Dumb, Dumber & Eric Rosen
4-21-24
Opening Comments
My last note was entitled, “Leaving Your Comfort Zone” and resulted in some amazing feedback. I outlined examples in my life that I pushed myself and it turned out to be the right decision. It is better to fail then to never try in my opinion. The most opened links were Kobe on practice and the article about colleges and antisemitism.
I did miss a shout-out to Nelly Korda (#1 in the world) who has won four straight LPGA tournaments and is in contention for her 5th today. Go Nelly! Of note, Scottie Scheffler is leading at the RBC after shooting 63 on Saturday. If he wins, he would go 4 out of 5 including a major (Augusta) and the Players Championship. Nelly and Scottie are en fuego.
Mia Rosebud Boca Review-Go Somewhere Else
A group of 3 couples including us, went to the new Mia Rosebud Italian Steakhouse in Boca. I fondly recall eating at the Rosebud on Rush in Chicago 30 years ago. My food game has improved sharply from my 20s and this version of Rosebud was a big disappointment. The room is loud making it hard to hear people at your table. The appetizers were decent and the meatballs and the pappardelle pasta were largely eaten. However, the chopped wedge salad was the single worst salad I can recall. Bland. The service was spotty in that half the table was served entrees and the other half waited over 5 minutes to get food. I have never been to a restaurant where NO ONE finished their entree. One person ordered mussels and maybe 20% were eaten by the entire table. She could not give them away. I had the highly recommended brick chicken at $42 which was presented nicely. Despite being hungry, I left half on the plate. It was so salty, I had to drink gallons of water. The crispy potatoes were soft and hardly crispy. My wife loves vegetables and have never seen her leave any on her plate. She ordered spinach, mushrooms, and broccoli and did not eat half of it complaining it was inedible. The food at Rosebud is not offensively priced, but fully priced, especially when you factor in the quality. On the positive front, the room is nicely done and the crowd was lively and young, not what you would expect in Boca. No plans on returning soon. There are a half dozen new steak restaurants in Boca and a dozen Italian eateries, so find dinner somewhere else.
Markets
Traders are Cashing Out
Moody’s on Private Credit
Copper and Cocoa Prices Skyrocketing
Audits of Wealthy NY and CA Taxpayers
Luxury Home Prices Declining in Areas
Build to Rent Housing Boom
Mortgage Rates Rising
Housing Affordability
Another Office Building Foreclosure
Picture of the Day-Gas Prices In California
There are a few reasons to love California and countless reasons to move out. Yes, the weather, humidity, beaches, and mountains are amazing but I won’t be moving there anytime soon. The traffic nearly gave me a nervous breakdown. Check out the pictures of gas prices that were all taken on the same day. Gas is approximately $2.30 more in CA (almost $6 vs $3.59) than in South Florida. The national average is $3.68/gallon. Californians drive an average of 12,500 miles/year. Assume 2.5 drivers per household and you end up spending almost $3,000 more per year just to drive your cars in CA. The average per capita income in CA is $45k.
There is Dumb, Dumber and Eric Rosen
At times, I feel as though I can digest a lot of information and come to conclusions in short order. Many readers ask me, “How do you do all this work by yourself?” I juggle more ventures than I can count, had a successful career on Wall Street, sit on boards, have an MBA from the University of Chicago, and mentor dozens of people each year, yet at times I make the dumbest decisions. Today’s note will be about a couple of those that occurred on my trip to CA last week. It was so bad, that the producers from “Dumb and Dumber” asked me to star in the next movie.
I flew into LAX on Monday morning and landed around 9:30 am. I drove to the Luxe Hotel on Sunset which has massive rooms at reasonable rates in a centralized location. Yes, they charge $53 for overnight parking, but overall, it is value.
On Tuesday morning, I met Jim, a Rosen Report reader, for breakfast at Shutters in Santa Monica. He was coming from Orange County and felt that was a little closer for him. I arrived early and being the idiot, frugal man that I am, I decided to park in a meter 100 feet from Shutters assuming valet parking would be a fortune. There were five spots and only 4 cars and I felt I got “lucky” finding a spot I tried to pay the meter unsuccessfully as they do not start working until 9 am.
I decided to go for a quick walk to look at the Pacific Ocean, meet my friend, and then quickly leave the breakfast to put money in the meter to avoid a 2nd ticket. I was not 50 feet from my car after parking it and I heard someone say, “You are getting a ticket.” I turned around and the meter maid was writing the ticket. I ran over to ask why, and he said, “No parking 7-9 am for street cleaning.” There were 5 cars in a line and I did not see the sign. I received a $73 ticket. It gets better. I asked, “Can I just leave the ticket on the car?”
