I spent part of the weekend on the Eastern Shore of Virginia. The wife and I are looking to downsize after raising children in the suburbs of Maryland. Or perhaps I should call it upsizing, since we are looking to sell our overpriced home in an overpriced area and move someplace better, cheaper, and more interesting.
Aside from Northern Maine, the southern tip of the Delmarva peninsula is the least developed place on the East Coast of the United States. You can still buy old Victorian houses on Main Street or newer hunting lodge-style places with lots of acres for a reasonable sum.
The problem is that the sums paid for these places before COVID-19 were 50 to 80% cheaper. Now these people who fled the cities with remote jobs in high cost of living areas are being called back to the office.
Just yesterday, Amazon (AMZN) said that its employees must work a full five days a week at the office. They are also cutting middle management. In 2020 you could have bought AMZN for $170 a share and today it is priced at $186 a share so maybe management wants to see some new energy.
The return to office mandate is something that management wants, not because of better productivity or because it’s cheaper. It’s not, on either count. No, management wants to cut staff without paying severance or unemployment. They want the high-salary middle-aged workers with kids in school, and parents in retirement homes to not come back to work.
Tech companies are always looking for a younger lower-cost workforce.
Furthermore, these types of soft layoffs don’t count as layoffs at all and aren’t reflected in government numbers. Unemployment for white-collar tech workers is much bigger than most people think.
The prices of houses in these COVID boom towns are dropping fast. People are waiting on the Fed to cut rates with the idea that this will free up home buyers in Boise or Crested Butte. It’s not going to happen. The one-off catalyst is done.
If you have to sell do it fast and cut your asking price. The COVID house you bought for $620k isn’t worth $940k two years later even if you relist it twice and hide the transaction history on Zillow.
Buy the Rumor Sell the News
Tomorrow the Fed will cut interest rates and the market will sell off. Every investor in the world knows that the Fed will cut tomorrow. Yes, there is speculation that they will cut 0.50% rather than 0.25%. But most investors are missing the big picture. It is priced in.
The optimism for just buying the VOO or some other S&P 500 index ETF is incredible. The passive market is up more than 40% over the past two years. Most people with a 401k are dancing in the streets.
They think they are gifted investors. But they are not. They are beneficiaries of Fed money printing. That printing ended over a year ago. The Fed hiked too fast and held high for too long. The U.S. economy takes a year to 18 months to turn around.
Right now passive investors are swimming in optimism but costs are up, real wages are down, and the unemployment trend has turned. The dollar, yields, and the price of oil are falling. Gold is hitting all-time highs, silver has broken the $30 an ounce barrier, and it is the defensive sector utilities, not the FOMO tech sector, that has been the best-performing sector of 2024.
Watch out below,
Christian DeHaemer
Outsiderclub.com
Brit tells you what to buy on rate cuts: https://www.outsiderclub.com/what-to-buy-for-rate-cuts/
Buy gold: https://www.outsiderclub.com/i-want-me-gold/
Cash is nice: https://www.outsiderclub.com/cash-is-a-posistion/
