Daily Advice Thread - All basic help or advice questions must be posted here. Investing |
- Daily Advice Thread - All basic help or advice questions must be posted here.
- Massive Wells Fargo layoff coming as soon as this Tuesday
- Dunkin' Brands to go private
- Beyond doom and gloom: A nuanced discussion of multifamily rentals / REITs in very high cost of living cities (VCOL)
- Anyone else tired of hearing about how "overvalued" the stock market is?
- Hydrogen Wars’ Pit Europe v. China for $700 Billion Business - Bloomberg article
- These Are the Airlines Teetering on the Brink of Covid Ruin
- Bruce Flatt (CEO of Brookfield Asset Management): Real Estate Will Be Repriced to Double
- Banks and Financials look good
- Investing Strategies - Dividend Growth Investing - Advantages/Disadvantages + Breakdown
- Brits and wider fam: How are you adjusting your investments in preparation for Brexit?
- Stake (New Trading Platform)
- why is everyone so against active investing and stock picking?
- SWBI a good buy pre-election?
- Is SQ being punished because of Dorsey and Twitter?
- Bad Ideas Report by Ark Invest [White Paper]
- I feel like for every piece of common investing advice, there is another common investing advice that directly opposes it.
- Market valuation totally gonzo?
- GDP/Market Cap at 182% and I am optimistic about the near future.
- Most innovative sectors
- Which U.K. stocks are you picking up this week?
- FBAAGM portfolio
- Where can I find financial statements for companies that have gone bankrupt?
- Supercycle 5G, Motley Fool advices
| Daily Advice Thread - All basic help or advice questions must be posted here. Posted: 01 Nov 2020 04:14 AM PST If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions. If you are going to ask how to invest you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions! [link] [comments]  |
| Massive Wells Fargo layoff coming as soon as this Tuesday Posted: 01 Nov 2020 07:01 PM PST It has been reported that Wells Fargo is planning a massive layoff. Cutting up to 25% of its workforce, starting as soon as this coming Tuesday. Price of Wells Fargo shares have also hit lows not seen since 2009. The upcoming structuring might be what Wells Fargo needs in order to bounce back from its current lows. Although Wells Fargo is probably one of the worst managed banks, other banks are also in similar situations. It is rumored that Bank of America is intentionally holding off their mass layoff until 2021. Sources: https://investorplace.com/2020/10/wells-fargo-layoffs-what-to-know/ https://finance.yahoo.com/news/wells-fargo-shares-plunge-investors-210538894.html? [link] [comments]  |
| Posted: 01 Nov 2020 07:30 AM PST
https://www.reuters.com/article/innovationNews/idUSKBN27G00D [link] [comments]  |
| Posted: 01 Nov 2020 04:03 PM PST Obligatory disclaimer: "predicting is very difficult, especially if it's about the future", and I've been very wrong before (most recently about the market rebound). But it's fun to have a discussion and what else is there to do now that it's cold with a COVID surge? Full disclosure: Despite my arguments below, I hold modest positions in several of the apartment rental REITs. One reason is simply to hedge against me being wrong. I also think there's a gap between the eventual modest decline in valuations and the 40-50% decline we've seen in luxury coastal apartment REITs (Essex, Avalon, Equity). The public REITs have investment grade credit rating, and several of them (Equity, Avalon) have recently issued debt at ~2% due to the accommodative corporate credit environment. Many also have suburban portfolios which could prosper from the urban departures.
IntroThere's been a great deal of hysteria in the popular press / investment forums about "the death of cities". This is clearly ridiculous. "Cities" are the engines of economic growth in every developed economy. The 100 largest metropolitan areas contain 65% of the US population and 68% of total economic activity (and closer to 75+% of patents, intellectual property development, etc). Cities as a whole will continue to grow and expand in the United States as they have for the past 200 years. On the flip side, not all cities are created equally. I think a very reasonable question to ask is how will the multifamily real estate markets in very high cost of living cities (VCOL), loosely defined as San Francisco, NYC, Boston, and maybe LA fare in the near future? I'm personally a big believer that external shocks very rarely generate new trends but tend to accelerate existing underlying ones. And when looking at the future of VCOL areas we have a story about demographics, affordability, schools / child care, job dispersion, supply, and immigration.
ThesisMy thesis is that VCOL, and in particular the dense urban cores, will see flat to negative growth in populations, rent, and condo prices as Millennials age into child-rearing years and move to areas with more affordable housing / better schools. Older generations will continue their preference for warmer, lower tax areas while foreign immigration remains depressed. This trend will be compounded by the increase in luxury rental units as projects initiated in 2018, 2019, and early 2020 move onto the market. More flexible work from home policies will also contribute modestly to this trend, but is not the main driver. Single family housing, even in VCOL areas, will likely be unaffected due to severe supply constraints.
I see Millennials primarily moving to 3 distinct areas of the country:
What do the public markets say?One of the features (not a bug) of private real estate is that it moves much more slowly and is oftentimes uncorrelated with public markets. Case in point, residential housing prices peaked in the US around 2006-2007 and then decreased until 2012 (i.e. 3-4 years after the stock market and other public markets fully reflected the valuation shifts). Luckily for today's investors, one major difference between 2008 and today is that we have large, national, publicly traded REITs in both the apartment and single family rental sectors. Even better, the apartment housing REITs have different geographic concentrations and economic consumers (i.e. luxury, affordable, student, etc.). We also have large, publicly traded companies involved in single family home building / renovations that are also great proxies for the single family housing market.
