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As a huge number of floating-rate multifamily loans will come due in Q3 and Q4, Jimmy expects widespread distress in the CRE market.
Plus: Vanguard thinks an oncoming recession might be delayed until 2024, and Taylor Swift’s concert series is a multi-billion dollar economic force to be reckoned with.
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- A maturity wall is coming for multifamily. Can rescue capital save the day? (The Real Deal)
- Midyear economic outlook: Sticky inflation most everywhere (Vanguard)
- Taylor Swift is so important to the economy that she’s in the latest Fed report (Fortune)
About The WealthChannel Podcast
On The WealthChannel Podcast, we unlock the world of wealth, money, and finance. Hosts Jimmy Atkinson and Andy Hagans deliver unfiltered views on the most important news that investors need to know right now.
Jimmy: Welcome to The WealthChannel Podcast, the show where we explore the world of wealth, money and finance. He’s Andy Hagans. I’m Jimmy Atkinson. On today’s episode, a massive wall of maturities is heading straight for us. Inflation is down once again, but still sticky. And Taylor Swift’s big impact on the economy.
But first, Andy, hey, I gotta take a moment and gloat. My bull of the week bested your bull of the week from last week, a big three to two win for my national league. in last Tuesday’s MLB All-Star Game. Did you catch the game? And how was your weekend, by the way?
Andy: Yeah, we caught the first three or four innings before we sent the kids to bed. And I, Hey, hats off to the national league. Cause they, they needed to break that losing streak. So you called it, Jim, my hats off to you and to the NL teams.
My weekend was great. We actually made our annual, maybe twice a year pilgrimage to Max’s South sea hideaway, which is a, like a high end, very legit Tiki restaurant. in Grand Rapids. So we all had cocktails, kids all had kids’ meals. And then we got the poo platter, of course, with all of our favorite appetizers. I just love tiki. I never get tired of it makes me feel like a kid just being in that atmosphere. So we had it we had a great weekend. How about yours, Jimmy?
Jimmy: Yeah, you and I hit the road a couple times last year, Andy, and we got to Esotico in Miami. That was a hot spot. And then I remember we went to one in Brooklyn. I can’t remember the name of it off the top of my head. But yeah, my weekend was pretty good, pretty relaxing. I got to play some hockey with my son a couple of times over the weekend and just trying to get him up to speed on the ice, so to speak.
So with that, let’s move on to the meat of today’s episode. Story number one is a headline that comes to us from The Real Deal, one of my favorite. Articles are my favorite resources for real estate news. The headline is, A Maturity Wall is Coming for Multifamily, Can Rescue Capital Save the Day? So here’s the deal, a record number of commercial mortgage-backed security multifamily loans are gonna come due between the third quarter of this year, which is right now, through the end of 2025.
And when they do, there’s potentially going to be a huge wave of distress. in the market. So this article from the real deal begins with a case study about a company called A&E Real Estate. They recently refinanced a 31 property New York City portfolio in 2021 with a $506 million floating rate loan. All they had to do was finish renovations and raise rents. But finishing renovations during that time period proved a little bit tricky. It was tough to get contractors on site sometimes.
There was supply Chains shortages and in the meantime spiking interest rates have now sent A&E’s debt service coverage ratio Below one which is French for they don’t have enough free cash flow to pay off their debts And now annual rent growth has slowed significantly in New York City over the past year and the loan comes due in June 2024 so there one case study That kind of highlights this massive problem now nationwide Andy multifamily real estate borrowers took out $682 billion in short-term low rate loans in 2021 and 2022. And oftentimes they take out these loans, they expect to refinance down the road and we’ve had these low interest rate environment for 15 years, well, that’s no longer the case. So when some of these multifamily developers, property owners need to refinance their… loans in 2023, 24, 25, they’re gonna be hit with much higher rates than previously, which could put them in some jeopardy.
In TRD’s analysis, that’s The Real Deal, in their analysis of 1,240 floating rate, multifamily loans originated in those two years between 21 and 22, and are set to come due. between July right now, July 23 and the end of 2025. At issuance, the debt service coverage ratio was 1.37, pretty healthy, but now the median DSCR is down to 1.07. Scott Rechler at RXR, big property developer says, quote, this is going to be the Achilles heel of the commercial real estate downturn. There’s a great research brief. that this article links to from Gray Capital. And Gray Capital sees two scenarios for distress.
