Ben Apple

🏗Real estate development and construction

[Ben Apple @bapple999]

Here's what Blackstone is investing in in their new $30B fund:

“We made a huge pivot in our business away from U.S. traditional office assets - toward industrial, rental housing, data centers and life sciences, with hotels holding a place in the firm's heart"

[Rich Falk-Wallace @richfalkwallace]

Performance analysis is where risk models meet fundamental theses.

'Advanced Portfolio Management' describes the state of that art.

Chapter 8 bullets, with math & comments.

Let know if you'd like the excel.

*1) Factor vs. Idio Decomp*

"The Earth rotates around the Sun at a speed of 67,000mph. When I go for my occasional run, my own speed is in the tens of thousands of miles per hour. Should I take credit for this amazing performance?"

Risk models prevent conflation of stock-specific, 'idiosyncratic' performance with macro or 'factor'-driven returns.

Step one is to aggregate exposures, model relationships, and predict volatility.

But the second, at least as important step for fundamental equities investors is single stock & portfolio performance decomp.

Why has a stock moved the way it has over the past year? This week? Today?

Why has a PM / analyst / fund performed as it did?

*2) "Annotate the Idio" *

Performance analysis itself spins into two distinct threads:

First, how do we analyze investor performance:

- Hit rates on factor vs. single stock (idio) bets
- Skill in stock selection vs. sizing
- Earnings vs. ex-earnings P&L
- Similar-investor crowding

Analyzing performance this way does several things:

It informs that investor's compensation, promotion, success.

It drives capital allocation, and more subtly, helps elicit the residual signal necessary to build "back books" on top of fundamental portfolios.

But most important, it creates feedback loops in fundamental stock picking. Instead of 'better decisions next time', it identifies where decisions are already excellent, and where they are poor or mediocre.

Incrementalist, continuous improvement compounded can be the difference between long-term success and failure.

The second thread is single stock research:

What KPIs, narratives, & data drive residual performance in this name or sector? Are we focused on single stock research, or conflating idio and macro?

Tracking residual performance focuses research on what has fundamentally mattered to a stock, instead 'playing macro PM' in your names.

"The simple fact is that factors can find infinite ways to mar your performance, but cannot tell you how to be profitable."

*3) Sizing vs. Selection; Breadth; Information Ratios*

Stylized math on sizing vs. selection, breadth, and translating hit rates and idio %s into Information & Sharpe Ratios attached.

But stepping back, what Gappy describes is a synthesis.

Between the analytical decomposition of risk & performance on the one hand,

And, on the other, excellence in fundamental single stock research.

Historically, the two have remained separated.

But the accelerating future is a closer pairing of these two functions, in which the insights from each side drive iteration & excellence in the other.

As Gappy points out, "quantitative analysis is helpful in itself, but it is most helpful when it is combined with detailed, qualitative knowledge.”

[Ben Apple @bapple999]

@realEstateTrent Right near me - need to try that out!

[Ben Apple @bapple999]

@BowTiedBroke What made you jump in now?

[Ben Apple @bapple999]

@thesamparr Was shocked to find I'm top 5% of MFM listeners... That has to be too much Sam and Shaan

[Erik Kaiser @ErikKaiser]

More than $10,000,000 in real estate personal guarantees, @ArtemTepler took his own life. Many are going through hell, but united we can all win against despair.

Men need a path forward.

We spoke on Oct 21, a Sat night. I put my kids to sleep, we went to work. He wanted to find a path out.

We devised an interim plan, very much in contrast to his highs. His father was wiped out when he was around the same age of 40.

My DM's are packed with similar stories, and I respond to everyone. This will only seem genuine to those who have been in the same situation and made it out.

Please retweet my pinned tweet to encourage awareness as I will consult anyone in need.

[Taylor Avakian @TAYVAY_]

Explain the real estate market to me like I'm an associate:

[Ben Apple @bapple999]

@BobKnakal Good to know! This is in my neighborhood and I had been curious about the story!

[Ben Apple @bapple999]

@sweatystartup The name may have been the first problem, but hindsight is 20/20!

[Bill Ackman @BillAckman]

I believe that long-term rates, e.g, 30-year rates, will rise further from here. As such, we remain short bonds through the ownership of swaptions.