He said, “Yes, but you will need to put money in the meter at 9 am, as you received a ticket for street cleaning not a meter violation.”
I was livid. I went to my breakfast, excused myself to put time in the meter, and ran back in all of three minutes. My friend parked at the restaurant and had the parking ticket validated. I asked how much it costs to park, and the attendant said, “With validation, it is $14.” I almost blew a gasket. My parking ticket was the first idiotic mistake I made. My friend was laughing at my idiocy. I just give so much fodder; I make it too easy.
The setting is more impressive than the food at Shutters, but it is an iconic spot in Santa Monica. The breakfast was good enough but FULLY priced. We sat outside and it was a great setting.
I met some USC students for a quick sandwich and then drove to Fresno to surf. I put “The Ranch” in my Waze and headed to have fun with friends. The traffic was awful; welcome to LA. I drove three miles in the first hour. Eventually, traffic thinned and I was on my way. I followed the directions and when I was very close, I realized that for the SECOND STRAIGHT YEAR, I put the wrong “ranch” into Waze going 30 miles out of my way. The screaming at myself ensued for a good 5 minutes. I made up some good new nicknames to memorialize my idiocy. I put in the “Surf Ranch” in Waze and went on my way red-faced and angry.
I made two idiotic mistakes just hours apart. I was steaming but thankfully, I had a great time (more to come) at the Surf Ranch with my friends. Here is a sneak peek of a few of my surfing pictures. My next piece will be dedicated to the Ranch and will have amazing drone video footage and professional water photos including my “Wave of the Day.” I can tell you that it was a fun couple of days with a great group of people, but I am sore as though I ran a marathon. I am getting old and in the end, did better than I expected.
Quick Bites
The stock market has taken a breather largely due to inflation/rates concerns coupled with geo-political risks. We are seeing some of the best-performing tech stocks under pressure with Nvidia and Super Micro Computer down 10% and 21% respectively on Friday, while Netflix fell 9%. YTD, Nvidia is +54%, Super Micro+150%, and NFLX+19%. Seems as though Super Micro will announce earnings on April 30 and did not pre-announce anything spooking the market. The S&P is down for the third straight week with a loss of 3%+ largely driven by tech stocks. The S&P is-5%+ from its 52-week high of a few weeks ago. The Nasdaq was -2% Friday and down for 6 days straight. However, YTD, the S&P is +4.1% and Nasdaq +1.8 %. The VIX (a measure of the volatility of the S&P 500) is +50% YTD and is now 18.7+ after starting the year at 12.4. Oil fell 3% on the week as the market is discounting the Israel/Iran conflict, but it is +16% YTD.
This Bloomberg article is entitled, “Traders Are Cashing Out of Markets En Masse.” With Treasury yields breaking out, Federal Reserve hawks ascendant and Middle East strife flaring, money has just been pulled out of equities and junk bonds at the fastest rate in more than a year. Dip-buyers have been muzzled. The S&P 500 fell every day this week as the top seven tech behemoths closed nearly 8% lower, with equity volatility climbing. Valuation worries are building within the equity ecosystem, particularly the Nasdaq 100, whose seven biggest members saw the worst weekly drop since November 2022. Cheaper-looking companies have been back to outperforming their often artificial-intelligence-enhanced growth counterparts.
Interesting Bloomberg article entitled, “Private Credit Funds Get Moody’s Warning on Problem Loans.” The ratings company on Monday reduced its outlook for direct lending funds managed respectively by BlackRock Inc., KKR & Co. alongside FS Investments and Oaktree Capital Management, lowering them to negative from stable. The three publicly traded business development companies, with a combined total of more than $20 billion in assets, each increased the number of loans on non-accrual status, meaning they’re in danger of losing money on those investments. “We’ve been expecting non-accruals to increase with the jump in interest rates,” said James Morrow, founder and chief executive of Callodine Capital Management, an investor in public BDCs. There is a lot of capital chasing deals. That leads to more aggressive lending practices, lower rates and weaker documents from the lender’s perspective. The next cycle will be interesting.
I found a couple of charts of copper and cocoa prices showing substantial price appreciation. Some copper mines closed while demand is soaring (EVs) driving prices sharply higher. For Cocoa, bad weather in West Africa crushed recent crops driving prices skyrocketing to $12k/ton from $2k/ton recently. Also cited were “geopolitical disruptions” creating supply chain issues.
