It was considered unthinkable that this would not continue.
Stein's Law
"If something cannot go on forever, it will stop."
Herbert Stein, chairman of the Council of Economic Advisers under Richard Nixon & Ford.
Cady Longmire: Why are all these people here?
Mandy: …People are taking you more seriously now. Oh, I-I took $20 from each of them. That's like a retainer, right?
Cady Longmire: No, no, no. You have to give that back. This is...This is a nonprofit legal-aid center.
Mandy: Free is insulting. If you don't charge them, people will think that you're giving them shitty service.
“The complacent investor view that geopolitics should be ignored might be true, except for the times when it isn’t. We suspect we are in one of those times.”
You probably saw this:
And this:
As I wonder this:
And laugh at this:
“…if we ignore the never-implemented student loan forgiveness program, the deficit actually doubled from FY 2022 to 2023.” - Ryan McMaken
Just fyi, if you’re still earning 0.1% at a bank, Uncle Sam (finally) offers some nice alternatives ($100 minimum):
Even more convenient - at slightly less yield - is something like this Vanguard Treasury Money Market Fund:
Both options (which I use) are state tax free.
Nothing here is ever investment advice.
I’ll just reuse QTR’s disclaimer:
“QTR’s Disclaimer: I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have not been fact checked and are the opinions of their authors and are either published with the author’s permission or under a Creative Commons license. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.”
“…Eisman and his team were so certain the world had been turned upside down that they just assumed Raymond McDaniel must know it, too. "But we're sitting there," recalls Vinny, "and he says to us, like he actually means it, 'I truly believe that our ratings will prove accurate.'" And Steve shoots up in his chair and asks, 'What did you just say?'--as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him. "With all due respect, sir," said Vinny deferentially, as they left, "you're delusional."
This wasn't Fitch or even S&P. This was Moody's. The aristocrats of the rating business, 20 percent owned by Warren Buffett. And its CEO was being told he was either a fool or a crook, by Vincent Daniel, from Queens.”
- Michael Lewis, The Big Short
Raymond McDaniel is still CEO of Moody’s.
“Softbank announced a $6.2 billion loss for 3Q23 as it continues to suffer from its ill-begotten investment in WeNeverWorked (WE). Analysts on S&P Global Intelligence were expecting a $1.2 billion profit for the quarter, raising the question whether Softbank is more clueless than its analysts or vice versa.”
There’s a lesson here:
Softbank should have written off the investment years ago rather than digging a deeper hole. But one of the hardest things to do as an investor is take a loss, and Softbank demonstrated this by deferring and deepening the loss which is now $14.3 billion (and running). This is another example of the adage “pain deferred is pain increased.”
Here’s the second part of Jason Hartman’s interview with Melody Wright I mentioned in the last post. At the end of part 1 - where Hartman cut her off - Melody said you can’t trust Altos’ data. Her explanation was apparently edited out.
Ivy Zelman Update On Real Estate1 “In multi-family, we actually think we’re 30% oversupplied.” The charts below are from Zelman.
“If we have a shortage, why is it so challenging to fill up these buildings?”
”I do think there’ll be a lot of workouts. They don’t want those keys back, so what can we do to modify those loans…”
Sonja Przulj loves her two-bedroom, two-bath condominium in Miami, located on the 21st floor of the 27-story Palm Bay Yacht Club, with spectacular views of Biscayne Bay, downtown Miami and South Beach. She paid $285,000 for the corner unit in September 2021 after renting in the building for years. Przulj, 39, purchased at the height of the pandemic, when she was working nonstop as a nurse. “It seemed like it was meant to be,” she says. “But the thrill was very short-lived.” That’s because less than a year later, Przulj, who lives in the condo with her husband, Jean Pablo Vialle, and their five-year-old son, was hit with a $145,000 special assessment by the condo association to pay for repairs in the aging building. “It’s an earth-shattering number,” she says. And one she can’t afford to pay.
Austin homes used to sell in a week. Now sales take months, if they happen at all.
When Lindsay Mader put her house up for sale earlier this year, she braced herself. For the past two years, the combination of plummeting mortgage interest rates and an influx of remote workers to Austin meant for-sale homes were in high demand. The result was a frenzy. Dozens of people bid to buy the same home, some of them offering $100,000 over the asking price.
Then, everything changed. Mortgage interest rates nearly tripled in a year. Buying a home became much more expensive and interested buyers dried up. “We knew that the market was nowhere what it used to be,” Mader said. “But I don't think we were adequately prepared.”
In May, Mader and her husband listed their North Austin home for $650,000. Then, they waited.
…In late September Mader and her husband finally got an offer. It was $100,000 below the original asking price. Worried they wouldn’t get another shot, Mader and her husband decided to sell.
That sale is the new neighborhood comp.
“Police brutality, ethnic demagoguery, and credit manipulation (“the peasant in debt is the safest voter”) kept the peasants in line.“
United States Michigan Consumer Sentiment Lacy Hunt says this is a very important indicator.
