Perspective

7-9-23

Opening Comments

I hope everyone had a good July 4th holiday and was safe from the crazy world we live in today. In a rare occurrence, I did not publish on Wednesday as I was fishing in the Bahamas. I have missed 5 newsletters in 2.5 years, so I am consistent with my writing which can be found on Substack dating back to April of 2021.

My last note, “Poop Shake,” got a nice response and some laughs. The most opened link by far was: Here’s the one number to calculate if you want to be rich, says millionaire—‘very few people’ know it.

Yes, I made it on my trip to the Bahamas and made it back safely despite the 124-mile journey each way. The next Rosen Report will have details on the fishing adventure with lots of pictures. Yes, despite being a shortened journey, it was a hell of a lot of fun. Here is one sneak peek, but there is so much more to come. Below is a 70+lb Yellowfin Tuna caught in 2500 feet of water in the middle of the ocean. These fish are very strong and harder to bring in than I thought.

Today’s theme has a bit more of a serious tone. I try to have fun and tell some good stories to give the readers entertainment, but today’s is an admission of fault and perspective.

I am in Southampton for a couple days. Not sure departure date.

• Video of the Day-Dolphin Followed My Boat Very Closely

• Perspective

• Quick Bites

  • Markets/Payrolls/Rates

  • King Street and Bridgewater on Market Views

  • Norwegian EV Adoption/Oil Consumption

  • Consumer Charts on Savings and Net Worth

• Other Headlines

• Real Estate

  • Mortgage Rates Higher

  • Indian Creek $68mm Off Market Sale (Miami)

  • Palm Beach $68mm Sale

  • Beverly Hills Market Update

  • Floating ate Debt Pain for Multifamily Investors

Video of the Day-Dolphin Followed My Boat Very Closely

• During the 124-mile crossing, we were fortunate enough to see some spectacular sea life including whales, dolphins, turtles, and the beautiful blue sea. I captured some amazing footage (2 minutes) of dolphins following my boat and got some in full speed and some in slow motion with my iPhone as I hung myself over the bow of my boat while the dolphins were right underneath it. For perspective, we were driving 35 mph. It was a great trip with a lot of fish caught, but watching nature was a lot of fun. Check out a couple of pics from the trip as well.

Perspective

I think it is very hard to keep a perspective on what is important in life. I am guilty, as we all are, of letting little things bother me at times, and it is easy to lose perspective.

In the past couple of weeks, the Rosen family has had a few challenges. My son, Jack, had a rough golf tournament. I will hand it to him, he never gets down and keeps his head high. He works hard and never loses his passion.

We got off the course Thursday before the July 4th weekend and my wife, Jill, called screaming and said “Julia may have broken her nose.” Julia is a counselor at a day camp in the Hamptons, and a 6-year-old was hanging on her and hit her head on Julia’s nose in an accident. They were in Southampton at the time and went to a private “Emergency Plastic Surgeon” who charged $1,300 to see her. No insurance for the 25-minute visit. Welcome to the Hamptons. Home of $100/lb lobster salad, lots of $50mm homes, and overpriced everything.

Jack and I were in Philly at a tournament at the time and had to drive almost 6 hours (should have been 3:30) in a challenging July 4th drive to Southampton on Thursday before the holiday. It was a painful drive due to the mood in the car, my concern about my daughter’s health, and the 4 mph traffic for much of the trip. Clearly, my ADD and lack of patience were not helping when we were stuck on the Belt Parkway.

To add insult to injury, my arm has been in great pain for 5 months as my tendonitis was so bad, I could barely carry anything. My heavy doses of Prednisone had me barely sleeping, but the pain is a little more under control now that the drugs have kicked into gear.

On Friday am, I decided to walk into the town of Southampton to clear my head after being frustrated by recent events. I was a little irritated by the stupid things going on in my life and the truth is I am ashamed that I was feeling a bit sorry for myself and my kids in light of the recent happenings.

