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REITs Deliver Inflation Friendly Income and Growth

REITs deliver inflation-friendly income and growth as price increases are reaching levels not witnessed since the 1980s. Inflation is reflected by rising…

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REITs deliver inflation-friendly income and growth as price increases are reaching levels not witnessed since the 1980s.

Inflation is reflected by rising wages, commodity prices, cost of services and monetary policy tightening. The bond market is already pricing in several rate hikes by the Federal Reserve in upcoming Federal Open Market Committee (FOMC) meetings, and the war in Ukraine is pushing out expectations of easing for supply chain constraints that have kept prices of everything elevated.

The main problem with high inflation is that it is very sticky and can last for months and even years, first transitioning the economy into a period of stagflation and then running risk of falling into a recession. The Fed can raise rates, but that does little to change the supply/demand equation for the prices of oil, natural gas, wheat, corn, soybeans, beef, chicken and most other commodities beset by supply chain disruptions and strong organic demand from end markets.

Because of inflation, there has been tremendous upheaval in the stock market in the form of a rolling correction that has taken a big toll on what formerly were the hottest growth stocks in the market. There has also been heavy downside pressure on retailers, several industrials and a number of rate-sensitive stocks.

Aside from the volatile energy and commodity sectors, one area of the economy that has remained extremely consistent and reliable for investors has been real estate. Most operators of income-producing real estate have enjoyed strong year-over-year gains, as well as increasing dividend payouts.

REITs Deliver Inflation-Friendly Income and Growth: XLRE

The chart of the S&P 500 Real Estate Sector SPDR ETF (XLRE) shows a steady rise in price over the past two years, interrupted briefly by the recent market correction, only to reclaim its 200-day moving average and resume its upside bias. It is a bullish technical indication for a sector that can quickly overcome market adversity and regain its relative strength, making the recent pullback an attractive entry point.

Because real estate investment trusts (REITs) come in various classes of underlying assets, it is crucial for investors to commit capital to those sub-sectors within the larger REIT space that have strong secular trends in place. Areas under stress include office properties, nursing/long-term care, shopping mall and mortgages. Those that are seeing strength are ecommerce logistics, data center, self-storage, multi-family residential, lodging and experiential entertainment now that the pandemic has diminished.

Since income investors are rotating heavily out of intermediate and long-term bonds and fixed income assets; they are turning to the equity markets for assets with stable underlying businesses that pay substantial yields that do a good job of keeping up with the rate of inflation, while also delivering some long-term capital appreciation.

REITs Deliver Inflation-Friendly Income and Growth: Cash Machine REITs Shine

To this point, REITs become a primary target of capital flows aimed at higher yields and growth. It is why I’ve structured a new REIT portfolio within my Cash Machine newsletter’s income advisory service. This new portfolio has five REIT holdings with dividend yields ranging between 3.5% and 6.2%. Each REIT is a leader in its respective sector.

Below is a link to obtain more information about how interested investors can get involved in this special portfolio along with the other 22 Cash Machine holdings, some with yields well in excess of 10%. It is a portfolio that is tailor-made to benefit from inflationary tailwinds, with strong exposure to energy, commodities, floating-rate assets and covered-call exchange-traded funds (ETFs) where volatility favors such strategies.

The market gets a bad rap for once-darling stocks like Meta Platforms, Inc. (NASDAQ: FB), formerly Facebook, Netflix Inc. (NASDAQ: NFLX), PayPal Holdings (NASDAQ: PYPL), Block, Inc. (NYSE: SQ), formerly Square, Shopify (NYSE: SHOP), Starbucks (NASDAQ: SBUX) and Salesforce.com (NYSE: CRM) getting crushed by 50% or more. Meanwhile, the performance of well-situated REITs has been solid.

REITs Deliver Inflation-Friendly Income and Growth: Risk-Reward Advantages

Even as the market has enjoyed a nice oversold rally from the lows, there remains a very high level of uncertainty surrounding inflation and geopolitical risks. Investing is about risk versus reward, and the right REITs offer a very compelling risk/reward equation.

