Landmark Links June 25th – Increasingly Risky

Must Read: As discussed here previously, pension funds are allocating more capital to alternative investments – the category under which real estate falls – in an effort to generate higher returns for their beneficiaries.  However, core and core plus returns have fallen in this long recovery, leading pension funds to allocate a growing amount of capital to riskier value-add real estate investments, just as they did in the later phases of the prior economic cycle.


Crystal Ball: In the latest reminder that interest rates are impossible to predict, the 10-Year Treasury bill dropped below a 2% yield last week, a move that absolutely no one was predicting back in October 2018 when it was at 3.25%.  See Also: While US yields may be low, they are still substantially higher than most of the rest of the world.  The value of negative yielding debt has now hit a record of $12.5 trillion.

Over The Hill: Driven by the massive Baby Boomer generation aging and living longer combined with dropping birth rates, the median age in the US is now over 38.

Together Forever: Add divorce to the list of things that millennials “ruined.”  The divorce rate is at a 40-year low, unless or 55 and older.


Ramping Up: Amazon is expanding its domestic air-cargo operation, adding smaller jets to its rented fleet to link its distribution centers and extend the reach of its next-day delivery service.

Here We Go Again: Like flies to shit, non-traded REITs are starting to seek out opportunity zone properties.

Another One Bites the Dust: In the latest example of under-performing retail being re-purposed for other uses, Lennar is buying the Santa Anita Plaza in Arcadia to turn it into a gated residential community and 11,000 sf of retail space.


Off to a Slow Start: Fannie and Freddie rolled out a program about a year ago to provide mortgages on manufactured homes as a way to focus more on affordable housing.  However, the effort has been hampered by a narrow focus and complex regulations.

Danger Zone: Three quarters of Californian voters believe that the state should restrain home building in areas at high risk of wildfires according to a UC Berkeley Institute of Governmental Studies Poll.  This sounds like an impressive number until you take a step back and realize that nearly 75% of California voters likely oppose building any housing anywhere (at least if its near where they live).  See Also: Southern California cities are rejecting the state’s push for more housing.

Overwhelmed: Flippers are completely overrunning the entry level marketSee Also: Investors are buying more of the the US housing market than ever before.


Power Hog: A new study found that Bitcoin requires an amount of electricity that leaves it with a carbon footprint roughly the size of Las Vegas or a small country like Sri Lanka.

Cruise Control: Walmart is making a big investment in autonomous trucking aimed at adding efficiency in the “middle mile” or segment where goods are delivered from a big-box warehouse to a last-mile distribution facility.  See Also: Amazon pays incredibly low rates for trucking – to the point that some truckers refuse to work with them.

Stampede: Despite a couple of recent weak high-profile IPOs, venture capitalists have been largely vindicated when it comes to criticism of over-valued Silicon Valley unicorns.

Podcast Links 

Podcasts are pretty much all that I listen to in the car these days so I figured figured that I’d start posting some that are a particularly good listen.

John Burns on why the new housing market has run out of steam without ever really picking up in the first place.

Malcolm Gladwell on how arbitrary time constraints lead to highly arbitrary results.

Charts of the Day

The charts below lay out a great bull thesis for the lower-end apartment market:

We simply aren’t building enough units to support the nation’s household formation.

Source: The Daily Shot

That being said, first time buyers as a percentage of the population are still very low.

Source: The Daily Shot

This is exactly what an entry level market taken over by investors looks like.


Source: John Burns Real Estate Consulting


Extra Protein: A large, dead rat fell out of the ceiling and onto a woman’s plate at a Buffalo Wild Wings in Los Angeles.

Jury Doodie: A man on trial for burglary defecated in the courtroom, threw his poop at the judge and was still acquitted because Florida.

Comedy of Errors: The manager of the Mets cursed out a reporter and a pitcher challenged that same reporter to a fight after the team’s latest loss which is about the most on-brand thing to happen in team history.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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