I was startled by the huge number of police officers and cars with flashing lights. The only time I see that is for the 4th of July Parade out there. Traffic was blocked on all the major streets in the town of Southampton in the middle of the day on Friday. I was concerned that there was some type of crime incident, a rarity in the town area of Southampton.

I asked a police officer, what happened and the officer replied, “A 4-year-old girl died of cancer after a 2-year battle, and her father is a Sergeant in the police force. As a result, we are showing support and closing the roads for the funeral procession. The girl loved animals and a horse-drawn carriage is carrying the casket through town and we are blocking traffic.” Obituary here. Her name was Kaianne Lily Farr Davis.

Her words were a punch in my gut. I started to cry as I felt like such an ass for feeling sorry for my family’s situation, which in the scheme of things is irrelevant. Jack’s golf, Julia’s nose, medical expenses, traffic, my arm… are all so minor relative to real problems and tragedy facing so many families.

Here a child died from brain cancer, and the family must be grieving in a horrible way. I am sure they would change places with the Rosen family in a second despite the current state of our “dysfunction.”

We all lose perspective from time to time, and it is important to realize that we are fortunate, and things can generally be far worse. I take too many things for granted and need to appreciate all the good things in our lives.

I hope my readers enjoy life despite all the setbacks they inevitably face. Time flies and it is important to keep things in perspective. For whatever reason, I seem to lose my perspective far too often. Please don’t lose yours. Julia’s X-Ray came back after 5 days due to the holiday and it is not broken. She has a deviated septum and swelling making it harder to breathe. Hopefully, the swelling goes down and things settle in another 10 days.

My good friend, Bryan, once said, “How many more good summers do I have left?” It was his way of saying he has to enjoy his time and appreciate the positives in life. Your summer activities at 55-years-old tend to be far more interesting than those at 75-years-old.

The picture below was from a trip to Costa Rica when the kids were ages 4 and 5. Despite my setbacks, I have been so very fortunate in so many aspects of my life. I just don’t want to forget it. After all, I have my health, great family and friends and so many loyal readers/connections from the Rosen Report. What more could I ask for?

Quick Bites

• The market sold off Thursday and bond yields rose as data showed the labor market remains hot. Private sector jobs increased by 497,000 in June, according to data from payroll processing firm ADP, in the biggest monthly gain since July 2022. However, the actual data on Friday showed a 209,000 increase in payrolls, less than the 240,000 forecast. Stocks sold off again on Friday with the Dow -.6%, S&P-.3% and Nasdaq-.1% on fears of Fed hikes. Big Bank earnings next week. The 2-year Treasury yield popped as much as 15bps to 5.10% before closing at 4.99% Thursday, but yields fell 6bps on Friday after the actual data. Check out the Treasury market chart below. You can earn real money in short dated Treasuries. Coincidentally, I had Treasuries mature Thursday and I bought 1 and 2-year on Friday. Despite having a great call on peak inflation, I was wrong about the Fed. I thought they would be done raising by now. I do feel things are slowing, but not as fast as I thought it would play out. There is now an 88% chance of a July hike and a 40% chance of an additional one in October. Oil is up to a 6-week high on supply concerns with WTI at just under $74/barrel. Bitcoin hit $31.5k on Thursday but settled at $30.3k on Friday. It seems as though institutional demand may be growing.

  

  

  