An avid reader, Brad, sent me this Bloomberg article, “New York’s Rich Get Creative to Flee State Taxes. Auditors Are On to Them.” At New Jersey’s Teterboro and Long Island’s Islip airports, dozens of private jets destined for Florida take off at times such as 11:42 p.m. or 11:54 p.m. Over at JFK, a regular flight from San Juan, Puerto Rico, arrives at a seemingly purposeful time: about 15 minutes after midnight. Meanwhile, tax attorneys tell stories of clients idling in their luxury SUVs near the New Jersey entrance to the George Washington Bridge shortly before 12 a.m., waiting for the clock to turn before crossing the state line to New York. For the ultrarich, even just an extra day in the wrong place could mean millions in income-tax liability. Residency audits have long been big business in New York. The state collected roughly $1 billion from 15,000 audits between 2013 and 2017, according to data obtained through a Freedom of Information request. A cottage industry is rising to serve the taxpayers navigating these issues. A residency tracking app called Chrono, which uses biometric data to prove users’ whereabouts, launched in 2021. Co-founder Luke McGuinness said it stemmed from the frustration he and friends felt as “digital nomads,” a growing class of people who work remotely and travel regularly.
Another tracking system, Monaeo, automatically logs users’ locations to create detailed records of their whereabouts. I have heard tales of people driving cell phones and iPads out of NYC with limo drivers to cheat when they get close on days. My personal belief is tax savings is one factor in the equation driving people out of NY, IL, CA, DC… However, I believe quality of life, safety, crime, homelessness, cost of living, weather, COVID mandates, overly woke policies, and anti-business policies have all contributed to the migration. The cost of high-end R/E and the number of high-end new restaurants, shops and golf courses in South Florida tell you all you need to know. I was told 4 more high-end restaurants are going into Delray in 2025.
Israel
Israel launches strike on Iran, US official says
It looks as though not a lot of damage was done and more symbolic than uber-aggressive. The attack was targeted and Iran state media played down the incident. The oil market is telling us this is not turning into a major conflict, as oil was down approximately 3% on the week.
After the initial Israeli strike, Iran came back to send a message, but not too aggressively. Now, Israel did the same.
Netanyahu’s government splinters as security minister calls attack on Iran ‘lame’
Senior Hezbollah field commander killed in Israeli airstrike on moving car, IDF says
FBI on alert for threats to the Jewish community ahead of Passover, director says
Israeli beauty queen who served on frontlines of war assaulted in NYC by Hamas-loving psycho
Other Headlines
Trump Media shares closed nearly 26% higher, capping second day of gains for DJT
The company updated the website to show investors how to prevent their stock from being used to help short sellers. A short squeeze. Friday, the stock was +6% but remains -56% from 3 weeks prior.
The Bitcoin network completes the fourth-ever ‘halving’ of rewards to miners
BTC was volatile, as it dipped below $60k last week before settling in the $65k range. Recently, it hit an all-time high of $73.7k.
Tesla recalls Cybertruck over ‘trapped pedal’ issue seen in owner’s viral TikTok video
This Is Why Tesla’s Stainless Steel Cybertrucks May Be Rusting
TSLA is -41% YTD and -65% from the 2021 highs. EVs continue to fall in price and some TSLA models are down well over $15k from 18 months ago with yet another price cut.
Netflix blows past earnings estimates as subscribers jump 16%
Prosecutors: Trump violated gag order in hush money trial seven more times
New York AG says $175 million Trump fraud bond isn’t properly backed, should be voided
Bank of America Boycott Calls Grow After MAGA Accounts Closed
Bank America denied claims of “de-banking.”
36-year-old joins wave of House Republican retirements
The Republicans are dropping like flies. Jake LaTurner only served 3 years in Congress.
Another Republican joins effort to oust Johnson, putting the speaker in real peril
Fact check: Biden makes false and misleading claims during Pennsylvania campaign swing
He is so lost, it is scary. Again, there are not exactly amazing alternatives in this election but read Biden’s lies as called out by a left-leaning network. Biden also claimed his uncle was eaten by cannibals, but military records suggest otherwise.
Denver Mayor To Slash Funding for Police, City Programs To Deal With Migrant Influx
House passes Ukraine, Israel, Taiwan aid, potential TikTok ban
Remember, China does not allow US social media sites such as Facebook, X and YouTube. Why do we allow the Chinese government to block the US and we seem to cave on everything for them? Let’s get tough on China and force the same rules on them that they impose on our companies.
California Assembly Introduces Legislation to Combat Retail Theft
Wait. Consequences for crime in California? What an amazing idea. “One of the large retailers told me based on video footage they have, they identified that there were a couple 100 people responsible for 80% of the thefts in all of the stores in L.A. County,” said Assemblymember Zbur.