There’s two possible outcomes here that we’re gonna see unfold pretty soon, over the next few months. One, it could be a completely uncontained wave of distress, Andy, which would indicate that there’s not enough rescue capital out there. The sellers are gonna outnumber the buyers, and it’s gonna lead to a lot of… price declines across multifamily real estate and other real estate asset classes as well. Option number two is what he calls contained distress. So rescue capital comes to the rescue, so to speak. Interest rates end up falling over the course of the next 12 to 24 months and borrowers are essentially saved by the bell.
Oh, by the way, this story from TRD covers multifamily real estate, but this wall of maturities is not limited to multifamily. It’s not even limited to real estate. There’s walls of maturities all across the economy. There was an article in Bloomberg a few days ago that pointed to a $785 billion junk bond maturity wall. So we can spend a few hours on this topic alone, I’m sure Andy, but suffice it to say, it goes beyond multifamily, but let’s just focus on multifamily for the sake of our discussion today.
It seems like these wall of maturity stories, by the way, Andy, are never ending. You can go back five years, 10 years, 20 years, et cetera. You’ll… always find these types of stories. And oftentimes they’re overblown, nothing comes of it. But considering how quickly the Fed has hiked interest rates, is it different this time? Is there a huge wave of distress in multifamily and potentially other asset classes heading our way, Andy? What do you think?
Andy: Yes and no, it is different this time. I mean, I think it is in the sense that it’s been quite some time since the Federal Reserve raised interest rates this much, this quickly, to rates that we’ve not seen in decades. So I think that was a shock to the system, totally unexpected. Whatever version of this story may have happened 10 years ago or whatever, Jimmy, it wasn’t like this where interest rates have been hiked by this amount. That being said, I think like this moment in time, you know, July 2023, this almost may be, we’re getting into the worst of it, where the optics look the worst, in the sense that interest rates are still really quite high compared to, you know, where they have been for the last 20, 30 years, but the CPI just hit 3%, right?
So it’s not quite to the point. where the Fed is taking their victory lap. But to use the football analogy, they probably feel like they’re at the 10 yard line, right? And they’re going to drive the ball in and score soon. Like the job, I think that we’re going to have some sticky inflation in terms of some structural things, but inflation doesn’t look like it’s going to be sticking around five, six, seven, or eight percent. And so probably interest rates, they’re not going to keep right. Right. We might see one or two more hikes and then that will probably be the plateau.
And then we’ll see them start to slowly go down, especially if the economy goes on to recession. So this may be kind of like the perfect storm, like the single worst moment in time for these kinds of projects, right. And in the sense that if, you know, depending, if you can hold on for 12 or 24 months, you might see lower interest rates at that point, plus. The longer you hold on, you know, if, even if we get back to more normal rent growth, you know, not, not the 10 or 15% rent growth that we saw some of this crazy 2021 rent growth, like in Florida and other places, but if we even have 3%, 4% rent growth in a lot of places, you know, that’s going to help you, uh, you know, be, that’s going to help your DSCR metric, right?
If, if, if your rent grows year over year. So I think this may be the single. uh, worst moment in time, like this next six months for a lot of these folks. And you mentioned, you know, the supply demand question of, is this going to be contained? There probably will be more supply, distress supply enter the market, but I think there’s buyers out there. I think there is dry powder, not necessarily a lot of lending, right? But I do think that there’s cash on the sidelines who’s waiting to snap some of these up. So even if, as these come to market, I don’t necessarily know that prices are going to tank. What do you think?
Jimmy: Well, I think prices have to tank actually. So I think I might disagree with you. I think if I’m a developer and I’m holding debt on my balance sheet, I think this may not be the worst time. I think the worst is still yet to come over the next few months and maybe the next year or two, Andy, because these loans are coming due with these balloon payments and these interest rates are going up.
And oftentimes they just relying on being able to refinance or maybe they’re oftentimes relying on being able to sell before the loan comes due. after they complete the renovation and increase the rents and they get their rent rolls looking in good shape. But that hasn’t happened a lot lately. We’ve been delays in construction. I mean, there’s always delays in construction. These are like supply chain shortage delays in construction that were happening, you know, 12, 24 months back and are still kind of impacting things on a lag here, Andy.
So and I do think, by the way, that there’s a huge opportunity if you have some dry if you’re a rescue fund or if you’re an investor in a rescue fund or maybe you’re just a retail real estate, I should say, a real estate investor with a little bit of dry powder. I think a lot what’s going to happen here is a lot of these properties are going to go through distressed asset sales. Right now, there’s, I’d say between a 10% to 20% bid ask spread basically between
Jimmy: As interest rates have gone way up, real estate’s become a lot more unaffordable if you’re trying to buy it, right? Because you can’t, you can no longer rely on getting a low interest rate mortgage or low interest rate loan to be able to help you secure the property.
