ICYMI: January Reads, Streams, and Listens – My monthly recap of book recommendations, good shows and movies, and podcast episodes I found informative.
China grapples with severe housing bust by ResiClub
China is in the midst of a housing bust that some say will bottom out in 2026 with China’s housing sector contracting by 45%. Housing is estimated to be 20% of China’s economy. The market is significantly overbuilt and the debt issues there are spilling over to the banking sector. China is taking steps to minimize the impact and slow it down versus letting market forces drive a sharp and quick contraction.
The Fed is concerned that the weak commercial real estate market will have a sizable, but manageable impact on banks. By one estimate, we could have 1 billion square feet of unused office space by the next decade. Less tenants, less rental income, more problems paying for the debt used to acquire and improve buildings and refinancing now will be at higher rates. While the forecasts of what will happen range from small to cataclysmic, most seem to agree that the regional and smaller banks face the biggest challenges.
Slow(er) Ride to Rate Cuts by Charles Schwab Asset Management
This piece hits on many good topics. The job market still looks strong. Rate cuts are coming, but not as fast as the market originally predicted. Beware of data being presented on how markets do following the last hike in a cycle – the average looks good, the there’s a huge disparity. Earnings look good, but revenue and profit margins are something to watch as they are coming in a bit weaker.
Active stock management has taken a PR beating over my career. This post shows that managers top ideas are strong, but it’s when they round out a portfolio for a variety of reasons like risk management, being able to manage more money, and behavioral mistakes that their picks weaken. A good concentrated portfolio is obviously a great way to make money, but the concentrated portfolio better turn out good in the end or else the results will hurt more than the positive outcomes would have helped.
Keep your politics away from your investment portfolio. Markets are up most of the time, which means there’s data supporting any combination of election outcomes being favorable for your portfolio. That’s another way of saying it’s ultimately just noise.