Client Update

Arguably the wildest consequence of the recent pandemic is the remarkable price boom in the U.S. housing market—which, some might remember, went spectacularly bust in the 2008-9 Great Recession collapse.  Today, half of all houses put on the market are purchased in less than a week, often for more than the asking price.  One recent poll found that most buyers admitted to bidding on homes they had never seen in person.  Home prices are at record highs; inventories are at record lows.  More than half of homes on the market have been selling above the asking price—which is so far above the previous record that the statistic is simply offered in isolation.  The average home price, as measured by the S&P CoreLogic Case-Shiller 20-city index, rose 13.3% in a single month, following a 12% jump the previous month.

One driving factor is historically low mortgage rates, around and sometimes below 3% currently.  Investors have also stepped in; they bought 17% of all homes in April, and some might re-label them speculators who believe (as many did in the runup to 2008) that prices have nowhere to go but up—forever.

But beyond that, prices have been driven up by simple economics and the laws of supply and demand.  The number of homes for sale fell 21% recently, near a record low that dates back to 1982.  New home construction has been slow due to a severe lumber shortage, and we are still feeling the effects from 12 years ago, when the Great Recession knocked the construction industry back on its heels.  At the same time, millennials—many of them too financially-constrained to have bought houses at normal interest rates—are storming into the housing market, ending forever the trope of boomerang kids living in their parents’ basement.

Does all this signal another housing bubble?  Are we now destined to live through another Great Recession when a housing bubble bursts?  Fortunately, there are a few checks and balances on the current boom that were not in place back in 2006-7 when the seeds of the Great Recession were planted.  For one thing, lenders are no longer handing out mortgage loans like candy, with zero documentation.  Today’s lending standards are higher even than the requirements of the Dodd-Frank act of 2010, which was passed in response to the financial crisis.  Loans today are generally smaller in proportion to house values, and leverage is down on owners’ balance sheets.

That does not mean that housing prices will not drop at some point in the future.  One possible trigger would be a sudden rise in mortgage rates, which would cool demand significantly.  But even that would not trigger defaults; according to the Mortgage Bankers Association, just 0.1% of mortgage loans issued this year are tied to adjustable rates.  That is compared to about 60% during the bubble years of the mid-2000s.

Is there a brain chip in your future?  People who say that someday brain implants will allow computers to read minds might be startled to realize that the day is already here.

Neuroscientists at the BrainGate consortium made history in 2012, when they inserted a chip in the mind of a person with an amputated arm, allowing him to control a robotic arm with his brain.  In 2017, the team developed a thought-to-text system that allowed monkeys to “think” at a computer and have the computer transcribe their thoughts at the rate of 12 words per minute.  Later the same year, a similar chip was installed in several people suffering from severe paralysis, allowing them to type on a computer screen at a rate of about eight words a minute.

That was the precursor to installing two sensors, each about the size of a baby aspirin, each with 100 hair-fine electrodes, into the brain of a man who had suffered a spinal cord injury that left him paralyzed below the shoulders.  The sensors picked up his neural signals, which were processed by a computer to decode his brain activity, allowing him to write words on the computer screen at the record-breaking speed of 16 words a minute—about three-quarters of the speed that people achieve when typing on their smartphones.  He used the ‘greater than’ symbol on his mental typewriter to denote spaces between words.

Neuroscience still has a ways to go before we are reading each other’s minds.  The new mental interface requires a specialized high-performance computer, and a technician to set up the brain-computer interface and run the software.  And, of course, it requires brain surgery to insert the sensory devices.  But scientists believe that we are on the edge of creating a version of the technology that would be always available to the user who wanted to type, control the computer, perhaps even neurally communicate with others who have a similar chip.  Pets with a similar insertion (remember the monkey) might be able to have more personal communication connections with their adopted families.

This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.

Space is the final frontier.  Our military now has a space force.  We are about to get a full report from the government on what it knows about UFOs.  Space is in the news, from space tourism to the long-shot prediction by Elon Musk that humans will soon colonize Mars.

