Projects
![]()
No projects found
Investors
New
DAO Treasuries
DATs
Lend / Borrow APRs
Chains
Categories
Spaces
#FinanceDaily: AirBnB industry troubles | Fed signals more tightening
Recorded: June 29, 2023 Duration: 1:46:12Space Recording
Short Summary
The conversation explores emerging trends in the financial sector, including the impact of quantitative tightening on Bitcoin, the potential transition to a CBDC, and strategic consolidations in the banking industry. These developments highlight significant shifts in market conditions and regulatory landscapes.
Full Transcription
Yeah, we'll be starting a couple of minutes.
By the way, I posted about aspartame.
It's interesting.
Did anybody see that?
I don't know.
I'm thinking about maybe doing spaces on, like a deep dive into aspartame and all the data.
It's kind of scary right now.
For people that drink Diet Coke, stop.
Like I'm telling you right now, stop.
I've been saying it if people follow me.
I've been saying it for maybe, I think I put a whole thread out maybe six months ago.
I don't know, maybe people remember, but about six months ago about how these non-nutritional sweeteners, by the way, that's what they call it.
It's actually supposed to be non-nutritional sweeteners, which means that there's no nutrition in these sweeteners, these artificial sweeteners.
I'll give people a little life lesson right now.
there's no free lunch.
Like literally, there's no such thing.
Something is getting messed up somewhere, all right?
The only answer is actually moderation.
Anything that's like totally artificial is bad.
So it's like a little sort of hint on how to make decisions.
Process things are usually bad.
There's some shit going wrong somewhere.
All right.
So thread maybe six months ago, I'll find it in the comments.
But where they looked at all of these non-nutritional sweeteners and what they found was crazy.
What they found, and this is like in nature, really high quality study, they looked across cells to animals to humans, all three, okay?
So this is like the best type of study that you can do where you're kind of working through the whole thing.
Now, they didn't do a meta-analysis, which is the highest level of evidence, but I don't think they need to for this kind of thing.
And it's really hard to do like RCTs or randomized controlled trials on nutrition.
So we can talk about it separately.
So what they did was they looked at the whole thing.
And I kid you not, what they found was that taking non-nutritional sweeteners like
Aspartame and Stevia and all of these different ones, they actually cause more metabolic
dysfunction than just taking sugar.
Because what they did, so for people that don't understand what type 2 diabetes is,
sorry, I know this is a finance base, but there's only 700 people here.
Just me and my good friends here.
So, you know, the thing...
That's crazy.
If you just think about how diabetes happens, it makes complete sense.
So what diabetes is is taking sugar,
Your body has a glucostat or something that looks at, okay, did we take in sugar?
Did we take in sugar?
Do we take in sugar?
And so then when it notices, quote unquote, that you take in sugar, there's two types of
stats, okay?
Two types of like little meters in your body.
One is at, one is in your pancreas and then one is in your brain.
All right?
Both are the sensation of sweetness.
is a glucose.
Now that you know that, you're like, oh, shit.
So our brain thinks that we're getting something sweet.
Our pancreas does not.
Brain overrides pancreas.
That's what we found recently.
So what happens is your body reacts as if there's sugar, but there is no sugar.
Okay, what's the problem? That's okay. It'll just get more sugar into your cells. No big deal.
Well, that's not good because what happens is that over time your body, your brain keeps thinking, hey, there's sugar, hey there's sugar, hey there's sugar, but there's no sugar.
So what it does is the receptors that take in the sugar on the cells. They say, well, my brain's dumb.
It keeps making these dumb mistakes. I'm just going to be less sensitive to it. So they become more resistant.
to that's that glucostat, which by the way is called insulin resistance, which by the way is
diabetes.
Like we're literally causing diabetes.
And so it's acting the problem it was supposed to prevent.
And this is the crazy part that nobody's telling people.
This shit is still sitting on the shelves.
We have enough data now.
Like, you guys have heard me hate on the FDA quite a lot, but how is this allowed?
Like, and now the WHO, whatever you want to say about them, this is an example of, you know, when people come on these stages and they're like, the WHO is bad, like we should not support it.
Dumbasses, the WHO is not connected to the FDA, which means that it can do independent studies.
And the WHO has some issue.
There is some politics, sure, but they are the...
It came out.
The FDA did not come out and talk about the possible carcinogenic effects of aspartame.
By the way, I can't say this because I don't have the evidence, but I'm letting you all know, do not take any artificial sweeteners.
Just listen.
I don't have the evidence to prove it.
I'm just telling you, do not take it.
It just makes sense.
So I know I started on a completely...
random tangent but this is my PSA of the day uh uh Rob's listening I'm gonna bring him up
because he he drinks now do fake meat that includes any fake meat fake meat fake me I generally
have a diet cook of my hand on these faces so it's good to know yeah no more Matt you
got to stop it's not medical advice but you got to stop it's friendly advice hey by
the way friendly advice not medical advice before I get sued by Diet Coke um
It's crazy.
Like, this is, this is my opinion.
Not as a doctor, but as somebody that's read the research and, and have a doctor.
There's just too much data now.
Be dumb enough to continue to do this.
So now you can't say I didn't know.
There's, you know, drink black coffee.
It's easy.
If you want the caffeine, just drink black coffee.
Much better.
And, you know, less carcinogens.
Super simple.
All right.
You know.
Another news in healthcare, I was going to share the actual, give me one second, I'm going to pull up the story.
So when we think about what's going on in healthcare, you know, a lot of people, okay, actually before we go there.
Trevor, did you have a question?
Just want to make sure.
Yeah, I was actually, I was talking to one of our tech guys yesterday who said that, I don't know if it was the FDA or if it was a trial proceed or something, but that it's been accepted now that for drug trials that they're going to allow simulation and modeling instead of
rat trials have you heard anything on this yeah so what they're talking about is in silico trials
that can predict use artificial intelligence to predict what would happen in a human trial it's not in
the mood of that it's just it's in the earlier phases okay yeah so in the earth so what we do today
is there's different um feasibility trials there's different things that happen before the actual
clinical trials
And so like you mentioned, like instead of animal trials, which by the way, don't really translate well anyway, it's better to be able to take that compound and do in silico trials or artificial intelligence-based trials so that we can predict what should be, what should go to phase one and what shouldn't.
Easier to get through IRBs, institutional review boards, easier to get through the early phases and kind of speeds up the process of getting it to phase one trials.
Okay.
So hold on. I'm going to add this here. This is a story that's not in the title, but I wanted to make sure that we covered it since it's, again, this is the reality of healthcare. Hold on here. So DOJ, the Justice Department just charged.
78 people with $2.5 billion in health care fraud.
Did people see this news?
If you did, please feel free to weigh in.
The DOJ said that the defendants allegedly defrauded programs used to take care of elderly and disabled people and in some cases bought
exotic cars, jewelry, yachts.
It's 11 defendants of committing, you know, so of the 78 people, 11 of them, you know, so
remember, it's 78 people that did 2.5 billion health care fraud, but 11 of them did
$2 billion in fraud.
So there was like 11, like, big lynchments.
These 11 defendants claim, you know, they used telemedicine to do all of this fraud
and you've got to read the...
I'll even put the link to the CNBC article,
and there's a bunch of articles out there.
Give me one second.
I'm going to reply to this,
so you guys can do your own research as well.
But...
But what's really crazy about it is that they built software, I'm not even kidding, that automated the telemarketing of this.
So they were marketing to old people telling them, hey, we've got these same day doctors, you can get access to care, all of this stuff that people can't get access to.
And then they would, the same doctors also had medical equipment and also had pharmacy.
And so they were claiming that they were sending medical equipment to people that didn't need the medical equipment.
And they were sending medications to people that didn't need the medications.
And they didn't actually do either.
But they claimed that they didn't.
They build insurance.
So technically it's a victimless crime, technically.
But you know, all of our insurance prices are going up because of it.
Right.
And so these people literally claimed that they were doing things they didn't do and then they got caught.
Crazy. It's so much money.
Like, people don't realize how much money that is in healthcare.
$2.5 billion from 11 people were involved in that scheme.
And, you know, the reason why I'm bringing this up is because there's been a lot of talk about how great telemedicine is.
By the way, I believe in telemedicine.
My company uses telemedicine.
You know, I'm a big bull on telemedicine long term as a channel for care delivery.
But man, are we seeing a ton of fraud in telemedicine?
And, you know, it's a, it's so telemedicine for people that don't know, you know, during COVID, remember how you could zoom your doctor?
That entire industry is called telemedicine.
And this is crazy that we had such a huge amount of fraud happen at such a large level because of telemedicine because doctors, you know, and yesterday there was a stage of...
I'm not going to talk about COVID.
It's literally the worst thing for me to talk about,
unless I absolutely have to.
But, you know, they were talking about,
well, you know, doctors are infallible.
You know, it's not the doctor's fault.
Dude,
Doctors are humans and there are good humans and bad humans.
And I'm a doctor so I can say it.
You know what I mean?
Like, it's not a big deal.
We can say there are bad doctors out there.
And these were bad doctors.
They literally 11 people were stealing money from old people.
Like, can we just, can we just like say, okay, these are bad people?
And, you know, people keep through the DOJ for X, Y, or Z.
But man, this is a big catch.
$2.5 billion, $2 billion of which was against 11 people who were defrauding old people.
It's kind of nuts.
And so, you know, it kind of speaks to some of the challenges that we have here in the U.S.
with our husband.
And I can tell you this, for people that are hoping for lighter legislation and lighter regulation of medicine industry, this doesn't help.
Um, you know, has anybody here used telemedicine for themselves in the last few years?
I'm actually kind of curious about whether you felt like it was actually effective.
And no one's here seen a doctor on.
Holy moly.
So he's this service called Forward.
Yeah, I use a service called Forward that's, I guess, kind of in that telemedicine run.
But they have real, you know, I go in and see them for real too.
It's more of a concierge, but.
Yeah, yeah, no, I'm forward.
I have thoughts about what they claim to be medicine.
But, um...
Sorry.
But nobody else...
No, please do, because they told me to drink more Diet Coke, so...
Well, they told you drink more Diet Coke.
Are you serious?
I'm just...
No, no, no.
I'm just...
Okay.
Okay.
He's referring, you know, before like all these thousands of people came in, I was mentioning
about...
And I guess I should add that here.
Let me find my tweet here.
All right.
Why you're finding it, though, why you're finding it, though, that's not like, I've been hearing that a while, even about stevia and how, you know, dump it.
