The new COVID variant, Omicron (B.1.529) was first detected in South Africa in November 2021. Omicron is now the dominant COVID variant today.
Reports are showing Omicron is less potent, which is leading to less hospitalizations per infected cases. Reported symptoms are generally more mild as the variant doesn't seem to attack the respiratory system as hard. However, it also seems as if Omicron is more contagious than previous variants.
Given we went through the Delta variant without too many hiccups, the investment thesis for this latest variant should hopefully be similar. Let's review this latest COVID variant investment thesis for stocks and real estate.
Overall COVID Variant Investment Thesis: Buy The Dip
Thanks to our experience since 1Q2020 dealing with earlier variants, we now have a decent roadmap for what to expect. Therefore, if there is another sustained surge, we can expect less safety compliance, less fear, and more economic activity.
In other words, things won't get as bad this time around. Therefore, we can rule out another 32% S&P 500 correction like the one we saw in March 2020. Therefore, I'm nibbling on the selloff. COVID will be endemic. We just have to learn to live with it.
However, we could easily see a 10% – 15% S&P 500 correction that would bring the index back down to the 4,000 – 4,100 range. Valuations are expensive and corporations must grow earnings to meet high expectations.
As for real estate, the new variant should be good for real estate as more people spend more time at home again. Interest rates will likely decline as Treasury bonds get bid up. Further, more people will try and convert more paper money profits into hard assets.
Let's get into more detail.
New COVID Variant Investment Thesis: Stocks
Since none of us have future-revealing crystal balls, we must accept our COVID variant investment thesis could be dead wrong. However, if we logically think things through, hopefully, we'll have a greater than a 50% chance our investment thesis will be right.
When it comes to building wealth, our net worth allocation is the biggest determining factor. However, when it comes to active investing, all we need is enough 51% chances to outperform.
Again, expect the S&P 500 to decline by 10% – 15% if the new Omicron variant rages as much as the alpha variant. After the correction, we can assume new booster shots will target the B.1.1.529 variant and things will more quickly get back to normal.
Therefore, if there is a 10%+ correction in the S&P 500 (4,150 – 4,200), I would be aggressively buying the dip. I expect the S&P 500 to recover all its losses within three months of the correction and the market to reach new highs.
Here is my 2022 stock market forecast calling for roughly 5% upside to 5,008 on the S&P 500.
Outperformers In A New COVID Variant Scenario
During the worst of the Omicron variant spread, these sectors/stocks may perform the best.
- Home media: Netflix, Disney, Hulu, Roku
- Food delivery: DoorDash, Postmates, HelloFresh
- Home furnishing/remodeling: Wayfair, Home Depot
- Home fitness: Peloton
- REITs, eREITs, real estate ETFs: Vanguard Real Estate, American Homes 4 Rent, Realty Income
- Social media: Twitter, Snapchat, Facebook
- Big tech: Apple, Google, Amazon, Microsoft
- Pharma: Pfizer, Moderna
Underperformers In A New COVID Variant Surge
During the worst of the new COVID variant spread, these sectors/stocks will likely underperform the S&P 500. If there is a omicron variant booster shot or if the variant starts to get under control, there's a greater chance these sectors/stocks will then begin to outperform.
- Financial (XLF): JP Morgan, Chase, Wells Fargo
- Materials (XLB): Newmont Corp, Dow Inc, Linde PLC
- Industrials (XLI): Honeywell, UPS, Union Pacific, Boeing
- Cruises & Airlines: Delta Airlines, Norwegian Cruise Lines, Carnival Corp
- Small-Cap Russell 2000: Plug Power, Novanax, Penn National Gaming, Caesars Entertainment
New Omicron COVID Variant Investment Thesis: Real Estate
The new COVID variant makes me bullish on real estate due to a decline in interest rates, an increased desire to own hard assets, and more time spent at home. Whenever you spend more time using something, its intrinsic value goes up.
One of the reasons why I've been seeing more online search traffic tick up about migrating to California and Hawaii is due to higher vaccination rates. The combination of a better lifestyle, more job opportunities, better weather, and higher vaccination rates is alluring to some people.
Therefore, if the omicron variant becomes a beast, there will at least likely be a slowdown of people migrating to the Midwest and South to save money. Here is my 2022 housing market forecast, which calls for 8% – 10% pricing upside.
Below is a map of risk levels by state by Johns Hopkins University back in August 11, 2021, when the Delta variant was spreading rapidly. Today, the COVID risk levels are relatively similar by state.
Related: How To Get Rental Deals And Better Tenants After COVID-19
Underperforming States During A New COVID Variant Surge
- Arkansas
- Louisiana
- Florida
- Mississippi
- Alabama
- Kansas
- Oklahoma
- Wyoming
- Nevada
- Utah
- Arizona
Most of these states either have lower vaccination rates, more liberal mask and social distancing mandates, unhealthier people, or a combination of all items.
