What I’m Reading
Scapegoat: Lots of chatter over the past couple of weeks about how Blackrock and other institutional asset managers are ruining the US housing market. In reality, their position is tiny. NIMBYs are a much larger issue:
The U.S. has roughly 140 million housing units, a broad category that includes mansions, tiny townhouses, and apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are rental properties. Of those 15 million single-family rentals, institutional investors own about 300,000; most of the rest are owned by individual landlords.
Wishful Thinking: Public pension funds are pouring money into alternative investments thanks to low yields (and the fact that they still haven’t lowered absurdly high return expectations). However, merely investing in alternatives doesn’t necessarily generate higher returns. This quote from Jason Zweig of the WSJ sums it up perfectly:
“The message for you and me? You can’t earn a higher return from alternative assets just because you need to. Only the earliest and most skillful (or luckiest) can get the best returns.”
Frothy: Housing isn’t a ‘bubble’ but prices are definitely out of line with fundamentals on a historical basis. Calculated Risk Blog
Pivot: Frustrated by the lack of actionable distress, opportunistic buyers are turning to alternative strategies to deploy their capital. During the last recession, distressed investing focused on investors stepping in to rebalance capital for cash-flowing assets that had too much debt relative to income. This time around, buyers are focusing on repositioning underutilized assets to higher and better uses. Globe Street
Catch Up: Last year, housing prices soared across the US while rents largely stagnated – aside from a handful of markets. Now rents are surging, driving up the cost of living across the board. Axios
Chart of the Day
US CLO issuance is expected to hit a multi-year high in 2021.
Source: DeutscheBank
WTF
Over Reaction: An angry man pulled a gun on a Starbucks drive-thru worker because they forgot the cream cheese with his bagel. The employee at the other end of the gun just happened to be the daughter of the local police chief because Florida. WBNS
Wrong Way: A man who caused a collision driving a semi truck the wrong way through a Burger King drive through told police that he had been drinking Listerine because Florida. Yahoo News
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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