Shoplifting is turning NYC into a ghost town, we have to fight back
Concerning statistics in the piece.
Bad policies ruined this little girl’s life. How many others too?
Amid Budget Shortfall, San Francisco Reexamines Tax Burden On Big Businesses
Awful policies have driven businesses out of San Fran and CA. The 5 largest employers now account for almost 25% of the city’s total business tax revenue. What could go wrong?
House votes to ban TikTok in US unless Chinese owner ByteDance sells to American company
Finally, the House made a good decision. The Chinese government banned American social media.
California loses 2 more property insurers in growing crisis
Homeowners in CA facing surging rates and loss of coverage as more insurers flee. Not dissimilar from Florida where insurers are pulling the plug.
5 shot after Maryland high school senior skip day turns violent: 'What is the world coming to?'
The salary a single person needs to live comfortably in every U.S. state
Very good advice.
There ain’t no free lunch.
Ultra-rich put off buying yachts, jets in hope of massive Trump tax break if he wins
How much would Tiger's 2000 season have earned him in 2024 money?
Early days of the pandemic, I pushed the lab-leak theory and was canceled by countless readers. Sorry folks, this just does not look good.
Former Naval Officer Raises Alarm About “World-Changing” Underwater UFO Captured on Video
Cool video showing a UFO flying low above the water and then splashing into it filmed from the USS Omaha in 2019. I contend we are not alone but am yet to be abducted. Aliens, I live in South Florida and am anxiously awaiting abduction if you are reading this. I need to write about it in the Rosen Report.
Real Estate
This WSJ article is entitled, “Buyers Are Back in Control as Luxury Home Sellers Slash Prices.” I know some markets are getting hit but can tell you that luxury from Miami to Palm Beach remains in demand after a slow 4th Q. The amount of deals over $20mm is staggering and the best inventory is hard to find. My phone continues to ring with people looking to relocate to South Florida and for the most part, they are uber-wealthy. In March, the share of homes priced at over $5 million that have had their price reduced was 7.8%, up 1% from March 2023 and 3% from March 2022, according to Realtor.com. That is the highest level of price cuts recorded since Realtor.com began collecting its price cut data in 2017. The metro area with the largest share of price reductions was Austin, Texas, where the share of $5 million-plus homes with price reductions was 18.7%, up 8.9% year over year. That is a sharp turnaround from the pandemic era, when the Austin market posted record sales activity amid an influx of remote workers. Other markets with a significant share of price cuts at $5 million and above include Phoenix, where the share was 13.6%, a 6.3% increase from last year, and Tampa, Fla., where the share was 12.8%, up 0.3% from last year. I am also told that some of the condos in Midtown Manhattan are under pressure and selling at substantial discounts to prior purchased prices. One unit at One 57 sold for approximately $30mm after the prior sale was $40mm and the owner put $5mm into it. However, I know spots downtown remain hot. I understand the West Village remains in high demand and there have been some major off-market sales.
Interesting article in the CRE Daily entitled, “The Build-to-Rent Housing Boom: New Single-Family Rentals Reach All-Time High, With Another 45,000 on the Way.” In 2023, the build-to-rent sector witnessed unprecedented growth. A record-breaking 27.5K rental homes were completed nationwide, a 75% uptick from 2022 and almost 300% more than in 2021. Three key metros—Phoenix, Dallas, and Atlanta—led the charge, collectively accounting for nearly 33% of all new build-to-rent units added last year. I am hearing about more markets struggling to digest the excess inventory. I was told of some shocking examples in Nashville where landlords were struggling to get new apartments rented. Lots of good charts in the link.
The average rate on the popular 30-year fixed mortgage sits around 7.5%, the highest level since mid-November of last year, according to Mortgage News Daily. Even with rates higher, however, mortgage applications to purchase a home rose 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Concerning article entitled, “Middle Class Can't Afford Homes In Nearly Half Of Top 100 US Metros, Study Finds.” Given the sharp increase in home prices coupled with the large move in interest rates, housing affordability is a major challenge.
Ft. Worth Texas' tallest building is facing foreclosure just 3 yrs after the buyer acquired the building. The 40-story, 1M SF office building will be sold at a foreclosure auction scheduled for May 7. The seller acquired the building (801 Cherry St) in 2021 for $137M. The Four Seasons Wailea in Maui has been added to the default watchlist on a $234 million CRE loan. Given the cost of travel and the boom in luxury vacations, I am not sure what went wrong at the Four Seasons Maui. I presume they did not lock in low-interest rates on debt and struggled with refinancing. I looked up room rates and trust me, there were no bargains.
© 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™ #675 ©Copyright 2024 Written By Eric Rosen.