Andy: So Jimmy, you think, so you think to what you’re talking about, that bid ask spread, I agree and we’ve seen whatever, you know, 10, 15, 20% price declines already in many different places, but there’s still this, like this air pocket, this spread between the buyers and seller. You’re basically saying the buyers are going to get their way. They’re going to wait 12 months, and then they’re going to get their way.
Jimmy: I think, well, unless, yeah, I think they’ll have to get their way, right? Because I think at some point something has to pop that air gap, as you termed it, Andy, that difference between buyers and sellers, transaction volume is way down.
But as this wall of maturities kind of hits, people who have, developers, investors who have these types of loans on their balance sheets and they have nowhere else to turn, I mean, what are their options? They can kind of hope that they’re able to increase rents enough so that they can get their debt service coverage ratios back up above one at a higher interest rate loan. But oftentimes, that’s not going to pencil, right? So their other option could be…
Andy: Or they can do a capital call, right? Aren’t some of these projects…
Jimmy: They could do a capital call, yeah. So I think a lot of investors in some of these funds are going to get a capital call potentially. Or they can redo their capital stack with some infusion of capital from a rescue fund. A rescue fund is essentially this specialty type of fund that comes in with a combination of debt and equity to bail out these types of projects.
Or they might have to declare bankruptcy, or maybe they end up putting a lot of these assets on sale. If you’re this property developer who has a 31 property portfolio, like we heard in that article, maybe you end up selling a few of them. And if you have to sell a few of them at a loss, and if you have to bring down your asking price just to
over… the debt on your other properties. I mean, maybe that’s the least terrible option. What do you think, Andy? I think if you’re an investor and you’ve got some dry powder, I think bide your time, wait till October, November, when a lot of these loans are coming to maturity, I think there’s gonna be some great deals out there. Do you disagree or what are your thoughts?
Andy: You know, well, I, if we see price declines across the board, as you’ve predicted, you know, I’m more predicting, I was more predicting like we are going to see some price declines. We are going to see distress assets come to the market, but we’ve already seen that. We’ve already seen that in the last nine months, we’ve seen distress assets come to market and we’ve seen some moderate measured price declines. But nothing that really feels like 2008, like, Oh, the sky is falling in a good way. If you have dry powder, like it’s, it’s time to go shopping.
We, I, in my opinion, we haven’t really seen that. And I still question if we’re really going to see that kind of a sense of panic or, you know, real, uh, attractive pricing across the board and multifamily because of that underlying strength in that market, right? The supply demand mismatch, the strong fundamentals, too many family offices, too many investors, too many institutional investors. believe in this asset class.
And so I think when you start to see even, you know, slight price declines, I think there’s quite a few buyers that are potentially interested, maybe with more judicious use of debt this time around, right, versus three or four years ago. I have to say, you know, watching the real estate market in this phase, you know, and I’m not really a real estate guy, right? I’m more a generalist with all kinds of alternative assets as an investor. It’s so slow.
It’s like watching a car wreck in, you know, this like slow motion. Whereas in other markets, prices, you know, you see the damage and then prices clear and like a month later, everybody can go on with their lives. So frustrated in real estate. It’s like, we’re going to draw out this pain and make it this three or four year, you know, uh, kind of a frozen market and market of pain. And it just takes that long to digest. I mean, but it is what it is, right?
Jimmy: Yeah, there’s a lag, right? And it takes long to adjust. It’s pretty illiquid for the most part. By the way, I’m not saying that there’s gonna be like, the sky is falling type of scenario. But I do think there will be pockets of opportunity in certain markets and in certain asset classes for investors to take advantage of. So if you’ve got some dry powder and you’re looking for some real estate deals, maybe keep looking a little longer, keep waiting a little longer.
It does look like, according to this report from Grey Capital, we’ll try to link to it in the show notes, there’s this chart that shows each month the volume of maturities, or the volume of debt that comes due, right? And it’s these really tall red bars in October and November of this year when a lot of these are coming due and they’re not gonna be able to refinance at rates that pencil oftentimes. So I think there’s gonna be a lot of distressed asset sales this fall, Andy. That’s all I’m saying. And it’s gonna depend on location. I think it’s gonna depend on sector and asset class and the whims of Mr. Market as well. See what else is happening in the economy. But I think there’s a good chance for investors who have some dry powder to load up on some deals this fall in multifamily.
