Our new series to track commercial real estate … crypto keeps climbing despite negative headlines … Luke Lango’s forecast … why Louis Navellier is increasingly optimistic today
“There are a lot of commercial real-estate assets in the banking sector and there are some losses there that will probably work its way through the banking sector.So that process will take time to fully become clear.”
That comes from Federal Reserve Bank of Minneapolis Neel Kashkari when he spoke on Sunday’s “Face the Nation” on CBS.We’re beginning a new running segment here in the Digest – “commercial real estate watch” – because this sector serves as an excellent indicator of broader recession risk.The same factors that just resulted in a handful of banking failures are creating cracks in the foundation of the $20-trillion commercial real estate sector. If defaults snowball, it will have an enormous impact on the U.S. economy.Back to MarketWatch and Kashkari’s take:
Rising interest rates can make it harder to refinance debt for property owners and overall values of debt tied to real estate have slumped, weighing on banks who have exposures. Small banks have become key players in commercial real estate over the past two decades.The Fed president [Kashkari] emphasized that the banking system “is resilient and it’s sound,” but cautioned that the troubles emanating from the banking sector may not be over.“We know that there are other banks that have some exposure to long-date Treasury bonds, who have some duration risk, as they call it, on their books,” Kashkari said.He said that current challenges with banks “definitely brings us closer” to recession but warned that it may still be too early to know the impact of troubled banks on the economy.
One way to keep your eye on this from an investment perspective is by watching some of the largest commercial REITs.For example, below, we look at Annaly Capital, AGNC, and Simon Property Group. Since news of the banking chaos broke last month, these REITs are down, respectively, 21%, 18%, and 20%.
As Kashkari pointed out, we don’t know the extent of the potential contagion here, but this could be setting up some fantastic buying opportunities in some of the nation’s best REITs in the weeks to come.And more broadly, the performance of these REITs will give us insight into the economy’s health thanks to commercial real estate’s role as a bellwether for the economy.We’ll keep you updated.
Meanwhile, last week brought some bad headlines for the crypto sector, yet the overall market response was bullish
Last week, the SEC sued Justin Sun, the founder of the altcoin TRON (TRX).From CoinDesk:
The SEC said in a press release it was suing Sun, the Tron Foundation, the BitTorrent Foundation and BitTorrent (now known as Rainberry) over the sale of tronix (TRX) and bitTorrent (BTT) tokens, which the regulator described as unregistered crypto asset securities.The regulator further alleged the defendants “fraudulently manipulat[ed]” TRX’s secondary market through an “extensive wash trading” scheme.
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 risk asset, this is a headwind.But rather than suffer a selloff, 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 news headline perspective, it was a bad week for cryptos. Yet, cryptos rallied anyways. This strongly suggests to us that cryptos are in a macro-driven bull cycle and that positive macro developments regarding inflation and the Fed will drive crypto prices higher in 2023 – regardless of headline news flow.
On the macro front, Luke points toward leading inflation indicators that continue to show progress. For example, he highlights “Truflation,” which comes from Truflation.com, which aggregates real-market prices from merchants, research institutions, and commercial data providers, to calculate the most accurate and current daily inflation rates.While last month’s CPI number came in at 6%, today’s Truflation rate clocks in at just 3.98%.Back to Luke:
…While this past week included negative crypto-specific headlines, it also included positive macro headlines. Cryptos ignored the negative industry-specific headlines and rallied on those positive macro headlines. Again, this is confirmation to us that the macros are driving crypto price action in 2023. That’s bullish because we believe the macros will significantly improve over the coming months.
If you’re hesitant about 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 better-known cryptos:
- Bitcoin: +62.8%
- Ethereum: +43%
- Cardano: +39%
- Polygon: +38%
- Solana: +99%
Be careful about jumping in right now, however. As Luke explains below, we’re likely due for some consolidation:
On a short-term basis, we still think 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. Consequently, we wouldn’t chase the crypto rally right now. Rather, wait for a 5% to 10% pullback, then load up for the next rally…However, we believe cryptos are due for significant gains over the next 12 to 24 months, with BTC’s fourth halving in early 2024 only strengthening the bull thesis.
For another reason to be cautious, yesterday brought news that the SEC is suing Binance
The SEC is going after cryptocurrency exchange Binance, along with its founder Changpeng “CZ” Zhao. The allegations are that Binance and CZ violated certain trading and derivatives rules.Here’s more from CoinDesk:
The lawsuit…alleged that Binance operated a derivatives trading operation in the U.S., offering trades for cryptocurrencies including bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT) and Binance USD (BUSD), which the suit referred to as commodities.The suit also alleged that the company, under Zhao’s leadership, directed its employees to spoof their locations through the use of virtual private networks.
Bitcoin sold off roughly 3% on the news yesterday but has since steadied, again showing strength in the face of negative headlines.On a related note, this morning brought the headline that disgraced crypto entrepreneur Sam Bankman-Fried (SBV) allegedly paid over $40 million to bribe at least one Chinese official.We’ll keep you updated on this story.
Before we move away from crypto, another Crypto Cash Calendar event is happening tomorrow
Here’s Luke and his partner and fellow crypto expert, Charlie Shrem, to explain:
Crypto is the future. But that doesn’t mean all cryptocurrencies are the future.To sift through all the blockchain noise, we’ve put together 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’re able to interpret the usefulness and potential impacts of those technologies.Here’s how it works: Behind the scenes, our proprietary research system gathers information and indicates which altcoins and crypto events are of particular interest.From there, we’ll share with you the most exciting and promising of those coins and events in our Crypto Cash Calendar.
Tomorrow, Luke and Charlie are revealing an event that’s just triggered their Crypto Cash Calendar system.To learn more as a Crypto Investor Network subscriber, click here.
Finally, Louis Navellier is growing increasingly bullish
Let’s end today with an optimistic take on the market and economy going forward.Yesterday, in his Special Market Update podcast in Platinum Growth Club, legendary investor Louis Navellier explained why he’s feeling increasingly confident today:
I’m expecting the market’s breadth and power to improve when first-quarter [earnings] results come out.The banks will lead the way. If the JPMorgan’s of the world do have better-than-expected earnings, that’s going to help restore confidence…We are definitely in an economic recovery now. We are definitely looking at 3% GDP growth for the U.S. We really don’t have to worry looking forward because earnings will continue to improve.From everything I can see, we’re on the path to a good economic recovery…It’s time to cheer up, and focus on the springtime.
Building on Louis’ reference to first-quarter earnings, Q1 earnings season begins in earnest the week of April 10th when the big banks report.And as to the GDP, the Atlanta Fed’s GDPNow Tool, shows that the latest estimate for Q1 GDP is 3.2%.Here’s a comparison of the Atlanta Fed’s estimate alongside a consensus estimate:
