Investor Weekly News Update | April 24, 2023

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Investor
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April 24, 2023
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U.S. Inflation Eased to 5% in March
Source: https://www.wsj.com/articles/us-inflation-march-2023-consumer-price-index-fa6eba99
● The Consumer Price Index increased at an
annual rate of 5% in March, down from 6% in
February, the Labor Department said
Wednesday. That was better than economists'
expectations that inflation had risen 5.2% last
month. It also represents the smallest 12-month
increase since May 2021, the Labor Department
said.
● "We can safely say that we are past peak
inflation, but it is too early to call victory against
inflation," Gargi Chaudhuri, Blackrock's head of
iShares investment strategy for the Americas,
said in a note. "While we believe inflation will
continue to remain stubbornly high for the rest
of 2023, we expect it to moderate by the end of
the year and still remain above the Fed's 2%
target."
● "Housing costs are still a key driver of inflation,
accounting for the largest part of the monthly
increase in the CPI." Because the the Federal
Reserve has raised interest rates at the most
aggressive pace in decades as it tries to slow
the economy and tamp down inflation.

Weekly Report
Adjusted CPI Inflation Falls to 2.4% for Homeowners, 5.1% for Renters
Source: https://www.chandan.com/post/adjusted-cpi-inflation-falls-to-2-4-for-homeowners-5-1-for-renters
Economy-wide inflation for the average consumer,
personal inflation rates can differ widely depending
on whether someone rents or owns their home.
Meanwhile, a return to a normal inflationary
environment has come more quickly for fixed-rate
homeowners (or those that own their homes free
and clear). Chandan Economics estimates that the
adjusted CPI inflation rate for homeowners was just
2.4% in March, falling from 3.4% the prior month.
Between 2000 and 2019, homeowners had an
average adjusted inflation rate of 1.4% — a
benchmark that no longer seems far out of reach
after nine consecutive months of disinflationary
progress.

Weekly Report
cont. Adjusted CPI Inflation Falls to 2.4% for Homeowners, 5.1% for Renters
Source: https://www.chandan.com/post/adjusted-cpi-inflation-falls-to-2-4-for-homeowners-5-1-for-renters
As the Fed’s fight against inflation has shown
progress over the past year, both renters and
owners have seen an across-the-board easing of
inflationary pressures. However, with renters
experiencing a higher adjusted CPI than
homeowners (9.3% vs. 7.5%) and progress coming
more slowly, the inflation spread between these two
groups has continued to widen. Through March
2023, the difference between renter and fixed-rate
homeowner personal inflation rates have reached
another all-time high, hitting 2.6 percentage points.

Weekly Report
Home Remodeling Market Projected To Contract by 2024
Source: https://www.jchs.harvard.edu/blog/home-remodeling-market-projected-contract-2024
After more than a decade of continuous growth, annual spending on improvements and repairs to owner-occupied homes is
expected to decline by early next year, according to our latest Leading Indicator of Remodeling Activity (LIRA). The LIRA projects
that year-over-year expenditures for homeowner improvements and maintenance will post a modest decline of 2.8 percent
through the ﬁrst quarter of 2024.
Higher interest rates and sharp
downturns in homebuilding and
existing home sales are driving our
projections for sluggish remodeling
activity next year. With ongoing
uncertainty in ﬁnancial markets and
the threat of a recession,
homeowners are increasingly likely
to pare back or delay projects
beyond necessary replacements and
repairs.

Weekly Report
Blackstone in Talks to Help Regional Banks With Lending
Source: https://finance.yahoo.com/news/blackstones-first-quarter-earnings-plunge-110715524.html
● Blackstone Inc, the biggest manager of private equity and real estate assets, said on Thursday it was discussing
partnerships with U.S. regional banks to help them with constraints in areas such as car loans and home improvement
financing.
● Gray said some banks which have good relationships with borrowers are struggling to maintain them because of their
eroding capital base, and that Blackstone could help them with some of the lending flow. "The regional banks generally
play a very large role in home improvement loans, auto loans and equipment finance. Those are all areas of opportunities...
We're in a number of discussions," Gray said. He did not identify the banks Blackstone is speaking to.
● The slowdown in commercial real estate — triggered by higher interest rates, fears about an economic slowdown and
businesses consolidating office space in the aftermath of the COVID-19 pandemic — has also prevented Blackstone from
selling assets for top dollar in many of its real estate funds.To be sure, BREIT's underlying performance continues to be
strong, with 9% cash flow reported in first quarter. The firm has shifted its focus in real estate to resilient sectors such as
logistics and rental housing.
● Traditional U.S. office space, which has been hit hard by the work-from-home movement that followed the onset of the
COVID-19 pandemic, accounts for less than 2% of Blackstone's real estate holdings, down from 60% in 2007 when
Blackstone listed in the stock market.
Morningstar analysts said that Blackstone's challenges in the real estate sector and a slowdown in fundraising weighed on its
valuation, and that some investors may view this as an attractive opportunity to pounce on its stock.

Lesson Learned
What's better, a 12% return back by a hard asset or a 15% contract?
Just be careful. I would much rather that 12% secured by cashflowing real estate as
opposed to what this sounds like 15% unsecured debt. Now I get it if your net worth is under
1.5M you need to take some chances with less than 10% of your net worth... but if my net
worth were under 2M I'd rather go after asymmetric plays in alts/crypto right now than to
only make 15% and still risk losing it all on low quality paper.

Lane Kawaoka, PE
Lane@SimplePassiveCashflow.com
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Legal Notice and
Disclaimer
This presentation does not constitute the
rendering of legal advice or services. The
information being presented is intended for
informational use only and is not a substitute
for legal advice. State, national and international
laws vary, as do individual circumstances; so
always consult a qualified attorney on all legal
matters.

Investor Weekly News Update | April 24, 2023

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Investor Weekly News Update | April 24, 2023