Free Market Capitalism by Javier Milei (President of Argentina)
1-25-24
Opening Comments
My last note was about my lost wallet and where it was hiding. I was surprised by the number of emails I received telling me how funny they found my story. A few dozen emails looked something like this one: “Thank you for giving me the biggest laugh-out-loud moment I’ve had in quite a while. I am still smiling.” The most opened links were the CNBC story of the trait suggesting high intelligence and the Richie Torres video about antisemitism.
I went to a new Italian restaurant in Delray Saturday night called, “Campi.” It is the sister restaurant of the 40-year establishment, Campagnola in NYC. Campi is in the Ray Hotel and the former site of Amber Grill. The room and ambiance are better than expected with a beautiful bar and great music. We arrived late as I was entertaining, and we were told we had an hour to eat to give up the table. We ordered quickly and the food and service did not disappoint. We had a ton of veggie sides, and they were all fantastic (roasted cauliflower with chili, broccolini, rosemary potatoes, brussels sprouts). I had the Lasagna Bolognese and would get it again. The presentation was different as you can see (on its side), but the flavor was amazing, and the sauce was so good that I cleaned my plate. Could be the best lasagna I have had in Florida. The kids ordered the Chicken Parm and the Angry Lobster Ravioli, and all received high marks. I tried the ravioli, and I thought the taste was outstanding, but the temperature of it was a little cooler than I would have liked. The prices were not offensive. There is a 100% chance I go back but note if you park at the hotel, it is $25 which seems a bit steep to me.
I apologize as Substack crashed on me and did not save my work. I am sure I have extra typos and a missed story as a result.
Free Market Capitalism by Javier Milei (President of Argentina)
Markets
Top Hedge Fund Returns
Outsized Returns on Catastrophic Insurance
Stealth Inflationary Costs
US Alcohol Consumption
Mortgage Rates are Forecast to Fall in 2024
Homebuyers getting older
Luxury Dubai Residential R/E
NYC Market Update
Picture of the Day-Osprey Eating Its Catch
My sister and brother-in-law went to Flamingo on a hike and took pictures. This is an Osprey eating what appears to be a crab. There are some interesting places to venture to in Florida. I have fished in Flamingo and caught a ton of fish (redfish, trout, tarpon, snook…). Flamingo is the southernmost part of Everglades National Park south of Miami as seen below. Photo© Debbie Glade
Free Market Capitalism by Javier Milei (President of Argentina)
I am a Capitalist and have been so fortunate to have been born in the USA and through hard work and some luck, “made it.” My success and that of others is not possible or common in many other economic systems.
The Davos World Economic Forum has become a bit of a joke. World “elites” fly in on private planes and espouse views on what you are doing wrong, with special mentions to the environment. The cache of the event is a fraction of what it once was and social media has erupted, generally negatively, about the ongoings in Davos.
However, there is one speech that is getting most of the attention from the 2024 Davos event and the message went against the mission of the conference. It was a 19-minute lesson in capitalism and the dangers of socialism by the new President of Argentina, Javier Milei. He is a far-right libertarian who has vowed to “exterminate” inflation and slash government spending. He campaigned with a chainsaw after being an economist and TV personality. Argentina was once a booming country and power. Socialism and collectivism have turned the country into an unmitigated disaster according to the new President. The poverty rate in Argentina is 40% and it is 11.5% in the US. Inflation in Argentina in 2023 was approximately 211%. Interestingly, 100 years ago, Argentina was wealthier than France, Germany or Spain and had one of the highest GDP per capita in the world. Let’s just say, those days are long gone.
From the opening of Milei’s speech. “Today, I am present to inform you that the Western World is facing a significant threat. It is in danger because those who are supposed to defend the values of the Western World are co-opted by a world that inevitably leads to socialism and consequently to poverty and economic deprivation. Unfortunately, motivated by some well-intentioned desires to help others and others by the desire to belong to a privileged cast, the main leaders have abandoned the model of freedom for a different version of what we call collectivism.”
Milei is concerned about the direction of the West, the continued move towards collectivism, and the impact on the citizens. His statistics and examples are eye-opening.
He said, “Not only did capitalism create an explosion of wealth from the moment it was adopted as an economic system but if one analyzes the data what is observed is that growth is accelerating throughout the entire period.” He went on to say, “Don’t forget that by the year 1800, about 95% of the world’s population lived in extreme poverty. That number dropped to 5% in 2020 prior to the pandemic. The conclusion is obvious. Far from being the cause of our problems, free-market capitalism as an economic system is the only tool we have to end hunger, poverty, and destitution throughout the planet. The empirical evidence is unquestionable. Therefore, as there is no doubt that free market capitalism is Superior in productive terms.”
