Yeah fair enough, it depends on whether you're borrowing at positive or negative real interest rates.
This is probably difficult for non RE investors to understand. Interest rates matter but only the inflection, not the magnitude. Interest rates are built into commercial RE contracts, as is most property maintenance. The leases will pencil out, over time, regardless of inflation and interest. The key is they use interest rates from the previous year so leases perform poorly for owners in a rising rate environment. On the other hand, leases perform like gangbusters in a falling rate environment. These contracts also make it very difficult to stop inflation. Its difficult for most business to manage a 12% lease increase without bumping prices accordingly, even if inflation has returned to only 3%. In these cases, business often go bankrupt waiting for their lease and inflation to stabilize. Sometimes, companies are deliberately run into the ground to get out of 30-40 year property leases while a new company is created to scoop the business and employees from the ashes of the old. Sometimes companies get caught doing this but its pretty rare. It usually works. This is why the fed is deliberately trying to kill a small ratio of companies to stop the inflation cycle. Nothing short of doing this can stop inflation.
Canada is working on some sort of hydrogen production agreements with Germany. How many billions are morons going to waste on hydrogen? If they would take a basic physics class, the world would be a better place. So many people think they can make any decision, even if they don't have basic knowledge about it. Ignorance is lethal.
Even though I like Intel and had planned to hold for the long term, my position is now under a long term sell order for all units. They were purchased in 2022 at roughly $26. It is not a large position. I still believe in Intel, to a degree. They have massive amount of government money coming in for the next few years. Their fabs could easily catch up with TSMC, or close, but I don't see a lot of upside in INTC, anymore. As it isn't distributing much, it's time to cash out the gain. Future platforms will enable amazing things but I'm of the opinion we simply do not require nodes beyond TSMC's N3E and N3P. Intel's 15k CPUs will be made by TSMC on N3P in 2H24. These CPUs should have rough parity to AMD's 8000 series. I'm not saying we should stop developing lithography platforms or that more powerful semiconductors will not have an application. I just believe 4k video with 100 fps frame rates is getting into territory of diminishing returns for gaming platforms. The gaming cash cow appears to on a down ramp. Gamers haven't upgraded yearly for a while. Even two year upgrade cycles has slipped to three. Before the year is over, gaming systems with five year life cycles will be the norm. So, time to take my gains and buy a mobility scooter.
Politics. Strap in. Canada has an election no later than Q3 of 2025. Right now, it appears the Liberal government is unlikely to retain minority power. During my lifetime, the early favorite has only won a few times across many, many elections. Word to the wise: ignore early polls. The Canadian RE sector is suppressed by current government policies. RE is down and REITs are down. Here is the situation: If conservatives gain power, RE will jump. If conservatives retain power, I suspect RE will sink further. I believe the up side is far greater than the down side. I also believe the up side is a bit more likely than the down side. Tom's opinion: With prices depressed, this makes it a good time to look for bargains on Canadian REITs with excellent potential for a strong 18 month return.
I currently have two long term buy orders in place for companies I consider incubator stage. Both are micro-cap, penny stocks. I will reveal these companies when the orders are either filled or expire. One of the things I struggle with is figuring out how long my industry knowledge will remain helpful, given I haven't worked in over two years.
Austan Goolsbee believes there will be three rate cuts in 2024. https://www.reuters.com/markets/us/feds-goolsbee-says-he-sees-three-rate-cuts-this-year-2024-03-25/
The Boeing issues clearly demonstrate a core piece of investment theory: When a company goes toxic, it is extremely difficult to bring it back to a functional working environment. It can and has been done but it's really, really difficult and also rare. If a new CEO is to right the ship, he is not only going to need to be an excellent CEO but he will also need to be a ruthless sociopath who kicks the cancerous management and staff under him to the curb. That guy probably exists but Boeing is not going to find him or her.
My money market fixed income is now averaging 5.3%. That's not enough for long term sustainability, as inflation is a bit higher, but it's getting close. These are interesting times.
That sounds like a nightmare. I would sell both companies short. Six months later, I would be as broke as everyone else who has bet against Elon.
Let's see... Money markets currently paying 4.83%. Best 1 year GIC is 5.13%. The fed is talking about interest rate reductions soon. Unless they are full of crap, the smart thing to do is buy the GIC and lock in the higher rate. So, I just pushed a bunch of loose cash into money markets.
Russia has just claimed the Gulf of Finland as it's territorial waters. Apparently, the markets can ignore war, recessions, inflation, and pretty much every macro economic factor that can be imagined. We'll see how it does with a RussiEuro war.
Russia has withdrawn the threat to take over the Gulf of Finland. It is now clear China is helping Russia in Ukraine. These two countries are the new primary axis of evil. It will remain to be seen how bad the new Iranian leader will be, in terms of terrorism and war.
I still have quite a bit of money in the markets but my current fixed income is now way over half my nest egg. All of the money coming into my portfolio from RE has gone into GICs and money markets. It's not that I don't belong here but I am not much of a growth investor. I doubt my plight would be of interest to others so I haven't posted much. The psychology of my position is perhaps more interesting. I am in a position in which I can risk some capital. I'm doing just that, with two businesses I've been working on for a while, although the risk is low and the numbers are small. It just doesn't make a lot of sense for me to take much risk. For what gain?
It appears we are heading into a period of low rates and likely growth. That's not ideal for someone like me who is heavily invested in fixed income. While I could easily make some moves, I have decided to do nothing. That's what I do best. I'll just watch as my money market funds slowly produce less return. lol! I'm not saying I will never do anything. I just have no interest in panicking or making a move when the best course of action is not clear.
