Investing

[Tigeraholic1]

22 hours ago, Deleterious said:

They were expecting 1% GDP growth last quarter but they just announced it was negative 1.1%. 

This was a huge miss and expect inflation to continue at a steady rise. Housing market set to implode as well as interest rates sky rocket.

[Deleterious]

I'm curious to see what happens to housing prices.

I have a theory that so many people bought and/or refinanced at sub 3% that they won't want to sell with higher rates. That will limit inventory and keep prices elevated.

[1776]

Labor Department officials believe Fidelity Investments’s plan to allow investors to put bitcoin in their 401(k) accounts risks the retirement security of Americans, a senior administrator said.

“We have grave concerns with what Fidelity has done,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, said in an interview with The Wall Street Journal.

Mr. Khawar’s group works inside the Labor Department to regulate company-sponsored retirement plans. In the interview, he said he views cryptocurrency as speculative. There is “a lot of hype around ‘You have to get in now because you will be left behind otherwise,’” he said.
 

WSJ

[gehringer_2]

1 minute ago, 1776 said:

Labor Department officials believe Fidelity Investments’s plan to allow investors to put bitcoin in their 401(k) accounts risks the retirement security of Americans, a senior administrator said.

“We have grave concerns with what Fidelity has done,” Ali Khawar, acting assistant secretary of the Employee Benefits Security Administration, said in an interview with The Wall Street Journal.

Mr. Khawar’s group works inside the Labor Department to regulate company-sponsored retirement plans. In the interview, he said he views cryptocurrency as speculative. There is “a lot of hype around ‘You have to get in now because you will be left behind otherwise,’” he said.
 

WSJ

Nice statement, but if he doesn't have any jurisdiction, it probably doesn't change Fidelity's mind.

[gehringer_2]

Ideas tossed out by Musk for 'monetizing tweets' included a cross posting fee. That would cut the time to read the fora here in half......🙄

[1776]

This topic may not be specific to investing but it is an interesting read and don’t know that this is as public as it should be.
 

https://www.morningstar.com/articles/1088562/big-changes-may-be-coming-to-traditional-medicare

Edited April 29, 2022 by 1776

[1776]

The old adage advising “sell in May and go away,” may have been a month late this year.

The Nasdaq suffered its worst month since 2008 falling 13.3% in April. Dow down 4.9% and the S&P down 8.8%. 
 

 

[Tigeraholic1]

23 hours ago, Deleterious said:

I'm curious to see what happens to housing prices.

I have a theory that so many people bought and/or refinanced at sub 3% that they won't want to sell with higher rates. That will limit inventory and keep prices elevated.

This formula is shutting young first time buyers out of the market.

[1776]

9 minutes ago, Tigeraholic1 said:

This formula is shutting young first time buyers out of the market.

And rents are going through the roof at the same time (no pun intended). We bought our house in October 2020. We were entertaining the idea of buying a house elsewhere and selling here but don’t see that as feasible at this point. Out of curiosity I called a local outfit that oversees rents, handles everything. This, in the event we opted to keep this house and just rent it out if we bought elsewhere. The lady handling my call during my inquiry asked maybe a half dozen questions and told me without seeing our house what they could rent it out for a month. The monthly rent she suggested getting for our current abode was two and a half times more than our monthly mortgage payment. 
Investors are buying an inordinate amount of homes solely for the purpose of renting them out. In the Raleigh, NC area, investors are loading up on properties. Then you have other outfits that are buying and flipping. Approximately 30% of homes in the triangle (Raleigh/Durham/Chapel Hill) are being purchased in full cash and are going way over asking. Some of the numbers are ridiculous. 
Home ownership is indeed eroding for the less than affluent. It’s ludicrous the way the market is at this point. Something has to give at some point.

[Tigeraholic1]

10 minutes ago, 1776 said:

And rents are going through the roof at the same time (no pun intended). We bought our house in October 2020. We were entertaining the idea of buying a house elsewhere and selling here but don’t see that as feasible at this point. Out of curiosity I called a local outfit that oversees rents, handles everything. This, in the event we opted to keep this house and just rent it out if we bought elsewhere. The lady handling my call during my inquiry asked maybe a half dozen questions and told me without seeing our house what they could rent it out for a month. The monthly rent she suggested getting for our current abode was two and a half times more than our monthly mortgage payment. 
Investors are buying an inordinate amount of homes solely for the purpose of renting them out. In the Raleigh, NC area, investors are loading up on properties. Then you have other outfits that are buying and flipping. Approximately 30% of homes in the triangle (Raleigh/Durham/Chapel Hill) are being purchased in full cash and are going way over asking. Some of the numbers are ridiculous. 
Home ownership is indeed eroding for the less than affluent. It’s ludicrous the way the market is at this point. Something has to give at some point.

