The Cost of Money Is Changing Everything
570: Housing, Yields, and What's Next
Morning guys.
Hope the week is going well and you are stacking bands and cashing checks. We have had 300+ new subscribers since July 7th so welcome to all of you.
Some exciting market development this week that we will start off with and then we will dive into a basic real estate overview.
Seems like folks are getting back into the swing of things. Maybe people are returning from vacation or maybe it is the movement in markets, either way, welcome back if you took a short hiatus.
If you missed Tuesday’s post make sure to check it out below, it had some solid reception.
We will be monitoring the Iran and Strait of Hormuz situation through the weekend given the fact it seems to be ramping up again. Truly just never ending.
Financial Markets & Equities
Interesting week so far in the equity world.
As of market open this morning the Dow is down 600 points, the S&P and Nasdaq are down over 1%, and crude oil is over $100 after Iran backed militias claimed responsibility for attacks on Saudi tankers.
More noise, and might use the day to add to some of my positions. That being said it looks like some of the major narratives are showing some cracks.
GOOG 0.00%↑ is getting hammered today down about 7% after reporting cash flow is negative for the first time in many years and TSLA 0.00%↑ is hurting as well, just hours after Jim Cramer said the “bulls don’t care”.
Deutsche Bank headquarters has been raided for a third time this year - fire up the memes again (Unusual Whales/FT)
The EU has fined Google $1,020,000,000.00 for favoring its own products across Search and the Play Store (Polymarket Money)
Japan is considering regulating Pokémon cards amid concerns over counterfeiting and resale (CoinTelegraph)
US 30 year Treasury yields have now traded above 5% for 27 days in this year which is the most since 2007 (Bloomberg). The US 10Y Note Yield officially surged above 4.70% for the first time since January 2025 (Kobeissi Letter)
Amazon is hiring a Bitcoin & Crypto Ecosystem Lead to drive blockchain integration and crypto adoption (Whale Insider)
INTC 0.00%↑ is reporting earnings after market close today (I yolo-ed a few $115 calls for fun)
The United States Oil Fund LP USO 0.00%↑ is up a whopping 87% this year
Yields are now soaring globally right now.
What is the TLDR monkey brained takeaway?
Let’s go back to Freshman year econ class. Bond yields represent the cost of borrowing money. So when we see them rise globally, capital becomes more expensive for governments, businesses, and consumers.
You get higher mortgage rates, more expensive corporate debt, increased financing costs, and tighter financial conditions across the entire economy.
And remember!
The U.S. now has a whopping $40 trillion in national debt. Every sustained increase in yields means the Treasury eventually has to refinance some maturing debt at significantly higher interest rates. That then causes interest expense to balloon, which will then crowd out other government spending. We see the same issue emerging in countries like Japan, France, Germnay, and the U.K.
On the stock pick front…..
Our SMCI 0.00%↑ play was looking better mid week after the company's preliminary fourth quarter update showed some dramatic improvement in profitability. Gross margins are now expected to come in between 15% and 17%, which is nearly double prior guidance of 8.2% to 8.4%.
The company pointed to this being driven by a more favorable customer and product mix.
Even more impressive in my opinion is that Supermicro disclosed more than $60 billion in new orders during the quarter, pushing its backlog to a record high and reinforcing our view that AI infrastructure spending remains one of the strongest secular growth trends in the market.
While their revenue is expected to land near the low end of guidance, the sharp improvement in margins might just suggest they are gaining a bit more pricing power and operating leverage as demand for AI servers continues to accelerate.
Good to see after the negative headlines and FUD on this name. I hope that they catch up to the other AI behemoth plays of the last year. Readers would be printing.
Defense has also done well with the continued Iran tension after a little bit of a slowdown.
Anduril and Archer unveiled Thunder this week, the Dune-esque autonomous attack aircraft designed to operate alongside crewed helicopters. It has counter drone tech, missiles, the whole nine yards.
We also saw Israel approving a significant increase in defense spending as regional conflicts continue to reinforce this multi year rearmament cycle we see on battlefields across the globe.
