Real Time Price Discovery
In our last commentary, we opened by discussing the drastic change in expectations in the 18 months that followed a truncated 2-month recession. We went from worrying about losses to beating the S&P 500, then the QQQs, then ARKK, then Bitcoin and Ethereum, and finally, the Bored Ape Yacht Club NFT. Reality has set in. Stocks across the board are down, QQQ is down -11.37% alone through January 28th. As a market, we are actively participating in price discovery in this new pandemic-becoming-endemic hybrid economy on the backs of never-ending quantitative easing (QE). The best way to describe the current state of QE is to compare it to the healthcare industry. Our economy is essentially forever hooked up to a dialysis machine with no chances of detaching – only small tweaks in our dependency on it for survival.
Real time price discovery means our larger assumptions on value shift often. Is every piece of real estate on the planet really worth more today than it was January 2020? How can that be if tech stocks are plummeting? What are the effects of every echo chamber thinking they were “right?” Is inflation here to stay? Could it morph into stagflation or deflation even? It’s difficult to even assess an asset without considering the massive amount of printing done by central banks. Real estate assets across the country are currently up 35%. Even in major cities, with huge business centers still starving for patrons to return to their storefronts, are currently up 20% in value from pre-pandemic levels. It is our belief that the whole viewpoint on housing has shifted. While there is a pendulum swing to almost every change in market, the lasting effects of what we desire from our “home” has changed. The single 20-year-olds in major cities who boasted about their shoe-box-sized homes but spent every waking hour outside of them are now clamoring for a two-bedroom apartment to give their home office its own portion of the living space. We desire more square feet per human in our household, if we have the means. The world is changing, evolving with each passing week. Markets are trying to catch up. New expectations of what an open economy will look like, with the pause in reopening due to omicron, are likely going to make some rethink their reopening plan all together.
