Scaling the Mountain
Paths to financial independence, a decline in the housing market and $0 down mortgages
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Back in 2016 when I started my YouTube Channel, the objective was to help folks build wealth and reach financial independence. An integral part of this is anticipating financial crises and preparing for them; and right now, crises are aplenty.
The latest CPI data showed that inflation still remains at historic highs and with further rate hikes being a near certainty, the rout in equity markets continued with the S&P 500 dropping more than 5% this week. Further, FedEx’s CEO warned about declining global shipments and an impending global recession as their earnings rate dropped below analyst expectations, which caused the FedEx stock to drop by 21% in a single day, the biggest since 1978.
“The Chinese use two brush strokes to write the word 'crisis'. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity” - John F Kennedy
With the overall economic scenario looking grim, pretty much every week, I come across some issue or the other that I feel necessary to inform you guys about. However, I realize that identifying headwinds is only the first step: after all, you can always find problems if you look hard enough. The key is to also figure out the opportunities that these issues present.
Path to Financial Independence
Last week I went back to my roots and did what I love the most; guiding people on their path to financial independence. A recent survey showed that most Americans would feel comfortable retiring with $1 Million dollars. Here, I describe my own journey towards reaching that amount in 10 years starting from pretty much nothing.
In this video, I lay out a blueprint on how you can become a millionaire as well, starting today. There are three key steps towards reaching financial freedom: cutting back on spending, increasing your income, and investing your savings.
Even if these steps do not make you a millionaire in the next 10 years, they will undoubtedly be an excellent start for your journey towards financial freedom. So watch it and let me know what you guys think!
I consider myself to be an undeclared king of frugality, but it is impossible to have covered all the saving and income generation steps. Let me know what your favorite ideas are in the comments below!
Decline in the Housing Market
US housing prices recently saw the largest single-month deceleration in the past 40 years and refinances, which constitute a critical part of the housing market, fell to an all-time low in July. With the Fed planning to raise interest rates even higher, Goldman Sachs now predicts that ~40% of housing markets will see a decline next year.
In this video, I talk about how rising mortgage expenses are causing a glut in housing inventory, which markets are likely to be hit the most, and how the astronomical increase in rent that we saw in the last couple of years might start to come down soon.
Return of $0 Down Mortgages
As housing prices decline and home buying affordability tanks, banks are bringing back no money down loans for certain buyers. Specifically, Bank of America launched a pilot program to raise home ownership in underserved neighborhoods in select cities. This allows folks to buy homes with no money down, no PMI, and no minimum credit score or private insurance! Instead, the banks use a special purpose credit program that considers other factors like timely rent, insurance, and utility payments.
In my third video last week, I talk about who is eligible to apply for these loans and the locations where they will be available. The subprime mortgage crisis in 2008 was caused by indiscriminate lending leading to so-called ‘ninja loans’, so will this cause a similar issue? The banks assure us that they are providing fixed rate loans instead of variable rates and there are other steps in the program like income verification to ensure that the loans are paid back on time. So, take a look and let me know what you guys think!
I have a recommendation…
Check out the GRIT Capital newsletter.
GRIT is the #1 FREE finance newsletter on Substack – talking stocks, crypto and investing. Run by a former $100MM portfolio manager Genevieve Roch-Decter. Her mission is to democratize access to stock market insights to the masses through her platform GRIT. She has +400,000 followers on social media and writes a daily newsletter to +65,000 investors - including hedge funds, billionaires, investment advisors, and retail investors.
This week, Genevieve writes inflation which again appears to be heating up. What can we draw from the CPI report and what does it mean for investors going forward?
So that’s it for my Sunday round-up. For the new folks here, in this newsletter, I give a quick recap of whatever you may have missed over the week on Sunday, and on Wednesday, I will be doing my deep-dive article on one of these topics. Just hit reply if you have any questions/feedback/queries - I try to answer them all :)
See you next week with another bunch of exciting videos!
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