This is not licensed financial advice. This is the observations and musings of some dude on the internet with graduate degrees who likes to share his research with his closest 6,000 friends. I spent a few days putting this together, so enjoy the research.
////// Disclaimer – I’m short everything at the moment. My highest concentration is housing and commercial real estate. This article is to try and understand both sides of the trade. So far, I’m getting my face ripped off – and could continue to do so. Do not attempt to mimic these trades, as you will most certainly lose money. No one can call tops or bottoms, but we want to try and find a good space to capitalize on profits, and bank profits. This is part of the portion of my trading account that I use for swing trades, LT trades. These typically are not in and out trades. The exceptions I have to that are if I get in, get a 30-40% in a day on a put/call, I take the money and come back another day. Your mileage may vary. My major investment is, in fact, in real estate. I’m not a 2020-2023 recent lever up property owner. I have had these properties since 2005-2007 and have suffered through quite a bit to get to this point. The POINT of my account is to try and hedge downside losses in my RE portfolio, and make a few bucks in the process. I have significant LT holdings in PM miners that are my “core” that I don’t touch, waiting for eventual 3-10xs on some which may never come.
////End Disclaimer
Now that we got through the disclaimer, I wanted to briefly share what I see with the housing macro. I wrote about it in my 2023 macro forecast. I wanted to put my macro ideas to paper, so at the end of the year I could score myself. I felt, big picture, that housing would decline due to rising interest rates. That’s not a crazy thought. However, I felt that the pain would be more acute in areas where the AirBnB crisis is unfolding. In these markets, speculators bought up a lot of the single family properties and converted them to short term AirBnB rentals. While you have the Blackstones of the world who gobbled up a lot of houses, a lot were mom and pop speculators that levered up. It has been reported that with the downturn of the economy, the AirBbBust is upon us, as bookings fell off of a cliff. The theory then goes – for those highly leveraged with this, they will have to lower rents, by a lot, convert to long term rentals, or sell into the market (or be foreclosed on). With a lot of COVID protections ending for commercial real estate a few months ago, it also stands to reason that it may now be the wild west for a lot of these properties no longer getting rent – but costing owners a ton each month.
As time goes on, and the economy continues to catch up to the 12 straight months of rate hikes, I believed that in these specific areas of the country, we would start to have volume dumped on the market. I feel that those who unload first will be the best off. However, we aren’t seeing a lot of these hit the MLS. Apparently, according to Amy Dixon – a lot of these are being sold privately in groups. For now, it seems to have staved off the worst. The question is – at what point does the bid get lowered? At what point do the speculators flip that switch from greed to fear?
I believe that event is coming. Right now, we are all seeing markets pricing in a near term pivot. Everyone is front running the idea rates are to come down, and soon. The big issue with this, is they are all missing the point. Darth Powell is TRYING to pop the bubbles to reduce inflation, but he also cannot create a condition of massive deflation. Hence, the term “soft landing”. So far, the gaslighting, mixed messages, and constant parade of Fed Presidents sprinkling mixed thoughts daily have been able to hold adjustments, thus far, to stick a landing. But as long as there is this form of euphoria, the Fed has no real choice but to continue to raise rates. And – as I called in my macro forecast, they have to hold them there for longer than anyone thinks possible.
The first casualties of this massive rate hike, so quickly, has been regional banks who took all of this cash they had sloshing around and bought on the longer term side of treasuries/paper – and all of that has lost value over the last year, so when withdrawals happened due to .1% bank interest rates and 5% money markets, cash left these banks and fled to yield. So far, the nominal amount of pain with these banks in the last 4 months eclipsed the dollar amount of bank failures in 2008-09 combined. Meaning, this crisis has the potential to be far, far worse than 2008 – but many outlets are not reporting this. Why? Because as long as the economy “looks” good, their advertisers make money and they continue to pay the bills for news outlets.
The crack is coming there in the form of all kinds of cutbacks and closings of news agencies lately. You can also see Netflix, Disney – all of these streamers now also cutting back shows. That is, many people in their households are cutting back on spending. Cutting back on streaming services. Advertising is weakening. This is hurting the news outlets. This is the canary in the coal mine of recession.
