, you have lost a lot of money. Buy your convictions only and hold, if you must be in the market. My father in law took all his money out before the inauguration. That seems to have been the best move. As long as the war rages on in Russia, the markets are going to be shaky.

[Tyga11]

I think we need to separate trading from investing...trading right now you can make a killing with the volatility. Investing I guess is like trying to catch a falling knife

[Chick Webb]

Originally Posted by Tyga11

I think we need to separate trading from investing...trading right now you can make a killing with the volatility. Investing I guess is like trying to catch a falling knife

Agreed, volatility is great for trading. But inflation + rising rates + geopolitics = tough for investment.

I heard a good interview the other day in which the interviewee opined that we were going to be stuck with inflation for quite some time due to 1) declining labor force/productivity, 2) de-globalization, and 3) de-carbonization. The "3Ds", he called them. That seemed spot on to me. Boomers retiring, on/near-shoring, and weaning off of oil are all going to be drivers of higher prices for the forseeable, I think.

[antzcrashing]

Originally Posted by Tyga11

I think we need to separate trading from investing...trading right now you can make a killing with the volatility. Investing I guess is like trying to catch a falling knife

You know all those loss porn posts and memes you see? Peoples whole portfolios falling to near zero? Those are from people who though calls and puts would be easy due to volatility. While I use those techniques too now is and even harder time to play that game. But as an investor with a long term horizon your future self will thank your current self for putting money into good stocks, etfs right now. Your future self is going to hate you if you sell right now and sit on the sidelines like the bears are telling you.

[Tyga11]

Originally Posted by antzcrashing

You know all those loss porn posts and memes you see? Peoples whole portfolios falling to near zero? Those are from people who though calls and puts would be easy due to volatility. While I use those techniques too now is and even harder time to play that game. But as an investor with a long term horizon your future self will thank your current self for putting money into good stocks, etfs right now. Your future self is going to hate you if you sell right now and sit on the sidelines like the bears are telling you.

I dabbled a little with options a few months ago...it was basically a lotto ticket. I don't trade anymore and I haven't sold anything even though I'm down 35% YTD.

[antzcrashing]

Originally Posted by Tyga11

I dabbled a little with options a few months ago...it was basically a lotto ticket. I don't trade anymore and I haven't sold anything even though I'm down 35% YTD.

Being down 35% YTD hurts but you are in good company, even the indexes are down probably 20-25 percent. Hang in there

[barcelona]

Barclays

[Chick Webb]

I don't think we're at the bottom yet (trend is still lower highs and lower lows) so I don't want to buy anything outright, and while 4% on 1-yr Treasuries is certainly an improvement, it's still a negative real rate. So, broker and I agreed to use the cash in my IRAs to sell Jan '23 cash-secured puts on several big names. Strike prices all about 10% below current (AAPL, for instance, @$130) and all stocks that I would be happy to own at those prices if the options get exercised. Collected premiums to the tune of about a 13.5% annual rate-of-return. If I'm wrong and the trend reverses before the end of January, I'll likely buy the options back to free-up that cash and buy the stock.

[2008M36MT]

I buy and sell stocks, don't mess with options. Bought a large amount of AAPL shares @142/share. I'm sure it will go lower, but I'm buying for the long term and if it drops significantly, I will use margin to dollar cost average. For now though, I'm all in on AAPL in my discretionary account (e.g. not my corporate Roth). My diversified portfolio also has a rental property, but right now a good chunk is AAPL stock. Here's for continued innovation over the next 5 years.

[chassis]

Originally Posted by Chick Webb

I don't think we're at the bottom yet (trend is still lower highs and lower lows) so I don't want to buy anything outright, and while 4% on 1-yr Treasuries is certainly an improvement, it's still a negative real rate. So, broker and I agreed to use the cash in my IRAs to sell Jan '23 cash-secured puts on several big names. Strike prices all about 10% below current (AAPL, for instance, @$130) and all stocks that I would be happy to own at those prices if the options get exercised. Collected premiums to the tune of about a 13.5% annual rate-of-return. If I'm wrong and the trend reverses before the end of January, I'll likely buy the options back to free-up that cash and buy the stock.

Interesting strategy. How much capital did you put at risk in the options whose premia yielded 13.5%?

[MKSixer]

Originally Posted by Chick Webb

Agreed, volatility is great for trading. But inflation + rising rates + geopolitics = tough for investment.

I heard a good interview the other day in which the interviewee opined that we were going to be stuck with inflation for quite some time due to 1) declining labor force/productivity, 2) de-globalization, and 3) de-carbonization. The "3Ds", he called them. That seemed spot on to me. Boomers retiring, on/near-shoring, and weaning off of oil are all going to be drivers of higher prices for the forseeable, I think.

Thoughts on the current bond yields? I'm tempted on the 2-year note.

[Chick Webb]

Originally Posted by chassis

Interesting strategy. How much capital did you put at risk in the options whose premia yielded 13.5%?

I'm not comfortable throwing out numbers, but it's like 2% of my positions now. If all of the options expire I'll have made enough after taxes for us to take a real nice vacation someplace.

[Chick Webb]

Originally Posted by MKSixer

Thoughts on the current bond yields? I'm tempted on the 2-year note.

If you're going to hold them for the duration, putting some money into Treasuries is a safe way to not lose quite so much to inflation while taking zero risk and waiting for the dust to settle. Rates may go up more, though, and if they do and you have to sell you'll likely lose a little of the capital. But rates aren't likely going to go up that much more so you're not going to get shellacked like those of us holding bonds in January. And if the market turns up it's likely because rates are down and then you'll be able to sell for a small profit and put the money back into stocks if you'd like.

But, you will be losing money. Inflation isn't likely going to be below 4% anytime during those two years (IMHO), so if you do hold them you're pretty much guaranteed to lose money. Could you lose more in stocks? Maybe. History says that they (and other hard assets) are the only way to beat inflation in the long run, though. And it would be very unusual to see the market down two years from now, based on how much it's already declined. Could happen, of course, but that's a place I don't personally want to go in my head. Too scary.

[chassis]

Originally Posted by MKSixer

Thoughts on the current bond yields? I'm tempted on the 2-year note.

I’m buying 3, 6 and 9 month Treasuries and holding to maturity. I look at them as cash.

[chassis]

Originally Posted by Chick Webb

If you're going to hold them for the duration, putting some money into Treasuries is a safe way to not lose quite so much to inflation while taking zero risk and waiting for the dust to settle. Rates may go up more, though, and if they do and you have to sell you'll likely lose a little of the capital. But rates aren't likely going to go up that much more so you're not going to get shellacked like those of us holding bonds in January. And if the market turns up it's likely because rates are down and then you'll be able to sell for a small profit and put the money back into stocks if you'd like.

But, you will be losing money. Inflation isn't likely going to be below 4% anytime during those two years (IMHO), so if you do hold them you're pretty much guaranteed to lose money. Could you lose more in stocks? Maybe. History says that they (and other hard assets) are the only way to beat inflation in the long run, though. And it would be very unusual to see the market down two years from now, based on how much it's already declined. Could happen, of course, but that's a place I don't personally want to go in my head. Too scary.

You talked about an absurd amount of cash earlier. What vehicle are you holding cash in?