The Long Term Investor

These are the people seeing opportunity in the current real estate market.

Institutional investors ‘buying in bulk’ as homebuying cools

https://finance.yahoo.com/news/investors-buying-homebuying-cools-131902326.html

(BOLD is my opinion OR what I consider important content)

"Rising mortgage rates have sidelined many would-be homebuyers, but for institutional investors, it has become an opportunity as home builders try to unload properties.

“What we're seeing is builders have to make their quota. They have to make the end-of-the-year numbers," Kinloch Partners Cofounder and CEO and President Bruce McNeilage told Yahoo Finance Live (video above). "So they're reaching out to folks like us, the institutional owners of houses, and we're buying in bulk using those as rental homes.”

September marked the ninth consecutive month that confidence in the housing market fell among builders as persistent supply chain disruptions and high home prices continue to wedge into their sales and profits, the National Association of Home Builders/Wells Fargo Housing Market Index showed.

As a result, homebuilders are slashing prices. About 24% of builders reported reducing home prices, which is up from the 19% last month, said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia.

The weakening market could be a factor that “people are just not walking in and the traffic has stopped in looking at models and looking at houses in suburbs and the subdivisions,” McNeilage added.

Another problem: Climbing mortgage rates have reached nearly 7%, continuing to take a toll on affordability.

Thanks to elevated construction costs and an aggressive monetary policy, home builders are trying to offload their supply quickly. The trend has prompted builders to think about incentives to boost sales.

“I'm getting five to 10 emails or calls a day. It really has picked up,”McNeilage said. “We're so far into the year, people are trying to make their numbers. And we're looking at a 10% to 20% discount off of retail pricing that's being offered to us if we're buying in bulk.”

These sales conditions are across the country as companies build these homes for specific purposes to sell to investors, according to McNeilage. However, there's still too much supply on the market.

“Right now, there's just too much product. Too many houses have been specced that are just sitting on the ground. And these builders really need to move these houses," McNeilage said. "And folks like us in the institutional rental business are helping these builders by buying up the supply that they have right now.""

MY COMMENT

these bulk buyers are willing to buy at a 10-20%.....below retail. Looks like we might be at the start of a new era of single family home markets......which will emphasize professional investors over the single homeowner.

Even for single home buyers this might be a good time to look at new construction as we enter the holiday season and demand softens for the big spec builders.

 

Looks like with only 25 minutes left in the day.....we are STILL in the green.....in spite of the FED minutes having been released this afternoon.

Fed officials worried about ending inflation battle prematurely, minutes show

https://finance.yahoo.com/news/fed-officials-saw-cost-doing-180858008.html

(BOLD is my opinion OR what I consider important content)

"WASHINGTON (Reuters) - Federal Reserve officials agreed they needed to raise interest rates to a more restrictive level - and then maintain them there for some time - in order to meet their goal of lowering inflation, a readout of last month's policy meeting showed on Wednesday.

The minutes of the Sept. 20-21 meeting showed many U.S. central bank officials "emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action."

At the meeting, many officials said they had raised their assessments of the path of interest rate increases that would likely be needed to achieve the policy-setting committee's goals.

That said, several participants in the discussion said it would be important to "calibrate" the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.

At last month's meeting, Fed officials raised interest rates by three-quarters of a percentage point for the third straight time in an effort to drive inflation down from 40-year highs, and Fed Chair Jerome Powell vowed afterward that they would "keep at it until we're confident the job is done."

Since the meeting, policymakers have been united in their comments that they see an urgent need to address inflation, which they fear risks becoming embedded, even if their aggressive policy tightening comes at a cost of higher unemployment.

The minutes from the meeting underscored that view. Several policymakers "underlined the need to maintain a restrictive stance for as long as necessary, with a couple of these participants stressing that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation," the minutes showed.

TURNING POINT

The last several weeks have marked a turning point for financial markets that for much of the year had clung to a conviction that the Fed would swiftly reverse course next year and cut rates in the face of slowing growth and higher joblessness. Fed officials have openly pushed back on that expectation, saying they expect to leave rates elevated for some time after they have finished lifting them.

As markets have fully digested the Fed's hawkishness, the result has been crushing losses for U.S. stock markets, rapidly rising yields on government debt and a surging dollar that has aggravated weak conditions in overseas markets.

Policymaker projections released at last month's meeting show the Fed's target policy rate, currently in a range of 3.00%-3.25%, its highest since 2008, rising to the 4.25%-4.50% range by the end of this year and ending 2023 at 4.50%-4.75%. The year-end 2022 projection suggests one more 75-basis-point hike is likely at the central bank's remaining two meetings of the year.

