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To: robert b furman who wrote (40153)	4/7/2024 10:31:10 AM
From: skinowski	Read Replies (1) \| Respond to of 41471

From a fast track, hi potential young employee grad of GMI with honors, I left the fur lined rut of a big corporation and went to work for a man who needed some youth in his operation. Best thing I ever decided to do. Bob, your story is an American success story. You worked hard, made the best decisions you could, stayed patient and diligent - and eventually, you did very well (and had fun getting there). My story with navigating the rates and the economy was, in essence, similar. In the late 70’s I realized that RE was a bargain. I invented my own “indicator” - figured that if it’s possible to buy a one family home for a sum equal to 2-3 year salary of a rookie police officer or teacher - that means we’re NOT in a phase when house prices are high - it meant that the prices are, actually, moderate or low. Many years later I found out that this was kind of similar to the “standard” valuation methods, like price divided by average family income, or price to rent roll ratio. Anyway, it worked out. Professionally, my path was more straightforward - I was an Internal Medicine doc, and wanted to treat sick people. Training - and then, setting up and developing a private practice. One smart thing I did was to buy the house where I had my practice - rather than rent (which was what most young docs did back then). When I needed change, I sold everything - and worked for some years as a Hospitalist. In many ways, that was great - a new challenge. Reinventing myself in a new specialty. It was stimulating and interesting. But, it had an unexpected consequence - by age 65 it became too difficult to work days and nights around the clock. So, i had to retire. I still had too much energy, and for another 6 years or so took a part-time day job. ————— Back to our current reality…. We are at a curious juncture. The decade of 1910’s was a very inflationary period, with price inflation up to 18% and even higher. The “roaring” 1920’s started out with a severe but brief recession (some say, depression). The decade was rather deflationary, compared to the previous one - and ended with the great market rally of the late 20’s, followed by the Great Depression. The next seriously inflationary period was throughout the 1970’s to early 80’s. And now, we are flirting with a new resurgence of inflation. Roughly, every 45-60 years or so - which is, interestingly, consistent with the Kondratiev cycle. corporatefinanceinstitute.com en.m.wikipedia.org. It’s vague - and various researchers emphasize different aspects of it. But still, the cyclicity is real - and may help get a sense what the general trends may be for the coming years. Personally, I suspect that we are in a long term bear market in bonds. Besides, we live in VERY interesting times - so, that’s another known unknown… :)

To: robert b furman who wrote (40153)	4/8/2024 7:26:07 PM
From: Perspective	Read Replies (2) \| Respond to of 41471

Nice post! Glad to hear there might be one or two other wise folks who look forward to a little mean reversion here. I'm very, very curious because I'm trying to choose broad asset allocation for the next 10-20 years: can you please elaborate a bit on the calculus that went into buying a home in the 1970s? You and Ski both moved forward with purchasing homes with mortgages at double-digit interest rates. Housing prices had doubled between 1968 and 1978 in the face of rates moving from 6% to 9%, (making total interest payments soar 200%) yet you still found the case for purchasing a home to be compelling? How did the comparison to monthly rents look? The reason I ask is that I have a large investment exposure to residential rental property that I purchased twelve years ago when things were bottoming out. I lost interest in stocks due to the repeated violations of the Federal Reserve Act by the monetary authorities, and decided I wanted to own something tangible. I also wanted something that would track wage inflation, which is extremely hard to come by. Rents are about the only thing that has this property. I got pretty lucky on timing as it turns out. In retrospect, the housing prices led wages, not the other way around, but that's fine. Now I'm trying to wrap my head around a coming decade reminiscent of the 1970s, a decade in which inflation continues to increase, interest rates may exceed 10%, wages continue to rise but probably lose ground to inflation. I'm thinking a $50 minimum wage. One million dollars for the median home. $10,000/oz gold. And my guess would be SPX still hanging out around 5,200. Is that an environment that I should just hang on to my real estate? Or even lever up? I'm skeptical given that rising inflation, rising interest rates, and lack of housing affordability are all working against higher house prices, and the tremendous run-up in prices from 2012-2024, on top of the huge run in the 1990s. My gut says that it's unlikely to outperform in the coming 10-20 years. But... I did just say a $1M median home and $50 minimum wage. If that comes to pass, then - lever up, right??? It seems like I'm arriving at a list of investments more by what to avoid than anything else. What's left after you avoid stocks that will lose to inflation and higher interest rates, avoid bonds, and avoid commercial real estate (especially office, retail, and multifamily, although there could be an opportunity when all the aging debt issued in 2021 causes forced selling in 2025-2027)? All that's left is residential real estate, commodities, and perhaps stocks somewhere outside of the U.S. I'm sure there will be a few winners in the U.S. I was looking at how stagnant biotechs have been. If my industry can finally start to truly improve health outcomes - healthcare instead of sickcare - then there will be winners there in any stock market environment. Would love to hear the thoughts of those who remember enough about the 1970s to opine about the comparisons to the present time, though, especially as it pertains to residential real estate. Can housing prices really go up 2.5X further, in the face of rising interest rates and inflation, even after two consecutive bubbles? Or are commodities and cash the only things that will do well in the next 10-20 years??? I guess there's always short selling! Fun times. Not. BC