Skip to main content

Coronapocalypse Now - Into the Heart of Darkness

Greetings,

Today I would like to do a continuation of observations I had about our Coronavirus lives:

- Cash is Trash. The Fed has decided to monetize not only government debt, but had a "special purpose vehicle", or "SPV" to purchase corporate debt. The reason they had to do this is because their charter does not allow them to purchase these types of (risky) assets, the SPV is housed at the Treasury, meaning with the executive branch.

- This is sinister as it bypasses the need for the executive branch to ask Congress to loosen the purse-strings, Mnuchin, and by extension, Trump, can buy what he wants at will. 

- Debasing the currency means that you should consider hard assets, either gold ($GLD, $IAU) or real estate. I have closed, or will close (removed contingencies) on 4 properties since this started, two of which are units.

- Seriously, in case you missed it, go buy gold and real estate, when you debase a currency, assets denominated in that currency go up.

- At the same time, I would like to quote Jared Dillian @dailydirtnap;

If I told you that the Fed was going to buy a thing, you would probably buy the thing. Let's not overthink this.

Consider equities trades as well, Don't fight the Fed, though buy and HODL (hold on for dear life) may not be advisable.

- Consider real estate to be a collection of commodities (lumber, cement, tile, paint, etc.) plus the land value. The land value is decreased (land value is based on distance to amenities, work and family, which are all devalued right now), but the commodity values will increase, not the raw costs, but for finished products (cabinets vs. lumber)

- The Phase 1 trade deal signed in January, is probably not happening, US will continue to tariff Chinese products. When I first started rehabbing houses in 2013, we paid $2,200 for cabinets for a 1,000 s.f. condo, in 2016, we paid $4,200 for the same set-up, and today we are paying closer to $5,000. HOWEVER, consider that this set, if it was "made  the USA" would cost closer to $10,000 to $12,000. Our behavior may be changing so that we have to "repair" things rather and "buy new" for everything.

- As a consequence, I think home improvement will be muted, warehouses are almost empty with non-essentials, manufacturing is being geared towards masks versus these non-essentials, such as, cabinets and shingles and floors are all on the back-burner.

- Labor rates will go up, a new labor movement will form, not unlike what we saw with Cesar Chavez in the 70s. This is actually common when pandemics occur in history, less supply, similar demand equals higher prices. I expected to see continued shortage of construction worker and possible collapse of the gig economy, such as Postmates, Lyft, Uber. I expect to see "legislated equality" as these workers, who feel slighted for generations now, form new forms of labor unions, even if not by that name.

- Obvious maybe, but many stores that are now closed will never open again, especially small businesses that have low cash flow and high labor (restaurants).

- DO NOT BE LATE ON YOUR MORTGAGE OR FORBEAR IT, if you can help it. We are likely to see historic, generational, insert your preferred hyperbole, lows in rates. If you can get a 30 year fixed for 1% or 2% down the line, it is worth some short term pain. The Fed really wanted to decrease rates, and although they messed up initially, they are coming down now.

- Mortgage interest rates dropped last week, and are etching up this week, best time to lock rates would have been the Thursday before good Friday, if you missed it, there will be other opportunities, you just have to be ready to strike when it happens, so be prepared.

- Stocks that benefit from Covid-19 are at an all-time high, including $NFLX, $AMZN, $ATVI (streaming video, onlines sales, video games). Amazing.

- Unemployment numbers out tomorrow, 16M new unemployment filings in 3 weeks, approx. 10% of the entire US labor force, people are projecting unemployment to reach 30%. The consequences of this is apocalyptic (hence the title of this piece), and governments MUST GIVE DIRECT CASH TRANSFERS (to citizens, not companies), otherwise revolution will happen.

- I consider myself a Capitalist, so I think that we should not be doing bailouts of companies, bankruptcy exists for a reason. If airlines go out of business, those jobs do not just disappear, they just answer to new shareholders.

- At the same time, I do not believe in complete laissez-faire, it is unpatriotic because you are agnostic about the outcome. If all systems were allowed to compete unfettered, it would be no different than anarchy. Example, if you believe that the US should compete with China and Europe on things as critical as 5G communications, Airplanes, and ports/harbors, and you do not think they would "cheat" (subsidize research, guarantee outcomes), hi there Pollyanna, long time no see. 

- The United States is also better than those large countries and worth protecting, it is a latter day Rome, with all its good and bad; we are the beacon of democracy, rule of law, not of men, with the free world relying on the Pax Americana. You are damn right I am biased on what horse I want to win.




#Odaenathus
#COVID19
#Coronapocalypse
#CashisTrash
#PayYourMortgage
#Goldbug
#Fedup
#Fedtastrophe
#Fedpocalypse
#Fedsury

Orange, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn

Comments

Popular posts from this blog

Your First Home: Step 8-Protect Your Investment

Welcome to the world of home ownership, besides feeling like you signed your life away-how does it feel? You may find yourself feeling pride of ownership, because you now in fact own something. But with great power comes great responsibility-home maintenance. One of the best resources for you, even after the transaction, is going to be your real estate agent. Chances are, if you need a specific kind of vendor-they have one they trust and can refer you to. Home maintenance falls into two categories: Keep it clean and keep an eye on it. Review the maintenance needs for your home once you are settled in plan for regular service. If you notice something different, investigate it and fix it. A small problem not treated turns into a massively more expensive problem when ignored. Be sure to also read your home warranty, some of the repairs that come up may be covered. Also, have reserves set up for “Life Happens” situations. Finally, the most important part, Housewarming Party! Nothing w...

Why Real Estate is Such a Good (Great) Investment: Part 3-Sell it

This is the next installment of a 7 part series exploring ideas of why real estate is such a good investment. The focus will be on single family and multifamily real estate, but a good idea is a good idea, enjoy.  Alas, today we will be discussing the main thing people think about when they think about real estate investing, selling the asset high after buying low. The biggest advantage to selling real estate is the value added you can do yourself. There is no requirement to hire anyone to do any repairs on the property, as real estate is sold as is. You can do your own marketing, your own negotiating, there does not have to be anyone between you and the market unless you choose for there to be. You choose your partners at terms you both agree with. With that great power, comes great responsibility. Though you can do it yourself, it is more advisable to partner with those who do it every day, rather than every so often. Consider that a real estate transaction employs a...

Your First Home: Step 2-Hire Your Agent

Now that we have made the decision to buy your first home, scary I know-time to find a real estate agent to help you do it! What does a real estate agent do for you exactly? They are your market consultant, home guide, your liaison for other partners in the home buying process, negotiator, and the closer. They wear a lot of hats, for this reason it is a very good idea to have conversation with them and get to know them as a person and as a professional. Here are some great questions to ask them: 1.       Why did you become a real estate agent? 2.       Why should I work with you? 3.       What do you do better than other real estate agents? 4.       What process will you use to help me find the right home for me? 5.       What are some mistakes that you think people make when buying their first home? 6.       What are ...