And so, like, I have this vegetable-based protein powder.
I've been taking, I shouldn't say taking it.
That's funny.
I've been eating it for crying out loud.
I've been mixing, like, kale in with it and peanut butter, and I've been doing this protein powder.
And I'm trying to find a replacement without stevia and good freaking luck.
It's really hard to find.
Well, also, oh, man.
Not medical, but be careful of protein powders also.
I'm happy to kind of talk about it.
I think I'm going to do with separate spaces on that topic because...
I have a ton of data that I can share and go super deep on this.
But this is like an example of something where there's an entire industry that
excuse that something was good for you.
And it's actually not.
Because you just have to like sit through and understand the mechanisms.
Or it's not clearly good for you.
How about that?
So the risks may not outweigh the benefits.
That's how I think about everything.
The problem in our, you know, we talk about the medical industrial complex.
The supplement industrial complex is worse.
Right.
It is way worse.
Like way worse.
Do not just go out there.
You know, like some of these supplements contain, you know,
arsenic and mercury.
The things that people are freaking out about.
You know how, and I'm not going to get too political,
but RFK Jr.
is out here talking about vaccines and the shit that's in vaccines,
but I've never heard him go after the supplement industry.
Why are we not seeing that?
That is way worse.
So just want to say that,
All the supplement and wellness people, people should be calling them out and saying, you told me to take stevia.
You told me to take aspartame.
You told me to do X, Y, or Z.
And now we know that it causes, it has, there's multiple pieces of evidence that shows that aspiratee actually is a carcinogenic.
It actually is potentially a causative factor in.
Now what?
And that's what I'm saying.
It's like, I thought we've known that for like, we haven't.
I thought we've known that for like over a decade.
No, people have been talking about it, but there's no, there's not been high quality studies.
That's the thing.
Science takes time.
That's just how it works.
And you can't make like claims like, hey, something's a possible carcinogen.
People can do it.
And they're the way, what's interesting is, and this is something that, again,
Again, I'll do a separate space on because this is a finance space and probably all of our listeners are like, man, Donish is going off the deep end here.
But it's because, you know, first of all, you all are listening, which means I get a chance to make you like not stupid.
Like continue to take aspirin.
Rob, stop the Diet Coke.
Stop it.
All right.
And then not medical advice.
And then friendly advice.
So number two, stop doing process shit.
All right? It's not working.
Like, it's not.
Keep finding stuff.
But the thing that's really interesting is that there are some rules of thumb.
And so a lot of the people that have been saying, hey, aspirin causes cancer.
They're also making a bunch of other claims that are unsubstantiated, right?
And so the problem is it's hard to know the signal from the noise.
So here's a simple example.
If you just say everything causes cancer, then when you're right once, you can say,
oh, I told you that this causes cancer, right?
And so that's actually what's happening.
We need, like, better people going into this that actually have backgrounds in science and research,
and we need more money going towards this so we can find these things out.
So I will now remind you that we've talked about,
industries within healthcare that are actually not just pharma-based.
Like the supplement industry is completely unregulated.
People, there are doctors, like actual medical professionals,
they are going out here and saying,
if you take this drug, by the way, it's under my name, right?
It's my, it's named by, you know, it's using my brand, right?
And or their brand.
And they're pushing it to their patients, and it's awful.
It should be illegal.
Like, we're not allowed to do that with drugs.
I can't name a drug the, you know, Donish.
And you guys, oh, I'm just taking the Donish today.
It's like, that shit's not allowed, right?
Like, it's against the law.
Why is that not the same for fucking supplements?
Like, how is this possible?
So, anyways.
Done. Sorry. We're going to get started.
Hopefully.
We didn't even get into the fact that listening to Miley Cyrus music also causes cancer.
Oh, God. Can't say that. Disavow.
But I was going to say that for people that are listening, if you want more of this.
content please let me know go into the comments on the bottom right please let me know if you
guys actually want me to do a space on this and actually like a research based space i'm not gonna do
just like a talk shit about stuff i'm happy to like actually do a deep deep dive if you want to hear
more about all of these topics but like with the research we know and what we don't know yet
just go into the bottom right and put it in there and i i swear i read them and i will uh
I will see if we should do like a bigger space.
We're also talking just so for people that are aware,
we're currently in talks with the most well-known name in longevity.
I'm not going to say it,
but it's the most well-known name and longevity
about doing spaces on health and longevity
that are science-based to begin with.
And this is legitimately, when I say,
like, if you literally Google longevity...
you know, lab, like it's the biggest person that everybody talks about.
So we're talking to them about bringing them in, no guessing,
talking about bringing them in and actually at least doing one or two spaces and seeing how they go.
So if there's a strong interest, please go on the bottom right, into the comments and let us know.
And we're happy to kind of go into it.
All right, we're going to move on.
And if there's any questions, I'm happy to answer them right now, but we've got to move on.
We're good.
So with the supplements, if it's named after somebody, it's probably BS.
Does that apply in economics as well?
Possibly.
But my point is actually not that it's probably BS.
My point is that it should not be allowed.
Because people think that if it's associated with a person, that they follow on like TikTok and shit, like it's actually like a good quality.
And what's really interesting is that all of the supplements are actually sourced from the same sources and made in the same factories.
It's just there's a different label on it.
And no one's actually going in and reviewing the quality of this work at, you know, at scale.
There are third party evaluators, but they're not very good.
And so there's a lot of issues with the whole industry.
And we'll talk about that some other time.
All right, we're going to move on.
We talked about a lot of health care already,
but I wanted to move on to the Airbnb industry.
And, Amy, if you don't mind putting your tweet in the nest,
I'm happy to find it too.
But, you know, what's really interesting is
how long have we been talking about Airbnb's on this stage?
I don't know, like a few months now.
And it seems like the rest of the world is catching up.
So, you know, Amy, do you want to talk about that Newsweek story and also kind of lay the land about what's going on with Airbnbs across the country?
You know, a few people were asking me about it yesterday because they heard about it.
Amy would love to get your thoughts on just, okay, what are the underlying conditions that make the Airbnb industry separate, like very different from regular home ownership?
Like, you know, and we're doing.
And Airbnb bust, we're going to call it that, we're going to coin that,
look like.
Amy, go ahead.
Sure.
Yeah, I don't know which tweet you were referring to wanting me to pin.
Yeah, you have like 15 tweets on it.
Let me go find the one.
Why don't you get started and I'll find it?
Yeah, you know, I originally tweeted this idea of an Airbnb best back in October and it totally went viral and I was covered in media for it.
And, um...
I think what's unique about Airbnb and what makes it different for this particular housing cycle is everybody is talking about right now how this is not like 2008 because after 2008 happened, all of the lenders –
had these tight regulations and they changed the way that they gave out loans to regular homeowners.
They made everything strict.
They had strict underwriting processes.
And it was like a uniform, positive change for protecting the loans going forward.
But in 2005 to 2007, when the first housing boom was going on, Airbnb did not exist.
Airbnb was founded in 2008.
And the way that you get an Airbnb property is not the way that you get a residential owner-occupied property.
You take out a different kind of loan and you typically would use a private lender.
Private lenders are not held to the same standards that all of the GSE government sponsor entity like the Freddie Fannie, the FHA loans, the ones you typically would have heard about during the great financial crisis and the ones that were sort of corrected for back in the day.
Those are totally separate.
What we're dealing with with Airbnb's are private loans.
It's kind of a shadow banking industry.
We actually don't know the extent of these loans, the leverage in them.
We don't know what a lot of these loans actually look like on the books.
And what we do know is that since 2020, the stock of U.S. residential properties that are Airbnb's has increased by over 50%.
So essentially...
We have gone, I think, I don't remember the exact numbers, but we had, there are now over
two million Airbnbs in the United States, and prior to the pandemic, that number was like less than
one million.
So this was definitely, I don't know if you want to call it a fad or a mania or like a hot
investment thing.
You could see it all over TikTok.
You could see it all over people on YouTube, people on Instagram.
They were like, hey, money's cheap right now.
It's, you know, rates were at 2%.
So even if you were getting a private loan and you don't get the same loan terms for a private loan as you would get for a residential property that you're going to live in.
So maybe you would get like a 4% or 5% rate.
So Amy, one question about that.
With the short term rentals, can you get a 30 year fixed with like your sixth or seven property?
Exactly.
And that's like, isn't that at like somewhat at the core of the problem?
Yes, because a lot of people, I mean, they sort of tried to turn this into a new business where they were buying, you know, 10 or 15 of these properties.
And they didn't really know how to be a landlord.
They didn't know how to be.
And it's not really even landlording.
What it is is customer service.
It's a hospitality industry.
So people, you had people buying properties in residential neighborhoods that are not vacation type properties.
They're just residential homes.
and they're trying to turn them into these bed and breakfast that people are going to
pay exorbitant amounts of money to stay in for short periods of time, which by the way is actually
pretty lucrative because if you buy a house and you're going to rent it out to a long-term
tenant, you're probably going to get $2,000 a month in rent.
Whereas if you try to turn this into some sort of mini hotel, hey, there's a chance you
could charge maybe $200 a night, throw some T.J. Max decor in there, make it look cute, you
know, spiff up the pool.
If you book it a reasonable amount of nights, your income is far going to surpass what you're going to make if you use this as a long-term rental property for a family.
But that's problematic for society.
And it's also problematic because Airbnb is not up until about $1.
you know, six or eight months ago when these things started to emerge, Airbnb was not very
tightly regulated because like I said, it was founded in 2008. It was a, it's a new industry. It initially
started out as just people sort of sharing rooms in their homes and,
renting out unused vacation properties. And I don't think that they ever saw that it was going to turn
into this like mini hotel complex where you have a bunch of unregulated hotels in residential
neighborhoods, which is essentially what happened. And so now you have neighborhood HOAs like in
Dallas. They just banned short-term rentals in residential neighborhoods. So there's
A bunch of people who bought, you know, at these low rates in 2021, 2021, they got in these
bitting wars.
They bought these homes in Dallas to be short-term rentals.
They probably got what's called a DSCR loan, which is a loan that's pretty much just based
on expected revenue of the property.
And by the way, when they did that expected property revenue, they were probably using
2021 numbers, which were record high.
We had record boom and travel post-pand-pand-trovac.
And we had no fear of recession.
The best revenge, as they called it.
Yes.
Yeah.
So they probably got this loan based on pretty unrealistic forward carry on revenue.
And now suddenly Dallas comes out and they ban these properties in residential neighborhoods.
