What’s Lichtenfeld’s “#1 IRM” Housing Crisis Stock Pick?

Marc Lichtenfeld has made a new prediction regarding the U.S. housing market and, in the presentation, teased his number one “IRM” (aka “interest rate multiplier”) stock, which he suggests could help investors “beat” the housing crisis he’s predicting.

In short, it was all part of a pitch for his Oxford Income Letter service ($49).

So the only way to know what he’s teasing (for sure) would be to join that service and see his report called “Unlimited Income: Beat the Housing Crisis With My #1 IRM Play.”

But in this post, I’ll show you what I think it is based on the clues he shared.

Let’s start by unpacking Lichtenfeld’s real estate prediction. Then, I’ll break down what he said about his “IRM” pick and show you what company looks like a match.

Marc Lichtenfeld’s Real Estate Prediction: “The 2022 Housing Crisis Will Be Worse Than 2008”

Marc Lichtenfeld’s latest Oxford Club presentation is a pretty ominous one.

In short, he believes that the “U.S. housing market is about to go up in flames” and that it’ll be “even worse” than what happened in 2008.

“Last year, I issued two major warnings to our Members.

“First, I told them that inflation could go over 8% and that energy prices would spike.”

[…]

“Now I’m coming to you with a third – and much more important – prediction.

“The U.S. housing market is about to go up in flames.

“Your home could lose as much as half of its value – or MORE…”

[…]

“We are now on the verge of another major housing crisis just like the one in 2008… only this time, it’s set up to be even worse.”

Source: https://pro.oxfordclub.com/p/HOUSINGTO79BRKLT2YRDSCLOCLOLTTOT/EBRKYAAR

I’ve seen so many different presentations over the years that I don’t tend to get too concerned (or excited) by stock teaser pitches anymore.

For the most part, it’s just marketing.

What these “gurus” do is come up with different marketing angles to pitch their newsletters. Sometimes they appeal to our greed, and other times – our fear.

Still, that doesn’t mean he’s wrong. And I was curious to know what his prediction was all about, so I looked into it further.

What’s got him so bearish?

I can’t speak for Lichtenfeld but based on what he said in the presentation, his main concerns are that both home prices and interest rates are elevated.

He likens the situation to 2008, but this time, he believes that things could get much worse.

In the presentation, Lichtenfeld talked about how the average home price has almost doubled since before the 2008 financial crisis. And he believes that at “some point,” we will see a “dramatic crash” in prices.

This, according to Lichtenfeld, is all part of what he refers to as “Phase 1.”

“Right now, Phase 1 of Housing Crisis 2022 is taking shape.

“Housing prices have reached screaming highs… record highs, to be exact.

“The average home price in 2022 is closing in on a RECORD half-million dollars.

“That’s $500,000! For an AVERAGE home… that’s nearly DOUBLE the price of an average home before the 2008 crisis.

“That’s crazy!”

[…]

“Housing prices don’t go up forever.

“When they reach record heights…

“At some point, you WILL see a dramatic crash, like a rubber band snapping back.

“The snapback is starting to happen NOW.

“Prices are already weakening…”

Another part of Lichtenfeld’s prediction relates to the Fed raising rates, which, as he points out, puts upward pressure on mortgage rates. And when that happens, fewer people can afford to buy, which puts downward pressure on prices.

“And with the Fed aggressively raising rates to combat inflation… causing a spike in mortgage rates…

“We’re already seeing the housing market stumble.

“Almost HALF of sellers are dropping their prices in hot markets…

“And two-thirds of all housing markets are considered ‘overvalued.'”

[…]

“The Fed is jacking up rates every time it can.

“And in order to stop inflation, which is double what it was before the 2008 crisis… it is going to have to take rates much higher much faster than it did before.”

[…]

“As mortgage rates go higher… we could see an absolute free fall in home prices.”

According to Lichtenfeld, “all of this could begin” on October 19. This, he believes, could be when “the crash” phase of his prediction begins.

“And I’ve pinpointed an exact date all of this could begin: October 19.

“My research leads me to believe this is when the next phase – the crash – could start.

“We are on the verge of Housing Crisis 2022… and it’s not going to be pretty.”

[…]

“When Phase 1 ends on October 19… that’s when I’m predicting the house of cards will really begin to collapse.”

I would suggest taking that “October 19” date with a grain of salt, though.

I guess there’s a chance that something important could happen on that date, but Lichtenfeld never elaborated on this in the presentation.

And knowing how these pitches tend to work, I’m willing to bet that this date was mostly added to create a sense of urgency in order to sell more newsletters.

In any case, one last aspect of Lichtenfeld’s thesis is that a “huge portion” of stocks “will be in trouble” should his prediction unfold.

In particular, he believes that “highly leveraged growth and tech stocks” will see further drawdowns, as will homebuilder stocks.

“I believe a HUGE portion of stocks will be in trouble.

“I’m looking to avoid any stocks with outrageously high debt, and I recommend you do so too. Higher interest rates mean higher payments for companies with debt.”

[…]

“Highly leveraged growth and tech stocks – which have already taken a beating this year – will continue stumbling… as will homebuilder stocks. Obviously.”

What’s he recommending, then?

Lichtenfeld teased three separate research reports in the presentation, which each go into detail about exactly what he’s recommending.

