How To Exploit "Work From Home," In Reverse
Celebrating Jamie Dimon's rant, how housing is about to get weird, and why you should be looking into one market sector that's been left for dead.
When you shut down the world economy for a pandemic, there’s going to be ripple effects. Back in May 2020, the oil facilities in Cushing, Oklahoma were completely at capacity, so it was impossible to take delivery on crude futures at settlement.
Crude traded down to negative 40 on that crash.
Other ripples take time. Sometimes years. Systemic inflation started to trickle in, and even though the Fed swore it would be transitory (lol), it’s been sticking around for years… especially in shelter.
We’re starting to see a shift.
This is a chart of home listings in the State of Texas, which is now at multi-year highs.
Housing is about to get weird. Not “expecting a crash” weird, but a reset of housing affordability from rate cuts and price cuts.
Will some of this be due to a Fed cut? Sure. But it helps when 1.6 million migrants leave the country.
Law and order helps as well:
It’s still about men with guns, enforcing laws. That’s a deflationary source not priced in by the bow-tied economists.
There’s another space that will soon offer solid upside for investors willing to step in when nobody else wants to.
This Sector Has a Case Of The Mondays
Office. Space.
This is not a hot market. Analysts are calling this “structural oversupply” due to work from home and uncertainty from tenants.
The reasons stated are pure cope. The real answer is that major metro areas are completely full of violent homeless vagrants and drug dens. Employees don’t want to step over literal human shit on the sidewalk in order to go to their office job.
How does this get fixed? Men with guns. Right now Washington DC is running a law enforcement op… and crime follows a kind of power law, where if you lock up 20% of the worst offenders, then 80% of the crime disappears.
Once the streets get cleaned up, then employees have fewer excuses to get to the office. And I don’t buy remote productivity numbers.
Jamie Dimon said it best:
And don't give me this sh-t that work-from-home-Friday works. I call a lot of people on Fridays, and there's not a g-ddamn person you can get a hold of...It simply doesn’t work...And it doesn’t work for creativity. It slows down decision making...The young generation is being damaged by this. That may or may not be in your particular staff, but they are being left behind...They’re being left behind socially, ideas, meeting people...There is no chance that I will leave it up to managers...Zero chance. The abuse that took place is extraordinary.
I’m expecting that within the next year we’re going to see a ramp of office workers going back into actual office buildings.
Here’s where the opportunity can stack:
This chart is floating around, showing how data center construction is about to eclipse office construction.
That tells me there could be supply constraints in office space, giving REITs more pricing power and the ability to remark their assets.
How To Trade The Office Space Theme
Here’s a look at a monthly chart of Boston Properties (BXP) on a total return basis:
It’s got a range between 60 and 80 that’s been in play for a few years. It could be a good long term hold, but this doesn’t have the kind of sensitivity in case I’m right on the bet.
Instead, I’m looking for beaten down office REITs. Maybe they cut their dividend, maybe they eliminated it. But if they made it through the office space collapse and interest rate hikes, then we’ve got the chance for some massive upside.
Today’s deep dive for Convex Spaces Clients will reveal a stock that fits that criteria. It’s been in turnaround mode this entire year, price action has improved, and it has multiple tailwinds where I expect it to be an easy double from these levels.
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