So now these people have, I think they have.
I don't remember what the window of time is, but they have a certain number of months before they have to pivot these properties all to long-term rentals, which is great for our rental market because we need more housing for families and we need more residential homes to be used for long-term rentals instead of short-term rentals.
But it's a problem for...
A lot of people that jumped into this Airbnb industry sort of blindly, just hoping to make a lot of money, get rich quick.
Anytime people do that, it ends in disaster.
And in this particular instance, I just think that a lot of people did not, Airbnb has only ever existed in a period of time where we, A, did not have a recession, and B, had ridiculously low rates.
So we're about to find out what happens to Airbnb in an economy where maybe we are headed for recession, A, and B, we're heading into an higher interest rate environment.
You know, what's really interesting, by the way, I just want to share some new data that just came out.
So US GDP, quarter over quarter, actual 2% wholly. Okay. Forecast, 1.4%.
Now I understand why
Bidenomics came up yesterday.
They knew something we didn't know.
All right, we're going to talk about this a little bit.
And Amy, we'll go back to Airbnb,
but this is new data.
US GDP quarter over quarter, final actual...
2% forecasted 1.4%. U.S. initial jobless claims, actual 239,000 forecasted 265,000. So less jobless claims than expected.
US continued jobless claims, actual 1.742 million, forecasted 1.765 million.
And PCE prices, final actual, 4.1%, previous was 4.2%.
Core PCE, 4.9%, previous 5%.
Holy moly, they win everywhere.
Every single measure is better than expected.
Every single measure.
I'm going to bring up what Neely brought up.
I think it was last month or two months ago.
Sure.
She basically called this and she said, hey, all these COVID benefits are expiring.
People have to reenter the workforce.
So this is what's going to happen.
I'm pretty sure that was Neely.
So it's literally happening just, you know, as she's perfect right out.
But just then GDP is also going up.
That's the issue.
The issue here is not.
Yeah, that's fair.
That's fair.
This explains.
Yesterday, I was thinking to myself,
The large majority of people in this country think that the economy is going to the crapper.
They're feeling the pain of inflation.
They're upset.
How could this administration be this tone deaf right now?
Well, this is why.
They knew that this data was coming and they got ahead of it.
Again, just as a reminder, U.S. GDP quarter over quarter increased by 2% as compared to 1.4% expected.
And U.S. GDP price index actual was 4.1% pretty much in line with forecast.
So, you know, we we are seeing...
you know, the numbers beat on jobs.
We're seeing the numbers beat on GDP.
We're seeing the numbers beat on PCE.
And so this is, this is,
one, we're expecting a rate, you know, we know that at least one rate hike is coming.
I bet you two come now.
Again, not financial advice, but this is just my speculation.
And then two, this is, this is good news, bad news.
Good news for Americans in general, bad news for real estate.
And so we're going to talk a little bit about this.
You know, initial thoughts on this, Amy?
Okay.
Um, gosh, I mean, these are all major beats. But, um, yeah, I mean, I, I, first of all, I mean, in the last
FMC conference, Powell let slip the word skip. And I, you know, obviously kind of lashed
on to that, because I was pretty sure, um, that he was not done hiking. And I personally was
always thinking we were going to get another hike in July. And now I think, you know,
looking at that data come in, that pretty much seals the deal. I can't see.
any way that we're not going to get another hike in July.
And another two actually does now sound like that could be back on the table as well.
Yeah, the economy continues to sort of chug along.
I think we're kind of in a position where...
It's going to continue to do so until something breaks.
And yeah, we've had the regional bank failures, but it sounds like, you know, to a certain extent, we've got enough of the JP Morgan's out there that can absorb these smaller bank failures.
And as long as they can sort of quote, I hate use this word, but contain...
you know, these little cracks that are popping up in the system with the higher rates,
then I think they are going to continue to hold rates higher and even, maybe even push rates higher
with the next two opportunities that they get.
Because the reality is, and I know, I mean, this might be controversial, but I mean,
now I'm just giving you my opinion, which is,
I don't see a way out for our country other than to eventually, just looking at our debt burden,
I don't see a way that we're not going to eventually need to cut rates again and go back to another QE cycle.
So in my personal opinion, I think Powell front-loaded all the hikes to get the Fed funds rate high enough, fast enough before something could break,
just so that the Fed has that tool back in their toolbox if they need it.
Because if they found themselves in a position where our Fed funds rate was really low and we had another sort of global financial crisis of some sort.
They're out of luck.
I mean, what are they going to do?
They need to get the Fed funds rate high enough that they're going to have this tool in their back pocket again so that should we have, which we all know we will, some sort of major crisis in the future, whether it's a war or another pandemic or some sort of systemic failure financial that we don't foresee yet.
they're going to need to use QE and lower rates again because that is the only way that our system has been able to function for all these years.
And I just don't know how you lean off of that when you have, what, $32 trillion in debt.
And I'll tell you this.
The fascinating part about all of this is one of the comments that he made in the international meeting that they had was, hey, I know that all the systemically important banks will pass the stress test, but we actually need to do stress tests on banks that look more like SVB.
And he said that very clearly.
That's what struck me.
I think that's where he thinks that there is some weakness.
And for people that are not aware, systemically important banks
have to do significant stress testing and actually in the last 24 hours all of them passed.
So all the systemically important banks have to have a certain amount of deposits in there.
They have to be leveraged accordingly.
They have to do all of these different things to make sure that they don't crack in the case of things like,
I mean, a really bad bank run can take anybody, but a smaller bank run can't take a systemically
important bank.
You know, they're able to withstand a lot of these issues.
after 2008.
And so,
but,
you know,
banks,
there are less than,
I believe,
50 billion?
Is that correct?
Can someone correct me?
I think it's 50 billion.
Less than 50 billion.
They don't need to undergo these stress tests.
They have their own,
you know,
like,
stress test light,
but they don't have to go.
And interestingly,
you know,
I'm sorry,
it might be 500 billion.
You guys should look this up for me
to make sure I'm doing it correctly.
But,
but,
you know,
you know, for SVB, they were underneath that threshold.
And interestingly, that threshold was changed during the Trump administration.
That doesn't mean that there was a policy of the Trump administration.
Just it happened during that time.
And so, you know, we have weakness in those banks.
And those banks aren't being tested appropriately.
And we have this entire shadow banking sector that is tied closely to it.
And look.
This data, if you are hearing this data and you don't think that they're going to do more rate hikes, I'm sorry, you are sadly mistaken.
Good news is bad news if your entire portfolio is relying on their not being a rate hike.
And so, Simon?
I know. I know. It's a Ponzi scheme. Go ahead.
It wouldn't be one if I didn't use the word Ponzi.
But I think Amy's spot on there.
That was, I haven't heard that take in terms of, you know, really hiking.
in order to get it to the point where they do have a tool in preparation for what they know is coming
because they do have to get back to a QE cycle at some stage to roll over the Ponzi, my famous word.
But I think that's a really interesting way of looking at the events and, you know, breaking the smaller banks,
consolidating them into the larger,
having a choke point 2.0, get in charge of the crypto cycle, get ready for the CBDC stable coin regulations.
It all fits together perfectly in terms of the actions and the cause and effects.
One thing I found quite interesting in the parallel you gave with the Airbnb analysis tying it all together.
is obviously 2008 wasn't just the birth of Airbnb, but it was also the birth of Bitcoin.
The big test of this cycle as you move into halving in 2024 is can Bitcoin survive quantitative tightening?
Because it's never been in that environment before, just like Airbnb, has always been in a quantitative easing cycle and low rate cycle.
And so that's the parallel between what happens to Airbnb and what happens to Bitcoin is a new test that we get to experience right now at the same time as resetting the tools.
that the Fed can use in preparation for a number of geopolitical risks that they're going to have to manage and roll over the Ponzi.
And you all know that I eventually think that just rolls into a CBDC where everything goes on the central bank's balance sheet.
Yeah, Simon, one thing I wanted to clarify, sorry, and we'll go to Mickle.
I was going to say that...
I misspoke, so I wanted to correct myself.
Systemically important banks have to have more than $250 billion in assets.
And so anything, and SVB was $200 billion.
So they were right underneath that.
And so what's interesting is Powell's saying, hey, we need to make that threshold lower.
All of these banks need to be stress tested.
And Amy, I wonder how many banks gave loans for those...
for those short-term rentals.
I really do wonder how pervasive this problem truly is.
We all assume, and Amy, you can correct me if I'm wrong,
but we all assume that private equity was more involved.
But it seems like if individual people have been doing this
and getting these NERDC loans, is that what you were calling it?
Just want to make sure.
What kind of loan is that?
It's DSCR, DSCR.
D-S-E-R, sorry.
The SER loan.
Are those given by regional banks primarily, like local and regional banks, or do you have to go to the big banks for that?
They probably went to local and regional banks.
And honestly, they probably went to small private lenders that are like these pretty obscure.
A lot of them are new.
There is a huge one in Austin that's only a couple of years old.
So when you're talking shadow banking, like this is really shadow banking.
Is this like a U.S.
Is this a U.S. centric thing or is this a global thing?
I've never heard of an Airbnb loan to build like a, it's fascinating what you were saying.
That's a good question.
I mean, Airbnb obviously is international.
They have properties everywhere.
But in terms of the lending practices, I don't know how the lending practices work in other countries.
But I do know that in the U.S. we have a lot of these smaller businesses.
private lender mortgage shops that just and a lot of them started popping up and doing fantastic
business over the last three years which again is another thing and you're like well how regulated is
this um i think we're about to find out
Yeah, it's interesting how...
In the UK, obviously, most mortgages, you get like a two-year fixed and then it pivots to variable.
How is it with these loans?
Are they all variable from the start?
The data that I have, which again, this is kind of shadow banking, so it's hard to get accurate data.
But what I saw was that 25% of them are adjustable rate mortgages.
So pretty much all of the people that bought with those are going to be in big trouble.
Yeah.
God damn it.
Arms.
Arms are always the problem.
Arms.
Adjusted rate mortgages are always the problem.
By the way, the other day...
Get rid quick.
Leverage is always the problem.
That's fair, Simon.
I was going to say, you know, there's a few hands up.
So I'm going to go to Mickle first, and then we're going to go to Greg.
Go ahead, Mickle.
Yeah, so just on the Airbnb comment, I think I've mentioned this on before.
My dad's a mortgage broker in this past two years.
He's been saying that he's done more loans for Airbnb people,
and they also tend to be some of the most intelligent,
the most unintelligent people he's done loans for.
