The Ultimate 'At Home' Market Is Booming at a Record Pace
The tools of a new 'at home' system... Don't miss the forest for the trees... The ultimate 'at home' market is booming at record pace... Mortgage rates keep dropping... Consider refinancing today... Better yet, think about more real estate...
We've talked our mouth dry about 'at home' businesses this year...
Giant cloud providers Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL), as well as the software makers dominating niches across many industries have kept life going.
The world is abuzz about these tech-focused companies. Here's another new example...
Snowflake (SNOW), the Warren Buffett-supported cloud-software and data-storage company that went public in September, is up about 210% from its initial public offering price of $120 per share. The stock closed today at roughly $371 per share.
Snowflake's $100 billion-plus market cap is now roughly the same as tech titan IBM (IBM), conglomerate General Electric (GE), defense contractor Lockheed Martin (LMT) and ride-hailing service Uber Technologies (UBER)... And yet, most people have never heard of the company.
Want another major recent example of the "at home" world?
Last week, business software company Salesforce (CRM) announced that it agreed to buy remote-work software platform Slack Technologies (WORK) for roughly $28 billion. It's a direct move to compete with Microsoft and its similar Teams platform... and Salesforce spent a lot of money to do it.
Salesforce CEO Marc Benioff said on a phone call announcing the details of the megadeal...
We see in Slack a once-in-a-generation company platform. It's the central nervous system of so many companies on this call and our company and so many of our great customers.
It's true...
Stansberry Research has used Slack extensively for years, and we can't imagine what our working-from-home lives would be without it today. We imagine countless people and organizations who've started using Slack during the COVID-19 pandemic feel the same way.
By now, it should be clear...
People are using remote platforms more than ever. And they will continue to do so in the future, even if folks return to the office en masse. As we wrote back in August and still believe today...
Change, especially changing the behavior of so many people, can be hard... A large number of smart people have said that over time. But once that change is made, it can be even harder to convince people to go back and do something the way they did before.
In this case, a virus forced massive changes in the way we work and do business... instead of an internal company committee or a boss.
And now, there's no putting the "genie back in the bottle," so to speak. Now, people are putting up their own "work sheds" in their backyards. Cloud vendors and SaaS companies are bringing in piles of cash. The future is here. There's no turning back now.
It's like the old Pringles slogan... "Once you pop, you can't stop."
But we don't want to 'miss the forest for the trees'...
I (Corey McLaughlin) have no idea who first uttered this old saying. But I first heard it from U.S. Naval Academy men's basketball coach Ed DeChellis several years ago...
He was trying to get a point across about the mistakes you can make, or the opportunities you can miss, if you don't understand a larger situation (the forest) because you're only looking at one part of it (the tree right next to you).
I'm mentioning this saying right now for one reason. I want us to look beyond the trees...
It doesn't get any more 'at home' than your house...
I know I often take this for granted. With all the flashy things happening in the world and grabbing headlines today, it's easy to lose context...
In other words, all the software companies selling recurring subscriptions, all the cloud companies hosting skyrocketing amounts of data, and all the hackers trying to mine it (as we wrote about two weeks ago) are doing more business than ever because of where people are spending more time...
At home.
We know this. I might be stating the obvious, but it's important... I've spent so much time at home this year, I long for the days of complaining about travel and bad hotel beds.
The same idea applies to the tailwinds behind the booming sales that home-improvement stores have seen this year. As we wrote back in May, all the warts of your home come to light when you're staring at the same four walls every day.
We've written about home-improvement retailer Home Depot's (HD) success over the past six months in the form of blowout earnings... both because of increased demand for its products and services and also because the company was recession-ready to adapt to changing needs.
The company strengthened its supply chain and distribution network and added expanded online pickup options because it had the cash to do it. If you ask us, Home Depot's efforts during this recession are a great blueprint for other retail companies to follow.
But here's the big point we want to make today...
At the same time more people are spending more time at home than ever, demand for homes is skyrocketing... and supply is tight across the U.S.
That might sound wild, but it's true...
Sales of both new and existing homes are at or near their highest levels in more than 10 years. And home prices continue to rise...
Real estate is local, of course... But in the third quarter, the Federal Housing Finance Agency's House Price Index rose an average of 32%, the highest level on record.
Regarding new homes, as Stansberry NewsWire analyst Nick Koziol reported last month...
The [U.S.] Census Bureau said that new home supply remained at 3.3 months in October. This means that, at the current sales pace, it would take 3.3 months to sell all newly constructed homes on the market. This is the lowest level for new home supply since the Census Bureau began tracking the data in 1963.
Take that in for moment...
New homes are being sold at their fastest rate in at least 57 years...
Compared with October 2019, the Census Bureau said new home sales rose 41.5%... That's good for an annualized number just shy of 1 million new homes sold for the year.
We see a number of contributing factors here...
First, record-low mortgage rates – less than 3% interest on a 30-year loan – are making it easier to "buy more house for the same amount of money"... Who doesn't like the sound of that?