To learn more about my Cash Machine investment newsletter and its REIT portfolio, I invite you to click here now.

 

The post REITs Deliver Inflation Friendly Income and Growth appeared first on Stock Investor.

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Economics

Housing Affordability Index Drops To Lowest Rate Since 1989, Still Way Too High

Housing Affordability Index Drops To Lowest Rate Since 1989, Still Way Too High

Authored by Mike Shedlock via MishTalk.com,

The National…

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Housing Affordability Index Drops To Lowest Rate Since 1989, Still Way Too High

Authored by Mike Shedlock via MishTalk.com,

The National Association of Realtors says "affordability" dropped to 98.5 in June, the lowest since 1989.

Housing Affordability Index and mortgage rates via St. Louis Fed.

Affordability in June Was the Worst Since 1989

The Wall Street Journal reports Affordability in June Was the Worst Since 1989

It was more expensive to buy a U.S. home in June than it has been for any month in more than three decades, as record-high home prices collided with a surge in mortgage rates.

The National Association of Realtors’ housing-affordability index, which factors in family incomes, mortgage rates and the sales price for existing single-family homes, fell to 98.5 in June, the association said Friday. That marked the lowest level since June 1989, when the index stood at 98.3.

Housing Affordability Index

The NAR's Housing Affordability Index is based on median income data current  through 2017, projected forward. 

Only 13 months of data is available on Fred, the St. Louis Fed repository.

Affordability is based on whether the median family earns enough income to qualify for a 30-year fixed mortgage loan on the median single-family home without spending more than 25% of the income on payment for principal and interest.

An index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 means a median family has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. 

Inquiring minds may wish to look at the NAR's Housing Affordability Index Calculations.

Curiously, the NAR concludes the median household can nearly always afford the median home price.

Do you believe that? More importantly, even if accurate, so what? 

The median person who can afford a home and wants a home probably already has a home. 

First Time Buyer Index

In terms of new and existing home sales, what matters is what a buyer who does not have a home, but wants a home, is willing to pay and can pay. 

The First-Time Buyer Index for 2022 Q2 fell to 68 assuming a starter home price of $351,500. 

Can 68 percent of would-be buyers afford (and find) a $351,500 home in a neighborhood in which they want to live? 

68 percent is a much more reasonable number than the overall 98.5 percent calculation, but that still strikes me as too high. 

Case-Shiller National Home Price Index

I have not updated my full set of Case-Shiller home price charts for a while but that chart is current (May data). 

Case-Shiller lags by a few months so it's even worse than shown. 

The pre-pandemic index was 212 and it's now 306. That's a 44 percent jump with real median wages declining, property taxes soaring, food soaring, and energy soaring.

Yet, the NAR says that median overall affordability has declined only to the 98.5 percent level. Yeah, right.

Meanwhile, rent and food keep rising and the price of rent will be sticky. Gasoline is more dependent on recession and global supply chains.

Food Prices Rise Most Since February 1979

For more on the price of food, please see Food at Home is Up 13.1 Percent From a Year Ago, Most Since February 1979

For more on rent, please note Tennant's Unions Demand Biden Declare a National Emergency to Stop Rent Gouging

For more on producer prices please see Producer Prices Decline For the First Time Since the Pandemic Due to Energy

Spotlight on Fed Silliness

The Fed has blown three consecutive bubbles trying to produce two percent consumer inflation while openly promoting raging bubbles in assets especially housing.

*  *  *

Please Subscribe to MishTalk Email Alerts.

Tyler Durden Sun, 08/14/2022 - 12:30

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Economics

Summer Teen Employment

Here is a look at the change in teen employment over time.The graph below shows the employment-population ratio for teens (6 to 19 years old) since 1948.The graph is Not Seasonally Adjusted (NSA), to show the seasonal hiring of teenagers during the sum…

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Here is a look at the change in teen employment over time.

The graph below shows the employment-population ratio for teens (6 to 19 years old) since 1948.

