Hard Landings on the Horizon? –
The stock market continues to rally on. We’re seeing unprecedented highs and it feels like the good times just keep on rolling…but are they really good times?
We’ve talked about paying attention to what the billionaires are doing and lately, they’ve been doing a whole lot. Here’s a quick roundup of some noteworthy recent activity:
- Jeff Bezos dumped a total of $8.5M in Amazon stock within a two week timeframe.
- Mark Zuckerberg recently unloaded $428M of Meta stock.
- Jamie Dimon and his immediate family members sold off $150M of JPM, the first time that he’s sold JPM…ever.
- The members of the Walton family sold a combined $4.5B worth of Walmart stock.
And these are just the heaviest hitters. Many others are following suit, like the CEO of Advanced Medical Devices (AMD) who sold $20M of her shares in the company.
Oh, and don’t forget about certain members of Congress. Alabama senator Tommy Tuberville sits on a ton of committees, everything from rural developments and commodities to military action and nutrition. A little birdie told him to dump quite a bit in February.
The richest among us are selling, but why now? Are you going to make moves based on what the gurus are saying, or what the billionaires are doing?
Whys Behind the Worries
Should we be concerned about this uptick in stock sales? Well, they say that Jeff Bezos only sold his shares to avoid a tax bill from his recent cross-country move from Seattle to Miami.
Washington started up a state-level 7% capital gains tax three years ago. Florida doesn’t have such a tax, so Jeff saved himself roughly $430 million in state taxes in the move.
Meanwhile, millennials can’t seem to get out of their parents’ basements, despite doing everything they’ve been told to do. But we digress.
Today, the Dow Jones Industrial Average looks suspiciously similar to how it did in the 1920s. Between 1921 and 1929, the bubble reached 504%. Between 2009 and 2024, we’re also at 504%.
On the bank credit side, we have a pretty sharp contraction. The first time it contracted was back in 1974. The second was during our last major financial crisis. Do bad things really come in threes?
One more fun fact for you: did you know that the media’s mentions of the phrase “soft landings” are actually a reverse indicator? Historically, usage of the term spikes right before a recession and right now, it’s everywhere you turn.
Reeling In Real Estate
Of course, we’re still keeping our eyes on real estate, both commercial and residential. On the residential side, we seem to be smack dab in the middle of the fastest housing crash in recorded history.
There have only been five periods in recorded home price records where prices have dropped by over 2% in a 12 month period: 1969, 1990, 2008, 2019, 2024.
As we mentioned last time, commercial real estate is in full on spiral mode, and we know about all the regional banks filled to the brim with CLO products and CMBS.
Defaults in CRE have now reached 8.6%. The distress rate is now 480% higher than it was in February of last year.
Is that a big deal?
Jamie Dimon says as long as the U.S. avoids a full-blown recession, many property owners will be able to handle the stress and muddle through. He also believes the problems in CRE will be contained in “pockets” (but probably not his).
Joshua Pack of Fortress Investment Group is predicting a “multi-trillion dollar problem” that will hit smaller banks the hardest. We’ll see more and more consolidations and liquidations and in his words, a lot more eggs are going to get broken.
Fortress is staying ahead of the curve, picking up office loans on the cheap (between 50 and 69 cents on the dollar), but Pack mentioned the FDIC was reluctant to sell to firms like his. However, he thinks that the scale of the crisis on the horizon is so big that regulators will have no choice but to tap private capital for a way out.
Depending on which side of the fence you’re on, this could wind up being the best or worst year you’ve ever had.
Mastering Two Worlds
On the hero’s journey, sometimes you’re up and sometimes you’re down. No matter where you are, though, it’s all about what you make of it and the mastery attained.
Joseph Campbell’s hero learns to master two worlds: the material and the spiritual. In today’s environment, we’re mastering the known and the unknown.
By taking things day by day, applying both a healthy dose of caution and a dash of calculated risk, we wind up achieving a comfortable and competent stance.
At Dare, we know how to walk this tightrope and would love to help you across to the other side.
Our Back Room Service is one of a kind. When you work with Dare Capital, you’ll experience:
- Greater income (a lot more)
- Owning assets instead of commissions
- Zero investment down
- No personal liability
- Fifty-fifty split on risks and profits
Give us a call, we’d love to get to know you. If you enjoyed this newsletter, pass it along to your friends.
Until next time,