To The Moon

(This is an article I received from a friend. I am NOT the author. This has got me thinking.)

🚨REAL ESTATE CRASH ON THE HORIZON by Josh Rincon

Warren Buffett has just made a striking move, reallocating a staggering $234.6 billion into treasury bills. This marks the first time he's held more than the Federal Reserve's $195 billion.

When Buffett shifts his investments like this, it's time to pay attention. Something major is brewing.

Consider this: over the next 20 months, a whopping $2.7 trillion in commercial loans is due for repayment. These loans originally had an interest rate of 4.3%, but now they've surged to 6.2%.

Let's break it down with a straightforward example:

Imagine a $100 million hotel with a 3.5% loan. That's an annual interest payment of $3.5 million. Under today's rates, that figure skyrockets to $7 million.

While the hotel still generates $5 million annually, it now faces a $2 million deficit due to interest payments. 

Banks aren't likely to extend new loans to properties operating at a loss, causing the property's value to plummet from $100 million to around $48 million. Why? Because lending is based on the $5 million income, not the previous inflated valuations.

This scenario is set to repeat itself thousands of times in the coming months. 

This will effect commercial real estate NOT residential real Estate, at leastt that's my guess! What we're witnessing goes beyond a real estate crisis; it's a shift in the entire industry.

Take note of the recent NAR settlement in March. The traditional fee structures are on their way out. The future of real estate looks like this:

- Powered by AI

- Transparent and straightforward

- Free from hefty fees

The established players are losing their grip.

While many only see the impending crisis, history shows that the toughest times often give rise to innovative companies.

Significant changes pave the way for remarkable opportunities.

Real estate is transitioning from:

- High fees to zero fees

- Hidden charges to transparent pricing

- Dependence on intermediaries to tech-driven solutions

For the first time, we have the chance to eliminate real estate fees entirely—not just reduce them. This is a game-changer.

Think about it: Why should you pay 6% in fees to purchase a home? Why hand over thousands to middlemen? Why spend an extra $24,000 unnecessarily?

The clear answer is: you shouldn't. 

What are your thoughts on these shifts?

My thoughts: 

There are some risks in the horizon and it's important that we have some hedging in our portfolio. If Mr Buffett choose to put majority of the cash into such bonds, it implies that there is nothing worth buying within his circle of competence.  

They will still be some stocks that are suitable for trading. However the market seems to be leaning over valuation for now. Let us research before investing and here is wishing all success.

$S&P 500(.SPX)$  

$iShares U.S. Real Estate ETF(IYR)$  

@TigerStars