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Markets still falling like whoa

Llano Estacado

By Llano Estacado
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Eastwood
Eastwood

That's why I'm out. There is no end game, IMO. This has to be fixed outside of the market and I got too nervous about what that entails for retail investors. They will always be last on the list, if o

Rusty Shackelford
Rusty Shackelford
Eastwood
Eastwood

I'm not a financial advisor. This is not financial advise. I don't work in finance. I do not have a degree in finance. Actually, I have a BA and I'm bad at math past Cal I. I won't apologize for the l

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Fudge Nuggets

Fudge Nuggets 19151

Posted
Posted
On 6/16/2022 at 1:13 PM, Laxtonto said:

Provide enough to meet the inflation jump and the changes in healthcare cost and enough flexible work options to use the part time boomer to their advantage.

Lol, if companies were willing to do that, they wouldn’t have a worker shortage to begin with.

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Fudge Nuggets

Fudge Nuggets 19151

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On 6/16/2022 at 2:50 PM, Johnny Chimpo said:

We will have to pay more for the privilege of increasing our manufacturing / commodity base.

Most people are whining and bitching about the first bout of inflation in nearly 40 years.  You think they aren’t going to whine and bitch about the cost of their useless plastic crap going up 20% due to this privilege you mention?

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tbone_

tbone_ 14025

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So in 2007/2008 I was division president for a public homebuider in Phoenix and had a front row seat for the action on the front lines that started that debacle. I had about 100 houses in backlog in summer 2007 and about 90% of them were qualified on bs mortgages. The other 10% were cash buyers. Total backlog value, or so we thought at the time, was about $100M.

When the mortgages collapsed we thought well this sucks and we’ll have to deal with these houses in backlog, but it will work itself out, defaults will rise from 2% to 8-10% (which is what happened btw iirc), prices will be flat to down slightly for a while as the mtg investor market works itself out and resets underwriting standards to what they should have been all along. Not the end of the world.

What none of us knew is we were only looking at the tip of the iceberg above water. And that we were sitting on a mountain of highly leveraged derivative products that needed just the slightest negative spark to detonate like an atomic bomb and nearly kill the global liquidity system.

So my question is, is there another derivative atomic bomb waiting around the corner that just needs this type of stagflationary negative pressure spark to unravel and blow us all to smithereens again?

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Laxtonto

Laxtonto 11934

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5 hours ago, tbone_ said:

So in 2007/2008 I was division president for a public homebuider in Phoenix and had a front row seat for the action on the front lines that started that debacle. I had about 100 houses in backlog in summer 2007 and about 90% of them were qualified on bs mortgages. The other 10% were cash buyers. Total backlog value, or so we thought at the time, was about $100M.

When the mortgages collapsed we thought well this sucks and we’ll have to deal with these houses in backlog, but it will work itself out, defaults will rise from 2% to 8-10% (which is what happened btw iirc), prices will be flat to down slightly for a while as the mtg investor market works itself out and resets underwriting standards to what they should have been all along. Not the end of the world.

What none of us knew is we were only looking at the tip of the iceberg above water. And that we were sitting on a mountain of highly leveraged derivative products that needed just the slightest negative spark to detonate like an atomic bomb and nearly kill the global liquidity system.

So my question is, is there another derivative atomic bomb waiting around the corner that just needs this type of stagflationary negative pressure spark to unravel and blow us all to smithereens again?

I don't think its a derivative bomb like the housing bubble, but instead, it will be a wave of consumer credit default for the middle class mid to high credit rating target market. The only way I can come up with that I could think of is if there are derivative funds tied to consumer credit debt that could follow the same chain reaction default that we saw in the housing bubble pop.

The pandemic saw a wave of refis that locked in many people to a specific budget with the assumption that the prime rate would stay within a reasonable level. If instead, the prime rate explodes upward, what is the common man going to do? It is not feasible to sell or refi with a collapsing housing market to attempt to offset their consumer credit debt that tends to be tied to prime +.  If they cannot use their new home equity as a piggy bank due to sky high interest rates and the wage growth does not match inflation, how do they pay down or payoff their consumer credit debt that is now crippling thier household budget? You cant get blood from a stone and so the easiest route will be bankruptcy.

