#162 - Getting Back Into Writing / Reading / Sharing
It's been quite a while since I wrote or published a podcast, but for several good reasons. Time is our most precious currency and I've been investing mine in other endeavors as of late, but hope to return to writing more regularly as things settle down on the home front.
In the past 6 months, I purchased 2 businesses (a real estate property management company and a home services business), started a real estate development company (East Rock Development) with one previous consulting engagement on a multifamily project and two live mixed-use projects currently in pre-development, am currently studying for my North Carolina Building Contractor's license, and have been busy raising an 18 month old daughter. Busy, but a good busy!
Victor, my podcast partner, started his MBA at UNC and is full steam ahead on his search to purchase a service business to run post-graduation. If you know of an interesting service business opportunity in the Southeast, reach out to me and I'll put you in touch with Victor.
As both of us began new trajectories in life (post-acquisition for me, MBA for Victor), it became immediately clear that time was a luxury we didn't have to dedicate to the podcast. BUT, we have remained good friends since we put the podcast on the shelf for a while and certainly have the door open for future episodes or collaborations if our schedules allow.
In the meantime, I have missed writing. I decided 6 months ago to cleanse my schedule of social media, the podcast, and writing for a while to focus on myself, my goals, my faith, and my family. Writing is the only one of these I miss, and it is cathartic for me, so I have decided to gently add it back into my schedule as time permits along with sharing great reads I come across.
The topic I'm dwelling on right now is inflation. Is it transitory or sustained? My view is it is likely sustained the longer the Fed holds interest rates artificially low and we effectively 'pay' people to borrow in depreciated dollars. I'd rather hold crypto, real estate, and equities with this big of a spread between inflation and risk free rates.
For real estate investors, how are you thinking about the macro picture? To me, if you have debt maturities in the next 2-3 years, you may have some refinancing risk with yield curves widening and rates potentially being raised next year by the Fed. On an inflation related note, I had sticker shock with the first round of pricing for the two projects I am working on at the moment (20% over estimated hard costs). I spoke with a self storage developer yesterday and his hard costs were up 100% in the past 3 years alone based on quotes he received 3 years ago. No inflation here...
For equities investors, what is your positioning with current inflation numbers? What are you adding to and what are you trimming? Everyone knows that just holding equities isn't a panacea against inflation's effects on purchasing power in your portfolio, but finding the right businesses that are able to pass on cost increases is not the easiest task. I am adding slowly to a few companies that I hold already in concentrated amounts (BAM, TPL, INMD, BRK), but have a lot of cash sitting on the sidelines and am finding it hard to put any real amount of money to work at this point.
For operators, what is your take on inflation and where are you being hit the hardest? I can tell you anecdotally that water heaters and HVAC systems are up 30-40+% in the past year alone.
Buffett's classic 1977 Fortune piece on inflation comes to mind as worthy of rereading.
Josh Wolfe's / Lux Capital's Q3 2021 letter underscoring the excess of excesses in markets
Robin Sloan's notes (and criticisms) on Web3
Berkshire Hathaway Energy is a behemoth
Hayden Capital's memo on Coinbase (disclosure: long)
Roger Lowenstein's critique of Fed's dovish behavior
Cushman Wakefield's research report on data centers
Bridgewater Associates' musings on the demand shock behind the supply-chain issues