Jet Setters

Can Volkswagen top Tesla? ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 29, 2022

Read in Browser

TOGETHER WITH

Good morning.

On Tuesday, Airbnb announced that the party is over. The short-term rental platform is making a global ban on "disruptive parties and events" — put in place during the pandemic to stop the spread of Covid — permanent.

That nice lake house rental will forever assume its intended purpose: for you to dream of socializing while managing an overload of remote work on the porch.

Morning Brief

•

House flipping hits new heights.

•

VW's CEO thinks his firm can topple Tesla's EV throne by 2025.

•

US companies are spending the most on executive private jet travel in a decade.

Real Estate

Home Flipping Rises to Highest Level This Century

Missed out on a possible dream home? Don't worry, you may have to wait just a few months before it hits the market again. Of course, you'll likely have to pay a slightly higher price.

Roughly 10% of US homes purchased in the first quarter of 2022 resulted from a "flip" — the practice of buying and selling a home within a year, most often after renovations — marking the highest level since 2000, according to real estate database ATTOM.

Buy the Flip

While the emotional value of a home may be incalculable, this is a story best told in numbers. Through the first quarter of the year, 9.6% of home resale transactions, good for some 114,000 single-family houses and condos, resulted from a flip, ATTOM reports. That's about double the nearly 5% rate from the same period last year, and up from Q4 2021's 6.9% (overall, flipping has been rising for five straight quarters).

The trend, in particular, is striking the housing market in bustling up-and-coming metro areas:

•

Nearly 19% of all home sales in Phoenix were flips in the first quarter. Rounding out the top five: Charlotte (18%), Tucson (16.2%), Atlanta (16.2%), and Jacksonville (16%). Olympia, Washington came last among metro areas analyzed by ATTOM, with flips representing just 4.4% of home sales.

•

Rising building material costs make flipping homes much cheaper and easier than building new ones. In May, new home construction fell about 15% to the lowest levels in a year, according to US Department of Commerce Data, while a Freddie Mac report from last year pegged a national housing shortage at 3.8 million.

Fixed-Up: The median price of a flipped home in Q1 2022 was $327,000, a significant payday over the median investor purchase price of $260,000. Meanwhile, nearly two-thirds of all flipped homes were completed with cash. Blame those deep-pocketed private equity groups next time you get outbid.

On the Flip Side: But… the market seems to be cooling. Profit margins for flippers fell in Q1 in nearly three-quarters of analyzed metro areas as mortgage rates rise and demand cools. Whether a bubble is popping is tough to say — flipping last peaked in 2005 at 8.2%, according to ATTOM, when levels reached nearly 20% in Las Vegas, Phoenix, and parts of Florida. It may be safer to keep flipping dreams relegated to the land of mindless reality TV.

Automobiles

VW CEO Says His Firm Can Topple Tesla as Electric King by 2025

Volkswagen CEO Herbert Diess thinks his firm can become the world's largest electric vehicle (EV) manufacturer in three years, putting industry leader Tesla in the backseat.

"Tesla is weakening," the CEO told his employees at a meeting in Wolfsburg Tuesday. "We have to seize this opportunity and catch up quickly – we can take the lead in 2025." Elon tweetstorm incoming.

Fiery Furnaces

Tesla is the EV king, a fact made especially true by the low-interest rate environment that benefitted high-growth companies like Tesla leading up to this year's bearish market turn. But with that friendly environment in the rearview mirror, Diess thinks his company can round into first place as Tesla deals with a series of roadblocks:

•

While VW's EV plant in Saxony is running at full capacity and its factories in China are back online, Tesla is still struggling with supply chain backlogs. Last week, Musk called the company's German and US plants "gigantic money furnaces" that are "losing billions of dollars" and earlier this month announced the company was laying off 10% of its workforce and freezing hiring.

•

VW, which has invested over €52 billion to develop battery-powered EVs, doubled the number of all-electric vehicles it sold to 369,000 last year — Tesla delivered 936,000. This year, VW plans to sell 700,000 EVs, while Musk suggested that his firm deliver 1.5 million.

