Borrowing Window Coming to a Close

• 4 min read
Borrowing Window Coming to a Close

SOMETHING INTERESTING

Great incentives create great outcomes - and they can make or break your business. It’s important to know how to introduce and establish incentives in a healthy way - sans manipulation - to avoid inadvertent consequences (fixing one problem, but creating another). One of our founders says there are 3 ways teams break, and one of them is ‘misaligned’ incentives. This causes BIG, and expensive issues.

Long thread here but well worth the full read - a treasure trove of pitfalls to learn from, AND an incentive creation framework. (Click to read)

MARKET MOVERS

  • Timeshares get a modern and luxurious update. Startup Kocomo is bringing a co-ownership model to luxury international homes (we love a good market-disrupting biz model, especially in the REI market). The company’s mission is to democratize owning a luxury second home in popular vacation destinations. Unlike a traditional timeshare, the shares are actually owned rather than sold as “right to use” to the buyer. This allows buyers to amass equity as the property value grows while also renting the weeks they don’t use as extra income. Sounds like a win-win incentive for both buyer and investor. Could be a lucrative model to follow, even on a smaller scale, if executed well. Read more here.

  • Inflation is pushing asset prices higher, but employee salaries are also ballooning. For example, first-year analysts at Goldman Sachs got a 37.5% base salary pay bump to $110,000 this year. US Job Quits are at an all-time high - we’ve been talking about this a lot (like here). Companies are having to pay more, provide more benefits, and shift labor dynamics/culture to retain and attract employees. Like we said in this digest, tech and innovation will likely replace “expensive” employees. Read more here for an employee’s perspective. Good insight.

  • Rent inflation surges are likely to continue for years to come, creating an affordable housing shortage (Read more here). The booming housing market with home prices continuing to reach new highs means rents, too, are set to explode (rising faster than income). For investors, this presents big opportunities in real estate stocks. The White House also wants to fix the housing shortage with low-income builder tax credits, subsidies, and zoning changes - hoping to bump single-family and multi-family housing supply. Jury’s out on if these efforts will actually benefit the investor in the long run, since land and labor shortages and building material costs are still an issue.

  • House hunters are scooping up B&Bs and converting them into luxury single-family homes. Smart move, with the current housing shortage. Although travel has rebounded, Covid-19 forced some proprietors to rethink their business. In the U.S., B&B revenue plunged 43.7% in 2020. Buyers and investors alike are having to get super creative and resourceful to find inventory. Read more here.

  • Banks and investors gear up for US corporate debt binge/borrowing spree as the window of opportunity to lock in historically low interest rates may close and a surge of bond supply burgeons in September. Big corporations will likely rush to seek out financing for big mergers and acquisitions. Other companies will use the stretch before Thanksgiving to hunt for low interest rates, before things get tricky around year-end, when liquidity can dry up (not to mention high inflation is sure to create higher borrowing costs by EOY). Read more here, and here.

WHAT TO WATCH

  • Motels are making a comeback (yes, you heard that right). Roadside motels and bungalow colonies, which have been hiding in plain sight throughout upstate NY, are being restored by a new generation of owners as vacation destinations. These once-forgotten road trip stops are getting a second chance at becoming tourist destinations for those looking to escape the city. In light of Covid, outward-facing rooms and unshared hallways are desirable. We think hospitality could be a risky, albeit, FUN endeavor. Motels — both old and revived — pose unique investment opportunities - ripe for the picking on the market and awaiting new stewards. Source.

  • The world of blockchains and NFT coming together has been transformational, and market disruptive, for sure (see how they are drawing money away from Bitcoin). If things keep moving in a bullish direction, this art will continue to appreciate in value. Our take: The fun and the community make it a worthwhile investment and way to support the movement. Source(8:19)

  • Paypal to become Robinhood's competitor as they plan to expand into securities investing. The company is developing and registering an investment platform called “Invest at PayPal”, and it could launch next year. Paypal has 20 times as many active accounts as Robinhood and doesn't need to incentivize frequent trading to make money. Read more here.

  • Labor shortage and supply chain issues are impeding home construction and remodeling (for those needing these services for investment properties).  This thread and this thread give insight into this ongoing challenge.

FINAL THOUGHTS

Look for people who have lots of great questions. Smart people are the ones who ask the most thoughtful questions, as opposed to thinking they have all the answers. Great questions are a much better indicator of future success than great answers. - Ray Dalio, Principles: Life and Work

Who you spend your time with and surround yourself with, both in your business and personal life, can either produce compounding returns or devastating losses. Be intentional to look out for people who aren’t smart in their own right, but are self-aware enough to know there’s always more to learn.


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