So I think to Amy's point,
I think a lot of these people getting involved in Airbnb's
don't really understand what they're doing
and more seeing TikToks and influencers,
pitching the idea and them just going out and trying to pull it off themselves.
The one other thing I wanted to note about that GDP number that I think is really interesting
is I think we're finally in a place and I consider this good news where the market is looking at
news like that and reflecting it as good news. I looked at futures and they were up pretty big
and I just think that might be the market saying,
hey, we understand the Federal Reserve is going to hike again, likely two more 25 basis points.
But I think the market is now questioning how much that's going to matter and how much that's really going to influence earnings coming out later.
I think what the market is saying is, hey, you already hit us with the majority of what we're going to see.
What's two more small hikes?
So far we've survived.
I think the market's betting that will continue to survive and move forward.
Absolutely.
And do we have any data on the, like, I'm just really interested from your experience as your father's broker in the space in Amy's research.
But do is, is there any comparable?
Are you thinking that this is kind of like a subprime?
This is always...
the lower end of the market.
Yeah, that is a very good comparator, is a subprime.
There are people, and I'm happy to let Amy or Mickle,
yeah, I knew Amy would agree,
that there are people that literally are over leveraged
across multiple properties
that essentially we're relying on revenue from Airbnb's to pay the mortgage for these properties.
As these properties and their mortgages go higher and higher and get more expensive,
the amount of revenue that they can possibly make.
Remember, that they can't just keep increasing pricing because all of them are struggling.
Right.
So now there's a competitive free market, you know, and then on top of that,
not only are they competing with each other, they're also competing with the local hotels.
And so there's a cap to that price for everybody, right?
And so literally there's only so much they can do.
And by the way, hotels are not financed the same way as Airbnb's are, right?
And so hotel financing is very, very different.
And so what we're seeing is that all of these Airbnb properties are being owned by people that have what we would call paper.
equity, which is they feel like, hey, I've got 35 properties. You'll see these TikToks and you're like, you've got these like 35 year olds, sorry, you know, that are essentially buying all of these properties so they can rent them out to others and they've never seen a down cycle in their entire lives.
And what type of equity and skin in the game do they have? Do they do they do they?
Like, literally, you just walk away like the credit cards.
Simon, I'm going to tell you something really scary because I know people that have done this and I apologize for outing them.
I'm not going to tell you their names.
But they are taking the cash flow from one business to get a loan on the other business.
That's the really bad part.
And they probably invested their crypto gains into the nothing down deal.
And it's just they keep putting all of their money and they're thinking in deeper and deeper.
And this is the actual problem.
So I want to go to Greg.
I want to get Greg to jump in here.
And then we can kind of continue around the horn.
Go ahead, Greg.
Yeah, so I've been, I'm a real estate developer. I started my career in 1997 on the
Outer Banks of North Carolina, a little barrier island off the coast of North Carolina where
the Wright brothers took off. So I've been in the short-term rental space before all of this
was even a thing. I mean, that was a vacation destination, summer vacation homes. I had mountain
property as well. So I've been in this game a long time and I went through, you know, 2000,
2001 where everybody was cashing out of the markets and coming down and buying a million-dollar
beach houses, rents.
rent them out, things like that.
And then, you know, of course, I went through 2008-9.
I had 30, 40 million of these things in process when 2008-9 went down.
And I had short-term construction loans from local banks.
That's how I built all mine back then.
You didn't have all of these private lending options back then.
But we did have the exotic loans.
And Lehman Brothers was my takeout on all my construction loans.
So I got stuck with 40 million in, you know,
you know, a million dollar beach house loans, I could not get permanent financing on during that time.
So, you know, that was a lot of fun.
Of course, they were all non-recourse, you know, done in the corporate name.
And, you know, we worked them out and worked through them.
And I had money and I had a good business.
So, you know, it wasn't an issue.
But I saw a lot of people get wiped out in 2009 that had short-term interest on the arms.
You know, no doc loans, you know, a lot of negative amortization loans, you know, all these different
subprime loans that were being done primarily by Lehman Brothers.
If you couldn't get a loan anywhere else,
they were the lender to jour back then.
But this, what we're dealing with now is very different.
So there's a lot of misinformation about Airbnb out there in terms of the numbers and
things that are being reported.
You've got to remember a lot of these things are what they call arbitrage,
which is basically a master lease.
so somebody's leasing a room or a property or an apartment and then, you know, on a yearly basis or a monthly basis and then they're running it out Airbnb.
So that's where a lot of these...
People that say they have 35 properties, a lot of them, they don't even own them.
And, you know, as far as the number of units, you know, not very many of these are actual single-family homes that are in the Airbnb and the VRBO programs.
A lot of them are, you know, hotel rooms, apartments, you know, ERCs, you know, RVs that have been turned into Airbnb's, rooms, you know, things like that.
So it's a very...
The data is very confused and misleading in terms of what's really going on.
Greg, a lot of people.
I want to get to the bottom of this.
Because are you saying that there is no concern around short-term rentals?
Well, what I'm saying is the ones that were done just in the middle of some neighborhood just anywhere.
Yeah, those are going to struggle.
And that's a problem.
But what I'm saying is it's not systemic.
It's not at scale.
And it's nowhere near anything like 2008 or not.
Greg, what about the fact that...
Sorry, once a second, Mickle.
Because Greg, now, we have to...
speak bias.
I don't own any Airbnb's, so I'm biased.
And Greg, you own Airbnb's, so you're biased.
So let's just kind of put that out there for everybody to know that I always think that a lot of these things that happen so quickly, they're often unregulated.
And no one here really, I mean, I know Amy researches this.
So I feel like maybe she's a little bit less biased, but, you know, you don't know the extent to which this problem exists, right?
Like no one does.
because people are buying it as individuals.
That's my understanding.
Well, let's define the problem.
What's the problem?
And again...
I also want to say that people that are in the real estate business,
it's sort of like crypto in some ways where you don't want FUD because FUD leads to bad pricing.
So I want to say that, Greg. I'm not trying to discredit what you're saying.
I think it's important what you're saying. We do need the other side to this story.
But I do want to be honest about the fact that you have a vested interest.
Just like people that come up here, I don't know if you come to our space every day,
but often when people come up here and they start talking their book,
Like I talk shit to Simon literally every time he's up here.
He'll tell you because he's always talking his book and he says I'm talking my book.
He thinks of the world in Bitcoin, which is fine.
So I want to push back a little, but I want it to be respectful about it.
So you got to tell me if I'm not being respectful.
Okay.
Okay.
Well, so I'm in markets, crypto.
I'm also a commercial, multi-family developer and all that.
So I'm not just short-term rental.
I'm just saying I've got, you know, 30 years experience.
Yeah, but there's a vested interest here.
I just want to be.
So the reason why I'm bringing that up is because.
But let's define the problem, though.
So what is the problem is that a bunch of people have over leveraged themselves and bought short-term rentals.
There are people.
So I'll agree with that.
I'll agree with that.
And they bought short-term rentals and now they're about to go bust because the amount of revenue that's coming in is not keeping up with their actual mortgages.
So I'll agree with that.
Okay.
And that this is happening to many individuals across the country.
Agreed.
Okay.
So what's the solution?
I just want to clarify what you're saying.
I just want to clarify what you're saying and then you can let me know.
What you're saying is that this is not that systemic, that this is going to be a significant issue that affects real estate in general or the short term rental market.
Is that what you're saying?
I just want to understand what you're going.
Exactly.
Yeah.
Because the people that are under stress have options so they can sell.
They can rent it out long term.
They can rent it out midterm.
So they have options.
So it's not like, and even if there were, let's say there were a million homes that were under stress and had to be sold today.
And every one of them hit the market today.
If they are priced right in a decent market, they're going to get absorbed instantly because we're still seeing extreme demand in the housing market, multiple offers, houses selling in days.
It's not a systemic problem that's going to bring down banks or bring down the industry.
All right, bye, bye, buddy.
So that's how you get kicked off the stage.
Amy, go ahead.
I want you to be able to respond to Greg.
Yeah, I mean, systemic is an interesting word because, you know, it makes everybody
think of this big, scary thing.
I've always thought of the Airbnb problem, quote problem, as, you know,
Look at how tight inventory is in our housing market right now. Look at how tight it's been over the last couple of years. And look at with the Fed hikes in that extremely tight inventory. We have seen certain regions in the country, San Francisco, Austin, Boise. Home prices have come down a lot since late 2022 in certain regions of the country.
And again, Airbnbs are concentrated in certain regions in the country a lot more so than other regions, which are sort of the vacation hotspies.
So if you're a regular person out there and you've been wanting to buy a home, you might hear, oh, you know, it doesn't matter if another million properties hit the market.
You know, we're two million properties short of a, quote, normal real estate market.
Well, if we're in a market where prices have already started to fall a little bit in a lot of regions with tight inventory,
Can you imagine how much more prices are going to soften and, frankly, improve for buyers if we even got, you know, another $500,000 or $500,000 properties on the market?
It would make a big difference in a market like this that has such tight inventory.
So I do think that it does matter for the overall housing market just because the inventory tightness issue has been such a big piece of why prices have held up to these rate hikes.
Yeah, Greg, I'll let you respond. Go ahead.
Yeah, so we've had 30 to 40% some cases 50% of appreciation over the last few years in the housing market.
Typically, you see 5% a year.
So the price reductions we're seeing.
So real estate's hyperloval.
Every market's different.
Every street's different.
Every city, you know, understand that.
But in general, median home prices across the country.
you know, if you're seeing a 30 or 40% decline, that's coming back from a very highly distorted price level to begin with.
So you've got to go back to what were the values in 2018, 2019, not 2020, 2021 with zero interest rates and, you know, 2% mortgages to really understand where have the values really gone, where have they corrected too.
So we're going to see stress in some markets.
But we're seeing appreciation in other markets where prices are still going up,
houses are still selling with multiple offers in days, you know, things like that.
So again, this is not millions of homes that's a systemic thing all across the country.
It's little spots here or there.
So, you know, so the underlying challenge, and by the way, everybody that's got their hand up, there's a lot of you, please either go into the bottom right and comment so we can see your comments that you're not a bot and you're not going to do something stupid like the last person did.
And then two, either that or send us a DM either to Mario or to myself and then our team will make sure that you can get up just because as you just saw, it can be disruptive.
So, you know, I think.
So the crux of the argument right now is that Greg believes that this is not systemic.
and that there's too much demand
and not enough of supply
in the real estate business to begin with right now,
especially in the residential business.
