what good reason is there to wrap instruments in an instrument called a synthetic GIC ?

Even homeboy said "oh they are required to hold fixed income and that's why they put it in GIC" but GIC is not just fixed income shit

it's a way for them to get around legislation so that it's technically "fixed income" but it's backed by shit that is not fixed income

y

why not attack hte substance of hwat i'm saying brody

why bother wrapping those instruments in a product at all when these insurers hold those instruments by themselves ?

there's no good reason to wrap the instrument and have someone else be responsible for it i mean wtf

idc if moody's and S&P think Synthetic GIC is okay, that shit is impossible to find information on and promises guaranteed yields

it promised guaranteed yields during a time of 0 FFR

oh gee i wonder how this is possible. Anytime anyone offers guaranteed yields and it is not jerome powell himself it is a fucking scam

look if you wanna pull up a financial statement from a builder that shows margin compression please do

i haven't seen it yet and ur kind of proving my point

Maybe expanding is a strong word, but their costs have cratered I mean lumber is down a bajillion %

I've been thinking this is gonna happen to multiple insurance companeis for a long time

u wanna know something else fun ?

They also all have a shit ton of something called "Synthetic GIC" on their books. At least the ones I looked into have it PRU, they have tens of billions of this shit. Google what a Synthetic GIC is and tell me that shit is not a ponzi scheme.

U wanna know what else is fun ? Is all these insurers reinsure each other. This makes sense for localized events...like a hurricane isn't likely to strike Florida at the same time an earthquake wipes out los angeles, at the very least you can make an argument they are uncorrelated

But lmfao macroconditions have a correlation of 1 and if they all reinsure each other that is just fucking moronic

so TOL average home selling price is 1mil

idk who makes the lower priced housing, but the luxury end of housing is keeping up in enough markets that builders can maintain their margins

the key is understanding that homebuilder costs went up a bajillion % when they were competing with speculators and flippers. Now their costs are cratering as the price insensitve speculators get fucked, so even if home prices crater, they can still maintain margin

people have been cancelling liek crazy and walking away from deposits...oh no the builders keep the deposit and then drop the price by 10% and sell it to someone else and still keep a huge margin.

Look there are risks here no doubt, but right now every builder has GFC being priced in when it is in every politicians best interest (including Jerome) to keep the housing ponzi going.

Speculators are gonna get blown out coz they need a 6% increase just to break even post fees and what not, but homebuilders keep margins even if speculators lose money. Go thru their income statements, 20% margins broadly, and their costs have been coming down as speculators get iced

i am long

i am kind of happy to know that everyone in this shid is bearish

i am bearish home prices, home flippers are fucked and all the airbnb hosts are gonna bankrupt each other

but builders margins compress once home flippers are iced. Too many people are expressing a bearish home price thesis (which i think is correct) with a short home builder trade structure, which IMO is silly and ya'll gonna get face ripped

Anyways one of us will eat

Remind me in 6 months

so this is a good point, builders with regional presence might be fucked. I think ackman is fuckign himself with his Howard Hughes home building play, they mostly build in Vegas, Phoenix, Texas, they are fucking fucked those markets are all down -20% already what's to stop them from going another -20%

KBH and TOL do have exposure to cratering markets, but they also have exposure elsewhere, including multifamily residential in cities...they can rotate around and print money thru whatever is next in the economy. We have an undersupply of homes coz no one built shit after GFC, airbnb hosts going wild obviously is contributing a little to make this a "shortage" and those airbnb hosts will capitulate, but even if/when they do it's not gonna make up for the structural deficit

we are in populist politic regime, millenials are gonna vote for politicians that keep helicoptering money for new home builds so we can all have our picket fence and fluffy doggie

Look from 2006 to 2009 TOL fell from 60 to 15.

During march 2020 TOL fell from 45 to 15. As a society we are scarred by the GFC and any time it seems like shit might get rocky everyone gets mega bearish on housing and mega bearish on builders.

i'm mega long all of these shits for this reason, RE bulls are delusional af and loss averse af. THey will refuse to sell for a loss. How is this good for builder ? For one, it ices the home flipper lottery...home flippers are kinda price insensitive in a mania and will bid up contractors, equipment, materials. Look at lumber, price way downies. Contractors are now hungry for work. Etc. margins are expanding for builders. Home flippers are gonna hold the bag for years rather than take the L and move on with life. Not only that, but who is gonna buy from a flipper when they could just buy a brand new home from one of these builder for a 5% discount off median or whatever

Btw BLDR bought back literal 10% of their float in the last fucking quarter and has a forward p/e of like 4

backlogs of a year broadly throughout the market idk literal GFC is already priced in, as long as Jerome doesn't use his tool too hard i don't see how i lose money on this

in 2020 everyone kept shorting every rally coz "everything is over valued, companies r loosing money and world is ending" even tho jerome kept promising us he will pump markets and devalue currency until we wipe our ass with the dollar

now we keep longing every dip coz "fed will pivot soon" even tho jerome is promising to bankrupt us into spending less money

lmfao

what u r seeing is a major fund, who is probably concentrated on tech, and is down bad, saying "oh fuck i better gtfo out of this before everyone else does"

except "everyone else" is also tech focused funds that all CRWD'ed in the same 69 tech names during 2020-2021 and is also now facing existential risk as their LP's r wondering why they are paying 2/20 to get fucked raw when they could be doing it on their own

i'm pretty sure this information is useful

i'm also sure none of us know how to use it

idk if u've ever seen the experiment with pigeons, where they randomly feed them and then the pigeons start doing whatever they were doing when they got fed to induce another feeding

rly feels like looking back is gonna give u very little info on how these things will move going forward