Plus, Is the U.S. Heading for Another Housing Crisis?
Welcome to your Sunday digest…my weekly breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
Of course, front of mind for everyone right now is the Russian invasion of Ukraine.
We’ve been covering the economic fallout from that crisis here in Field Notes and we will continue to do so. In fact, in the coming days, I’m planning to hold a special webinar on the long-term impacts of the Russia-Ukraine crisis, and to share some of the ways you can protect your portfolio and profit from the volatility it’s causing. I’ll even be giving away the name of my top investment recommendation for free during the broadcast.
Keep an eye on your email for all the details… I’ll be in touch in the coming days to tell you how to get access.
But for today’s mailing, I wanted to focus on some other stories. Amid the conflict, a lot of big developments are understandably being underreported…including this week’s first story about the New York Stock Exchange.
It was reported this week that International Exchange Inc., the parent company of the NYSE, will take a significant stake in a tokenized securities venture called tZERO.
Tokenization is the process of taking a security, like a stock or a bond, and converting it into a crypto asset.
Selling stocks as crypto tokens offers numerous advantages over traditional trading systems. Using a crypto blockchain to trade assets would likely be safer and cheaper, since it would remove middlemen.
Moreover, when you tokenize an asset, you can sell pieces of it. This would be an important development for stocks.
Take the example of Amazon. One share of Amazon costs around $3,000 at time of writing. So, you must spend at least that much to add Amazon to your portfolio.
However, if Amazon’s stock was tokenized, you could buy pieces of a share, in the same way you can buy fractions of a bitcoin.
Tokenized shares already exist on certain crypto exchanges, though these are unofficial.
Now, with its investment in tZERO, the NYSE would seem to be taking steps toward offering official tokenized securities.
When I used to suggest that NYSE shares would one day be traded as crypto tokens, colleagues and friends would scoff. But they don’t scoff anymore. That day is coming…sooner than most of us think.
Sticking with crypto for a moment…
In recent days, we learned that California-based venture capital fund Sequoia has launched a $500 million to $600 million crypto fund.
Based in San Francisco, Sequoia is one of the foremost technology-focused venture capital firms in the U.S.
The new Sequoia Crypto Fund has some heavy hitters as partners, including former Twitter CEO Jack Dorsey and Sam Bankman-Fried, CEO of leading crypto exchange FTX. The fund will primarily focus on investing in liquid tokens and digital assets.
Although this is the firm’s first crypto-focused fund, it has been around crypto for some time. According to Sequoia partner Shaun Maguire, “20% of the entire firm’s investments went into crypto in the U.S. and Europe” in 2021.
Overall, this move by a major player like Sequoia shows that while crypto markets remain volatile, Silicon Valley is as hot on crypto as ever.
Finally…U.S. home prices.
I’m sure it will come as little surprise to you to learn that home price growth in the U.S. hit a record high last year.
New data from the S&P CoreLogic Case-Shiller National Home Price Index shows that the average home prices in major metropolitan areas soared 18.8% in 2021.
Two major factors helped cause this spike—low mortgage rates and a lack of housing. The shortage of homes, in particular, inspired ridiculous bidding wars…pushing prices ever higher.
Price growth has been slowing in recent months, and is expected to continue to slow as mortgage rates increase once the Federal Reserve raises interest rates.
However, the bigger problem is the lack of supply. In January, the number of homes for sale hit an all-time low.
This is a dangerous situation for the wider economy.
If the Federal Reserve does, indeed, raise interest rates, that will in turn raise mortgage rates. And rates will be escalating even as the crimped housing supply pushes prices up. This is not going to play out well. It’s going to create housing zombies who are forced to stretch far beyond their means to chase that American dream of home ownership…which means less money to spend on consumer purchases.
I see another housing crisis coming for America at some point in the not-too-distant future.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.
Enjoy the rest of your Sunday.