Prices, Inflation/Deflation, Interest Rates & The Fed

I think he is best explained by having many talents and in the social media or media gone wild world, EGO gets the best of some, or will eventually if the ego is too big. That's the case here. The best thing he could do by far is admit that on this topic, he got it wrong. It would show that his character is elevated, which is far more important than being "smart" or a good mental processor of things.

It’s either ego or the fact that he’s a crypto-globalist like many former Wall Street bros. Regardless, he’s totally unhinged on Twitter and when it comes to CV19.

Like I've said in other threads, he's a raging liberal and like Eusebius says, a crypto-globalist. Gun bans, bailouts, lock-downs. If you dig into the people he associates with, they also are elite liberals (although they try to hide behind other political descriptions).
 

Eusebius Erasmus

Kingfisher
Do you think that's by design, on purpose or when you get into the "club" it just changes your thinking?
No idea. Doesn't really matter: the fact is he's controlled opposition, despite his facade of being a rebel.

The guy was born into a wealthy Lebanese political family, and attended a prestigious French school in Lebanon. He went to Wharton and worked at Credit Suisse, BNP Paribas, and First Boston. Nowadays, he supports masks, distancing, vaccines, etc.

Taleb was particularly nasty in throwing Saifedean Ammous under the bus, without provocation from the latter:

 

Jestx

Robin
The Treasury market seems fairly convinced the inflation really is "transitory". The action in the decline in the 10-yr yield recently has the bond market actors convinced we're peaking "now" in summer and it will decline after the "Summer of Inflation (Love)" is over.

If the inflation rate continues to ramp up the bond market will have a freakout and yields will start to climb back up to 2% on the 10-yr which the Fed CANNOT allow under any circumstances and you'll see a large public attempt to sooth the market through YCC announcement (if they aren't already doing stealth YCC anyway).
 

FrancisK

Kingfisher
Gold Member
I’m a business guy but not really a finance guy, not beyond things I had to deal with for my businesses anyway.

My take has been this, since everyone has money now and money is so cheap it’s why assets such as businesses that survived Covid, housing and even cars have skyrocketed….that’s the obvious part.

I have a bunch of rental houses I was going to sell and I was even going to sell a branch of business since I was worried about the bubble popping. But now with the looming inflation I’m kinda hesitant to do so, I think the prices will continue to rise because of it and the money sitting in the bank isn’t as valuable. Mind you if I had an investment lined up for the money that would be different but I don’t, really hard to find anything to invest your money into right now business wise (I know I know, crypto and metals).

Does anyone care to dispute the notion that assets will continue on their rise even when inflation becomes a forefront issue? Would love to hear the argument for or against it from people more knowledgeable on the topic than I am.
 
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NoMoreTO

Ostrich
Does anyone care to dispute the notion that assets will continue on their rise even when inflation becomes a forefront issue? Would love to hear the argument for or against it from people more knowledgeable on the topic than I am.

If you look to inflationary periods, there are some serious downsides to rental properties. Rent Controls being the most common.

Still real assets are a safe haven. I think if your businesses are tied to things people "need", then you're in the right spot.
 

FrancisK

Kingfisher
Gold Member
If you look to inflationary periods, there are some serious downsides to rental properties. Rent Controls being the most common.

Still real assets are a safe haven. I think if your businesses are tied to things people "need", then you're in the right spot.

Interesting I was not aware of that, I would love to know what the reasoning for that is. I hate my rentals, by far my most annoying investment. I bought them to sell not necessarily as rentals but of course I wasn’t going to leave them empty.

The businesses do provide things people “need” in a sense but also deal with gift type items.

Are we talking more in regards to an economic collapse or inflation?
 

NoMoreTO

Ostrich
Interesting I was not aware of that, I would love to know what the reasoning for that is. I hate my rentals, by far my most annoying investment. I bought them to sell not necessarily as rentals but of course I wasn’t going to leave them empty.

The businesses do provide things people “need” in a sense but also deal with gift type items.

Are we talking more in regards to an economic collapse or inflation?

The issue that you might find with selling is that you'll pay capital gains. As inflation continues, and low rates (money printing) persists, you'll be paying capital gains on inflation. It really stinks.

I considered selling both my rentals and putting the money into a single piece of farm land to basically hold til I die. The rent or profits aren't near the same, but the pain in the arse is much lower, and the intrinsic value I thought was appealing, but I missed the deal and now farm land has flown.

My best guess is some form of stagflation, with high inflation, low interest rates through money printing, and steady pre inflation wages which don't buy as much.

If I sold a property, I'd just buy physical gold with it if I wasn't investing it in another property or a business. It's just hard to find anything that is safe.
 

