In today’s Money Morning…panic across Wall Street…a potential supply crunch for new homes…it pays to be a contrarian in a bear market…and more…
Overnight we saw another bloodbath across US markets…
A slew of weaker earnings from retailers has ignited panic across Wall Street. Along with increasingly hawkish comments from Fed Chairman Jerome Powell, the figures have got investors jittery once again.
It really seems that this inflation/rising interest rates theme isn’t going away anytime soon.
Until inflation figures actually start to ease in a meaningful way, investors have a right to be concerned.
Having said that, I wouldn’t be surprised if peak inflation has passed either. Time will tell which narrative is correct, but for now, all we can do is try to remain objective. Because whether the worst is behind us or not, the pain for many businesses is likely yet to come…
A prime example of this fact right now is Metricon.
As Australia’s largest homebuilder, Metricon seems like the kind of business that should be able to endure volatility. Sadly, that assumption looks as though it may be dead wrong.
A potential supply crunch for new homes
According to reports, Metricon is reaching out to the Victorian state government for help. After all, Andrews’ party has some $195 million worth of taxpayer money tied to Metricon projects.
However, any talk of a bailout has yet to manifest. It seems as though the builder is simply looking for ways to renegotiate some of its contracts as it faces financial pressure.
In other words, like many other builders, they have been caught off guard by the sharp rise in costs. A factor that has already claimed two other big builders this year: Probuild and Condev.
If Metricon follows suit and goes into liquidation, then things could get very ugly for new home supply…
Acting Metricon CEO Peter Langfelder has denied these rumours, however. The issue is that the timing of them couldn’t be worse.
These reports have come just days after previous CEO and co-founder Mario Biasin unexpectedly died. And with the company confirming he was facing mental health issues, the conspiracy theories have naturally followed.
What this all means for investors is that we may be bearing witness to the early signs of a housing supply crunch. After all, this shortfall in new builds could come right as both political parties are promising to prop up housing demand.
Getting more Australians into their own homes has been a key battleground of the entire election campaign. But that could come at the cost of surging property prices — particularly if first homeowners are given the green light to dip into their super.
So for property investors, despite recent pessimism over rate rises, the outlook may be changing…
It pays to be a contrarian in a bear market
Now, obviously, this contrarian view I’ve put forward will rely on many circumstances.
You could just as easily argue that the collapse of Metricon is bad news for property after all. It may suggest that building contracts are drying up as developers flee a cooling market.
Like I said, though, I expect government incentives to help on this front. And, perhaps more importantly, if we really have passed peak inflation, rates may not go as high as many expect.
I wouldn’t be surprised if Australian property prices see a strong rebound for these reasons.
It’s just another promising sector that could help guard your wealth amidst this bear market. Because as we’ve been stressing a lot recently, these tough market conditions present some of the best opportunities for big gains.
All you need to know is where to look…
That is where tools like Jim Rickards’ new portfolio can help. It’s a solution that is designed to help you navigate the current ‘axis shift’ in markets.
You can read all about Jim’s thoughts and his solutions right here.
Because if there is one thing to take away from Metricon’s woes right now, it is change.
For better or worse, investors need to be ready for this shift. Because while it will likely be challenging to navigate, it could also help you make your investments more successful.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