So, how are apartment rental REITs in VCOL locations doing? The first one to consider is Essex Property Trust (ESS), a member of the S&P 500. They have luxury apartments primarily in LA & San Francisco (~75%) and also in Seattle (~25%). They are down ~40% from their all time high in February. Next up is Avalon Bay (AVB), the largest apartment REIT, which owns luxury apartments in VCOL coastal areas in Boston, NYC, SF, etc. They are down ~40% from their all time high. Equity Apartments, similar to AvalonBay but with a slightly worse credit rating of BBB+, is down ~50%. UDR, another coastal luxury apartment REIT, is also down ~40%. If you read the most recent earnings calls from Equity / Avalon, one thing they both cite is their high rental collection rate (~98%) and the high household income of their tenants (~$150,000).
Let's contrast that to the sunbelt / mid Atlantic luxury REITs: Camden Property (CPT) and Mid America Apartments (MAA). These REITs have extensive holdings in Texas, Florida, Phoenix, etc. Mid America is down ~22% while Camden is down ~25%.
The market is currently discounting luxury apartment rentals in VCOL by almost 2x the rate as more affordable sunbelt / Southern cities. This is despite the fact that rental collection rates remain high and that these properties have affluent tenants who are least likely to be affected by the recession.
The contrast is even more stark when comparing against single family rental REITs, the largest of which is Invitation Homes (a spinoff of Blackstone, INVH). They own ~90,000 homes across the Sunbelt, upper mid-west, and more affordable areas of the West. They are down only 9% off of all time highs. The US home construction ETF from I-shares (ITB) which tracks home developers such as Lennox and home supply stores like Lowes actually set an all time high in September 2020.
The bottom line is that public markets suggest that luxury, apartment rental housing companies have lost 20-50% of their pre-pandemic value, with VCOL losing almost twice the value of luxury rentals in booming sunbelt / southern cities. In contrast, single family home rentals remain extremely strong with valuations of home building companies trading at all time highs. As an aside, if you're bullish on VCOL areas I would strongly suggest purchasing these REITs. The dividend yields are ~4.5% which is the widest spread over 10 year treasuries (0.8%) in many years. If you listen to the earnings call from Equity, Avalon, etc. you'll also hear the CEOs cite the high private market valuations of their properties. If the market is wrong you'll lock in relatively high dividend rates with price appreciation. DemographicsEven before the pandemic, VCOL had stagnant or modestly declining populations. Government census records estimate that NYC lost ~76,000 residents in 2019, a drop of around 0.4%. It's worth noting that NYC has for years experienced net negative domestic migration, but foreign immigration balanced out the departures. The Boston metro region stayed flat while San Francisco declined slightly (~0.2%). While economically vibrant, the populations of these cities had clearly started to plateau and even modestly decline prior to the pandemic. There's a nice graph at rent cafe that summarizes the metros with the highest and lowest net migration over the past decade. NYC and LA top the list, with Boston at the number 8 position. In contrast, the metros with the highest migration are Phoenix, Dallas, and Austin in the Top 5.
If we look at the composition of these cities, the largest age bracket is from 25-44: 37.5% in San Francisco, 33.2% in Boston, and 33% NYC. This essentially encompasses the millennial generation, who the census defines are born between 1981 - 1997 (~23 to 39). The millennial cohort comprises ~75 million individuals and is the largest generation since the baby boomers and significantly larger than the next generation, Gen-Z.
The millennial cohort entered their mid-20s during and immediately after the Great Recession. Millennials with technical or advanced degrees flocked to the new "knowledge" jobs in tech, consulting, marketing, etc. at employers clustered in VCOL areas. With significant disposable income, these millennials fueled a rise in service industries that attracted other millennials to work as baristas, waiters, etc. At the same time, new single family home construction declined significantly due to the fallout from the housing bust.
As a consequence rents held relatively steady during the financial crisis than surged during the recovery. As one data point, rents increased ~50%+ from 2010 to 2019 in SF. As Millennials willingly paid rapidly rising rents in these VCOL, a narrative emerged that millennial were somehow different. They were comfortable renting forever, they didn't need much space, they believed in the sharing economy and wouldn't purchase cars, etc. The data appeared to support this data, as the number of renters earning $150,000 increased at twice the rate as home owners.
Unfortunately there is increasing evidence against this narrative. A linked MIT Sloan study suggests millennials may actually utilize vehicles more than older generations. The linked survey from ApartmentList suggests that over 90% of millennials want to own homes eventually. Millennials, based on all the studies and surveys I've seen, have similar aspirations as older generations. They want to eventually own, not rent, a residence and personal vehicle while raising children. All of these goals have simply been delayed due to financial constraints. As we'll see in the next section, these aspirations are effectively impossible for the vast majority of millennials in VCOL areas. Affordability:There's a popular stereotype that the average millennial is a 4 year college graduate, making $100,000+ in tech, who walks around in Patagonia vests sipping $5 lattes (fuller disclosure: this stereotype hits uncomfortable close to home). According to the Government Accountability Office (GAO) only 44% of millennials even have 4 year or higher college degrees. Moreover, at age 39 (i.e. the oldest millennial), an income of $100,000 is in the top ~25% of incomes. The median net worth of the prime home buying aged millennial (30-34) is only $35,000 (including home equity), while the 90th percentile of this group is only ~$260,000 (including home equity). In 1989 (when baby boomers were the equivalent age of Millennials today) they held about 21% of the wealth in the US. In contrast, Millennials today have ~3%.