Therefore, at the margin, these states may be relative underperformers from a real estate investment standpoint as investors avoid these states until things get better. If enough hospitalizations and deaths occur, economic activity will slow down.
On the flip side, more individual liberties may result in more economic activity, which could boost real estate prices further. I'm hypothesizing that enough people have died from the coronavirus that people in the most affected states will take things more seriously this time around.
Unfortunately, I don't see the southeastern states like Mississippi, Alabama, and Arkansas climbing out of the bottom 10% poorest states in the country any time soon. It takes time to change.
Outperforming States During A New COVID Variant Surge
Given all of us have already gone through 1.8+ years of a pandemic, at the margin, we should be more comfortable living with this disease. Therefore, I don't see as many people fleeing big cities like San Francisco, New York, and Boston as much this time around. Safety protocols are robust in these cities.
The midwestern and southern states have had their time to outperform during previous variants. As a result, I see a normalization of real estate price increases where the fastest growing cities slow down and the slowest growing cities stay the same or increase.
Check out this Burns Home Value Index chart highlighting May price increases and upcoming supply. If you read my heartland real estate investment thesis piece from 2016 and took action, you are now well in the money owning Austin, Dallas, and San Antonio property.
It is highly unlikely cities like Austin will see a similar level of price growth under another COVID variant scenario. House price growth cannot outstrip income growth by that much for too long. Further, be aware of rising supply in cities with the highest price appreciation.
Instead, I expect to see the above graph look more uniform around the overall United States real estate price growth figure. In other words, big cities will underperform less. Price growth for 18-hour cities will slow.
Big Cities Should Underperform Less
Due to high cost, I don't think real estate prices in cities like New York and San Francisco will outperform 18-hour cities like Charlotte or Charleston for a while. The “spreading out of America” is a permanent trend. The law of large numbers is also hard to overcome.
However, don't feel sorry for residents in higher-cost cities. Even a 10% price increase on a $2 million home is equivalent to a 40% increase on a $500,000 home. The main difference may be that big city residents also have higher incomes and a larger public investment portfolios.
If larger public investment portfolios so happen to be concentrated in sectors that outperform, then the wealth gains can be enormous. I know plenty of people who became millionaires and multi-millionaires in the San Francisco Bay Area after the NASDAQ closed up 43% in 2020.
One guy I know joined a San Francisco startup two years ago when it was valued at $500 million. Recently, the company raised a large round that valued the company at $10 billion! He is now a deca-millionaire on paper.
Although big city real estate will underperform less, they will likely still underperform. Therefore, it's up to you to take in all the variables of lifestyle, income, family, and friends to decide where you want to live.
Personally, I've used part of my Buy Utility, Rent Luxury (BURL) strategy to invest. In other words, I have continued to live in an expensive city like San Francisco for lifestyle reasons and invest in less expensive cities like Charleston for capital gains reasons.
My Invest Strategy If Things Get Worse
If the latest COVID variant aggressively spreads, bonds will do well and yields will decline. We already see the 10-year bond yield below 1.4%. Therefore, I'm happy to keep my existing bond positions and will focus on putting new money to work in real estate.
In my post, Why The Housing Market Won't Crash Any Time Soon, one of the bullish housing scenarios I discussed was a bear market in stocks resulting in a bull market in bonds and a decline in rates.
We saw this mini-scenario play out on July 19 when the S&P 500 declined by 1.2% and bond yields declined to 1.18% from 1.3%. We saw this scenario play out for years after the 2000 dotcom bust.
If the new COVID variant doesn't ravage the economy, then strong economic growth will do well for stocks and real estate. Bonds may underperform. However, bonds have done incredibly well in a multi-decade stock bull market. Therefore, don't completely disregard bonds just because interest rates are low.
I'm investing in a build-to-rent fund because I believe rents will continue to go up. I don't currently have enough capital to buy another physical rental property, nor am I sure I want to given time constraints as a father.
My current real estate exposure consists of three rental properties in San Francisco, a rental property in Lake Tahoe, multiple real estate crowdfunding investments, and various real estate public securities. These investments make up roughly 40% of my net worth.
Watching Stock Underperformers
On the stock side, my focus is on the sectors and names in the Underperformers category. The reason why is because I'm already long names in the Outperformers category (tech, media).
JETS, RCL, CCL, and XLB are the main securities on my watch list. Airlines and cruise ships have up to ~30% downside from current levels if the new COVID variant shuts us down. If these stocks do decline by this magnitude, eventually I believe they will recover by 50%+. I also bought health and fitness stocks as a laggard reopening trade.
It's important to develop a watch list because, otherwise, you'll tend to buy what you've always been buying. A great investor is always prepared and trying to connect the dots.
Given I believe there will be booster shots to counteract new variants, I expect the Underperformers to eventually outperform again. In other words, I'm looking for a mean reversion.