I think most ordinary people are beginning to recognize that this isn't a temporary surge in military budgets, but a structural shift toward higher defense spending and new operations by the Trump administration across much of the developed world.
It's no surprise then that many of the names we've been highlighting continue to perform well over the last week including:
ONDS 0.00%↑ (up 24% in last 5 days)
KTOS 0.00%↑ (posts earnings August 4th)
LMT 0.00%↑ (just beat on EPS and Revenue)
All these are posting some gains so far this week as capital continues flowing into the sector.
Amid ongoing updates from the Middle East today the Kobeissi Letter highlighted that Iran’s Speaker of the Parliament Ghalibaf said that the Strait of Hormuz will not return to pre-war conditions:
“In a region where we do not sell oil, no one will sell oil. If our security is not ensured, no infrastructure will be safe”
President Trump is reportedly considering new escalation in response saying this week he is considering “major combat operations”. The pain literally never ends for us.
It should be very clear to consistent readers but I remain extremely constructive on defense as one of the defining investment themes of the decade, primarily because it increasingly marries AI/drones with heightened confrontation between the major powers AND big spend from Europe, Israel, and the US.
Crypto
Hate to say it, but some of our momentum got knee capped with GOOG 0.00%↑, yields, and other tech dumps.
Before today crypto looked to be in a holding pattern awaiting a positive development related to the Clarity Act.
It was flatlined just content to wait while Bitcoin ranged around $66,000, now down to about $64,500 at the time I am writing this (9:05am).
There’s continued discussion online as to whether or not the bottom of this bear cycle is close with the consensus being sometime in October. I said last week I am a bit wary with everyone agreeing on this timeline.
If you think that the majority are wrong and the bottom might be in already (or we are close to it) there’s a solid window here to position, especially before Clarity potentially goes through. There’s also the possibility AI rotations come to crypto.
The Clarity Act seems to be close to approaching do or die time now, with some positive developments coming out. After months of political gridlock, the most recent reports suggest negotiators are closing in on a compromise over ethics language with the latest version barring presidents and other federal officials from issuing or sponsoring digital assets.
Convenient timing for Trump lmao.
I haven’t checked today yet but you can view the latest odds of Clarity passing on Polymarket. I think the most entertaining outcome there is extreme doubt and then it suddenly makes it through unexpectedly.
We are also starting to get some major institutional figures giving their opinions on Clarity. Goldman Sachs CEO David Solomon said this week:
"I’m very supportive of moving the Clarity Act forward, so we can get some market structure in place."
Senator Thom Tillis of North Carolina has said:
“If we bridge the gap on ethics tonight or tomorrow, then I think we’ve got a shot.”
I am not purchasing crypto today, when we get a conclusion to Clarity I think we will have a better idea of when this market bottoms and what catalyst it will take to reverse us into a bull bender.
Real Estate Check In
As I prefaced on Tuesday I am far from a real estate expert but I can try to break down the current snapshot in easy terms for you all. If we have experts or folks in the space that want to share additional insights/regional takeaways in the comments please feel free.
For most of our readers (age 20-35ish) home ownership is likely a major goal. Post Covid has proven to be a difficult time for young people to achieve that goal for a multitude of reasons, but chiefly, much higher prices and rates.
The money print fest in 2020 (that you can see below) absolutely catapulted sales prices. Right now on Polymarket there’s about a 30% chance that the median home value in the US ends up being somewhere between 419K to 426K by September 30th.
For years, investors and young folks have been waiting for the U.S. housing market to “break.”
It hasn't and instead, we've entered something a bit stranger, just take a look at some of these headlines from July:
As reported by CBS News, U.S. home prices have indeed risen for 36 straight months, reaching a record median price of $440,660 for existing homes in June
46% of home sellers have offered concessions to buyers, an all time high, per Redfin (Unusual Whales)
Roughly 227,500 properties filed for foreclosure so far this year, a 21% increase from last year and a 30% increase from two years ago (Barchart)
As a 33 year old with a family I am beginning to look a bit more seriously at the market. We rent a larger townhouse now in a great town and as someone who prefers to remain liquid I am not crazy about caving to finally buy, but we likely need the space.