“Socialism is always and everywhere impoverishing. Failed in all countries where attempted. It was a failure economically. It was a failure socially. It was a failure culturally....”
I love the All-In podcast and they discussed the speech and thought David Friedberg (15-minute mark) showed an impactful chart of how the government “assistance” backfires. Note the things in the chart that are up the most in price tend to be industries with more government intervention. When free markets can work, innovation, technology, and efficiencies are gained, and prices have come down in most cases. Friedberg spoke about government intervention and wealth redistribution. Friedberg said, “The market role the government plays causes inflation, causes degradation in economic opportunity, economic mobility, and prosperity for most people. In a separate event, Musk chimed in. “The CEO of SpaceX and Tesla calls Milei's speech a "good explanation of what makes countries more or less prosperous."
Please watch President Milei’s impactful presentation which is garnering a lot of attention. I feel the message is important and the continued vilification of capitalism is dangerous. Remember democratic capitalism has provided more freedom, prosperity, products, and services, than any other economic form (socialism, communism, monarchy) in the history of mankind. It is not perfect but is so far superior to all other alternatives.
Quick Bites
The rally is never ending in stocks. Records are being broken and now all in the green absent the Russell 2000 (-2%). TLSA missed on 4thQ revenue and warned of lower volume growth in 2024 sending the stock -3.5% after hours. TSLA is now -19% YTD. The Treasury market has sold off recently with the 2-Year +26bps (4.38%) and the 10-Year+25 bps (4.18%) in recent weeks. After a major rally on the ETF news, Bitcoin has shed 17% to under $40k.
The Bloomberg article entitled, “Hedge Funds Cap Bumper Year for Profits With TCI, Citadel Leading Pack,” outlines the biggest winners in the hedge fund industry in 2023. The industry produced combined gains worth $218 billion after fees, according to estimates by LCH Investments, a fund of hedge funds. Hohn’s TCI Fund Management made $12.9 billion to top LCH’s rankings, followed by Citadel, which made $8.1 billion. As measured by a more traditional way of assessing returns, the top grouping gained 10.5% in 2023, outperforming the average hedge fund which returned 6.4%. Over the past three years, the top 20 have generated 83% of the absolute gains made by all hedge fund managers, the report found.
A Duke student, Jasmine, sent me this article about hedge funds profiting from bets on catastrophic risk. The best hedge fund strategy of 2023 was a bet on insurance-linked securities (of which catastrophe bonds are the dominant sub-category), which generated over 14%, according to Preqin, a consultancy that provides data on the alternative asset management industry. Preqin’s benchmark return for the industry — across strategies — was 8%. That compares with a 19.7% gain in the Swiss Re Global Cat Bond Performance Index Total Return. I have spent time on this space and feel the market is an interesting one. However, I am a believer that you need to invest over time as you can get hit in any one season by a major storm, fire, earthquake, or tsunami…. My friend ran a cat insurance business and out of 20 different funds, 18 or 19 did incredibly well (35% type returns) and a couple got hurt. With spreads near historic highs, it is worth a look for those looking to diversify.
I have written extensively about the China slowdown and used a lot of R/E examples, youth unemployment and other measures to showcase my concerns. This Bloomberg article is entitled, “Hong Kong Stocks at 36% Discount Show True Depth of China Gloom.” A rout in Chinese stocks listed in Hong Kong intensified Monday, pushing their discount to mainland peers to the deepest in fifteen years in the latest sign of growing pessimism among international investors. As a result, a gauge tracking mainland stocks’ price gaps versus their dual listings in Hong Kong reached the widest since 2009 — implying a 36% discount for the offshore market. Chinese stocks listed in Hong Kong are often regarded as a better barometer of the health of the world’s second-largest economy and a more accurate gauge of broader investor sentiment. In comparison, trading in Shanghai and Shenzhen is constantly under the influence of meddling by Chinese regulators, from restrictions on anything from short selling or initial public offerings to verbal warnings and direct intervention by state funds.