FrancisK

Kingfisher
Gold Member
The issue that you might find with selling is that you'll pay capital gains. As inflation continues, and low rates (money printing) persists, you'll be paying capital gains on inflation. It really stinks.

I considered selling both my rentals and putting the money into a single piece of farm land to basically hold til I die. The rent or profits aren't near the same, but the pain in the arse is much lower, and the intrinsic value I thought was appealing, but I missed the deal and now farm land has flown.

My best guess is some form of stagflation, with high inflation, low interest rates through money printing, and steady pre inflation wages which don't buy as much.

If I sold a property, I'd just buy physical gold with it if I wasn't investing it in another property or a business. It's just hard to find anything that is safe.

Yea I’m going to get bit by that, mind you we’re talking about homes I bought at the height of the recession for joke prices and the area has boomed since so hey if I gotta pay capital gains it is what it is I’m more than making out on them. One of them I’m actually exempt I believe, I lived it in myself for a few years after college.

That’s exactly what is giving me pause about selling the business, I’m getting a crazy number for what it is but what’s the point if the money just sits in a bank account. This is the first time in my entire adult life on this earth where I don’t have a single feasible business idea or investment in my head because everything is swallowed up. The only thing I can possibly think of is growing weed which is iffy and takes a huge amount of cash for a grey area business, plus I really don’t want to be in that world even as just an investor. I actually do have opportunities to get into more hotels but where as before the people with the connections needed my cash and credit they definitely don’t now so I can only jump in if I’m willing to be an owner operator. I have other businesses to run and I’m relatively young I’m not going to eat up all my opportunity cost for a 10 year investment on a hotel even if it is nothing work.
 

NoMoreTO

Ostrich
Yea I’m going to get bit by that, mind you we’re talking about homes I bought at the height of the recession for joke prices and the area has boomed since so hey if I gotta pay capital gains it is what it is I’m more than making out on them. One of them I’m actually exempt I believe, I lived it in myself for a few years after college.

One option is to refinance them to pull the money out when the time comes and just have a property management company manage them. This would defer any capital gains. Ultimately if you can refinance 50-75% of the equity, then perhaps no need to sell.

I spoke with a pricey accountant who does tax strategy recently, and it was well worth it. I'm in Canada though so lots more tax to hide from here.
 

Robert High Hawk

Kingfisher
Yea I’m going to get bit by that, mind you we’re talking about homes I bought at the height of the recession for joke prices and the area has boomed since so hey if I gotta pay capital gains it is what it is I’m more than making out on them. One of them I’m actually exempt I believe, I lived it in myself for a few years after college.

That’s exactly what is giving me pause about selling the business, I’m getting a crazy number for what it is but what’s the point if the money just sits in a bank account. This is the first time in my entire adult life on this earth where I don’t have a single feasible business idea or investment in my head because everything is swallowed up. The only thing I can possibly think of is growing weed which is iffy and takes a huge amount of cash for a grey area business, plus I really don’t want to be in that world even as just an investor. I actually do have opportunities to get into more hotels but where as before the people with the connections needed my cash and credit they definitely don’t now so I can only jump in if I’m willing to be an owner operator. I have other businesses to run and I’m relatively young I’m not going to eat up all my opportunity cost for a 10 year investment on a hotel even if it is nothing work.
I would not sell, for exactly the reasons you mention. Unless you want to go YOLO and invest in bitcoin as an inflation hedge. If it's for less stress that's a different story but have a plan on where to park your money.
 
Hope you boys kept your powder dry. Data confirming my call that reflation is over. Almost no denying it now that inflation isn't coming. Deflation from here on out.


  • Eurodollar downside plays (1Y midcurve puts / put spreads) continue to see liquidations in 0en (July), 0eq (Aug) and as of yesterday, now 0eu (Sep) as hike premium is taken out of the market—while many of these expressions were funded by selling ED$ Calls, which have exploded higher in Value in pure “pain-trade” fashion
  • Curve Caps- (curve steepener options) and High-Strike Payers- being unwound at an accelerated pace
  • UST 10Y Treasury (nominal) yields are on-pace for the largest weekly decline in a year as crowded shorts are stopped-out; recall, the CTA Trend model shows that now, 2w, 1m and 3m model windows are all now strong “Long” signals, while as a further qualifier of the magnitude of the algo buying in TY yesterday, our “trade imbalance” analysis shows that the cumulative buy imbalance in 10Y futures was the 2nd largest since July 2019, and 99.7%ile (only second to the buying on 2/26/21)
  • 10Y UST Breakevens continue their collapse despite higher Crude Oil, -28bps at the lows yesterday from the May 12th highs (ironically, the release of the prior month’s “inflation shock” April CPI print)
 
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