It's going to be worse than the interest bubble. With the bubble pop you had prices regressing to market value. Now the cash investments by wealthy investors is backed and can dictate the market for the forseeable future.

[Deleterious]

The Journal had an article about the supply shortage. 

Quote

Construction of new housing in the past 20 years fell 5.5 million units short of long-term historical levels, according to a new National Association of Realtors report, which is calling for a “once-in-a-generation” policy response.

Quote

The report also says that from 2010 to 2020, new-home construction fell 6.8 million units short of what was needed to meet household-formation growth and replace units that were aging or destroyed by natural disasters.

Those are some big numbers but they are also from a lobbying group.  So I was a little skeptical.  Then I found this from an economist at Freddie Mac.  The numbers are a bit different but still very large.  They break things down a bit further and get to a really big problem, we don't build nearly enough starter/entry-level homes.  Going from 400K units per year in the 70s to 65K last year is a huge problem.

Quote

The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes. That decline has been exacerbated by an even larger decrease in the supply of entry-level single-family homes, or starter homes.3 Between 1976 and 1979, the construction of new entry-level single-family homes4 averaged 418,000 units per year or 34% of all new homes completed (Exhibit 2 and 3). During the 1980s, mortgage rates increased dramatically, rising from an average of 8.9% during the 1970s to 12.7%. The rise in mortgage rates led to a decline in housing demand and supply as housing became less affordable. As a result, entry-level housing supply fell by over 100,000 units to 314,000 units per year during the 1980s. While the overall number of new single-family homes fell, the entry-level share of all new homes constructed remained at 33%, similar to the late 1970s, indicating that entry-level supply dropped by a similar number as the overall new construction market.

Quote

During the 2010s, new entry-level housing supply decreased further to an average of 55,000 units per year, and in 2020, we estimate that there were only 65,000 new entry-level homes completed – less than one-fifth of the entry-level homes constructed per year in the late 1970s and early 1980s.

 

[CMRivdogs]

 

54 minutes ago, 1776 said:

And rents are going through the roof at the same time (no pun intended). We bought our house in October 2020. We were entertaining the idea of buying a house elsewhere and selling here but don’t see that as feasible at this point. Out of curiosity I called a local outfit that oversees rents, handles everything. This, in the event we opted to keep this house and just rent it out if we bought elsewhere. The lady handling my call during my inquiry asked maybe a half dozen questions and told me without seeing our house what they could rent it out for a month. The monthly rent she suggested getting for our current abode was two and a half times more than our monthly mortgage payment. 
Investors are buying an inordinate amount of homes solely for the purpose of renting them out. In the Raleigh, NC area, investors are loading up on properties. Then you have other outfits that are buying and flipping. Approximately 30% of homes in the triangle (Raleigh/Durham/Chapel Hill) are being purchased in full cash and are going way over asking. Some of the numbers are ridiculous. 
Home ownership is indeed eroding for the less than affluent. It’s ludicrous the way the market is at this point. Something has to give at some point.

That’s what we’re seeing here as well. We’re in a new sub, closed June 2020. Homes are going on the market near the 1 year resell date. A lot of investors renting them out.

We have a niece in the Raleigh area who bought last fall, her old home went within hours to a Texas investment company, way over asking price.

It’s not surprising here with the military presence, but low inventory on houses.

At the same time, I was seeing the same thing in Michigan. We sold our home in Farmington Hills in March 2017 and rented in preparation for our move south. Our apartment rent for a 2 bedroom 1800 sq foot place in Commerce Twp went from just shy of $1400 to over $2000 if we had renewed in 2020. That’s higher than what our mortgage was for a 4 bedroom in FH. 
 

[CMRivdogs]

3 minutes ago, Deleterious said:

The Journal had an article about the supply shortage. 

Those are some big numbers but they are also from a lobbying group.  So I was a little skeptical.  Then I found this from an economist at Freddie Mac.  The numbers are a bit different but still very large.  They break things down a bit further and get to a really big problem, we don't build nearly enough starter/entry-level homes.  Going from 400K units per year in the 70s to 65K last year is a huge problem.