The quick math I just don’t like:
Let’s take a $1 million home with a 20% down payment. That leaves an $800,000 mortgage. At 6.75% on a 30 year fixed loan, the monthly principal and interest payment is roughly $5,190.
Over the life of the loan, you’ll pay approximately $1.87 million in total, meaning more than $1.06 million goes to interest alone! That’s before factoring in property taxes, homeowners insurance, maintenance, utilities, or dreaded HOA fees.
Now compare that to the same mortgage at 3%, where the monthly payment falls to roughly $3,370 and total interest over 30 years is only about $415,000.
The difference?
Nearly $650,000 in additional interest simply because rates doubled.
Absolutely absurd.
You are 100% better off buying in cash and I read a report from our town from last year. Almost 45% of properties were purchased with zero mortgage lol. Bonkers stuff.
Reality is we have a market that's largely frozen in place.
Millions of homeowners remain locked into those sweet sweet 2-4% mortgages they have little incentive to give up while new prospective buyers continue looking at financing costs that remain more than the double pandemic era lows. Those people who purchased then really made out like bandits.
If you check in recently, the average person online thinks real estate is starting to crash a bit but it isn’t (could be cope).
Instead we’re seeing an unusual split combo. You have:
Existing home sales remaining pretty sluggish
Home prices continuing to hit record highs nationally (it’s absurd)
Inventory slowly rebuilding
Mortgage rates remaining stubbornly elevated around the mid 6% range (and likely headed higher)
So I think we’re in a weird little stand off where people don’t want to sell because they refinanced into 2-4% mortgages and potential buyers don’t want to buy because financing costs doubled.
The result we get is very little turnover with a market that is not defined by collapsing prices but by the fact you have collapsing transaction volume. Existing home sales remain historically subdued even as national home prices continue hovering near record highs. Take one drive around/check zillow and you will see some boomers asking laughable levels for $400,000 homes.
I can only speak for myself (in the Northeast) but where I live if you want the basics (no remodeling or additional work needed) you are going to have to pay $1M - $1.2M.
You CAN get a nice house for $800,000 to $950,000 BUT it is going to require some work within the first two years to either re do the kitchen, upgrade older parts, or re-do some floors/rooms etc.
People’s own personal financial situations dictate the risks they want to take. For me?
If I need to pull the trigger I will, but my preference is to always play it a bit conservative as I like flexibility. If I were to buy soon I would play it safe and shoot for something well within my means that I could put some work into myself.
Unfortunately if you are in the market now, the implications are fairly straightforward.
The Federal Reserve doesn’t directly set mortgage rates of course, but its policy heavily influences Treasury yields, particularly the 10-year Treasury, which serves as the benchmark for 30 year mortgages.
If the markets continue pricing in additional rate hikes (as we pointed out on Polymarket earlier), mortgage rates are likely to remain elevated or even push higher from their current mid-6% range, where they’ve already climbed to the highest levels of 2026.
Something’s got to give.
For now I remain a lurker, wondering if I will ever be able to achieve the American Dream white picket fence and crisp green lawn while Somali daycare scammers in Minnesota buy McMansions with my tax money.
Have a great rest of the week guys. We're almost in August, and with it comes the gradual shift out of the summer lull.
Vacations begin winding down, kids head back to school, Wall Street desks start filling back up, and attention inevitably returns to the markets and work.
Historically, this is when I notice volume begins picking up and newer narratives start taking shape heading into the fall. We'll be keeping a close eye on the biggest opportunities and developments so you're positioned before the crowd catches on.
See you in the next one.
Andy
Trade on Polymarket
Disclaimer - None of this is meant to be formal financial advice, I am a former corporate sales/trading guy with a monkey brain who writes about my own opinions each week. Do your own research before investing or trading and never make decisions that are contrary to your own personal risk tolerance.