• I have known Brian Higgins for over 20 years. He is a very impressive hedge fund manager for King Street Capital which now manages $23bn. I liked this Bloomberg article entitled, “Hedge Fund King Street Raising Funds for ‘Slow-Motion Car Crash’ in Credit.” King Street, which Higgins co-founded in 1995 with fellow First Boston alum Fran Biondi, is seeking roughly $3 billion of fresh capital across various funds. The money manager joins funds including Angelo Gordon & Co. and Brookfield Asset Management in building up war chests aimed at the credit market, where worries are mounting as the tally of distressed debt — loans or bonds that are in default or at high risk of defaulting — has already surged. For dollar-denominated corporate bonds and loans in the Americas, the pile was about $274 billion as of the end of last month, from below $100 billion in early May 2022, data compiled by Bloomberg show. As Higgins sees it, opportunities will emerge over time, as financial conditions gradually tighten for businesses and consumers that still have excess savings from the trillions of dollars of pandemic stimulus.  “This market is a slow-motion car crash,” he said. “There are opportunities in terms of new lending, a bit of a walk-don’t-run.” On a related note, this Bloomberg article has a similar theme, “Bridgewater’s Greg Jensen Sees a ‘Bad’ Outlook for Bonds and Stocks.” “My view is you end up with growth disappointing a bit and inflation disappointing on the high side a bit, ending up probably bad for bonds and probably a little bit bad for equities and generally weak growth.” Although I don’t find the High Yield market incredibly interesting today with yields of just under 9%, I think that changes over the next 12 months, and will lead to real opportunities.

• I thought this Bloomberg article, “Oil is Hard to Quit, Even in Norway Where Electric Cars Rule the Road,” was interesting with good charts. “In Norway, the sale of new electric cars has gone from 3% in 2012 to almost 80% in 2022,” Christina Bu, the secretary general for the Norwegian Electric Vehicle Association, said in an interview. After years of subsidies, more than a fifth of Norway’s automobile fleet is now battery-powered. As a result, gasoline use has fallen by 37% since 2013, according to data from Eurostat. Yet for other types of transport, oil has been harder to give up. Though electric cars accounted for 23% of miles driven in Norway in 2022, diesel still accounted for 43% of the distance covered. Heavier trucks, which for technological reasons haven’t seen widespread adoption of electric drive trains, are still predominantly running on diesel. Diesel consumption in Norway is just 10% below its 2015 peak and has yet to show a consistent downtrend. Norway’s oil demand has proven resilient partly because its population has grown about 1% annually since 2008, a faster rate than its neighbors. The EV adoption in Norway is impressive and is having a clear impact on gasoline demand. Given EV costs and weak power grids in the US, I do not see any type of adoption as substantial as Norway in the near term. In the 1st q of 2023, EV sales in the US were 7% of total auto sales. The latest number I see on US EVs suggests a little more than 1% of total autos are EVs, this is a tiny fraction of Norway’s numbers for perspective.

• I have written extensively about my concerns about the US consumer fighting inflation and rising rates by dipping into savings and credit cards while ballooning debt levels to all-time highs. I do not believe it is sustainable and these charts outline my case. I was surprised by the last chart from Fed showing Household Net Worth Contracting sharply.

Other Headlines

• Fed sees more rate hikes ahead, but at a slower pace, meeting minutes show

• Summers Warns on Inflation Complacency, Sees More Bond Declines

• Fed's Goolsbee sees 'golden path' to lower inflation without a recession

• Fed Economists Warn Of Looming Disaster Due To High Interest Rates

  

• Subprime Auto Bondholders Face Possible First Hit in Decades

  

• Meet the CEOs Who Pull In More Than $100 Million a Year

  • Link in the piece to the S&P 500 CEO compensation.

    

• Yellen says she's 'concerned' about China's new export controls in her first public remarks in Beijing

  GM second-quarter sales increase 18.8% as supply chain stabilizes

• Samsung estimates profits plunged 96% in the second quarter

• Zuckerberg-Musk fight is on: Meta launches 'Twitter Killer' Threads app

  • Meta’s Twitter rival Threads explodes to 70 million signups one day after launch

  • Twitter is threatening to sue Meta over Threads

  • Twitter Awarded Three State Money Transmitter Licenses

• An ancient language with nearly a million undeciphered texts just got a translator that does the job in seconds: A.I.

• Biden Approval Rating Lowest Since Carter at this Stage in Term

  • Neither Biden nor Trump are the answer. America deserves better.