Andy: Jimmy, let’s go on a shopping spreee. Let’s pencil it in. I’ll put it in my calendar now. Late November, meet up with Jimmy, location, TBD, let’s go on a shopping spree for some distressed assets. That sounds good to me.
Jimmy: Yeah, New York City. You never know.
Andy: Yeah, sounds good.
Jimmy: I love it, Andy. And by the way, as I mentioned, we were going to cover this from the corporate bond sector, Andy, because there’s $785 billion of junk bond maturity wall that that’s really close, according to Bloomberg. I’ll just kind of recap that one really quickly.
It’s a similar thing with some of this corporate debt, this speculative grade debt. According to S&P Global Ratings, over $100 billion of speculative grade non-financial debt is maturing this year in 23 at more than doubles to 247 billion next year. And then it’s gonna be nearly 400 billion in 2025.
And some of those more distressed borrowers are gonna be looking to probably unload some assets in order to pay back their debt piles over the next few years. So just as far as suffice it to say, there’s a… a lot of debt that’s come into over the next couple of years and refinancing at close to zero interest rates is no longer an option, you know, both for both for corporations and for real estate developers. So Andy, with that, I think we’re ready to move on to story number two, unless you got anything else.
Andy: No, let’s do it. What do you got?
Jimmy: All right, well, as a reminder, you’re listening to The WealthChannel Podcast. This is the show where we explore the world of wealth, money, and finance.
Story number two is a report to us from Vanguard with the headline, Mid-Year Economic Outlook, Sticky Inflation, Most Everywhere. I should note, by the way, that this report was issued on June 30th.
And since then, just last week, we did get the June CPI print. We’re down to 3.0% inflation rate year over year. So it’s the 12th consecutive month, Andy, in which inflation has cooled. We’re officially in a disinflationary environment if we haven’t already been. Also wage growth is finally outpacing inflation for the first time in two years now.
Jimmy: So this June 30th report from Vanguard, they state that the last mile to target inflation may take some time. By the way, they don’t look so much at the headline CPI, but rather core inflation, which is CPI minus energy and food, where there’s a lot of volatility in those markets.
So Vanguard says, quote, we expect continued progress in the fight against inflation with central banks having to keep interest rates in restrictive territory for longer. And with that, we anticipate some economic weakness in the months ahead. The Vanguard also goes on to say that they foresee developed market core inflation, as I mentioned, continuing to fall through the end of this year from recent generational highs, but they expect it will only be late 2024 or even 2025 before inflation falls back to central banks targets. which are mostly around 2%.
So this persistent inflation combined with the Fed policy elevate the risk of a recession according to this report. And Vanguard says, one more quote from Vanguard here, quote, we still assign a high probability to a recession though the odds have risen that it could be delayed from 2023 to 2024, end quote.
Andy, I don’t know. I’m actually starting to buy Bidenomics after shorting it a few weeks ago, inflation looks better than it did a year ago. It’s down for the 12th consecutive month. The labor market is really strong. The stock market just keeps going up. I don’t know, maybe Biden and his team have it right. Maybe the Fed has it right. Maybe the economy’s not all bad. What’s not to like? Am I crazy?
Andy: Well, you’re a little bit crazy. Yeah. You know, this is a little bit of what I was talking about though, with this, this lag, this moment of time where, where things are kind of like the worst in the sense that we now have inflation back down, you know, CPI at least to 3.0, but interest rates are still quite high and the Fed is even expected to raise, you know, hike rates again, you know, so it’s, it’s going to take some time for this, you know, lower inflation to kind of move its way through our digestive system at the Fed, I guess.
Um, and by the way, I want to give credit where credit’s due. We had Cullen Roche on the wealth channels, alternative investment podcasts, and also at a couple of our recent events, and he predicted this. You know, he basically said, look, disinflation is very, is happening very, very quickly and all the leading indicators I’m seeing show that. You know, inflation is. is falling very quickly, but it’ll take six months to show up in the data. I remember him telling me that about six months ago, that we’re already probably safely landing back right around where we are right here. So props to you, Cullen, if you listen to the program. Credit where credit is due.
With that, Jim, I got to say that the problem is with Bidenomics and taking the victory lap is when you caused massive inflation, hyperinflation or high inflation. and disrupted all of these markets, disrupted supply chain market. And then you fix the problem that you yourself cause, you know, in terms of the policymakers and the politicians, like almost all of this economic damage, supply chain issues, et cetera, were self-inflicted by policymakers, by central banks, by lawmakers.
