February 2020

Bonds, Bernie, and Coronavirus

What a week. The 10-year treasury bond yield hit an all-time low of 1.15% this week, and the Dow is on track for one of the steepest weekly sell-offs in its 124-year history. Conventional wisdom is suggesting that investors are fearful of the coronavirus spreading into a worldwide pandemic. The implications of that could be economically disastrous. Goldman Sachs yesterday warned investors that the virus may bring corporate earnings growth to zero in 2020. Goldman’s strategist David Kostin said that “a more severe pandemic could lead to a more prolonged disruption and a U.S. recession.”

However, a few investors are citing the rise of Bernie Sanders as a growing risk to the markets. The failure of a more moderate candidate to emerge from the crowded Democratic field is rattling markets. The loss of Bloomberg’s momentum and the surge in Sanders popularity is the main cause according to bond king, Jeffrey Gundlach of Double Line Capital. Gundlach has recently warned that Sanders could trigger a market correction and reiterated this sentiment on Wednesday. “If the stock market reversal is due exclusively to the virus, then why is United Healthcare down far more than SPX”, Gundlach wrote in an email to CNBC. “Why is the healthcare sector broadly not outperforming”, he continued. His answer is that the market is digesting a better than 50% chance of Bernie getting the nomination.

Traders are also now pricing in a better than 50-50 chance that the Fed cuts interest rates three times this year! Goldman predicted that the Fed could reduce interest rates by 75 basis points in the first half of 2020. It now appears that neither of these stories will end anytime soon. Interesting times.  

Edward M. Aloe
President and CEO
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U.S. inventory of homes for sale reaches record low

Supply shortage is choking the housing market and driving up prices

The inventory of entry-level homes saw the steepest drop in the series that goes back to 2012, the report said. The supply of properties priced under $200,000 fell 19%, while homes priced $200,000 to $750,000 declined 12%.
A supply shortage is choking the housing market, as evidenced by December’s 4.9% drop in pending home sales, the largest in almost a decade, according to the National Association of Realtors.

Record number of renters believe renting is more affordable than owning

42% of renters pay more than a third of their household income on rent

A whopping 84% of renters said they believe renting is more affordable than owning – an all-time high for the survey. For comparison, this number is up 17 percentage points from February 2018.
The survey also found that affordability issues affect the average renter more than a homeowner. Freddie Mac said there are 42% of renters who paid more than a third of their household income on rent.

There haven't been this few homes on the market since 2013

Supply crunch spurs January's home price uptick, bidding wars

In January, the active listings of homes for sale fell 11.4% year over year, marking the biggest drop since March 2013 and the sixth consecutive month of declines.
Not only were there fewer homes available for sale than any time since January 2013 but also none of the 85 largest metros tracked by Redfin posted a year-over-year increase in the count of seasonally adjusted active listings of homes for sale, according to the company.

On the lighter side....
About CALCAP Advisors
California Capital Real Estate Advisors, Inc., and its affiliate entities (CALCAP Asset Management I & II, CALCAP Properties, CALCAP Lending, and CALCAP Senior Healthcare I, collectively known as "CALCAP"), is a California based investment company founded and 2008 and headquartered in Pasadena, California. The Company sponsors alternative real estate investment opportunities focused on demographically driven housing. CALCAP has been able to consistently provide both individual and institutional investors with outstanding returns over the last 10 years. The Company's core strategies look to actively create alpha for investors while managing risk. CALCAP currently has over $300mm in Assets Under Management. To learn more visit
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CALCAP has created the CALCAP CARES program to encourage employees to find a way to give back to the neighborhoods where we invest. CALCAP has created "GiveTime4Autism" as its initial program which will allow employees the ability to donate unused vacation and sick days for a very worthy cause. 
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