And Amy's concern is that actually this might be bigger
than we think it is because it's completely unregulated.
Right?
So I will remind people, and Greg, you know,
again, I'm trying to tease out the exact argument.
So, you know, you may remember, Greg,
since we're both older,
that, you know, remember when in 2007, maybe 2006,
people were saying that subprime was gonna be a limited issue?
I remember those days.
I'm old enough to remember when people said
that subprime was a small issue,
that it was only affecting certain people,
and it was very limited in terms of its practice.
Do you remember that, Greg?
Or am I just- Okay, so let me qualify one thing.
So I'm older, but I'm not a boomer.
I missed the cutoff by two years.
You're a geriatric millennial like me, probably.
I'm only 55, so I'm
I missed it by two years.
But yeah, I do remember that.
So what we're dealing with now,
so back then, subprime was everybody.
So that was not only people like that shouldn't be able to do what I was
Hold on,
hold on,
so the subprime wasn't just...
I asked to push back.
2006 people were saying, Greg, let me just finish real quick.
I want to clarify my commentary.
I'm not talking about 2008 when everybody was talking about it.
I'm talking about 2006, early 2007.
It was said that it was a limited problem that was affecting only coastal communities.
I can find the articles, Greg.
Don't make me.
Greg, do you agree that that was the initial point that it's only affecting certain communities
that people were saying that in 2006, 2007?
So the market peaked in 0405 and in 0607 the subprime expanded around the country to primary
residences. So it wasn't a it wasn't an investment property thing. It was a year-round primary residence thing that was expanding. But yeah,
Nobody ever sees the problem before it happens.
Just like we didn't see inflation, that was transitory, just like we don't see a recession, you know, from the Fed standpoint.
So, you know, the experts that, you know, try to predict these things are never correct.
But that was the crux of the issue.
The subprime expanded to everybody all around the country for all types of loans, not just investment properties.
And this is a very small segment of the market right now and again.
I mean, we're 10 million units short in housing right now.
10 million, you know, in terms of the demand.
You know, we, home builders can't build fast enough to, you know, to meet the demand.
We'd have to build out 10 million units, you know, to catch up.
Now, at some point, with demographics, will that shift?
Sure.
But, yeah.
We're in a very unique, very different situation right now.
And the mortgage loans that are out there right now are extremely healthy.
The borrowers are healthy at scale.
There are some unhealthy ones like you've mentioned, you know, that got some of these loans, the DSCR loans.
That's private lending.
So those, you know, they'll just take the property back and sell them.
So I mean, that's not a big deal either if those go bust.
but from a banking standpoint,
the banks that have originated these loans,
they're very healthy,
they got big down payments,
they got qualified borrowers.
So you're talking about a very,
very small segment
of the subprime grouping right now
that's at risk.
So let me paint a different picture
and then I'll go to Amy and then Mo.
The different picture here is
it's death by a thousand cuts,
not a single one and not a single blow.
And I think that that's what I'm more worried about
The same banks that have been funding and supporting these short-term rentals are the same banks that have been given out loans for office and commercial, which have record low occupancies.
The same banks are not being stress tested like the systemically important banks.
The same banks as of, I believe, three years ago, could invest in private equity funds.
Google it. It's crazy. They changed the law where banks could directly invest in private equity funds.
The same means that they have direct contacts.
Hold on, Greg.
I just want to make sure I finish.
So the problem is that we have multiple challenges that all are affected by one thing and one thing alone.
High interest rates.
So there's one blow that has multiple impacts.
And so I do want to kind of give a different narrative,
which it's not that the Airbnb issue is going to cause trouble.
Maybe as Airbnb starts flooding, like in Dallas where they changed the laws,
which is very different.
But in general, these issues, these Airbnb properties start going underwater.
You don't think that the average, the smarter ones, let's say,
are going to say, oh, shit, the market's still hot enough.
There's not enough inventory.
Let me just sell my property.
and a bunch of them come in when a bunch of them come in they're going to start competing
with each other because they have a limited timeline and then they start competing with each other on
price which then starts bringing prices down as prices start going down other people that have
been holding on to their 3% mortgage because they assume that the market only
could only go up, now suddenly start flooding their properties in, and then we start having an avalanche.
Greg, I'm just giving the other side.
I don't actually think that will happen for sure, but it's just the other side that could happen.
So I want to go to Amy, and then I'll let Greg respond to that.
Go ahead, Amy.
Okay, Donish, you just started to touch on what I was going to say.
And just in terms of the big picture of the housing market.
Airbnb is one slice of the pie. And it's not a huge slice. I mean, in terms of total inventory that's out there. But it is a piece. And you have to look at that piece alongside the fact that we just had a record-breaking number in housing starts that came out a couple of weeks ago. Those properties are all going to be finished to completion probably in about six to nine months. The Fed is still going to do another, what, one or two rate hikes?
And we've also got a lot of analysts at a lot of banks signaling that we are headed for a recession.
What's going to happen if we have a recession?
People are going to lose their jobs, A, and B, the Fed is ultimately going to have to pivot back to cutting rates.
And when they cut rates again, you're going to see all of these people that are on the sidelines with these homes that they don't like and they want to sell, but they feel trapped and with their 3% mortgage.
they're going to suddenly be able to jump back in the market and sell.
But they're also going to be selling when perhaps a million Airbnbs are trying to offload.
People that lost their job during a recession are trying to offload.
And suddenly, I think we might be able to see that this tight inventory is going to resolve in a flood of inventory.
And if it all hits at the same time, that's when you get a severe housing correction.
And I'm not promising this is going to happen, but I'm saying that just Airbnb P sets up a path where you could say that, hey, there's a possibility down the road that if all of these snowballing factors combine at the same time, there is a chance that we could have this outcome where there is a lot of inventory that's already been built flooding the market at the same time.
And that is all we need to get prices back to that, quote, normal 2019 or pre-pendemic level.
Yeah, I'll let Greg respond to that since Amy and I are sort of flooding it right now.
But Greg, I'll let you respond to that and then we'll go to Mo.
Yeah, yeah.
So, I mean, I agree with what you're saying.
There are, you know, possibilities and potentials out there.
One thing, Fed rate hikes don't affect mortgage rates.
You know, that's the benchmark in your treasury.
You know, the other thing on the systemic scale of what banks are exposed to, so SBB was a very different environment.
Yeah.
Most banks are only exposed maybe 10, 20% to real estate.
That's commercial and residential combined.
That's their max exposure on most banks across the board.
And as you know, banks write into their business plan for 10 to 20% losses.
They could write off all the real estate that they're exposed to right now and not feel a thing.
Banks are killing it, you know, with the interest rate environment and with it, well, it killed some,
but they're also killing it in general with the loans that they're making now and the ones that are using, you know,
that are trading and doing other things.
you know, commercial real estate's a whole other thing.
I don't think that's big enough to take down, you know,
the economy at scale either.
Because again, you've got to look at the numbers and the data.
You know, the Airbnb inventory of single family homes you're talking about, it's minuscule.
You would need millions of homes to hit the market to make a dent.
And like Amy said, if we do, you know, enter a recession, it's probably not going to start till next year.
I mean, it is what it is.
The labor market is too strong.
You know, we're not going to see things change, you know, unless something happens that none of us know about quick enough to really affect the labor market anytime soon.
There's a huge shortage there.
So this could play out over the next two or three years.
And there's enough demand out there to absorb things over the next two or three years.
There's enough people that are still flush.
You know, there's people still have a lot of money.
You have the two extremes.
You have people with a lot of money and you have people with no money.
That's kind of where we're at right now.
And there's, again, there's just too much demand.
As far as the exposure to real estate in banks that are exposed,
they're already unloading inventory of commercial real estate loans and residential portfolios at a loss just to get them off their books.
So this is kind of working itself out and balancing itself out.
You know, there's, I don't know, 1.5 trillion in commercial loans come and do over the next couple of years.
You know, the commercial real estate market is 20 trillion.
The residential market is 30 trillion.
So we're talking about, you know, I mean, you know, a few hundred million dollars worth of Airbnb's that if they all hit the market tomorrow, maybe.
So, you know, it's just not there when you look at the numbers and the hard data, not right now.
And we have plenty of time for this to work through the system.
So that's why to me it's just not a systemic concern.
Greg, I have a follow-up question for you.
Would you buy an Airbnb right now?
Be honest.
Don't you lie to me, Greg.
Well, the right ones in the areas that I work in.
So the areas I work in are resort areas that that's what they've always been.
That's what they're always going to be.
So I don't buy Airbnb or do Airbnbs where they can get down zoned or, you know, anything like that.
And there's great tax advantages.
There's a loophole for the real estate professional status where you can have an Airbnb
and offset W2 income capital gains and all that if you manage it yourself.
So there are some good reasons to own one.
But, you know, I'm into bigger deals now anyways.
I don't, you know, I mean, I built and sold my last ones right before the pandemic hit.
So I haven't done any since the pandemic.
But I've been doing it for 20 or 30 years.
But I do bigger deals now.
I do more land development, commercial, multifamily, things like that.
So Greg, would you do it?
I'm still confused.
You would do it in the right market, in your opinion.
So I build them and sell them.
I don't own them.
So let's qualify that.
But yeah, in the right market, right now, I would definitely build them to sell, but I don't like owning them and keeping them.
I kept them long enough to get the income going and then I sell them.
I'm a developer.
I'm a merchant developer.
That's fair.
Mo, go ahead.
Yeah, hi, Mario.
Hi, Dynush.
Yeah, look, I agree with Greg.
I think the way you're speaking about a systemic issue, first of all, short-term rentals are, and I don't want to rehash, but it's a small portion of the real estate portfolio.
Then you're talking about default rate.
And let's not forget, you have a lot of real estate that is under mortgage.
at very low interest rates that were secured two, three years ago.
And they still have a lot of time on them.
And those don't move.
And that's the predominant majority of real estate assets under, say, the stress test of banks.
Then you have all this other stuff.
So, yeah, short-term rentals, that's always good for the market.
I would be a buyer of short-term rental properties because we couldn't get them a year ago, two years ago.
No one could find what they wanted.
and at least now it will get absorbed and I agree with Greg on that point.
Interesting.
Mickle, go ahead.
Yeah.
Yeah, I just wanted to make a quick point because I have talked to my dad about the comparisons to now to 2008.
And I think Greg makes a good point.
And the real thing he always says is, like I said earlier, he's saying that a lot of very dumb people are getting involved in this Airbnb thing.
But his whole reasoning for why it wouldn't be systemic is because he doesn't think what is happening is necessarily broken.
Just the wrong people are getting involved.
He was involved during 2008.
And he was saying that was a broken product and a broken situation.
So it brought down the entire system.
So he does think there's going to be significant issues in this market.
But after talking to him, I think he would agree with Greg in saying that as of now,
he sees it as more of an isolated issue rather than a product that simply doesn't work and is going to break the market.
Interesting. So I hope that people that are listening felt that we were being balanced.
But if you didn't, that's okay. You just got to let us know. We try our best to be as balanced as possible. Go ahead, Amy.
Yeah, you know, I just wanted to speak to one thing Greg said, which I do actually agree with.
So far in CRE and even with residential housing, what we've seen so far is,
that there is a lot of dry powder on the sidelines, and people that have been in distress up to this point have been unable to unload properties to willing buyers that have cash and are wanting to buy.
It has felt sort of like a controlled demolition to some extent, especially with CRE.
But at the same time...
That also gives me, you know, a little bit of those eerie twinges back to, you know, subprime is, quote, contained.
This feels like it's everybody's sort of keeping it in this contained box.
Like, oh, yes, you know, these, you know, Blackstone is unwinding commercial real estate properties,
but there's a lot of private equity in the sidelines with cash and they're buying.
I mean, you know, it's, it's this contained, like we can, we can do this.
We can unwind this mess and it can be clean and contained.
And what?
I think that it would be great if we can continue to do that.
And it is possible that in both of these areas, with commercial real estate and with Airbnb's,
that we will be able to do that.
But the one thing I will say about the dry powder on the sidelines is that dry powder gets wet very quickly in a storm.
I just want to add one thing.
Oh, sorry, Amy.
Sorry about that.
Why don't we let Amy finish and then Mo you go next?
Go ahead, Amy.
I mean, yeah, I was basically going to end on that note and just say that, you know,
It feels like they're trying to do this in an orderly, not panicky process.
But sometimes what happens is people panic.
And when that happens, it's the point of no return.
Yeah, a 20% correction in real estate is healthy from where we came from if you want to do the numbers.
Yes, that could be, and it wouldn't happen in that fashion, but it can absorb a 20% move.
And that's what you just need to look at from a real estate perspective.
I don't think anything collapses from there.
I don't think that's where our issues are.
But again, but again, these banks, these local banks, so Greg's like, well, interest rates have gone up, but credit is also tightened, Greg.
You know, yes, things have gone up, but they're also holding significant assets as collateral.
Now, luckily, real estate assets are better than, you know, soft assets.
But still, you know, they're not being stress tested on the back end.
And that's something that we haven't been doing with these local regional banks.
And again, I'm reminding people.
that the Fed, the Treasury has come out,
and they've been talking about the commercial real estate sector
and these small regional banks.
They are giving, they are choreographing something.
They always do exactly as they say.
They're saying they're going to be rate hikes.
Believe them.
They say that commercial real estate is in trouble.
Believe them.
They say that these small regional banks might be in trouble and they need to be more
stress tested.
Believe them.
I don't understand why people just keep living in this like nothing is wrong.
Everything is fine mentality.
Right.
Guys, the Fed is telling us what they're worried about.
Janet Yellen, it takes a 30 minutes to say five words.
So she chooses those five words really, really carefully.
So, you know, I want to warn people, and this is not fud.
Because, by the way, if you listen to this space and make all your financial decisions based on this space, that's on you.
I'm not giving you financial advice.
What I'm telling you is, look, the trends are being, are pretty clear that,
people are worried about this space
and where there's smoke, there's fire.
You know, before I go to Greg and Moe again,
I wanted to bring up Trisha,
music,
new voice uh trisha i see that you're a realtor in southwest florida and uh and i saw some of your
comments uh so for people that are listening before trisha goes on mickle is up here because he was putting
good comments out there and when you are putting in good comments we often bring you up and then you
get to get to get to have a say that's how i run my rooms and so
You know, Tricia, thank you for joining the conversation.
Trisha, do you agree around this concern around short-term rentals?
Or are you sort of on the fence or are you completely on the other side where this is, you know, not a big deal?
No, I definitely am concerned. I've seen a lot of them. I'm in like a coastal area and we've had a lot of people buying into them in some of these communities. And one of the things I've specifically seen that regarding the banks, it's not so much your big banks. I know people talk about the lending being tighter and this is just general with what I've seen this cycle. And a little background, my background is accounting. I was a controller for developers back in the last cycle.
But what I'm seeing with the big banks are really tight.
So now as a realtor, if I get an offer from somebody and they're doing financing through a Chase or Bank of America,
you roll your eyes because you're like, oh gosh, this is not going to be fun.
Now, it's a lot of your loan depots, your rhythm capital, a lot of them have been very prominent in this cycle.
Regarding the DSCR specifically,
I first was hearing of these as referred to as like investor loans.
So I don't know if anybody's familiar with rhythm capital.
They used to be new res.
And they're a publicly traded reed.
They affiliate with a lot of the real estate brokerages and partner up.
So they actually are like the affiliated lender for a lot of the realtors that are doing them.
So they started doing these and they called them investor loans.
and now I've also seen a lot with like these shadow banks that like Amy was mentioning.
I know Lima Capitals one,
but what I'm seeing with those is what when you get to the people that are doing multiple ones,
what they're doing is they're creating LLCs.
And what's concerning even more to me is I'm seeing a lot of the fraud like I saw last time.
Specifically, I've seen a few people that are, you know, from the other coast that have bought probably, I don't know, 15, 20 properties at least in my area.
And even with the acquisition at the purchase, I can see that there's fraud with the way some deeds are getting filed and stuff.
And they, what's interesting about those DSCR loans, because these lenders are not like your big ones, they're not a primary user, so it's not like a homestead type of property, they are moving quick on foreclosures.
So like this one group I've seen, I've already seen at least three of them that they've gone into four, that they've actually foreclosed on many others that are.
So a lot of those are coming back.
But part of the problem with them was they were part of the cause of inflating the prices.
And as far as a systemic, I think they're one of the earlier ones that are going to start causing these to come back onto market.
And as, you know, these non-experienced, you know, entrepreneurs are losing these properties that'll start the downtrend in the pricing.
To me, actually, my bigger concern is what's happened with a lot of the institutional lenders and that what I've seen with them is they were also coming into this.
And, you know, I've posted a few times before, like I've gone through county records and seen some of the mortgages that they're filing where they're taking.
And after they've purchased these properties with cash, they're going ahead.
bundling them into like a mortgage and they're selling them as securities.
And I've seen one in particular.
It's a privately owned,
you know,
private equity owns the actual.
Hold on.
Hold on.
I'm sorry.
You're going to have to repeat yourself there because I just want to make sure I
understand.
So they're buying it cash.
Yeah.
And then they're converting it in, can you walk us through that again, that approach?
Okay, with a big corporate landlord. So, I mean, everybody's familiar with invitation homes, but there's so many others. And, you know, there's Pretium, first key, a lot of these. And, you know, I'm not exactly sure how many, because you get different numbers of people saying how many are actually owned. So, yeah.
Through this cycle, and now just a little background, my area is very bubbly, if you will.
It was the last time we got hit really hard.
We, you know, it's pretty easy for builders to come in here and start building.
And so we've really ramped up construction.
I'd say we have more under construction now than we ever did in the last cycle.
But what happened was a lot of these institutional funds,
They've been buying, you know, they started what with invitation homes in that back in 2008,
2012, where they were buying the portfolios out of foreclosure.
So they were buying these homes at really low prices.
So the math made sense.
Well, what happened in the last couple years with all this squeeze, they've raised the rents.
These institutional buyers have come in.
They make cash offers.
So that was a big driving factor for a lot of these homes.
you know, over-ask offers.
And even though they're making cash purchases for the transaction,
they are on the back end issuing mortgage-backed securities that they are selling.
And I have came across a few in my county, in fact, with one particular institution,
well, or corporate landlord, I'll call them that,
where they were actually doing up to 99.5% loan to value on that.
Oh, did I lose you there?
Yeah, yeah, you lost it.
So keep going.
Okay, so what happened?
Loan to value.
Can you repeat there again?
You got on.
99.5% loan to value.
And these were properties they were purchasing in 2022.
And I could see the list.
And they'd file it with accounting.
And when I say this, I'm talking about like over a billion dollar mortgages.
So they're taking all of those homes that they're purchasing and then they're issuing securities,
just like they did in the last cycle with the MBS and that.
And the valuations just don't make sense.
Like I can see the list of the properties.
I know the ones they're buying here locally.
And I mean,
homes that they would have paid $200,000 for in 2019,
they were paying up to $400,000,
sometimes more for some of these.
And they're doing them based on these inflated rent.
So they're trying to, you know,
charge $3,000 in rent for a market
where the median household income is like $60,000.
So I think those are going to be where you're really going to start to see that.
And it's just going to be about the time and how that plays out because the rents,
we're starting to get flooded with rental inventory and the rents are starting to drop.
For the sake of this conversation and the claims that you have made, I got to see receipts.
So can you post this data up in the nest?
I want to make sure because for people that are listening,
if it's happening in one community,
it's probably happening in many communities.
Exactly.
And again, as a reminder,
the shadow banking sector
is big. It's bigger than you think it is. And it's completely unregulated. And it's been working
together with the traditional banking industry, especially at the small and regional banks.
And I'm concerned. All I'm saying is I might be 100%. I hope actually, let me say the words,
I hope I'm wrong. I was reading one of the comments and they were like, Donish is great, but he's always so pessimistic.
And it's like, dude, I still have PTSD from 2008, 2008, 2009 when my family, that had no money, by the way, lost everything.
You know, I'm sorry that I'm a geriatric millennial, but our families got completely wiped out by this shit.
So I apologize if I'm a little bit sensitive to it.
I literally saw my family just do the normal thing by putting their money in the markets and then completely lost everything.
So, you know, maybe I am a little bit.
pessimistic. But Trisha, what you're telling me
is important. And so if you can share it
up in the nest, I don't know if you
know how to do that. If you don't, just DM me
the article and I'll put it out, or the
actual information that you're... When you say
the nest, are you just talking about posting
in the comments? Because I've got some posts,
I could just copy and link them
and put them in there. Yeah, yeah. Put them in the
in the post and then you know our team can look through it and put it up in the nest so the nest is up there like the little
thing at the top so we're happy to do that uh Greg I want you to to respond to trisha if what trisha is saying
is well founded which I believe it is I don't you know trisha doesn't sound like somebody who's just making
shit up Greg isn't that concerning man
Well, again, you know, those are some isolated areas where so you're talking about a whole different category now where you're talking about, you know, for rent homes, build a rent. You're talking about, you know, invitation homes and institutional, you know, rental homeowner that owns, you know,
thousands and thousands of homes across the country.
