Should I invest in real estate or stocks?
The Federal Reserve is doing a good job of managing trillions in home equity. The Fed’s move last week will likely further curb inflation as accessing credit remains a challenge, and many are unable to tap into the massive homeowner equity. A recent chart from Goldman reveals that almost 90% of all existing mortgages carry an interest rate under 5.50%, with 60% even below 3.5%.
When juxtaposing this with the 2022 valuation of the U.S. real estate equity, considering a maximum 80% withdrawal, there’s an evident $23 trillion in equity. But with rising interest rates, this vast sum seems immobilized. This status quo, driven by interest rate strategies, implies that this surplus equity may not be utilized to enhance leverage or be put down for another asset—unless a new financial instrument is introduced.
The average consumer isn’t the only one restricted here. The U.S. government’s soaring expenditure now incurs a $910 billion interest cost, a staggering 80% hike in just over two years. Dismissing this as inconsequential would be naive; it has palpable implications for inflation and the nation’s ability to cater to its socio-economic needs. For perspective, the government shells out an average of $2.5 billion daily on interest alone.
The towering debt, currently at $33.5 trillion and climbing, combined with escalating interest rates, poses a serious threat to the U.S.’s capacity to trade dollars for more affordable products and services. Even if this advantage lingers, the surmounting interest will either drown the country or propel it towards a potential default.
This scenario possibly explains the government’s interest in accumulating Bitcoin through seizures. This is also why storing BTC on exchanges feels precarious to me. It’s easy to foresee firms like Fidelity claiming a hack, or even Coinbase facing similar issues. Not to insinuate any deliberate deception, but it’s clear that Bitcoin stands in stark contrast to traditional fiat currencies. Given the government’s inflationary tendencies, Bitcoin’s value is poised only to surge.
Currently, Bitcoin is approaching a significant threshold at $36,000. If it moves beyond but then drops back, we anticipate some selling. However, the prevailing trend remains bullish.
In other financial news, the U.S. bond market witnessed short-covering, especially since the 5% yield mark seems to be the current ceiling. Interestingly, Ackman recently tweeted about covering his long bond shorts. As a result, today witnessed a stronger performance in the long-end and some curve corrections.
On the settlements front, the recent trends indicate a steadying U.S. dollar and energy sector. Regarding our futures market stance, we’ve made a few adjustments, including trading our bond short for the ultra bond sale.
For the MEGA8s, they saw a bounce today, with the total market cap holding firm at about $11.3 trillion. If this changes, it could signify the end of the current bullish phase.
In conclusion, as the buyback blackout period concludes, we anticipate some market support. With the market dipping recently, a new wave of investors might emerge. However, the prevailing sentiment is undeniably fragile. Given the ongoing geopolitical tensions, we expect continued market volatility, with dominant companies likely outperforming.
Should I invest in real estate or stocks?