The world is a structurally different place than it was. The peace dividend is no more. The long-term deflationary effects of outsourcing production to China are no more. Workers and unions’ bargaining power continues to rise. Strikes abound, with more likely to come as successful walkouts achieve substantial wage gains.

Energy prices are rising rapidly. Not refilling the SPR was a misguided and dangerous mistake. Our strategic assets should never be used to achieve short-term political objectives. Now we must refill the SPR while OPEC and Russia cut production.

The green energy transition is and will remain incalculably expensive. And higher gas prices will raise inflationary expectations. Just ask your average American. They see the prices at the pump and in the grocery store and don’t believe inflation is moderating.

Our national debt is $33 trillion and rising rapidly. There is no sign of fiscal discipline by either party or by the presumptive presidential nominees. And each debt ceiling is an opportunity for our divided government and its most extreme actors to get media attention, and for our nation to threaten default. This is not a good way to recruit the many new buyers we need for our bonds.

The government is selling hundreds of billions of bills, notes and bonds weekly. China and other foreign nations, historically major buyers of our debt, are now selling. And the QT unwind experiment has barely begun. Imagine trying to do a massive IPO where the underwriter, insiders and short sellers are all selling at once, competing to hit every bid on the way down while the analysts downgrade their ratings to ‘Sell.’

Our economy is outperforming expectations. Major infrastructure spending is beginning to contribute to economic growth and the supply of additional debt. Recession predictions have been pushed out beyond 2024.

The long-term inflation rate is not going back to 2% no matter how many times Chairman Powell reiterates it as his target. It was arbitrarily set at 2% after the financial crisis in a world very different from the one we live in now.

I bumped into the CIO of one of the world’s largest fixed income asset managers the other night and asked him how it was going. He looked like he had had a tough day. He greeted me by saying: ‘There are just too many bonds’ — a veritable tsunami of new issuance each week. I asked him what he was going to do about it. He said: ‘The only thing you can do is step away.’

I have been surprised at how low long-term rates are. I think the best explanation is that bond investors thought of 4% as a high rate of interest because rates hadn’t breached 4% for nearly 15 years. When investors saw the ‘opportunity’ to lock in 4% for 30 years, they grabbed it as a ‘once-in-their-career opportunity,’ but today’s world is very different from the one they have experienced up until now.

The long-term inflation rate plus the real rate of interest plus term premium suggests that 5.5% is an appropriate yield for 30-year Treasurys. And query whether 0.5% is a sufficient real long term rate in an increasingly risky world.

And the technicals could cause yields to go even higher, particularly in the short term. We saw the beginnings of that today.

It wasn’t that long ago that a previous generation thought five percent was a low rate of interest for a long-term, fixed-rate obligation.

But I could be wrong. AI might save us.

[Ben Apple @bapple999]

@JohnJBlatchford What a great topic - I'm in the preservation camp, but it can also take years for a building to be deemed architecturally significant or historic. And sometimes, as in this case, it just seemed like an economic decision.

[Ben Apple @bapple999]

@realEstateTrent I know where this is - right in my hood - cool spot!

[Ben Apple @bapple999]

@chenellco I'd actually love to see more stories of longer journeys. Not as sexy as "50k followers in 4 months" but shows the grit and probably more realistic story for most

[Ben Apple @bapple999]

@imrichardfertig That's absurd, I've had similar experiences - not fun

[Ben Apple @bapple999]

@aussieflya Dislike!

[Marilyn Moedinger @mwmoedinger]

Want to see how I found a way to make a 1 bed/1 bath into a 2 bed/2 bath? I explain it here!

If you're in the design phases of a building, and you think you can get more and/or better units, or you feel like there's wasted space, you might be right.

Not every architect is good at laying out floorplans. It happens to be my superpower 💪

I do this for clients as their architect, and on a consulting basis...and I love it! I've never met a floorplan I couldn't unlock...there's always a way to make it better!

[Ben Apple @bapple999]

@LoganHaskett Oh no... haha how much was this??

[Ben Apple @bapple999]

@AdamSinger @danielcberk That was my question! Were people under 20 ever buying houses?

[Ben Apple @bapple999]

@philwinkle @joshuamschultz @danielcberk You are still refinancing based on a valuation - the interest rate hike is a crushing blow at current valuations

[Ben Apple @bapple999]

@heydannymiranda I see some good ones there! Looking forward to it!

[Ben Apple @bapple999]

@wagieeacc @Austen Sounds expensive…