are you incinerating money when you sell your house?
Moontower #262
Friends,
I’m in Tahoe for a friends and family weekend so less rambling today. Just gonna do an Arnold and “be useful”:
In Wednesday’s don’t sleep on this stuff we talked about “vibe coding” or using prompts to code.
I wanted to cap the topic with a cheatsheet summary of the LLM’s available today. I used Grok to generate much of it. Very meta, I know.
I recruited my friend Rohit, fellow substack writer (Strange Loop Canon), investor, author of the recent book Building God: Demystifying AI for Decision Makers, and overall humble genius (he’s local so we get to take walks and chat about all the things) to add his notes to the cheatsheet.
Screenshot:
More LLM curation:
AI Does 90% of My Work Now as a Product Leader (Peter Yang’s Behind The Craft)
Yana Welinder, founder of Kraftful, is not kidding. She’s a one-woman army with these LLM’s at her fingertips. She’s been in the AI space long before the recent wave. Her husband is also VP of Product at OpenAI, so I’m guessing the pillow-talk is a lot of “beep boop”. The first half of this video where she explains how her team uses Operator is sick.
Money Angle
Last week I said I scored 29 out of 100 on Khe’s Buy/Rent Calculator leaning me more towards renting.
Jake mentioned that with his low locked in mortgage he scored a 76 (so leans towards buying)…BUT if he had to use current rates he scores a 48!
Jake lives in my neck of the woods where the economics favor renting so it’s not shocking.
When he disclosed how much the mortgage rate affected his score I thought it would be educational to spell out the exact math of this.
I actually buried it in a post I wrote last year, but the mortgage detail deserves its own article because overlooking the math, or at least the intuition behind the math, could be a major personal finance mistake.
💸if you have a low rate mortgage, you incinerate money when you sell (4 min)
It opens:
This is a tidy explainer of something you feel but might not be able to articulate.
The reason you feel that selling your home to buy another these days feels like you have somehow incinerated money, is because you are.
It’s just bond math — you are buying a loan that is trading at a massive discount back for par when you pay off your mortgage. We can compute just how much money you are incinerating.
Quite unfortunate because along with low-supply and bottlenecks this is financial force that also conspires to remove supply and liquidity.
Excerpt below…
An observation that blew my small mind
About an hour after I published the incinerating money post, I was chatting with my friend Victor. He was raving about how well Gemini 1.5 with Deep Research did on creating a European trip itinerary. He gave it a bunch of prompts and before it “goes off for 10 minutes to think” it explicates its research plan which you can tweak before finally sending it to the mines.
So I asked him to prompt it about selling a house that’s locked into a low mortgage rate.
If you are locked into low rate mortgage, and you sell your home, it feels like you are incinerating money. What is the financial articulation of that feeling? Please include math about how bond prices are affected by interest rates
It did quite well. You can read the whole response here:
The Financial Reason Why Selling a Home with a Low-Interest Mortgage Feels Like Burning Money (Gemini response)
But it was the citation that had me trippin’. That post had been up for about an hour and Gemini used it.
Money Angle For Masochists
Busy week in markets. I did some option trading and as usual share my thinking publicly. I hope all of this is helpful.
🧵My reflex when I saw the options on these European names that screamed higher this week (thread)
🧵Awesome seeing non-option traders with a great understanding of vertical spreads! (thread)
Videos I published regarding trades on Monday and Tuesday
🎥post mortem of a silver strangle (moontower YouTube)
🎥understanding the risk of a BTC ratio put spread (moontower YouTube)
Stay Groovy
☮️
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Hey Kris,
I noticed that your LLM spreadsheet doesn’t include the Qwen models. Not sure if they’ve been on your radar, but they’re developed by Alibaba and currently available for free on their website.
I’ve used them for reasoning and coding tasks with solid results—might be worth checking out!
Thinking about a mortgage as a bond... if I ask Grok what the impact to the bond value is on a 30 year duration when interest rates rise from 3 to 6%, it tells me that the bond would lose 90% of it's value (duration * change in rate). Even if remaining duration is 20 years, that's still more than half the value. Is this correct? If it is, it would be insane to buy back almost any mortgage when rates are higher. Unless I'm missing something?