The question is then, how do you leverage this logic on the market? Does it make sense to do some longterm shorts on the major CC companies for when we see a massive slew on CC debt bankruptcies? Is there a major player in the collections market to instead to invest in?  I am not sure what the play would be here and how large of default of consumer debt it would take to see the CC companies crack, but it is something that is at least feasible to start thinking about.

 

Regardless this is a really good question that probably needs a bit more in-depth thought and reserach instead of just pontificating over my Saturday morning coffee.

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tbone_

tbone_ 14025

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Not directly stock market related, but capital market related… I work in the apartment development business. I’m hearing that pretty much all new equity investors are pencils down on new deals now and the first new build deal to go to market here since interest rate rise got zero bids last week. 90 days ago they would have had 20.

The apartment market absolutely needed a cool down. But if it has completely stopped might be time to buckle up.

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The Royal We

The Royal We 3065

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1 hour ago, tbone_ said:

Not directly stock market related, but capital market related… I work in the apartment development business. I’m hearing that pretty much all new equity investors are pencils down on new deals now and the first new build deal to go to market here since interest rate rise got zero bids last week. 90 days ago they would have had 20.

The apartment market absolutely needed a cool down. But if it has completely stopped might be time to buckle up.

Not too surprising. 

One of my best friend works for a very large residential flipper/wholesaler/renter in the DFW metroplex who is looking to liquidate out of all of their current holdings.  But...then he told me he was on his way to make an offer on a house today, so maybe they are just going to be buying even deeper.

Real estate is in for a lot of pain IMO.

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washparkhorn

washparkhorn 9935

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Posted

WSJ fanning the housing bust flames. 

https://apple.news/AyCy-e0i7Th-3LyUqpVBeSQ

Quote

America Faces a Housing Bust

All ingredients seemed in place at 2022’s start for a continued housing boom, but now the market has priced itself for a sharp reversal. 
 

. . . Compounding the problem [of higher interest rates], a lot of people who already own homes are effectively stuck in them. The last time mortgage rates were as high as they are now was in 2008. Anybody who bought a house since then got a better rate than they could now. Moreover, there have been several waves of refinancing since 2008, the last one coming during the pandemic, when the average mortgage rate got as low as 2.65%. With the exception of people who have paid off or nearly paid off their mortgage, moving to a new home isn’t very easy—and of course they need to find someone to buy their old home first.

So it seems as if, disappointing as some of the recent housing data have been, it will only get worse in the months ahead.

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UTGrad98

UTGrad98 2259

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I'm keeping a log of why I traded when I did and what my thinking was. Really just learning and researching to get experience. So far this year I have been pretty happy with myself and my choices. All I wrote this morning was "I am an idiot sandwich" 

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Guest

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Posted
Posted (edited)
On 6/13/2022 at 8:50 AM, FirstTimeCaller said:

Tell me why I shouldn't see these levels (and even if we go lower) as a buying opp?

I see inflation as being driven by consumer demand that spurred so much of this, and now being driven my high energy prices (that are in part high due to speculation, imo). Meanwhile, OPEC has said they will pump more and U.S. production is increasing. 

In my eyes it's not something like the pandemic or the blow-up of the housing market/Lehman where you didn't know what the hell the world would look like the next day. We have inflation, it's being addressed (fucking slowly), but the labor market is strong and balance sheets are strong. 

It can always get worse, but at this point I don't have that fear and trepidation I felt in 2008 or 2020. I do think we have a while to muddle through this stuff, but that's some good medicine for the past two years.

Since I posted this about a week ago, oil has gone from $123 to $103 -- a 16% drop.

I think there's been a good bit of speculation in that market like there was in 2007/08. It's been the one trade that has worked this year and I think people have just piled into it, pushing prices higher.

If oil can get contained then I think inflation slows pretty quickly given everything else (though back to 2% seems unlikely. More like dropping from 8-9% to 4-5%). 

Edited by FirstTimeCaller
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52-80

52-80 19096

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less than half of the open positions on west texas intermediate are from 'producers/consumers'.  the other are institution/cta/traders, so a lot of the volume and pricing action are just from speculators, and doesnt result in settlement and physical delivery

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LTtxfan

LTtxfan 48980

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1 hour ago, UTGrad98 said:

I'm keeping a log of why I traded when I did and what my thinking was.  So far this year I have been pretty happy with myself and my choices. All I wrote this morning was "I am an idiot sandwich" 

Just have to be right more often than wrong.