For the median millennia household, who has an income of ~$69,000 pre-pandemic, buying even a modest apartment in a VCOL is difficult to impossible without extensive family assistance. Let's assume that most millennial households want to have at least 1 child (a Gallup poll found ~87% of millennials without children eventually wanted to have them). That means long term millennials are likely to settle in at least 2BR and more likely 3 BR and up apartments / homes.
The median priced condo (not house) in VCOL areas (pre-pandemic) is approximately ~$1.2 million in SF, ~$650,000 in Boston, and ~$667,900 in NYC (Manhattan, Brooklyn, and Queens). This understates the lack of affordability, because these prices reflect a mixture of studios to 3+ BRs. I couldn't find detailed sales pricing for condos segmented by number of bedrooms, but glancing at Zillow / Redfin the prices for 3BR apartments or single family homes across all VCOL areas seems to be at least $800k and above depending on quality, location, etc.
Rents are luckily far more transparent. According to Zumper, the rents for 3BR apartments and above in VCOL (pre-pandemic) areas were ~$5,000 in SF, ~$3,500 in Boston, and ~$4,000 in NYC. As an aside, if we use a 30% rent to income ratio than a millennial household would have to make at least $10,500 per month (or an annualized salary of $126,000) to rent a 3 BR in the cheapest VCOL area. For households with families in 2017 between 30-35, an income of $126,000 is at the 80th percentile. As we'll see in the next section, childcare dramatically adds to a households costs.
So let's focus our analysis on the wealthiest 10% of millennials (who coincidentally are also most likely to have affluent parents who can assist with a home down payment). These millennials, particularly those in the prime family formation years of 30-35, make over $170,000+. Given the well documented trend in associative mating, they are also likely to partner with other high income millennials. Let's assume that ~5% of millennial households make >$200,000 per year (for comparison, the top 10% of all households made over $200,000 in 2019). These households can easily afford even San Francisco rental prices. And at first glance, a millennial household making $200,000 could save for a downpayment of a $1 million dollar home (~$240,000) within ~6 years if they saved 20% of their gross income. But what about affording the monthly mortgage payment?
As rough numbers, a household making $200,000 in Boston, MA would be left with $148,712 after taxes. If they maxed out their 401k, they would have $121,135 or ~$10,000 per month. Redfin estimates that a $1 million home in Boston will cost ~$4500 a month based on a 3%, 30 year mortgage and including home insurance + property taxes. If we assume maintenance + furnishings + misc expenses we can probably assume a total housing cost of ~$5500 per month. Our hypothetical household is thus left with ~$4500 per month to spend on food, entertainment, vehicles costs, etc. while also maxing our their 401k. Let's assume there are roughly 31 million households between 25-39, so back of the envelope math suggests that there is a pool of 1.5 million households available to buy real estate in VCOL areas (5% of 31 million) if they could afford the down payment or receive family assistance. There is one giant impediment to that math though: affordable childcare and public schools. Child CareThe biggest single reason in my opinion that millennials will leave VCOL urban areas is the the cost of childcare (averaging $2000 per month) and the persistent poor performance of public schools.
The premier public school districts continue to remain in the outer suburbs of urban areas. A list of the top 15 public school districts in America shows numerous school districts in suburbs surrounding Chicago, NYC, San Francisco, Boston, and Philadelphia. In contrast, public school districts in dense urban areas often receive mediocre ratings. The simplest alternative to these urban public schools is to pay for private school. Private school tuitions in VCOL areas range widely between ~$25k and ~$70k per child. These means a family of 4 could easily pay $50k or more in combined tuition, on top of the $66k ($5500 monthly) in housing expenses noted above. These two expenses alone would effectively consume the entire after tax income of a household making $200,000 per year.
The crushing expense of childcare shows up in declining birth rates in VCOL. Since 2011, the number of babies born in NYC has declined 9%. San Francisco has the lowest share of children of any of the top 100 metros. Families with children older than 6 are in decline in high density urban areas. (There's a great Atlantic article from Derek Thompson linked below)
The bottom line is that for all but the wealthiest ~5% of millennial households settling down and raising a family in a VCOL area is essentially unaffordable without significant tradeoffs or parental support. Buying a modest home in a VCOL area, sending your children to private school, funding your retirement, and owning a modest vehicle combined requires a household income of close to $300,000.
Before the hate mail begins, the key word in the sentence above is trade-offs. I'm well aware the maxing out a joint 401k is puts a household ahead of almost all other American families. Unlike some personal financial columnists, I'm in no way suggesting that earning $300,000 per year is close to poverty or any other nonsense like that. Clearly, earning $300,000 a year as a household is a rare privilege that lets you enjoy a very comfortable lifestyle. The point I'm making is that in a VCOL a $300,000 salary does not make you feel affluent. You're still likely stressed about money, still having to save for years to afford a down payment, driving a modest vehicle, etc. Meanwhile, any of your friends who live in Austin, Denver, etc. are able to enjoy a more stereotypical upper middle class life. Not to mention that your friends who move to Boise, Pittsburgh, etc. likely feel flat out wealthy.