It’s hard to really take a victory lap and say, Hey guys, we fixed the problem that we ourselves cause, you know, and with inflation specifically. You know that the disinflation has brought the inflation rate back to a more normal 3%. But prices are still way higher on goods than they were three years ago, right? That doesn’t mean that you, when you compare the prices of, you know, uh, a random good or service that it’s 9% higher than it was three years ago, right? Like 3% a year. It’s like 30% higher. It’s just that future or your 20%, you know, it’s substantial.
So I think consumers. And especially homeowners, renters, folks wanting to purchase their first home. They understand, okay, prices may only be appreciating 3% now going forward, but they still, you know, had that huge leg up in the past couple of years.
Jimmy: They had that 10% jump a year ago, right?
Andy: Yeah. A new … this higher floor, it’s not going away. And when you’re talking about goods and services that you’re spending money on weekend and week out. you know, higher price floors is bad news. So I think that’s what’s sticking around in people’s minds.
And I think that’s why, as we discussed a couple of weeks ago with Bidinomics and taking, there really can’t be a, you know, victory lap in that. Because as soon as you’re even talking about, we brought inflation back to 3% is sort of begging, you know, what was it at before and why, you know.
Jimmy: I take issue with one thing you said though. I mean, didn’t Trump and Trump’s policies during the pandemic kind of fan the flames to begin with? I’m not saying Biden’s team cleaned things up immediately when they took office, but Trump was the one who shut down the economy, his administration.
Jimmy: They were the ones that passed the CARES Act and a lot of these other free money programs when the pandemic first started. So maybe Biden and his and his administration were a little slow to get things cleaned up, but…
Jimmy: … go ahead.
Andy: And totally and the Biden administration and then the Democratic Congress passed what was you know I forget the name that legislate…
Jimmy: The Inflation Reduction Act.
Andy: The Inflation Reduction Act. No, but you’re 100% right.
But what I’m talking about this applies to any really any politician Who was involved with shutting down supply chains and any politician? Who was voting or signing legislation to you know inject massive stimulus into the economy? None of them can take a victory lap Right.
I don’t think Republicans can take a victory lap and I don’t think Democrats can take a victory lap for getting inflation under control because this was a self-inflicted problem. As you point out, um, both parties had, uh, huge responsibility for the runaway inflation, but at the same time, you know, when you hold the presidency, I think the public right, right or wrong. Looks. looks at you as if you are the economic czar, you’re in charge of the economy. The truth, that’s pretty far-fetched. But for better or worse.
Jimmy: Well, yeah.
Andy: You pretty much own it. For two years into a presidency, I think politically, you own it regardless of that cause and effect.
Jimmy: Yeah, that was another thing I was going to point out is the president always gets way too much credit and way too much blame for the economy. What oftentimes these things lag like the effect that a policy may have suffers from a huge lag, right?
ike something that Trump may have done in 2016 may not have had an impact on the economy until 2019. And maybe something you did in 2020 didn’t have an impact until 2022, for instance. So to blame Biden for everything, to blame Trump for everything, and to credit Biden for everything, and to credit Trump for everything. Kind of a fool’s errand sometimes. Well, let’s talk about shelter inflation though, right? Because like maybe CPI, the headline CPI at least is coming down, core CPI also coming down, core inflation coming down, but housing inflation is still a real problem, right?
I mean, not only are… housing prices much higher than they were a year or two ago, right, Andy? But now, if you’re a first time homebuyer, forget first time homebuyer, if you’re any type of homebuyer, look at the mortgage rate you’re looking at. I mean, that’s a huge, huge issue that I think oftentimes gets overlooked by these CPI numbers, these headlines that we read the first or second week of every month when last month’s inflation comes out. What’s the solution there? What’s your commentary on housing inflation.
Andy: Well, again, I’m going to go back to nobody can take a victory lap here. And even if, even if housing price, you know, if housing prices continue to cool so much damage was done. That like a small give back towards affordability is not going to be something that I think that the, you know, that home buyers, potential home buyers are going to celebrate, right? Because the home affordability index. It’s at like near all time lows, right?