A new term came out the last few years I had never heard before – stagflation. That is, you can have a stagnant economy that doesn’t grow, but yet have inflation. Consider the definition of a recession USED to be 2 consecutive quarters of negative GDP. They, of course, changed the definition – one of their tools in the rhetoric tool box. This can perhaps allow for positive GDP growth of .5%, but if inflation over that quarter rose .7%, you are actually in a form of contraction – in a way. I know this can be apples and oranges, but it’s the slow drip of getting poorer over 40 years. Everyone will point to the GDP, but then not be able to convey accurately to others that perhaps your purchasing power went down versus the costs of things.
So – while we may not get “cliff drops” of 2020, the scenario is setting up for a decent market capitulation once that “switch is flipped”. Michael Oliver has talked about “arm wrestling down” – and I’ve been in his camp for quite some time. In my estimation, the markets are now setting up for a significant down leg. To me, the industry that is most overbought at the moment is upscale housing. More on that in a bit.
If we look at the Dow, we have some sort of potential breakout up, or break down, coming.
The biggest thing you see near term is that it looks like there’s a triangle setting up, which can have this thing blow shorts out of the water. Many would point to the debt ceiling as a catalyst for this, but this problem has been resolved what – 65 times before in the same manner this will be? I think the bigger catalyst is the continued rate hikes. Markets absorb the 25 point basis hikes, then after that, rally because this time it’s the last. Even if so – I believe rates will stay there for quite some time – UNLESS SOMETHING BREAKS.
The key here is the last part of that sentence. Right now, a few regional banks died. While the value of those banks is substantial, FDIC sort of swooped in there and bailed out the rich people who should have lost a lot more. But all of you keep piling in, expecting that pivot. Look around – and profits are down everywhere. A handful of companies are propping up the S&P and Nasdaq. Zombie companies are up and down the S&P. High rates guarantees many of these are about to go bankrupt as they cannot rollover debt.
But with this, unemployment is – still low? I had ventured here as part of my thesis that many of these companies are cutting back their footprint with commercial real estate, first. You can see this with the massive vacancy rates, and this will play out with the regional banks. Many companies are burning through cash right now to keep employees and ditch the expensive office buildings. However, Papa Powell will not help them, this time. He will then become Darth Powell to them as companies will have to abandon expansion plans, and make significant cuts to employment. One of the mandates of the Fed is maximum employment. It’s not to keep your stock market gainz intact.
As long as you see unemployment numbers sub 4%, I don’t know what the hell you think you are front running. Why on God’s earth would he pivot if he didn’t see pain with unemployment?
But housing shortages!!!
We now dig into the housing stuff. You hear everyone talking about shortages. The “scarcity” has run up the prices of houses all across America. However, again, it’s FAR worse in the AirBnB concentrated cities. In my neighborhood – houses are going up for sale, and they are sold within the week – either at ask or a bit higher. In my neck of the woods, I feel we are pretty solid. Why? No one wants to vacation here. There’s no acute shortage like perhaps NYC, LA, SF. Meaning, my market here is functioning somewhat normal. This was also part of my macro thesis. I expect in the next year, perhaps I lose 10-20% of the price of the house. While substantial, 20% loss from here is still 33% higher than I paid for it at the bottom of the market in 2014.
What I believe you are seeing is FOMO. It’s the same thing I went through in 2007, when I bought the only real house I could afford at the time on my salary. Housing had gone wayyyyyy up, and my realtor begged me not to offer more than $115k. They were asking $145k. Sold for like $125k, and rolled closing costs and stuff into it. At a point in like 2013, the market value had it and maybe $65k. I could not sell, even if I wanted to. I was forced to become a landlord in 2014 and absorb losses each year.
Meaning, I believe the mindset of everyone right now is very similar to mine in 2007. My wages at the time could not afford a big fancy house, so I bought a big house in an undesirable neighborhood. You know, the 3000 sq wannabe brownstone where gang murders happen on your corner? Yeah. So the folks right now bitching about high costs of houses are flocking to whatever stock is there, at 7% 30 year rates, damn near the peak of the market. Where have I seen this before? Yeah, I was one of them. If I could advise my past self, I would have just continued to rent where I was and continue to save until the market corrected.
But what you are about to have, is a lot of people buying at or near the tops of the market, locked into a 30 year mortgage. Perhaps, they reason, rates will come back down and I can refinance then.
However, many are now buying and getting hit with inflated tax bills. Even if they are able to refinance, you have a fly in the ointment here. Assume you bought a property for $500k, but the most recent tax assessment was at $250k. You may be seeing DOUBLE tax bills coming. On top of that, it’s also entirely possible you see another 20% down in the markets. Now, your house is worth $400k, and you are paying tax bills on a $500k house. What then happens, happened to me – when you are way underwater on your house, you cannot refinance it when rates come down, because you may already owe a lot more than your house is worth, so banks won’t refinance you. You would have to come up with perhaps $150k for that imaginary $500k house to then pay your principal down to $350k to refinance it at $400k with lower rates. But are you going to do all of that for 1% lower? 2%? You could take that $150k and invest it for a better ROI.