Boosting Cash As Well
Finally, I am happily stacking cash in order to take advantage of a potential 10-15% correction in the S&P 500. I only assign a 25% chance there will be a correction of this magnitude. However, I still want to have a decent amount of cash to deploy if it does.
Having a robust investment portfolio and a large cash hoard feels good after a massive rally. I'm currently deploying capital into a venture debt fund, which has a lower risk profile than venture capital funds I'm also investing in.
Let's hope things don't get too bad with the new COVID variant But if they do, now we've got a plan.
Diversify Your Investments Into Real Estate
Stocks are very volatile compared to real estate. Therefore, if you want to dampen volatility and build wealth at the same time, invest in real estate. Real estate is my favorite asset class to build wealth.
The combination of rising rents and rising capital values is a very powerful wealth-builder. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Best Real Estate Investment Platforms
Check out my favorite platform, Fundrise. Fundrise enables investors to diversify into real estate through private eREITs. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain real estate exposure.
Another great platform is CrowdStreet, which focuses mainly on individual opportunities in 18-hour cities. 18-hour cities tend to have faster growth, lower valuations, and strong demographic trends. I've met the team before and their platform is excellent if you want to build your own select real estate portfolio.
Readers, what is your new COVID variant investment thesis? What are you waiting to buy if things start getting very bad again? Are you putting more capital to work in real estate or stocks? Or are you buying something else or hoarding cash?
Disclaimer: I've written my investment thesis and what I plan to do with my money. Given you are not me, please write your own investment thesis and follow your own objectives. Invest at your own risk.
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Buy now while the market is on sale. I can’t believe people are afraid of Omicron when there are currently 7 deaths out of 183,000 cases in the UK. Common cold folks.
Fortunately, we have a playbook for this scenario. But that also means there is an opportunity to more confidently maneuver in those market conditions (as you mention, just see it as a short-term sale). My guess would be we can’t go back into a lockdown scenario, so from an economic standpoint I don’t think we’ll get anywhere near the impact of the initial scare. Then again, nobody knows anything at this point.
My investment thesis is on autopilot and doesn’t change with omicron. I make automatic paycheck contributions into my 401k, 529 accounts and brokerage. I plan to invest my EOY bonus into my youngest kid’s 529 plan, which is in all equities. My investment real estate consists of 2 duplexes in a desirable location that has been positively affected by COVID, and I’ve already updated both duplexes and refinanced both to low interest rates. I invest half of the net cash flow into principal paydown and the other half into a brokerage account. 50% of my NW is in real estate; the other 50% is in equities with just a bit of bonds. I used to save cash and look for real estate opportunities, but now with young kids I just want to automation and simplicity. I don’t think any world event is going to change what I’ve got set up, but it’s hard to say until it happen.
Sounds like a good plan to stick with!
Solid advice. Question: from your 40% portfolio exposure in real estate, what is the breakdown in exposure of actual properties VS REITS and crowdfunding investments?
About 90:10 with the goal of getting to 60/40 within 10 years.
I should’ve listened to your post, “how to predict a stock market bottom like Nostradamus”. I would’ve been very rich if so .
it could be a sign of, “here we go again!” with the Omicron variant!
I’m with you on this one. There’s just to much money on the sidelines not to buy the dip. Thanks for LTH!! 30 percent in a month
Hah, nice on LTH, we were up closer to 40% at one point. Hopefully things don’t get too bad. Otherwise, gyms are gonna get smacked again sadly.
COVID has shifted future demand for housing forward. The fed must raise interest rates if inflation turns out to be non-transitory as business hates uncertainty in pricing; A 4% 30-year home loan would “completely halt the housing market” according to Ivy Zelman … the Mortgage Bankers Association is on record predicting median home price declines of 2.5% by the end of 2022. I would steer clear of this sucker rally as US household growth in last decade was lowest ever recorded, and US demographics are getting worse from here, especially if there’s a surge in deaths due to this new COVID variant.
Hi Sam,
There is one thing nobody is talking about – and it is – what if the “omicron” variant infection was milder ? Covid could become like a regular flu. Certainly not fun. But if very few people get to the hospital, there may be no need at all for new restrictions.
This possibility means that we could have a real “natural herd immunity” much quicker that thought AND that anti-vaxxers would have nothing to say about it – after all, the virus doesn’t care about the opinion of their host !
Best of both world ? Probably. But it’s how nature works. Viruses tend to adapt to their host. They don’t do that willfully. They do that in order to survive. The more infectious they are and the milder they are, the better their chance of survival.
So, in the end, omicron could end up being a good news, and signaling the end of the pandemic.
At this point, this is just a guess. There is no way of knowing how the mutations will affect the virus. But we can’t exclude that possibility…
As for my investment, I don’t change anything. I still think this pandemic will end in a way or another and that we will have a lot of inflation. So I’m still heavy on recovery stocks, consumer goods and commodities.