    

• Secret Service Confirms Cocaine Was Found In West Wing Phone Cubby Hours After Hunter Biden Visit

  • New reports have cocaine in a more highly trafficked area of the White House. I am not going to lie, my initial reaction was pointing to Hunter for all the obvious reasons, but it may not be the case based on the timing of the finding and Hunter’s travels. Either way, the White House needs to be more open on this incident.

• Attorney disciplinary committee recommends Rudy Giuliani be disbarred for 2020 election legal work

• Justice Department had video of boxes being moved at Mar-a-Lago before FBI search, unredacted document shows

• DeSantis Campaign Stalls as He Tries to Court Trump’s GOP Fans and Foes Alike

  • I felt as though DeSantis had a good chance to dethrone Trump but Ron has made too many mistakes. Shocking.

• Dutch government collapses over immigration policy

• Woman pummeled on NYC subway after being ordered to ‘look somewhere else’

• Serial shoplifter fatally stabbed by Midtown CVS employee during fight

  • The shoplifter punched the employee. Welcome to NYC. The shoplifter threatened the security guard multiple times with, “I’m gonna kill you.” The now deceased shoplifter had 16 arrests. Maybe, just maybe he should have been in jail.

• Disturbing videos show deranged gunman killing elderly man, shooting ‘random’ pedestrians in broad daylight NYC rampage

• Gunman arrested for Philadelphia mass shooting which left 5 dead is BLM activist who wore women's clothes

• Mothers attacked by baseball-bat-wielding children as San Francisco crime wave intensifies

  • The news is so damn sad. If I lived in Chicago, San Fran, NYC, Philly…I would get a concealed carry permit. Your life apparently depends on it in these cities. Bad policies are driving people, businesses, and commerce away from these areas. At what point will politicians realize safety matters and wealth is mobile?

• NYC Crime Dropped in Most Major Categories in First Half of Year

  • The good news is murders fell by 7.9%, reported rapes were down 9.9%, robberies fell by 4.8% and burglaries declined by 9.9% in NYC. Shootings fell by 24%. These data points are improved, but crime remains too high and many people feel unsafe. I was just in NYC, it is filthy, homeless people everywhere, stores have goods under lockdown and I feel less safe, so clearly more could be done. Let’s start by putting bad actors in jail.

• LA County sheriff investigating after bodycam video shows deputy throwing Black woman to the ground

• City Sanitation workers caught on video ignoring sidewalk trash in Brooklyn

• Nearly half of the tap water in the US is contaminated with ‘forever chemicals,’ government study finds

  • PFAS are a family of ubiquitous synthetic chemicals that linger in the environment and the human body. PFAS exposure is linked to problems like cancer, obesity, thyroid disease, high cholesterol, decreased fertility, liver damage and hormone suppression, according to the US Environmental Protection Agency.

• Riots in France have already cost businesses more than $1 billion

  • Macron is threatening to cut off Social Media during the unrest.

• 30% of Americans say ‘tipping culture is out of control,’ as some businesses agree to scrap tip prompts

  • I was a valet attendant, busboy, waiter, and bartender… and understand the importance of tipping. However, I wrote a piece recently which included a section on the absurdity of tipping prompts everywhere you go. It is getting offensive. Here is a related article entitled, “Tired of ‘tipflation’? 5 times it’s OK not to tip, according to etiquette experts.”

• Multiple shark attacks reported off New York shores; 50 sharks spotted at one beach

  • I can tell you, my boat was surrounded by sharks on my trip to the Bahamas and I lost a handful of tuna to the toothy critters.

• Finland is home to the world's happiest people—their No. 1 secret is this 500-year-old mindset

• Former FBI agent shares 3 things people with high emotional intelligence always do when talking to others

• Alzheimer’s drug Leqembi has full FDA approval now and that means Medicare will pay for it

  • Who names drugs? Keep it simple. Call it Alzheimer’s Med #1.

• Being overweight is now linked to 18 types of cancer

• A Harvard genetics professor who only sleeps 6 hours a night and doesn’t exercise every day swears 3 habits helped reverse his biological age by a decade

  • He lost me on his diet.