This CNBC article is entitled, “A stealth inflationary cost is hitting corporate profits and consumer wallets,” and I agree with it. While some companies are now seeing lower input and freight costs, one expense is not falling: insurance. In its earnings report Travelers said insurance premiums that it charges are still soaring. Premiums on business policies jumped 14% in the last quarter. Consumers are feeling the pinch, too. Homeowner renewal premiums spiked 21%, while those for auto policies jumped 17%. Soaring insurance costs have hit companies such as freight shipper J.B. Hunt hard. During Thursday’s earnings report, it said it took a hefty $53 million charge, related to higher insurance and claims expenses. For those who missed it, I have a new sponsor, Lang Insurance who is a broker that specializes in personal property and casualty in all 50 states. A bunch of readers have switched over and are saving money with top insurance companies. I switched and saved. Tell him the Rosen Report sent you.
I have written frequently about spending issues, entitlement reform, the aging population and the impact on national debt levels. This article is entitled, “Childless Future? Birth Rate Plunging as Millennials Decide Against Being Parents.” The ramifications are dire and only embolden my arguments around entitlement reform. Less than a fifth of millennials, specifically those between 26 and 35, are certain that they want to become parents one day. This inclination further diminishes among individuals with pronounced environmental concerns. Simply put, four in five young millennials want to remain childless. The findings revealed a correlation with the nation’s declining birth rates, highlighting a drop in the number of young adults planning to have children. Only 19 percent of younger millennials expressed a definitive desire to have children, while 30 percent leaned towards probably wanting children. Among older millennials, between 36 and 41, 36 percent were certain they will not have children, and 20 percent were leaning towards not having them. Link to a related story.
America has a drinking problem and when you see the statistics in the article entitled, “The States That Drink the Most Alcohol in America,” you will agree. It’s no secret that Americans love to drink. According to a recent Gallup poll, more than three out of every five Americans regularly consume alcohol, with approximately 20 percent of those drinkers admitting to overindulging on occasion. Data from the National Institute on Alcohol Abuse and Alcoholism (NIAAA) upholds the poll’s findings, demonstrating that alcohol consumption in the U.S. has been trending upward since 1995. In 2021, Americans consumed a staggering 8.1 billion gallons of alcohol (approximately 2.51 gallons per capita) by way of beer, wine, and spirits. That marks a whopping 200 million gallon increase year-over-year, likely spurred by continued Covid-19 lockdowns.
Israel
21 Israeli troops are killed in the deadliest attack on the military since the Gaza offensive began
Israel has only killed 20-30% of Hamas terrorists, US intelligence says
Israel’s spy chief proposed Hamas leaders leave Gaza as part of broader ceasefire talks
Israeli women and girls have suffered horrific sexual violence from Hamas. Where is the outrage?
IDF finds Gaza tunnel where 20 hostages, including 5-year-old, were held in ‘inhuman conditions’
How traumatized will these hostages be for life? Could you imagine a child going through this? The terrorists responsible need to be held accountable including the billionaire leaders.
Sundance Shut Down: Pro-Palestinian Protest Closes Main Street; Melissa Barrera Among Demonstrators
Antisemitism is getting worse as more 'shocking' and 'scary' incidents are exposed, DC residents say
Other Headlines
Netflix Earnings resulted in a 12% stock price increase
They signed 13.1mm customers in the 4thQ
Apple to launch its own EV in 2028 after SCRAPPING plans to create a fully self-driving car
Trump cruises in New Hampshire primary election, Haley vows to fight on
Haley skewered Trump in her speech and hammered him for election losses/mental capacity. Reid Hoffman paused funding for Haley.
Ron DeSantis drops out of 2024 presidential race, endorses Donald Trump
A year ago, I thought he would get the Republican nomination after sweeping Florida in the Gubernatorial race. I was wrong. It became clear that he picked the wrong battles and was flat for in-person meetings despite an impressive resume.
Investigators are looking into Miami Mayor Francis Suarez’s lucrative side jobs
This is not the first time a politician has been paid but this one reads poorly. According to the article, Suarez was being paid by a local developer $10k/month at the same time the mayor’s office was intervening to help the developer overcome a permitting issue. I believe Suarez has his sights on higher office. Let’s see what the investigation into various business relationships uncovers.
Wall Street opposition to Trump collapses, as ‘pipe dream’ of primary defeat ends
I was early on calling out the absurdity of our lack of a border and was vilified. Now that it is a complete disaster, more rational minds are speaking up about it. This is yet another example of Americans paying a price for our awful border policy. You know it is bad when Fetterman is screaming about it.
NYC Council members must see the light on latest anti-cop insanity and uphold Adams’ veto
The legislation would bury cops under mountains of paperwork, forcing them to log every interaction with a civilian, no matter how brief, mundane or inconsequential. If a tourist comes up to a cop and asks for directions, the interaction would need to be logged.
