The Investment Thread

[BrewerFan]

On 6/6/2024 at 1:50 PM, nate82 said:

I believe they will be having a stock split on Friday for 10-1.  But I don't think that is what is driving the price going up.  Well it is driving it just not the primary reason. 

I would expect it to run up a bit more in the short term...or at least historically, that's what happens AFTER the stock splits...but it's run up so much as it is, I don't know. It is still "cheap" relatively speaking. A ~45 Forward PE is much lower than it's been in the past...but I could also see a pretty solid pullback. 

Maybe some out-of-the-money long spreads and if you get an interest cut or just the next earnings...which Hensen seems pretty confident about. It seems like many of the "cyclical concerns," have been eased...at least in near term and with Blackwell coming out(and now another Chip on schedule for next year as they enter a new era with a new Chip each year)...it seems as though people are really confident they can maintain their edge for the next ~3-5 years. 

If they can keep their margins in the high 70s and keep just...crushing their earnings(and more importantly, expectations) it's going to really do well, but the first time they've got a Quarter where they just hit earnings, that's effectively missing for NVDA.

 

BUT...again, as of now, Huang said that the demand for Hopper GREW more than they anticipated after they announced Blackwell. 

The end of August is going to be a very interesting time for NVDA. 

[LouisEly]

10 hours ago, Fear The Chorizo said:

 and should strongly consider raising them further to actually get inflation down to their stated goal in the short term.  

That's the absolute worst thing that they could do right now.

The ONLY things that are driving inflation right now are shelter and insurance.  Raising interest rates won't help those at all.  Raising rates is more likely to increase the cost of rent (less affordable to buy, and have to live somewhere, so have to rent), and you don't want to discourage people from buying insurance.

The problem is that shelter is a very lagging piece of CPI.  Right now shelter includes the run up in rents from back in 2022-2023.  How so?  Most leases begin in May/June/July/August and are for at least one year.  The latest data is through April 2024, which means that the bulk of it is leases signed May-Aug 2023, compared to April of 2023, the bulk of which includes leases signed in 2022.

https://fred.stlouisfed.org/series/CUSR0000SAH1

The shelter index in May of 2022 was 350.4; then there was a big run up in rents and the shelter index in May of 2023 was 378.5, an increase of 8%.  Then from April of 2023 to April of 2024 the index rises only 5.5%.  Once you get past the summer of 2023, the index in September of 2023 was 385.4 and the index for April of 2024 was 397.4, an increase of 3%.  Rent inflation is coming down, insurance has flattened, and once they get through the new lease cycle inflation will start coming down.

[Fear The Chorizo]

10 hours ago, LouisEly said:

That's the absolute worst thing that they could do right now.

The ONLY things that are driving inflation right now are shelter and insurance.  Raising interest rates won't help those at all.  Raising rates is more likely to increase the cost of rent (less affordable to buy, and have to live somewhere, so have to rent), and you don't want to discourage people from buying insurance.

The problem is that shelter is a very lagging piece of CPI.  Right now shelter includes the run up in rents from back in 2022-2023.  How so?  Most leases begin in May/June/July/August and are for at least one year.  The latest data is through April 2024, which means that the bulk of it is leases signed May-Aug 2023, compared to April of 2023, the bulk of which includes leases signed in 2022.

https://fred.stlouisfed.org/series/CUSR0000SAH1

The shelter index in May of 2022 was 350.4; then there was a big run up in rents and the shelter index in May of 2023 was 378.5, an increase of 8%.  Then from April of 2023 to April of 2024 the index rises only 5.5%.  Once you get past the summer of 2023, the index in September of 2023 was 385.4 and the index for April of 2024 was 397.4, an increase of 3%.  Rent inflation is coming down, insurance has flattened, and once they get through the new lease cycle inflation will start coming 

Lagging indicators or not, the reason shelter costs are exploding has more to do with lack of supply than rates.  The reason insurance has gotten out of control expensive is because costs for everything that gets insured have also exploded.  

Raising interest rates to where they need to be right now will tank this economy, i agree - but it's the medicine this economy needs due to close to two decades of rates largely suppressed to zero amid printing money to try and artificially bolster growth.  Trying to keep propping this up with half steps and more money printing will lead to the whole works crashing down, and also leave the govmint/fed with limited options to help when that does happen.

[owbc]

3 hours ago, Fear The Chorizo said:

Lagging indicators or not, the reason shelter costs are exploding has more to do with lack of supply than rates.  The reason insurance has gotten out of control expensive is because costs for everything that gets insured have also exploded.  

Raising interest rates to where they need to be right now will tank this economy, i agree - but it's the medicine this economy needs due to close to two decades of rates largely suppressed to zero amid printing money to try and artificially bolster growth.  Trying to keep propping this up with half steps and more money printing will lead to the whole works crashing down, and also leave the govmint/fed with limited options to help when that does happen.