• World registers hottest day since records began — with fresh highs expected in the coming weeks

• House investigator warns UFOs are beyond control 'in our military airspace'

  • I have read dozens of articles and spoken with multiple pilots who have seen “UFOs” and I have never been more convinced we are not alone. I want the government to publicly release the data they have already. Again, if aliens are listening, I am willing to be abducted just so I can write a Rosen Report on the subject.

Real Estate

• On the heels of stronger-than-expected labor data, mortgage rates ticked up sharply and the 30-year fixed rate hit 7.22% on Thursday. The rate is up 31bps in the past week alone.

  

• Indian Creek is an EXCLUSIVE 34-home community in Miami Beach. It has 13 Police for the community with armed guards and boats patrolling the waters. Many uber-wealthy/famous people live there including Julio Iglesias, Carl Icahn, financier Charles Johnson, supermodel Adriana Lima, hedge funder Eddie Lampert, former college basketball coach Rick Pitino, Tom Brady, Ivanka Trump, and real estate mogul Jeff Soffer. A house was sold in the past few days on Indian Creek. A former hotelier, Tulia Soucy de Gonzalez Gorrondona, sold her waterfront estate for a record $68 million in an off-market deal. Records show the Panama Capital & Investment Corporation bought the 2.8-acre waterfront estate for $1.4 million in 1982. The original house, which is the only home currently for sale on the Biscayne Bay island, Mr. Gonzalez said, dates to 1977 and was completely remodeled and expanded by the current owners in 2016. Kushner and Trump dropped $24 million on an 8,500-square-foot waterfront mansion on the island in 2021. I have been to the Island, and it is quite impressive with large lots and big homes in a golf course community. The place is secure like Fort Knox. It is very hard to get into the club with some residents of the island unable to join. I looked at land there in 2016 and clearly should have bought it, but it was too rich for my blood then and definitely is today.

  

• A mystery buyer or buyers who may require ultra-top-level security services just paid a recorded $68.146 million for a Palm Beach house at the “corner“ of the Atlantic Ocean and the inlet on the northern tip of the island, the Palm Beach Daily News has learned from people familiar with the purchase.  The contemporary-style house stands at 149 E. Inlet Drive, a short street that makes a loop to the beach from North Ocean Boulevard. The property itself also is said to have been vetted by personnel from at least one government security agency to ensure that it can be secured adequately, people familiar with the deal have told the Palm Beach Daily News. Other homes are in the article as well. The ultra-high end has such limited product, and the demand remains robust for all those wanting to migrate to paradise. I can’t wait to find out who the mystery buyer was.

• In Beverly Hills, Even the Cheapest Homes Cost Millions. Home to L.A.’s most expensive houses, 90210 is outranked by just two other ZIP Codes as the priciest place to live in the U.S. Great, interactive links in the article about homes, restaurants, culture, shopping and much more.

  

• Good Real Deal article about investors who got cute with floating rating debt on multifamily space and paid the price. It is entitled, “Tides Equities flew too close to the sun. it wasn’t alone.” Tides Equities” showed its hand last week. If this were poker, folding would be a good option. Instead, the multifamily syndicator asked investors to cough up more capital to salvage properties with negative cash flow and declining occupancy. In the past few years, Tides acquired a $7 billion multifamily portfolio by taking out floating-rate loans at dirt-cheap interest. When the Fed hiked rates, the firm’s debt service ballooned. Now, 20 percent of its portfolio faces distress, co-founder Ryan Andrade told investors in a letter. Without a capital infusion, Andrade warned, properties would not have “sufficient holding power.” At least $1.5 billion of the firm’s floating-rate loans mature in the next two and a half years. Tides isn’t alone. A number of small-time investors, lured by the cheap money of yesteryear, employed the same value-add strategy. So-called syndicators pooled money from well-heeled yet largely unsophisticated investors, promising outsized returns on multifamily deals. A bunch of good examples in the article. I am certain, many owners who borrowed using floating-rate debt will be paying the price over the next 24 months.