"Elon must simultaneously ramp up two highly complex factories in Austin and Grünheide and expand production in Shanghai," Diess said, according to German newspaper Handelsblatt. "That will cost him strength."

Troll Wars: Diess included a meme in his presentation to employees that he tweeted earlier this month, in which actor Jason Momoa, representing VW, is seen sneaking up on Henry Cavill, representing Tesla. One may be German and the other South African, but Diess sure knows how to speak Elon's language.

SPONSORED BY Acretrader

This One Investment is Farm Strong

If you've ever spent time working on a farm, you'll know the "simple life" is…how do we put this?

Not so simple.

Thankfully, you don't have to run a farm yourself to support the hard work of growing our food at the same time as enjoying the benefits of farm ownership.

AcreTrader offers professionally-vetted farmland investments, allowing investors like you to participate in farms from potato fields in Washington to timber tracts in Alabama. Here are a couple of the historic advantages of farmland investing:

Beanstalk-Style Historical Growth: According to NCREIF, a $10,000 investment in farmland in 1991 would be worth over $215,000 today 一 the kind of return that could leave your accountant with plenty of bean counting to do (the good kind).

Consistent Return: Above and beyond the attractive long-term growth, farmland returns have been positive every year since measurement started in 1990.

Hedge against the turmoil and volatility of today's markets with a time-tested investment in our food supply and those who grow it. Invest in American farmland with AcreTrader today.

Corporate Spending

Executive Private Jet Use Soars to 10-Year High

(A private jet at Norman Y. Mineta San Jose International Airport; Photo by Scott Schnaars)

When you go to the airport these days, odds are you will be stuck waiting in line. If you work for an S&P 500 company, your boss likely won't have the same problem.

New data from ISS Corporate Solutions reveals that chief executives and board chairs at US companies are using private jets for personal reasons more than any period since 2012.

Jet Worth

It's not shocking news that CEOs get more perks than you can dream of, but at least in this case there was a massive global pandemic to (kind of) justify it. Firms like Discover Financial relaxed air travel policies to accommodate their leaders when the aviation industry was flying through a cloud of uncertainty. Those leaders leaped at the newfound freedom: Discover spent $153,000 on private flights for CEO Roger Hischild and his family in 2021, up from just $12,000 a year earlier.

Oreo and Chips Ahoy! maker Mondelez was another company that greenlit personal travel on private jets for executives, and its spending rose 33% to $214,000 last year from $161,000 in 2020. They were not exceptions to the rule:

•

According to ISS, executives at S&P 500 companies increased private jet spending 35% to $33.8 million, the highest since 2012.

•

The biggest spenders were Meta, Tyson Foods, and aerospace firm Lockheed Martin — Meta spent $1.6 million on private jets for CEO Mark Zuckerberg. At the same time, Lockheed confirmed that over $350,000 of the $1.1 million it spent on flights for CEO James Taiclet was for his personal travel.

Sky High Morale: Cruising at 30,000 feet might be an excellent perk for top leaders, but in at least one case the troops on the ground were not exactly pleased. Last year, Bloomberg reported that Goldman Sachs CEO David Solomon's use of the company's private jets as "vacation ferries" on at least seven weekends, including four to the Bahamas, left some at the bank "bristling."

Extra Upside

•

23 million Californians will get "inflation relief" checks worth $1,050.

•

NASA is experimenting with a new moon orbit that it hopes can get people back on the moon.

•

Capital gains taxes are a real kick in the pants. But what if we told you there was a way to not pay them until 2027 (and cash in on that sweet, sweet compounding potential)? Enter Opportunity Zone Funds. Read how savvy investors are using these to defer their capital gains taxes and cash in big-time.

•

Prefer the slopes instead of the beach? If so, you're in luck — The Daily Upside is giving away a five-day spa getaway in Park City. Drop-in and enter here.