Are we done with the rate-hiking cycle?

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Are we done with the rate-hiking cycle? The Dow Jones notched its 13th straight day of gains, the longest since 1987, as the Federal Reserve imposed a 25 basis-point hike but hinted a skip in the next meeting. Fed Chair Jerome Powell remained neutral by saying that a rate hike or a pause is possible during its next meeting in September. In other words, he avoided choosing a side of hawkish or dovish. Instead, he insisted on being data dependent from now on. - “I would say it’s certainly possible that we will raise funds again at the September meeting if the data warranted. And I would also say it’s possible that we would choose to hold steady and we’re going to be making careful assessments, as I said, meeting by meeting,” said Fed Chair Jerome Powell at a press conference. Jerome Powell (Photo: AP Photo / Jacquelyn Martin) Despite being neutral, Powell’s comments led to an explosion of opinions on Wall Street. Some analysts believe that the recent hike will be the last of the cycle. The central bank would pause for all of this year’s meetings, and any change would be rate cuts next year. - “In our opinion, the rate hiking cycle is done and the Fed will now pause for the rest of the year. The latest market reaction also supports this thesis with yields dipping slightly across the front end of the yield curve,” said Rajeev Sharma, managing director of fixed income at Key Private Bank. Frances Donald of Manulife Investment Management also said that Powell simply threated a rate hike to keep the markets from being too bullish. - “We now believe that the Fed is on a prolonged ‘hawkish hold’. In our base case, their next move will likely be a cut but it will take until 2024 until we see it. That said, Powell will have no choice but to keep the threat of hikes alive, lest he encourage markets to prematurely price in cuts and reignite inflation expectations,” said Frances Donald, global chief economist at Manulife Investment Management. Frances Donald, global chief economist at Manulife Investment Management (Photo: CNBC) At the same time, Chris Zaccarelli of Independent Advisor Alliance pointed out that the central bank called core inflation “pretty elevated.” Since Powell is taking it meeting-by-meeting, any uptick in inflation could lead to another rate hike. - “Bears can point to Powell’s insistence that all meetings are live and that core inflation is ‘pretty elevated,’ and bulls can point to Powell’s insistence that they could easily skip the next meeting and keep rates unchanged in September,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.  10X Growth? New Innovative Business Model Is Taking The Market By Storm Today’s Pick: Safehold Inc. ([SAFE]() A classic infomercial back in the early 2000’s by Ron Pompeii had the famous tagline for his Showtime Rotisserie & BBQ machine: And 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. 16x Book Value Growth Since IPO: As a proof of its innovative business model, Safehold saw its growth exploded in the last five years: (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 $3.92 billion in debt (although its current ratio is 45). 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. 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!   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance  If you no longer want to receive these messages, you may [click here]( to unsubscribe.