“If we’re able to produce a general purpose robot that could observe you and learn how to do a task, that would supercharge the economy to a degree that would be insane….Working could become a choice,” said Elon Musk, founder of PayPal, Space X, Tesla, Solar City, The Boring Company, Neuralink, and owner of “X”, the former Twitter.
Global Market Comments
November 24, 2023
Fiat Lux
Featured Trade:
(MY UPDATED PERSONAL ECONOMIC INDICATOR),
(HMC), (NSANY), (GM), (F), (TSLA)
(HERE IS YOUR TOP PERFORMING INVESTMENT FOR THE NEXT FIVE YEARS),
(ITB), (PHM), (KBH), (DHI)
(TESTIMONIAL)
There is no limit to my desire to get an early and accurate read on the US economy, which at the end of the day is what dictates the future of all of our trades and investments.
I flew over one of my favorite leading economic indicators only last weekend at the controls of a vintage Cessna 172.
Honda (HMC) and Nissan (NSANY) import millions of cars each year through their Benicia, California facilities, where they are loaded onto thousands of rail cars for shipment to points inland as far as Chicago.
In 2009, when the US car market shrank to an annualized 8.5 million units, I flew over the site and it was choked with thousands of cars parked bumper to bumper, rusting in the blazing sun, bereft of buyers.
Then, “cash for clunkers” hit (remember that?).
The lots were emptied in a matter of weeks, with mile-long trains lumbering inland, only stopping to add extra engines to get over the High Sierras at Donner Pass.
The stock market took off like a rocket, with the auto companies leading.
I flew over the site last weekend, and guess what?
The lots are empty.
U.S. new vehicle sales, including retail and non-retail transactions, are estimated to reach 1,354,600 units in August, a 15.4% jump from a year earlier, according to the joint report by J.D. Power and GlobalData. Consumers are estimated to spend $47.8 billion on new vehicles, the highest on record for the month of August, and 10.5% higher than last year, the report said.
Japanese cars are suddenly selling so fast that vehicles are being sold even before they land on the dock.
It is all further evidence that my increasingly optimistic view on the US economy is correct, that multiple crises this year are fully discounted, and that the stock market is poised for new highs.
The conventional auto industry should lead to the upside, as it has already done, led by General Motors (GM) and Ford (F). But the move may not happen until the second half of 2024 when the market’s love affair with big tech stocks reaches the point of temporary exhaustion.
As for Tesla (TSLA), better to buy the car than the stock at these depressed prices. Once the EV price wars end, the stock should double again to new all-time highs.
This is a big deal because the auto industry directly and indirectly accounts for about 10% of the total US economy.
It is also the largest manufacturing employer, with the legacy Big Three accounting for 6 million jobs, 4.87% of the 124 million US total.
Not only do you have to include the big four automakers, but you also must include the vast number of parts suppliers, advertisers, and the national dealer networks.
Since so many car purchases are financed with loans, it turns out that the industry is a great play on falling interest rates.
There are $1.6 trillion in subprime auto loans on lenders’ books now.
If you don’t believe me, check out the resale market price of your wheels at Kelly Blue Book (click here for the site)
You will see they have recently risen steadily in value.
It is all further evidence of the hard data/soft data conundrum, which I have written about extensively in the past.
Look no further than Consumer Sentiment, which has held up remarkably well for the past three consecutive months.
Sorry the photo below is a little crooked, but it's tough holding a camera in one hand and a plane's stick with the other, while flying through the never-ending turbulence of the San Francisco Bay’s Carquinez Straight.
Air traffic control at nearby Travis Air Force Base usually has a heart attack when I conduct my research in this way, with a few joyriding C-130s having more than one near miss in recent years.
Will gold be your best-performing asset for the next five years?
Is it high-growth technology stocks?
Energy stocks?
Or maybe biotech shares?
How about French collectible postage stamps or vintage racing cars?
Nope, you’re not even close. I’ll give you a hint: you’re probably sitting in it.
Yes, the best-performing investment you will own for the next five years will most likely be the home you live in.
Psshaww you may say. Perhaps even balderdash!
However, if you look at the crucial data that drives this long-ignored sector, my conclusions are unassailable.
You can count on your home to appreciate at a 3%-4% annual rate until well into the next decade, and more if you are fortunate enough to live on the red-hot West Coast.
Net out the copious tax breaks that come with home ownership, and your take home will be even higher than that.
For a start, the Federal Reserve’s imminent interest rate cuts are hugely pro-housing.
The conventional 30-year fixed home mortgage can now be had for a bargain of 7.40%%. They are on their way to 5.0%. And many finance their properties with the 5/1 ARM’s that I have been recommending which are currently going for only 6.60%.
Wait a few quarters and you’ll probably get a lower rate than you can get now.
That is, assuming you still have a job and haven’t been replaced yet by an algorithm.
The good news for those homeowners who rely on the floating rates of an adjustable-rate mortgage is that this is not a low-interest-rate decade coming, but a low-interest-rate century.