Yep, the fed can't fix housing. It's clear that some major housing legislation is what is desperately needed at the state and national levels. 

1. Severely restrict corporations from purchasing single family houses.
2. Override local laws to relax zoning restrictions, permit detached units, increase density, and streamline permitting. 
3. Targeted incentives and subsidies to reduce construction costs. 

Even so, it's going to take until the end of the decade or longer to fix housing. 

Interest rates are clearly not going to move before the election. 

[nate82]

22 minutes ago, owbc said:

1. Severely restrict corporations from purchasing single family houses.
2. Override local laws to relax zoning restrictions, permit detached units, increase density, and streamline permitting. 
3. Targeted incentives and subsidies to reduce construction costs. 

 #1 need to also include pensions.  
#2 not going to happen.

#3 there needs to be an industry wide standard with few exceptions for local weather.  Florida houses don’t need to be earthquake proof and Montana doesn’t need to be hurricane proof.  

 

[owbc]

2 minutes ago, nate82 said:

 #1 need to also include pensions.  
#2 not going to happen.

#3 there needs to be an industry wide standard with few exceptions for local weather.  Florida houses don’t need to be earthquake proof and Montana doesn’t need to be hurricane proof.  

 

#2 is already happening at the city and state level. The policies that are already working just need to be refined and scaled up.

For #3, I'm not following. The private sector is getting smarter at pricing geophysical hazards. Nobody is going to force them to underwrite your mortgage or home insurance -- and they have shown a willingness to pull out of areas where regulations are preventing them from pricing appropriately. 

[nate82]

11 minutes ago, owbc said:

For #3, I'm not following. The private sector is getting smarter at pricing geophysical hazards. Nobody is going to force them to underwrite your mortgage or home insurance -- and they have shown a willingness to pull out of areas where regulations are preventing them from pricing appropriately. 

Industry standard for houses will allow for mass manufacturing of houses.  Currently there are none because of all of the different regulations local, state and federal.  Once you start to get into mass production prices tend to decrease.  Quality though also tends to take a hit on mass production also.

[LouisEly]

7 minutes ago, nate82 said:

Industry standard for houses will allow for mass manufacturing of houses.  Currently there are none because of all of the different regulations local, state and federal.  Once you start to get into mass production prices tend to decrease.  Quality though also tends to take a hit on mass production also.

Already happening - they are using 3D printing to build homes, with a whole neighborhood being built outside of Austin, TX:

https://www.cnn.com/style/worlds-largest-3d-printer-homes-maine-hnk-spc-intl/index.html

https://builtin.com/articles/3d-printed-house

Unfortunately, going back to local laws/regulations/etc., the bigger cities will require some changes to the codes (read: bribing of corrupt officials) to allow it, and printing an entire home may not be the best, but if they can use 3D printing to speed up building certain parts of homes that can reduce costs.

[LouisEly]

23 hours ago, Fear The Chorizo said:

Raising interest rates to where they need to be right now will tank this economy, i agree - but it's the medicine this economy needs due to close to two decades of rates largely suppressed to zero amid printing money to try and artificially bolster growth. 

And what will happen if the economy tanks?  Millions of people will lose their jobs, the unemployment rate will skyrocket, and the government will need to enact a stimulus package - and print more money to artificially bolster growth - to get the economy going so that there are jobs for people.

Nobody is saying take rates back to zero.  They're saying to begin to lower the rates... before it's too late.  The Fed waited too long to raise rates and that led to inflation.  Waiting too long to lower rates will lead to a recession and millions of people losing their jobs.

[igor67]

Insurance (i.e. climate) related housing displacement looks like it is going to become a bigger issue in the coming years as well. Some disincentives (limited deductions, aggressive code or modernization requirements perhaps) for institutional investors make some sense if you combine modest movements on that side with actual supply changes the price distortions will even out quickly. Raising capital gains taxes is another way to remove institutional/ corporate money and not a bad idea to cut down on future investing bubbles.

[owbc]

2 hours ago, igor67 said:

Insurance (i.e. climate) related housing displacement looks like it is going to become a bigger issue in the coming years as well. Some disincentives (limited deductions, aggressive code or modernization requirements perhaps) for institutional investors make some sense if you combine modest movements on that side with actual supply changes the price distortions will even out quickly. Raising capital gains taxes is another way to remove institutional/ corporate money and not a bad idea to cut down on future investing bubbles.

I work in insurance…last year was a record year for weather-related claims and so far 2024 severe weather season has been even crazier than last. A hurricane in the wrong spot could really blow things up. 

 

[LouisEly]

On 6/10/2024 at 12:13 PM, owbc said:

1. Severely restrict corporations from purchasing single family houses.

Here's a potential solution - if they build them, they can own them.  But can't buy "used".  Increase the supply, and they have the capital to invest.

