Readit Newscamnora commented on Ask HN: What are you doing now to profit from the current or upcoming recession? · Posted by u/carabiner
They say you shouldn't try to time the market, which is probably good advice. However, my approach is/was:
- back in April, moved 401k fund from S&P allocation to cash equivalent (2% yield). Note: this wasn't a cash out, just reallocation.
- Bought long-dated treasuries (10 yr and 30 yr). Allocated through July and August. This one is not doing well, but allocation was sized appropriately (< 2% of portfolio).
- pooling any excess capital in a savings account until volatility calms down.
- have a couple rentals and plan to continue holding. It will be interesting to see some buying opportunities in the upcoming year or two.
camnora commented on The Fed's $2.7T mortgage problem axios.com/2022/05/18/fed-... · Posted by u/gmays
Just curious, how does the Fed selling Freddie Mac and Fannie Mae/Ginny Mae mortgage backed securities cause a shift in the markets? What's the likelihood the Fed would actually do something like that?
An increase of MBS offered on the market will cause mortgage rates to rise because there's too many loans for sale and not enough buyers. Buyers will demand higher and higher rates to make it worth their while.
camnora commented on The Fed's $2.7T mortgage problem axios.com/2022/05/18/fed-... · Posted by u/gmays
> Why does this reduce the amount of funds to the treasury?
It's an accounting thing [1]. When the Fed makes a profit, it remits it to the Treasury [2]. (I believe this is an anachronism from the gold standard days, but not sure.)
[1] https://www.stlouisfed.org/on-the-economy/2018/september/fed...
[2] https://www.wsj.com/articles/fed-sent-88-5-billion-in-profit...
Oh neat, TIL. Thanks
camnora commented on The Fed's $2.7T mortgage problem axios.com/2022/05/18/fed-... · Posted by u/gmays
But if the inflation is not due to overconsumption in the US, but about global problems with supply side issues on the front and China in lockdown not helping at all, how does it make sense to cause a housing crash?
I certainly think the fed should stop to build the bubble, but it should also not go all in and crash everything.
I think the idea is that the Fed is trying to tamper demand by softening the economy. Lower demand will inevitably help prices.
It doesn't help much though if we get a "rough landing" and people can't afford food/housing because they're out of a job.
camnora commented on The Fed's $2.7T mortgage problem axios.com/2022/05/18/fed-... · Posted by u/gmays
> If the Fed sells mortgage securities that pay low rates at a time when prevailing rates are much higher, it will incur big financial losses that reduce the funds the central bank returns to the Treasury.
Why does this reduce the amount of funds to the treasury? The losses are on the Feds balance sheet. My understanding is that the Treasury is not involved here, but the article hints at them being affected. Is it implying that treasury yields will rocket higher???
> In that scenario, expect officials to face tough questions from Capitol Hill to explain why they've lost billions of dollars on behalf of the American people.
If the Fed takes a loss, doesn't this mean that base money supply increases? Sure it will be drawing liquidity out of the system, but in the long run, it will leave more money in the system compared to where they started with QE.
You probably want finance as much as macro. Take a master's degree (not sure if these are as common in the US as in Europe). This stuff is hard, you need to spend time on it. Failing that, follow the advice of lesswrong and read textbooks.
Textbooks won't tell you about Brent Johnson's Dollar Milkshake theory. They also won't have insight on todays inflation and whether it's more similar to the 1970s or 1940s.
Textbooks are great for finance fundamentals, but shouldn't be the sole source of macro.
Here's a list of podcasts that touch on macro:
- Eurodollar University
- The Grant Williams Podcast
- Grant's Current Yield
- Hidden Forces
- Inside Baseball with Old Chestnut
- Keeping it Simple with Simplify Asset Management
- Library of Mistakes
- The Macro Compass
- Macro Musings
- The Macro Trading Floor
- Macro Voices
- The Market Huddle
- Money Sense
- On The Margin
- Real Conversations
- Real Vision Daily Briefing
- The Rebel Capitalist Show
- Super Investors and the Art of Worldly Wisdom
- Wealthion
The best thing you can do is be open to hearing all opinion/theories. Some people will contradict others, but over time you figure out who is right and who is not.
In addition, I also watch a few indices in my stock app for a high level overview. These are the treasury yields, corporate credit spreads, dollar index, s&p 500, nasdaq, etc. I used to follow much more, but it's not needed for higher level macro.
I tend to keep my PRs small enough to where several can be submitted within a day. This being said, I tend to keep my changes un-staged.
When I'm ready to commit:
1. `git diff` to get an overall picture of what changes were made. Which parts of this diff can be packaged into an isolated commit?
2. `git add -p` This is where I selectively stage bits.
3. `git diff --cached` to verify that the staged items are all in place
4. `git commit` with a detailed message.
5. Repeat steps 1-4 until all changes have been committed.
6. `git fetch origin main && git rebase origin/main`
7. Finally, `git push`
When PR feedback is left by peers, some teammates prefer you to not rewrite commits and force push. This makes re-review easier for them (especially if you use the Github features around PR review).
I opt for rewriting commits if it's okay with team members. This way you don't have "fix typo" commits getting merged into the main branch.
Edit: formatting
Why do you say that?
There seems to be this idea among younger individuals online that because prices jumped so quickly that a correction is inevitable, and it’s just not. There’s a ton of demand still out there, and the second any sort of meaningful dip is perceived all those buyers will be right there.
Prices went up because a shit ton of money was printed with sub-3% rates. Why would any sane person with a 3% mortgage ever sell, especially when inflation is 9%? It’s quite literally free money.
[1] https://calculatedrisk.substack.com/p/new-home-sales-decreas...
[2] https://www.freddiemac.com/pmms