Another big housing positive is plunging fuel prices, which have cratered 35% in two months.
Cheap fuel means that consumers have more money in their pockets with which to qualify for loans, buy houses, and meet their mortgage payments.
Not only will this be a low-interest-rate century, but it will also be a low-energy cost century as well. If solar energy costs continue their dramatic rate of improvement, around 50% every four years, it will nearly be free by 2030.
Not only will free energy provide a big underpinning under home values, but it will also increase the value of suburban homes where commuting is a major factor.
It gets better.
You know that Millennial of yours who’s been living in your basement since he graduated from college?
Go downstairs and take a look. Chances are he probably moved out when you weren’t looking, turning his prodigious gaming skills into a high-paying coding job.
What’s more, he’s now dating a girl. You know, the one with the nose ring, the streak of purple hair, and tattoos up and down both arms.
That leads to family formation.
And you know what? The most important trend affecting the economy that no one knows about is that THE UNITED STATES IS ABOUT TO ENJOY ANOTHER BABY BOOM!
That’s why new household formations are likely to jump from the current 1.2 to 1.5 million a year in the coming decade.
However, only 1 million homes a year are being built, thanks to the halving of construction capacity in the aftermath of the Great Recession. Subtract from that 250,000 houses a year that get demolished.
Does anyone hear the words “short squeeze”?
That means 86 million Millennials will be chasing the homes of only 55 Gen Xers. Americans aren’t the only ones buying homes.
Are you convinced now? Are you ready to jump into the real estate boom and participate more than just through your residence?
Fortunately, there are several ways you can achieve this.
Residential Real Estate Investment Trusts (REITs), like Anally Capital Management (NLY), offer the opportunities of both a high yield and capital appreciation.
Better yet is that all of these trade at deep discounts to book values because of the wreckage caused by the recent interest rate spike.
They include traditional new homebuilders, such as KB Homes (KBH), Pulte Homes (PHM), and DH Horton (DHI). Another option is to take a basket approach by picking up the iShares US Home Construction ETF (ITB).
See you at the next open house!
Dear John,
I want to thank you for the outstanding conference in Miami.
The hotel and food were first class along with the very informative presentations.
I felt that the information I learned will more than pay for the trip. Hope to see you in Incline Village.
Thanks
Rich
Detroit, Michigan
“Instead of buying low and selling high, you’re buying high and crossing your fingers,” said Bill Gross, former head of the bond giant PIMCO.
Global Market Comments
November 22, 2023
Fiat Lux
Featured Trade:
(TRADING THE KENNEDY ASSASSINATION)
Global Market Comments
November 21, 2023
Fiat Lux
Featured Trade:
(THE NEW OFFSHORE CENTER: AMERICA), (SPY),
(THE CHINA VIEW FROM 30,000 FEET)
(DBC), (DYY), (DBA), (PHO), (FCX)
I have long sat beside the table of McKinsey & Co., the best management consulting company in Asia, hoping to catch some crumbs of wisdom (click here for their home page).
So, I jumped at the chance to have breakfast with Shanghai-based Worldwide Managing Director Dominic Barton when he passed through San Francisco visiting clients.
These are usually sedentary affairs, but Dominic spits out fascinating statistics so fast I had to write furiously to keep up. Sadly, my bacon and eggs grew cold and congealed.
Asia has accounted for 50% of the world's GDP for most of human history. It dipped down to only 10% over the last two centuries but is now on the way back up. That implies that China’s GDP will triple relative to our own from current levels.
A $500 billion infrastructure-oriented stimulus package enabled the Middle Kingdom to recover faster from the Great Recession than the West, and if this didn’t work, they had another $500 billion package sitting on the shelf. But with a GDP of only $19 trillion today, don’t count on China bailing out our $24 trillion economy.
China is trying to free itself from an overdependence on exports by creating a domestic demand-driven economy. The result will be 900 million Asians joining the global middle class who are all going to want cell phones, and PCs, and to live in big cities. They’ll want bandwidth too.
Asia has a huge edge over the West with a very pro-growth demographic pyramid. China needs to spend a further $2 trillion in infrastructure spending.
Some 1,000 years ago, the Silk Road was the world’s major trade route, and today intra-Asian trade exceeds trade with the West.
Climate change is going to become a contentious political issue, with per capita carbon emission at 19 tons in the US, compared to only 4.6 tons in China, but with all of the new growth coming from the latter. Protectionism, pandemics, huge food and water shortages, and rising income inequality are other threats to growth.
To me, this all adds up to buying on the next substantial dip in big core longs in commodities (DBC) and the 2X (DYY), food (DBA), Freeport McMoRan (FCX), and water (PHO).
A quick Egg McMuffin next door filled my other needs.
Global Market Comments
November 20, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE WEEK THAT WAS)
(SPY), (TLT), (JNK), (NLY) (BA), (UUP),
(TLT), (FCX), (GLD), (GDX), (GOLD)
