Market Perspective

It Is The Interest Rates! Week 5

Posted by on Sep 19, 2018 in Ned Massie, Perspective | 0 comments

Demographics and the Residential Market: What is unique in the residential market today is the stark differences between the three generations that are active in the residential market. The Boomers are looking to downsize and control an enormous amount of the nation’s wealth. Gen Y is the generation which has been hammered by the Obama economy. They are now beginning to acquire full-time jobs and entering into the housing market as buyers. They are the largest generation of Americans that are active in the economy. That is a significant fact. Just as significant but less understood is that the generation in between the Boomers and Gen Y, called Generation X, is the smallest of the three generations. Their small size will also significantly impact and distort the new housing market as interest rates go up. Literally demographics will win. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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It Is The Interest Rates! Week 4

Posted by on Sep 13, 2018 in Ned Massie, Perspective | 0 comments

Housing/Residential Market: As interest rates increase, the impact on the residential market is predictable. The average household has a certain number of dollars that they can afford to spend on housing each month. As mortgage rates increase, the amount of mortgage bought by that monthly payment is reduced. Given the fact that households also have a certain amount of equity that they can put into buying a new home, the result of that combination is that the price that they can pay for a home (resale or newly constructed) is reduced. Residential sales are a leading indicator of the economy. While less than 2% of the GDP of the USA, residential sales ripple through almost 30% of the GDP of the USA. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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It Is The Interest Rates! Week 3

Posted by on Sep 5, 2018 in Ned Massie, Perspective | 0 comments

Stock Market: The formula that establishes the market value of publicly traded stocks includes a number of inputs and two key fulcrums. Obviously, the driving force is corporate profits. Because of the 2017 Tax Law, profits are increasing and will continue to do so. But the fulcrums that leverage profits into stock valuations are interest rates (the cost of money) and the anticipated rate of inflation. With both of those rising, the impact of profits  is reduced relative to the pricing of the corporate stocks. We have seen that over the course of 2018. The interplay between profits versus interest rates/inflation will continue to play out over the next several years. This does not mean stock prices will universally decline. It does mean that stock prices will not increase as rapidly as they would if interest rates and inflation both were stable. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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It Is The Interest Rates! Week 2

Posted by on Aug 29, 2018 in Ned Massie, Perspective | 0 comments

Turkey: Since January of 2018, the Turkey currency (Lira) has lost more than 40% of its value. Allow me to restate that, prices in Turkey have almost doubled since the first of this year. Now that sounds bad because it is horrible. But it is not as bad as the inflation in Zimbabwe which is 98% per day or Venezuela where the rate of inflation is now 1,000,000% annually. Because of Socialism in Venezuela, there are no goods to be bought and last year the average Venezuelan lost 24 lbs. They are starving to death. So what is the significance of Turkey? Turkey demonstrates what happens to a country when its economic house of cards begins to fail. In many ways, it is a forecast of the risk that the world faces in China. The risk is that Turkey’s problem does not stay in Turkey. In our inter-connected global economy, my opinion is the problem will spread. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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It Is The Interest Rates! Week 1

Posted by on Aug 22, 2018 in Ned Massie, Perspective | 0 comments

Introduction: There are so many interesting trends occurring within each of the agricultural product market segments. I would love to focus on those trends. However, we are living in such a unique economic period that the desire to monitor economic trends is simply overwhelming. For several years, we have discussed the fact that the global economy has never seen the unwinding of Quantitative Easing (QE) on the scale that is now occurring. That single event is such a powerful economic force driving the world economy, that it is important to spend time describing its impact on the land market. Interest rates are the single number that provides you with an insight into the diminishing of QE and those ripple effects. Thanks to the 2017 tax law, the USA’s economy is strong and getting stronger. As a result, the Fed is doing what they should do, normalizing interest rates. The most important debate in the normalization of interest rates is whether the prolonged QE has lowered what is the “normal interest rate” or not. I am in the camp that believes it has, but the Fed does not seem to feel that way. As the Fed raises interest rates, all of the financial formulas used to value assets (stocks, bonds, real estate, etc.) will begin to function again. The increasing of interest rates will put downward pressure on the values in each of the various asset classes because of those formulas. Over the next few weeks, we are going to be discussing how the combination of these forces is playing out globally as well as in the land market. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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These Are Interesting Times – A Hegemon Struggle Not A Tradewar – Week 6

Posted by on Aug 15, 2018 in Ned Massie, Perspective | 0 comments

The Impact of the Current Hegemonic Conflict: The main event is not the “trade war” with the Euro zone because the Euro will not endure so it cannot be the Hegemon. NAFTA is also not the main event because neither Mexico nor Canada have the capacity to be the Hegemon. China not only aspires to be the Hegemon, on paper it has the capacity. For that reason, the conflict with China about “Free and Fair Trade” has enormous impact on the economic future of the world in general, but the USA in particular. As so well explained in Kori Schake’s book “Safe Passage”, when a country becomes the Hegemon it uses its position and power to replicate its values globally. As the Hegemon, the USA replicated its core values of democracy, self-determination, and free trade to eliminate European empires. Imagine China replicating its values of dictatorship, government control of the economy and of every aspect of life, and “Anything goes if it benefits China” trade. Contemplate the collapsing socialistic governments of Venezuela, Brazil, Nicaragua and Rhodesia with their imploding economies and starving citizens being replicated globally. It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is...

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