More Inflation Data Show More Work Ahead

Beat The Market With Realtime Data! Join our LIVE Trading Session at 8amPT/11amET͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ ͏ ‌ THE WEEK IN REVIEW Every Saturday Starting At 8am PT / 11am ET Every week we review the rollercoaster ride that is the most dynamic stock market in history. We review, in detail, the best options and equity plays of the week. Your host, Mike Anderson, will provide a step by step breakdown of how these winning trades were first identified and how they were timed. Understanding how these trades are made will help you to identify similar trends and have confidence in executing your own successful trades. Plus: Bring your ticker and we will use Trade Algo's proprietary algorithms to help you analyze that trade you've been thinking about. [JOIN OUR LIVE TRADING SESSION @ 6am PT / 9am ET!]( [Shadow] Hello investor, Despite many concerns about the economy, corporate earnings continued to post strong results and led to a rally in stocks on Friday. Blue-chip companies, Exxon Mobil and Intel, reported strong results. There were also some red flags. Amazon fell 4% after reporting a slowing growth in its cloud computing business, and First Republic Bank plummeted 43% after the report about the bank being likely to go into FDIC receivership. - “Earnings relative to expectations appear resilient with a little more than half the S&P 500 reported,” wrote Scott Chronert, managing director at Citi Research. “Full-year numbers and revisions have stabilized of late. The issue remains sentiment and positioning.” The personal consumption expenditures price index (excluding food and energy) jumped 0.3% in March for a second month and went up by 4.6% year over year. This makes a 25 basis-point hike almost a sure thing during the Fed Reserve’s May meeting, and the second hike after that is back on the table. And this may delay rate cuts that the markets have been anticipating for. - “What looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters,” wrote Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets. Moreover, the Labor Department reported that its employment cost index jumped by a seasonally adjusted 1.2% last quarter from the fourth quarter – about 20% higher than what the economists forecasted. And it is a 4.8% increase above its year-earlier level. In the graphic below, you can see how the change in private-sector wages and salaries accelerated from the prior quarter to the second-highest level going back to 2015: (Source: WSJ) As you know, inflation doesn’t fall too quickly. These data points show that it will be a long battle against inflation, and the central bank may do more than just one rate hike from now on . Based on corporate earnings and inflation and economic data, things seem to be headed in the right direction. Inflation is falling (slowly). Economic data shows that the economy is slowing but still holding up well. Corporate earnings remain solid, as well. But the question is whether it is going fast enough for the central bank to halt its rate-hiking cycle soon. - “April largely is a good month. Again, it’s probably earnings-season driven, but we’ve been getting some economic reports that are also saying that the economy, and especially inflation, is likely going in the right direction — just not maybe fast enough,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. - “Businesses and people are spending, inflation is still there, but the data says it’s slowly ramping down.” The next catalyst in the stock market is likely the Fed’s meeting. It will happen on May 2-3, and the markets will watch closely for Fed officials’ comments on the future path ahead. Officials have pushed back against the speculation of rate cuts as soon as this year. We will see whether they will stand by this statement. “Dark Horse” Real Estate Stock To Buy Immediately Today’s Pick: Safehold Inc. ([SAFE]( Today’s stock has the quality of “set it and forget it” where you’d want to invest and hold for a decade. Safehold Inc. is a REIT that focuses on owning ground leases rather than physical buildings -- which is an innovative model in the real estate industry. Wait, what are ground leases? Most real estate developers will buy land first, and then construct the building on the land. Here are two problems: First, lands are a capital-intensive part of the real estate -- where you’ll need to take out two loans. One for the land, one for the building itself. As a result, developers need massive loans to get projects started. Here’s one scenario: (Source: Safehold) If a developer doesn’t need to take out a loan for the land, its loan requirements go down by 54% from $25m to $16.2m. As a bonus, its IRR will boost from 12.6% to 18%. Surely, this is a huge win for the developers who use ground leases! So, Safehold offers an enormous value to developers by buying lands and making ground leases available for them to construct buildings cheaply. 23x Gross Book Value Growth Since IPO: As proof of its innovative business model, Safehold saw its growth explode since its IPO in 2017: (Source: Safehold) And the company isn’t slowing down. Marcos Alvarado, President and CIO of Safehold, said: - “And so we've stated that we look to double our portfolio over the next 3 years. And internally, I would tell you, we'd be disappointed if we didn't hit that target.” Inflation Will Be A Bonanza: The biggest fear for any lender is inflation. Why? If inflation runs high for several years, then payments on the loan are worth a lot less than they were at the time when the loan was written. Fortunately, Safehold has the ability to raise the rate of the lease using a 10-year CPI lookback. This helps to increase rental rates in event of higher inflation. If inflation is around 3% annually for a decade, then its lease rates will increase to offset all inflation, according to CFO Marcos Alvarado. With inflation at 3%, the annualized yield will rise from 5.1% to 6.1% -- or an increase of 19%. (Source: Safehold) Safe, Low-Risk Business Model: The nature of real estate business is being heavily in debt. Safehold is no exception. It holds $4.2 billion in debt. Now, what if the building owners stop paying Safehold the ground leases? What will happen? In fact, Safehold will take over the ownership of the building. In other words, Safehold will own the building (that it didn’t pay to construct) if the lessor doesn’t pay on time. This is a nice “worst-case scenario” to have. (Source: Safehold) Bottom line: Safehold’s business model is revolutionary for real estate financing, and it’s taking the market by storm. The value it offers is irresistible to the developers. And if anything goes wrong, Safehold owns the building on its land. So, its future is bright and a perfect stock to own for the next decade. Set it and forget it! [JOIN OUR LIVE TRADING SESSION @ 6am PT / 9am ET!](       © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](