🗞️ Homecoming in Summer

WHILE YOU POUR THE JOE… ☕️
Bidder Bidder Where Have You Gone

On Wednesday, the ten-year bond auction reported a lower-than-expected bid for United States treasury bonds.

What all this means is that supply is heading down, but demand is another story here. Warren Buffett now reportedly holds more capital in bonds than the Federal Reserve 💰️.

Never bet against Buffett, but also do your own homework. In the coming months, I expect to see increasing bond demand (despite a weak auction) as the Federal Reserve gets ready to cut interest rates.

So, as you can probably guess, I am doubling down on my $TLT bond ETF holdings 👀, expecting to make a hefty profit.

This is a bearish bet on the U.S. economy, a call we’ve been making for several weeks now.

Speaking of making a hefty profit, let’s get on with today’s email 📧…

SECTOR OF INTEREST
Are Houses Hot Again?

Not for millennials, that’s for sure. I’m sorry to burst your bubble, but owning a home today isn’t like owning one a few decades ago.

For one thing, current salaries have underperformed inflation growth, while property prices have more than outpaced inflation 📈.

This means your buying power is nonexistent in the real estate market, so you must depend more on a mortgage than ever. Boomers will scoff at you since they had 13% rates back then when we only have 6.8% mortgages.

But

Their average mortgage balance was nearly a third of today’s balances, meaning their monthly payments were roughly 15% of gross monthly income.

Today that looks more like 55-65%, so figure out whether buying a home is still a good investment (unless you have the cash to buy it outright 💵).

Because of the continued home unaffordability crisis in the United States, BlackRock’s little brother Blackstone has been buying up a lot - and I mean a lot - of the U.S. housing market.

Yep, this behemoth has acquired up to $41 billion in real estate, but not all its properties are equal.

Up to 40% of the portfolio (the biggest category) is held in multifamily. Now, why would that be?

If the next generation has little to no chance of owning a home, the next best thing is renting apartments or duplexes, considered multifamily property.

Don’t kill the messenger, okay? I’m just letting you know where the economic masters are betting and why.

All of these renters and immigrants will look to these multifamily units to live, and trust me, not that many people will be looking to buy homes (unless they are rich immigrants or international investors),

Want to hear something even sadder? Check this out:

The fertility rate in the U.S. is below 2. This means that if every two parents have - on average - one child, then when the two parents die and leave one child behind, there is a net 50% reduction in population 📉.

This has been worsening since the 1990s, which is also why the U.S. population decline has been accelerating lately:

So, if populations are collapsing, and the next generation can’t afford to buy a home, what are we going to do with all of these vacant units?

Drumroll…. We just copy and paste England’s strategy, which is open-border unfettered immigration, especially to the markets where Blackstone has been investing into the most.

These are:

• Orlando

• Tampa

• San Antonio

• Dallas

• Los Angeles

You know what these places have in common? Lots of immigration and lots of wealth gaps create an insanely unaffordable housing market.

Are you depressed yet? Yeah? Okay, here is how I am about to make it better for you and make the pain disappear.

But before you continue to the next segment, here is a snippet of our proprietary real estate monitor model.

You’ll find that both building permits and housing starts are down to a cycle low. Still, the spread (difference) between them also shows signs of an upcoming opportunity 🏠️.

Since we are in the spirit of helping people outperform the market and stay one step ahead, we are giving this model for free.

It’s yours. Just repost this tweet from our feed, and email us at [email protected] with the subject “RE model” to get it in your inbox.

STOCK OF THE WEEK(END)
Good News is, You Can Still Make Money

Connecting these new potential renters to America’s rising star tenants is a full-time job, and therefore, it deserves a full-time payoff, right?

How about $572 million 💸? Because that’s how much revenue Zillow Group (NASDAQ: Z) generated in the past quarter alone, which was 13% above what the company did during the same quarter last year.

Now, most of this revenue, about $409 million, came from the residential sector; you can now be the one looking at your cards and screaming Bingo!

Because these rising listings and the massive wave of rental demand that could be about to hit in the coming months require a middleman to connect landlords and renters, Zillow’s upside is as clear as ever.

The stock now trades at 45% of its 52-week high 📉, even after rallying by 17.5% in a single day after its most recent quarterly earnings release.

Despite a most recent bullish run, there is still overwhelming evidence pointing to a few more days of upside ahead for Zillow stock, here’s why.

The mortgage market index is now back to 1997 lows, meaning there is little to no mortgage demand in the United States today; remember what I said about our real estate monitor indicator above?

But, what this means is that, as the Federal Reserve (the Fed) gets on with its interest rate cuts by September 2024, lower mortgage rates could also help the index find a bottom and see underwriting volumes go up.

Wall Street knows this, so analysts at Jefferies Financial Group slapped a price target of $75 a share for Zillow stock 🎯 right now, calling for up to 58% upside from where it trades today.

Looking at the way Zillow stands out in the real estate operations industry makes it very clear that markets are in agreement with just how much upside there could be had in Zillow stock.

Why? Two metrics, which typically lead the way:

• Forward P/E ratios (PEG2 column)

• Earnings growth ratios (EG2 column)

Whatever stock comes as a positive outlier to the rest of its peers has to be there for a reason; in other words, it must be ‘expensive’ for a reason.

Zillow management also thinks the stock is a buy today, as they allocated up to $292 million to buy back stock in the past quarter, with a further $381 million in consideration for this quarter.

NOW GO AND MAKE IT HAPPEN
What Else Can You Do?

Renting is the next best thing since buying a home is not that achievable in today’s economy. However, that doesn’t have to be a bad thing.

Most people mistake a house for an asset, especially in their 20s. My mentor, Anton Kreil, always instilled that freedom is the ultimate asset, and owning a home takes away from that freedom.

Renting allows you to be flexible and, therefore, free, and in today’s economy, that matters more than fitting the status quo. So, no book recommendation today 📖, but a two-hour video to watch over the weekend—you’re welcome.

To your success,

G. 🥃