Yes, good point and I hope so. I think COVID is just going to be part of our daily lives. And more people will just get on with it. As a result, I’m buying the dip. I think we will adapt and science will find a way to combat.
I do like how the 10-year bond yield fell below 1.5% again. Good for real estate.
Nancy Pelosi doesn’t seem to be to worried about the risk in Florida with her new 25 million dollar beach front mansion. Maybe she sees the risk as a great opportunity to buy on the cheap.
lol, fake buddy
Lol, TRUE. Pelosi sees that Florida per capita number of COVID cases lowest among U.S. states. If you buy into the covid fear porn then why are congress and illegals crossing the border exempt from the “vaccine” mandate?
What a drag this darn virus keeps mutating, but it’s not a huge surprise. I know several people who caught the Delta variant even when they were vaccinated, but fortunately none of them had any severe symptoms. Makes me thankful the vaccines came out when they did and that cases are very low in my area. Hopefully the omicron variant will not spread that far.
Interesting thesis!
I’m pretty much fully invested but if there is a 10-15% dip I’ll definitely try to free up some extra funds to invest.
An outperformer stock to add to your New COVID Variant Scenario is Novavax (NVAX).
Better efficacy, safety profile and durability than any of the others. Traditional protein-based vaccine type that has been in use for decades. Will soon be the go-to vaccine. Approvals in 2 countries already and filings in dozens of others with more approvals coming in next week(s) from EU, Canada, Australia, WHO, Japan, Singapore, Mexico, India etc..
You do not hear much about NVAX in the press and it has been kept down in the US due to politics and big pharma/FDA corruption, even though it is a US company headquartered in MD. It has been running this week and is still 100 points below recent highs. Pay no attention to law firms soliciting clients for losses-all bogus and going nowhere.
NVAX is a second-stage rocket about to blast into orbit. Moderna and Pfizer Covid vaccines will be relegated to history once this baby takes over, and they know it. They were both up today, but will not sustain those gains given the problems with durability, severe side-effects and total lack of sterilizing immunity.
What is your background? The novavax speculationsounds interesting. What scientific experience/education do you possess for such a qualified opinion?
I’m guessing his/her “expertise” is based on the fact he/she already owns a lot of this stock. Notice each claim is more over-the-top than the last with no evidence to support any of them. Maybe they’re a writer for Zero Hedge…
This is a pretty good thesis. During the whole March 2020 crash I just bought more and more with almost all the cash I had left.
The companies that were hit hardest (big airlines and oil) eventually recovered after a few months and I locked in some sweet short-term cap gains.
This pattern could definitely happen again for delta variant and so I think it’s a pretty good way to go.
Sam,
What are your thoughts on selling positions in 401ks and other retirement accounts at a time like this? When we think a large correction is coming, should we sell these positions that wont create any tax impact, then buy again once the correction occurs?
I have this same question—would love to know what others are doing / when you’re selling.
We like your idea of keeping some dry powder so we can pounce if there is a big dip.
But aren’t going to beat ourselves up too much for lacking the prescience to rotate in and out of sectors during a time of market and medical uncertainty. Buy and hold or HODL serves us just fine. Particularly if those HODL are paying an acceptable dividend until the markets offer some recognizable direction.
Great article and good ideas if the US begins to lock down due to the Delta variant. That said, as other readers have pointed out the death rate is exceedingly low and vaccines are readily available to those that want one. I think that even more so than last year – the decision to re-enact a mask mandate or limit gathering would be even more socially charged than it was in 2020 / early 2021. Select states such as California may move in that direction, but I think the vast majority of states will remain fully open – even those that were late to re-open earlier this year. I’m more concerned about the economic implications of what the Fed is doing than of the Delta variant.
I bought a property in Las Vegas to get to about 40% of my portfolio for real estate. I’m glad to hear I’m aligned with you on real estate now.
I’m still very bullish on tech for a long-term investment, along with real estate. Everything else just seems like a waste of money. I did make a slight shift from some tech to Birkshire Hathaway, but it was only about a 3% shift. I’m 52 years old, so I’d like to begin to shift into slightly more conservative stocks that still should generate strong returns over the next 2-4 decades.
Delta death rate 0.13% and severe illness rate 0.18% according to NHS of UK.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/997418/Variants_of_Concern_VOC_Technical_Briefing_17.pdf
Both these numbers are loewr than the flu. If you have a respiratory virus that’s less dangerous than the flu, I all it a common cold. It won’t have any long term effect on the economy.
Agreed – and while this virus might not have long term effects, government actions might
>777,000 deaths in the U.S. in less than two years is not the flu.
If you want to be precise, let’s be fully precise.
Deaths credited to COVID and deaths credited to flu are counted differently. Also, NATHAN said Delta, not total COVID deaths.
Regardless, as Rob points out, data and government action don’t seem to correlate with this disease anyway.
Overcounting was and is in effect. Financial incentives for hospitals and covid diagnoses abound. PCR tests were notoriously unreliable. Four comorbidities plus covid might equal a covid death, but c’mon man.
