저자: Kevin · 외국인
요약 보기
8월 PPI·CPI·소매판매 등 지표가 좋았으나 과열·이익둔화 우려로 베어 입장 유지. 경기침체 전 디플레이션→실업 증가 가능성을 주장하며 헤지를 청산. 디플레이션 환경에서 주택담보대출(모기지) 관련 기업(Rocket Mortgage, United Wholesale)이 금리 인하 시 리파이낸싱 증가로 유리하다고 봄. 엔비디아·테슬라 비중은 0으로 축소, 금리 인하 시 장기채권 선호, 금은 비선호.
다듬은 글
Your boyfriend Kevin just lost a bunch of money. Damn, you idiot. You are wrong. Bring me. Yes. Welcome everyone. It's, ooh, a bit of a rough day for the dirty bear. This week's data was really good. My hedges smoked so much they burned like a small house in Florida. Poof. Unfortunately, I think that's the downside of being a bear against Train America.
Dirty, dirty, dirty, Kevin. So where does that leave us now? Because, honestly, this week's data was really good. The PPI was pretty good. We're like: huh, okay, that's pretty good. And the CPI is coming. Oh, okay. Well, that's pretty good. Personally, I thought that good inflation data would actually have a bad impact on the company and earnings, as we saw in the recent CPI reports.
But instead, we saw that now we would just grow on everything. We will rise after the Bank of Japan rescued the US stock market last week. We will grow after unemployment claims. What? When will we grow after unemployment claims ? On Thursday. We will then rise ahead of the Producer Price Index (PPI) on Monday.
We'll rise after the Producer Price Index (PPI) on Tuesday, we'll rise after the Consumer Price Index (CPI) on Wednesday, and then Iran won't attack. I guess the week isn't over yet, but then you get retail sales data, which is just a complete blowout after McDonald's, Amazon, Disney and most companies complain about a much weaker third quarter and this consumer weakness.
But no, you get an explosion in retail sales and a really good report from Walmart. I know some people will say and argue that, you know, Kevin, more people shopping at Walmart is actually bad because it means they're so broke that they have to do it. And I'm like, " I don't know." Or people like the fact that Walmart is responding to disinflation.
He lowers prices and people want a good deal. You...That's kind of like me. I want a good deal on real estate. I want good deals. So, I don't blame people for shopping at Walmart. I actually think that's a great thing. I think everyone should just have a Walmart Plus membership and stop wasting time going to the store and just order everything online and get it delivered.
I think it was the same day. Not advertising. #not an advertisement. Uh, but in this video I want to talk, uh, about my thesis on recession, uh, data. And I also want to talk about a new stock sector in which I am increasing my position. Uh, I'm exposing myself. Okay, that sounds strange. I am increasingly influenced by a certain sector, and there is a real reason for this , and it would make sense.
Uh, this is the complete opposite of where we were earlier in the year and at the end of 2022, when we were calling Nike volatility a Nike recovery. So far, it's been a Nike recovery, and it's been volatile, but that volatility hasn't pushed us into a recession yet. Er, and that's why, er , I'm still a bear.
I still, uh, I didn't flip. And, and this is not to be stubborn. Uh, the thing is, I'm really concerned about the slowdown in the third, fourth quarter. I'm really worried about, uh, unemployment. Uh, and I'm also concerned about, uh , deflation, which is actually a great thing, mind you, for the consumer.
It's just bad for jobs. The Economist, just as an example, published a fantastic article the other day about how manufacturers in China are going bankrupt, uh , because there are n't enough of them to produce. Er, in other words, supply chains have become so loose that manufacturers are happy to produce a lot more stuff.
You know, that's why I don't think there will be a second wave of inflation. People get the impression that, oh, okay, well, as soon as we lower rates, we'll have a second wave of inflation because everyone will be able to buy cheap things again. But the factories say, " Please, we have expanded our capacity with new equipment, capital investments, and much larger factories." We are currently overloaded with capacity.
Please, we are built for COVID in a world that will not print money like this , at least in such a short period of time, probably never again. This was probably a one-time printing of money in such a compressed period of time. Don't get me wrong, we will always print money. But manufacturers would be very happy about the influx of orders.
So I don't believe in a second wave of inflation, but I do believe in deflation, which I think is leading to this direction we're heading. I don't believe, or I believe that deflation will eventually lead to unemployment, in addition to artificial intelligence, which is actually emerging in this sector, which interests me as a beneficiary of artificial intelligence.
So, uh, yeah , I-I closed my protective fences. Uh, I closed my hedges yesterday, actually, after the CPI data, because I'm like: bro, everything is trading , everything is going up, no matter what. This is madness. So, uh, we just had a weak uptrend , and, uh, a week in a row of uptrends, and it seems unstoppable now.
