Here's What I'm Thinking About Right Now

I'm going to start writing a weekly version of this. Here are some things I'm thinking about this week:

The Covid Crash was our 1987 crash.

Over the next four years from the bottom the S&P 500 was up a little less than 110% in total. It was a wonderful buying opportunity. In the four years or so since the Covid Crash bottom in March 2020, the S&P 500 is now up nearly 150% in total. It was a wonderful buying opportunity. The bull market lasted well over another decade following the 1987 debacle. I don't think we'll be that lucky this time around but the Covid Crash is eerily similar to Black Monday.

People with money continue to spend money.

I'm on spring break this week with my family in Florida. Like many places, prices here are noticeably higher. Food, drinks, hotels, experiences -- everything is more expensive than it was just a few short years ago. But that's not stopping people (me included) from spending money. I know spring break is not real life, but people with money are willing to keep spending even at elevated prices. This helps explain much of what's been happening in the economy in recent years.

Nothing ages well in the markets.

I've spent the past few years writing positively about the U.S. economy. I've done so not to predict what will happen in the future but to analyze what is happening in the present. Last week, I made the case that we're living in our own version of the Roaring 20s. A permanently bearish guy who wears a bow tie1 even poked fun at my analogy by pointing out the original Roaring 20s ended in the Great Depression. Jeez, I never thought of that. I get it. I'm probably too glass-is-half-full most of the time. But pointing out that good times are usually followed by bad times is not an original thought. Of course today's good times will end badly at some point!

I would bet on weather & water in the housing market.

The two housing themes I'm most bullish on in the coming decades are good weather and water. I've traveled to Florida a handful of times in the past few years, and every time I check Zillow, the housing prices seem to keep rising. The pandemic had something to do with this but you also have 10,00 baby boomers retiring every day and many of them want warm weather. There are 70 million baby boomers and they control something like $70 trillion in assets. We're looking at 10-15 years of boomers buying places in Florida, Arizona, the Carolinas and other warm destinations. Most of them have paid off mortgages and an obscene amount of home equity. Good luck betting against this trend.

They have a lot of money money and are ready to enjoy retirement so most boomers won't worry about sky-rocketing insurance premiums. They'll roll the dice. By the time the baby boomers die off the oldest millennials will start thinking about early retirement and Gen X will already be there.

At that point, we could see a reverse migration to the north and more moderate climate as the heat in the south becomes more unbearable in the summers. Owning real estate by the Great Lakes is my personal climate change hedge for the next 10-30 years.

Michael and I talked the stock market, consumer spending, economic commentary, wealth inequality, Florida, and more on this week's Animal Spirits video:

Subscribe to The Compound so you never miss an episode.

Further Reading: Are We Living in the Roaring 20s? My biggest financial loss (Marvin's Substack) The financial story that sells (Of Dollars & Data) A simple theory of the stock market (Interfluidity) How to spend $200,000 a month (Forbes) How much does it cost to build a new home? (Construction Physics) Flowers, finance, and human fallibility (Finding Joy) Books: Deep Blue by Randy Wayne WhiteThe Fish That Ate the Whale by Rich Cohen

Read more