Quote of the Week

“He who is not courageous enough to take risks will accomplish nothing in life.” – Muhammad Ali

Tech Corner

Equity markets wrapped up the worst month of the year. Rising interest rates, inflation fears, and developments in China all weighed on equities in September. Last week the Dow was down -1.36%, the Nasdaq was down -3.20%, the MSCI-EAFE was down -2.58%, and the S&P 500 was down -2.21%. Certainly not good news in Mudville. Mighty Casey can’t seem to be able to hit the ball.

On the other side of all this gloom and doom, we have moved solidly into Quad II. If you remember back to November and December of 2020 and January of 2021, we were also in Quad II when we got our greatest gains. Quad II has traditionally been the best quadrant for investing. Pretty much everything works. Quad II is good for equities and commodities, just where we are positioned. Quad II is bad for bonds.

What gives me hope is that the virus is declining, and 4.25 trillion dollars are sitting in peoples’ checking, savings, and money market accounts. This is a record amount. So, with the virus declining and $4.25 burning a hole in consumers’ pockets, the probability is that they will spend some of it in the fourth quarter. Maybe they will spend a lot of it. That is good for business and will also drive up inflation which will cause commodities to go up.

So, chins up; the near future probably will get better.

Larry’s Thoughts

I found an interesting article from The Real Economy. Americans spent more on building homes rather than building anything else. Our opinion is that home prices will continue to rise for the foreseeable future.

You can use this link, or read it below:


Americans spent more on building homes than on building anything else for the first time in 14 years   


In another sign of the housing market’s continued strength, U.S. spending on residential buildings—both private and public—increased by 0.4% in August to $795.5 billion, while nonresidential spending declined by 0.4% to $788.6 billion, on a seasonally adjusted annual rate.

The data points directly to a housing market that remains robust as home prices fluctuate around record highs and as money is steered from investments in infrastructure that are sorely needed.

The report, released by the government on Friday, showed that June was the first time since November 2006 that Americans spent more on building homes than on building anything else—including offices, schools, hospitals and other nonresidential buildings.

It was somewhat anticlimactic that August’s report represented such a turning point; June’s and July’s readings on residential spending were revised significantly higher. Still, the gap between residential and nonresidential spending continued to widen in July and August.

It is tempting to compare this data to 2006, when housing prices peaked and started to plummet, dragging down the soaring housing market that was destined to crash and, eventually, push the economy into a deep recession.

This time, however, the market is not in a bubble. In fact, the key difference in today’s housing market is the resilient demand for private houses, ignited by the pandemic and fueled by historically low mortgage rates and historically high personal savings rates.

After the financial crisis and before the pandemic, spending on residential buildings began to move in tandem with nonresidential spending, even though a consistent gap between the two remained.

This trend, though, made a U-turn in the wake of the two-month mini-recession in 2020. Since the pandemic, residential construction spending has increased by 32.4%, while its nonresidential counterpart has dropped by 11%.

The ability to work remotely is the main contributor to this reversal as some homeowners and renters want bigger houses to accommodate their home offices. Other workers are now able to move to less populated cities, where housing prices and costs of living are lower.

Dire need for infrastructure modernization

Data on non-residential construction spending continues to support our case for a significant revamp of the country’s infrastructure system that has been in dire need of modernization.

The details on public spending on nonresidential construction—which includes highways, health care buildings, schools, transportation systems and power grids—reveal a stark picture of the U.S. infrastructural development as the spending-to-GDP percentage ratio has essentially stagnated since its peak of 2.09% in 2009.

Spending on construction is a leading indicator for infrastructure and home building needs in the near future because it takes some time for those newly constructed buildings to come online and be put into use.

As of right now, the market is heading to a future with more money allocated toward home building than needed infrastructure.

That spending pattern only bolsters the case for the $1 trillion infrastructure bill that remains before Congress.

The takeaway

Higher residential construction spending is another sign that work-from-home is here to stay, not only in terms of how employees perceive it, but also in terms of all those fixed costs spent on home building and other home goods. In the end, that spending will become a significant drag on bringing workers back to the offices.


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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

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