Expert investor James Stack warned of rampant market speculation, predicted inflation, and blasted the Fed in a recent interview. Here are the 8 best quotes

James Stack
James Stack.

  • James Stack called out massive speculation in stocks, real estate, crypto, and other markets.
  • The investor said Federal Reserve policies are fueling reckless behavior on Wall Street.
  • Stack drew parallels between the current market boom and the dot-com and housing bubbles.
  • See more stories on Insider’s business page.

James Stack warned of rampant speculation across multiple markets, rang the inflation alarm, and urged investors to be careful in a recent MarketWatch interview.

Stack is the founder and CEO of Stack Financial Management, as well as the publisher of the InvesTech Research newsletter. He compared the Federal Reserve’s stimulus efforts to spiking Wall Street’s punchbowl, cautioned houses are more overpriced now than during the mid-2000s housing bubble, and likened the hype around SPACs and NFTs to the dot-com boom.

Stack’s firm takes a “safety-first” approach to investing, paying close attention to market risk and historical trends. It boasted a $1.2 billion stock portfolio at the end of March, which included a $97 million stake in Microsoft, and roughly $50 million stakes in each of Accenture, Cisco, and Walmart.

Here are Stack’s 8 best quotes from the interview, lightly edited and condensed for clarity:

1. “The Fed brought the punchbowl back to the party and, particularly when the pandemic hit, they decided to add more and more alcohol to it. There’s a lot of participants on Wall Street investing like they’re a little bit inebriated.” – describing the impact of the Federal Reserve’s expansionary policies since 2019.

2. “We have more of an upside disparity between housing prices and long-term inflation than we did in the housing bubble in 2005.” – Stack Financial’s housing barometer estimates US house prices are 43% above the long-term inflation trend, exceeding their 35% premium in 2005.

3. “Speculative psychology tends to spill over into multiple asset classes. Stocks are very, very expensive by most historical measures, but we’re also seeing it in real estate, we’ve seen it in cryptocurrencies – bitcoin shot up to $60,000 and now is struggling to stay above $30,000.”

4. “Our housing prices have gone ballistic. It seems that everyone’s quitting their job to become a realtor. It brings back all the memories of 2005-2006.” – describing the local housing market in Flathead Valley, Montana.

5. “Speculative excess is spilling over into all of the new IPOs, the SPACs. We’re raising money and we don’t know what we’re going to do with it. Then we’ve got the new NFTs, digital art – it’s so extreme, it’s almost nonsensical. But it’s not unusual. We saw it in the late 1990s, when companies could go public that had never made a penny. We’re starting to see a lot of that today in the meme stocks favored by new, young traders.”

6. “The bubble is invisible to those inside the bubble. Don’t go to someone investing in NFTs and try to tell them that they’re speculating in a bubble that could be almost worthless. You’re going to get in an argument that you can’t win except in the aftermath.”

7. “We are in one of the most overvalued markets in history and one of the most speculative-excess periods in history, so you don’t have to be fully invested today. If you’re going to invest in today’s market, don’t go out buying the SPACs, or the stocks that have infinite PE ratios, because they have yet to make earnings. I would put higher allocations into those sectors that are going to benefit from, or at least be resilient to, increasing inflation.”

8. “When the Fed does decide to start taking the punchbowl away, growth stocks are where the pains could be felt the greatest. Think ‘safety first,’ walk softly, and carry a comfortable cash reserve.”

Read the original article on Business Insider

Take a look inside the ‘uninhabitable’ house without a toilet or power that just sold for $3.5 million in Australia, as global property markets boom

A large room with crumbling walls and building materials on the floor.
The property listing says that it is located close to a shopping district and several schools.

  • A Sydney home lacking flooring, a toilet, kitchen, and power sold for $3.5 million, Bloomberg first reported.
  • The property received 30,000 enquiries globally in a wild property market, which stunned the selling agent.
  • The property listing says that “behind its charming façade” it has “uninhabitable interiors.” Take a look inside.
  • See more stories on Insider’s business page.
This “uninhabitable” four bedroom house in a Sydney suburb sold for $3.5 million (4.7 million Australian dollars), despite not having a toilet, kitchen, flooring, or power, selling agent Joe Recep told Bloomberg.

A large house with a brown roof and white awning sits on a slope next to a road.
This property sold for $3.5 million in June despite not having a toilet, kitchen, or power.

The house sold at auction on June 5, according to its listing on Australian property site Domain.com, where it’s marked as “sold.”

The listing says that “behind its charming character façade” the property is in need of “major work.”

Joe Recep, selling agent at NG Farah Real Estate, told Bloomberg that the property lacked basic amenities like painted walls, a toilet, kitchen, or power. 

The 556.4 square-meter home has four bedrooms and three bathrooms, and is described as a “neglected period home” with “uninhabitable interiors” in its listing.

A large dilapidated room with paint peeling off the walls is lit up by the sun coming through the windows
The 556.4 square-meter property is described as having “uninhabitable interiors” in its listing.

The median price for four-bedroom houses in the Sydney suburb is $2.28 million (3.055 million Australian dollars), according to data from Domain.com, based on sales within the past 12 months. 

The property received 30,000 enquiries in four weeks from all over the world, including buyers in the United States, United Arab Emirates, and New Zealand, Recep told Bloomberg.

A large room with crumbling walls and building materials on the floor.
The property listing says that it is located close to a shopping district and several schools.

The property listing says that it has off-street parking space for three cars, and is close to a vibrant shopping and restaurant district as well as several schools.