And then, you know,
and there's only certain markets where those are concentrated in Florida's a big market,
you know,
for those types of communities.
And yeah,
she is correct in terms of those investors buying houses and then packaging them up
and securitizing them based on the rents,
not the mortgage payment.
So that is happening.
That is going on.
But those are a very different animal.
And again, you know,
rents,
sure, rents were highly distorted.
And in some areas you're seeing rents back up.
But, you know,
in general across the country, rents are going up.
I don't know anybody who owns an investment property
and I work with people all over the country
that are lowering rents.
They're all raising rents.
All your multi-family syndicators, you know,
everybody that's buying houses,
everybody's increasing rents.
And you know, to the decline in short-term rentals,
the areas that I follow, occupancies are down,
but the rents are up and the profits are up,
the revenues are up in the short-term rental areas,
you know,
of the coastal areas I'm involved in,
but,
you know,
every area is very different.
You know,
to Amy's point,
there is a ton of dry powder on the sidelines.
And what's really at risk here?
What you're really talking about?
The shadow banking is huge.
I mean,
what is that,
$100 trillion?
So it's like 14,
15% of the,
you know,
global investment capital out there.
What's getting wiped out with commercial real estate is the equity, not the banks necessarily at scale.
It's the equity.
What's getting wiped out when, you know, these properties sell and, you know, you're talking about that 20% like Mo talked about the 20% decline in values.
I mean, that's the down payment.
So even the DSCR loans, depending on your credit score, you still have to put 35, 40, 25, 35, 40% down.
Commercial properties, you got to put, you know, 20, 30% equity down.
The 95% or 99.5% that Trish is talking about, that's when they're securitizing and selling that.
And that's, I don't even know, I don't know about that.
But, you know, if they're recognizing the value, that's because they're selling, you know,
securities based on that.
But no bank is doing that.
no private lender necessarily is doing that.
Some might, some hard money lenders, you know, for, you know, flipping houses or short-term
rentals or whatever, you know, for Burr until you refinance on the back end might lend you
a little bit more.
But in general, you got to, you know, you talked about credit tightening and you're absolutely
correct.
Credit markets have tightened, lending standards of tightened.
And that's the reason this is not systemic.
And the residential housing market at scale, most of those loans are very healthy where people
had to put...
significant down payments up, the commercial market, the same thing.
Those loans generally were based on the income of the property.
There had to been 20 to 30 to 40% equity put into them.
So the equity investors are who's getting wiped out there, shadow banking industry.
That's a big shoe that could potentially drop that could create a systemic event.
Oh, finally.
Finally, Greg is on the same page.
There is the possibility of...
By the way, Greg, you actually articulated
what I think Amy and I were trying to articulate.
And I...
Sorry, Amy.
I'm not saying that you were just as bad as me.
But that's what we were saying
is actually they're all connected
because the institutions are connected.
That's actually kind of what the main point was.
Tricia, I put your post up in the nest.
This is...
insanity people go check that out cody i wanted to give you a chance to weigh in since you are a
always bull when it comes to real estate uh so cody i'll let you jump in
Hey guys, good morning.
Yeah, you know, I think Greg made a ton of great points.
You know, Tricia, I couldn't hear your audio, but I was following along on the closed captions there.
You know, those points are really interesting to me that she was making.
You know, my last tweet was about this, right?
So, you know, we are starting to see that, right?
It was kind of a race to the finish line for a lot of...
these trying to be institutional property investors, where they're piling on as many properties as they can in order to qualify for a large-scale agency financing.
And, you know, they got caught up chasing the mouse is the way I put it in the tweet.
And so what happened was as property values were increasing,
their margins started decreasing
because state taxes and insurance costs
started climbing rapidly.
The broker or the investor syndicator
that I was talking with is in the Texas market in particular.
But his fund alone was $350 million
in single family properties aggregated together
their debt stack started rolling at the beginning of this year.
By August they'll be way underwater and now they're trying to get a hundred year tax
abatement from the state in order to stay afloat.
And that's the only way they'll be able to roll that into agency financing and survive.
That fund alone, they're party to another almost $2 billion in syndications across the Southwest
corridor of the United States.
So it'll be really interesting to see how some of this stuff plays out.
If these states want to play ball, they're going to lose tax revenues, right?
Counties will lose tax revenues and rents are seemingly stabilizing.
I know some of the data is skewed depending on the markets, but...
I think we're definitely starting to see some stabilization.
So that's a really good point.
And I totally forgot to mention taxes.
Thank you for bringing that up, Cody.
So for people that are not aware on how the U.S. works,
because we have a lot of people that are international also that listen to us.
So when the appraisers come back and let's say the market has gone up,
which it has gone up largely, now they readjust the tax.
on that property.
So now not only do you have to pay higher interest rates,
you're also paying higher taxes.
And so that altogether is starting to cause even more trouble because, again, it's revenue in, costs out.
And your two biggest costs, I mean, there are a lot of other costs with owning a short-term rental.
But two large costs are taxes and your mortgage payment.
So both of those things are now increasing because of the current environment.
Tricia, did you have a comment?
Yeah, can I just kind of expand on that?
And what I'm seeing, especially here in Florida, is insurance.
And I know people don't remember it.
We went through this back in 2006, too, where, you know, when those values go up,
the insurers are looking at replacement cost value.
So we're seeing premiums, especially down here because we have all the hurricane issues,
we're seeing premiums double for some people.
And then on top of that, they have this risk rating 2.0 for flood insurance.
A lot of times the Airbnb type properties are located in coastal communities, you know, not all, but that's very often.
And a lot of them are getting blindsided with the flood insurance right now.
So that's a huge one we're seeing down here.
It's a major issue that we're going through in Florida at least.
Yeah. Greg, I want to give you the final word on this before we move on to the Fed and close up in a minute or two.
But Greg, wanted to give you an opportunity to respond to some of this because, you know, we talked about the mortgage payments.
We talked about the tax adjustments where we've talked about insurance, especially in certain markets like Florida.
You know, Greg, are you...
Are you still bullish on short-term rental or just overall bullish that it's not going to lead to this issue?
Just want to make sure before we finish up.
Yeah, so you're correct.
All those costs are increasing, not just short-term rentals, but for everybody's house in year-round situations for commercial, all of that.
Insurance is a big deal, especially in Florida with all the storm.
So those are going to be factors, but again, there just aren't enough.
at risk right now. The short-term rental market is such a small portion of the housing market in the
United States. I mean, the housing stock, I think, is $30 trillion short-term rentals. I don't know what
that would be. It's just not enough right now. If you combined, you know, if every short-term
rental went into default right now, every commercial property went into default that's at risk right
now and then combine it with the shadow banking, then you might have an issue. Then you might have a
situation. But I don't think there's enough of any of it.
it right now fast enough that it's systemic that's going to, you know, create any kind of an
event that's going to cause the Fed to respond or that's going to cause severe distress in the
economy, in the banking system or in the credit markets right now. And I think we have, you know,
probably a year or two potentially, potentially.
to work through the system. And I'm not so sure the Fed is going to raise rates. I think Powell,
you know, has very little backbone. He could have came out, you know, yesterday very strong and he
didn't. He kind of green lit the market yesterday with his comments. And, you know, he wouldn't even
use the word skip. He wouldn't use the word pause. He said, we decided to maintain the level of
the Fed funds rate until the next meeting. I mean, it was really funny how he worded that.
So, I mean, there's a, so here's the big thing.
It's all about liquidity.
There's so much liquidity in the system still, so much money that's been flooded in, you know, several trillion dollars over the last few years.
that is still out there floating around.
It's floating around in private equity.
It's floating around in the consumer's pockets.
People still have jobs.
When you have jobs, you're spending.
So it's going to take a while for all this to unwind.
And to your point, back in 0809, that issue started in 0607.
And it took until 2009 for it to happen before the banks really started cracking up.
And that was because you had a $30 trillion housing event happened.
So that's what you need.
You need $30, $40, $50 trillion of an event to happen all at once to bring down the economy at scale to create any kind of a seismic event that would really cause the Fed to pivot and reset where we are from a liquidity standpoint.
So let me completely disagree on the Fed not hiking rates.
Greg, I will bet you a case of Diet Coke.
I'm kidding.
I don't do that.
Aspartame's bad for you.
Sorry, that was a joke from earlier.
Just trying to keep it all together.
I was a lifelong Diet Coke guy until this year.
I finally got off of it.
Good for you.
Since now, WHO is coming out and saying that it's a possible carcinogen.
Yeah.
which is super scary if you think about it because so many people use and by the way there's also stuff on metabolic dysfunction we're not going down that yet uh but by the i will say that everybody that's commenting saying that they want to space on this uh you're going to get one and we're going to get some real experts to come up and talk about this uh thank you so much for for the kind comments on that i was going to say you know the um
The big thing here about the Fed and about whether they're going to increase rates is what are they worried about?
And I can tell you right now that too much is happening right now where there is no way that with shelter staying stable, I don't think rents are going to go up.
I think rents are going to stabilize.
I think we're seeing some early signs of that.
You can tell me otherwise, Greg.
And it depends from city to city.
But if you look across the nation, rents have stabilized.
They're coming down in some areas, going up in some areas.
That's number one.
So shelter, we're not going to see disinflation at the rates that we think we are.
So with that being above 2%, and the Fed's goal of 2%,
everything else has to be below 2%.
That's a dangerous place to be.
But that's the place, if they want to land this plane, that's the place they've got to land it.
And if they want to avoid stagflation, they've got to break some of the other things.
And the only tool the Fed has is demand destruction.
So that's the real challenge.
And they're going to go.
He is not going to bend.
He is going to go.
I will bet anyone...
anyone that there is a raid hike this year at least one if not two but one i can bet who wants
to take that bet with me we will make this public who wants to take the bet that there will be at
least one more rate hike oh cody cody will take that bet because cody is wrong uh it's okay
i'll take cody's money once again uh but uh go ahead cody
Oh, no, I'm with Greg on this.
You know, I think this pause may be a little longer.
You know, I've said it multiple times.
We'll see kind of how this plays out.
