Latinos In Real Estate Investing Podcast

Diving into Inflation, Skyrocketing Shelter Costs and Business Takeovers | Weekly Business Briefs w/ Martin Perdomo

August 16, 2023 Martin Perdomo "The Elite Strategist" Season 2 Episode 266
Latinos In Real Estate Investing Podcast
Diving into Inflation, Skyrocketing Shelter Costs and Business Takeovers | Weekly Business Briefs w/ Martin Perdomo
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Show Notes Transcript

Ever wondered why your paycheck doesn't stretch as far as it used to? Ever been curious about the hubbub surrounding big industry acquisitions and what they mean for you? This week's episode offers some enlightening answers as we dive into the nitty-gritty of the latest US CPI report revealing a lower-than-expected inflation rate increase and the implications of skyrocketing shelter costs. We'll also be exploring the potential repercussions of rising interest rates on housing rents, with expert insights from financial giants like Bank of America, Goldman Sachs, and JPMorgan Chase. 

Buckle up as we journey into the exciting developments in the steel industry, with a particular focus on Esmark's hefty $10 billion bid to buy over US Steel. We'll dissect the potential implications of this seismic deal and the overarching trends in the North American steel sector. As a side note, we'll also touch on Argentina's financial woes and the dramatic measures taken following a major electoral defeat. From a drastic currency devaluation to a significant jump in the central bank's key interest rate, we'll break down the impacts these moves could have on the global economic scene. Cap it all off with spirited discussions on the ongoing debate about dollarizing the Argentinean economy! You're in for quite a ride.

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July's CPI report is out and is less than expected. A second US deal-suter offers $10 billion and Argentina's government finally hit the panic button as it runs out of options and money. These are the top three headlines in this week's weekly business brief. First up, july's CPI report shows inflation gauge rose 3.2% less than expected. According to the CPI report, the consumer price index rose 3.2% from a year ago in July, a sign that inflation has lost at least some of its grip on the US economy. Prices accelerated a seasonally adjusted 0.2% for the month in line with the Dow Jones estimate. The Bureau of Labor Statistics reported on Thursday. However, the annual rate was slightly below 3.3% forecast, though higher than June and the first increase in more than a year. Almost all of the monthly inflation increase came from shelter cost, which rose 0.4% and was up 7.7% from a year ago. Rents rose 0.4%, the BLS said more than 90 guys 90% of the increase came from that category, which accounts for about 1 third of the CPA. Weighing the comparative tame inflation levels help raise worker pay. Real wages increased 0.3% on the month and were up 1.1% from a year ago, the BLS said on a separate release. However, more economists are beginning to expect the US can avoid a recession, despite the aggressive rate hikes. Bank of America, goldman Sachs and JPMorgan Chase all recently had forecasts that a contraction is becoming less and less likely. Now we're seeing that rents have gone up and that 90% of inflation is due to the cost of housing. Now, as interest rates continue to rise, I don't think we're going to see a slowdown in rents going up. Think about this just logically as investors buy more properties and they have to pay for higher payments on their debt, that means it's going to come from somewhere and it's going to get put on the residents Now, unless a slew of inventory hits the market for vacancies and rentals. And then, and only then, do I see that particular category of rent and housing softening some more. Next up, esmark becomes a second US deal suitor with a $10 billion offer, reported the Financial Times. Esmark, a privately held industrial group, said it had made an all-cash offer to buy a US deal for about $10 billion, including debt, becoming the second company in two days. To announce a bid, james Bichard's family controlled group said on Monday it had offered to buy the US deal for $35 per share, although it did not give any details on how it plans to finance the deal or names of investment banks and law firms advising it on the bid. The move by Esmar comes a day after US Steel rejected a $35 per share cash and stock offer bid from Cleveland Cliffs, the largest North American producer of flat rolled steel. Man, can you believe this? A $10 billion deal? That is crazy. $10 billion, guys. That's a thousand million, ten times Just. Can you wrap your brain around that? That a company is worth that much money? People close to the company stressed that the US Steel was not putting itself up for sale and added that ultimately it might remain independent. North American steel companies have undergone a wave of consolidation in recent years, dominated by four players Cleveland Cliffs, us Steel, newcore and Steel Dynamics. Lastly, reported by Yahoo Finance, after years of trying to avoid currency devaluation that would add soaring inflation and reduce its popularity with voters, on Monday it did just that. The move was an admission by President Alberto Fernandez that his administration had run out of options and money to defend the unsustainable exchange rate after suffering a stinging defeat in a crucial primary election on Sunday. Wow, elections on Sunday, different right. The 18% devaluation takes the official pesos rate to 350 pesos per dollar exchange, compared to 287 per dollar on Friday and comes with another huge hike in the central bank's key interest rate. It was lifted 21 percentage points to 118 percent. The drastic decision will do little to calm investors, with Argentine assets lumping since the stronger than expected performance on Sunday by libertarian candidate Javier Millay, who wants to dollarize the economy and abolish the central bank. Now, if they dollarize the economy, that's actually good for the dollar, right, because the dollar gets more strength and, as you may or may not be aware, you have the BRICS countries Brazil, china, russia, I think, india and they want to create their own dollars and Saudi Arabia and get rid of the dollar and they're attacking the dollar. This happening, this president taking the Argentinean new president, taking their means of exchange to dollars actually helps the dollars, in my opinion. Do you think what is currently happening in Argentina will be coming soon in a theater near us here in the US? Let me know what you think and let's discuss in the comments below. And this has been your weekly business brief. I'll see you guys next week, peace.