Meaning – a lot of people buying now will be trapped in that house for 10-15 years, potentially. What if a divorce happens? What about potential job losses coming? These houses will hit the market as unemployment rates go up. But, you cannot even short sell without the bank’s permission. Imagine tomorrow you lose your job after buying that $500k house 6 months ago. Now, it’s worth $400k and you lost your job. You only have a few months of savings, as buying that house and furnishing it crushed your savings, and you didn’t bank on the higher tax bills which are now eating up your ability to save more.
The shortages are from people like me. The house I paid $325k for is now worth like $500k. I own $290k and have a 2.75% or so mortgage on it. I am never selling, even if I hit the lottery. I have a low mortgage payment. This does strip a lot of supply from the market. However, you have some sources coming soon…
- Baby boomers wanting to downsize. Perhaps they have a McMansion they paid $300k for 25 years ago that is now worth $800k. Every year, you will have this hit the market. However, as inflation is steadily hot, you can potentially see many wanting to downsize and sell at the peak of markets.
- Divorces/job moves – this is a steady source. I believe both of the houses that recently sold in my neighborhood were for this reason.
- Unemployment – I believe this is a major variable that will start to tick up
- AirBnB – To me, these houses will start to massively bleed into SPECIFIC markets
So – you can have a relatively tight supply of houses, AND see market sales drop. Why? If people FEEL the economy is getting worse, many will put off buying a house. I believe those with FOMO right now are drivers of buying – recently married couples who are told they must buy some McMansion to belong. There’s an endless supply of these people. 27, decent careers, and they want to buy a home to be in, forever. Brandon is a part time painter, and Lydia is a gig photographer. They have a budget of $800,000. Sure, this ends well. Why? Because banks are lending. And, because these 27 year olds have no concept of wages.
Enter home builders. The ones I think are on my short list for a double tap in the head cater to more upscale type of housing. Those are the public ones that I’m aware of. I can’t short my local home builder, as it’s a private company. But the big boys – who might sell to the top 1-2% or so. You have to ask yourself, with a declining economy – how many of these are business owners that are seeing significant declines in profits? Yes, you will always sell these properties to surgeons, lawyers, etc. But how many of them are local business owners? That’s perhaps where you start to see the crack in the armor.
If there’s these 25 year old McMansions for $800k, why don’t I just build new for that? What the main issue here is – is that these buyers are there, but the over-supply of these upscale houses now is the problem. Perhaps Brandon and Lydia were previously approved for $500k. With regional banks having issues, and credit getting tighter, they may now need a 740 score, 20% down, and verified debt/income ratios with 2+ years of employment. Then, those houses that were approved for $500k are no longer getting approved. This happened to my brother a few years ago at the top of the market. Someone offered him 10% over ask, but the bank would not approve. He had to take the cash offer at ask. I believe we will start to have problems with these over-inflated prices being able to get mortgages on them.
Meaning, these luxury home builders may have been asking $800k, with a cost of $720k, but banks see the values of properties coming down and maybe they only allow financing for $700k. Is the builder going to sell that for loss? Or, could inventory pile up? That’s precisely what we are seeing now. Margin compression, sales down, and inventory piling up. Meanwhile, as housing is cooling off, and AirBnB houses come to market – we may have significantly lower property values to come. This really isn’t great for luxury home builders then to be sitting on billions in inventory. Then, the question is, what kind of fire sale and offers can they give to offload this inventory? Is a 5% loss on a house worse than a 20% loss? Idea being – slowing of sales of new, and with this, reduction of inventory at potential losses coming.
Is this going to play out in the next quarter? I don’t know. My puts hope so, but I may have to face the music and roll them out further. Could I be very wrong? Sure.
Evidence
I made a lot of bold claims above. But I don’t write on emotion. I do an obscene amount of reading and research. Often, I read things, and share the opinion of the author, and then build a lot on top of that thesis to have my own flavor of it.
Let’s look first at my market analysis. I did a few things about this over the last week or two, but here’s Tavi putting something out there.
While he is writing about the Nasdaq above, many of these markets, today, look a lot like this…
IF this is where we are in the markets, it means that there’s a down leg coming, at some point.