Recent inflation data has shown little to no improvement despite the Fed's aggressive tightening - it also announced 75-basis-point rate hikes in June and July - and the labor market remains robust with wages increasing solidly as well.

After the release of the minutes on Wednesday, financial markets continued to reflect expectations for the Fed to raise interest rates by another 75 basis points next month, and then downshift to a half-percentage-point hike in December and a quarter-percentage-point increase early in 2023. But prices in futures contracts maturing later next year showed investors are adding to bets the Fed will reverse course and begin cutting rates in the third or fourth quarter of 2023."

MY COMMENT

Really nothing new here....except for.....dashing the hopes of the delusional people in the financial world that were hoping for the FED to pivot. YES......we are going to see another 0.75% increase in November.

It would have been nice if the FED had followed this path from the start of this process;

"several participants in the discussion said it would be important to "calibrate" the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook."

Unfortunately.....instead of setting a rate increase schedule and giving the markets confidence in what their plan was for the rest of the year......they just went on a spree of random increases based on being jerked around by short term news and events. They lost the confidence of people by being totally reactionary.

 

STILL....green across the board in the averages with 15 minutes to go......but.....you cant let your guard down till the markets actually close.

I have dodged a bullet today when it comes to hitting my YTD low for the third time this year. I am going to finish the day today with about a......one day....cushion above that prior low. So far.....the last two times I hit that particular point in my account value I have seen a nice bounce back up. Hoping for the same this time around. That would go a long to toward telling me that where we are now is a bottom.

 

Can you believe it.....with 15 minutes to go ALL the averages were in the green. Fifteen minutes later at the close.....they are all red.

LOL....looks like lots of traders decided to jump on the BAD CPI bandwagon before tomorrow happens.

I ended the day with a TEENY TINY loss......but....red is red. I did manage to beat the SP500 by 0.12%. I had five stocks up and five stocks down today. The UP stocks were.....AMZN, NKE, MSFT, GOOGL, and TSLA.

STILL....slightly above revisiting my YTD low for the third time. A down day tomorrow will take me there.

The short term markets and trading are INSANE.

 

We have now seen SIX days in a row of losses for the market averages......oh the humanity.

BUT.....tomorrow is the day I have been waiting for.....SOCIAL SECURITY COST OF LIVING DAY. I am going to make some money tomorrow (on paper since the raise does not happen till 2023).....one way or another. It is pretty pathetic when your big event of the year as an investor is the SS cost of living announcement.

 

Who knows Spud.....we will find out tomorrow.....if we are lucky the CPI will show raging inflation and we will get 9% or more.

By the way.....after the markets last 15 minutes today to go from nicely green to red in the blink of an eye.....I might be ready to join you on the couch and light one up. (A reference to the new SPUD thread on here......"Takin a trip on the couch")

 

Nice Emmett.....yep you are old enough to get it. That entire sound track represents my take on the last 15 minutes of the market today.

(I hope people realize that I am often tongue in cheek and sarcastic on here.....it is not negativity...... and include little obscure tid-bits in my language at times from movies and other sources that just pop into my head.....unplanned)

 

BAD NEWS for the markets this morning. We hit 8.2% inflation in September......worse than expected. Treasury yields are UP today. The FED rate hikes have done NOTHING...so we are definitely going to see a hostile FED for the rest of this year and most of next year. this is the worst inflation situation since 1982.

The ONLY good news is the announcement today that the Social Security raise for those of us on benefits will be 8.7%.....the largest increase in 40 years......due to the inflation data for July, August, and September.

 

Here is the info as we wait for the open today.

Core US Inflation Rises to 40-Year High, Securing Big Fed Hike

https://finance.yahoo.com/news/core-us-inflation-rises-40-123213300.html

(BOLD is my opinion OR what I consider important content)

"A closely watched measure of US consumer prices rose by more than forecast to a 40-year high in September, pressuring the Federal Reserve to raise interest rates even more aggressively to stamp out persistent inflation before it becomes entrenched.

The core consumer price index, which excludes food and energy, increased 6.6% from a year ago, the highest level since 1982, Labor Department data showed Thursday. From a month earlier, the core CPI climbed 0.6% for a second month.

The overall CPI increased 0.4% last month, and was up 8.2% from a year earlier. The median forecasts in a Bloomberg survey of economists had called for a 0.4% monthly rise in the core and a 0.2% gain in the overall measure.

The advance was broad based. Shelter, food and medical care indexes were the largest of “many contributors,” the report said. Prices for gasoline and used cars declined.

On the heels of a solid jobs report last week, the CPI report likely cements an additional 75-basis point interest rate hike at the Fed’s November policy meeting and spurred speculation for a fifth-straight increase of that size in December. Traders also priced in a higher peak Fed rate for next year.