 

That’s the big thing. You can find stuff in the $350,000 plus range. But those looking to start out or us older geezers who are opting to downsize are having to scramble for something affordable without having to put a ton of money into bringing it somewhat up to date.

We looked at several places here that were in the 200-270 thousand price range, but by the time you did just the basics on kitchen, bath, etc you were out of luck.

Meanwhile those of use who bought shortly before the 2000 housing bust barely broke even when we sold in 2017.

[gehringer_2]

46 minutes ago, Deleterious said:

They break things down a bit further and get to a really big problem, we don't build nearly enough starter/entry-level homes.

Interesting note. In one of Ezra Kleins podcasts (a national treasure) recently he went into some detail about how in the pre-crash period, an unrighteous feedback loop arose between the banks, mortgage originators and builders that motivated the building of ever higher priced housing to support more bond issuance and of course the shenanigans to get people into bigger houses than they ever should have been considering. So that was one big piece - at least up through 2009. 

Of course generally, you have the same issue with houses that you have with cars - profit margins are better on big houses than small ones, so no-one is going to build small as long as they are still able to sell big. The crash may have broken some of the abuse in the mortgage/bond system, but it didn't change that, and near zero interest rates had a similar effect at keeping builders building bigger than buyers could afford at the more historically average interest rates we are on the way back to.

The other thing I wonder, and this is pure speculation because I don't have any specific data - is whether the pressure on latino immigration is constraining the housing construction industry. Anywhere you go in America most housing construction workers are hispanic. If you want to jump start housing construction, I would suggest liberalizing legal immigration from Mexico and CA.

Edited April 30, 2022 by gehringer_2

[Deleterious]

Reality TV has taken over Netflix.

[1776]

Is today the day the 10 year benchmark eclipses 3%?

[Deleterious]

They are saying a half point bump three times this year.

Fed to fight inflation with fastest rate hikes in decades

[Tiger337]

43 minutes ago, Deleterious said:

They are saying a half point bump three times this year.

Fed to fight inflation with fastest rate hikes in decades

It's almost like they should have started doing this years ago.  

[gehringer_2]

7 minutes ago, Tiger337 said:

It's almost like they should have started doing this years ago.  

this is very silly. If you know you need to/plan to go up 1.5%, go up 1.5%. It amounts to putting out a fire by opening the valve on the water hose one 1/2 turn per hour. The only justification for not going faster is that they are going start cuttin their bond holdings faster, which is also deflationary.

Edited May 3, 2022 by gehringer_2

[Deleterious]

I believe the silly part is thinking 1.5 points will fix it.

Wake me up when rates are > 8%.

[Screwball]

I think the 10 yr did touch 3% today.

From that AP article;

Quote

That’s why Powell and other Fed officials have said in recent weeks that they want to raise rates “expeditiously,” to a level that neither boosts nor restrains the economy — what economists refer to as the “neutral” rate. Policymakers consider a neutral rate to be roughly 2.4%. But no one is certain what the neutral rate is at any particular time, especially in an economy that is evolving quickly.

That is a sample of bullshit from the article trying to explain the clueless Fed wizards trying to manage something they cannot manage, and haven't for a very long time.  Slow learners, but our system.

It appears the bond market is starting to agree with that assessment.

But they have a problem; They blow up the everything bubble or they starve half of America.  Your move.

[gehringer_2]

17 minutes ago, Deleterious said:

I believe the silly part is thinking 1.5 points will fix it.

Wake me up when rates are > 8%.

the bond repurchases are supposed to be about a trillion/yr rate. If they doubled that it would probably have a big effect, but probably also drive long term rate up a lot - which I'm sure they don't want to do but which is always the ultimate answer.

[1776]

26 minutes ago, Screwball said:

I think the 10 yr did touch 3% today.

Yes it did, first time since 2018.

[gehringer_2]

1 hour ago, Deleterious said:

I believe the silly part is thinking 1.5 points will fix it.

Wake me up when rates are > 8%.

IIRC, I had some CD's paying in XS of 10% in the late 70's. Not sure what the highest were but they were 2 digits.

[Deleterious]

29 minutes ago, gehringer_2 said:

IIRC, I had some CD's paying in XS of 10% in the late 70's. Not sure what the highest were but they were 2 digits.

I just bought my dad $10K worth of IBonds @ 9.62%.

I'm pretty sure my parents had a mortgage with a rate of 16% on my childhood home.

This article says CDs paid 18% in the early 80s.

https://www.google.com/amp/s/www.bankrate.com/banking/cds/historical-cd-interest-rates/amp/