While not perfect, you can argue that there have been lower higher highs. This is a sign of breakdown, bear rally, breakdown, etc. The question then is – are we near the end of this bear rally? One would think that with only a handful of companies currently propping up trillions in market value – one has to wonder if that is a good idea to add to this situation? Should you really be risk on in this environment? Tavi wrote something at the end of this Tweet which I found rather poetic.
“To be clear, the recent market rally has been almost entirely driven by megacaps. Beware of times when the generals lead but the soldiers don’t follow.”
So Tavi also sees some problems with markets. IF I’m a betting man, I find it more likely than not that markets will head lower. When? I don’t know. But to break this trend, you want higher – higher highs.
Zooming in – this appears to look like you need 34,000 on the Dow in the next 1-2 weeks and RSI somewhere around 57 on the daily to call the end of this next bear rally. IF we see 35,000 or 36,000 inside of a month, this could be indicative of short squeezes. But it doesn’t change the fundamentals.
So the pain I’m suffering here is being an idiot and calling the top, and hoping things roll over. IF I was doing this professionally, there’s obviously more things I would have to de-risk.
Assuming I’m correct, and Dow and others are on borrowed time, then it would stand to reason that profits would start to be taken from companies that have done well recently.
Let’s look at BLDR. One of my shorts. Their revenue, YoY is down 31%. I got the idea from Dave Kranzler – so this is not my independent analysis.
Since I saw Dave’s recommendation, the chart has gone almost vertical. The RSI now stands around 84. Let’s look at BLDR’s income statement. See that gap up? Surely they are massively profitable? Errrr
You can see that in just about every aspect, the Q1 2022 to Q1 2023 is down, by a LOT. You can also see 40m less shares, which indicates that the company bought back a lot of shares to prop the price up.
Looking at the balance sheet, to me a few things bother me.
Their inventory is down 35% or so YoY. It’s good that they don’t have inventory piling up, but this also means they have less properties to sell. The common stock equity is listed at about $4.6b, down from $5.1b a year earlier. That’s 10% less equity. But a good portion of this value comes from “goodwill”. $5b. What is goodwill? I’m not a CPA either. But let’s see what investopedia says.
So assume you were Pepsi and had a great brand name. You maybe had $1b in inventory, but you can bank on the sales and price to produce profits in the future. IF you were to sell this company, part of its value may be in this category – depending on how you valued it. My main issue here is that if you take out the goodwill, and just wanted to sell the company for spare parts, it’s value is -$331m. A year earlier, it was $328m. That’s a hell of a swing.
But Nate – the stock is performing!!
Yup, and this is good that the company gave back to the shareholders and rewarded them for their trust. But you then look at the last area there and see shares were trimmed by perhaps 25.5%.
The question now is, do we see this share buy back continuing? No. Could the stock, on its own merits, today, justify this market cap? Market cap is $15.65b. P/e ratio is only 7.68, but that is trailing 12 months. EPS is an impressive $15.93 – but again, that is TTM. The most recent quarter was $2.21. Essentially, business is slowing from previous quarters.
Dave Kranzler had this in his SSJ from April 26th – Single family housing starts are declining. In addition, the market is sitting on the most multi-family units under construction since 1973. This was under a heading for BLDR.
If we look at where we are with new housing starts….let’s look at FRED.
I have a red circle of where we are, today, and then walked back through the last 60 years to see where this was in relation to it. We can see that most of these red circles on the down swing were entering a recession (the gray area). You can see that most of these had a good move down to 600k from 800k. In 2008, however, this went down to below 400k. It’s not to say we won’t get there again, but it is rational, using these data points, to expect two things in the next year:
- We will enter a recession
- Housing starts will drop to about 600k. That’s approximately 25% drop from levels we are at now.
Let’s zoom in a bit
You can clearly see a breakdown in the trend. Dec 2020 has the peak building, and since then, it has the look of the market cycle – with a lower high in 2022. This is in free fall now, with some stabilizing it appears recently. However, we haven’t even entered a gray strip yet for a recession. If we can assume a recession is inbound, we can thus reasonably expect another 25% lower in new housing starts.
Another data point we can look at is housing cancellations. In Q1, many saw 30% cancellation rates, but have more recently rebounded to perhaps 15%. One explanation you see is that housing is rebounding. However, another explanation can be that less people at risk are applying for new housing builds. Or, being denied the credit.
Another analog of BLDR is DH Horton (DHI).
