Bad News for “Buy the Dip” Buyers

Andy Snyder|July 25, 2022

Bad news, friend.

This mess we’re in could last a whole lot longer.

One sector is flashing warning signs that this won’t be any ordinary downturn.

It could be far worse than most folks – especially the “buy the dip” crowd – expect.

We’ve written our fair share about real estate in recent weeks. We’re excited by the space.

But thanks to some fresh research and some ominous headlines… our excitement is waning.

It all has us quite concerned.

Hear us out… and get a sense for our new strategy and our “enhanced” timeline.

The facts surrounding this downturn are quite clear and simple.

We printed too much cash… and now we’re paying for it. We have to equalize things before we can start anew.

The Fed is raising rates (it’ll do it again on Wednesday) to try to slow the loans that are responsible for creating new money in a fractional reserve economy like ours.

It’s working.

The nation’s economy is going backward… quickly.

A Superspreader Rally

The battle cry of the Wall Street republic is heard blaring across the nation. “Buy the dip,” the refrain goes. Stocks will rebound.

We once were there… but now we’re not.

We were lost… but now we’re found.

That trade is too crowded. The rally is surely a superspreader event.

We say the dip is further off. We’ll buy en masse when the crowd is crying… when it isn’t so excited and confident about getting a discount.

The situation is most acute in the slow-moving world of real estate. That’s why we’ve been studying it closely.

The news isn’t good.

We learned last week that the nation’s largest landlord – Blackstone – is sitting on a record $50 billion in liquid assets… ready to “buy the crash” in real estate.

And it’s not just the big dogs.

Last week, we heard from a fella with a $40 million rental portfolio. He’s ready to buy.

And so are the folks with $5 million… $10 million… and even the wannabe landlord still sitting on last year’s “stimmy” check.

We’re convinced real estate will fall and present a grand buying opportunity. Like we published on Saturday, undervalued homebuilders are already giving us a shot at short-term gains. Nobody wants to touch them… so we will.

Too Much Money

But we’re not dumb. We know how this goes. All that money above must disappear from the market before the moneymaking begins.

Prices won’t fall if buyers know Blackstone is in the shadows, puffing on a fat cigar, waiting for the downturn. Sellers won’t need to lower their prices if, say, a 2% dip brings in scores of new “buy the dip” buyers.

And like we said, whether it’s stocks or real estate… that ain’t good.

It’ll extend this mess we’re in and give Jay Powell and his troops quite a self-induced headache to deal with.

While the equity in our homes isn’t the top driver of this inflation fiasco… it’s a stubborn foe for the money maestros. It represents a lot of money and buying power that must be erased before we go from 9% inflation… wee, wee, wee… all the way back to 2%.

You know us and our charts…

This one shows just how much equity is jingling in the pockets of American homeowners… $28 trillion. And there’s not a hint of a downward turn in sight.

Yes, sales are slowing… but prices remain at record levels.

Again, with so many deep-pocketed folks looking to buy the dip, it’s exactly what we’d expect.

It tells us things have to get much, much worse before they get better.

It tells us this inflation mess is likely to linger longer than folks expect.

And it tells us it’s not this current recession we need to worry about… it’s the big one that follows it. It’ll be a doozy.

There’s still too much money in the system.

Getting rid of it all will be painful.

Too many folks are still smiling.