At the same time, the youngest of the millennials – now our country's largest living adult generation – are looking to buy homes and start families. This generation makes up the largest percentage (38%) of homebuyers in the U.S. today, according to the National Association of Realtors. (There's another trend at work here, though... Declining birth rates linked to COVID-19 are starting to appear now, too, but that's a discussion for another day.)
And whatever their reasons, a lot of people are rethinking whether they want to be living in a city or not... and are looking to move out into the suburbs or the country. (As investors, we don't necessarily need to know why, though it's fun to talk about.) Maybe a "work shed" isn't good enough and a new walled-off office is needed for work or remote school.
Maybe people want solar panels on their roof... or more energy-efficient homes. For those folks, this stuff can't happen quick enough, and people are asking for and scooping up new homes quickly.
So that's the backdrop we see unfolding today...
We'd be curious to hear about your personal experiences and opinions on this topic. As always, e-mail us with your comments and questions at feedback@stansberryresearch.com.
In the meantime, here are a few actionable points we want to make before we wrap up...
This information may find some use for your portfolio and investments...
First, if you haven't yet considered refinancing your mortgage this year, you owe it to yourself to think about it. Rates have literally never been lower...
In some cases, lenders are even paying folks a little bit of money back to refinance today to rates roughly 2% lower than they were just a few years ago. Look at the history of Freddie Mac's 30-year fixed-rate mortgage...
This is one surefire way to lower your monthly expenses by owing less principal (and less interest on it) per month... It'll put you on the path to spending less than you earn, which is the bedrock of any successful financial plan.
You don't have to move or buy a new home to do this, either... although you could kill two birds with one stone and do that if you want.
Either way, make sure to account for how much it will cost you to refinance and how long you plan to be in your home. As True Wealth editor Dr. Steve Sjuggerud said most recently back in our June 14 Masters Series...
Please, talk with your bank. Or go online. Do what it takes to at least find out how much money you could save by refinancing today. (Make sure you ask about how long it takes before you "pay off" the closing costs... That basically tells you when refinancing starts to be profitable for you. And if it's in five years or fewer, it's a no-brainer.)
Steve went on to show why investing in a home is a good bet right now. With interest rates so low – thanks to the Federal Reserve's "easy money" policies and near zero benchmark rates – homes are super affordable today. In fact, Steve said...
House prices are at an all-time peak. But thanks to ultra-low mortgage rates, housing in the U.S. is still incredibly affordable. Take a look...
This chart distills the three pieces that make up affordability into one simple number. A reading of 100 means a typical person can afford a typical house in the U.S. A reading of 150 means he could afford 150% of the typical home price. So higher numbers (low on the chart) mean housing is more affordable.
The market isn't as cheap as it was in say, 2012, when both house prices and interest rates were incredibly low. But today, this metric from the National Association of Realtors – the Housing Affordability Index – reads roughly 160. That means buyers generally have 1.6 times the money they need to buy (or refinance). As Steve says...
Again, don't look at the price by itself... Look at the value. The value in housing today is all about interest rates. They're near record lows... And that's giving us our extraordinary opportunity today.
Secondly, there are smart ways to play the ultimate 'at home' trend in your portfolio...
To be clear, it may sound counterintuitive since many folks are struggling to pay rent. But I'm not talking about the kind of investments tied to those concerns...
I'm talking about the roughly 3% to 5% of annual U.S. gross domestic product that comes from the residential home market, according to the National Association of Home Builders.
This includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes, and brokers' fees... All of these areas of the sector are seeing record demand.
Those who can afford it are looking for new homes.
If you're invested in broad index funds, you likely already have some exposure to the housing market (along with everything else). But if you're interested in some more targeted exposure to the housing market, you want to be aware of our most recent "Stock of the Week," an exchange-traded fund shared by our research team on Monday...
The iShares U.S. Home Construction Fund (BATS: ITB) holds 48 stocks in the home-construction sector. Its three largest holdings are homebuilding giants D.R. Horton (DHI), Lennar (LEN), and NVR (NVR). But it also holds housing suppliers like Masco (MAS), as well as home-improvement retailers Home Depot (HD) and Lowe's (LOW). These are all companies that stand to benefit from a strong housing market.
Like the rest of the broader market, ITB sold off sharply in March... But since bottoming later that month, the stock has soared. Since its March 23 low, ITB has more than doubled, and now sits near an all-time high.
Please note... we're not making a formal recommendation of ITB here in the Digest today. Consider this another edition of "food for thought" and information that can color your "big picture" thinking of the market and an important trend that we wanted to highlight.
If you want more details and actionable advice on investing in the housing market and the entire real estate landscape today, you might want to give Steve's True Wealth Real Estate service a try...
He urges subscribers to go even further than refinancing or owning your own home... or considering stock exposure to the big housing demand trend. In short, Steve believes it's a great time to buy residential U.S. real estate. And in this new service, he shares some great, well-researched opportunities for individual investors.
Steve launched True Wealth Real Estate over the summer, and it's available at no additional charge to all Stansberry Alliance partners. You can find it right here. And if you're interested in learning how you can subscribe today, click here for more information.