I still think it's euphoria. I still think the estimates are high, and I think the data is noisy. But, uh, there are a few things that I think really, really bother me. First, production, and second, what happens when EPS growth slows down and we get significantly more layoffs. The SOM rule was not triggered in error.
We've talked about this before. We also talked about the false fire in 1959, how it wasn't really a false fire. You had a recession right after that. The only reason it didn't lead to as high an unemployment rate as in cycle 57 is because it literally only started two years before that, because there was a kind of double-dip recession then.
Anyway, I want to talk a little bit about my current strategy and where I am right now, because obviously things are going really well in the markets right now, people are euphoric and things are growing, and that's great. But that's my point of view. First, I'll talk about my personal game plan. And then I'll talk a little bit about this current stock sector that I'm really interested in, and why.
So, the current game plan. First, buying a large amount of real estate. This is what we do with houses . In fact, I wore a T -shirt with hacker attacks on homes. Uh, low- return deals. Everything is great with us now. We make an average of about $134,000 per low- margin deal, which is great. Um, we have ongoing third- party evaluations to substantiate what we're doing, and things are going very, very well.
So on the real estate side, for now, knock on wood, we're not sad. Everything seems to be going great. That's not to say there aren't ups and downs , and little things, you know, things that could have gone more perfectly or something, but everything is going great. Secondly, I, um , started studying LSAD.
I don't know if I've mentioned this, but it's just such a personal thing that I always enjoy learning about, and I always love learning about something. Although I also had to register for a few more FINRA tests yesterday. I thought I was done with them , but I'm signing up for 86th and 87th . Uh, FINRA is getting pretty exciting, so we're really excited about what's happening with us.
So, I have Elsat in November, on the eve of the 86th and 87th seasons. I spent a lot of time playing Nerf guns with the kids, and , um, we're also going to build a little greenhouse with the kids. So a lot of time with family , which is really cool. But as for the stock sector that interests me, first of all, it is built around the idea that recessions happen slowly.
Recessions don't move very quickly outside of Colorado. It's clear that when we had COVID, we had a recession explosion. It made sense to have put options and hedge all day because we had a 30-day crash. I mean, you could make a ton of money every day because the market was only 7-7-7-7%. You regularly trip circuit breakers , right?
So it was a pretty significant time. But typically, when you look back at recessions, it takes the stock market 1 to 3 years to sell off stocks. And the most difficult thing is trying to determine exactly when it will start? And how will your hedges survive, say, during naked market rises? If we enter a recession, right?
Maybe we're not even entering a recession. Maybe we'll keep the soft landing of 1995, and that's great. Uh, that's what I've focused my influence on, it may sound crazy, but it's actually the mortgage sector. And I will explain why. First, in the case of a soft landing due to disinflation or, frankly, even deflation, not just deflation in manufacturing, but also look at the Wall Street Journal, where they say that hourly wages are falling sharply because so many people can work for hourly wages.
People are starting to desperately look for work. This, I mean, Spirit Airlines is laying off pilots. I literally went from a pilot shortage to Spirit Airlines laying off pilots. Maybe it's because it's Spirit, but laying off pilots is crazy. 250 pilots are being laid off. This is simply incredible.
So, if you combine output deflation and wage deflation, you get economic deflation, and I don't think there will be a second wave of inflation because of the overcapacity arguments that I gave. So I think the Federal Reserve is on a clear path to lowering rates. Therefore, I have no concerns about the CPI and PPI.
I think they will just keep falling. I am concerned that this will lead to layoffs, which will ultimately lead to EPS collapse, earnings collapse, and consumer market collapse. We haven't seen an explosion of layoffs, other than obviously the triggering of the SOM rule. You know, I need a new scale for this, by the way, someone who doesn't sit at a desk.
Uh, and he'll put it on the floor, and it's kind of curved. This will be a little better. I'm only testing this for this video because it's more of a conversational video. If I'm using the computer, taking notes, and other things, I'll have our regular shotgun mic. By the way, tell me which one you think sounds better.
This is, uh, a desktop microphone. And this is the same shotgun microphone that you're probably used to hearing. So, the shotgun microphone that you're used to hearing is a desktop microphone. They obviously sound different, but in any case, the current sector, the mortgage sector, is very interesting.
Uh, they had a little inflow yesterday because there was news about the refinancing, and so a lot of people were buying and essentially trading it, people were coming in to trade and then closing those positions today. This is quite typical. But if you look at the trends now and type refinancing trends into Google and look at the last five years, you'll see something very interesting.
