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The Insider: How To Weather This Storm

By June 17, 2022 No Comments

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We have been fielding a lot of questions about global asset turmoil recently and what we think about it. So today’s Insider is dedicated to showing how to think about global money flows and how they might impact New York City real estate.
Let’s start with some facts.
1: Equities are down, and in bear market territory:
2: The bond market is getting slammed as interest rates go up (bond yields and bond prices move inversely)
Source: CNBC
3. Gold prices have swooned in the last 3 months:
4. Cryptocurrencies have been in a scary free-fall:
Source: World Coin Index
5. AAAAAnd Inflation is soaring:
With more sellers than buyers in equities, bonds, gold, and crypto there is a LOT of cash sloshing around global financial markets at the moment. Cash is not a safe haven, though, with inflation at 8% y-o-y as measured 3 days ago by the Labor Department – a 40 year high.

How are we to make sense of all of this? Let’s start with remembering that the cause of all of this turmoil is inflation. Inflation destroys value, and taken to extremes undermines governments.  This explains the Fed’s drastic 75 basis point increase in the Fed Funds rate this week.  We are likely to be in a period of strong inflation at least until the war in the Ukraine and the zero-Covid policy in China are over. What “inflates” during these times? Prices of things, particularly hard assets. And real estate is the pre-eminent hard asset of them all.

How do you pick what real estate to buy? Turbulence typically sees money moving to safe havens – in other words to blue chip assets. The premier blue chip real estate market in the USA is New York City. There is no second place.

Our conclusion is this. In a world where most asset classes are hemorrhaging and inflation is soaring, the most sensible long term asset class is real estate. New York City represents the ne plus ultra of that market.
Mark Chin

Author Mark Chin

C.O.O. of The Rubin Team, Mark has his BA from Columbia in Economics and Philosophy. He got his MBA from NYU Stern School of Business in Finance and Statistics. He has been a stockbroker, derivatives trader, dotcom entrepreneur, M&A executive, a successful real estate agent and CEO of a major NYC brokerage house. He now runs the Rubin Team with it's eponymous head as Chief Operating Officer.

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