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As the AI infrastructure crash takes form, its recessionary effect suppresses bond issuance and powerfully caps yields, giving battered housing, mortgage and related stocks a lift. Starwood Property Trust, Rocket Companies and Builders FirstSource should get a powerful boost as yields fall, with huge short covering and fundamental improvement; many in the group trade well below book value. x.com x.com x.comÂ
Rocket Companies' underlying platform is worth far more than its price, which looks like under 10x earnings power. Its mortgage servicing rights are exposed to rate hikes and credit, and the stock swings with rates, but management can largely shape earnings. @BoxLongs sees a big TAM and notes ValueAct's involvement, with the rate-driven selloff a reload point, though a sharp market drop could take it to $10-12. x.com x.comÂ
Starwood Property Trust's acquisition of Fundamental looks disastrous in retrospect, as Starwood pays out NAV while not earning its dividend. General pressure on rates and spreads adds to the damage after the stock was clobbered. The open question is when it becomes a buy, and whether it falls to Covid-era levels below $10 soon. x.comÂ
Rate-sensitive stocks look set to outperform as the market looks ahead to rates nearing a peak. After four years to price in inflation, these sectors have been severely punished, are excessively cheap and nobody owns them, and their divergence from bonds reflects that anticipation. Biotech showed a confluence of bullish factors earlier this year, airlines and real estate followed, and fintech now looks primed, despite lingering skepticism over rate and oil pressures. x.com x.comÂ
Starwood Property Trust's dividend remains uncovered, and elevated leverage limits its room to sustain the payout. Its 15.3% yield comes with a 132% payout ratio and a dividend frozen for over a decade; the estimated chance of a cut within 12 months is 65%. Rating: sell. x.comÂ