🍋 Rents Keep Mooning

Author

Short Squeez
August 12, 2022

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"Reading the printed financial records about a company is never enough to justify an investment." — Phil Fisher

Good Morning and Happy Friday! Since inflation has been as hot as your college hot wing challenge, 36% of US adults have had to tap into savings to get by (savings rate has fallen to 5.1% in June from 8.7% in Dec '21). Janet Yellen is urging the IRS not to increase the number of audits on middle-class Americans (your Venmo transactions) after the Senate approved $80 billion for the IRS, meaning ALOT more IRS agents. Lots happening in the media world after Axios' $525 million sale to Cox. ValueAct Capital Management has built up a 7% activist position in New York Times. Shares were up 11% on the news.

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1. Story of the Day: Rents Keep Mooning

The times they are a-Little rough. It's becoming harder to own a home. It's also becoming harder to rent a home. Costs for renting have jumped at the fastest pace in over 30 years, and the US median amount per month has passed $2,000.

If you are in a metropolitan area, be warned that your figures are definitely on the higher end of that spectrum. Increases were even more dramatic in cities that became popular during the pandemic: 40% YoY increase in Wall Street South (Miami), 25% in Orlando, and 17% in Phoenix.

Low inventory has also been a factor, and has sent buyers into bidding wars. Plus the federal eviction moratorium is over, so people are between rocks and hard places.

Renters are staying put and occupancy rates are at their highest level (96.8% in June) in at least 20 years, which adds to the pricing pressures.

Single-family renters paid a record increase of 14% in May from a year ago. That translates to 5.4 million households, aka 40% of households that are not current on rent or mortgage payments, saying they're likely to be foreclosed on, or get evicted in the next two months.

Short Squeez Takeaway: There might be light at the end of the tunnel. Nearly 1 million rental units are expected to be added over the next year or so, which could bring rents down. Rents could drop 5-8% but still, it's not clear when the market will return to the low single-digit increases more typical before the pandemic.

Single Family YoY Rent Increase by City

Source: Bloomberg

2. Markets Rundown

After a rally, markets ended mixed because mega cap stocks looked weaker. Crypto was up though, thanks to the news about the Ethereum merge taking place on Sept 15/16th.

Movers & Shakers

  • (+) Walt Disney ($DIS) +5% after better than expected quarter results for the top and bottom lines.

  • (+) Ralph Lauren ($RL) +4% as the company cintinues to rally post earnings that beat expecations.

  • (–) Six Flags ($SIX) -18% because of a rough Q2 earnings expectations miss.

Private Dealmaking

  • Devon buys Validus Energy for $1.8 billion

  • Bevi, a smart water coolers company, raises $70 million

  • OMERS Private Equity invests $100 million in NovaSource, a solar operations company

  • CleverTap, a B2B customer engagement platform, raises $105 million

  • The NFL approves sale of Denver Broncos to Walmart heirs for $4.65 billion

  • Upper90, a provider of hybrid growth capital, raises $180 million 

3. Top Reads

  • Jobless claims rise to highest level in 2022 (Fox)

  • Disney is raising prices, but don't blame inflation (CNBC)

  • Box fatigue is hitting the apparel industry (CNBC)

  • Thrift shop business booms as inflation throttles American bank accounts (Fox)

  • Robinhood must face market manipulation claims over ‘meme stock’ rally, judge rules (Reuters)

  • What cooler inflation numbers mean (Axios)

  • Mortgage rates surpass 5% again (YF)

  • U.S. SEC investigating Melvin Capital, hedge fund behind GameStop squeeze (Reuters)

  • Gas prices in U.S. fall below $4 per gallon for first time since March (YF)

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4. Book of the Day: How to Solve Impossible Problems

No matter your field of expertise, every day you’re presented with seemingly impossible challenges. Issues that you or your company can’t seem to crack, even after weeks, months, or years of trying.

How do you approach these impossible challenges? Do you have a strategy that you follow, or do you just hold a brainstorming session and hope for the best? Do you tell yourself, “Think harder!” and pray inspiration will strike?

There’s a better way to solve problems like these — improve the quality of your thinking. Better thinking, problem-solving, and reasoning are skills. They can be developed through self-examination, learning new frameworks, and expanding our mental models.

Lucky for us, brilliant thinkers, creators, entrepreneurs, and philosophers — people like Elon Musk, Aristotle, Charlie Munger, Issac Newton, Ada Lovelace, Albert Einstein, Frederick Douglass, Maya Angelou, and Henry Ford — have left behind documentation, frameworks, and tools for considering impossible problems.

“We cannot solve our problems with the same thinking we used when we created them.”

5. Short Squeez Picks

6. Daily Visual: Where US Consumer Start Their Search When Shopping Online

% of respondents; May 2022

Source: Insider Intelligence

7. Daily Acumen: Fear, Failure and Shame

Fear runs deep. Fear used to keep our ancestors alive. Fear keeps you from taunting a saber tooth tiger.

The thing is, most of us don’t have to deal with tigers any longer. But the fear still runs deep.

We still feel the same feelings when we face possible failure, but now those feelings revolve around shame. Losing a videogame in private is fine, but asking a stupid question in a meeting is not.

Shame is the dream killer, because shame (or the possibility of shame) amplifies our fear of fear, keeps us from contributing and short circuits our willingness to explore.

As soon as we give it a name, though, as soon as we call it out, we can begin to move forward. Fear of shame unspoken is fear of shame amplified.

Be afraid of significant failure if you can quantify the downsides. But fear of shame is a waste and a trap.

Source: Seth's Blog

8. Crypto Corner by Bonkalytics.com

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9. Memes of the Day

 

 

 

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