Hi Everyone 👋,
Happy Sunday Everyone! Welcome to the +930 NEW subscribers who have joined this week. If you’re reading this but haven’t subscribed, join our community of smart, fun & edgy investors 👇
Contrary to what the media will have you believe the U.S Consumer is actually in excellent shape.
Yes, there are MILLIONS of Americans who lost their jobs and have yet to regain them.
But there are MILLIONS more who didn’t and their finances have never looked better.
HOME EQUITY UP
STOCK PORTFOLIO UP
DEBT LEVELS DOWN
During the worst pandemic in 100 years, U.S household net worth ironically hit record highs!
This is because the FED fired up the printing press and never turned it off.
But also because we all stopped doing dumb sh**t like this:
“buying things we don't need with money we don't have to impress people we don't like.”
So we saved a lot.
And once the economy re-opens we will have mountains of money to spend on REVENGE:
And I believe the economy will ROAR back to life. Setting off a chain reaction of hiring across the entire service industry which represents +86% of the US economy.
Why should you care?
Because investors are selling their Work-From-Home stocks like ZOOM and BUYING Reopen-The-Economy stocks like AIRLINES.
This week, let’s break down the U.S CONSUMER in <5 mins and I will tell you what I am buying:
5 Charts 👉 Savings, Debt, Housing, Investing & Spending
Grit Picks 👉 Re-Open the Economy Stocks
Let’s get started!
Americans stashed away a lot of money during COVID.
Over $1.5 trillion to be exact.
They had nowhere to really spend their money; +100MM Americans didn’t lose their jobs and received free money.
Biden just approved another $1.9 trillion of stimulus with a large chunk going directly to Americans.
“$700 billion is expected to be delivered to consumers over the next few months, when the savings rate is already over 20% — more than triple the typical rate.”
We’re literally swimming in money!
Check me out on YouTube. Every week I drop some *EXTRA* insights HERE!
90% of people become millionaires through homeownership.
Many just became a lot closer to achieving that dream as home prices and home equity hit record highs.
“Despite Coronavirus, U.S. Homeowners Gained Record $1.5 Trillion of Equity in 2020 ($26,300 per homeowner)” -CoreLogic
The crazier stat is that now only 2.8% of all mortgages are in a negative equity position.
What does this mean?
It means, almost everyone’s house is worth more than they paid for it.
So what have people been doing with this extra wealth?
Some people used it to renovate their homes (helloooo Home Depot stock +30% over the last year) or pay down other expensive debt. Others used it to invest in the stock market.
What could go wrong?
Interest rates rising. This makes mortgages more expensive and could dampen housing prices’ continuing rise.
This isn’t necessarily a bad thing for everyone. Many millennials who have been priced out of the market may finally get a chance.
COVID gave many people the opportunity to get off the debt hamster wheel. Or at least significantly reduce the speed it was spinning.
“Only the second time in the past 35 years we’ve ended the year owing less credit card debt than we started with.” -CNBC
Low rates and actual time on their hands gave people the opportunity to refinance all sorts of debt: mortgages, home equity loans, auto loans, student loans, and credit card debt.
Why does this matter?
It matters because it means more money in your pocket. The household debt service payments as a percent of disposable personal income is at the lowest it’s been in decades!
So where is all this extra money going?
COVID has given millions of people a taste of stock market glory.
Stuck at home with no sports to watch or bet on, people opened new brokerage accounts in record amounts.
And yes, we had that little hiccup with Robinhood screwing over retail investors. But even this couldn’t stop the retail warriors from buying the DIPS with their DIAMOND HANDS 💎
And now the value of the global stock market has reached a record high of +$100 trillion dollars.
And more stimulus money is arriving.
Like every other finance professional, I think at some point we will have a correction. It’s a necessary and healthy reality of the stock market. But you can’t time it and real professionals don’t.
It’s important to remember the U.S stock market has always recovered from corrections.
“All 28 corrections over the past 50 years have been more than COMPLETELY erased by a subsequent bull market rally.”
But it’s even more important to realize not every single stock recovers from corrections and bear markets.
Make sure you aren’t overly concentrated in high-risk micro-cap and small cap stocks or crypto coins you heard about on TikTok.
After spending most of this newsletter telling you how much cash the consumer has because they haven’t been spending…
I am now going to drop a very bullish bomb on you.
Consumer spending just TICKED BACK-UP to pre-COVID levels!
So what does this mean for the stock market returns?
Let’s check in with the Doctor…
A DOCTOR’S DIAGNOSIS
For a little fun with numbers, let’s check in with my great pal Chartered FINMEME Analyst Dr. Parik Patel:
How Grit Is Playing It
Since I launched this newsletter 4 months ago, I have highlighted stocks I own related to Reopen-The-Economy.
Let’s review how they have done and what else I am buying.
1) Revenge Travel: AIRLINES
I agree with Charlie, I am very bullish on airlines, revenge travel will be fierce!
Here are the stocks I own and highlighted in previous newsletters & how they have done:
I still own these stocks and have been adding to Cargojet. It’s think it’s unnecessarily beat up here.
2) Revenge Build: COMMODITIES
After decades of neglect it's no surprise that U.S infrastructure is now rated a lame C- by the American Society of Civil Engineers.
Soon, Biden is expected to announce how many trillions of dollars his infrastructure plan will be.
“The jobs we need to build a modern, sustainable infrastructure now and deliver an equitable clean energy future.” While the plan is priced at around $2 trillion dollars, the White House has not yet decided on the package’s exact size.
Back in November I wrote a newsletter on Biden’s green plan and the ‘electrification of everything’ including how I was playing the theme —EV’s, green grid & power generation— through copper stocks.
Here are the ones I own and highlighted in previous newsletters:
I also bought some energy stocks to play the rebound in oil. I like to invest in the energy producers when the upside-to-downside ratio is very favourable as it’s been. But I don’t hold over the long-run as they are volatile and cyclical.
3) Revenge Spend: Entertainment & Consumer Discretionary
SeaWorld re-opened all parks last week.
NO I won’t be going or buying the stock. I have a moral issue with locking up animals and gawking at them.
BUT — it is a leading indicator of the entertainment economy reopening.
The way I am playing it is through Walt Disney (DIS-NYSE). I’ve owned it for years and it’s starting to do really well again. With this stock you get the best of both worlds: physical & digital entertainment. Their parks are reopening and the streaming side has been kicking a$$ — reaching +100MM paid subscribers.
One last thought, remember that in the short-term the economy and the stock market can be disconnected.
Last year the economy was in terrible shape but the stock market was doing well. This year, the economy is re-opening but the stock market could get a little volatile.
During these times, zoom out and keep the long game in mind!
Until next time. Always Yours. Incessantly Chasing ROI,
-Genevieve Roch-Decter, CFA
P.S Bitcoin hit a new all-time high this weekend. A financial advisor from RBC messaged me saying he is not allowed to solicit investments in bitcoin for his clients. They have to proactively ask him to be invested in it… STILL EARLY DAYS!
What else we Grittin’ On:
STIMULUS. Checks started arriving this weekend. +50% of young people say they will invest it in the stock market.
BITCOIN. Goldman Sachs said this week “Reports Rising Customer Demand for BTC: Predicts an 'Explosion' in the Use of Digital Currencies.”
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