Slaying dragons.
"What the consumer wants is deflation." - Dick Kovacevich, being correct for once on CNBC
Saagar Enjeti: If you had a message to people who are cavalier - in Washington, it's very in vogue to call for war with Iran, it's very in vogue to call for war with Russia, with anyone, everything starts to become pieces on the chessboard. It’s like, oh well, if they do this, we'll do this - what would your message be to people who are very cavalier in their discussion of the use of force in the US military?
Jocko Willink: From everybody from the people in Washington DC, that are cheering for war, to the people on the streets that are cheering for war, on either side, I would say get your shit on, get your gear on, and go lock and load a weapon, and go fight, because you have no idea what you're doing, you have no idea what you're talking about, and you're sending young brave people to fight, and you have no idea what it's like, so I'd say if you want war, go get your kit on.
Taleb “goes after “interventionistas” who have repeatedly urged us to intervene in foreign countries—Afghanistan, Iraq, Libya, Syria—whose governments did not meet abstract standards of political acceptability. Each of those interventions made conditions significantly worse in the country being “saved.” Yet the interventionistas pay no price for wrecking the lives of millions. Instead they keep appearing on CNN and PBS as “experts” who should guide us in choosing what country to bomb next.”
One cannot overstate the childishness of the ideas that feed and stir the masses. Real ideas must as a rule be simplified to the level of a child’s understanding if they are to arouse the masses to historic actions. A childish illusion, fixed in the minds of all children born in a certain decade and hammered home for four years, can easily reappear as a deadly serious political ideology twenty years later.
From 1914 to 1918 a generation of German schoolboys daily experienced war as a great, thrilling, enthralling game between nations, which provided far more excitement and emotional satisfaction than anything peace could offer; and that has now become the underlying vision of Nazism. That is where it draws its allure from: its simplicity, its appeal to the imagination, and its zest for action; but also its intolerance and its cruelty toward internal opponents. Anyone who does not join in the game is regarded not as an adversary but as a spoilsport. Ultimately that is also the source of Nazism’s belligerent attitude toward neighboring states. Other countries are not regarded as neighbors, but must be opponents, whether they like it or not. Otherwise the match would have to be called off!
Many things later bolstered Nazism and modified its character, but its roots lie here: in the experience of war — not by German soldiers at the front, but by German schoolboys at home. Indeed, the front-line generation has produced relatively few genuine Nazis and is better known for its “critics and carpers.” That is easy to understand. Men who have experienced the reality of war tend to view it differently.
Granted, there are exceptions: the eternal warriors, who found their vocation in war, with all its terrors, and continue to do so; and the eternal failures, who welcome its horrors and its destruction as a revenge on a life that has proved too much for them. Göring perhaps belongs to the former type; Hitler certainly to the latter. The truly Nazi generation was formed by those born in the decade from 1900 to 1910, who experienced war as a great game and were untouched by its realities.
Quite untouched? At least, you may protest, they suffered starvation. True enough; but hunger scarcely interfered with the game. It may even have enhanced it. Well-fed, satisfied men are not given to visions and imaginings.
- Sebastian Haffner, Defying Hitler (written in 1939)
“Cassandra in Greek legend, you recall, was condemned to know the future but to be disbelieved when she foretold it. Hence the agony of foreknowledge combined with the impotence to do anything about it.”
Excellent housing market discussion between Melody Wright and Travis Spencer So much better than the typical mainstream housing market pablum.
Melody: You can go back and historically look at a home ownership for primary residents in our country, and you can go back and look at how the government got involved in the 1930s, and they got involved again and again and again, and they always tried to push it up ,but every time you try to push it over that 64%, 65% home ownership rate like things just go south in a hurry, and I can't tell you why that is. I can just tell you that you know there's a lot of reasons people can't afford to buy a home right now…
Travis: What do you think is a solution to the foreclosure crisis, the forbearance crisis, what is the solution here?
Melody: Well, what's going to happen versus what's the solution?
Travis: I know, right?
Melody: I mean, honestly, you know what's going to happen is something similar to what's going on with the VA loans, and that is the distressed loans are going to be bought from the servicers…I think what what's going to happen is that all of the [taxpayer-backed] agencies - Fannie, Freddie, FHA, VA - are going to get in the business of holding these assets…that's kind of what I see happening, but honestly Travis the solution is is to let the process play out, and I know that's not what people want to hear…
2006 Century 21 Ad
Travis: We didn't do this, Mel. I mean we're sitting here warning people. We're not sitting here making the problem worse, so it's not our fault. It's not like we want people to be hurt. We’re talking about it because we don't want people to get hurt, right?
