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Vizionary Quarterly Report: 2021 Q2

Here's What We've Been Watching

The first quarter 2021 has brought a lot of change to our nation, the world and the financial markets – we’ll keep our comments to the markets and the economy as I am sure we all have different hot buttons on things like politics and international relations.

The markets have been very hot as of late, driving speculation of bubbles and concerns about economic fallout should those bubbles burst.  Let’s discuss a few of them.

Crypto Currencies

There is a legitimate need for and evolution towards crypto currency globally and there is a ton of money flowing into buying up the currencies themselves right now; which by the simple laws of supply and demand is driving up the prices of those currencies.  

If you haven't checked out our resources on this, take a look at these:

In reality, the long term benefits to our world and economy may be in the development of the technology and blockchain infrastructure that support these currencies rather than the currencies themselves.

We are evaluating the impact and appropriateness of both the currencies and the companies who will directly benefit from their implementation.

Keeping an Eye on Real Estate

Housing has seen a huge run up of late.  However, this time is very different from the circumstances that led to the 2008 housing crisis.  This boom is being driven by organic supply and demand.  

The people who are buying houses are actually living in them not buying speculatively and renting them. The debt is largely fixed interest rate debt vs adjustable rates. Covid related supply chain issues in construction materials have driven up the cost and slowed the pace of building so supply of new houses has slowed.

Remote working environments that will likely now persist for a long time are allowing more people to choose where they want to live vs forcing them closer to cities.  All of this and a federal government that has put a virtual stop to foreclosures until we get through Covid – this alone has kept and average of 1.5 million homes from coming to the market in the past year.  Add all of this up:

  • Cheap money
  • Remote working options
  • Delays in supply chain dynamics
  • No foreclosures
  • Courts operating at 5% capacity to process bankruptcies and historically very affordable debt payment levels relative to household incomes

With all of this, you have a formula for an ongoing run in housing.  

Brick and mortar retail is going to be the ongoing fight of location, location, location; entertainment venues will need some time to recover; multi-family housing is the beneficiary of the boom in single family housing (keeping families in apartments longer) and then there is office space which will have the longest most painful tail of all.

Finally, the Stock Market

Stock Market prices have been (again) hitting all-time highs leading many to speculate about impending doom, imminent crash and falling skies.  

However, when reviewing fundamentals like actual earnings, cost of carrying outstanding debt, anticipated increases in earnings for 2021 and WHAT OTHER CHOICES ARE THERE … suddenly, stocks don’t look so outrageously expensive. 

We are concerned about some corners of the market being overpriced and we have done videos on specific areas like the SPAC market, etc. – but outside these corners, the stock market is benefitting from a number of tail winds at the moment; rising earnings, cheap debt, lots of government stimulus, anticipation of MORE stimulus, and most of all … money is moving off the sidelines and into the market.

There has been more raw cash moved into the market in the last 6 months than in the last 12 years.  Heck, after the GameStop fiasco, the number of outstanding short positions has plummeted leaving nothing but long buyers in the market.  This is what bull markets look like and they don’t usually die when the circumstances are where they are now.  

Things are frothy, the market has moved up a lot in what feels like a short time (I mean – do you remember how “down” we all were in March 2020?), but we are expecting markets to trend higher in the short to intermediate term with typical volatility.  

Eventually, fundamentals will deteriorate, another crisis will occur, buyers will dry up and short sellers will return to push prices down.  Right now however, let’s just enjoy the moment, take a breath, keep our wits about us and enjoy the warming up of Spring, the nearing end of this nightmare that has been Covid and look forward to getting a bit of travel and normalcy returning through the remainder of 2021.

As always, call us any time – we are always here with perspective for the decisions ahead. Talk soon.

Wayne Wagner Jr, ChFC