10% of Americans own 90% of Stocks
Episode 17
Hello everyone! Greetings from Austin!
Here’s what I got for you this week:
Downtown apartments are struggling
How Amazon crushed eBay
10% of Americans own 90% of stocks
🏡 Real Estate News of the Week: Downtown Apartment Rents decrease for the first time in 10 years
For the first time in a decade, rents decreased for apartments in downtown areas, aka Central Business Districts (CBD). However, what’s notable is that rents of suburban apartments are still positive, albeit increasing at a slower growth rate. I think there’s a couple main reasons for this:
The shift to remote work has led millennials and people with flexibility the chance to leave these downtowns and tier-1 cities, either temporarily or permanently. If your job is not dependent on your location, most people will optimize for cost of living and a better lifestyle.
With uncertainty about the economic future, people are leaving their luxury apartment buildings (Class A) and beginning to downgrade to a lower class of apartment buildings (Class B) buildings. This is either in anticipation of uncertainty, or being forced into this position
This is why I’m bullish on multifamily in these Tier-2 markets that are located up to 30 minutes from downtowns. Don’t get me wrong — I don’t think cities are dead. You can’t replace the energy and feeling you find in downtowns, but there will definitely be some pain felt at least over the next couple years.
📱 Tweet(storm) of the Week
Here’s another Tweetstorm from Dan Rose on the brilliance of Jeff Bezos business chops. This time, he talks about Bezos’ stubbornness to not give up on 3rd parties selling on Amazon. In the early 2000’s Amazon had separate pages for 3rd party sellers and 1st party sellers (the products Amazon was selling). No one would actually visit the 3rd party store and instead would just go to eBay. Bezos decided he had to show 3rd party and 1st party products all on the same page. Effectively, driving competition within his own business. It was a genius move — higher margins because of no inventory risk or fulfillment cost. Within a few years, 3rd party sales went from roughly 0% of GMV to 40%.
eBay today has a market cap of about $40B, whereas Amazon’s market cap is $1.6 TRILLION.
📈 Chart of the Week
Many people talk about the “disconnect” between Wall Street and Main Street. This chart from Morgan Stanley should tell you everything you need to know about this disconnect. Individual stock ownership from the 1970s to today has fallen from over 70% to roughly 40% today.
If you dig even deeper, what you see is that roughly 10% of Americans own about 90% of total stocks outstanding. Which means the remaining 30% who owns stock only own about 10% of total stocks outstanding. In practical terms, that means that 10% of America has investments of Equities of anywhere from a few thousand dollars to Billions of dollars. Whereas 30% may have a few hundred dollars in equities. And 60% have nothing invested in equities.
I often talk about the importance of personal finance and learning how to make money. It’s so important. But I also believe there are some deeper fundamental changes that need to occur, otherwise we are on a path to ruin. It’s a story as old as time. It’s not only an interesting problem to solve, but it might be the most important problem to solve right now. If you have any thoughts on income inequality, how to grow the pie, and ideas to fix these problems, let me know — I hope to write a long-form essay on this topic at some point.
Have a great Sunday,
Rohun