‘Closer’ to a recession | InvestorPlace
Our new series to track commercial real estate…crypto continues to climb despite negative headlines…Luke Lango forecast…why Louis Navellier is growing more bullish today
“There are a lot of commercial real estate assets in the banking sector and there are losses there that will probably trickle down to the banking sector.
So this process will take time to become fully clear.
This comes from the Federal Reserve Bank of Minneapolis Neel Kashkari when he spoke on Sunday “Confront the Nationon CBS.
We are starting a new racing segment here in the Digest – “commercial real estate watch” – because this sector is an excellent indicator of the risk of a broader recession.
The same factors that have just led to a handful of bank failures are cracking the foundations of the $20 trillion commercial real estate industry. If defaults snowball, it will have a huge impact on the US economy.
Return to MarketWatch and the taking of Kashkari:
Rising interest rates may make it harder to refinance homeowners’ debt and the overall value of property-related debt has fallen, weighing on exposed banks. Small banks have become major players in commercial real estate over the past two decades.
The Chairman of the Fed [Kashkari] stressed that the banking system “is resilient and solid”, but warned that the problems emanating from the banking sector may not be over.
“We know there are other banks that have some exposure to long-term Treasuries, which have some duration risk, as they call it, on their books,” Kashkari said.
He said the current challenges with banks are “definitely bringing us closer” to recession, but warned it may still be too early to know the impact of troubled banks on the economy.
One way to keep tabs on this from an investment perspective is to watch some of the larger commercial REITs.
For example, below we look at Annaly Capital, AGNC and Simon Property Group. Since news of the banking mayhem broke last month, these REITs have fallen 21%, 18% and 20% respectively.
As Kashkari pointed out, we don’t know the extent of the potential contagion here, but it could create some fantastic buying opportunities in some of the country’s top REITs in the weeks ahead.
And more broadly, the performance of these REITs will give us insight into the health of the economy through the role of commercial real estate as an indicator of the economy.
We will keep you posted.
Meanwhile, the past week has made some bad headlines for the crypto sector, but the overall market response has been bullish.
Last week, the SEC sued Justin Sun, the founder of the altcoin TRON (TRX).
The SEC said in a press release that it is suing Sun, the Tron Foundation, the BitTorrent Foundation, and BitTorrent (now known as Rainberry) over the sale of tronix (TRX) and BitTorrent (MTB) tokens, which the regulator described as securities of unregistered crypto assets.
The regulator further alleged that the defendants had “fraudulently manipulated[ed]» Secondary trading of TRX through an “extended wash trade” program.
In another blow to crypto investor confidence, Binance was forced to halt spot trading due to a technical bug (more on the latest with Binance in a moment).
And then, of course, the Fed raised rates another quarter point. For investors who view crypto as a risky asset, this is a headwind.
But rather than suffer a massive sell-off, the crypto sector continued to climb last week.
For how to interpret this, let’s jump to our crypto expert Luke Lango and his Crypto Investor Network weekend update:
From a headline perspective, it was a bad week for cryptos. Yet the cryptos still rallied.
This strongly suggests to us that cryptos are in a macro bull cycle and that positive macro developments regarding inflation and the Fed will drive crypto prices higher in 2023 regardless of the news feed.
On the macro side, Luke points to the main inflation indicators which continue to rise. For example, it highlights “Truflation”, which comes from Truflation.com, which aggregates real market prices from traders, research institutes and trade data providers, to calculate the most accurate daily inflation rates. and the most current.
While last month’s CPI was 6%, today’s Truflation rate is only 3.98%.
Back to Luke:
…While last week included negative crypto-specific headlines, it also included positive macro headlines. Cryptos ignored industry-specific negative headlines and rallied behind those positive headlines.
Again, this confirms to us that macros are driving crypto price action in 2023.
This is bullish as we believe macros will improve significantly over the next few months.
If you’re hesitant in the crypto market, that’s understandable, but it’s important to be aware of what’s going on.
Here are the year-to-date returns for some of the best-known cryptos:
- Bitcoin: +62.8%
- Ethereum: +43%
- Gimbal: +39%
- Polygon: +38%
- Solana: +99%
Be careful not to jump right now, though. As Luke explains below, we probably need to consolidate:
In the short term, we still believe cryptos are overbought and due for a pullback. BTC is technically overbought and needs to consolidate at lower levels before taking its next leg higher. Therefore, we will not continue the crypto rally at this time. Instead, wait for a 5% to 10% pullback, then load up for the next rally…
However, we believe cryptos are set to make significant gains over the next 12-24 months, with the fourth BTC halving in early 2024 only reinforcing the bullish thesis.
For another reason to be cautious, yesterday brought the news that the SEC is suing Binance
The SEC takes on the Binance cryptocurrency exchange, along with its founder Changpeng “CZ” Zhao. The allegations are that Binance and CZ violated certain trading and derivatives rules.
Here are more CoinDesk:
The lawsuit… alleged that Binance operated a derivatives trading operation in the United States, offering transactions for cryptocurrencies, including bitcoin (BTC), ether (ETH), Litecoin (SLD), tether (USDT) and Binance USD (BUSD), which the prosecution characterized as goods.
The lawsuit also alleged that the company, under Zhao’s leadership, instructed its employees to spoof their locations through the use of virtual private networks.
Bitcoin sold off around 3% on the news yesterday, but has since stabilized, again showing strength in the face of negative headlines.
In a similar vein, this morning made headlines that disgraced crypto entrepreneur Sam Bankman-Fried (SBV) paid over $40 million to bribe at least one Chinese official.
We will keep you posted on this story.
Before we move away from crypto, another Crypto Cash Calendar the event is tomorrow
Here’s Luke and his partner and fellow crypto expert, Charlie Shrem, to explain:
Crypto is the future. But that doesn’t mean that all cryptocurrencies are the future.
To sift through all the blockchain noise, we have assembled an exclusive team of crypto engineers and coders to collectively research, analyze and understand the core technologies underlying the cryptocurrency revolution.
Informed by this research, we are able to interpret the usefulness and potential impacts of these technologies.
Here’s how it works: Behind the scenes, our proprietary research system collects information and indicates which altcoins and crypto events are of particular interest.
From there, we’ll share with you the most exciting and promising coins and events from our Crypto Cash calendar.
Tomorrow, Luke and Charlie reveal an event that just triggered their Crypto Cash Calendar system.
To learn more as Crypto Investor Network subscriber, click here.
Finally, Louis Navellier is increasingly optimistic
Let’s end today with an optimistic view of the market and the economy in the future.
Yesterday, in his Special Market Update podcast in Platinum Growth Clublegendary investor Louis Navellier explained why he feels more and more confident today:
I expect the breadth and power of the market to improve when the first quarter [earnings] the results come out.
The banks will lead the way. If the JPMorgans of the world have better than expected earnings, that will help restore confidence…
We are definitely in an economic recovery now. We’re certainly looking at 3% GDP growth for the United States. We really don’t have to worry about the future as earnings will continue to improve.
From all I can see, we are on the path to a good economic recovery…
It’s time to cheer up and focus on spring.
Building on Louis’ reference to Q1 earnings, Q1 earnings season begins in earnest the week of April 10 when the big banks report.
And when it comes to GDP, the Atlanta Fed’s GDPNow tool shows the latest estimate for Q1 GDP at 3.2%.
Here is a comparison of the Atlanta Fed estimate with a consensus estimate:
But to come full circle at the start of today’s Digest, we’ll need to keep an eye on commercial real estate and, by extension, smaller banks. That said, it’s encouraging to see Louis’ growing confidence.
Have a good evening,