No one bats a thousand on investing...

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Blotto

Blotto 23434

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5 minutes ago, FirstTimeCaller said:

Since I posted this about a week ago, oil has gone from $123 to $103 -- a 16% drop.

I think there's been a good bit of speculation in that market like there was in 2007/08. It's been the one trade that has worked this year and I think people have just piled into it, pushing prices higher.

If oil can get contained then I think inflation slows pretty quickly given everything else (though back to 2% seems unlikely. More like dropping from 8-9% to 4-5%). 

I'm sure there is a good amount of speculation in the price of oil, as there usually is, but we have an issue with refining capacity as well. People don't buy barrels of crude to drive across town. Walmart doesn't buy barrels of oil to fuel their trucking fleet, UPS doesn't buy barrels of oil to fly your shit across the country. For those tasks you need gasoline, diesel, jet fuel.

https://www.reuters.com/business/energy/us-oil-refining-capacity-drops-2021-2d-straight-year-eia-2022-06-21/

Declining capacity paired with increasing demand causes its own inflationary pressures. We're not yet at a critical situation where we don't have adequate supply ( lines at gas stations etc...) but an active Gulf hurricane season, or some other event significantly impacting refining capacity will be suboptimal this summer. We just continue to whistle past the graveyard as refinery utilization rates are pushing mid 90's%, demand increases as the country gets out of the pandemic, and no plans (that I am aware of) for new refining capacity.

I get why refiners wont invest in large capital intensive projects that might never be profitable due to the shift to renewable energy. But if the government is going to force that change (and I don't disagree with the need to end reliance on fossil fuels), they also need to own up to the consequences of that change. Closing our eyes and imaging how great everything will be in 40 years, while ignoring how we get to there seems like a plan that needs some improvement. I don't know, perhaps the plan is simply to use the economic pain caused by the transition to accelerate the process. Whats a new refinery cost $20 billion, thats peanuts compared to what we spent in the middle east and during covid. I guess the other issue is that it would probably take 5 years to get a new refinery online. 

And then you have the overall fuckery in Europe right now. Its a strange situation where Russia continues to sell O&G to Europe to a lot of the countries that are arming Ukraine and sanctioning Russia. Yes, I realize Russia needs to sell O&G to fund itself, but I continue to expect some significant shakeups on that front as well, which may cause price pressures beyond just Europe as everyone struggles to readjust to that changing landscape. 

 

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tokamak

tokamak 6352

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19 minutes ago, Blotto said:

I'm sure there is a good amount of speculation in the price of oil, as there usually is, but we have an issue with refining capacity as well. People don't buy barrels of crude to drive across town. Walmart doesn't buy barrels of oil to fuel their trucking fleet, UPS doesn't buy barrels of oil to fly your shit across the country. For those tasks you need gasoline, diesel, jet fuel.

https://www.reuters.com/business/energy/us-oil-refining-capacity-drops-2021-2d-straight-year-eia-2022-06-21/

Declining capacity paired with increasing demand causes its own inflationary pressures. We're not yet at a critical situation where we don't have adequate supply ( lines at gas stations etc...) but an active Gulf hurricane season, or some other event significantly impacting refining capacity will be suboptimal this summer. We just continue to whistle past the graveyard as refinery utilization rates are pushing mid 90's%, demand increases as the country gets out of the pandemic, and no plans (that I am aware of) for new refining capacity.

I get why refiners wont invest in large capital intensive projects that might never be profitable due to the shift to renewable energy. But if the government is going to force that change (and I don't disagree with the need to end reliance on fossil fuels), they also need to own up to the consequences of that change. Closing our eyes and imaging how great everything will be in 40 years, while ignoring how we get to there seems like a plan that needs some improvement. I don't know, perhaps the plan is simply to use the economic pain caused by the transition to accelerate the process. Whats a new refinery cost $20 billion, thats peanuts compared to what we spent in the middle east and during covid. I guess the other issue is that it would probably take 5 years to get a new refinery online. 