Interesting article. I’m keeping my portfolio boring. I prefer it that way.
As far as masks. It’s a free country wear one if you want to. I could care less.
Thanks for laying out the strategy and I agree, for those that are willing to be more active, evaluating the historical trends form the Alpha variant and applying that to this time around is not a bad strategy. Those that stay the course and decide not to trade in and out will likely do just fine as well.
I love that you are getting into BTR as it is a very interesting place to be. Are you able to share where you are investing in your BTR fund? This is one of the few times in history where its actually cheaper to build than to buy a SFR property. Building BTR properties allows you to build at an efficient cost 5.5% to 6% cap rate and at scale, your fund can monetize the portfolio at an attractive cap rate (4-5%), creating a ton of value.
At the moment, CrowdStreet has a BTR fund with a $150,000 minimum investment. It will invest in 8-10 properties.
Sam, do you believe that the real estate market will eventually revert back to the mean? As you mentioned, income growth does not match home prices in most markets. And most studies show that the global housing market is about 10% overvalued (e.g. https://finance.yahoo.com/news/global-housing-boom-home-prices-look-very-overvalued-164637180.html).
I understand you feel confident in the real estate market, but do you have any self-doubt regarding your thesis? If it wasn’t for this pandemic, we would have been in a recession. And if it wasn’t for the Fed and government bailouts, the economic fundamentals would be wreaking havoc in every market. Feels difficult to put millions of dollars at risk when the foundation is shaky and the retail investor is always the last to know.
The overall housing market must slow from its current pace for sure. But I believe it will still go up for several more years. 85% confident.
Here are all the reasons why IMO: https://www.financialsamurai.com/why-the-housing-market-wont-crash/
I don’t think we would have gone in a recession without the pandemic. We were doing well in early 2020 and President Biden would have stilled focused on stimulus spending.
Another reason why I’m confident with real estate is because it’s easier for me to find deals and negotiate deals.
Example of latest: https://www.financialsamurai.com/buying-a-home-with-the-listing-agent-to-save-money/
How is your net worth structured and what are you doing with your cash?
Since 03/20, I’ve been sitting on more cash than ever (over 25 years) – I started increasing cash in 11/2019, anticipating the US administration would pooch something with China and overall trade relations. While that didn’t come to pass, it was beneficial with the pandemic, though I didn’t have the guts to go all in during the dip.
Currently: 85% Equities, 9% Real Estate, 6% Cash (in 03/20, this was up to 10% the other 4% has gone back into Equities). Currently looking for more real estate options, but the current increases have made most of those less attractive to me. I no longer invest in single unit housing – only multi-tenant (apartments) via managed LLCs, which have provided a reliable 8% dividend plus double digit asset growth for those that have been sold.
My current goal: 75% equities, 20% real estate, >5% cash. At that point, the dividends will provide an income stream to meet our budgeted spending by 125%.
That’s a lot of cash! And given cash is 25 years expenses and 6% of net worth, are you saying your net worth is over 420X annual expenses now?
If so, I encourage you to live it up more!
I think your delta variant thesis is spot on when you mention people returning to larger metro areas. I recently accepted a job in Detroit and even though I will be virtual for at least the next 6 months I’m looking to relocate there before the end of the year. Most of my peers who graduated college and accepted a position like mine have either already moved or are planning a move.
I’m planning on saving to invest in a duplex/condo in the area in the next 6-7 years. Hiring is intense in the area and there is limited housing availability up until December 2021 in popular commuter areas.
The relatively lower housing prices in the midwest also make investments very attractive like you’ve mentioned in multiple posts. Especially when properties are near major employers or cities with a high quality of life (Ann Arbor).
All of this could be biased because of my position and experience, but most college grads I know want to be in person and near their coworkers early in their careers.
Early on in your career, it is definitely best to build in person relationships. The people you know will gradually become more connected and gain more power over time. These are the relationships that you need to develop to help you along.
There of been so many times where I’ve been able to gain access to some thing because I knew someone. It’s just human nature to help people you know. Good luck!
probably the true key to life…
“It’s not what you know, it’s who you know…”
I just found out I have access to an After-Tax 401K and have in-service rollovers, but can only do this once every annually. I’m thinking it might be a good way to deploy a bunch of money into a roth IRA in the case where what you talk about above does end up happening.
Thanks again so much for your advice. This is an outstanding perspective and as usual you normally hit the nail on the head.
Please keep up the anti Arkansas content! The last thing we want is an influx of people from California or the East Coast. Its vital everyone thinks that we’re all obese and ignorant, like my 66 year old wife who just won the grand masters trophy from her most recent marathon or me who’s playing on an 18 and older tennis team. We can barely get out of our twin naugahyde recliners to get another six pack out of the fridge. You wouldn’t like it here with all the millions of acres of unpopulated wilderness except for a few inbred, banjo playing hillbillies. Stay away, its not safe here. I mean the property tax of nearly $100 per month on my paid for home is killing me. Or the free five years of college tuition and fees provided to anyone who graduates high school from the local school district, surely every place does that. Life is bad, really bad here.
