Yields rose and stocks fell hit then fell from record highs to start the U.S. trading week. Like most weeks, the narrative is that investors are awaiting word from Powell and economic data, this week being the Jobs report on Friday. There are some other narratives about Chinese stimulus and how draining the RRP is de facto QE, etc. but for now the focus remains on U.S. growth and inflation expectations with many pundits continuing to push their equity calls higher and some moving to the no rate cuts for 24 camp.
Crypto and shitcoins don't need any excuses to rally, I mean we're buying a coins called "Dog Wif Hat and Frog Wif Hat", a coin called "Retardio" is up like 50%....sure, the technology, the spot etfs, the halving, the correlation of all-time highs with the release of Dune movies, etc....looks up definition of money...looks up definition of asset, closes books, burns CFA Charter.
Maybe the definition of money that is in play for crypto comes from Aesop's Fables story of the miser [substitute 'crypto' for 'gold' in the story] which concludes that "The worth of money is not in its possession but in its use." I still haven't seen any cryptocurrency that has a legitimate use case. And don't say, 'but I can sell my alt-coin and use the money', that seems to imply what you sold wasn't money.
Speaking of money, every couple of months a debate pops up on X/Twitter where someone claims that banks are not intermediaries as they create their own money. The modern view is that banks don't need deposits to make loans, in fact it is making a loan that creates their own deposits. I don't dispute that view, but where the debate seems to really heat up is essentially around the topic of how those loans are funded, which is the key to whether or not there is any intermediation going on when banks lend. One person who gets really fired up on this topic is economist/professor George Selgin. "A bank that is constrained by the “cost of funds” is an intermediary _ipso facto_. Banks that dob’t need to borrow from others to finance their own lending face no such cost. In this respect the 2014 BofE article is self-contradictory."...."Claiming that a bank "funds" its lending by taking advantage of its ability to create exchange media, is not much better than claiming that anyone with a blank check can fund her shopping by taking advantage of her ability to fill out the check for some positive amount. In the second case, the blank check isn't enough: the real "funds" available consist of the shoppers deposit balance. In the first, they consist of the resources the bank has to make good on the loan when the fact that it is drawn upon results in claims against it." Feel free to follow @GeorgeSelgin on X as he'll probably be pissed off about this topic for at least another few days.
I've already spent too much time on Money today, guess we'll have to save the distinction between "inside" and "outside" money until another date.
Look on the bright side, I could have written about R-Star again, but fortunately the BIS did it for me https://www.bis.org/publ/qtrpdf/r_qt2403b.htm They even threwin a Knut Wicksell reference.
XTOD: me explaining to my parents that I make a living by rearranging logos on powerpoint and doing basic math on excel https://pbs.twimg.com/media/GHyjjq-WMAA9tg5?format=jpg&name=medium
XTOD [Andy Constan replies to some dude who lost money following his trades]: Lots of lessons here for everyone including me
1) Most importantly. Hold assets for long term passively with low fees
2) market timing is hard and most people can't do it.
3) Following others trades particularly when you cherry pick is silly
4) follow people you can learn from.
5) big concern for
@kevin_jawn that after all those lessons he has decided to follow only bullish accounts. If that's for market timing reasons review 1-3 and the remind your self about 4. For me I am here to learn and teach and hold myself accountable by detailing my trades and performance. The last 3 months have been bad. The career good. I want follows from people on the same journey. Don't be stupid. I give my opinion on stuff. In the end it's not investment advice and you need to decide for yourself and do your own research. Again review 1-5 Thanks for your tweet Kevin and the comments within. I see flaws in your logic and worry about your ongoing process but proud of you that you are reflecting and thinking deeply about what works for you
XTOD: We have that policy now. The American Opportunity Tax Credit (AOTC) is usually described as a $2,500 tax credit per child in college. But it is mathematically identical to giving every household $5,000 but then assessing a penalty on non-college ones. The thought experiment does not answer the question of whether the AOTC is a good policy. But it is a useful way to reframe the question to ask yourself because every benefit sounds good but all of them are effectively a penalty on others. (This was inspired by the Wendy's "debate" where you had people saying that it is fine to give discounts in slow periods but unfair to have surcharges in busy periods--when those two are identical pricing policies just framed differently.)
XTOD: I grabbed coffee with a former colleague over the weekend. He works for a multifamily GP. They have (had?) a $100M fund with a family office. However, the fund can veto any deal. If they do, the GP can syndicate the deal. The fund was smart and declined to participate in most of the 2022 deals. So, what did the GP do? Everything you’ve been reading about in TRD, Bisnow, etc. Purchased properties in the Sun Belt with max leverage and floating rate debt. They raised the remaining capital from retail LPs.
The acquisitions team was having a hard time getting deals to pencil. Luckily, the CIO was able to solve the problem! He increased the rent growth assumption and lowered the exit cap. Magically, they had a bunch of home runs on their hands. They bought 10 properties in 2022. Fast forward to today- most of the properties are bleeding cash. Even worse, their interest rate caps begin to expire in a few months. The situation is clearly spiraling out of control. I asked my former colleague, “Why haven’t you approached the lender yet to start discussions?” His response was that the CEO and CIO are afraid they’ll have to pay a “wider spread” in the future if they have a loan modification on their records.
These guys are living in an alternative reality.
XTOD: Worth reading, but I think this emphasizes “clock speed” a bit too much. The more fundamental issue for Google, as @bgurley and @altcap pointed out in their excellent new pod, is that LLM-generated answers cost a LOT more to serve than a handful of blue links. And it’s not clear at all that the revenue will sufficiently offset those costs. The days of the search cash cow might be over.
XTOD [full Tweet from Marc Andreessen is very long]: The conclusion is obvious: OpenAI must be immediately nationalized.
XTOD: Check out this *beautiful* chart of consensus US growth forecasts for 2024. Not even a soft landing, just a brief refuelling. https://ft.com/content/0d58cb77-c771-4b05-8e7b-fca2a53e4912
https://x.com/litcapital/status/1764464990625386503?s=20
https://x.com/dampedspring/status/1764603034888220866?s=20
https://x.com/jasonfurman/status/1764112317833195970?s=20
https://x.com/investingcre/status/1764444455736623509?s=20
https://x.com/nbashaw/status/1763775792369242340?s=20
https://x.com/pmarca/status/1764374999794909592?s=20
https://x.com/RobinWigg/status/1764641873237283179?s=20
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