The graph is Not Seasonally Adjusted (NSA), to show the seasonal hiring of teenagers during the summer.

A few observations:
1) Although teen employment has recovered some since the great recession, overall teen employment had been trending down. This is probably because more people are staying in school (a long term positive for the economy).

2) Teen employment was significantly impacted in 2020 by the pandemic.

Click on graph for larger image.

3) A smaller percentage of teenagers are obtaining summer employment. The seasonal spikes are smaller than in previous decades. 

The teen employment-population ratio was 38.4% in July 2022, down from 38.9% in July 2021. The teen participation rate was 43.6% in July 2022, down from 43.8% the previous July. 

So, a smaller percentage of teenagers are joining the labor force during the summer as compared to previous years. This could be because of fewer employment opportunities, or because teenagers are pursuing other activities during the summer.

3) The decline in teenager participation is one of the reasons the overall participation rate has declined (of course, the retiring baby boomers is the main reason the overall participation rate has declined over the last 20+ years).

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Economics

Braxia and KetaMD, CEOs McIntyre and Gumpel Speak on Acquisition

Last week, the Canadian company Braxia Scientific acquired 100% of the issued and outstanding stock of KetaMD, Inc. This is an exciting acquisition, and…

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Last week, the Canadian company Braxia Scientific acquired 100% of the issued and outstanding stock of KetaMD, Inc. This is an exciting acquisition, and in today’s interview, The Dales Report’s Nicole Hodges talks with CEOs Dr. Roger McIntyre and Warren Gumpel of Braxia Scientific and KetaMD respectively.

For some background information, KetaMD is a U.S. based, privately-held, innovative telemedicine company, with a mission to address mental health challenges via access to technology-facilitated ketamine-based treatments. Braxia Scientific is Canada’s first clinic specializing in ketamine treatments for mood disorders. They recorded revenue of $1.49m for 2022 fiscal year, ended March 31. On a year-over-year basis, revenue increased 47.5%.

Here’s some highlights from the interview.

KetaMD gives Braxia a presence in the US

Dr. McIntyre says that KetaMD gives Braxia what they’ve had as their vision from the beginning: a US presence. KetaMD is a living program. It’s already running, has infrastructure, and patients. McIntyre believes that a program like KetaMD is something Braxia’s needed to scale and obtain commercial success.

With telemedicine, Braxia has a potential to serve a gap in access. The zeitgeist of “patient going to medicine” has flipped, McIntyre says. “Now it’s medicine goes to the patient, and that is long overdue.”

COVID speeding a trend that was already happening

In 2020, 80% of physicians indicated they had virtual visits. That’s a number up from 22% the year before. But this is something that many doctors, McIntyre included, believe always should have happened. The pandemic only was the catalyst for innovation and making the option viable.

While some treatments will always need a clinic or a hospital, McIntyre believes some treatments can be done safely at home. And they are, for many chronic diseases. He feels implementing ketamine and psychedelics would be among these treatments where service could be expanded into the home. It would require careful SOPs in place, best practices, and surveillance. But he believes Braxia Scientific could deliver this with KetaMD.

Gumpel to stay as CEO of KetaMD

Gumpel says that KetaMD benefits in this acquisition from being part of the world’s most prominent researchers in depression, psychedelics, and ketamine. In the acquisition, he’ll stay on as CEO. He admits that Dr. McIntyre has been a huge part of collecting the data on the safety of ketamine treatment, and has a strong motivation to “see this thing through until most of society can access that – or at least the people that need it and want it.”

Gumpel admits he has a personal connection to ketamine treatment. As a person who has experienced bouts of depression for years, it saved his life, he says. He is grateful he was living within walking distance of ketamine treatment in Manhattan. It made him extremely aware of the accessibility gap, which in part inspired KetaMD.

Be sure to tune in for the full interview regarding Braxia and KetaMD, right here on The Dales Report!

The post Braxia and KetaMD, CEOs McIntyre and Gumpel Speak on Acquisition appeared first on The Dales Report.

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