A difficult spot

Hey there,

It’s hard to make predictions, so, this is NOT a prediction. Instead, this is a mere observation from someone who watches markets on your behalf.

A ton of things are VERY expensive… especially stocks… and multifamily.

Take a look at this Twitter post from Charlie Bilello:

The spread between US and World equities based on their earnings is historically wide… meaning “investors” are willing to pay significantly MORE for the same earnings of US companies vs companies in other countries. Part of this is likely coming out of expectations of future earnings growth.

Per the chart below, we can see not only have valuation spreads widened but minimum expected cash returns have plummeted. Note, the last time the S&P had back-to-back 20+% gains was 1998 & 1999.

All this means is that the margin for error is zero in an economic environment that is “difficult” to put it mildly. While the prospects of incoming deregulation and tax reductions generally are friendly to business… there still lies the problem of reheating inflation via damned-if-you-do damned-if-you-don’t interest rates.

So what to do??

From a multifamily perspective. Sit tight. This is exactly the situation you bought multifamily for. Collecting cash flow when there are few well-priced alternatives. Inflation helps you with higher rents while lower rates would help you with a refi.

From a liquid stock perspective, I’m personally more risk-off at the moment and will likely take a small cut to some of my open positions.

“When in doubt, stay out”

Help us with research!

Questions always welcome!

Nate & Steven
Rust Belt Capital, LLC

www.rustbeltcapital.com

_Disclosure:
Rust Belt Capital, LLC is not a Registered Investment Advisor. Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Rust Belt Capital, LLC does not provide tax advice and does not represent in any manner that any outcomes described herein will result in any particular tax consequence. This is not an offer to buy or sell any security. Offers to sell, or solicitations of offers to buy, any security can only be made through official offering documents that contain important information about investment objectives, risks, fees, and expenses. Prospective investors should consult with a tax, investment, or legal adviser before making any investment decision. Distributions or profitable investments cannot and are not guaranteed. Not intended to be tax advice and should not be solely relied upon to make an investment decision.