Author: Matt Thalman

2023 Housing Market May Be Different Than Expected

Posted on by Matt Thalman

On December 20th, the Commerce Department released data showing that housing prices remain high, renter demand is still strong, and the supply and demand imbalance appears to show no relief.

These economic data points indicate that the housing crash, or pull-back many expected to see with housing prices in 2023, may not be coming.

Let's look at the numbers and then explain why a housing crash doesn't appear to be on the horizon in 2023.

The December housing numbers showed US single-family homebuilding dropped to a two-and-a-half-year low in November 2022. Permits also fell in November by 7.1% for single-family homes and 11.2% for overall building permits. Overall housing 'starts' dropped 0.5% in November, with single-family starts falling 4.1% and multi-family units up 4.8%.

So essentially, we are seeing that construction of new single-family homes is slowing when we are already in a tight supply-demand situation with those types of units. This supply shortfall comes from data showing that from June 2012 to 2021, the US had 12.3 million new households formed, but only 7 million new single-family homes were built.

The pandemic played a role in making this shortfall wider, as it is estimated that in 2019 the US was only short 3.84 million units. But, labor shortages before the pandemic started, which worsened during the pandemic, and costs of materials and land, all pushed housing prices higher.

Higher housing prices make it harder for more people to afford a home. Thus, fewer homes get built. High housing prices were likely one reason we didn't see more homes built in 2021. In 2022, the main reason was increasing interest rates. Again, higher interest rates push the overall cost of ownership higher, resulting in fewer people building homes.

Another interesting data point from December was the Homebuilders' confidence levels also plummeted in December for a record 12th month straight. This data point only adds to the idea that single-family homes will continue to be underbuilt in the near future. Continue reading "2023 Housing Market May Be Different Than Expected" →

FTX Disaster Could Be Good For Crypto Market

Posted on by Matt Thalman

The disaster we are all still watching play out with Sam Bankman-Fried and his cryptocurrency exchange FTX could actually be suitable for the longer-term viability of Bitcoin, Ethereum, and other cryptocurrencies.

I know it sounds crazy, and if you were an investor who had money in FTX, you are certainly not happy with this, but long-term, the size of the losses incurred by investors in FTX could benefit the crypto market in years to come.

Why?

Since massive losses were incurred, regulators are taking note and investigating what happened.

Sam Bankman-Freid has been arrested and charged with many crimes, including conspiracy, fraud, money laundering, and campaign finance violations.

However, while those charges against him don't have much to do with cryptocurrencies, it is likely that the investigation into how these crimes were committed and, more importantly, how he and his team at FTX were able to evade detection sooner will lead to some changes in the crypto world.

The change I'm referring to, which would boost cryptocurrencies and in some ways turn a bad situation into a good one, would be government oversight and regulation of the cryptocurrency markets.

Since Bitcoin, Ethereum, and all the cryptocurrencies came into existence, we have had no legitimate regulation or oversight of the industry.

While some believe that is a good thing, a lot of investors have been hesitant up to this point to jump into the world of crypto because there is limited to zero oversight. And I am not just talking about small retail investors who have sat on the sidelines, but big-time money managers who are not permitted to invest client funds in such investments due to their largely unregulated markets. Continue reading "FTX Disaster Could Be Good For Crypto Market" →

Electric Vehicle Exposure That's Not Tesla

Posted on by Matt Thalman

Just a few years ago, it seemed that electric vehicles were never going to "catch on," whether that was because of price, possible reliability issues, or, most importantly, range anxiety. (Range anxiety is the fear that the electric vehicle will not have enough battery to reach its destination or the next charging station, ultimately leaving the driver stranded.)

But, better, much better battery technology, vastly more vehicle and brand options for consumers to pick from, and exponentially more charging stations located all over the country, have changed consumers' minds about the electric car.

While a large number of new, start-up car manufacturers are developing only electric vehicles, one significant change we are seeing is that almost every major car manufacturer is already offering fully electric vehicles or plans to do so in the next few years.

This is nice because we can get our iconic-looking vehicles in electric form; think the Ford F150 pickup truck, the Jeep Grand Cherokee, or even the gas-guzzling Hummer!

Most people don't like change. Thus changing the way a vehicle looks and what powers it may have been some of the reasons consumers didn't rush to get an electric car a few years ago but are now more willing to do so.

Regardless of the reason or reasons why more people are purchasing electric vehicles, the fact is, it appears electric vehicles are not only here to stay but may be the only type of cars on the road in just a few decades. This major shift in how we move from one place to another can also be a massive windfall for your portfolio.

Even though some people may feel they missed the EV investment because they didn't buy Tesla 5 years ago, there are still plenty of opportunities out there that you can put money into today and reap the rewards for decades to come.

Let's take a look at a few Exchange Traded Funds that will expose you to not just car manufacturers in the EV space but also crucial materials and technologies that EVs need to operate.

The first two are ETFs that focus on the production of electric vehicles and the future of transportation. The KraneShares Electric Vehicles and Future Mobility Index ETF (KARS) and the Fidelity Electric Vehicles and Future Transportation ETF (FDRV) invest in essentially the same companies. Continue reading "Electric Vehicle Exposure That's Not Tesla" →

The Thanksgiving Rally Should Not Be Trusted

Posted on by Matt Thalman

The market rally during the shortened holiday trading week of November 21st-25th should not be trusted just yet.

The Dow Jones Industrial Average rose 1.78% during the week, the S&P 500 increased by 1.53%, and the technology-heavy NASDAQ grew by 0.72%.

The move higher came for several reasons, but none materially changed the economy's outlook over the coming six to twelve months.

The biggest news was from the Federal Reserve. The Fed's meeting minutes from their November 1st and 2nd meeting pushed prices higher after several Fed members expressed interest in slowing the pace of rate hikes during future meetings.

Just the fact that the Fed is talking about reducing the amount of their rate increases is significant, and many economists applaud this move. Economists are happy with this because the Feds policy changes have a lag, meaning it takes time for rate increases to show in economic data reports.

The concern has been the Fed is raising rates too quickly, and by the time the lag sets in, the economy will be in the dumps. So, slowing the pace today is a possible way the Fed can avoid running the economy into the ground. Not running the economy into the ground is the "soft landing" we often hear about when people refer to the Fed and its current policies.

Another catalyst for the recent move higher was the Consumer Price Index in October, which was up 7.7% from a year ago. This was the lowest CPI reading increase since January of this year. But, let's be honest, a 7.7% increase year-over-year is still ridiculously high inflation.

However, many economists are actually saying they are seeing inflation leveling out. We aren't yet seeing that happen with the CPI numbers because we are still looking at year-over-year comparables before inflation got out of control.

The true sign that inflation has slowed, or is still climbing, will be in 2023 when we see year-over-year comps comparing current inflation measures with the elevated inflation we began seeing in early 2022. Continue reading "The Thanksgiving Rally Should Not Be Trusted" →