Opening Comments
I am seeing more signups recently and I am happy to see more new women readers. I am back in Florida as of Sunday, July 2nd, and hopefully off to the Bahamas to fish Monday, so no report on Wednesday absent an early return or a canceled trip. I took a 5:40 am flight this morning out of Islip, which is a story for another day. Note to self, there is a reason to leave Florida in the summer. I am melting. If you move down, November thru May is ideal if you can pull it off.
I have been battling tendonitis in my left bicep for 5 months and the pain has been unbearable. I took a heavy dose of Prednisone to help with the inflammation. I am hopeful it brings it under control, but the side effect is I barely close my eyes at night.
As a reminder, readers help by sending me story ideas or topics of interest. I am getting many hundreds on a slow week and up to 1,000 on a busy one. Keep them coming, as about 1/3 of the topics covered are generated by readers. As a reminder, you need to hit “View Entire Message” on some servers, especially Gmail to see the entire newsletter.
Markets
State Budget Deficits and Tax Receipts-GREAT CHARTS
SCOTUS on College Admissions
Paycut to Keep the Job You Love
High-end Residential Transaction Examples in Miami & Boca
LA Office Building for 50% off 2016 Price
Hamptons Retail Boom
Pictures of the Day-Interesting Charts
A few charts are below. The first shows credit card delinquencies rising after a sharp fall due to the pandemic free money giveaways. The second chart is from a Bloomberg article entitled, “US Consumers Lose Steam, Setting Economy Up for Slowdown While Cooling Inflation,“ and shows inflation receding and personal consumption stalling. The third picture is a concerning chart comparing adult milestones over time. Most notably, home ownership for 30-year-olds went from 53% in 1982 to 33% in 2022 (far right on chart). The next chart is the personal savings rate which has plummeted (33% to 4%) since all the government money due to COVID. The last chart is M&A revenue Year over Year and note it is down sharply for the Investment Banks (WSJ).
Poop Shake
Jack was about four years old and went to nursery school on the Upper East Side three days a week. At the time, I was making a lot of protein shakes in our Greenwich Village apartment. I used frozen fruit, some almond milk, and a little yogurt and threw it in a blender with protein powder. My son loved chocolate chips at the time. While I was making a shake, I took one out of the bag and asked Jack, “What is this?”
He said, “Daddy, it looks like poop.” The kid was not wrong, it kind of does look like poop. So our daily shakes had a name, “Poop Shake,” given the one chocolate chip he would drop in the shake in the end as the pièce de résistance. He would sit on the counter as I blended it and excitedly drop the chocolate chip on top.
I did not think much of the near-daily ritual other than it was fun and Jack liked to drop the “poop,” I mean chocolate chip, into the shake.
Back to Jack’s school. Apparently, the teachers had a little game where they asked kids their favorite food in front of the entire class. Lots of kids said, “Pizza, pasta, hamburgers, fries, ice cream, cookies…” My son, in his infinite wisdom, said, “Poop Shake.” When the teachers asked more questions, my boy stayed the course and continued telling the Temple Emanu-El nursery school faculty that his dad makes “Milkshakes with real poop.” Kids were confused and teachers were concerned.
I received a call from the teacher asking when I can come in to have a discussion. I assumed it was because Jack did something wrong in class. I asked Jack about school to help me prepare for the meeting, thinking he would tell me he got in trouble. Nope, Jack was all good and had nothing to report. It is not uncommon for kids to suggest nothing happened at school. How many times have my wife and I asked, “What happened in school today,” and a blank stare with the comment, “Nothing” happens, often, even in high school? The tuition sure does not suggest nothing is happening at school.
I went to school the next day to pick Jack up to have the proper discussion with the teachers, and truth be told I was worried. They asked for me and not my wife, which I thought was strange. Could it be my vulgar mouth where he repeated one of the 237 swear words I had uttered? At times, I have been known to make up fantastic new curse words by stringing together old ones or merely creating my own. It is a talent and core competency of mine that is unmatched on a global level. Instead, the teacher’s question caught me off guard. “Can you tell me about your son eating poop shakes and exactly what is in them,” she asked.
I tried not to laugh, but it was very challenging to keep a straight face. I then had to explain that it was not real poop, but a chocolate chip that Jack thinks looks like poop that was in a milkshake. The teachers nearly wet their pants they were so happy and found the whole misunderstanding quite funny. In the meantime, I could see the cover of the NY Post in my mind, “Wall Street Executive Forces Son to Eat Poop.”
