This Week’s Priorities…

361 Capital Market Commentary | November 25th, 2019

You might be checking the financial markets this week, but I know where the main focus is. Getting to where you are going safely. Cleaning the house for guests. Double checking that shopping list. And making sure that Mom has a perfect turkey. Least important is that stocks are continuing to float to all-time highs, but it is nice that they are.

Not much going on in the markets now that earnings are past and Washington D.C. is distracted. Some mixed retail earnings last week, with Target the big standout. Economic data was also light and mixed. Stocks were muddled with the ongoing China rumors but Healthcare continued to outperform and Financials got help from Schwab’s interest in TD Ameritrade. Five trillion dollars in assets under management will make that a behemoth to be reckoned with.

Have a good week away from the markets and be safe if you are traveling. And if you are coming to our mountains, enjoy all the fresh powder which will drop this week. Happy Thanksgiving!

Another mixed week of economic data but the bottoming in the Markit PMI series stood out…

Markit US Manufacturing PMI

RenMac on why both Investors and U.S. Farmers should fear a President Trump re-election…

* A number of articles have highlighted Wall Street investors’ fear of an Elizabeth Warren win in 2020 and a stock market sell-off.
* But the real trouble would be if President Donald Trump wins reelection.
* Trump would be free to double down on his economically damaging trade war with China, and there’s little Congress could do about it.
* Warren, on the other hand, would need congressional help to pass her agenda. Such support is unlikely at best.


And as the data shows, the more divided a government, the better the returns are for the markets…

S&P 500 returns based on the control of the federal government

Crazy to think that individual stock investors are now responsible for only 10% of U.S. trading volumes…

Stockpickers feel like an endangered species

Energy risks continue to rise…

This as above-average temperatures and an overproduction of North American energy is keeping a lid on prices. All eyes are on Chesapeake Energy right now which is trading at $0.58. It is one of the largest components of the high yield energy space so if it goes, the cracks in the energy debt markets could widen given all of the supply and delivery contracts between the industry.

Tweet from Not_Jim-Cramer

Rising insurance losses have led to continued insurance premium price increases which all businesses are feeling…

@DriehausCapital: ICYMI: Commercial insurance premiums are accelerating, impacting numerous industries from restaurants to truckers. But this isn’t necessarily all good for insurers.

US Composite Insurance Pricing Change

In the commercial real estate space, the largest player in many major cities (including Denver) is looking less stable…

Tweet from @TheStalwart

Meanwhile, as China pulls back from U.S. real estate, Los Angeles is feeling the pain…

The real estate market in downtown Los Angeles is taking a hit as Chinese cash dries up.

Condo sales plunged 31% in the third quarter from a year earlier, according to data from appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.

Chinese buyers have made about 50% of the purchases in downtown Los Angeles in recent years, said Stephen Kotler, who oversees the western region for Douglas Elliman. But tightened restrictions on capital flowing out of China have hampered the market.


Tweet from Condos Cooling

But among new housing builds, the recent permit data is guiding to a very good outlook…

Tweet from @RenMacLLC

A great long read in the WSJ on the massive housing inventory which is going to hit the U.S. market over the longer term…

The U.S. is at the beginning of a tidal wave of homes hitting the market on the scale of the housing bubble in the mid-2000s. This time it won’t be driven by overbuilding, easy credit or irrational exuberance, but by an inevitable fact of life: the passing of the baby boomer generation.

One in eight owner-occupied homes in the U.S., or roughly nine million residences, are set to hit the market from 2017 through 2027 as the baby boomers start to die in larger numbers, according to an analysis by Issi Romem conducted while he was a senior director of housing and urban economics at Zillow. That is up from roughly 7 million homes in the prior decade.

By 2037, one quarter of the U.S. for-sale housing stock, or roughly 21 million homes will be vacated by seniors. That is more than twice the number of new properties built during a 10-year period that spanned the last housing bubble.

Most of these homes will be concentrated in traditional retirement communities in Arizona and Florida, according to Zillow, or parts of the Rust Belt that have been losing population for decades…

But the buyers coming behind the baby boomers, the Gen Xers, are a smaller and more financially precarious generation with different preferences, posing a new kind of test for the housing market.

One problem is that the bulk of the supply won’t necessarily be in places where these new buyers want to live. Gen Xers and the younger millennials have shown thus far they would rather be in cities or suburbs in major metropolitan areas that offer strong Wi-Fi and plenty of shops and restaurants within walking distance—like the Frisco suburbs of Dallas or the Capitol Hill neighborhood of Seattle.


Glad to see that concentrated solar is close to going commercial…

If you grew up as a kid with a magnifying glass in your back pocket then you totally get it. Looks like the dream is finally going to become a reality thanks to some very big backers. I raise my hand to be a beta tester!

A secretive startup backed by Bill Gates has achieved a solar breakthrough aimed at saving the planet.

Heliogen, a clean energy company that emerged from stealth mode on Tuesday, said it has discovered a way to use artificial intelligence and a field of mirrors to reflect so much sunlight that it generates extreme heat above 1,000 degrees Celsius.

Essentially, Heliogen created a solar oven — one capable of reaching temperatures that are roughly a quarter of what you’d find on the surface of the sun.

The breakthrough means that, for the first time, concentrated solar energy can be used to create the extreme heat required to make cement, steel, glass and other industrial processes. In other words, carbon-free sunlight can replace fossil fuels in a heavy carbon-emitting corner of the economy that has been untouched by the clean energy revolution.

“We are rolling out technology that can beat the price of fossil fuels and also not make the CO2 emissions,” Bill Gross, Heliogen’s founder and CEO, told CNN Business. “And that’s really the holy grail.”


How Heliogen works

If you are traveling this week, do not plug your USB cord into that unknown outlet!

As the busy holiday season approaches, the Los Angeles County District Attorney’s Office is warning travelers about a USB charger scam, or “juice jacking.”

“A free charge could end up draining your bank account,” Luke Sisak, a deputy district attorney, said in a video posted online this month.

Juice jacking happens when unsuspecting users plug their electronic devices into USB ports or use USB cables that have been loaded with malware.

The malware then infects the devices, giving hackers a way in. They can then read and export your data, including your passwords, and even lock up the gadgets, making them unusable.


Electrical Outlet

“Pleased to meet you”…

Everyone’s lighter is up for the BritRock frontman who daylighted as one of our favorite FinTwit stock geeks. Jon, we wish you a very long encore performance with your family. 361 Capital was lucky to have crossed your path.

@JBoorman Twitter Profile

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