Because of not only higher interest rates, but because home prices appreciated so much in 2020, 2021. And so like these little give backs, they don’t in any way compensate for the fact that the floor is so much higher, right? So if that home that four years ago was a $200,000 home, then appreciated $350,000 in a relatively short amount of time. And then the price declines from 350 to 320. I think in the mind of the potential home buyers, like, yeah, but this was still a $200,000 home four or five years ago. That’s now 320. So it’s like that. That’s the problem with the victory lap here. Now I will say.
Jimmy: And now the monthly payment on that home has gone from $2,000 to $3,500 a month, right? I’m kind of making up the numbers, but that’s ballpark.
Andy: Even worse than that, right? Because…
Jimmy: The impact of that asset price increase and the mortgage rate increase, right?
Andy: Exactly. So it’s not only the increased asset price, but then the higher debt servicing costs for consumers. I will say, you know, you can give the fed a little bit of credit in the sense that they said they have that target 2% rate, you know, that’s their long, long run target rate of inflation and they just hit 3%, right? And in my mind, 3% is almost like if you’re hitting, if you’re below three, You’re pretty much okay, right?
Like in the nineties, nobody batted an eye at, you know, 2.75% CPI. It was like, yeah, whatever. That’s, that’s normal. So I think the fact that they’re even within striking distance of that. And if it goes any lower at all, they’ll be in the twos, so to speak. I do think the fed can take somewhat of a victory lap, but that’s, that’s not really going to help any of these politicians. It’s going to be very, I think. We may be in this kind of, to go back to the 1970s, we might be in a malaise for a little while.
Jimmy: Interesting. Forget about student loan forgiveness. Why not mortgage forgiveness? Andy, what do you think? Did that become a successful strategy for the administration going forward? I jest. But, well, let me ask you a serious question. If a recession is forthcoming, as the Vanguard report seems to predict and indicate, what can investors do? How can they prepare for a recession? What are some plays for an investor?
Andy: Uh, whoa, good question. You know, we talked about, you see there last week or a couple of weeks ago on this program, how bonds had relatively attractive prospective returns compared to stocks. And so I think, you know, if you think that a recession might be coming, might be time to rebalance if you have some equity positions in your portfolio. Um, you know, but Jimmy, the thing is with, with recessions. The stock market doesn’t necessarily move in lockstep with the recession.
Right. So I wouldn’t necessarily, uh, be making any dramatic changes to that portfolio of stocks and bonds. I do think what, you know, what you predicted is pretty interesting in terms of the real estate sector. So I’m going to keep that in mind in terms of it’s never a bad time to have dry powder at the ready. especially if we’re moving into a possible recession, possibly this year, possibly next year, where there could be distressed assets on sale, it might be time, you know, prepare to go on that shopping spree, especially if you’re a real estate investor.
Jimmy: Couldn’t agree with you more there, Andy. I think that’s spot on.
Well, with that, let’s move on to the most important story of the day, the one why all of the pre-teen and teenage girls have tuned in today. Let’s talk Taylor Swift.
So this is a report out of Fortune Magazine. The headline is, Taylor Swift is so important to the economy that she’s in the latest Fed report. So this article mentions that Taylor Swift… has such a notable impact on local economies that she has been mentioned as a specific factor in last week’s report by the Federal Reserve Bank. The Fed’s latest beige book summary mentions that Swift’s concerts in Philadelphia supercharged tourism in that city. It supercharged the revenue despite a lull in the industry overall.
And when Taylor Swift’s Eras Tour came to Chicago last month. That city enjoyed its highest post-pandemic public transit ridership with Taylor Swift’s three-night stay from June 2nd through 4th, generating over 43,000 extra rides on the CTA. Swift also reportedly made $90 million for the greater Cincinnati area during her two-night stint in that city.
And overall, Taylor Swift could add over $4.6 billion…
$4.6 billion, Andy!
… in consumer spending to the United States economy. That’s according to research firm QuestionPro. So her current tour, the Eras Tour, comprises 131 concerts across five continents. She’s selling out NFL stadiums here in the US night after night.
We’re not talking about filling like a basketball arena with 18,000, 20,000 fans. We’re talking about like 60, 70, 100,000 fans every night. She’s expected to gross over $1 billion overall during this tour, which would make it the highest grossing tour ever.
Just this week, she broke Barbra Streisand’s record for the most chart-topping albums by a woman. She now has 12 number one albums, trailing only Jay-Z, who has 14, and Andy, your favorite, The Beatles, with 19. She’s also the first living artist to have four albums in the top 10 at the same time since American trumpeter Herb Alpert did so in 1966. So Andy, I gotta know: Taylor Swift, Barbra Streisand, Herb Alpert, The Beatles, Jay-Z, who you got?