  • “The Top 5 Ticking Time Bombs to DUMP”
  • “The Top 3 Plays to Thrive in Housing Crisis 2022”
  • “Unlimited Income: Beat the Housing Crisis With My #1 IRM Play”

As mentioned, the only way to know what they are would be to join his paid Oxford Income Letter service, but he did reveal one stock to “avoid during Housing Crisis 2022” for free.

Here’s what he said about that:

“Here’s the #1 stock you must absolutely avoid during Housing Crisis 2022. Are you ready? Make sure you write this down somewhere important:

“Redfin (Nasdaq: RDFN).

“It’s a discount real estate brokerage company, which is not the type of stock you want to own right now.”

Lichtenfeld also shared several hints about his “#1 IRM play.”

So let’s dig into that now.

Lichtenfeld’s “#1 IRM Play” Pick Revealed

Until now, I’d never heard of an “IRM” stock, which is probably because it’s not an actual type of stock… it’s something Marc Lichtenfeld essentially made up for the presentation.

Nevertheless, IRM stands for “interest rate multiplier.”

And while I can only speculate as to why Lichtenfeld refers to the company he’s recommending as an interest rate multiplier, it seems to relate to his claim that as interest rates rise, “this investment stands to pay shareholders even more.”

Here’s how Lichtenfeld puts it:

“The next step is to take a position in my top interest rate multiplier (IRM) play.”

[…]

“My #1 IRM play offers one of the BIGGEST income payouts on the market.

“Better yet, it has actually been increasing this payout since 2020, even through all this recent volatility.”

[…]

“Let me repeat that: As interest rates rise… this investment stands to pay shareholders even more.

“That’s important because the increases in interest rates are still coming… and the rest of the stock market is going to react poorly to it.

“Best of all? You can grab a stake for under $20.”

What else did he say?

According to Lichtenfeld, IRMs are “not normal stocks.”

Instead, he says they are a “special kind of business” that invests in small companies.

He also says they are “required by law” to pay 90% of their taxable income to shareholders

“They’re a special kind of business that invests in small, innovative companies that need the funding…

“Giving them the capital they need to keep growing.

“In return, IRM companies collect interest on their investments… often at a premium because of the stricter lending standards I mentioned.

“And every time interest rates go up, the potential income for my #1 IRM increases dramatically.”

[…]

“IRM companies are not normal stocks.

“Rather, they are designed specifically to hand you huge profits.

“In fact, IRM companies collect interest and then are required BY LAW to pay 90% of their taxable income to shareholders.”

That last clue initially led me to think he was teasing a REIT (Real Estate Investment Trust), given they are required to pay out 90% or more of their taxable profits to shareholders via dividends. But given his real estate prediction, that doesn’t make sense.

And after looking further into Lichtenfeld’s clues, it seems that what he’s actually referring to here is a Business Development Company (BDC).

What’s that? As Investopedia puts it, a BDC is an organization that invests in small- and medium-sized companies (along with distressed companies). And according to Investopedia, BDCs “must distribute over 90% of their profits to shareholders.”

So, Lichtenfeld’s IRM pick appears to be a BDC.

As for what particular BDC he’s referring to, here’s a summary of the remaining clues:

“… my #1 IRM play pays around a 10% yield… more than five times the income of the S&P 500.”

[…]

“Word is starting to trickle out.

“In fact, Seeking Alpha just put out a report on this specific IRM, calling it ‘a compelling investment opportunity’…

“And saying this ‘company is generating cash, lots of it.’

“It even says directly, ‘Rising interest rates are positively affecting this company’s performance.'”

The above Seeking Alpha clues Lichtenfeld shared made this one pretty easy to solve.

A quick Google search revealed that the Seeking Alpha article Lichtenfeld was referring to centers around a company called Ares Capital Corporation (ARCC).

Ares Capital, which is a subsidiary of Ares Management, is a New York-based firm that was founded in 2004. And I believe this is Lichtenfeld’s pick.

Why?

  • Because aside from the Seeking Alpha clue matching, Ares Capital is a Business Development Company (BDC) that invests in private companies in numerous sectors. So what the company does and how it works seems to line up with what Lichtenfeld discussed in the presentation.
  • Second, the company’s stock price is currently “under $20,” as Lichtenfeld said.
  • And third, its current dividend yield is just under 10% as of writing, which matches his “pays around a 10% yield” clue.
Ares Capital Corporation stock chart from Google search.
Source: https://www.google.com/search?q=ares+capital+dividend

As you can see from the above chart, this company’s stock has pretty much traded sideways since 2004, but the dividend yield is above average.

I am not in the business of giving stock tips, so I’ll let you decide if you think Ares Capital is a good investment or not.

But this is the company that seems to best match Lichtenfeld’s clues.

Bottom Line

It’s not hard to see why some stock pickers are bearish on real estate.

I mean, all you need to do is reflect on the mad rush into real estate we saw in 2020 when interest rates were low and look at what the Fed has done this year (raised rates to levels that have substantially increased the average monthly repayment on variable rate loans).

What’s more, the Fed has vowed to continue fighting inflation, which means that, short of a pivot, rates are likely to continue rising until they’ve reached their goal.

Still, no one has a crystal ball.

So there is no way of knowing if we will see a repeat of 2008 or not. And even IF the scenario that Lichtenfeld is predicting does occur… who knows when it’ll happen?

The general consensus seems to be that real estate is headed for a decline, but there are varying opinions as to how bad this might get and when prices could drop.

Nevertheless, at least now we know what company Lichtenfeld is most likely teasing, so if you agree with my findings then you don’t have to join the service just to find out.

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