People get confused - oh why are you so negative? Because I opened my eyes and I see what's in front of me, and when you're warning someone of a hurricane or a tornado that's coming, you don't passively go in the corner and whisper it to them. You speak up, have courage, go against your peers if necessary, and you sit in the chair like we're doing, and you say, you know, here's my perspective, here's why. I think you're doing a great service for people, Melody.
Pretty good discussion of Florida real estate, especially concerning condo conversions. Some of the comments are interesting too.
Michigan Consumer Sentiment Index
If the real economy is so great, why is sentiment at levels only seen a handful of times in the past 45 years?
“European Central Bank President Christine Lagarde…admitted on Friday that her son lost "almost all" of his investments in crypto assets…he lost about 60% of it”
Gold today is around €1,830. In 1999, it was €285.
Lagarde’s son should’ve bought gold (or Bitcoin).
"These QE policies, as we all know now, resulted in financial markets going up at double the long-term average even as economic growth was at or below the long-term average. So the policy of QE was a great financial market policy, and not a great real economy policy."
Quantitative easing is the most radical and irresponsible fiscal action ever taken by a federal agency, yet the Congress remains strangely silent. Not a single member of either political party has called for Fed Chairman Jerome Powell to explain his illegal expenditure of Treasury funds, even during appearances before Congress. Again, the Fed’s capital is authorized by law; QE is not because the Fed is spending the Treasury's cash.
We have noted previously in this space that the central bank cannot make a “profit” and is always an expense to the US Treasury on a net basis. The intellectual author of the Fed’s illegal actions is former Fed Chairman Chairman Ben Bernanke, who tours the country collecting kudos and speaking fees for saving the world after 2008, but in fact is a fraud.
A venture of two nonprofits and Related Fund Management is poised to win an auction for billions of dollars of Signature Bank loans backed by New York apartments, according to people familiar with the matter. The venture’s leading bid of less than 70 cents of the loan’s face value shows how much the value of New York’s rent-regulated apartment sector has deteriorated in recent years…Sales of rent-regulated apartment buildings have come at sharp discounts. At some buildings, where all apartments are regulated, values have fallen as much as 70%
Treppwire Episode 229 The haircuts on some of these CRE properties are scary. 75%+ reductions in “valuations” are not unusual now.
Properties with near-term maturities, 24-months or less, with DSCR (Debt service coverage ratio) of 1.25 or less:
“I was really shocked when I saw the numbers…almost 7,600 properties that meet that criteria today…almost $117 billion in near-term loan balance outstanding…multifamily, not surprising, leads the way, but multifamily has almost 3,100 properties, about $55 billion of near-term maturity with debt-service less that 1.25…the one that really surprised me was industrial - about 2,600 industrial properties, about $21.1 billion…office is there, about $15 billion, lodging is about $11.5 billion…”
- Lonnie Hendry
Bank Failures in Brief 2001-2023
“Two years ago, the U.S. Federal Reserve’s interest-rate setting committee projected that the federal funds rate would be in the range of 1.1% to 2.1% by 2023. Today the rate is above 5%.” - Edward Chancellor (paywall)
“The current bear market in bonds is two years old. If history is any guide, it has many years to run.”
I noticed this comment back in early 2020, pre-panic:
A recent post I saw: “I’m a contractor. Here’s what I’m seeing and here’s my prediction. Correct me if I’m wrong.”
We work for builders all across the board that build lower priced spec homes ($600-$850k here), medium priced spec builders ($1.5m+) and commercial builders building large scale multi-family.
I’ve noticed that the lower priced spec home builders are squeezing us like crazy over a few hundred dollars here and there. Budgets on new projects have dropped by like 20%. Although, I work with them on price and they always move forward but always complain about all of our bids. It also seems like they are not starting anymore of these smaller homes and have moved towards larger $1.5m and up starts.
Our medium priced spec home builders aren’t really beating us up on bids. Some make comments but they all have moved forward. They are saying homes are staying on the market for twice as long as early last year.
Our large scale commercial builders are moving full steam ahead no questions asked on our bids. Some of these projects they are begging us to do and we are not bidding against anyone. I am talking 250 unit apartment complexes, industrial complexes, etc..
Sounds like people who need mortgages cannot afford the lower priced homes and therefore builders are making concessions/getting squeezed and my bet is there will be heavy losses in this niche of the market.
I think medium priced homes here will slow but stay steady as these folks are coming here from CA and Seattle in droves and paying cash.
Rental market for lower priced apartments is still very much in high demand here so I’m assuming this won’t be slowing down especially since rates are high and these folks cannot afford to buy with current rates.
I feel like this is a very segmented recession (if I dare call it that here). I’m going to be heavily focused on moving our branding towards remodels as I feel like people are locked in their homes at 3% ish and will want to make the best of it for the time being. Especially theoretically since inflation is coming down and hopefully folks have more money to spend.
