Displaying items by tag: crisis

In an interview with Russ Alan Prince in Financial Advisor Magazine, Jeffrey Schwaber, Chief Executive Officer of Bluerock Capital Markets, stated that he believes real estate is well-positioned to outperform in 2023. He noted that while some economic indicators are pointing towards a possible recession this year, “real estate market fundamentals remain very healthy.” He referenced the difference in real estate during the Financial Crisis and now. For instance, the three key factors that negatively impacted real estate during the financial crisis, supply, leverage, and jobs, are all now healthy. Real estate supply as a percentage of total inventory is the lowest it has been in the "trailing 10-year period compared to previous periods and is forecasted to remain at lower levels." The use of leverage since the Financial Crisis has been the lowest of any “real estate/economic recovery” in the last forty years. As for jobs, the unemployment rate was 3.7% as of November, close to the lowest level in 10 years. In terms of where to invest, Schwaber is bullish on the industrial, life science, and single-family residential sectors. The growth of online retail is driving demand for warehouse and distribution centers on the industrial side. Life science real estate offers an attractive opportunity due to significant growth in biotech research, and the significant undersupply of apartments and single-family rentals is fueling the residential housing market.


Finsum:Due to healthy fundamentals, Jeffrey Schwaber, Chief Executive Officer of Bluerock Capital Markets, believes real estate will outperform this year in the industrial, life science, and single-family residential sectors.

Published in Eq: Real Estate
Friday, 06 September 2019 12:36

ETFs May Implode Just Like CDOs

(New York)

You may not know the name Michael Burry off hand, but you probably should. He was one of the investors who made a fortune as part of the “big short” during the Financial Crisis. Well, he has come back into the limelight this week with an eye-opening warning. He argues that ETFs, and indexing generally, are essentially the same as CDOs were before the crisis. He explains that the massive capital inflows into ETFs have eliminated any realistic pricing mechanism for underlying stocks, just like huge demand for structured credit inflated all asset prices before 2008. Additionally, the daily liquidity underlying many of the stocks in index funds is vastly lower than the index funds themselves (again, just like CDOs). Burry uses a theater metaphor, saying that the theater has grown much more crowded, but the exits are still the same size.


FINSUM: This is a great argument, and one that seems to have fundamental truth to it. However, even Burry admits that he has no idea when this “bubble” might actually burst.

Published in Eq: Large Cap
Friday, 21 June 2019 10:21

US Consumer Debt is Hitting Alarming Levels

(New York)

For many years after the Crisis, the main theme around consumer debt was the idea that Americans were deleveraging. However, steadily, consumer debt has risen back to alarming levels. In the first quarter of this year, consumer debt hit $14 tn, surpassing the $13 tn of leverage pre-Crisis. Student debt has been a major area of credit expansion. Even when comparing debt to the population, the debt per person is a little higher than in 2008.


FINSUM: So obviously inflation needs to be accounted for here, but the picture is still worrying. It is yet another sign that we may be nearing the end of this run.

Published in Eq: Total Market
Wednesday, 16 January 2019 11:05

Why the Recent Market Downturn is Just the Beginning

(New York)

Many advisors may respect the opinion of Bob Rodriguez. The former fund manager achieved some acclaim by accurately forecasting the Dotcom bust and Financial Crisis. The former CEO of First Pacific Advisors says that a financial crisis is now a “near certainty”. His fear is that excess leverage in the economy, coupled with a recession, will cause a big crisis. He believes “delusional” equity markets are now only starting to recognize this reality.


FINSUM: The preconditions for a crisis are there—a big buildup in corporate debt and pending recession. However, the timing and magnitude are both big question marks.

Published in Eq: Total Market
Thursday, 27 December 2018 13:35

There is No Bond Crisis Brewing

(New York)

The market has been very worried about a potential bond market meltdown. Both investment grade and high yield debt have seen major losses lately as fears have mounted about high corporate debt heading into a possible recession and downturn in earnings. One of the big worries is that there will be a surge in BBB (the lowest rung of investment grade) debt that falls into junk status. However, Bank of America is more sanguine, arguing that growth is solid and companies have actually been issuing much less debt, and will continue to do so. Their view is that companies are in a much sounder financial position than before the last crisis.


FINSUM: The debt gorge that happened over the last several years is inevitably going to have consequences, and we think BAML is way too relaxed about the risks.

Published in Bonds: Total Market
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