We all had a good laugh and I had forgotten about the story until Jack, and I went for ice cream and he ordered chocolate chip and that sparked my memory. There was a show called, “Kids Say the Darndest Things,” and I am here to tell you they actually do.
Today, Jack makes his own protein shakes as part of his weight gain program as he is now well over 6’ and trying to put on muscle to hit the ball longer. He periodically adds some “poop” for old-time’s sake.
Quick Bites
Stocks rose Friday and technology stocks continued their staggering run as Wall Street looked to cap off a breathtaking first half on a positive note. The Dow gained 285 points or 0.8%. The S&P 500 climbed 1.2%, and the Nasdaq advanced nearly 1.5%. Mega-cap technology stocks are responsible for a sizeable chunk of 2023′s market gains that rose Friday. Dominant artificial intelligence chipmaker Nvidia jumped nearly 4%, bringing its yearly gains to 189%. Meta Platforms, Microsoft, and Netflix added about 2%. Apple added 2.3% to trade above a $3 trillion market cap. The three major averages also notched winning weeks, gaining more than 2% each. For the year to date and the first half: The S&P 500 popped 15.9% for its best first half since 2019. The Nasdaq surged 31.7%, for its best first half since 1983. The 30-stock Dow added a modest gain of 3.8%. What an amazing first half of the year. The market performance has defied the odds and has been incredibly impressive. Earlier in the year, the market breadth was awful with just a handful of stocks outperforming, but we have seen more participation in recent weeks, yet the equal-weighted index is underperforming historical levels from a breadth perspective (see 3rd chart). The 2-year Treasury closed at 4.90% after starting the yar at 4.42%. This is a worse performance than I envisioned. The 10-year Treasury went from 3.87% to 3.84% on the year. Although oil closed above $70/barrel, it is -11% on the year. I felt we could see a bigger supply shock which could have led to a pop in prices which is yet to materialize. Higher rates and a slower Chinese recovery have both played a role. Bitcoin was a big outperformer YTD and is now +84%.
There are three different related articles in this bullet about state budgets, wealth migration and contribution by states to US GDP. California was highlighted for going from a $100bn surplus to a $32bn deficit. However, Florida and Texas are seeing improved conditions with revenue growth from sales taxes. “For the first time ever, six states in the South - Florida, Texas, Georgia, the Carolinas and Tennessee are contributing more to US GDP than the northeast corridor of Washington-New York-Boston…” Just in the past few years, there has been a $160B swing in income between these two groups (South + $100B, NE - $60B). Thanks to a flood of transplants during the pandemic, six southern states have been growing at breakneck speed - as approximately $100 billion in new income in 2020 and 2021 have begun to reshape the southern US. Since early 2020, the Southeast has accounted for more than 2/3 of all job growth in the US, nearly doubling its pre-pandemic share, and making it home to 10 of the 15 fastest-growing large cities in America. The numbers are startling and fear they continue to get worse. Yes, taxes play a part, but so does the quality of life, cost of living, bad policies on crime, homelessness, COVID mandates…Having just spent a week in NYC, I can tell you that the quality of life has deteriorated sharply since I left 6 years ago. Homeless everywhere, the city is filthy, people smoke weed all over the place, you feel far less safe on the streets and subway and when you go to a store like CVS you need to ask the manager to unlock the cabinets to buy almost anything. Wealthy people have choices, and they are deciding to move out of some major cities for good reason. These people generate a disproportionate amount of income tax and spend a great deal more than average generating sales taxes and creating jobs. I am concerned for some of the obvious states and cities and the “doom loop.” Which services will need to be cut or taxes raised to fund the mounting deficits? Amazing charts below show the story in pictures.