Whoah! I didn’t realize things were so bad in Arkansas. Thanks for your perspective.
Hang in there you guys! And congrats to your wife for fighting the odds.
This post just objectively highlights the data from the CDC, Johns Hopkins University, and the US Census Bureau. Sorry that it offended you.
As investors, the goal is to try and take emotion out of investing and look at the facts before putting capital to work.
Any thoughts on why Arkansas is one of the top 5 poorest and unhealthiest states? What are some upsides you think could get the state moving again? Thanks
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According to the U.S. Census Bureau, the national poverty rate was 10.5% percent or 34 million Americans in 2019.
Poorest U.S. States (https://worldpopulationreview.com/state-rankings/poorest-states)
1. Mississippi
Mississippi is the poorest U.S. state. Mississippi’s median household income is $45,792, the lowest in the country, with a livable wage of $46,000. Additionally, the state has a poverty rate of 19.6%, the highest of any state. Unfortunately, Mississippi also has the highest obesity rate in the country of 40.8% and the lowest life expectancy of 74.5.
2. West Virginia
West Virginia is the second-poorest U.S. state, with a $48,850 median household income and a poverty rate of 17.54%. West Virginia’s educational attainment levels are on the low side, with the lowest percentage of adults with a Bachelor’s degree or higher, and has the second-lowest life expectancy of 74.8.
3. Louisiana
Lousiana is the third-poorest state. Louisiana’s median household income is $51,073, which is above its livable wage of $48,000. However, its poverty rate is 19.0%, the second-highest in the country. Louisiana public schools are considered to be among the worst in the U.S.
4. Arkansas
The fourth-poorest state in the U.S. is Arkansas. Arkansas’s median household income is the third-lowest at $48,952. The state’s poverty rate is 16.2%, the fifth-highest in the U.S. Arkansas’s obesity rate is 37.4%, the third-highest among all states, behind only West Virginia and Mississippi.
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Unhealthiest U.S. States (https://worldpopulationreview.com/state-rankings/most-unhealthy-states)
1. Mississippi
Mississippi has consistently been the country’s most unhealthy state for several years. While Mississippi has a low drug death rate and low prevalence of excessive drinking, it falls behind in many other categories. About 32.0% of Mississippi residents report getting no regular exercise, making it the most physically inactive state in the U.S. The state also has the highest obesity rate in the country of 39.5%.
2. Louisiana
Mississippi’s neighbor Louisiana is the second-most unhealthy state in the U.S. Louisiana has a very high rate of obesity as well at 36.8%, the fourth-highest rate in the nation. About 30.8% of Louisiana’s residents report no regular exercise, the fifth-highest giro for that statistic. Louisiana also has the fifth-highest cardiovascular deaths at 323.5 per 100,000 and the fourth-highest rate of diabetes of 14.1%.
3. Arkansas
Arkansas has a high prevalence of both obesity and smoking, at 37.1% and 22.7%, both of which are the third-highest rates in the U.S. Additionally, Arkansas has the third-highest rate of physical inactivity, with only 69.0% of residents reporting regular physical exercise. Arkansas also has the third-highest infant mortality rate in the country at 8.1 deaths per 1,000 live births.
It is common in political narrative-building to conflate cause and effect. One of the consequences of this is that regions that are most hospitable to the poor, the unintelligent, etc are maligned as having caused poverty and ignorance.
For example, it is far easier for a person of average intelligence to live well in Houston than in San Francisco, and as a result, such people flee San Francisco and migrate to Houston. But we can frame this as a narrative of Houston’s population being poorer and less educated than San Francisco’s, which would imply that San Francisco does better things for its people than Houston does. This is backwards – it is Houston that is better serving the needs of the everyman!
Not to mention things like an older than average population in Florida probably account for the large number of “unhealthy”.
MS, Lousiana, and AK all have high black populations, who have a VERY high rate of obesity and smoking. So they raise the average for the state.
Yup – adjust for race and cost of living, and those states poverty rates and low income largely to entirely disappear and states like CA look horrible looking at Median to get a good idea of the “average” person since CA has a very wealthy upper class.
So you are saying these states are doing fine so long as we exclude Black people?
Next thing you’re going to tell us is that you’re a racist, white, male, Republican who only speaks one language and isn’t vaccinated.
Black people account for 28% of Alabama’s population. You just can’t wipe them out, even though you want to.
How on earth is that what you got out of what I posted? I swear some of you people are insane.
All I said was NORMALIZE incomes for race – in other words compare Black’s median household spending power in Alabama vs California and then compare white’s median household spending power, then compare hispanic, etc. In other words, adjust for cost living and demographics and the income / poverty is gone.