NYC church worker slashed in throat confronting stranger urinating on car
This bloodthirsty Venezuelan gang has caused havoc in Latin America. Now it’s in Miami
The wheel of a Delta Boeing 757 flew off while it was preparing to take-off
Listen to the interaction with the tower. Could have been another disaster. Maybe less focus on DEI and more focus on safety is warranted.
YouTube star MrBeast makes more than $263,000 in X video, but calls it ‘a bit of a facade’
I have written about MrBeast frequently and recently discussed how Musk asked him to post on X. His first video on X had over 150mm views in a week and he made $263k on it. MrBeast is the biggest star on YouTube with 233mm subscribers. One article suggests he was offered $1bn for his YouTube channel.
He is one of my favorite musicians. Sadly, he has very little good material since 1982. However, his 1970s albums are on my “All-Time” List (Piano Man, Turnstiles, The Stranger, 52nd St, Glass Houses…).
The 10 fastest-growing jobs in the U.S. right now—many can be remote and pay over $100,000
Best-picture Oscar nominees ‘Barbenheimer’ account for 88% of the slate’s box-office haul
I have heard of horror stories in hotels and rented homes.
NFL star Brock Purdy made $870,000 this season — 16 college football players made more from NIL
I want you to think about this for a second. Purdy is an NFL star who has gone 20-5 as a starter and makes $870k. His backup QB is on a $34mm 4-year contract and college players are making more than Purdy. Arch Manning played a total of 27 snaps at the University of Texas this year as a freshman and made $2.8mm. I sure hope Purdy wins the Super Bowl; it would be an amazing story after being the last person picked in the draft. I have written about Purdy multiple times over the past 15 months.
Nick Dunlap becomes first amateur to win a PGA Tour event in 33 years
I saw him in junior tournaments and was blown away. He must turn pro given he is exempt for the PGA Tour through 2026. He moved up 4,061 spots to #68 in the world in professional rankings.
World’s most advanced humanoid reveals ‘biggest fear’ and ‘what it’s like to be a robot’
Scary answers.
Real Estate
Since March of 2022, we have been in a rising rate environment after the Fed left rates too low for too long. Mortgage rates skyrocketed. Thirty-year Mortgage rates went from 2.85% in September 2021 to almost 8% in October 2023. According to the CNBC article, mortgage rates are expected to fall by almost 1% to 5.75% by year-end. This reduction in rates would reduce the monthly burden by $200 for a median-priced home.
On a related note. The median age of repeat homebuyers has increased from 36 years old in 1980 to 58 years old in 2023. The median age of first-time homebuyers has increased from 29 to 35 over the same period. The median age of repeat homebuyers has increased from 36 years old in 1980 to 58 years old in 2023. The median age of first-time homebuyers has increased from 29 to 35 over the same period. To me, it appears homebuyers are getting older as the affordability has gone down.
Maybe I need to be a Real Estate agent in Dubai according to a Bloomberg article entitled, “Dubai Sales of $25 Million Homes Double as Global Elite Move In.” Sales of homes worth $25 million or more doubled in Dubai last year after some of the world’s wealthiest people snapped up homes in the Middle East’s business and tourism hub, according to property consultant Knight Frank LLP. A total of 56 ultra-luxury homes worth $2.27 billion were sold in the city in 2023, up from 28 properties worth $1.24 billion a year earlier. Most of those properties, 22, were on Dubai’s man-made palm-shaped Palm Jumeirah island and 15 were on the seahorse-shaped Jumeirah Bay island. Demand for Dubai property is booming as the government’s handling of the pandemic and its liberal visa policies attract more foreigners. The luxury end of the market is also benefiting from an influx of investors such as Russians seeking to shield their assets, crypto millionaires, and rich Indians setting up second homes.
A reader and colleague from Douglas Elliman in NYC, Jared Halpern, sent me the following notes. One big takeaway is pricing it right is key. He got a new listing at 150 Charles and received 10 showing requests in the first 48 hours. If you are interested, I can make an intro. I love 150 Charles.
Manhattan Signed Contracts are up 40% compared to same time last year
The last two-three weeks of December and first few weeks of January are some of the busiest I’ve seen for this time of year.
Inventory remains low
New Listings on the market are low
Discount on the Last Asking Price has gone down
Deals over the asking price are up
Competition for buyers is going up
Also, there was a contract signed north of $100MM at Central Park Tower. The building has been doing very well.
© 2024 The Rosen Report LLC. All rights reserved. Does not constitute investment, financial, legal or tax advice. Consult with your lawyers and professional financial advisers.
Rosen Report™ #650 ©Copyright 2024 Written By Eric Rosen