And then you have the overall fuckery in Europe right now. Its a strange situation where Russia continues to sell O&G to Europe to a lot of the countries that are arming Ukraine and sanctioning Russia. Yes, I realize Russia needs to sell O&G to fund itself, but I continue to expect some significant shakeups on that front as well, which may cause price pressures beyond just Europe as everyone struggles to readjust to that changing landscape. 

 

For the 37 trillionth time in human history, we've kicked the can down the road until the crisis arrives on the doorstep. Fossil fuel prices need to be high, we've basically run out of time on that. But clearly, gas going from $2.50 to $6 in a matter of months is a fucking disaster for the poor, the middle class, and the economy as a whole. Ramping it up to $6 over 20 or 30 years would have been a lot more manageable. Short-termism really is a motherfucker.

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Incredulity

Incredulity 11555

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7 minutes ago, tokamak said:

For the 37 trillionth time in human history, we've kicked the can down the road until the crisis arrives on the doorstep. Fossil fuel prices need to be high, we've basically run out of time on that. But clearly, gas going from $2.50 to $6 in a matter of months is a fucking disaster for the poor, the middle class, and the economy as a whole. Ramping it up to $6 over 20 or 30 years would have been a lot more manageable. Short-termism really is a motherfucker.

Have we, "run out of time" or do we have "20-30 years"?

 

make up your fucking mind.

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Sbbruin

Sbbruin 21738

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Posted
1 hour ago, Incredulity said:

Have we, "run out of time" or do we have "20-30 years"?

 

make up your fucking mind.

What he's saying is we would've been better off creeping our way to this point, rather than keeping an artificial cap on gas prices and then slamming into a brick wall in a matter of a few months.

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Fudge Nuggets

Fudge Nuggets 19151

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6 minutes ago, Sbbruin said:

What he's saying is we would've been better off creeping our way to this point, rather than keeping an artificial cap on gas prices and then slamming into a brick wall in a matter of a few months.

I too thought that was a pretty obvious point, but then I saw who made the snark post.

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Hefeweizen

Hefeweizen 5307

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3 minutes ago, Sbbruin said:

What he's saying is we would've been better off creeping our way to this point, rather than keeping an artificial cap on gas prices and then slamming into a brick wall in a matter of a few months.

You’re engaging with the proverbial idiot sandwich.  Talking to a tree is more productive.  I don’t have a problem with higher gas prices.  Let the market roll baby.  
 

I have a problem with subsidies and government whipsawing regulations which is what is making things uncertain right now.  Energy policy is not something you can change on a dime.

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Incredulity

Incredulity 11555

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1 hour ago, Sbbruin said:

What he's saying is we would've been better off creeping our way to this point, rather than keeping an artificial cap on gas prices and then slamming into a brick wall in a matter of a few months.

It would also make a fuckton of sense to have the generation capacity and grid to handle all that electrical demand.  But, we sure as fuck aren't going to do that until rolling blackouts become unbearable.

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Wally Fairway

Wally Fairway 5524

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1 hour ago, Incredulity said:

It would also make a fuckton of sense to have the generation capacity and grid to handle all that electrical demand.  But, we sure as fuck aren't going to do that until rolling blackouts become unbearable.

let me put on my tinfoil cap, and point out that rolling blackouts are part of the plan that will allow generation to be put on line with less restrictions and oversight to save everyone from looming disaster. And at an attractive price, for the generations, distributors, and those who keep it running. We will be much more willing to pay a higher price, once we've seen what those blackouts look like.

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Captainant

Captainant 27467

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Posted
On 6/22/2022 at 1:47 PM, Cheeseweasel said:

You can, but their are repercussions. IE: $5 gas.

I'd be curious to know your full reasoning for how our current energy policy is affecting the high market rates for energy - especially considering the increase in price is observed all around the world, not just in the US. Typically it takes a few years for the full effect of one policy or another to be fully felt. And even then it would usually not be echoed across the rest of the world to the extent that energy prices are high everywhere

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Wally Fairway

Wally Fairway 5524

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I know that the many of the major index funds rebalanced (Russell 1000, 2000, 3000 etc last friday; S&P 500 the friday before) but mutual and actively managed funds will be putting lipstick on the pig by the close tomorrow (window dressing their holdings for filings).  
With the daily large swings, will it even be noticable?
I've become a sit and hold guy, because I have no fucking idea what is happening in the economy much less how that reflects into the circus mirror that is the stock market

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