Arrakis Global
Global Thematic Fund Manager
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
The market looks further ahead than today's weak housing conditions, so Rocket Companies and Zillow look bottomed. Both appear poised for big runs despite how bad the housing market remains. x.comÂ
Starwood Property Trust looks like a buy because most of its loans are floating rate and its servicing unit alone is immensely valuable and countercyclical. x.com x.comÂ
Real estate stocks such as Rocket Companies, Zillow and Builders FirstSource will struggle to recover strongly until housing turnover increases. One possible offset: once rate hikes start, probably in September, 10- and 30-year Treasury yields and mortgage rates could tick down. x.comÂ
A clearing of the gloomy environment will make lending stocks the next multibaggers. SoFi, Upstart and Klarna are down now, much as many cybersecurity stocks were before rising two- to fourfold in under six months. Better Home & Finance (-75% YTD), LendingTree (-55%) and Rocket (-47%) join them among lending names whose current prices will look dirt cheap in 2028-2029. x.com x.comÂ
Rocket Companies is set up to benefit from a short-term bond bounce that would bring down long-end yields. Pension funds' quarterly rebalancing this week should buy bonds and sell stocks, and a 70% priced probability of an October hike leaves room for a bounce. A dovish PCE surprise, which BofA said might come from a methodology change, would add support. Rocket's weekly chart shows a good entry point, and the MOVE bond-volatility index has started to retrace, a good sign. 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
Hyperscaler credit stress and weak financials-versus-staples leadership warn of downside risk in the S&P 500 consolidation. Spreads have broken July wides, though an upside breakout is probable if financials stabilize. So far, tech weakness has lowered yields as Fed hikes are priced out, letting defensives rally and the S&P chop. If the Fed signals Nasdaq weakness won't stop tightening without better data, the tech-yield link could break in an uncomfortable, 2018-like direction. x.com x.com … Show more
Rocket Companies is positioned for higher mortgage volume as housing loosens and rates may ease. Inventory is up about 5.6% year over year with more flexible sellers, giving purchase originations a runway Rocket's digital scale can absorb. April to June is peak home-sales season, when its fast-close platform is an edge. With rates at 6-6.5% and the MBA projecting about 5.9% by Q4, a dip would reopen refinancing, Rocket's specialty. The median Wall Street target of $22 implies about 55% upside. … Show more
Rocket Companies is uninvestable while the 10-year Treasury yield and mortgage rates keep rising. It could be worth owning when the time is right, but it is still too early. x.comÂ
Debt-funded AI building is making tech stocks vulnerable to a 25-30% pullback as rates and energy prices rise. AI company borrowing reached $466B this year versus $101B a year earlier; weekly default-insurance trading on seven AI names rose from under $2B in July to over $9B in September. Keep cash for lower prices, though 30% earnings growth and a 19x market multiple argue this is not an AI bubble. x.comÂ
