S4-16: Is Commercial Real Estate in Trouble & the Magnificent Seven

Meghan discussed the topic of rolling over old retirement accounts. She suggested that consolidating multiple accounts into one can help minimize administrative fees, thereby maximizing returns over time. She recommended rolling over old 401Ks from former employers to a new account, either another employer's 401K or an individual retirement account (IRA) opened with a major brokerage firm. Meghan emphasized that the rollover process should not trigger tax consequences and is usually straightforward. She also advised contacting the administrator of the old 401K for guidance on the process, most of which is now possible entirely online.

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Meghan discussed the discontinuation of the popular budgeting tool, Mint, and shared her opinion on other budgeting apps. She expressed concerns over the time investment required to set up these apps and the added expense of using software as a service. Meghan, a former financial analyst and spreadsheet enthusiast, prefers the flexibility of a spreadsheet for budgeting.

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She also highlighted the importance of recording and monitoring expenses in the budgeting process. Meghan suggested the "You Need a Budget" app as a potential app-based alternative and emphasized that any new app or budgeting method will require an initial time investment.

Meghan discussed the current state of the housing market, including the risks and potential long-term benefits of buying a house. She highlighted that while interest rates and mortgage rates are currently high, the consistent monthly payments over a long period can create wealth. She suggested that home ownership could be a good long-term investment, but advised caution if the time horizon is less than five to ten years due to the associated closing costs. Meghan also reassured those worried about a potential 2008-like scenario, stating that she doesn't foresee it happening in the residential real estate market due to the fundamentals of supply and demand. She ended the discussion by mentioning resources to help understand the total cost of home ownership.

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As an example, Meghan discussed the impact of new property valuation letters on homeowners in her town, noting that the increase in property values due to a delayed reappraisal could potentially lead to higher property taxes. She explained that the total cost of homeownership includes not only mortgage payments but also property taxes and maintenance costs.

Meghan discussed the potential impacts of high vacancy rates in commercial real estate on banks, with the possibility of banks having to write down debt and negotiate with landlords who might not be able to afford to repay their debts. Meghan also mentioned the possibility of converting commercial real estate into residential real estate, but raised concerns about its cost-effectiveness. She announced her intention to review recent earnings reports of major banks to gain insights into their strategies regarding commercial real estate.

Meghan analyzed the current state of the stock market, focusing on the "magnificent 7" stocks - Facebook, Amazon, Netflix, and others - which now constitute nearly 30% of the S&P 500's total market cap. She noted that these stocks have outperformed the rest of the market, driving market growth, but as high valuation tech stocks, are also more interest rate sensitive. Meghan highlighted the current increased risk associated with investing even in index funds due to the dominance of a few large companies, leading to potential greater market volatility and more concentration risk than usual. She said she would illustrate these concepts through charts in an upcoming Instgram post.

She acknowledged he industry leadership of these companies and their progress in the AI sector. Meghan discussed the potential impact of a new technology, like AI, on the economy, suggesting it might take between five to ten years to realize the full benefits. She shared her insights based on previous experiences, such as the proliferation of the internet and its adoption rate.

Meghan then discussed the upcoming economic data releases for the week, including the first estimate of Q4 GDP, weekly jobless claims, mortgage rates, and the PCE Price Index. Meghan will also be going through recent earnings reports of major banks to see their discussions around commercial real estate.

She encouraged people to sign up for her newsletter and subscribe to her podcast for more information.