Charging My Daughter Service Fees

2/15/23

Opening Comments

Exciting Super Bowl game, but disagree with the holding call which sealed the win for the Chiefs. Looks like there is a new sheriff in town, and he wears #15. I was underwhelmed by the Rhianna show, but thought the Chris Stapleton’s rendition of the National Anthem was epic and starts at 55 seconds in the link. Many states have legalized online gambling, and the result was a massive record in Super Bowl betting. Call me crazy, but I am concerned about the impact of all the legalized gambling and damage it will do to the families of those who become addicted. This short CNBC link highlights the Super Bowl related gambling.

My last note was called a “Trade to Remember,” if you missed it and like the markets, read just the story, as it is a good lesson about investing and taking a small loss rather than a big one.

• Video of the Day-Speed Round Market Questions from my Panel

• Charging My Daughter Service Fees

• Quick Bites

  • Markets

  • Bond/Equity Markets Telling Us Different Things

  • Economic Data-CPI/Retail Sales-Good Charts

  • ChatGPT Bias

  • Balloons Everywhere

• Other Headlines

• Real Estate

  • Ken Griffin Inspires Work From the Beach

  • Remote Work Costs NYC $12bn

• Other R/E Headlines

• Virus/Vaccine

Video of the Day Speed Round Market Questions from my Panel

I moderated a panel for Prometheus last week with fund managers Kyle Bass, Jordi Visser and Robert Mullin. I ended the panel with a Speed Round asking questions:

Is Crypto Dead? Does Fed Cut in 2023? Full-Year S&P 500 Return? 10-Year Treasury at year-end, Average Oil Price for 2023? When do EV sales surpass ICE vehicles? Most Exciting New Technology? Is Putin in Power at end of 2023? Presidential Candidates in 2024 and much more.

The link to the video is in the picture below.

Charging My Daughter Service Fees

My daughter, Julia, has been babysitting lately.  It is quite shocking what the going rate is for a 15-year-old to babysit today.  I sound like I am 90, but when I baby sat, I made $2-hour when I was 15.  Julia gets $23-32/hr depending on family, time, day, kids ages….

A few weeks ago, she babysat for a lovely family with two children.  I dropped her off and picked her up less than 1 mile from our home. The parents did not have cash and asked if they could Venmo me.  “Of course,” I said and immediately, the money showed in my account.

The total was $120 for the night. Julia asked me, “Dad, how much money did I make tonight?”

I replied, “It’s complicated.”  She looked at me awkwardly, not comprehending the bomb I was getting ready to drop.

“Well, Julia, you were paid $120 for the night, but all the money is not yours.”  All she heard was $120 and was happy. Then she realized some strings were attached.

“Julia, I had to drop you off and pick you up from your job. An Uber each way with tips would have been $12, and you would have had wait time.  Then, there is the service fee for turning your hard earned money into cash. That is another $30. Let’s not forget resort fees…” She had no idea about resort fees which are incredibly frustrating when you are at a hotel which is not even a resort. Actually, President Biden mentioned “Junk Fees” in his State of the Union and specifically plans to ban resort fees.

Julia quickly was upset and did not want to hear dad charging her exorbitant fees for her to babysit. When we got home, I gave her $40 and told her the rest went to fees.  That did not go over so well, but she know understands the cost of doing business.

She got the full $120 in the end, much to my chagrin, but I hope the lesson on fees helped for her to be more cognizant of them. They are everywhere.

Quick Bites

• Stocks ticked higher Wednesday as traders mulled what strong retail sales along with the latest U.S. inflation data mean for the Federal Reserve’s interest rate hiking campaign. The Dow gained 39 points, or 0.11%, rallying more than 250 points from its intraday low to close at 34,128. The S&P 500 ticked up 0.25% to 4,148, lifted by shares of SolarEdge and Generac, which gained 9.05% and 8%, respectively. The Nasdaq rose 0.92% to 12,071, boosted by shares of Airbnb, which surged 13.4% after beating earnings expectations. Gains in Tesla, Rivian and Lucid also helped lead the tech-heavy index higher. Oil market steadied around $79/barrel.

  • This data is from Factset as of 2/13. “To date, 69% of the companies in the S&P 500 have reported earnings for the fourth quarter. Of these companies, 69% have reported actual EPS above the mean EPS estimate, which is below the 5-year average of 77% and below the 10-year average of 73%. In aggregate, earnings have exceeded estimates by 1.1%, which is also below the 5-year average of 8.6% and below the 10-year average of 6.4%.” Earnings are not remarkable, but the markets are trading as though earnings are amazing and rates are not going to stay elevated relative to the past decade. The divergence between the equity markets and bond markets is concerning for me. Marko Kolanovic outlined his views today and suggests the recent moves in bonds should have resulted in a 5-10% equity market sell-off in the Nasdaq, but instead it is +3%. Marko believes the risk/reward in the bond market relative to equities is better than any time since the GFC and I agree.