Stock futures fell sharply and Treasury yields surged following the report, with the 30-year rate reaching 4%, the highest since 2011.

The report stresses how high inflation has broadened across the economy, eroding Americans’ paychecks and forcing many to rely on savings and credit cards to keep up. While consumer price growth is expected to moderate in the coming months, it’ll be a slow trek down to the Fed’s goal.

Policy makers have responded with the most aggressive tightening campaign since the 1980s, but so far, the labor market and consumer demand have remained resilient. The unemployment rate returned to a five-decade low in September, and businesses continue to raise pay to attract and retain the employees needed to meet household demand.

Housing Costs

Shelter costs -- which are the biggest services’ component and make up about a third of the overall CPI index -- rose 0.7% for a second month. Both rent of shelter and owners’ equivalent rent were up 6.7% on an annual basis, the most on record.

Economists see the housing components of the report as being elevated for quite some time, given the lag between real-time changes in rents and home prices and when those are reflected in Labor Department data. Bloomberg Economics doesn’t expect year-over-year rates for the major shelter components to peak until well into the second half of next year.

• Food costs rose 0.8% for a second month and were 11.2% higher from a year ago
  
  
• The food at employee sites and schools index rose a record 44.9% from the prior month, reflecting the expiration of some free school lunch programs
  
  
• Used car prices dropped for a third month, while new car prices continued to rise at hefty clip
  
  
• Airfares climbed. While gasoline prices subsided in September, they’ve since started climbing again
  
  
• Americans also experienced higher prices for utilities like natural gas and electricity in the month
  

While the Fed bases its 2% target on a separate inflation measure from the Commerce Department -- the personal consumption expenditures price index -- the CPI is closely watched by policy makers, traders and the public. Given the volatility of food and energy prices, the core index is considered a more reliable barometer of underlying inflation.

Geopolitical developments could also keep inflation elevated. OPEC+ recently announced oil production cuts, and a potential gasoline export ban by the Biden administration could backfire with higher pump prices.

The Russia-Ukraine war continues to disrupt supplies of commodities like wheat, while the White House is also considering a ban on Russian aluminum -- a key component in cars and iPhones -- in response to the country’s military escalation in Ukraine.

What Bloomberg Economics Says...

“What’s really at play in the September CPI is the December FOMC meeting, and the news is not good: The higher-than-expected CPI print will make it difficult for the Fed to slow down to a 50-basis-point hike at its last meeting of the year, as it indicated in the latest dot plot that it wants to do.”

Fed officials have repeatedly emphasized in recent weeks the need to get inflation under control, even if that means higher unemployment and a recession. In minutes from their September meeting released Wednesday, many policy makers emphasized “the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.”

Central banks’ determination to crush inflation, in the US and abroad, has prompted a deterioration in the economic outlook globally. Excluding the unprecedented falloff in 2020 due to the coronavirus pandemic, the IMF expects economic growth to slow to the weakest level since 2009, in the wake of the global financial crisis.

Inflation has also proved to be a key political issue ahead of the midterms next month, dragging down President Joe Biden’s approval ratings and threatening Democrats’ thin majorities in Congress.

Excluding food and energy, the cost of goods was unchanged from August. Services prices less energy advanced by the most since 1990 on a monthly basis. Changing consumer preferences are underpinning services inflation and have helped ease demand for goods. Meantime, a strong dollar is diminishing foreign demand for US-made products.

Prices paid to US producers rose more than expected in September, driven in large part by services costs, Labor Department data showed Wednesday, likely portending ongoing price pressures for consumer prices for services. Producer prices for food and energy also rose.

A separate report Thursday emphasized how inflation is depressing workers’ purchasing power. Real average hourly earnings dropped in September and were down 3% from a year earlier, elongating a string of declines dating back to April 2021."

MY COMMENT

A BAD REPORT all the way around. It is telling that the 30 year Treasury yield hit 4%.....it has not been at that level for a very long time. No doubt the markets will get hammered today. The various events are lining up for another round of market drops in the near future.....perhaps at least 5-10% below where we are now.

ACTUALLY.....This report is about what I expected. I expect a 0.75% rate increase by the FED in BOTH November and December.

It is hard for me to get too excited about his inflation....having lived through the HORRIBLE situation and inflation of the late 1970's and early 1980's. That time period was SIGNIFICANTLY more severe than anything we are seeing now. So having lived through that time period and remembering it very well......what we are seeing now is not real shocking to me.

 

Here is my good news of the day.

