Let’s get right to point; it’s weird out there. Really weird. At times our lives resemble some sort of normalcy while at other times we are strange and unrecognizable forms of our pre-pandemic selves. We wear masks and stand 6 feet apart, occasionally moving momentarily closer to bump elbows. In 2019 this type of behavior would have earned you a room with rubber walls, today it makes you a responsible member of society. Our routines have been turned upside-down. It can be hard to remember what day of the week it is. Our commute is no different on Sunday than it is on Monday. Professional sports are played in empty stadiums, suburbs are now the cool place to live, and cats and dogs are living together. It’s mass hysteria. Bizarro World is a fictional planet from comic books where everything is the opposite of expectations. Referencing Bizarro World outside of the comic book crowd might have earned you a blank stare until the term enjoyed a rebirth in a Seinfeld episode titled Bizarro Jerry. After constant failure, the loveable loser George decides he will start doing the exact opposite of what his intuition tells him since his intuition seems to always be wrong. Instead of his usual act of pretending he is an architect in hopes of impressing a potential date, George walks over to a potential date and says; “my name is George, I’m unemployed, and I live with my parents”. It works, the results are completely opposite of his expectations! Let’s try this ourselves; my name is the Stock Market, there is a global pandemic, the economy is shut down, and millions of people have lost their jobs”. It works, stock markets are at all-time highs! In comic books, Bizarro World is a cube (instead of a round) shaped planet called Htrae (Earth backward). Everything is backward on Htrae. Our jaws dropped to the ground when we read this in the comic book; a Bizarro salesman is doing a brisk trade selling Bizarro bonds by promising investors, “they are guaranteed to lose money for you". They have negative interest rates in Bizarro World! Lest there be any remaining doubt, we are officially living in Bizarro World.
Let’s stop and take a moment to fully appreciate the bizarro behavior of Central Banks and their current application of Keynesian monetary policy. The thought of bonds with negative interest rates was so preposterous that the scenario was used in a comic book as an example of an insane world where everything operates in reverse of expectations. Here at troPneerG Capital Advisors, we have decided to embrace the comic book world we are living in. Deurbanization – The cool kids are moving to the suburbs and other rural areas. Living downtown is for the nerds. Millennials are abandoning their urban apartments and moving back in with their parents. City dwelling empty nesters are fleeing for their vacation homes if they are lucky enough to have one. Those without vacation homes are buying or renting homes away from the city. Fears of contracting Covid-19 and urban unrest are contributing to urban flight but according to feedback from the National Association of Realtors, fear is not the top reason for the exodus. The need for more space and recreational activities is the primary motivator. Many families need multiple home offices now that everyone is working from home. They also need to be able to go for a walk, jog, or a hike. Play golf or go fishing. Urban recreational activities like going to dinner, museums, and sporting events no longer exist. The ability to sit in the backyard and grill has never been more appreciated. The National Association of Realtors reported a 20.7% increase in home sales for June and July's number is expected to be even higher.
Home prices have skyrocketed in desirable suburbs and vacation communities. This New York Post article shows prices in the Hamptons jumped 27.1% in the second quarter. That’s crazy. Here’s an excerpt from the article; The jump in prices can be attributed to a variety of factors, but chief among them is increased demand from hordes of New Yorkers fleeing the virus epicenter. Also fueling the increase is the rise of a remote workforce and virtual education that may not require adults and kids to live near offices or schools in the five boroughs. The Great American Road Trip is making a comeback. Flying is out and driving is in. TSA checkpoint numbers have bounced off their pandemic lows but are still trending about 70% below the 2 million-plus a day pace before the pandemic.
Americans are hitting the road for their summer vacations. Gasoline usage and miles driven are approaching pre-pandemic levels. That’s quite incredible when we factor in that most of us no longer commute to work.
SUVs and minivans have replaced the station wagon and large colonials have replaced split level ranches, but Americans are behaving like it’s the 50’s. We often lament that our economy needs this generation of millennials to get married, buy houses, and have kids. The mantra of millennials is “we don’t need things to be happy.” They prefer spending money on experiences. Now that potential experiences are limited, our hope is millennials will finally become materialistic consumers like the rest of us. The economy has relied on people having kids and then buying things like cars, houses, and lots of other stuff to support their family and kids. Younger people fuel economic growth because they are in the accumulation phase of their lives. Moving to the suburbs is a nice start and there are promising trends in marriage statistics, now please buy houses, cars and have kids. We will check back in 9 months.
Bizarro World is indeed a very strange place. We continue to have an optimistic outlook for stocks but will continue to become more conservative if stock markets keep appreciating and the economy keeps recovering. Our concern is that the Federal Reserve (monetary stimulus) and Congress (fiscal stimulus) will stop over-stimulating the economy with liquidity as the economy improves and once again becomes self-sufficient. Only in Bizarro World would an improving economy be the reason we are becoming more concerned about the stock market. Suburbanly yours, The GreenPort Team