While DHI didn’t seem to suffer the revenue issues of BLDR, you could see their costs were significantly higher, which led to a drop in Net Income by perhaps one third year over year. You can see the EPS suffering QoQ. Unlike BLDR, these guys didn’t quite buy back all of the shares they did. In fact, it only looks to be 10m shares. Those expenses went up 10%!!
By all measures, DHI’s stock price is in the clouds. Look at that gap up on earnings! That must have been an earnings beat, right? With earnings way down. Gotta love how they juke the bots and algos into headlines.
Way over the 200dma and RSI was over 70. Rising expenses. Lower sales coming. What about their inventory?
Of interest here, they are sitting on $22b in homes?????
They also have $20b in stockholder equity, which a good portion of this is homes. This is a LOT of homes not sold. And, it has crept up each of the last 5 quarters. Do they slow in building? Will there be downward pressure on houses? These guys only have $163m listed for goodwill. But BLDR has $5b? Something doesn’t add up for BLDR.
Yet another analog is a famous home builder in my region, Toll Brothers.
Same story on all of these charts. Looks like a cup, of sorts, and perhaps making a lower high from the peak in 2022. All of these are VERY overstretched to the 200dma. All have stupid high RSIs.
Same story with BLDR. Revenues way down in Q1, but I don’t have YoY numbers here.
With seeing the big picture housing chart, you can see this being less profitable. Also – there’s some share buy backs, but only perhaps 6m over the last year. Nowhere near BLDR’s buy. Did BLDR create a short squeeze?
Let’s look at their inventory. Seems to be steady.
Seems their equity has increased. Cash position down QoQ, but higher than at other points in 2022. Of these so far, this looks the healthiest. However, it still seems the value of the stock is technically overstretched. Gun to my head, so far, this one seems healthiest.
Another I short is Beazer homes. BZH. Let’s look at their chart and numbers.
This is another one with a potential cup…or double top, or sloping downtrend with lower higher highs. Look at the explosion up the last few weeks! Blow off top anyone? RSI in the clouds, like all of them.
Beazer is much smaller than these other players. The revenue is steady, but costs are up 10% YoY, which then led to a 25% or so less Net Income/EBIT. The rest of their numbers don’t seem atrocious, but with being a much smaller player than these others, massive hits to profit margins can be devastating.
Again – a stock WAY overstretched to the 200dma in an industry that appears to be in recession.
What does Redfin say about single family home sales?
Redfin shows the avg sale price of a house is $408k, which is down only 4.1% in the last year. However, look at the top and you can see the number of homes sold in the last year is down 26.2%. With an avg mortgage rate of 6.3%. If you slide back just 3 years, the avg home price was about $300,000.
Meaning, in THREE YEARS the avg home price increased by 36%. Just please, for the love of God, baste in that number for a few minutes. Let it ruminate. To me, this has all the markings of the 2008 housing market. I feel that number is perhaps skewed by maybe 12-20 markets with a ton of the AirBnB buy ups. That created an acute shortage in those areas.
So not only are the property values up 36%, on average, but the interest rates are up 3.1%?
I’m not suggesting here that all of these houses are going to suddenly hit the market. However, IF we are entering a recession, and IF we may start to see unemployment tick up, it would stand to reason that we would see higher foreclosure rates.
Right now, the rates are pre-COVID. But they have to start somewhere. Perhaps it might be more accurate to think that we are in 2005ish. I’d say the BIG difference then might have been avg home values.
The avg home value then was $191k, or $302k adjusted for CPI. The interest rate in 2005 was comparable to today.
Meaning – inflation adjusted, the AVERAGE home is approximately 36% more expensive than in 2005. Well, if they are responsible with credit and loans – perhaps that should be fine?
No – we are at all time highs in credit card debt.
But can households afford all of this? Surely – the wages should have kept up?
Well – you have a car, right? How much does that cost? Dear….GOD. And – now you are dealing with high levels of interest rates for cars!
I had read an actual problem in the auto industry right now is lack of repo men. Can you believe that?
So wages are going up a lot to help all of this, correct?
This shows the median income in 2021 as $37,000. In 2005, it’s $33,800. So in those 16 years, income grew about $3200, or about 10%.
But how can you afford things if these costs are so high for everything? Cheap credit.
I would make an argument here, today, we are done with cheap credit for the foreseeable future – and the only thing that is going to fix that is great levels of pain. Do what you will with that information, but the pain train has to come for anything to change.
Where I could be very wrong
Not gonna lie, this past week had me worried. These things kept floating into outer space. Between that and my beloved FSM getting pounded into the dirt, this week hurt. One thing happened this week of interest for me. I bought a micro gas contract Weds evening. I had a feeling nat gas was about to run a little. Next morning, I woke up 1 cent up. I saw that it was near the end of the contract and didn’t want to get nailed by my brokerage, so closed it out. I went to then get in to the next month, and was denied as my account didn’t have enough. No biggie. Figured I’d get back in later in the week. Then, $.25 cents up in a day!!! I sold out 4 hours before the move.
The lesson was for me was that I had deep convictions in this. I took positions. My problem I’m running into now with puts on the housing is time. Most of what I have now are Sept/Oct/Nov, and most of them got clobbered this week. Meaning, it’s possible these things float for weeks yet. Maybe they don’t go down until 2024? That’s a LOT of puts I have that could expire worthless. I think I’m going to try and let the RSI come down a bit and re-evaluate the next 1-2 weeks. Take some ST losses and roll it out, IF I have the conviction.
The main issue you run into is – the markets can be irrational longer than you can be solvent. So what time factors am I looking at? The next few weeks is the debt ceiling stuff. Probably not going to be a biggie, but this then means a lot more treasuries need to be sold. More debt. Higher rates. Tighter credit. With the next FOMC, we could see yet ANOTHER 25 basis points. Until we see unemployment numbers looking like shit, I could imagine rates could keep going up. Intuitively, this will destroy a LOT of things. However, if unemployment STILL remains low, then that means forced house selling isn’t happening. Potentially AirBNB rates get lowered and occupancy picks back up over the summer and owners aren’t forced to sell quite yet.
Perhaps the low inventory from people like me continue to force more homes to be built. The problem with that is these are more high end builders. Is a recession affecting the top 1%, at all? In the builders above, we see lower revenues and higher expenses. This also means profitability is down. But can they use cash to buy back shares? Create incentives? Switch to building homes less expensive to satisfy the middle class?
Where I could be very right?
IF indeed the stock market is headed down another leg – perhaps due to higher rates – profitable stocks could be sold as people decide it’s time to roll into more defensive positions. If we are seeing 5% CDs, 5% 10 years, and 4.5% inflation, this might be a situation where you see massive amounts of capital leaving stocks with no meat on the bone to tuck cash away in higher rate “safe” vehicles as inflation is coming down. This appears to be very bullish for bonds/treasuries. If people take a moment and realize that recessions aren’t great to build new homes, and they may wait a year or so, squirrel money away, and wait until mortgage rates come down to 4.5% and these $800,000 homes turn into $600,000 homes.
Stan Druckenmiller recently called for problems by the end of Q2, which is end of June. It’s pretty dangerous rolling the dice on what one guy says. However, there’s been a few – Dalio is another – where there are massive warnings out there of contraction. Buffet recently warned. Earnings that have been coming in decent are warning of 2nd quarter potential issues.
It is very clear that things are slowing. Contracting. But is this enough to push people into defensive postures?
One of my theses has been that the whole point of this rate raise thing has been to shake money out of the stock tree so you can fund the treasury tree. If you want to prevent a 10% 30 year, the idea would be to create rabid buyers who promise to keep the rates at 5% as a steady supply of endless treasuries hit the market. You cannot do that if “stonks go up”. With 4.x inflation here, how long until we hit 3.x? 2024? 2.x – 2024 2H? The problem I feel many are missing is this – something has to break before a pivot is done. Period. The question then is, what damage has to be done to inflict that? And – the question then is, could that intentional damage be inflicted to then drive buyers to a treasury with no foreign buyers interested? Is the “controlled demolition” here meant to rotate over inflated stocks into soon to be over-inflated treasuries?
Furthermore, before this whole thing, didn’t all of the Fed presidents sell out of their stocks? Why? They all sold at the top.
So as they do, not as they say.
To me, I can see pain in the stonks coming. I believe this is going to also force a lot of people back into the work force. Smash cryptos. Smash stonks. You then start to have labor coming in cheaper just as unemployment starts hitting 5%.
I am not a doom and gloom guy. But it’s been 14 goddamn years since we had a proper recession, and all signals with the Fed here are that they are strangling the stonks slowly. I believe the first movers here will take max profits and also get into treasuries very soon near the lows. Unknown when that will be. I just can’t see more cash driving this clown car much higher as rates continue to rise and something will break.
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