[LouisEly]

Shelter ticking down to 5.4% YoY.  Insurance down 0.1% from prior month but up 20% YoY.  Still the only two things that are driving inflation.  Core goods and super core unchanged from prior month. 

Markets pricing >70% chance for cut in September (up from ~50% the day before) and a second cut in December (up from 50/50 the day before).

[nate82]

4 hours ago, LouisEly said:

Shelter ticking down to 5.4% YoY.  Insurance down 0.1% from prior month but up 20% YoY.  Still the only two things that are driving inflation.  Core goods and super core unchanged from prior month. 

Markets pricing >70% chance for cut in September (up from ~50% the day before) and a second cut in December (up from 50/50 the day before).

I think it will only be one cut and probably just after the election when the Fed meets in November.  I have been on the one or no rate cuts for a while now.  I don’t think we will see two this year.  There are still 4 members in the no cuts camp and 8 in the two cut camp.  Of the other 19 I haven’t seen anything or heard anything on where they stand.  I am going to assume they are in the only one rate cut camp.

[LouisEly]

Josh Brown is killing it on CNBC this morning:

• "If we start getting prints like 240K, 250K (initial jobless claims), that's getting toward the point where historically it's been a moment of no return and tips the labor market over."
• "One rate cut is not going to bring back 6% inflation, like are we all losing our minds?  That's not how it works."
• "Money supply is flat over two years."
• "I wouldn't worry what 25 basis points would do other than serve as a signal."

[nate82]

Powell is still pessimistic and isn't rushing a rate cut.  So I don't see one coming until the earliest being November or Q1 of '25.  We may see a second rate cut in Q2 or Q3 of '25 depending on how the economy is doing. 

Really need congress to do their job and actually make some cuts in the budget instead of kicking the can down the road for another 25+ years.  I wonder if the can has returned back to where it had started?

 

One thing people are not talking about enough right now is the horrible birth rate in the majority of first world countries.  Even with the illegal immigration that has occurred in the US it is still not enough to curb the coming doom for millennials.  Millennials may have to face a third crisis in their lifetime if the baby making doesn't happen soon.  Birth rates in the US have fallen a lot and our population density is starting to look fat at the top and then skinny in the middle and bottom.  Right now there are enough millennials and gen x in the workforce to support the baby boomers.  But once millennials and gen x's start retiring there are not enough Gen Z to replace them in the workforce and the next generation looks to be smaller than Gen Z.  

Government pensions will be hit the hardest by this.  This will be the millennials third financial crisis if this comes true.  For millennials it is the financial / housing crash and then the current housing market issues.  The third possible financial hardship will be the social security and pension crash after the baby boomers are gone.  There will not be enough high skilled workers (high paying jobs) to support the pensions.  If everything holds true we should see a pension crash somewhere between 2040-2045.  Gen Z's if they are in power are not going to vote for higher taxes as it won't just be the 1% paying these higher taxes it will be them.  We are kind of on track to follow in Greece's footsteps here and I don't see a EU to bail us out as Canada, Mexico, EU, South Korea and even China are facing this issue. 

Hopefully all of the models that I have seen are wrong about this but it may just suck to be a millennial. 

[owbc]

14 hours ago, nate82 said:

Powell is still pessimistic and isn't rushing a rate cut.  So I don't see one coming until the earliest being November or Q1 of '25.  We may see a second rate cut in Q2 or Q3 of '25 depending on how the economy is doing. 

Really need congress to do their job and actually make some cuts in the budget instead of kicking the can down the road for another 25+ years.  I wonder if the can has returned back to where it had started?

 

One thing people are not talking about enough right now is the horrible birth rate in the majority of first world countries.  Even with the illegal immigration that has occurred in the US it is still not enough to curb the coming doom for millennials.  Millennials may have to face a third crisis in their lifetime if the baby making doesn't happen soon.  Birth rates in the US have fallen a lot and our population density is starting to look fat at the top and then skinny in the middle and bottom.  Right now there are enough millennials and gen x in the workforce to support the baby boomers.  But once millennials and gen x's start retiring there are not enough Gen Z to replace them in the workforce and the next generation looks to be smaller than Gen Z.  

Government pensions will be hit the hardest by this.  This will be the millennials third financial crisis if this comes true.  For millennials it is the financial / housing crash and then the current housing market issues.  The third possible financial hardship will be the social security and pension crash after the baby boomers are gone.  There will not be enough high skilled workers (high paying jobs) to support the pensions.  If everything holds true we should see a pension crash somewhere between 2040-2045.  Gen Z's if they are in power are not going to vote for higher taxes as it won't just be the 1% paying these higher taxes it will be them.  We are kind of on track to follow in Greece's footsteps here and I don't see a EU to bail us out as Canada, Mexico, EU, South Korea and even China are facing this issue. 