But is space a growth industry worth investing in?

For now, the answer is: probably not, but we are getting close to the time when ordinary tourists will venture beyond our atmosphere.  The major players in the space tourism market have not yet proven that they can safely deliver a space experience to their passengers, though Jeff Bezos’ Blue Origin is expected to launch its first crewed flight when its new Shepard rocket launches on July 20.  Virgin Galactic, a part of Richard Branson’s Virgin Group, plans four test flights of its SpaceShipTwo system before it attempts to begin commercial service in 2022.  The first full revenue flight, where the Italian government has booked members of the Italian Air Force at $500,000 per seat, will fly later this year.  Elon Musk’s SpaceX, meanwhile, is focusing on a different market, launching Starlink satellites that are expected to provide internet service to earthbound consumers.  So far, the company has launched 1,500 interconnected orbiters.

The economics of these ventures do not look promising.  SpaceX is selling Starlink internet packages for $99 a month, but these are preorders that are fully refundable.  It is going to take a lot of $99 orders to pay for just the launches that have taken place so far.  Meanwhile, competitor Iridium Communications already has 66 low-Earth orbiting satellites which are providing voice and data connectivity everywhere that SpaceX plans to serve.

Virgin Galactic recently reported a loss of $55.9 million in the first quarter of the year, after losing $59.5 million in the last quarter of 2020, and $63.6 million in the quarter before that.  Its upcoming flight will generate just $2 million, which means the company would have to book at least 35-40 flights a year to break even—and one has to wonder how big a market there is for tourists lining up to pay up to $500,000 for a trip that would barely graze the top edge of the atmosphere.

As the pandemic shut down business and travel activity in the U.S. economy, it caused a dramatic increase in one industry sector: online activities.  The Comcast organization recently released a report showing that peak Internet traffic rose 32% over pre-pandemic levels, and over 50% in March 2020.

You might think that this was due to Zoom calls replacing in-person conversations among families and between businesses and customers, but in fact, videoconferencing traffic accounted for less than 5% of overall network usage.  Video streaming (movies and entertainment) accounted for 71% of all downstream traffic—with growth rates ranging from 20-40 percent.  Video gaming (10% of total traffic, with up to 80% growth in 2020) and web browsing (8%) were other areas where people spent their quarantine time.

The report found that 62% of employed Americans were working from home during the pandemic, and 93% of households with school-age children engaged in some sort of distance learning.

This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.

Many of us have been locked down for more than a year; cancelling vacations, restaurant visits and in-person schooling.  More than 500,000 of our loved ones across the country have passed away.

Is there any good coming out of the COVID pandemic?

Turns out, there is.  The messenger RNA immunization technology that was developed for the Moderna and Pfizer coronavirus vaccines has the potential to revolutionize the way we treat—and prevent—a wide variety of other maladies.  Scientists are sequencing HIV, seasonal flu viruses and certain cancers, and identifying snippets of their RNA that could teach the body to fight them off before they can run rampant through the body.

The vaccine approach to the coronavirus uses lipid nanoparticles—essentially fat bubbles—to deliver bits of a disease’s genetic material into the body, helping the immune system spot the spike proteins they use to enter human cells.  At the moment, Moderna is working on two HIV vaccine candidates: mRNA-1644 and mRNA-1574.  The vaccine has been tested successfully in macaque monkeys, which developed neutralizing antibodies that bind to the proteins that HIV uses to enter cells, neutralizing the disease before it can spread.  Another mRNA test has protected humanized mice against HIV infection.

Meanwhile, phase 1 clinical trials for more effective seasonal flu vaccines will start this year, and additional RNA vaccines are being developed for mononucleosis, types of lymphoma and nasal cancer.  Other experimental cancer vaccines will require doctors to extract tumor samples from the patient, sequence the genome and create a specific RNA therapy that will teach the immune system to destroy the cancer cells—and only the cancer cells.  Six of 10 patients in an early trial responded positively to the treatment; in two, the cancer was entirely destroyed, while four others stabilized and had no further cancer progression.