One of the most annoying econ major myths I see many people repeat (especially on Reddit, which is largely full of goofballs) is that lower prices are some sort of hellish outcome:
HappyDJ is right about inflation not being a synonym for price levels, but the whole “nobody will buy anything because it’ll be cheaper next year” concept is absurd.
Are you not going to replace your air conditioner in July in Texas because they might be cheaper next year? Are people deciding to try homelessness because they think rents will drop?
My take:
Excellent Point!
“Apple may have a lot of cash, but someone else has a lot of debts. So if one looks at these things in aggregate, everything might look better than it actually is. If you remember before the global credit crisis, everyone said credit doesn't matter. One man's debt is another person's asset. Well, it just didn't really work out like that, because…the person who was in debt couldn't actually afford to pay the debt, and therefore that wasn't particularly good for the other person's assets. So you have to be slightly careful with this aggregate analysis.”
Reminded me of this classic from Rick Rule:
"I learned that my assets were ephemeral, while my debts were money-good."
I think business classes can learn a lot from studying it - Iceland was one of the hardest hit countries during the Global Financial crisis, and the seeds were laid leading up to the the global financial crisis between 2003 and 2004. The Iceland stock market skyrocketed 900% in the span of one year, and like this is a recurring theme that I document through throughout my book.
There's a period of easy money, which, as we saw during like the most recent 15-year period, where there was easy money, and when when this happens people pile into basically anything but cash, because cash does doesn't pay a lot, so people, you know, buy up everything else, and the money supply in Iceland expanded by tenfold in the 14-year period ending with the global financial crisis, and I think a lot of these types of events have really been possible because I tie back to the the huge moment in in 1971 where the United States severed the link between the US dollar and gold, and that really, I think, facilitated a lot of these ultra-easy monetary policies, and also just piling on massive amounts of debt.
“An economy in which risk is socialized is no longer capitalist.” - Edward Chancellor
“I saw a quote the other day where somebody said, "Why in the world would you want to bring children into this world?" And the response was, " You think it's crazy to be bringing Dragon Slayers into a world that's dominated by dragons?"“
“Fairy tales do not give the child the idea of the evil or the ugly; that is in the child already, because it is in the world already. Fairy tales do not give the child his first idea of bogey.
What fairy tales give the child is his first clear idea of the possible defeat of bogey. The baby has known the dragon intimately ever since he had an imagination. What the fairy tale provides for him is a St. George to kill the dragon.”
- G.K. Chesterton, Tremendous Trifles
Fargo, Season 1, Episode 2
Lou: Not sure if you remember, but when you were five, they had to put you under anesthesia to fix your teeth. Gave you that mask.
Molly: Hmm.
Lou: Gas that smelled like tutti frutti.
Molly: Yeah.
Lou: My soft little girl, in a hard world of drills and needles.
Molly: I'm 31, dad. I carry a gun.
Lou: I know. But it's relative, you know? There's the kind of things a schoolteacher gets exposed to...truancy and the like...and then there's the stuff a cop sees...murder and violence and general scofflawery...and then there's the kind of deal you're looking at now.
Molly: Which is?
Lou: Which is, if I'm right...savagery, pure and simple. Slaughter, hatred, devils with dead eyes and shark smiles, and...one day, you're gonna get married...
Molly: [Scoffs]
Lou: …and have kids, and when you look at them, their faces, you need to see what's good in the world, 'cause if you don't, how you gonna live?
Molly: You talk a lot, you know that?
Lou: It's always been a problem.
Interesting discussion of demographics between two secular guys: "Why the Religious Will Inherit the Earth" with Eric Kaufmann and Coleman Hughes
Jocko Willink: From everybody from the people in Washington DC, that are cheering for war, to the people on the streets that are cheering for war, on either side, I would say get your shit on, get your gear on, and go lock and load a weapon, and go fight, because you have no idea what you're doing, you have no idea what you're talking about, and you're sending young brave people to fight, and you have no idea what it's like, so I'd say if you want war, go get your kit on.
Please put Lindsey Graham at the front of the line. I’ll even buy his kit for him.
The phenomena of 'chickenhawkism' is a relatively new thing made possible to a significant degree by the all-volunteer military. I think this explains in part the broader decline in civic virtue, not just in government. There was also a time in the US when C-level executives, many of whom were combat veterans, had ethical and moral foundations that would, at the very least, cause them some degree of shame if they failed to operate their business at a profit, and do so honestly. They felt some responsibility to their employees and communities. These appear to be quaint notions of a bygone era now.
I'm sure there are policies that could help to once again instill essential civic and patriotic virtue - and not just in the US - but even discussing this is not possible in legacy media at least. Fortunately, legacy media's days are numbered and falling fast.