Germany: Christoph Straube, CEO of property development company W&L AG, told Forbes magazine that after a decade of rising property prices in Germany, "for a long time it was considered unthinkable that this would not continue for a long time"
The five largest loans that resolved for a loss in October 2023 according to Trepp data:
For what it’s worth, apparently when you go above 30% in the above chart, your chances of a recession hits 90%. Lots of mocking comments on the below chart.
In the case of Peloton, the exercise bike manufacturer sold $1 billion of convertible bonds with a $239 per-share conversion price in February 2021 when its share price stood near $150 with a market cap north of $40 billion. Peloton’s stock price and market cap have subsequently shrunk to $5 and $1.8 billion, respectively, while the convertibles – which mature in early 2026 – changed hands yesterday near 74 cents on the dollar. “Refinancing these debts in a higher-yield context and with a lower share price may be challenging,” Tristan Gruet, convertible bonds portfolio manager at Allianz Global Investors, tells Bloomberg.
Potemkin Village
From the San Francisco Chronicle (via Grant’s):
San Francisco officials have been working to clear some of the city’s hot spots for homeless tent camps ahead of world leaders, dignitaries, corporate executives and international journalists descending on the city for this month’s Asia-Pacific Economic Cooperation summit.
A high-ranking official in the city’s Public Works department listed seven intersections in the Tenderloin and South of Market to target in an email to other city officials on Sept. 25. “With APEC coming, I am concerned about historical encampments that are close to priority areas,” wrote Christopher McDaniels, superintendent of Street Environmental Services, in an email obtained by the Chronicle through a public records request.
Below is via friend of the show Paul M. re: Pepsi. I’d mentioned a while ago that I thought that - with the ridiculous price increases in things like soda - sales may stay up, on higher prices, but volumes would go down, another indication to me of an increasingly bifurcated economy.
The only age group this century to have an increase in labor force participation is those over 65.
"There is a great man who makes every man feel small. But the real great man is the man who makes every man feel great." - G.K. Chesterton
‘While healthy frogs will jump out of water when the temperature slowly gets too hot, brainless or spineless ones will not.’
“On his last night, Oliver Reed downed over eight pints of lager, twelve double rums and half a bottle of whiskey, won an arm-wrestling contest against many members of the British Royal Navy crew, HMS Cumberland, and insisted on paying for the entire round.”
"I belong to the most boring and least exclusive club on earth, and every day it feels like an amazing privilege."
In accordance to the principles of doublethink, it does not matter if the war is not real, or when it is, that victory is not possible.
The war is not meant to be won. It is meant to be continuous. The essential act of modern warfare is the destruction of the produce of human labour. A hierarchical society is only possible on the basis of poverty and ignorance. In principle, the war effort is always planned to keep society on the brink of starvation.
The war is waged by the ruling group against its own subjects, and its object is not victory over Eurasia or Eastasia, but to keep the very structure of society intact…
There is truth, and there is untruth. To be in a minority of one doesn't make you mad.
- from the movie 1984
Sam Bankman-Fried Sent Himself to Prison “This was a very obvious fraud.”
“We’ve been covering the trial in my class this fall in Wisconsin in real-time. We thought that the moment he lost the jury was when Caroline Ellison testified that they were all driving luxury cars paid for by FTX or Alameda, and Sam Bankman-Fried pulled them into a meeting and said they had to get rid of them and get Toyota Corollas. Those are the moments when the jury not only sees credibility but intent, which you have to prove in a fraud trial. The whole schlubby, messy, I-sleep-on-a-bean-bag-chair image was contrived. Those kinds of things matter in criminal trials because at the end of the day, most of the time it boils down to whether the jury believes the defendant or not. It seems that the whole façade of FTX and Alameda was just that – a façade. They were losing money, not making money, and they were hiding it. I thought the evidence presented at trial was overwhelming.”
War All the Time: Israel vs Palestine, 1948-82 Have not heard this yet (it’s 4 hours long), but I’ve found Marty Made (Darryl Cooper) to be one of the more thoughtful Americans on the Middle East. Previously I’ve posted this and this.
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I had a person recently complain to his credit card company that his subscription was “fraudulent” - this subscription stuff is all automated by Stripe, not me, hence their cut - and it’ll cost me money to get rid of him (I have no problem with a refund, but I’ll still get hit with a fee by Stripe.)
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Zelman’s interviewer, the sensible Ted Oakley, was the guest on a recent podcast: “I think we've been defensive since really the beginning of 2022, and we're as defensive today as we've ever been I would say we were about as this defensive in early 2000…”
I've been known to do some seriously stupid dumb shyt in my life so....I DEMAND you remove the unsubscribe button from the bottom you substack emails I get for my money because these days what you do is invaluable and fear I may do something dumb like UNSUBSCRIBE
I’m here because Melody sent me. Worth every penny. In regards to this:
”I do think there’ll be a lot of workouts. They don’t want those keys back, so what can we do to modify those loans…”
I wonder…wouldn’t the note holders like nothing better than getting those 3% disasters off their books? Even if it means getting the keys back.
Unless of course the ‘workout’ forces the market rate on the mortgagee, but for a longer period. 40 years?
Higher for longer. Hmm. Now where have I heard that before.