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- The Borrow Smart Chronicles - Rentals and Wealth Gaps
"Last month, 76% of taxes went to servicing the $34 Trillion US national debt."
USA #1
Not trying to be a downer, but letting charts speak more this week, as I’m on vacation and feeling pretty lazy. We talk about three key areas, (lending, real estate and wealth creation) as that’s the 3-Sided Balance sheet we teach across multiple disciplines.
The government is of the people and for the people but they don’t operation a balance sheet like we do, and after going off the gold standard, money has become more and more conceptual. We seems to want to create it out of thin air (that’s called borrowing) and if you do that you can stimulate an economy just as a consumer who could borrow anything they want could then buy anything they want!
read post by Tavi here: https://x.com/tavicosta/status/1817209097055355059?s=43&t=-X083wnMZzqIAVRThn26NA
most societies collapse because the gap between the have’s and the have nots gets too wide… that’s a concern.
the other concern is that 25% of your wealth is an illusion, as it costs 25% more to buy what you want, and wealth is always relative
Millennials saw their net worth jump 10% in Q1 of this year alone…
When it comes to change, we often greet it like an unexpected guest—surprised, a bit wary, and not always ready to welcome it with open arms. After record years for lenders and realtors, we easily find ourselves faced with a cocktail of of challenges. Ultimately the FED will need to lower rates and that is good for the lending and real estate industry, but it could be a challenge for the investing industry…
one chart to rule them all… thanks to Dave Savage for this one…
a BORROW SMART CONCEPT
Rentals / Ownership
I like to say you always pay a mortgage once you leave your parents home (but they were paying it for you). Then you must rent or buy, and that ecosystem is key. If rent was $1 to rent a nice house, why would you buy (extreme but you get the idea)… if rent was $10,000 a month, why would you rent (extreme but you get the idea).
Some great work from John Avery on rental vacancy rates.
When there are more vacant rental units (higher vacancy rate), rent prices tend to increase slowly (lower rent inflation).
When there are fewer vacant rental units (lower vacancy rate), rent prices tend to increase quickly (higher rent inflation).
The Q1-2024 data shows that there were fewer vacant rental units and rent prices were increasing quickly.
As consumers many felt the deserved to spend more after COVID (a major depravational shock) that has changed our spending patterns, and driven inflation higher and now rates are higher as the medicine, but that medicine has side effects - like driving rates higher that make home ownership less affordable for many… again if you own a house that is beneficial. If you rent a house and miss out on that inflation (appreciation) then the medicine is more painful as you don’t have the house to appreciate, and you are less likely to have investments that are also going up.
This is yet another reason having access to good financial advice, in at least the three areas of borrowing/lending, real estate, and investing/wealth creation is key for a consumer, IMHO!
the economy is kicking ass because we are spending and that spending started after COVID - we deserved it, but for how long is that sustainable? and how will you save to buy a house - wait for your inheritance maybe?
LIABILITIES and DEBT
What’s Happening.
Nick Timiraos - no guarantee of a rate cut but language is changing…
note how much money supply and house prices are correlated!
another way to look at it! see inflation of 25% chart above
the haves and have nots - more struggle at lower end
and borrowing to survive not to invest doesn’t work…
sharing this one again
jobs now are back to COVID area… the ‘job hoarding’ seems to be slowing as companies are using AI and slower sales to justify not replacing employees
“If you don't like something, change it.
If you can't change it, change your attitude."
REAL ESTATE
What’s Happening?
improvement from prior week - good press on inventory and rates dropping
putting this here, as job losses trigger foreclosures, and that impacts real estate
again, waiting for an inheritance or other windfall to buy a house?
people are staying put
lower income (or GenZ) more likely to move
more spending for inventory leads to more inventory
as does poor home sales
and inventory is growing
“The only constant in life is change."
ASSETS and INCOME
What’s Happening?
we make a lot more money than most countries do…
a democratic president with a split congress is the best market condition for a stock market to grow
we aren’t as high in valuation as we were in 2000 Dot Com Era
stores sales are slowing
strange to see that many B’s
if this is a similar run, we are a long way from the next big TOP
flows of funds are like water filling up a tub, stocks get displaced UPWARDS
24% of American’s missed a utility payment last month - again big gaps in haves and have nots is growing
Fascinating article, what does this tell us? Guy sells business, wants help and creates an AI solution and gains $20B in Assets…
ON BEING HUMAN
What’s Worth Sharing?
We are all impacted by everything:
higher employment for next 2.5 years says the SUN GODS!
thoughts on this as where you’d sleep after preparing for the Olympics most of your life, I don’t know about you but I need sleep to perform!
Olympic gold medals
1908: 100% gold
2024: 1% gold— Tuur Demeester (@TuurDemeester)
11:33 PM • Jul 27, 2024
DOPAMEMES
And Other Happy Moments…
this is a complicated one, but I like it!
my future persona data center - creepy on so many levels
Artificial Intelligence
And the Future of Work…
AI may kill us, but it may also save us… the closest we might come to experiencing a supreme being that can think and create productivity at levels never imagined. I’m a glass half full guy in that department. As I use it daily I become more productive, but also learn at a faster pace.
One example: I create my sentiment indicator using a variety of prompts, but here is one you can use to source news for your newsletter or to send to partners and clients:
ChatGPT: “I live in the United States. I want you to source all the biggest local news stories in real estate for this week. After finding them from various sources, present them to me in unbiased language and structured formate for easily digestible reading.”
I’m outsourcing myself here: https://ai.meta.com/ai-studio/
Using this for my Cocaine Shark movie script: https://www.nolanai.app/
Build your own assistant:
https://www.folderr.com/
Chat with one of the charts above:
https://julius.ai/
I’m sorry, but really…
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