Taxes are also worth a passing mention. Households making $200,000 in salary, maxing out both partners 401k, pay ~$10k in state / local taxes in VCOL areas (LA, SF, NYC, Boston). It's worth noting that RSUs, i.e. the bulk of employees compensation at Big Tech firms, are taxed as regular income. Texas, Florida, Nevada, Washington, and New Hampshire all have no income taxes and most have booming metropolitan areas. The recent tax law changes passed by President Trump have also compounded the situation by increasing the standard deduction to $24,000 for married couples and capping the state and local tax deduction to $10k. Job Dispersion:As I mentioned above, the VCOL areas had stagnating or modestly declining populations even in 2019. In stark contrast, the sunbelt & Southern cities are booming. Austin, TX experienced a 2.8% population increase in 2019. Denver, CO experienced a 1.5% population increase. Boise, Idaho was the fastest growing city in the US over the past decade. Even Orlando, FL is growing at over 1% a year.
And employers are more than happy to open offices in lower cost, "business friendly" locations. Palantir announced its intention to shift to Denver, CO. Tesla plans to open up its Gigafactory near downtown Austin. Startup funding in Austin continues to rise (albeit from low levels). Even well established Silicon Valley offices have rapidly growing satellite offices in Austin, Denver, etc. Facebook has 1200 employees in Austin (compared with ~15,000 in San Francisco). Google has > 1500 employees in Austin as well. Google also employs 1500 employees in Denver / Boulder.
Many of these regions are anchored on world class research universities as well. The University of Texas at Austin has top 10 computer science and engineering programs. Carnegie Mellon in Pittsburgh is a Top 5 computer science school and leader in Artificial Intelligence research. The University of Minnesota has a top 2 Chemical Engineering program.
We unfortunately can't discuss job dispersion without addressing the vociferous work from home debate. I frankly don't think the pandemic will significantly impact the work from home trend long term. Many high paying sectors have already moved towards flexible work arrangements. Glancing at McKinsey's website, we see that many of their positions list 20+ major metros as possible locations, including Atlanta, Chicago, Denver, etc. Snowflake, the hottest company of 2020, lists 237 open positions on their website. Only 86 of those are in listed as San Mateo (their SF Bay Area headquarters), mostly in engineering / internal operations. The reason is obvious: over 125 positions (i.e. 55+%) are in customer facing roles in sales, professional services, etc. Companies want a geographic dispersion of these roles both across the US and internationally.
It's also worth mentioning that "elite" companies, who provide a disproportionate number of the jobs for high income millennials, frankly don't have that many employees. Alphabet and Facebook combined have only ~200,000 employees despite a market cap of approximately $2 trillion dollars. Bain & McKinsey combined only have ~30,000 employees. JP Morgan chase has 256,941 employees, but only 37,000 (14.4%) are in New York. The largest single office for JP Morgan is actually in Columbus, Ohio and houses 11,050 employees. We're also seeing a bit of a "resource curse" for VCOL cities as the extremely high costs of living / business drive out firms who aren't as profitable per employee. McKesson, #8 on the S&P 500 list by revenue, moved its HQ from San Francisco to Dallas in 2018. Charles Schwab, is leaving San Francisco while expanding its offices in Denver & Dallas.
The bottom line is that the trend was already clear pre-pandemic. The leading companies, who pay the highest salaries, are actively investing in satellite offices or remote positions across the United States. For tech and management consulting companies, this helps distribute their customer facing sales and service teams. For financial and other companies, they are able to lower their costs by moving back-office operations outside VCOL areas. Meanwhile, companies who aren't able to match the compensation packages of elite firms or want to lower their cost of business are relocating to cheaper areas. As a final point, Forbes has an interesting article about the top 15 metro areas ranked by revenue of Fortune 500 companies headquartered there. While the New York metro area dominates the list with 65 companies that earn $1.7 trillion in revenue, and the greater SF / San Jose area is second with ~$1.5 trillion, the next 2 spots are Dallas ($996.2 billion) and Chicago ($842.2). Minneapolis and Houston also are in the top 7 spots, above either Boston or Washington DC. Supply:Concerns about multifamily supply had already started in mid 2019. Years of low interest rates and strong rental price growth had led to dramatic booms in apartment housing. Fannie Mae (the government agency) has detailed insights into the multi-family market across major metros. Helpfully they also include rent growth predictions from 3 large real estate analytics companies.
The Boston, MA core urban area had a projected ~10,000 units in the pipeline for 2020 (estimated at 4-6% new supply). Rent price increases were estimated at average of 2% and trending downward pre-pandemic.San Francisco had planned delivery of ~5,000 new unites in 2019 and 2020 with a projected increase in vacancy rate of 5% (trending towards balanced). New York City already had a glut of luxury apartments in 2019, with stagnant or negative rent growth projected pre-pandemic. It's worth noting that while single family home construction has continued to lag demand, multi-family home construction rebounded to pre Great Financial Crisis levels by 2013. By 2015, multifamily construction had hit the highest level since 1987.