Put another way, a black and hispanic person in California is more likely to be poor than in Alabama once you adjust for cost of living. The black family in Alabama may only make $35k vs the $50k in California, but after you adjust for 2x cost of living, whom is better off?
Does analyzing data, absent emotion, really equal genocide? Or just in your mind? I think we know the answer.
Wow, at least try to hide your racism a bit.
Louisiana Black: 32.8%, White 62.8%
Arkansas Black: 15.7 % White:79%
Mississippi Black: 37.8% White 59.1
Source: https://www.census.gov/quickfacts/fact/table/AR,MS,LA
Now are you going to say the Govt twisted the numbers? BTW AK is Alaska you ignorant fool. What are you doing on this site?
1) Unless you adjust for cost of living, any measurement on economic wealth is pointless. (also – only use median, not mean)
2) Once you do #1, adjust for the same thing per household by race – once you do that, the poverty rates in the south largely go poof (and the ones still low in ranking are barely off from the average at that point)
3) The CDC /JH assume the vaccine is 90% efficacy against the Delta. Early data shows its only 39%, some of which will include folks that had the disease already and also vaccinated so its hard to say how effective the vaccines are – indeed – the surge is occuring in all 50 states among the vaccinated and unvaccinated
Got it. Good to hear you think the data is wrong and that these states are much wealthier and healthier than reported.
I do like the hypothesis that we are all middle-class people no matter how much we make or have.
What is your real estate investment thesis around the delta variant given your beliefs? Thx
The data is not wrong per se, it’s just in nominal terms rather than in real (spending ability). You yourself talk about cost of living and real estate all the time and why you are investing in 18 hour cities – I’m surprised you push back on it at macro level in general.
A family making $35,000 a year in Alabama can still find 3 bedrooms homes near its major cities for $200k while the same family doing the same work making $50,000 a year in California will cost you $1 million. So while the Alabama family makes 30% less nominal USD than in California, his housing cost 80% less, his utilities cost 70% less, etc. The #s you cite are all in nominal terms, not real spending terms.
Secondly, no matter which state you look at, the lowest income is Blacks and the highest are Asians. The south has 5-10x the amount of black families as most super liberal areas – once you adjust for cost living and the same race – most of the south is actually better off at the median level.
I think the delta variant is going to be short of a blip (Look at the UK’s data and Israel – which saw it explode first) to have long term implications – I think the real question is on other variants and how we react in general to them. I believe Covid will effectively be another flu – lots and lots of variants and never able to iradicate them – but 99.8+% of people live (just like the data on Delta variant). In general, I’m also bullish on 18 hour cities but more specifically 18 hour cities in red or purple states. I’ve bought 4 rentals in the last 6 weeks in the Carolinas (3 different cities)
And for further clarification, I am not suggesting we are all middle class. I’m suggesting CA and NY/NE have far more lower and middle class folks than data suggests and SE states have far more middle and upper class folks than data suggests due to Income / Cost of living – which you know is the entire definition of middle class – ie how much your money can buy. No surprise CA has the third highest homeless rate in the US too, behind only NY and DC.
If this is true, then wouldn’t it be better if one invests in states like California, Connecticut, and New York for more upside since you are saying residents there are relatively poorer, and therefore have more upside? Conversely, we should sell real estate in states like Miss., Arkansas, and Alabama since they are relatively richer?
In the same line of thought, perhaps more people from the south should migrate to California and take advantage of relative value.
I definitely have seen a large uptick in people searching for terms about migrating to California and to Hawaii lately.
See this post: https://www.financialsamurai.com/migrating-to-california-from-the-midwest-or-the-south-for-a-better-life/
Honestly, I have never thought about the poorest states actually being richer than the richest states once you exclude various factors. So this is an interesting thought dialogue. It’s traditionally been people moving out of the coastal states to the south of the Midwest as a way for Geo arbitrage to save money.
That is not at all what I’m saying. I’m saying the real spending power (nominal $ / COL = real household income) is the same or better in the South/southeast. I’m really am surprised you are pushing back on this. Are you suggesting $15/hr will buy the same in SF as in Mobile or Huntsville? If not, then why post stats that say someone making $10k less in Huntsville than in SF is poor and the SF person is middle class?
As far as investments, cap rates are better in the South/southeast than anywhere but the midwest, so I definitely wouldn’t invest in CA/NYC except for tech although I think long term RDU, Austin and a few other areas may be a better investment. Plus, owner rights are much stronger in those states as well.
The link and comments you posted above about southern states are not adjusted for cost of living, nor are national poverty rates. Do some homework, you’ll be surprised
“It’s traditionally been people moving out of the coastal states to the south of the Midwest as a way for Geo arbitrage to save money.”