Social Security benefits will increase 8.7% next year

https://finance.yahoo.com/news/social-security-benefits-cola-124207216.html

(BOLD is my opinion OR what I consider important content)

"The biggest increase in Social Security benefits in four decades will deliver much-needed breathing room for millions of Social Security recipients.

The Social Security Administration, the federal government agency that oversees the benefits, announced a 8.7% increase in the Social Security cost-of-living adjustment (COLA) for 2023.

The increase is the largest since 1981, when the COLA was 11.2%, and raises the average retiree benefit by more than $140 per month starting in January, according to the Social Security Administration.

The adjustment — coupled with a decrease in Medicare Part B premiums next year — will make a critical difference in making ends meet for the more than 70 million retired senior citizens and disabled workers who have grappled this year with mounting prices for everything from electric and natural gas bills to groceries and monthly rent.

“Today's COLA announcement is excellent — and important — news for retirees,” Nancy Altman, president ofSocial Security Works, told Yahoo Money. “The annual COLA is a key feature of Social Security, one that private-sector pension plans lack. It keeps benefits from eroding over time … [but] it is essential to recognize that the COLA is not a benefit increase. It simply allows beneficiaries to tread water in the face of rising prices.”

Folks who receive Social Security benefits are typically notified by mail in early December about their new benefit amount. Most beneficiaries can also view their COLA notice online through their personal my Social Security account at www.socialsecurity.gov/myaccount.

The jaw-dropping bump-up was stoked by the soaring cost of groceries, gas and other goods and services since July. The Consumer Price Index for Urban Wage Earners and Clerical Workers‌ (CPI-W) increased tk% year over year in September, down from tk% in August.

The COLA is calculated by averaging together the CPI-W consumer price index for the third quarter of the year – July, August, and September of 2022 – and then comparing that figure with the same data last year.

The once a year inflation adjustment began in 1975 under a formula made into law by Congress. And it goes a long way in helping beneficiaries stay abreast of increasing day-to-day living costs.

“We hear a lot about how retirees live on a fixed income,” Anqi Chen, a senior research economist and the assistant director of savings research at the Center for Retirement Research at Boston College, told Yahoo Money.

“Social Security is definitely not fixed income because it is indexed to inflation," Chen added. "The COLA prevents retirement income from being eroded away by inflation. That is a wonderful feature of Social Security because many retirees rely on Social Security for a large chunk of their retirement income. For the typical retiree, it covers about half of their retirement income. To have half of your income indexed to inflation is a big help, especially when prices are increasing.”

This year, 27% of retirees reported they’re spending much higher or a little higher than they can afford, versus 17% in 2020, according to the findings in the Employee Benefit Research Institute (EBRI)’s 2022 Spending in Retirement Survey. Seven in 10 say Social Security is a major source of their income.

"The combination of a COLA this high, and the fact that Medicare Part B premiums went down is a once-in-a-lifetime event,” Mary Johnson, a Social Security policy analyst for The Senior Citizens League, told Yahoo Money. “This is probably as good as it will get.”

In the meantime, it's too early to say how well the 8.7% COLA will keep pace with inflation in 2023. The 5.9% COLA received this year has fallen short by 50%, according to Johnson.

“Now let's watch to see if inflation comes down gracefully, instead of popping and deflating,” Johnson said. “That soft landing might mean that inflation slows in 2023 and people wind up with a small COLA of about 2% in 2024. The pop and deflate would mean no COLA in 2024 due to deflation and that brings a whole set of different issues. Pop and deflate occurred in 2010 and 2011 after the Great Recession.”"

MY COMMENT

YES......SHOW ME THE MONEY. No doubt.....this will be my ONLY good news today when it comes to the markets, investing, and money.

 

AND.......yes for anyone that is wondering......I will simply continue to do nothing.

I will.....continue to be FULLY invested as usual for the long term.

As I said.....I dont see anything happening right now or in the CPI that is unexpected. I have said many times I dont expect the actions of the FED to have much impact on inflation....it is going to take many months and will not really happen till they CRASH the economy. It is the CRASH that will have the impact on inflation.

NONE of the issues causing the current inflation are being addressed. In fact......the FED really has no power to address any of the current causes since they stem from.....the economic closure and the problems we have had and continue to have with re-opening, the supply chain disaster, labor and employment issues that continue to be totally disrupted from the economic closure (especially for small business), and......the big one....the total inability of government to see and admit economic reality and their massive ill advised stimulus of the economy with MASSIVE spending. The continued actions and policies of the current government are completely CONTRADICTING and HAMSTRINGING the FED.

 

That is the understatement of the day...Gtrueadu88......that it "MIGHT" be an ugly day. Thanks for making me smile.

Actually......it will be interesting to watch the HUMAN BEHAVIOR over the next couple of months........from investors and with the election.