The property’s listing describes it as an “extremely rare opportunity with big potential,” and the new owners can restore it to its “former grandeur.”

The sun streams through stained glass windows into a hallway with several dark wooden doors.
The four bedroom property received 30,000 offers of interest globally, selling agent Joe Recep said.

The listing says that the property sits in the “heart” of Kensington, a Sydney suburb.

Recep told Bloomberg that he’d been in real estate for 25 years and had “seen nothing like” the surge in interest for the dilapidated property.

A house in a state of disrepair sits on a bright green front lawn on a sunny day.
The house has three bathrooms and off-street parking space for up to three cars.

The global housing price average rose 7.3% in the year to March, the fastest surge since 2006, according to the Knight Frank Global House Price Index

Australia’s average house price climbed 8.3% over this time period, Knight Frank’s figured showed. 

The listing says the property is located on a “quiet street framed by a beautiful tree canopy” and has off-street parking space for up to three cars.

A house with a brown roof sits behind a large tree on a sunny day.
The average Australian house price rose 8.3% in the year to March, data from real estate agency Knight Frank showed.

The listing says the property has a “sunny north-facing yard, traditional entry verandah,” and “high embellished ceilings.”

Read the original article on Business Insider

Houses are selling in just 6 days on average in a red-hot market, and just 3 days in some Midwest cities, an industry report says

A couple stand in front of their new home and smile at each other.
Homes are typically taking just six days to be sold nationwide in a “red-hot” market.

Houses are selling quicker than ever before in the US, according to a report by real-estate site Zillow.

Newly listed homes nationwide typically took six days to go under contract in May, which was one day shorter than in April, according to the report. Homes in Cincinnati, Kansas City, and Columbus typically took just three days to be sold, the report said.

Zillow also said that high demand in one of the hottest housing markets in history and a lack of supply had pushed up prices. Typical house prices rose 13.2% year-on-year in May to $287,148, up 1.7% from April.

And rising home values show “virtually no signs of slowing as sky-high demand runs headlong into inadequate supply,” the report said.

But there are signs that the supply crunch could be easing. The report said that housing inventory – the number of new homes listed for sale – rose 3.9% over April, which was the first monthly rise in for-sale homes since July 2020.

The number of for-sale homes jumped 30.3% in San Jose, and 25.6% in San Francisco from a year ago, the report said. But inventory was still down 31.2% nationwide from the same period a year ago, it said.

In April, just under half of newly listed homes were sold within a week, and 76% were sold within a month, Zillow said.

Some buyers have been moving from coastal cities to states such as Texas and Florida during the pandemic as many jobs went remote. A Zillow survey in April said that 11% of Americans have moved since the pandemic hit last year.

Zillow did not immediately respond to Insider’s request for comment.

Read the original article on Business Insider

Legendary investor Jeremy Grantham sees a housing bubble in almost every market – and says the Nasdaq and SPACs have likely peaked

GettyImages 1193640565
Jeremy Grantham is highly regarded in markets as a value investor.

  • Jeremy Grantham said housing was “bubbly” in almost every major market in the world.
  • He told a Morningstar conference the SPAC boom and the Nasdaq had likely peaked.
  • Grantham, who cofounded GMO, also said “pessimism termites” might soon get the rest of the market.
  • Sign up here our daily newsletter, 10 Things Before the Opening Bell.

Jeremy Grantham said on Wednesday that real-estate bubbles were popping up in almost every market around the world and that eventually there’d be a “day of reckoning.”

The legendary investor, who cofounded the asset-management firm GMO, also said the market for special-purpose acquisition companies, or SPACs, had likely peaked, along with the tech-heavy Nasdaq stock index.

And he said “pessimism termites” may soon get to the rest of the market.

Speaking at the Morningstar Australia investment conference, Grantham compared the state of housing markets across developed economies to the 2008 financial crisis.

“This time you look around and you find the real estate is suddenly pretty bubbly in almost every interesting market in the world,” he said.

In the US, the Case-Shiller house-price gauge soared 13.2% year-over-year in March. In the UK, house prices shot up 10.9% year-over-year in April as a result of government stimulus and people looking for more space.

“You can’t keep an asset class like housing, where the house doesn’t change, and you’re just marking it up in real terms year after year,” Grantham said. “Eventually there’ll be a day of reckoning.”

Grantham, one of the most famous investors in cheap or “value” stocks, also said the SPAC market appeared to have been a bubble that has popped.

He said an index of SPACs – blank-check companies that go public before finding a target to merge with – was down sharply from its all-time high while many of the shell entities were trading below their initial price.

He said the Nasdaq had probably also peaked in February. On Wednesday, the tech-laden stock index was about 3% off its all-time high, reached in April.

Read more: Legendary investor Jeremy Grantham called the dot-com bubble and the 2008 financial crisis. He told us how 4 indicators have lined up for what could be ‘the biggest loss of perceived value from assets that we have ever seen.’

Grantham is a prominent bear, or someone who believes prices are about to fall. Many investors have come to discount his pronouncements given that stocks have consistently hit all-time highs over the past year.

Grantham continued his bearish theme at the Morningstar conference, saying that “pessimism termites” might “get to the rest of the market” in a few months. He said there were signs of craziness, particularly in the sky-high prices of electric-vehicle stocks such as Tesla.

“We’ve turned the pressure up and up, more money, more moral hazard, and here we are at the peak,” he said.

Read the original article on Business Insider