That’s exactly the point – they realize their $ and income goes much further in the south and are moving there. When you make $80k/yr in NJ and are considered middle class but spend $15k in property taxes and another $20k on the mortgage on a 1500 sq ft place, while you make $50k in SC but spend $1.5k in property taxes and $10k on a mortgage with $60k in income, you are far richer in SC than in NJ. (This doesn’t even count the federal tax hit from higher income)
OK, I’m glad my thesis is correct. Or at least that you agree with it.
I would argue the absolute buying power is more important then comparing relative buying power by race when it comes to investing in real estate nationally.
If you have a specific way of capitalizing on your view, I’d love to hear it.
I don’t think race impacts investing decisions/thesis – I was simply responding to your comment above on
“Any thoughts on why Arkansas [and then list other southern states after] is one of the top 5 poorest…” when that measurement of poor does not adjust for purchasing power whatsoever nor adjust for race.
Someone a family of 4 in alabama making $40k/yr will be considered poor but a family of 4 in SF making $65k/yr will be considered middle class by the data you gave, even though the family in Alabama will actually have a much higher standard of living. Once you adjust for standard/cost of living, then look at a black family in Alabama vs SF, etc and the data just gets worse for wanting to stay in CA.
Again, as far as investing, I think Delta will be too short lived to make long term investing decisions on – but how we handle variants in the future – especially ones that seem to spread just as much among the vaccinated with similar virale loads could have implications. Not clear what those are.
Actually, a family of 4 making $117,000 is considered “low income” in SF and qualifies for housing subsidies.
And one of the biggest conditions to be determined low income is housing. Therefore, I think the government is also taking cost into consideration.
Related: https://www.financialsamurai.com/living-a-middle-class-lifestyle-on-300000-year-expensive-city/
Don’t know about California, but here in South FLA we have New Yorkers moving in by the thousands. Florida has a much larger population than N.Y. and it keeps growing and N.Y. is shrinking.
When you are middle class and above, any southern state will do. It’s the poor, the black and Latinos who are dying but hey, as long as you are doing well…♀️
If you’re poor in this economy, it’s your own fault. And actually latinos die at a lower rate than whites (from covid and in general), and the reason blacks are dying from covid at such a high rate is that 84% of them are overweight and 45% are obese.
You are better off being poor in a southern state – lower cost of living, easier to qualify for benefits, lower taxes and more ethnic minorities!
Yes, the virus is hitting obese people harder – which unfortunately tend to be poorer and black. I am all for starting a campaign to encourage everyone to lose weight (which would save millions more lives than masks ever will!)
This is a great, emotionally-charged example for why most investors should invest possibly, not actively.
Sam stating objective facts and Steve getting all fired up and defensive.
The truth really does hurt much more sometimes.
Ditto from our vacation home in New Mexico. It’s terrible here. For your own safety don’t come. Wild Indians everywhere!
Steve that was hilarious…JL would be proud of your post. Congrats on “surviving” such an obese, inbred wasteland. Semper FI!
Your such a gifted writer and have a gift of how to zero in on timely topics. Thank you! One observation is that why are we not considering the use of drug therapies like Ivermectin and others. From what I am reading people don’t get as sick and do not end up in hospitals if they go on drug therapies right away.
So many are positive and grateful for the vaccines and I wonder if they are sure about the counts. There are people who have very valid reasons not to get the new mrna vaccines but they are called anti-vaxx for simply making an informed decision with their doctors about the risks.
The reason Ivermectin is no longer being considered for general use is that it has failed to prove efficacy in treating Covid 19 in higher quality studies. As a physician who has cared for many, many Covid patients in the hospital I can assure you that the one thing that (almost always) keeps patients out of the hospital is the vaccine.
Are there risks to any vaccine? Sure, just like there are risks to driving our car, or walking down the street. But the risk/benefit ratio overwhelmingly favors getting the vaccine. Just like the vaccines for polio and smallpox contributed greatly to controlling these terrible diseases, the Covid vaccines are the key to controlling this epidemic.
There have been hundreds of studies showing Invermectim to be effective when used before or early stages of covid. The only studies it failed when it was used with very advanced people. The lesson there is not to not use Invermectim, it’s to use it at the right time. The main reason the government didn’t want to use it was because based on our laws, none of the vaccines would have been able to have been accelerated if there was an effective existing treatment and would have taken the normal 5-10 years for approval (Plus, you know, Trump)
Sounds like you have read those articles–congratulations. If so, then you know the majority of the articles are of exceedingly poor quality. Even so, a few are of reasonable quality, and some of those even demonstrate some mild protection against some Covid symptoms.
The catch, as you point out, is that it must be used as a preventative agent, or early in Covid to achieve even those extremely modest improvements. In that regard, it is similar to Tamiflu, used for treatment of influenza. We use it, but it is not a substitute for vaccination, which provides far better protection.
Interesting theory as to why Ivermectin was not used early in Covid–because it would have prevented vaccine development from being accelerated. Makes no sense, of course, given the literature, but I can see its appeal to some.
Our local ICU is currently 40/60 vaxxed/unvaxxed.