The Supreme Court ruled that the affirmative action admission policies of Harvard and the University of North Carolina, which gave weight to a would-be student’s race, are unconstitutional. The court’s majority opinion said that the schools’ affirmative action programs “unavoidably employ race in a negative manner, involve racial stereotyping, and lack meaningful end points.” “We have never permitted admissions programs to work in that way, and we will not do so today,” Roberts wrote, finding that the universities’ policies violated the equal protection clause of the Constitution’s 14th Amendment. The clause bars states from denying people equal protection under the law.” Chief Justice John Roberts said his opinion to strike down student-loan forgiveness doesn't mean the court opposes all relief. It just means Biden didn't have the authority to carry it out. Justice Sonia Sotomayor said in a dissent: “Today, this Court stands in the way and rolls back decades of precedent and momentous progress.” The data was so blatantly biased, I understand the court’s decision, but also realize the impact on diversity. You can find the data on line about how various ethnic groups were “scored” and it was biased. In April 2023, I wrote a piece entitled, “Kidney Donation and Perfect Scores May Not Be Enough to Get Your Kid into College.” This is a story of an Asian man who dreamed of Harvard and was rejected despite incredibly impressive credentials and decided to fight it and played a role in the case against college admissions bias. He felt affirmative action cost him his dream school and fought back. This story shows a Berkely Law professor compromised himself by saying the school uses 'unstated affirmative action:' 'I'm going to deny I said this.' Interestingly, military academies exempt from Supreme Court’s affirmative action ruling.
Sometimes even NFL stars prioritize happiness over money. Record-setting tight end Travis Kelce, for example, could make significantly more money by leaving the Kansas City Chiefs, he told Vanity Fair on Wednesday. But he’d rather be “underpaid,” because he loves his team. “The free market looks like fun until you go somewhere and you don’t win,” Kelce said. “I love winning.” Kelce’s average base salary is currently $14.3 million. This year, he’ll make $11.25 million, the 51st-highest salary in the NFL. But his managers and agents regularly tell him that he’s “underpaid,” he said. I think if you are happy at your firm or team and you feel you are treated fairly, you should be willing to take some discount. Tom Brady, Patrick Mahomes and others have taken less pay to insure the team can bring in strong players. I have worked at firms I loved and others which I thought were awful. I can tell you from personal experience, enjoying your job, team, firm… is worth a great deal. Yes, at some point, if the discount is too great, you need to leave, but it is hard to find a situation where you enjoy what you do and the people you do it with from my perspective. Although everyone has a price, I would far rather work for less and be happy with my team.
Other Headlines
A U.S. recession is coming this year, HSBC warns — with Europe to follow in 2024
The U.S. will enter a downturn in the fourth quarter, followed by a “year of contraction and a European recession in 2024,” according to HSBC Asset Management.
Goldman in talks to offload Apple credit card, savings products to American Express, source says
What a reversal by GS.
Nike posts first earnings miss in three years as lower margins hit sports apparel giant
Supreme Court strikes down Biden’s student loan forgiveness plan
Comer says overseas payments to Biden family could exceed $40M
I believe Americans have the right to the truth and not cover ups. The more I read on these related topics, the more concerned I have become. I just want facts and the government agencies with knowledge to share it. If there is nothing to it, even better.
Fetterman approaches Biden-level unpopularity in home state: poll
Let me get this right. Fetterman is clearly diminished, cannot speak properly, took months off for mental health just after becoming a Senator and wears baggy shorts and hoodies to important meetings with President Biden and people don’t support him? Hello voters, you knew of his issues during the debates when he could barely speak, yet you voted for him over a highly qualified doctor who went to Harvard and was president of his medical school class at another Ivy League, U Penn. In their home state, Fetterman has a HIGHER approval rating than President Biden. I am sorry folks, Biden cannot be the best the US has to offer the constituents. Remember, I feel the same about Trump. New blood please.
Prosecutors are prepared to hit Trump and his allies with new charges, sources say
Article suggests up to 45 new charges over and above the prior 37.
Republican Group Condemns DeSantis Over ‘Extreme’ and ‘Homophobic’ Ad
DeSantis has made some bad recent calls which are taking away from a once high flying candidate. He played too strong on abortion, Disney and now this advertisement.
Man with weapons and Jan. 6 warrant arrested after running toward Obamas' D.C. home
Beloved NYC doorman slashed near jugular saving disabled tenant from mugger
This was blocks from where I lived on the Upper East Side for years. Very scary.
Check out the pictures of the locks on ice cream. Is this any way to live?
The shoplifting epidemic taking over America with a $100B annual price tag
Not enough consequences for theft brings prices higher for everyone else.
Williams was not sent to prison due to the scary video which shows Ouedraogo as the aggressor. The video and Ouedraogo’s behavior and comments are quite concerning.
8-year-old beaten to death by martial arts instructor
Happened in China on the boy’s first day of training. How disgusting.
France 'civil war' fears as 45k police scrambled – nation faces all-out anarchy
Police shot an unarmed 17-year-old boy which was caught on video and started the mayhem. Thousands of rioters have been arrested and hundreds of cops have been injured. A Paris suburb mayor’s home was ram-raided and set afire while his wife and children were alseep during the riots.
