The Calm Before the Storm
Marking to myth.
"Think about it. If you own a bond, you've got a claim on money, but the claims are too much...You're either not gonna get back that money in full, or you're going to get back money that's worth less, because they print the money."
- Ray Dalio
So I agree with Dalio there, and in most of that interview. At the end though he can't help himself, and goes full-Davos, first with his man-crush on Mario Draghi, and ending with a heartfelt presentation of the Chinese Communist Party's position on Taiwan.
With high food prices, grocery shopping has become a strategy game. “There is a trade-down with the consumer going on,” Louis said, “because at the end of the day, you have to think about disposable income.”
"I don't feel the pain of inflation anymore. I see prices rising but I have enough... I sometimes balk at the price of things, but I don't find myself in a space where I have to make tradeoffs because I have enough, and many Americans have enough."
In 2021, Mary Daly made $500K, just in salary. There were 1,800 employees at the San Francisco branch alone. She had 140 'other officers’ making an average of $272k each, plus juicy benefits, bonuses and pensions.
A $1.5 Trillion Backstop for Homebuyers Props Up Banks Instead
The Federal Home Loan Bank system provides billions to banks curtailing mortgage lending, and millions to its executives
It’s a feature, not a bug!
Federal Government Current Tax Receipts
Just another indicator. These generally seem to roll over going into a recession - sometimes during a recession. Don’t see a lot of false signals. I’m reminded that states can’t print money (although I’m sure California will try).
Conventional oil production has now unequivocally rolled over. Unconventional production, the only source of growth in global oil supply over the last 12 years, has also significantly slowed. The only growing non-OPEC basin is the Permian in West Texas. Never before has oil supply growth been so geographically concentrated. Six counties in West Texas are now 100% responsible for all global production growth.
Ten U.S. issuers defaulted on an aggregate $7.2 billion in bonds last month, strategists from Bank of America relay, marking “a significant pickup in pace.” Indeed, May’s 7.3% annualized par-weighted default rate stands far above the realized 2.3% trailing 12-month tally and 3.7% on an annualized three-month basis.
Recovery rates, meanwhile, languish at a feeble 27% over the past year, representing the fifth percentile on a long-term basis, BofAML adds, as “single-digit outcomes (i.e., sub 10% recoveries) are piling up.”
What part of “junk-rated” do you not understand?
The owner of San Francisco's largest- and fourth-largest hotels said it is planning for "the ultimate removal of these hotels from its portfolio" after ceasing payments on a $725 million loan anchoring both properties this month.
US banks prepare for losses in rush for commercial property exit
Lenders prepare to offload debt at a discount even when borrowers are up to date on payments
According to two of the people briefed on the HSBC sales process, the loans are fetching bids that would price the loans in the mid-90s as a percentage of their face value — meaning the bank would have to take a loss of as much as 5 per cent.
Filings reveal PE and VC returns amid escalating write-downs
Some high-profile venture capital and private equity firms are slashing the valuation of their holdings.
"If Blackstone REIT is 'mark to myth', then
the venture capital funds are 'marked to fraud' almost, right?"
The nonbank financial system now controls $239 trillion, or almost half of the world’s financial assets, according to the Financial Stability Board. That’s up from 42% in 2008, and has doubled since the 2008-09 financial crisis…
What could trigger problems in the broader private-credit universe? One concern is a potential wave of struggling borrowers larger than the anticipated 5% to 6%. Arsov says expectations may be too rosy, based on the low default rate during the pandemic, when the Fed stepped in with trillions of dollars in stimulus. With the Fed now raising rates to curb inflation and trimming its balance sheet, such assistance is unlikely to be repeated.
Long article with plenty of interesting information.
I keep hearing how the banks are so super safe now (ignore the recent large bank failures), but it seems we just shifted the systemic threat to areas with even less regulation than the banks.
Speaking of Austin: This city dodged the 2008 housing market crash—now it’s the epicenter of the pandemic correction
“Why is Austin getting hit so hard while much of the country sees little to no correction?”
Look at the above chart. Is that “getting hit so hard”? Come on.
“Keep in mind that while Austin home values have come down a bit over the past year, they're still up 42.6% since March 2020.”
“Rational people don’t risk what they have and need
for what they don’t have and don’t need.”
Florida’s homeowner insurance rates are four times the national average. Homeowners in the state pay private insurers about $6,000 a year
Another joy of homeownership people often don’t think about.
Interesting comments on the Airbnb experience
This thread/ Reddit page just presented itself on my homepage, yet I am not a host. However, I will give some perspective on my thoughts.
My profile: Married 45yr old, dual income, no kids, both executives in technology.
I WAS a serious Airbnb regular. Personal & work trips- I NEVER booked a hotel. Why? For less than a hotel room you’d get more for your money. A hell of a lot more. It was that simple. Personal touches like a 6 pack in the fridge from a local brewery or maybe some chocolates on the kitchen counter. A hand written note from the host that truly enjoys taking care of guests. The places were always “cozy”, and the personality of the hosts showed in every room. These were the days when being an Airbnb host was a way to share your extra space for a little bit of extra spending money. No regulation from the city, your HOA, or any other governing body. Remember those days?
Today… it’s a straight up business. Hosts make big investments to create serious passive incomes. Those same cute getaways that were offered are now 1000’s of sterile contractor grade, gray paint and LVP flooring, house flips. Hell, a lot of hosts went all in with Airbnb and quit their day jobs to make it rich.
The investments made require higher nightly rates. It’s not that I cannot afford it… again, my motivation was that airbnb was so much MORE for your money.
A lot of hosts aren’t actually hosts- they have a management company handle everything, so here came overinflated cleaning fees, pet fees, resort fees, guest fees, I even saw a charcoal grill use fee… all at the loss of any true personality and charm.
Some hosts now have a 25 line item list of “house rules”. I get no house parties… but things like no guests, no in and out after 10pm? C’mon- we are all adults here. If I want to make a run for Taco Bell at 1am, how’s that any of your business? No guests??? If I’m in town and a friend lives nearby, I’m not allowed to invite them over to catch up? Get outta here.
And the price now. What used to be more for less is now double what you’d pay for a nice hotel with a view, room service and valet.
TLDR: Airbnb is now a business. Just like Uber for example. Uber used to be a nice ride to your destination at the fraction of the cost to call a cab. Like Uber, Airbnb just isn’t what it used to be.
Young People Are Missing Auto Loan Payments At Near Record Numbers The average car payment for new car buyers was $800 last year, [and] about one in seven buyers has a payment of at least $1,000 a month
The Pandemic Caused a Baby Boom in Red States and a Bust in Blue States via Scientific American
The American West coast has been hit especially hard by the phenomenon as its numerous tech companies pivoted to fully remote work more aggressively. The University of Toronto data shows that apart from San Francisco, downtown activity has also stayed far below pre-pandemic levels in Portland, Ore. (37%), Seattle (44%) and Oakland, Calif (49%). Only four out of 62 analyzed downtowns surpassed their 2019 activity levels: Salt Lake City, Bakersfield and Fresno in California as well as El Paso, Texas.
Interesting that 6 of the 12 most empty American downtowns surveyed were Federal Reserve Branch headquarters:
Been in Austin, Texas for almost 3 years. Place is truly a hellscape, a lot of nice people though (not very many smart ones). When I first moved didn't see a for sale sign for over a year, could hardly find a home for sale on zillow or redfin. last 6 months they've been slowly piling up in some parts of the city with plenty of construction still going on. Same thing on other trendy areas around Texas Hill Country.
That quote by Mary Daly may be the most tone deaf comment I’ve heard in 60+ years on earth!