It’s a mega earnings day, with some big names, especially on the tech side, rolling out. We will also get housing data, as the state of this market is a hot topic for investors as mortgage rates keep climbing.

Last week, existing home sales marked an eight-straight monthly slump, the first such streak since 2007. It’s like a recent UBS survey showed five major US cities presented as overvalued.

Our call of the day by Jeffrey Kolitch, the portfolio manager of the Baron Real Estate Fund BREFX,
which sees rare bargains among “best-in-class” related companies thanks to a major pullback in such stocks this year.

So much so that if the current downturn leads to a recession, real estate companies will be off to a good start, Kolitch said in his recent third-quarter letter to shareholders. And while he’s wary of the near term, thanks to central bank hikes and political risks, he’s more optimistic about the two-to-three view.

In the first nine months of 2022, many real estate companies saw corrections of 30% to 60% that took into account low valuation multiples and expectations of slowing growth, Kolitch said, adding that their fund is now “filled with real estate”. real estate stocks that are unsustainably cheap.

Kolitch is bullish on the strong business fundamentals and healthy balance sheets he sees for many companies, as well as signs of hope for the overall economy – moderating inflation, plenty of jobs, rising banking central which is probably mostly done and a rebound from China which is just beginning.

He also notes that they have seen no signs of the over-leverage and overbuilding that marked the 2008 real estate crisis. “We are always alert to warning signs in the real estate industry.” , did he declare.

On its “best-in-class” picks, which must meet criteria that include: ownership of unique and well-located assets in markets with high barriers to entry, strong long-term growth prospects, industry leaders, a conservative and liquid balance sheet and strong management.

When it comes to real estate investment trusts (REITs), Kolitch highlights Invitation Homes INVH,
largest institutional owner of single-family rental homes, concentrated in neighborhoods with decent schools and job opportunities. Residential Equity EQR,
is another, the largest US apartment REIT with high quality units in prime coastal markets.

Equinix EQIX, a global carrier-independent and cloud-based data center operator,
and industrial REIT giant Prologis PLD,
also get endorsements.

Residential choices include household names including home builders Lennar LEN,
and Toll Brothers TOL,
and DIY retailer Lowe’s Companies LOW,
who each get nods for cheap reviews, as well as hard-flooring specialist Floor & Decor FND,

Among alternative asset managers, Kolitch rates Brookfield Asset Management BAM.A,
is rated over 50% off management’s own assessment, while the biggie Blackstone BX,
is valued at a “modest premium” to the S&P 500 despite “much better long-term growth prospects”.

Under the travel-related real estate umbrella, the manager likes MGM of casino group MGM Resorts International,
“compelling” value, with mountain resort giant Vail Resorts MTN,

The steps


ES00 Equity Futures,


are lower after the S&P 500 had its best close in a month, with bond yields TMUBMUSD10Y,

slightly lower, the dollar DXY,
up slightly and CL.1 oil prices,

tilted to the south. BitcoinBTC USD,
is trading around $19,356.

The buzz

Earnings are pouring in from some big names. GE GE,
is down on a lack of profitwith Xerox XRX,
Coca-Cola KO,
is on results that exceed forecastsin the same way UPS
Biogen BIIB,
profits also exceeded forecasts. 3M MMM,
fall on mixed results.

After the bell we will hear Microsoft MSFT,
(Insight), GOOGL Alphabet,
(Insight), Twitter TWTR,
and Texas Instruments TXN,
on the technical front. Elsewhere, Visa V,
Chipotle CMG,
spotify spot,
and Mattel MAT,
are also in the late lineup.

Shares of Weber WEBR,
are up 24% in pre-marketing, corresponding to the premium offered by its largest shareholder to buy the grill maker’s remaining stock for $6.25 each.

S&P Case-Shiller and the Federal Housing Finance Agency will release August home price indexes at 9 a.m. EST, followed by a consumer confidence index.

Adidas Ads,
has terminated its partnership with rapper Kanye West on his recent wave of antisemitic remarks which also led to his talent agency dropping and banning him via Twitter TWTR,
and Instagram.

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How persistent is high inflation? A team of Deutsche Bank strategists, led by Jim Reid, looked at consumer price inflation from 1920 (if any) for 50 developed and emerging countries, when inflation reached 8%.

German Bank

“Looking at this full history, the evidence shows that once inflation goes above 8%,
median inflation takes about 2 years to even drop below 6%, before stabilizing
around this level for up to 5 years after the initial 8% shock. It’s about 2pp above
the pre-shock median of c. 4%,” the strategists said. The US CPI hit 8.5% in March.

As they point out, the current consensus expects inflation to be back or even below 3% just two years after that first 8% overshoot. While “history never exactly repeats itself,” when inflation normally exceeds these thresholds, history shows it to be quite sticky, especially in post-1970 periods,” Reid and the team said. .

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