Homeless encampment takes over two-mile stretch of Hollywood
Check out the pictures.
Giant kites could pull ships across the ocean – and slash their carbon emissions
Extreme Pride in Being American Remains Near Record Low
The No. 1 number to calculate if you want to be rich, says millionaire: 'Very few people' know it
I am 100% in agreement with this approach and have done it EVERY year for 25 or more years. Know your income and expenses and where you spend money.
'Microscopic' Louis Vuitton-style handbag sells for over $63K: 'Smaller than a grain of salt'
Fire tears through newly refurbished Tiffany building on Manhattan's Fifth Avenue
Aspartame sweetener to be declared possible cancer risk by WHO, say reports
I am convinced my mother’s 2 liter/day Diet Coke habit contributed to her cancer.
Talk therapy? AI may detect 'earliest symptoms' of dementia by analyzing speech patterns
Great call by the doctor. Good pictures to show you what should be concerning marks on your skin.
Taking vitamin D supplements linked to better chance of avoiding heart attacks
It is one of the supplements I take daily.
Salvaged debris from Titan submersible contains 'presumed human remains'
Real Estate
Some South Florida recent residential transactions. The founder of HIG just bought a 28,000-square-foot lot on Sunset Island in Miami Beach for $25mm. The lot does not have amazing views I am told, and faces back towards the homes on North Bay Road. I believe he already owns multiple lots on the island. The neighborhood is very desirable. Also in Miami Beach, a lower North Bay Road teardown sold for $22.9mm on a 27,000 ft lot. Those lots do not have the views that the 40s and 40s streets have behind the home. On LaGorce Island, a home sold for $20mm after the seller rejected a $22mm offer in October. A 20,000 ft lot on Allison Island sold for $17.5mm (tear down house). At Shell Bay in Hallandale Beach, approximately 30 of the 108 condos have sold. Most of the units have sold between $4-5mm and some as much as $6-8mm. The course opens in early October and prices will increase in conjunction with that event. The last people to join the course paid $1mm, but it going up to $1.3mm shortly with dues of $45k. I believe over a dozen joined at $1mm and there are now over 175 members. These fees for golf in South Florida were impossible pre-pandemic. Devin Kay has sold almost all the units at Shell Bay. In Royal Palm in Boca Raton, a house on the Intracoastal of approximately 2.5 lots or .83 acres sold for $28.5mm. It had over 300 feet of water frontage, but was likely a teardown or needs a lot of work. For perspective a better lot (teardown house) on 1.25 acres sold for $10mm in September of 2018. I think the $28.5mm price point is challenging in Boca. Not nearly as many buyers in the $30-50mm range in Boca relative to Miami or Palm Beach. Buying land for $28mm and spending 2 years and another $12mm to build puts you in at too high of a price point from my perspective. I would not recommend spending that much money in Boca, as I fear it will be very challenging to get you money out of it. Just not enough buyers at those prices.
Another building in Downtown LA sold at 50% of the 2016 sale price and UCLA was the buyer for additional classrooms. The university announced Thursday it acquired the historic Trust Building for new classrooms and administration offices. UCLA did not disclose the sales price, but sources told the L.A. Times the deal came in at less than $40 million. Rising Realty and Lionstone Investments acquired the 11-story, 334,000-square-foot building at 433 Spring Street in June 2016 for $80.4 million, property records show. Additionally, Rising Realty, which is headquartered in the building, recently performed an estimated $40 million makeover, per the Times. The building is almost completely vacant. Given the money spent upgrading the building, the effective sale price is approximately 1/3 of the price paid in 2016. Many more of these discounted sales to come in many major cities.
My first trip to the Hamptons was 1994 and happen to be here while I am writing this bullet point. It has become so crowded and the nature of retail has changed. This Bloomberg article highlights rental prices being MORE than high end Madison Avenue in NYC in some instances. Historically, the Hamptons were a 3-4 month seasonal destination but the pandemic changed that a bit. The article suggests a building in East Hampton was $4k/foot compared to Madison Avenue (49-60th) which is $2k/foot. The article lists 16 stores to shop in the Hamptons including: Channel, Curio, Louis Vuitton, Simkhai, Reformation and others. Please don’t get me started on the traffic or lack of cell service in the Hamptons.
Poop Shake 🤣💩🪇