Andy: I just like them all so much, Jimmy. Full disclosure to our viewership, our audience, and all due respect to any Taylor Swift fans, I sent this news article in our research before each show, Jimmy and I send each other articles, like maybe we should cover it. I sent this article to Jimmy, but I referred to Taylor Swift. I thought it was Miley Cyrus, like I get them mixed up in my head and…
Jimmy: You did. You got her mixed up with Miley Cyrus.
Andy: Yeah. And I claim, I think it’s legit. I claim that I don’t know any songs by Taylor Swift. I don’t think I know any by Miley Cyrus either.
My wife, she argues with me. She’s like, no, you probably do. You just like don’t know that the song is by Taylor Swift, but you probably recognize them. So I don’t, I mean, obviously I know the name, don’t know anything about her, but music is a huge industry. I saw that a music ETF launched last week, Jimmy, and this is just Big business and you know, this whole story though, reminds me of how much economic damage was done in 2020, in 2021, when all of the things like this just totally ceased in the United States, and many cases globally.
And I think a lot of people don’t realize, you know, when any given company shuts down or any given economic activity shuts down, there’s that multiplier effect, right? It’s that people… who were going to go to this concert while they’ll take a flight, the book hotel, they’ll spend me on money on food. They’ll purchase all of these other services and then those businesses will make more profit. Those businesses will employ people, then their employees, their owners will in turn go and spend more money.
So I, I have to say it’s amazing numbers, you know, for this to be a billion dollar concert tour. And then when you imagine the, the multiplier effect of that, uh, Truly amazing. So hats off to Taylor Swift, whoever she is. I presume she makes good music. A lot of people seem to like it. Jimmy, I’ll have to ask you what your favorite Taylor Swift album is, or what your favorite song is.
Jimmy: I don’t know if I have a favorite album or not, but it’s the Shake It Off song is pretty catchy. Around my house at least that one gets played pretty frequently. She’s a pop star, Andy. I don’t know if she’s making like really meaningful, impactful, deep music, not really poetic, but it’s kind of catchy. It’s and it’s got some fans in my house for sure. I want to know from you, Andy though…
Andy: Jimmy, you do not need to apologize for being a fan, man. You can just, you can own it. You can own it proudly, okay? Yes.
Jimmy: I’m a huge Swifty, Andy. Is that what you want to hear? Is, is she actually having a real impact on the economy? Or is this kind of some silly thing that someone working with the Fed decided to slip into the report? What do you think?
Andy: Oh, no, I think it’s real when you’re selling out. I mean, let me put it this way, Jimmy, all of these, you’d appreciate this analogy, right? You’re a sports fan. All of these sports franchise owners going around to see, so build us a new stadium, you know, and give us a couple hundred million of this, a couple hundred million of that, because they claim, well, we’ll have nine home games here over here and think how much revenue that will bring into the city and how many tax and, and people buy that hook line and sinker, right? So if she’s selling out a football stadium four nights in a row, I think you can make that exact same argument. No, I think that’s totally legitimate, the numbers being thrown around.
Jimmy: No, good point, Andy. She was here in the Dallas-Fort Worth area, I don’t know, a few months ago, I know she sold out the Dallas Cowboys Stadium, I think it was three nights in a row. She was in Chicago, she sold out Soldier Field three nights in a row, I think she’s ending her tour, her US part of the tour in LA in a few weeks. I think she’s got, I wanna say five nights that she’s selling out that Los Angeles Rams Stadium SoFi Field, pretty impressive.
I don’t know how good her music is, but she’s very popular. It’s like a generational impact that she’s having with this concert. And I will say, I think there’s something to the fact that, you know, I think this is a post pandemic demand driven, where these people had plans to go to concerts, travel, go to football games during 2020 and maybe 2021 and all that stuff got canceled and now this one is on the map.
And, and it’s like the. the first time that a lot of these people are kind of getting out and going about doing stuff like this again. Maybe the second time, maybe the third time, I don’t know. But I think there was a lot of pent up demand that Taylor Swift is capitalizing on here. A lot of, maybe a lot of savings that Americans have. But I’ll tell you what, it makes it tough on the…
Andy: Jimmy, maybe this will be the concert series that finally brings Seattle and Portland out of all of the COVID theater.
Jimmy: Maybe. I don’t know if she’s named those cities or not.
Andy: We just heard from a mutual friend from Washington State.
Jimmy: We did.
Andy: There’s still a lot of COVID theater going on over there.