I do want to say one thing on the Airbnb thing real quick
before we transition.
Just keep an eye on Airbnb's revenues over the next couple of quarters here.
I mean, that'll be a clear sign of what the short-term rental market looks like.
I mean, they're up 20%.
currently so well they're up 20% because all of tech is up 20% can we just be like you can't
revenues revenues yeah yeah but but the PE has also gone up so so the point here is that
don't just look at that sorry I'm gonna push back at Dakota here uh and what are their earnings looking
like Cody are they profitable I can't remember yeah they're profitable yeah so you know
they're profitable but how have their earnings looked are their earnings better
Year over year? Probably not.
Yeah, I think earning they're up too.
I'll have to look back and pull the charts.
But so, Cody, you know, are you taking the bet with me on whether there's going to be another hike?
Are you saying that the Fed is not going to do what they've been saying they're going to do?
By the way, they've done exactly what they said that they were going to do?
I think it's possible, right?
There's possibility that there will be a hike.
But here's what I'll say.
I don't think that we'll see it.
I think we'll see a continued pause here.
They want to see how the market digests all of this.
I think like I said, Monday or later last week,
I think Powell was pretty clear that they're moving from this hiking regime to this regulatory regime.
And you'll see a lot more of that.
There's going to be a lot more regulation in the regional banking sector, or at least
posturing around that.
And his posturing, public posturing around inflation is primarily because that's what people
want to talk about the most and what impacts people the most, right?
But historically speaking, I mean, inflation is pretty consistent with where it's always been at this point here.
And so I think that-
So, Dakota, is your underlying hypothesis that they're not going to go for the 2%?
I don't think we'll be able to get to the 2%.
They could hype as much as they want.
And I think we'll see near-term inflation come down.
And then I think we'll see a resurgence of inflation sometime next year.
Greg, do you think the Fed is going for 2%?
Yeah, I think they want to see 2%.
And I think they're going to continue to say that, whether they can get there or not is another question.
I don't think they're going to hike if inflation comes in soft once again.
I think if you get an out of control inflation print, I think then he may hike.
But I think if inflation comes in soft, the economy is still strong enough for them to hold steady and wait and watch what's going on.
Because I think they do, to your point,
think that there are some things that if they raise rates again,
could then potentially put a lot more banks under pressure
and put the shadow banking system under a lot more pressure.
So I think there's things that are looking at in the background.
And I think they believe that the economy can handle inflation where it's at right now
if they can get it down in the threes.
Interesting.
I just fundamentally disagree.
So it's interesting.
I don't want to keep shouting at people.
I apologize.
Go ahead, Matt.
Yeah.
Just keep in mind there's some seasonality here, but operating income for Airbnb, Q4 of last year was $234 million.
Q1 of this year was negative $5 million.
Net operating income, Q4 last year, $344, $1.30 million this year.
Again, keeping in mind, there's some seasonality there because you're going to have a lot of holiday travel.
But just wanted to put that up there.
I appreciate that.
Michael.
Yeah, I just wanted to say in terms of that 2% that the Fed wants to get to.
I'm sure they want to get to that.
But if you look at the average inflation rate over the past 100 years, it's been 3.8%.
So whether or not the Fed gets all the way to 2%, clearly based on that average,
we've been hovering all around an area in the higher threes.
So whether or not the Fed is trying to get 2%, whether they get close to that or not,
I think eventually even if they don't get there,
they'll have to just move forward and focus on other issues.
And they'll be fine if we're sitting low threes.
I just don't think that's going to happen, Michael.
Everybody's being very wishful.
It's just like it's as if we don't realize that the Fed doesn't give a crap.
Employment has way too much room to go, y'all.
There's just too much room in employment.
Jobless claims dropped again.
Why would they not?
What is the...
Can you explain to me how this fits their mandate?
Amy, what are your thoughts?
I mean, how is it possible, Amy, that I'm losing...
Am I just losing my mind?
Am I just too much of a pessimist?
Okay, Donish, I'm 100% in your corner.
I absolutely think that they are hiking.
Okay.
in July and there's a couple reasons. Number one, hello, do you remember all the data that you just read this morning? Like every single piece of data that you read came in hot like for the economy. Like GDP was better than expected. Unemployment was better than expected. Um,
Housing has been better than expected.
Yes, housing has been better than expected.
And that combined with the fact that we are still no, we're near that 2%, which we may or may not hit, but they still say continually is their target.
I can't see how they would not hike.
And additionally, I personally think that Powell is dealing with.
His reputation and the Fed's reputation right now, which have been severely hit over the last several years.
I know that he chickened out in 2018 and he got kind of a bad rap for that when he was trying to raise rates and he backed off.
And then again, you know, he had this pandemic response.
And while it did save our country from what would have been probably a horrific depression,
have we done nothing during these mass lockdowns,
a lot of people were very critical of the fact that he held rates for too long, too low,
and he was wrong about the transitory narrative.
So now he is coming out.
He has been since the speech in Jackson Hole in August, he has been very consistently clear.
that he does not care if it damages unemployment.
He does not care if it damages the housing market.
He is committed to getting to that 2% target.
And when he came out and he said if he's giving us, like everything he said he's going to do so far, he has done.
And if he comes out and he gives forward guidance and says, hey, I think we're going to get two more rate hikes this year.
I think he almost has to hike just to restore credibility to the Fed because they desperately need it.
Yeah, and I do agree with you, Amy.
I do think they'll hike again.
Honestly, for me, the bigger question is,
is what is the impact of the rate hikes we're seeing?
Because I don't think this last 25 to 50 basis points
is really going to make that much of a difference in the long term.
I think the last...
500 we did is the massive impact and this is just kind of the last tiny little bit.
So I completely see what you're saying.
And honestly, whether or not he does do the 25 basis points 50 or zero,
I don't think that's going to be the thing that has the massive impact going forward.
Yeah.
And on that note, the thing that people should be worried about is that even if he does a pause,
which he's not going to do and you are all wrong.
But even if he does a pause,
He still has, like what Mikkel said, 500 behind it.
So that still hasn't flushed through the system.
We still haven't broken the things that actually need to be broken.
We still haven't seen the 20% drop we need to see in the real estate market.
We still haven't seen contraction or seen unemployment rise so that it's not as hot.
you know, there's a bunch of things that need to happen for this cycle to end.
I just, I don't want anyone to suffer, but I do want this pain to end.
I don't want to sit here and keep talking about the freaking fed.
Guys, for years, we never talked about the Fed.
And now all I can think, Jay Powell haunts my dreams.
No, no, haunts my nightmares.
I literally feel like I don't care what this guy has to say anymore.
I just want the pain to end.
I want this cycle to be over.
That's what the point is.
Ultimately, the whole market is sitting here and saying,
okay, this good news, is it good news or bad news?
Oh, shoot, is this good or bad?
Oh, what is the Fed going to do to this?
Like, that's not how a market is supposed to operate.
This is not a real, you know, like, how in succession they say, you're not serious people.
This is not a serious Fed.
This is stupid.
This is insane.
And so, you know, we're sitting here and we're trying to figure out what happens next with the Fed.
It's like trying to understand the psychology of a madman.
And so ultimately, like what we need to do is just focus on the fact that we need to move past this.
It's time to move on.
Raise the rates.
Right.
Break what you need to break.
And let's end this cycle.
Unfortunately, Greg is right that it's not going to happen for another 12 to 18 months.
Because, again, these are not serious people.
Go ahead, Matt.
I was just going to say, we need to keep in mind that the Fed here is literally a one-arm paper hanger.
And, you know, inflation is driven by monetary policy and fiscal policy.
Fed can only really manage monetary policy.
We have fiscal policy right now that keeps pumping more money out into the system,
which is literally fighting the Fed every step of the way.
I'm not sure that that's our intent.
I don't want to go down a political rabbit hole or whether it's a good idea or bad idea.
But we do need to keep in mind that this is not just caused or driven by the Fed.
There is a fiscal side of this that really needs to kind of come back into control at some point.
man that that's gonna that's gonna take a lot longer than you think it's just not gonna happen like
they can't even talk to each other anymore 100% uh but so so that's unfortunately why we're
stuck with the fed you know if we were actually being smart we would do other things like the
instead of talking about Bidenomics, we would do a mix of binomics and Reaganomics and probably end all of these issues and spur the growth that we need for this country again.
But anyways, I'm not, I'm never going to run.
So it doesn't really matter.
I can say these kinds of things because I don't have to run.
Go ahead, Greg.
So to Amy's point, you know, earlier talking about,
you know, Jay Powell and what he's going to do.
And to your point, you know, they've already hiked 500 basis points.
And I think the issue with Powell right now is he's afraid, his reputation.
So Amy was talking about his reputation.
I think that's more important to him than anything else.
and I think he's afraid to hike anymore.
I think behind the scenes, there's conversations
and they're looking deep into the banks.
I think they're afraid to hike anymore
because it's put too much pressure on the banks
and private equity and shadow banking.
And to the other point, I think it was Matt was making.
You've got the government coming out with, you know,
the infrastructure bills and the, you know,
the bionomics and all the things they announced yesterday.
This isn't political, but, you know,
to create jobs and to drive GDP and things like that.
So you've got, you know, two ends kind of banging heads together.
And I think Powell knows, I mean, he just, he just can't break
the labor market without severely hiking rates.
He'd have to go up another 100 basis points.
You can't affect the labor market right now with 25 basis points.
He knows he would have to go too far that then it would completely break the economy
to do what is necessary to be done to really slow the economy and really slow labor.
And it is business cycle.
You know, economy's running hot.
You got to slow it.
Economy's cool.
You got to stimulate it.
So you stimulate through physical and you stimulate through monetary.
And I think he knows the truth.
He is stuck.
He can't do much more because of the delicate balance.
And he does not want to be another greenspan.
He does not want to be the guy to put the country into the worst, you know, economic situation imaginable.
Because this is a big one.
If the shoe drops to your point, which you've been saying, if we don't land this properly,
this is a big, big deal that could potentially be.
and economic unwinding like we've never seen.
And on that wonderfully positive note,
we're going to end the day.
Thank you, everybody, for joining us.
This is, again, kind of nuts that you all do that.
But we appreciate you all joining us.
Thank you for all the people that commented.
We will do a space on supplements, on aspartame, and all of that.
So I'll try to see when we can get that on the schedule.
Thanks again, everybody.
We'll see you tomorrow, 8 a.m. Eastern.
Thanks, everyone. Thanks for having me. Have a great week.