    

• Inflation rose in January by 0.5% following a 0.1% increase in December, according to the consumer price index report released Tuesday. The CPI was up 6.4% from the same period in 2022. Both numbers were higher than expected. Across-the-board increases in shelter, food and energy boosted the index after inflation had shown signs of receding in recent months. Wednesday Retail Sales came out at +3% in January vs expectations of +1.9%. Food service and drinking places, motor vehicle and parts dealers, and furniture stores led the sales increases. The consumer is wounded with record credit card balances, higher rates and crashing savings, but this dats shows shocking resiliency. How long can it last? Check out the Bloomberg chart which shows 1 month and 1 year changes across the curve. Note the 6 month yielding 5%. We have seen a sharp increase in yields across the curve since the hot payroll data a few weeks ago. I have been surprised by the resiliency of stocks given the inflationary data and the policy the Fed will take to tame it. There are real alternatives to stocks now and for me, I am liking Treasuries and the yield there. I question the Forward PE of 18.3x as sustainable with rates where they are today.

• I have written extensively on ChatGPT and was early on it thanks to a reader educating me. I am growing frustrated with the “woke’ nature of ChatGPT and believe it must be addressed. The more time I spend on it the less excited I am, given the insane bias in the system. I do believe in the technology, but these AI models must become more independent and less woke in my opinion. There are too many examples to name, but here are a couple. ChatGPT won’t write a poem about Trump’s positive attributes, but when asked to do so on Biden, as “a leader with a heart so true.” When asked to write a story about Hunter Biden’s laptop it responded, “I cannot generate content that is designed to be inflammatory or biased.” Given the incredible liberal bias of social media, media and Google, I was hoping to have AI unbiased. I believe AI is a massive game-changer, and the ramifications are huge over the next 5-10 years, but am disappointed with the opening salvo. Also, about 50% of the time I go on ChatGPT, it is at capacity. Separately, Musk warned AI is “one of the biggest risks” to civilization.

  

• The balloon saga has escalated with a vengeance. Now China claims US balloons flew over its airspace 10 times in the past year. The other balloons which the US shot down bring up more questions than answers. It is unclear who is behind them, but Canadian Retired Maj. Gen. Scott Clancy, former director of operations at NORAD and former deputy commander of the Alaskan NORAD Region, said on Monday he does not believe China is behind the unidentified objects that have been shot down in recent days. This story suggests non-Chinese US adversaries may have launched the recent objects. Plots who were engaged suggest that the balloons “interfered with sensors.” Also concerning was USAF General Glen VanHerck: “I am unable to categorize how they are able to stay aloft.. We’re calling them objects, not balloons for a reason.” I believe we need some transparency on this topic which is getting concerning. These Are the $439,000 Missiles the US Is Using to Shoot Down Mystery UFOs. They could not use cheaper bullets/missiles?

Other Headlines

• El-Erian, Rogoff Say It’s Too Late to Fix Too-Low Inflation Target

  • They both see higher US interest rates for some time to come

  • ‘Higher real rates mean lower asset prices,’ says Rogoff

• U.S. will default on its debt between July and September if Congress doesn’t raise debt ceiling, CBO says

  • The CBO is not exactly accurate at making predictions.

• There’s a new inflation warning for consumers coming from the supply chain

• Coca-Cola revenue rises in fourth quarter, fueled by higher prices

• Airbnb beats on profit and revenue, stock is up +9%

• Ford sets EV battery factory plan with China's CATL

  • $3.5bn plant and Ford will own it and will have a licensing agreement with CATL. Plant opens in 2026 and will employ 2,500.

• Biden taps Fed’s Brainard, Bernstein for top economic jobs as part of White House reshuffle

  • This leaves an open spot on the Federal Reserve. Hey Powell, I am available, but would not have let you leave rates at zero and continue QE for as long as you did.

• Top Republican calls for investigation of Secret Service's 'bizarre' actions to help Hunter Biden

• Dianne Feinstein, 89, won’t seek re-election, opening up a California Senate seat in 2024

  • Term and age limits please. Thank you for your service. You should have

    retired years ago.

• Who should lead? Democrats, Republicans struggle to decide

  • Seems neither party is too fired up about Biden or Trump.

• Appeals court upholds $110,000 contempt fine for Trump in New York attorney general case

• Nikki Haley's 2024 presidential bid receives mixed reactions

• Ukraine plots post-war rebuilding effort with JPMorgan Chase as economic advisor

  • “The full resources of JPMorgan Chase are available to Ukraine as it charts its post-conflict path to growth,” CEO Jamie Dimon said in a statement.

• Jeff Bezos Asked an Amazon Candidate Two Questions, Then Hired Her on the Spot as One of His Assistants

  • I loved the questions and the answers. There is a reason Bezos has changed the world. As an aside, my wife ordered something on Amazon at 9:30am and the site suggested delivery between 10am-1pm (SAME DAY). How the hell is that possible? Do they have someone outside our home anticipating what we might order?

• $500 a Month, No Strings: Chicago Experiments With a Guaranteed Income

• Teens feel hopeless, suicidal more than ever, CDC warns

  • VERY concerning data around high school students. The data around girls is worse than the average. If the girls identify as LBTGQ the data is even worse. This related article is entitled, “The internet is destroying our kids — shocking new CDC teen report the latest proof,” and I agree. Also, this article suggests 14% of high school students have been forced into sex without consent. Shocking. Good charts in these articles.