Andy: When you weigh that against Taylor Swift and you’re a huge fan, maybe you do say, you know what? I got to hit that concert. Danger be darned.
Jimmy: I believe it. Some things are just more important.
But yeah, I don’t know she’s maybe she’s putting the Fed in a in a hard space here because if the Fed says, Hey, we’re trying to tamp down inflation, but then she’s selling her tickets for you know, hundreds or thousands of dollars a pop by the way and selling out these stadiums and bringing too much economic resurgence each of some of these cities, the Fed might take a second look and think boy, maybe we shouldn’t have paused those rate hikes. I don’t know.
Anyways, let’s move on to this week’s edition of The Bull of the Week, as I mentioned at the top of the show, my Bull of the Week defeated Andy’s Bull of the Week last week. Go National League! But Andy, I’ll give you another chance here. What’s your Bull of the Week for this week?
Andy: You’re not gonna defeat this Bull of the Week. It’s unstoppable, Jimmy.
Jimmy: I hope not.
Andy: I mentioned earlier in the program, we went to the Tiki Bar this past Sunday, Tiki Restaurant, I should say, Max’s South Sea Hideaway. My Bull of the Week is a cocktail. It’s the Painkiller.
Jimmy: Ooh, yeah, that is tasty.
Andy: Now, if you’re at a Tiki Bar, you can’t go wrong with the, yeah, you can’t go wrong with the classic Mai Tai. So right, so I’m not poo-pooing the Mai Tai. But if you haven’t, tried a Painkiller and you like this kind of thing, I heartily recommend it. It’s more of a creamy cocktail, there’s a little bit of nutmeg on it. I’m gonna give everyone the recipe real quick. I pulled this up on liquor.com and I think all these recipes for this cocktail are pretty similar.
Two ounces of Pusser’s Rum. I think if you wanna be a traditionalist, it does have to be Pusser’s Rum, but probably any rum would be okay
Jimmy: And it should be in the Pussers’ tin cup also if you really want to be traditional about it. But go on.
Andy: Well, that might be too far. I don’t know if you need the cup. Two ounces Pusser’s Rum, four ounces pineapple juice, one ounce orange juice, one ounce cream of coconut. That’s key, because it’s a creamier cocktail. And then the garnish, nutmeg, freshly grated nutmeg, and then a pineapple wedge. I gotta say the nutmeg is key, but it’s so refreshing, goes down so smooth. Absolutely my Bull of the Week. Try a Painkiller if you haven’t tried one yet.
Jimmy: That’s a great one. And please don’t use pre-ground nutmeg. Get a whole nutmeg in your microplane and grate that thing over there. It makes a difference and it smells great too when it’s freshly ground, right Andy?
Andy: Yeah, absolutely.
Jimmy: Okay, my Bull this week is Opportunity Zone investing. So for those who don’t know, I run a website called OpportunityDb. It’s the leading authority for Opportunity Zone Investors, which I believe is the greatest tax incentive ever created.
Essentially, I’ll just… give you the 10 second elevator pitch. If you have a capital gain, you can roll it over into an opportunity zone fund, which invests in distressed neighborhoods all over the country. And after 10 years, you pay zero tax on the ensuing capital gains that you accrue within your opportunity zone investment.
So this week on Thursday, July 20th, we’re hosting our thrice-annual Opportunity Zone Pitch Day, where you can learn all about opportunity zone investing and… We’ll even showcase a few open funds that are currently accepting new investors. You can learn more at ozpitchday.com. That’s my Bull of the Week, Andy, opportunity zone investing.
Andy: Love that one.
Jimmy: For any high net worth investors and advisors out there who wanna learn more. Check us out, ozpitchday.com.
Andy: I’ll be there.
Jimmy: Andy, yeah, heck, Andy’s gonna be there. I didn’t give you a speaking gig this time, but you’ll be in attendance. I don’t know, maybe you’ll make an appearance.
Well, Andy, we’re out of time for today. You wanna do this again next week?
Andy: Absolutely wouldn’t miss it for the world.
Jimmy: Neither would I. All right, well, thanks for listening to today’s episode of The WealthChannel Podcast, the show where we explore the world of wealth, money, finance, and Taylor Swift.
And as a reminder, you can find us online at wealthchannel.com/podcast. The WealthChannel Podcast is available on YouTube, Apple, Spotify, and all other podcast listening platforms. Just hit that subscribe button so you get our new episodes every Tuesday morning. And we’ll see you next week.