The Fed announced its 0.75% interest rate increase in an attempt to quell inflation and set the U.S. economy back to a pre-pandemic equilibrium. I reported on the initial market reactions and speculated that the sentiment would turn sour as the reality of these new rates set in.

And here we stand. Thanks to a surge of volatility and bleak buying behavior, all major equities indexes took a tumble yesterday to obliterate Wednesday’s rally.

The Wall Street Journal Reports:

The S&P 500 fell around 3.5%, while the Dow Jones Industrial Average dropped 2.6% or almost 800 points. The Nasdaq Composite slumped 4.4% as shares of big tech companies retreated. If the Dow industrials close below 30000—it was recently a bit below that level—it would be the first time since January 2021.

Investors seem to have lost any illusions of a soft landing in terms of interest rate increases. It’s clear now that the central bank is intent on levying whatever rate hikes it can to slow the scourge of inflation. And with this campaign, the risk of recession is ever-present.

Historically, the Fed hasn’t been all that good at balancing the market. Since the ’80s, the U.S. has suffered recessions four of the last six times the Fed ran interest rate increases.

This time, as inflation runs rampant, we’re already seeing the cooling of economic activity. Residential construction fell off last month. Retail spending also slumped for the first time this year, while a gauge of consumer sentiment collapsed to its lowest level on record.

This trend of tightening the market is never really a great idea, but it seems we may be all out of options. Our biggest hope is to maintain the spending surpluses that carried us through COVID, even with increased pricing pressure from the government and an inflated economy.

As for the stock market, there’s no telling how far the indexes will fall. This is only the second bump in a summer of rate increases. Hopefully, the next few will remain around 0.5% but who knows? Fed Chair Jerome Powell has indicated that the increases will come in varying increments between 0.5% and 0.75%. Either the worst is over or the storm is yet to come. Let’s hold out for the former.

More Non-REIT News to Know About 

Elon Answers the Big Questions 

Yesterday was a big day for Elon Musk. The tech billionaire finally sat down with his new employee base to discuss his impending acquisition of Twitter (TWTR). In this meeting, the Tesla founder addressed issues ranging from content control to his position on layoffs.

The meeting ran for about 45 minutes and was moderated by Twitter Chief Marketing Officer Leslie Berland. It kicked off with questions about whether Musk would do another employee meet-and-greet, which he said he would.

In response to questions regarding the future of Twitter, Musk’s answers reflected his unique attitude toward the modern corporate climate and his eccentric extracurricular interests. In answer to whether he would be CEO, he said he doesn’t care for titles and explained his idyllic philosophy to extend the scope, scale, and lifespan of civilization as we know it.

Musk also quickly touched on the prospects of alien life. “I’ve seen no actual evidence for aliens… yet,” he told employees.

Asked about his position on free speech, Elon explained individuals should be allowed to say pretty shocking things within the law, but that doesn’t mean those things should get amplified. He distinguished between freedom of speech and freedom of reach, the people said.

The entrepreneur clearly remains committed to his purchase and it appears he may actually be making headway with its employees. The world awaits his next move.

The World According to REITs 

Cannabis REITs Grow In Texas 

Austin, Texas has long been a mecca for mind-expanding exploration. As the live music capital of the world, this not-so-small town attracts talent from all over the globe and even hosts one of the most renowned creative retreats of all time: South by Southwest.

With so much to offer, it’s no wonder that San Diego-based Innovative Industrial Properties (IIPR) is set to pay $22 million to acquire 25 acres of prime Austin hill country for a facility to produce medical cannabis.

IIP said in a news release that it’s putting an initial $12 million towards acquiring the land and will spend an additional $10 million when its construction company finishes building out a cultivation and production facility.

My question is how this will affect the local economy and influence the political landscape of Texas. As of now, even medical marijuana is banned in the Lone Star State. With a 25-acre cannabis factory sitting right in the heart of Texas, you have to wonder what kind of lobbyists will start popping up in the capital.

As for IIP, the stock took a bit of a hit yesterday along with pretty much everything else. It’s currently sitting at a $109.85 share price, down about 16% for the week. Still, I’m impressed with this one as it pulled in over $64 million last quarter representing a 50% increase year-over-year. And with this additional 25 acres of space, it’s on track for continued growth and increased returns as America slowly embraces cannabis culture.