    

• NYC saw record levels of felony crimes last year, most in over 15 years

• 'He's crazy:' Family of crazed NYC U-Haul driver Weng Sor speaks out

  • Multiple arrests. System failed us again.

• MSU shooting: Gunman dead after killing 3 and critically wounding 5 in another US mass shooting

  • The shooter had a felony weapon charge dropped in 2019. System failed yet again. Soft-on-crime policies hurt the innocent.

• Taylor Swift is the highest paid female entertainer in the world, earning $92 million in 2022

• Dry clean your clothes in this climate startup’s vending machine

  

• ‘On-demand’ male birth control: Contraceptive pill taken just before intercourse prevents pregnancy

  • The team at Weill Cornell Medicine in New York is hailing the breakthrough as a potential “gamechanger” for preventing unwanted pregnancies.

• Study finds link between ‘free sugar’ intake and cardiovascular disease

  By Kristen Rogers, CNN

• Digital video viewing to top traditional TV in US

  • Wow.

• They can shoot down the UFOs, but they can't shoot down our hopes of meeting aliens

  • Fun NPR story about the hopes of finding aliens. The 27-second White House video is pretty funny. I continue to hold out hope of being abducted by aliens at some point.

• California Reservoirs Refilled by Winter Deluges, Satellite Images Show

  • Lake Oroville is at 69% capacity and was at 28% in November. Lake Shasta is at 58% capacity and was 31% in November.

    

• Death toll in Turkey and Syria earthquake tops 41,000 as UN says rescue phase is coming to a close

Real Estate

• Interesting Bloomberg article entitled, “Ken Griffin's Miami Move Inspires Investors Who Want to Work From the Beach.” According to the piece, finance professionals from all over the world would like to follow in Ken’s footsteps. Florida tops the investor list of where they could work from anywhere globally. I moved to South Florida 5.5 years ago and the area has changed a great deal. Many aspects of the change are positive (younger families relocating, smart/successful people are moving down, more jobs in finance and tech, better restaurants…). However, not all is positive. South Florida, specifically Miami, lacks the infrastructure (housing, roads, public transportation, schools, doctors, golf courses…) to handle the flow of families and wealth. Do not buy a home without getting your kids into a school first, which is easier said than done today. There is a related article by the Guardian entitled, “Lake Tahoe has a people problem: how a resort town became unlivable.” Having been there a dozen times and considered buying a vacation home at Martis Camp, I can tell you that things have changed drastically. The new work arrangements have put pressure on various cities and towns and they lack the infrastructure to handle the sharp increases in people. I can only talk about my personal experience and I can tell you that the people I meet in South Florida today are young, uber successful and coming from NY, NJ, CT, IL, CA primarily. They are Wall Street, venture, private equity, tech, entrepreneurs… It is hard to surprise me, but I am shocked at the caliber and wealth that has moved to South Florida.

  

  • In a related article, “US Residents Flocking to Florida Send Rent and Home Prices Soaring,” it outlines Florida population growth, real estate pricing and the firms moving down.

  • Another interesting Bloomberg article is entitled, “America's Priciest Neighborhoods Are Changing as the Ultra-Rich Move to Florida.”

    • Article calls Star Island the priciest neighborhood in America with a typical home at $40mm. up from $23.5mm in December 2019. Note, 9 out of 12 neighborhoods are in South Florida on the most expensive list. I would guess it would have been maybe 1 on the list 5 years ago from South Florida.

      

• This Bloomberg article is the other side of the prior one. It is entitled, “Remote Work Costs NYC $12 Billion a Year By Killing Big Offices” Check out the chart which shows how Manhattan spending peaks on Wednesday (Mastercard data) and falls sharply on Monday and Friday. Think of the ramifications to retailers, restaurants, and other services with far less traffic. In speaking with R/E people, the suggestion is that these new traffic patterns are killing retailers. Bankers, lawyers and other executives who expense black car rides to their New York City offices have also rejiggered their commuting schedules to focus on Tuesdays, Wednesdays and Thursdays, according to data from HQ Corporate Mobility, which works with Fortune 500 companies to book, bill and expense cars.

  From June to December 2022, rides taken on Mondays and Fridays reached only around 33% and 38% of pre-pandemic levels, respectively, according to HQ data of about 400,000 rides over the last three years.

Other R/E Headlines

• Brookfield’s Downtown Los Angeles Office REIT Defaults on Office Tower Loans

  • One loan was on 555 @ 5th Street (Gas Company Tower and was $465mm and the other was 777 S Figueroa Street for $318mm. Expect a lot more of these office defaults in 2023/24.

• The 15 U.S. cities where home prices are growing the fastest — none are in New York or California

  • Six of the cities are in Florida.

• San Francisco looks like a deflating Pandemic Housing Bubble—while housing markets in New York and Chicago remain stable

Virus/Vaccine

• Face masks made “little to no difference” in preventing spread of COVID, scientific review finds.