Clients & Friends,

August was a quiet month in terms of market returns and economic data (more below). We also saw heart-wrenching videos of folks trying to flee Afghanistan as the US’s departure allowed the Taliban to retake the country. No exit would have been perfect but this certainly did not look like a healthy way to handle things. I can only imagine the level of frustration and anger the people of Afghanistan feel towards Americans.

Otherwise, not a lot happened in August so this update is short and sweet.


Turning to the world of housing, prices keep going up. The percent of builder share (the share of houses built by a publicly-traded homebuilder) hit a new high this year. Nothing to really infer here, just an interesting data point – 39% of all houses built are being built by a public company.

Another reason prices keep going up is there is a low supply of available lots to build on. Demand is staying high while supply is decreasing leading to large price gains. Economics 101 on full display.

And no surprise that the median price for single-family homes continues to go up. The price has almost doubled over the past 10 years.

The availability of low-priced homes doesn’t seem to exist anymore. With prices increasing the way they have, home ownership for lower income families has become further out of reach. The % of homes being purchased for over $500K continues to grow and is the largest contributor.

And as we continue to recover from the COVID shock, mortgage delinquencies as a % of total loans continues to decline.

Shipping and Supply Chain Delays

We’ve been highlighting supply chain issues for some time as well as the shipping costs. Nothing has changed here and costs continue to rise. Price increases are likely to get passed along to consumers and it’s likely going to be a long time before this eases up. It takes years to add supply to shipping markets.

Come along and ride on a fantastic voyage….as a fertilizer. Pre COVID, an order placed would have taken 70 days. Now, an order placed February 2021 for at least 9 months!

There are a lot of ships anchored off the port of LA just waiting to be offloaded.

All the supply chain woes have lead to microchip shortages for cars and the lowest inventory level on record. Used car prices have sky rocketed and is why I keep getting things in the mail to sell my car.

And I don’t see this ending anytime soon as auto makers cut production. If you want to purchase a new car, I’d anchor your expectations that it’s going to take months if they don’t have it on the lot.


Goldman recently released their forecast for the S&P and EPS targets. Based on their expectations for 2022 year end, it equates to a 23X forward PE ratio which is incredibly high. But this should not be a surprise to anyone since most of us know markets are extremely over-valued relative to historical levels.

The 5-year cyclically adjusted earnings yield is below the 1929 peak and tech bubble. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of a company’s earnings per share. This metric is used by many investment managers to determine optimal asset allocations and is used by investors to determine which assets seem underpriced or overpriced. Historically, this pointed to poor forward performance.

Emerging market (EM) stocks relative to developed markets are at very low levels. I’ve been hearing managers rotating to be tilted towards EM for the past few years as they believe the underperformance won’t last.

I remember when you could buy a 5% muni-bond at par ($100) but it’s definitely fading as a memory. It’s very difficult to buy any type of bond at a 1% yield.

Real yields across the globe are incredibly low or severely negative depending on the country’s level of inflation. South Africa is now under 4% net of inflation which doesn’t seem nearly enough to compensate for the level of risk taken. We’ve been talking about low or negative yields for so long that I think we’ve become used to living in this environment. We’ve become used to something that makes no sense.

Just as working out without a spotter can be dangerous, investing without an “investment spotter” can be equally detrimental. I’m available if you need the spot.

I hope you found this month’s update helpful and informative.

Best Regards,

Jared Toren
CEO & Founder

Most Often Sources: Edges & Odds, WSJ Daily Shot, 361 CapitalSteve Blumenthal’s On My Radar

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