You'll see here, in early August, the first week , which is about the 4th to the 10th, as Treasury yields were falling, there was actually a nice spike in refinancing searches that hasn't yet been reflected in mortgage companies' earnings per share. And if you go even further back and go to 2004, you will see that a similar surge is just beginning.
And I think that trend line is actually going to continue to rise because there are a lot of people who financed loans in 2022, '23, and '24 who can either refinance their loans now a little bit cheaper or they need to do so because they have a lot of credit card debt. They are consolidating. Do n't get me wrong, I'm not encouraging you to do this .
I think this is a bad idea because if you refinance your house to pay off your credit card, then your credit card debt will go down to zero and then you will just end up in credit card debt again. Really bad idea. In any case, this is just more of a general . But the mortgage sector is really interesting because I think refinancing will increase.
The advantage of this is that you are actually increasing the value of the existing bonds or mortgages that these companies have, compared to the new loans that are being made. In other words, if you look at a company like United Wholesale Mortgage Company or Rocket Mortgage , they have billions of dollars in net assets, essentially assets in excess of the debt that they have.
And many of these billions of dollars are residential mortgages. So they are not affected by the commercial real estate sector. They are exposed to the residential mortgage sector, which I don't think has a repeat of 2008 because we have a completely opposite set of loans. This time we don't have credit default swaps in addition to negative AAA-rated ninja loans like those in 2008.
Today we have loans that people have the ability to repay. The Dodd-Frank Act forced this to happen after the recession. And these loans are actually very difficult to get. These are very, very high-quality, high-quality loans. So, I'm not too concerned about the loss of value of these mortgages. In fact, I believe they will increase in value as rates fall.
As rates decline, I think the mortgages on these companies' balance sheets will increase in value, and their refinancing income will also increase. Well, there is a slight drawback to mortgage servicing rights. This is a little more complicated, but to quickly address it, their value can decrease as rates fall because there is a refinancing risk that is factored into the price.
So, Loan Deep, I learned from them that Rocket Mortgage and United Wholesale had the highest percentage of mortgage loans to mortgage servicing rights, meaning more loans. And Mr. Cooper, Penny Mac, and Loan Depot, which are also good, had higher mortgage servicing rights percentages. So I'm leaning a little more towards Rocket Mortgage and United Wholesale compared to the others.
And now what's really interesting is that I think this approach works in both a soft landing scenario and a recession scenario. I still think we are entering a recession. I, I, I don't know when that will be. If we start seeing triggers, you know, in the third, fourth quarter, we're in the third quarter now.
If we start to see, uh, a real recession hit in 2025, I do n't know. I will be patient. I think the valuations are too high for it to be like a fear of missing out ( FOMO) to enter the market. I'm not really worried about it. Uh, this is personal advice for you. This is me, you know, trying to look at this from a protectionist perspective.
And my point is, no second wave of inflation, no subprime mortgage crash , rates will fall gently, or recession. Okay, great. This has a positive impact on earnings per share due to refinancing . This has a positive impact on the value of the mortgages, er, mortgages held by these companies, which increases the book value.
And so I actually think I have a price target for Rocket Mortgage of $30 and United Wholesale of $18, which is significantly higher than what they have today. And so, uh, I view these hot data trends that we got today as actually opportunities for the shares of these particular companies to fall. So I reduced my influence on Nvidia to zero.
My influence on Tesla is zero. Uh, Microsoft is zero. I have influence over Apple and Amazon. Treasury bonds like TLT or UTHY, and also this mortgage sector, because I think the mortgage sector as a whole benefits from a soft landing when rates come down, or much more quickly during a recession when rates come down quickly.
And yes, unemployment will increase, right? But you have to think about it like this. Unemployment could rise from 4% to 8% if there is a recession. Okay, so how many workers are there in the country? Well, you have about 150 million people working. So, take another 4% of them, and another 4% is 6 million, and then about 60% of them could be homeowners.
But a lot of them, I would say 30% of them, are two-income households. So it's not necessarily a default risk, if you do the calculations like this, if I say 30% are single, then I multiply by 70%. Actually, no, multiplying by 30%, because that's exactly the number I want...you have the risk that maybe about a million homeowners could lose their jobs.
And I think a lot of these homeowners probably have excess equity in their homes to help them transition to their next job or something else, to get through the recession. So I don't think this cohort is risky enough to justify putting pressure on the mortgage sector. Now the mortgage sector has already begun to recover.
You know, we don't buy them at the bottom now. So there is a risk that some of this hype has already been priced in, but I think the market has not fully priced in that there will be no second wave. This is my opinion. I could be wrong. Uh, I don't think the market has fully realized that there is no real estate risk of 2008.
