#writing --- **December 14, 2020** I’m getting old.  When I started in this business we had time stamp machines on the desks to stamp your tickets.  If you worked late you could hear all the machines ticking across the floor.  Stocks were traded in fractions back then too.  I was horrible at fractions in school, but when properly motivated I got pretty good at them (incentives matter).  I was researching Palantir recently and found it’s a favorite of the r/wallstreetbets crowd, so I spent some time in there to see what was going on.  WOAH.  Nowadays instead of fractions and time stamp machines we have stuff like this: ![[Pasted image 20221017125434.png]] It’s easy to dismiss this crowd, but they have become a market moving force, so it has become hard to ignore them.  To be honest, the banter reminds me of the trading desk and floor when I first started in the business. A lot of stuff today reminds me of the 90s.  Divided government and centrist President…Check.  Rampant speculation in tech stocks…Check. Gangbuster IPO market…Check.  Technological innovation disrupting traditional business…Check.  Remember that valuation chart from last week… We talked about the stock market last week and this week I want talk about Gold.  I put this probability distribution together back on August 11th: ![[Pasted image 20221017125451.png]] If you look at the chart of spot gold you will see 8/11 was the day gold dropped 100+ points which explains the “Yesterday” and “Today” labels in the chart.  At the time gold had just broken through the old highs of 1,900 and nearly got to 2,100.  Every strategist on the street was racing to revise their price targets higher yet the initial price move had already exhausted itself.  The reason I am more confident in higher prices despite the then drop in prices, is that big moves higher in price need to pause and consolidate so they can flush out the weak hands and set the stage for the next push higher in prices. The reason for the shift to the right from the Pre-COVID distribution is because fiscal and monetary policy reaction functions are working together today.  Back in 2011, we had asset purchases and ZIRP, but we also had austerity.  This time around there is no hint of austerity, and the policies today are focused on getting the money into the hands of people who have a higher propensity to spend it.  The central banks are egging on the governments for more stimulus.  This week alone Japan announced a $708bln stimulus package and the ECB expanded their PEPP by 500bln euros to 1.85 trillion euros.  Both are already doing QE, rates are deeply negative in Europe, and Japan is actively engaged in YCC.  In the US, we are squabbling over a $900bln stimulus package which might accidently cause a rally in the dollar in the short-term.  (Side Note: the best way to get the stimulus package through Congress is to get stocks to drop 10%.)  Historian [Adam Tooze was quoted in Barron’s](https://www.barrons.com/articles/why-the-coronavirus-pandemic-wasnt-a-black-swan-event-we-must-prepare-for-more-outbreaks-51607134151?tesla=y) last weekend saying, “America stumbled into how to avoid recessions—not just that, but how to avoid poverty, if you want to!”  One of his big themes is “the 50-year journey of realizing the power of a fiat money system.” I have learned that the key with this is to avoid judgement.  Remember, see the world the way it is, not the way you think it should be.  DM countries are going to run massive deficits and all sorts of extreme monetary policies for the foreseeable future.  It’s a race to the bottom for their currencies. Which naturally leads up to Crypto. Decentralized Finance (aka DeFi) is just the free market’s natural reaction to modern central banking and fiscal policy.  More from Tooze in Barron’s: “we learned that money and finance aren’t constraints.”  For any student of history, none of this is surprising.  It was reported this week that MassMutual bought $100 million of Bitcoin.  As institutional sponsorship of Bitcoin grows the price will move higher.  All of this is going to keep working until it stops working.  When debt matters again and austerity comes back that’s a game changer for equities, gold, and cryptos.  Until then, party like it’s 1999! Pew Research did a [survey](https://www.pewsocialtrends.org/2020/12/09/how-the-coronavirus-outbreak-has-and-hasnt-changed-the-way-americans-work/) of workers in October and released the results this past week.  I am a believer that we are going to see all sorts of pent-up demand in 2021 once the vaccines are fully rolled out and things start getting back to normal but the results of this survey makes me wonder about CBD office markets, especially places like Manhattan.  We are still very, very early in this CRE cycle, and I don’t believe anyone knows anything at this point, but my working thesis is that everything that has been working will stop working and things that haven’t worked will start to work.  For example, you can start to touch retail properties again.  I wouldn’t go so far as to say buy CMBX 6, but this is the final flush for retail, and a lot of those properties have great locations, and we are going to see a lot of adaptive reuse and other creative new business models for those locations that are not the 1970s enclosed mall concept.  Suburban office over CBD office is almost too obvious to even write down.  However, if you consider that the gateway markets like NYC saw the lowest cap rates in history and now face some of the biggest challenges, you realize there is a lot of excess to work off.  Hotels are going to work.  Business travel is going to hurt some hotels, but destinations are going to do well.  We just saw the [largest single period jump in homeownership](https://fred.stlouisfed.org/series/RSAHORUSQ156S) in history at the same time that the FHFA is starting to clamp down on Fannie and Freddie so I think the multifamily market is going to be facing more headwinds in the future, especially if you start to think about all the missed rent this year.  The urban vs suburban and rural is going to be a major factor for multifamily and CRE in general in this cycle.  Those are just my initial thoughts, more to come on this in the future. Have a great week.