The Gold-Bitcoin Relationship
Vince Lanci, founder of fund manager Echobay Partners, said back in September that gold would see its lows around Thanksgiving. So far, this has been the case... The metal hit a five-month low at the end of November.
The industry insider tells our colleague Daniela Cambone that he expects gold to rally by February. However, he also warns about bitcoin's threat to the metal in the long term...
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.
New 52-week highs (as of 12/8/20): AbbVie (ABBV), Analog Devices (ADI), ARK Fintech Innovation Fund (ARKF), ProShares Ultra Nasdaq Biotechnology Fund (BIB), BlackLine (BL), CBRE Group (CBRE), Cognex (CGNX), Editas Medicine (EDIT), Eagle Materials (EXP), FedEx (FDX), Fortescue Metals (FMG.AX), Gravity (GRVY), Intuit (INTU), Renaissance IPO Fund (IPO), Maxar Technologies (MAXR), Cloudflare (NET), Intellia Therapeutics (NTLA), Invitae (NVTA), OptimizeRx (OPRX), Palo Alto Networks (PANW), Qualcomm (QCOM), Construction Partners (ROAD), Sea Limited (SE), First Trust Cloud Computing Fund (SKYY), Scotts Miracle-Gro (SMG), Square (SQ), ProShares Ultra S&P 500 Fund (SSO), The Trade Desk (TTD), Take-Two Interactive Software (TTWO), ProShares Ultra Semiconductors Fund (USD), Vanguard Inflation-Protected Securities Fund (VIPSX), Vanguard S&P 500 Fund (VOO), and Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP).
In today's mailbag, more discussion on the "green wave" from Monday and more feedback on Dan Ferris' Friday Digest... What say you? Send your thoughts, comments, and questions to feedback@stansberryresearch.com.
"I was struck by a couple of readers' responses [yesterday] regarding the 'green wave' commentary which led me to believe they were either misinformed or are hanging onto their long-held opinions without giving serious consideration to the subject.
"First, Carl R. writes: 'Anyone who thinks that it is alright [to] drive around in a car or work with machinery while high as a kite on weed is not playing with a full deck.'
"I don't think anyone suggested or is suggesting that that is OK. It's not OK to drive drunk or operate machinery while intoxicated and neither is it while high, yet alcohol is legal and marijuana is a Schedule 1 drug. That marijuana is on that list makes no sense. Marijuana was made illegal in a blatant attempt to foster a racial divide, not because it posed any threat or danger. The result was decades lost in the study of its numerous health benefits much to the joy and benefit of big pharma and their opioids.
"The next comment came from reader Tom A., a longtime smoker, who claims: 'nothing, made me cough more than marijuana! That means that something is happening to your lungs!!'
"I agree. Smoking anything is bad for your lungs. However, that is a sidebar to the marijuana argument. There are many more available products that contain THC and/or CBD that do not need to be smoked, including tinctures, oils, edibles and beverages, among others.
"The bottom line is that people have been lied to for too long about the nature of marijuana. It poses no greater societal risk than alcohol and I, for one, don't like the government telling me what I can and cannot put in my body. Should I infringe on another while under the influence of any substance, or perfectly sober, I am responsible for my actions and should be held accountable, as should anyone else.
"Keep up the great work!" – Paid-up subscriber Scott N.
"Dan, thank you for another great Digest. Controversial as it may be, I could not agree more. I don't know about your parents' past, but I was adopted as a child into a wonderful family, I think we could be half-brothers or maybe distant cousins. In my childhood, we were encouraged to grow up with aspirations to become all we could be. President of the U.S. was way up there, they saw me as a Senator. Glad that never happened.
"Mandating inclusion in any part of our society because of race, ethnicity, gender, religion, sexual preference or anything else is no better than exclusion for those same reasons. Inclusion in any part of our society should be based on individual merits. There must be some midpoint that we can find collectively as a society." – Paid-up subscriber Tim L.
"With respect to Dan's Friday Digest in which he said: 'Social justice, diversity, and inclusion are all undefinably vague, but popular buzzwords of our time. They're used to justify the government (and other powerful entities) imposing their will on individuals who aren't infringing on anyone's person or property.'
"'The unintended consequences of [government's] social action are always more important, and usually less agreeable than the intended effects.' – Irving Kristol" – Paid-up subscriber Joe B.
"I think you (Dan Farris) are right on track. The people you were referring to have taken group think to a new level. Not only do they have their head in the sand, they are all standing around the same sand box." – Paid-up subscriber Ted R.
"I AGREE TOTALLY with you on both of your essays. We need the Feds (all sources) to shrink and not keep growing and telling us what we can and cannot do. Follow our Constitution. Thanks for your thoughts, Dan. Don't understand the people that don't agree and want the Feds to do everything for them. We need to work together as a people and solve our issues, not be told how to solve them." – Paid-up subscriber Jerry O.
All the best,
Corey McLaughlin
Baltimore, Maryland
December 9, 2020