I don't think that's included in the price. So I believe these companies have a discount. And I don't think the market has started to pick up , oh my God, there are a lot of people ready to refinance as soon as rates come down even a little bit. So I am very optimistic about this mortgage sector. I actually think that over the next 12 months this could potentially be the best performing sector.
Not AI, not Nvidia, not Tesla. Uh, I think maybe NFACE. I have experience working with NFACE. They're maybe, uh, they're, you know, they're also a bottoming sector, and they're somehow related, right? They, uh , use contract manufacturing so they can scale their, uh, costs. They benefit from the recession not in the housing sector, because lower rates allow homeowners to take out cheap loans to install solar panels on their homes.
So NPC is probably also in this segment if I'm actually optimistic about NPhase. But this mortgage sector, I think people are very bored with, and it's not very sexy or interesting. And again , I think this is certainly not personalized advice, but it seems like you know, except for the amazing growth that is happening in virtually every sector today except mortgage.
I believe that long-term companies like United Wholesale Rocket and even to some extent Mr. Cooper, Penny Bank and Lone Depot, are very attractive. So for me right now the bullish trend indicator is around 2.9. In other words, it's a slightly more bullish trend from 25, but it's by no means a return to bullish mode or even 50/50 mode.
I'm still pretty bearish. I think the inverted yield curve is inverting even more. And I don't think it would take much to cause us serious pain again. I know today is growth day, and then of course the bears always look like fools. Usually bears just crawl into a hole, lose ground, and simply don't show up for work on days when the market is rising like it is now.
I mean, look at this, for example, on Nphase. You literally went from my line 113 to my line 119. That's literally a perfect move. This is quite classic. We see how these lines often touch. Anyway, you have 2-year Treasurys, uh, up 16 basis points now, and 10-years up 11 basis points, which means that Treasurys are falling.
That is, today TLTs are sold, as are mortgage companies. But you also have a yield curve that's inverted by about five to six basis points, which means you need to work harder on pricing to get out of the recession. In other words, this week's data really just postponed the recession, making hedging very difficult .
You know, it's very hard to say, "Okay, I'm going to hold put options during every rally, because you're just going to get ripped off on them, just like I did." And, as I always say, I can't guarantee that we'll always make money. We will always be perfect. The only thing I can guarantee is that I will simply show up and do my best for you.
This is the best we can do. So I think this mortgage sector is, as Rory Kitti would say, an asymmetric market opportunity. And that's not something I want to trade day or short-term. This is something I view as normal, I want to increase my risk when rates are rising like they are today on the back of hot retail sales numbers.
But numbers like today actually delay a Fed rate cut, which actually increases the likelihood of a recession. And then it intensifies the market clamor: “Fed, you’ve gone too far. You need to quickly lower the rate by 50-75 basis points.” And I think that such actions could happen between the fourth and first quarters of next year.
So, uh, it delays events a little bit, which again makes hedging more difficult . Probably the best hedge is simply cash. Uh, but I still really like Treasury bonds. Again , 20-year-olds, 30-year-olds, I love them. Uh, because I think, uh, we're going to see a sharp decline. Uh, I'm not a big fan of gold because if you get into a soft landing or a recession, gold shows itself differently.
Gold performs well if you get into a recession, and not so well if you have a soft landing. The mortgage sector usually does well in both scenarios because rates are falling and people are buying in a frenzy, uh, you know, or refinancing and taking out financing, uh, taking out new loans, and you know, those who haven't lost their jobs .
And what's strange is, uh, the value of the loans they have if they don't default, because that usually only happens if there's a really rapid decline in house prices, which I don't see. Actually, let's see how they grow, uh, or are stable, stabilizing, and it depends on where you are. For example, California is performing much better than Texas and Florida.
Then the cost of the loans they have also increases. So, this is the thesis . This is not a guarantee, but this is roughly what I see in the markets right now. Uh, I'm not going to, you know, give in to, uh, give in to Walmart's retail sales numbers, which are usually always revised downward, but I will say that the numbers were good.
I have to give credit where credit is due. The data was good and I paid the price for it by hedging this week. But you know what? I'm a big boy now. This is a number. I can handle this. And the only thing I can promise is that I will be here and show up. So, let me know what you think in the comments below.
This is the same shotgun microphone you are hearing now. So be sure to leave a comment. Shotgun microphone or desktop microphone. That's pretty cool. In any case, thank you very much. Take a sip of this Runescape cup, which is definitely not filled with Kalúa, vodka, tequila, or all three. Yes. Anyway, thank you for being with us.
See you next time. Goodbye and good luck. Don't advertis. Greetings, friend. at, evaluate a shipk, be sure to check out the PPM at houseack.com.
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