We can see the effect of supply in the fact that average rental prices in several VCOL had started to plateau around late 2018. Boston, MA saw rental price growth of only ~2-3% annually between 2016 and 2019 according to RentCafe. RentCafe also shows San Francisco average rents increasing from $3450 in Nov 2016 to $3683 in Nov 2019, for an annual increase of 2-3% as well. Brooklyn, NY average rents increased from $2603 in Nov 2016 to $2928 in Nov 2019 for a total increase of 12% or ~4% per year. One thing to keep in mind is that these average rents don't take into account hedonistic adjustments, i.e. people moving into nicer, new luxury apartments and paying slightly more. Immigration / Baby Boomers / Gen Z:With evidence pointing towards a modest decline in the number of millennials in VCOL areas, could other groups offset their departure? What about foreign immigrants?
Regardless of your thoughts on the Trump administration, it's clear the administration has kept its promise to reduce foreign immigration into the United States. In 2018, the New York Times reported that net immigration to the US was only 200,000, the lowest level since the Great Recession. The same article, along with a related article from PBS also notes in particular that Chinese student attendance has dropped significantly due to concerns over visas, geo-political tensions, and violence. The current pandemic and recent trade tensions are likely to only exacerbate the situation. The Department of Homeland Security websites shows that "Persons obtaining lawful residence in the US" dropped by ~150,000 between 2016 and 2019 (or ~10%). This is a problem for VCOL which have relied upon foreign immigration to make up for net domestic migration. Foreign investment has often followed this migration. At the moment, there also isn't an obvious political constituency to argue for increased legal immigration into the US. The Democratic Party's immigration policy is largely focused on legalizing the Dreamers, i.e. children born to undocumented immigrants. The Republican Party's immigration policy has largely focused around halting illegal immigration.
What about baby boomers returning to the cities for their golden years? The New York Times cites census data which indicates that 17.8% of 54-72 year olds live in urban areas (defined by density). This compares with 21.6% in 1990. Moreover, while more baby boomers are renting, they seem to prefer to do so in suburban areas.
Well, what about Gen Z (those born after between 1997- 2012)? First of all, the generation is smaller than millennials by about 5 million individuals. Second, a Pew research study has found that for the oldest Gen Zers (18-23), over 50% have reported that they or someone in their household has lost a job or pay in the recent recession compared to 40% of millennials and only 25% of Baby Boomers. Last, but likely most important, the millennials successfully revitalized and then gentrified large parts of the VCOL urban cores. As a consequence, to borrow a phrase, the rents are already too damn high. Gen Z will enter the workforce already facing sky high rents in VCOL while dealing with a weaker labor market due to the COVID induced recession.
The bottom line is that there is no obvious group to replace the millennials if they start exiting core VCOL urban cores in large numbers. Final Thoughts:Whew, if you made it this far congratulations! I started writing this as a way to organize my thoughts, then frankly became fascinated in the topic. If I were to summarize this article, I would say "demographics is destiny" or "the pandemic accelerates, but does not change, existing trends". The 2010s saw the largest generation since the Baby Boomers delay the traditional milestones of adulthood to focus on their careers, education, and finances. Millennials preference for dense, walkable urban areas with deep job markets led to the urban renaissances of VCOL areas and accompanying spike in rents. A boom in multifamily construction followed as real estate developers rushed to deliver luxury rental apartments to cater to this new class of affluent urban dwellers.
The 2020s will see VCOL areas deals with the consequences of their success. Most millennials simply cannot afford to raise families in VCOL areas. Even before the pandemic we saw net migration increasing out of VCOL towards the booming Southern / Southwestern areas of the country. Companies are more than willing to follow suit, either by moving directly or by opening satellite officers to take advantage of cheaper real estate and lower taxes. Unfortunately this increase in departures is occurring exactly as multifamily supply continues to increase in VCOL areas due to a multiyear boom in construction. And there is no evidence that I've seen of any other demographic group who will rush to fill the vacancies generated by millennials. Baby boomers continue to prefer warm, low tax, suburban areas. Foreign immigration is depressed and likely to remain so for a variety of factors. Gen Z, with ~5 million fewer members than the millennials, is graduating into a depressed labor market with rents already inflated far past what the median salary can afford.
I want to emphasize that this is a modest shift in population, not a panicked flight. A number of affluent millennials will continue to reside in VCOL areas and even purchase long term residences (particularly with parental aid). Millennials who were able to buy in 2012-2014 have enjoyed significant real estate appreciation and are also likely to remain in those areas. But these modest population decreases will lead to a flat to negative rent price growth in VCOL areas as the market struggles to absorb additional luxury supply.
Unfortunately, as has been a recurring theme during this pandemic, the pain will be felt most acutely by small-scale landlords who bought properties recently in VCOL areas. Residential Real Estate is in some ways a zero sum game in that each tenant can usually only occupy one unit at a time. The large, publicly traded coastal REITs are currently tapping the corporate credit markets to push out their existing debt maturities and raise additional capital at historically low rates. They can, and are, offering deep concessions for their luxury units to attract tenants. They also typically have diversified into suburban areas and can invest opportunistically into high growth areas (notably Denver). They also have historically attracted the more affluent tenants who are willing to pay a premium for amenities (concierage, gyms, etc.) and are least affected by the pandemic.
To end on a positive note, I think the migration of millennials to more affordable, emerging cities is a net positive for the United States. Entrepreneurship, measured by small business formation in the US, has been dropping for years. I think part of the problem is that millennials in VCOL are locked into high paying career paths to afford rent, childcare, etc. Likewise spreading economic growth across the country and revitalizing other areas of the US may help bridge some of the bitter partisan politics.