Hopefully all of the models that I have seen are wrong about this but it may just suck to be a millennial. 

As a millennial...I think the people not having kids are the smart ones. Everybody sees what is coming. If you think it's going to be bad for millennials, imagine what it will be like for Gen Z and Alpha. What you describe above is a pyramid scheme built on the premise that the planet has infinite resources. It worked for a few generations post-Industrialization but it's over now. 

We ended up having one kid but we were seriously considering having none. And we are one of the lucky ones who could actually afford the daycare costs of a second kid if we wanted to. 

Eventually it will need to be recognized that we either need to come up with a degrowth strategy or massively increase immigration. 

As for rate cuts...I'm fine with keeping interest rates steady. The economy needs to continue to detox from the zero rate environment. Low rates aren't going to change the fact that AI is starting to erode the job market. 

[LouisEly]

On 7/2/2024 at 8:32 PM, nate82 said:

Hopefully all of the models that I have seen are wrong about this but it may just suck to be a millennial. 

Aren't Millennials primarily responsible for giving birth to Gen Alpha?  So, aren't they pretty much screwing themselves?

Speaking of that, looking at Millennial men collectively as a whole, I can understand why women don't want to have sex with a lot of them.  😜

4M more Gen Z than Gen X.  We did our part.

https://www.statista.com/statistics/797321/us-population-by-generation/

[nate82]

3 hours ago, LouisEly said:

Aren't Millennials primarily responsible for giving birth to Gen Alpha?  So, aren't they pretty much screwing themselves?

Yes and yes.  

[LouisEly]

Core CPI up only 0.1% MoM, shelter up only 0.2% MoM (in the hottest months for rent demand and lease initiations).  Core up 3.3% YoY vs. 3.4% YoY last month. 

All-items declined 0.1% MoM, first decline since May 2020.  Gas down 3.8% MoM during the first month of summer driving season, where it usually goes up.

[nate82]

1 hour ago, LouisEly said:

Core CPI up only 0.1% MoM, shelter up only 0.2% MoM (in the hottest months for rent demand and lease initiations).  Core up 3.3% YoY vs. 3.4% YoY last month. 

All-items declined 0.1% MoM, first decline since May 2020.  Gas down 3.8% MoM during the first month of summer driving season, where it usually goes up.

I don't believe that is going to be enough for a rate cut.  I think the FED will want to see this continue so probably still on track for an Oct or Nov rate cut.  I am going to continue to say it won't happen until Nov unless there is something serious that occurs between now and Nov. 

[BrewerFan]

1 hour ago, LouisEly said:

Core CPI up only 0.1% MoM, shelter up only 0.2% MoM (in the hottest months for rent demand and lease initiations).  Core up 3.3% YoY vs. 3.4% YoY last month. 

All-items declined 0.1% MoM, first decline since May 2020.  Gas down 3.8% MoM during the first month of summer driving season, where it usually goes up.

At least 2 cuts this year...probably a 3rd. 

I'd planned on divesting a bit from the large cap stocks and investing in a Russell 2000 ETF...but I may have waited too long. Oh well...good news either way. 

Unemployment claims also came in quite a bit below the 240K mark I know at least some investors were leery of. 

[CheezWizHed]

On 7/5/2024 at 4:37 PM, LouisEly said:

Aren't Millennials primarily responsible for giving birth to Gen Alpha?  So, aren't they pretty much screwing themselves?

Technically, the New Deal with FDR setup the row of dominos that requires the next gen to support the previous.  Might've been something needed at the time, but no one wanted to bite the bullet and fix it.

GWB tried to fix that in the early 2000s with the privatization of social security, but that unfortunately failed. 

My retirement planning has always had SS as a $0 contributor.  Anything that comes back to me is a bonus. 

[nate82]

59 minutes ago, CheezWizHed said:

GWB tried to fix that in the early 2000s with the privatization of social security, but that unfortunately failed. 

Of all the things GWB did that were horrible he was right on this one.

[PlayerHader]

On 7/3/2024 at 10:41 AM, owbc said:

As a millennial...I think the people not having kids are the smart ones. Everybody sees what is coming. If you think it's going to be bad for millennials, imagine what it will be like for Gen Z and Alpha. What you describe above is a pyramid scheme built on the premise that the planet has infinite resources. It worked for a few generations post-Industrialization but it's over now. 

We ended up having one kid but we were seriously considering having none. And we are one of the lucky ones who could actually afford the daycare costs of a second kid if we wanted to. 

Eventually it will need to be recognized that we either need to come up with a degrowth strategy or massively increase immigration. 

As for rate cuts...I'm fine with keeping interest rates steady. The economy needs to continue to detox from the zero rate environment. Low rates aren't going to change the fact that AI is starting to erode the job market. 

How do you continue day to day with a mindset that the future is so dark that you don't want to bring children in to it? Feels very depressing.