P.S. If I post links in my posts they usually get blocked. I generally used NYT, Fannie Mae, the GAO, RentCafe (part of Yardi), and the Atlantic for my sources. If you're curious about a particular source I'll post it [link] [comments]  |
| Anyone else tired of hearing about how "overvalued" the stock market is? Posted: 01 Nov 2020 10:06 AM PST I don't mean just in terms of the recovery over the last six months... Even pre-COVID, couldn't help but hear about how PE ratios and the Shiller CAPE are near historical highs. But isn't it silly to consider those valuation signals without the context of interest rates? After all, the biggest alternative to equities is bonds. Given that bonds are near historical low yields, isn't it to be expected that stocks be at historical high valuations? The way I see it, the spread between (stock) earnings yields and bond yields is substantially higher than it has been in the past, implying that stocks are undervalued. 4% earnings yields (25 P/E ratio) sounds terrible and like the stock market is overvalued... but only compared to the past, not compared to current alternatives (~1% for risk-free). [link] [comments]  |
| Hydrogen Wars’ Pit Europe v. China for $700 Billion Business - Bloomberg article Posted: 01 Nov 2020 07:46 AM PST Hydrogen is the new Oil... Europe has so much offshore wind farms, they're now using the excess energy capacity to create hydrogen fuel. Now China is racing ahead to try and dominate another growing industry... It could also be that Europe and China no longer want to rely on a dirty fuel that's mainly produced by unstable and despotic regimes.... All while the US is being left behind, while supporting a dying industry. If Biden wins, start investing in Hydrogen businesses... Gonna look into options tomorrow for the following: Bloom Energy (NYSE:BE) FuelCell Energy (NASDAQ:FCEL) Plug Power (NASDAQ:PLUG) Ballard Power Systems (NASDAQ:BLDP) 'Hydrogen Wars' Pit Europe v. China for $700 Billion Business [link] [comments]  |
| These Are the Airlines Teetering on the Brink of Covid Ruin Posted: 02 Nov 2020 02:39 AM PST These Are the Airlines Teetering on the Brink of Covid Ruin The article discusses the airlines that could likely go bankrupt based on Altman's Z-Score. Precision Air, Azul, Medview Airlines, Grupo Aeromexico, Gol Linhas Aeres Inteligentes and similar companies in Latin America, Asia, Africa could become bankrupt. [link] [comments]  |
| Bruce Flatt (CEO of Brookfield Asset Management): Real Estate Will Be Repriced to Double Posted: 01 Nov 2020 10:03 PM PST Disclaimer: I'm a BAM shareholder with about 15% of my portfolio. Great interview two days ago from one of the great asset managers of all time (IMO): https://www.youtube.com/watch?v=3PXxqCc24q4 Since COVID I still kept holding my BAM shares. Bruce Flatt is a legendary value investor. In this interview he says a number of interesting things: - BAM has up to $80B in dry powder and will look for distressed opportunities over the next 18 months - He thinks retail is going through a consolidation, but that strong will get stronger. They want to own the best mall in any given city, and its likely that the bottom half of malls will be bulldozed. - Bullish on return to office (boomer comment from him IMO) - Very interesting: Thinks that real estate prices should be 2x now due to the low interest rate environment, and this is starting to happen for BAM. But he also thinks people aren't quite comfortable doing these transactions yet and things are trading at big discounts I really agree with him on the last comment. Bruce Flatt knows how to smell a good deal. Buying Real Estate may be the best value opportunity in the market today. I'm primarily (80%) invested in tech (QQQ/ARK/individual picks). But I have been building up some dry powder since August or so, since values got out of hand. As a complete side note, I went to a "top" mall today to go to the Apple Store. The mall was absolutely packed. Does anyone else agree? Are public REITs currently a deep value opportunity? [link] [comments]  |
| Banks and Financials look good Posted: 02 Nov 2020 03:43 AM PST Rotation has just started. Buy fins. Heard it here first... $xlf $jpm $bac $wfc Last Friday 1 sector stayed green while massive red hammers abound...the rotation has just started ground level...interest rates about to skyrocket and who stands to benefit? Banks as they charge customers more interest. Get in while you can... [link] [comments]  |
| Investing Strategies - Dividend Growth Investing - Advantages/Disadvantages + Breakdown Posted: 01 Nov 2020 11:08 AM PST IntroductionHello guys, this will be a breakdown for the Dividend Growth strategy. It is important to understand how companies need to be evaluated differently based on the investment philosophy you are pursuing. Now, investing in a dividend growth strategy takes time and patience, depending on your income goal, it can take awhile before a dividend portfolio can fully support enough cash flow to sustain your lifestyle without you needing to rely on a full-time or part-time job. But that is the exciting part, once you have enough income from the dividends you can retire or work a job that you perhaps find more exciting? The Strategy:The dividend growth strategy is focused on building up a portfolio of high quality companies that not only pay out a dividend, but have regularly been increasing the dividend payout. The end goal is to create passive income to live off the increasing dividend payouts. So the focus is placed more on the cash flow for wealth rather than the stock appreciation (appreciation is ofcourse an added bonus). NOTE: Dividend yield is not main focus. A common misconception is that a high dividend yield, is the most important measure, however, a yield that is considerably higher similar stocks in the same industry may indicate not a good dividend but rather a depressed price due to company issues. This price may signal a dividend cut or the elimination of the dividend. Most dividend ETFs will filter out the top percentage of dividends yields for this reason. The strategy here is on the dividend growth. If a company increases their payout overtime it is going to have an insane snowball effect when the dividends are reinvested (kinda like the snowball effect for paying off debt). Dividend growth investing uses the compounding effect of reinvesting dividends into the same investment to increase your future dividend payments. With each reinvestment, your shares grow slightly larger. With slightly more shares, your next dividend payment is sightly larger. With enough time invested in solid companies, the growth effect is amazing. This is why dividend growers are so important, they add more fuel to this compounding effect! If you really want to see this effect visualized, check out the charts for Warren Buffets wealth. In 2018 alone, Berkshire raked in $3.8 billion in dividends – "a sum that will increase in 2019," Buffett said in the annual letter. The great majority of the stocks in Berkshire's portfolio are dividend stocks. And many of those stock are growing their dividend. Disadvantages:
Advantages:
Types of Companies to invest into:Below will be a list of Dividend paying companies that have increased their dividends yearly. Often when you are researching these companies you will see them thrown into these categories based on how often they have increased their dividends:
And now the companies (only a few common examples, there are way too many to list):
And so on, many of these companies are ones we all recognize because they are so well established have have very wide markets. They have incredible staying power for these reasons, often having enough money to expand into new markets by buying up new companies or just allocating free capital to the sectors. How to evaluate the companies for this strategy:Since the focus of this investing is less on capital appreciation and more on the dividend growth we need to evaluate the following factors:
There are ofcourse many other factors. Consider the business, does it have a sustainable model (Coca-Cola $ Pepsi)? Is its market shrinking (See oil companies)? Do you like the company and management?? For this type of investing (any type really), you need to know what you are investing into! Performance & Final Thoughts:It depends on what timeframe you are looking at, if say we take from December 1999 - 2017 the S&P 500 Dividend Aristocrats Index outperformed the S&P 500 by 3.37% per year. But if we take other timeframes then the S&P500 is dominant. Beating the S&P500 over the long term is near impossible, but beating the S&P isn't the goal of this strategy. This strategy is focused on passive income. Please supplement this post with your own research. Compare this strategy to general index investing and growth investing. Find what is right for you. The hope is this post provided insight into this strategy and evaluating dividend paying companies. Each different type of investor can learn from the other, dividend vs index vs growth or otherwise. Anyways, have a good day everyone! Edit 1: I did forget to mention ETFs. There are a lot that have many different strategies when it comes to dividends. Some particularly high quality ETFs would be: DGRO, DGRW, SPYD, and NOBL. [link] [comments]  |
| Brits and wider fam: How are you adjusting your investments in preparation for Brexit? Posted: 02 Nov 2020 02:20 AM PST Aware it's totally subjective, and there'll be a variety of different answers, which is exactly why I'm interested to hear what others are doing. Forex trading? Holding back? Going for it? Simply avoiding UK investments? I'd be curious to hear people's plans. [link] [comments]  |
| Posted: 02 Nov 2020 02:04 AM PST Hey investors, there's a start up trading platform around named Stake. It trades solely on the US market, provides $0 trades internationally, provides a random free stock (between Nike, GoPro and DropBox), and insures up to $500k in securities and allows fractional shares. I currently live in Australia, and the brokerage rates down under aren't exactly friendly, so this is a pretty nice option for me. My concern with the app is that on top of the forex conversion (for me USD/AUD to withdraw, AUD/USD to fund), there is a forex conversion fee of $0.7 per $100.. Bottom line is, I wanted to know your opinions on this platform in regards to trading shares simultaneously with the Forex (i.e. the consequences of changing forex rates for this platform), what do you guys/girls reckon? Link to their website: https://hellostake.com/au/ P.s. I've got some money in some ETF's already, just to test the waters, the platform is quite pleasant, the market itself however is currently not.. [link] [comments]  |
| why is everyone so against active investing and stock picking? Posted: 01 Nov 2020 01:21 PM PST i don't know about all of you but this is all i see over social media; that active investing is bad. everyone is preaching about chucking your money in an index fund and forgetting about it. i don't see how this is better carrying a load of underperforming stocks when you can have a basket of your own picks. whenever i raise my point it'll either get no answer or someone will point out that "a group of monkeys picked better stocks than the average investor" or something outlandish like that. if monkeys could do it randomly, why could you not replicate that with a more refined design? the reason they performed so well is that they often picked a bunch of small cap stocks, so why not do the same? i don't get how the argument that stock picking and active investing is bad. not to mention the wealth management industry; do you really think it would be alive and this big if it did not work? all of the investors in these funds are sophisticated investors, so they have been around the block a few times and are by no means stupid. there must be a reason for the industry to be alive still because why would it if it is that easy to chuck 1 mil in an index fund and make your averaged annualised of 10-11% before inflation? something with the whole thing just doesn't sit right with me. at 16 i would love to know how and why people debate this. thank you TL;DR - Why is everyone so against stock picking and active investing? [link] [comments]  |
| Posted: 01 Nov 2020 10:53 PM PST On one hand, a trump win would boost the gun industry as a whole but on the other hand Joe Biden winning could cause a short-term jump in sales from people fearing a lack of law enforcement. Almost like it's a win-win, and fairly valued at the moment. Thoughts? [link] [comments]  |
| Is SQ being punished because of Dorsey and Twitter? Posted: 01 Nov 2020 08:34 AM PST I noticed huge dip in SQ stock price in recent month. Last week way more than other peers from tech world. I was wondering if it has anything to do with Jack Dorsey and his troubles with Congress and his Twitter censorship backlash. Do you think there is an extra risk investing in his companies at the moment with incoming elections? [link] [comments]  |
| Bad Ideas Report by Ark Invest [White Paper] Posted: 01 Nov 2020 03:33 PM PST Link to report: https://ark-invest.com/badideas/ Today, we believe the global economy is undergoing the largest technological transformation in history. Disruptive innovation should displace industry incumbents, increase efficiencies, and gain majority market share. As technologies emerge and transform entire industries, investors in traditional benchmarks may face more risk than historically has been the case. To help investors stay on the right side of change, this white paper seeks to identify the industries and sectors most at risk of disintermediation and disruption. We aim to size investors' current exposure to those areas. Based on our research, we believe investors should evaluate and avoid the following "Bad Ideas": I. Physical Bank Branches II. Brick and Mortar Retail III. Linear TV IV. Freight Rail V. Traditional Transportation [link] [comments]  |
| Posted: 01 Nov 2020 01:28 PM PST
First tip implies that the best time to invest is as early as possible, regardless of how cheap or expensive the market is. Second tip says that valuations will inevitably drag an undervalued market up and an overvalued market down, and implies that one should only invest when valuations are reasonable.
I've been hearing the second one a lot these last two months. Lots of news about insiders selling their shares and asset managers moving to entirely cash. But that does directly oppose the old mantra of buy and hold.
One basically says if you have a hot outperforming stock, avoid the temptation to sell it. The other one basically says if you see a hot outperforming stock, avoid the temptation to buy it. [link] [comments]  |
| Market valuation totally gonzo? Posted: 02 Nov 2020 02:13 AM PST S&P 500 Earnings Yield have been in a general decline for about a decade (have only been lower in 2003 and 2009), the CAPE has only been higher once (in 2000), and the ratio of total market cap to GDP is at an all time high (over 175%). And yet, the S&P is about thirty point off of the high in February. I know Fed policy is to blame but how are the data points above pointing to anything other than market valuations being totally gonzo? If you disagree, what data gives you comfort that we are still within the realm of sanity? [link] [comments]  |
| GDP/Market Cap at 182% and I am optimistic about the near future. Posted: 02 Nov 2020 02:09 AM PST My oppinion is that we have learned a lot in tha last 2 crisis and keeping interest rates low will only let people borrow more and more. Especialy after couple of years and inflation kicks in and you actually earn money from the loan it s self. Real estate wont crach because people holding the prices up never lost their jobs or are already back to beeing employed. This bubble is kinda simmilar to the dot come crash only that the start ups are now SPACs with a solid technology (some not). So basicaly what I am asking you do you think that some investment banks will start selling their shers of tech giants? This would cause a total collapse, but at the same time they would be worse off to.... how deep in shit do they have to be before starting to sell? The crisis reserves some banks took for Q4, are enormous... [link] [comments]  |
| Posted: 02 Nov 2020 01:22 AM PST I saw a while ago somewhere a graphic listing all of the most innovate industries expected to pick up growth this decade. For se reason I can't find this graphic and I want to list innovative sectors to research. It listed, renewable energy, AI, Automation, ect. Does anyone have a list of the most innovative industries the reckon will boom in the next 10 years? [link] [comments]  |
| Which U.K. stocks are you picking up this week? Posted: 01 Nov 2020 01:30 PM PST Sorry if this has already been discussed; I just wondered which U.K. stocks you were picking up this week due to the new lockdown? I'm looking at some hospitality / non-essential stores in particular. It would be interesting to know which you were thinking would drop and be a perfect chance to buy at, long or short hold? [link] [comments]  |
| Posted: 02 Nov 2020 12:46 AM PST I am considering a portfolio with equal division between Facebook, Alibaba, Apple, Amazon, Google and Microsoft, essentially FAANG - N + BABA. I am mainly wondering, these companies are already worth trillions, is there that much more room for growth left? I back-tested this portfolio and it would have given 600% returns if invested in 2015, but I am wondering if its a good choice now? [link] [comments]  |
| Where can I find financial statements for companies that have gone bankrupt? Posted: 01 Nov 2020 03:00 PM PST I want to start looking at companies that went bankrupt as a focus for studying financial statements. If I want to look at WorldCom's financial statements for example where can I find them? For my own personal reading I would love to see where and when these companies went wrong at a specific point in time after the company has stopped doing business so I can see for myself what went wrong. Calculate out cash flows and metrics and so on to watch the decline like a museum dedicated to lost money. I tried just typing in bankrupt company ticker symbols like Enron (ENE) into EDGAR and nothing comes up that I can use. Where does this information go once a company goes bankrupt? [link] [comments]  |
| Supercycle 5G, Motley Fool advices Posted: 01 Nov 2020 10:34 PM PST I have purchased the list of stock picks from the Motly Fool 5G Next-Gen Supercycle and am looking for some idea. I am interested to see anyone has any updates specially in the recent days conditions? I know market's not good in the last week, but most of my stuck from that list had minimum volatility which should be a good sign, hopefully. Any idea? Should I keep them or sell them? Most of them gave me more than my expectations... [link] [comments]  |
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