Bigger is Not Always Better

4-13-25

Apr 13, 2025

Opening Comments

My last note was about the carnage from the Palisades fires and the drama of insurance. The most opened links were the Shay Boloor open letter to Trump and Marjorie Taylor Green’s stock trading. Also of note, my short video of the devastation of the Palisades fire was well-received.

Numerous readers have purchased Eight Sleep pods after reading my reviews on the product. One reader, a former hedge fund manager, texted me with glee about his recent purchase, and you can see the results for yourself. I, too, have slept much better since using the Eight Sleep pod. When I travel, I do not get the same level of sleep. Remember to use the Code: ROSEN to get your discount.

My editor is on holiday for a couple of weeks, so there may be a couple extra typos.

Picture of the Day-Snake in the Yard
Bigger is Not Always Better
Quick Bites
- Markets
- Lessons Learned
- Bond Market Warning Signs
- Commodity Sell Off
- Concerning Car Loan Data
Tariffs
Politics
Middle East
Other Headlines
Health
Real Estate
- Real Estate Taxes in NY
- Insurance Crisis Hits the Heartland
- Mortgage Application Rejections
- $87mm West Village PH

Picture of the Day-Snake in the Yard

I have an herb garden, and virtually every night, I go out there to grab some fresh herbs to use while cooking dinner. I planted green onion, thyme, rosemary, parsley, sage, chives, tarragon, and assorted other herbs. No, it was not poisonous, but it startled me nonetheless. I made branzino, but was a bit shocked by the encounter. Meyer Lemons are my secret ingredient.

Bigger is Not Always Better

I know that many of my readers are perverted based on the open rates on sexual topics and my piece entitled “Size Matters.” That note received a ton of opens, but much to the chagrin of my readers, it was about desk size. Today’s note comes on the heels of my surf trip to the Kelly Slater Surf Ranch in California. It is the best man-made wave in the world and offers perfect surf.

I need to explain a little surf math. The larger the board, the more volume and the easier to catch a wave. However, you lose handling. Think of a van versus a Porsche. Given my torn labrum in my shoulder, I started with a 5’9” board, which had 34 liters of volume, a little bigger than normal for me. I felt I needed something larger to help me paddle, given my shoulder injury. It turned out to be a horrible idea. I surfed so poorly that I was livid. I questioned everything, and my frustration was mounting. I despise doing things poorly and felt I did not come close to my expectations early in my first surf session. Yes, one year off contributed, but the bigger factor was the equipment, which was not right for me. I asked for a new board, and they brought a 5’7” board with 31.4 liters of volume. I was worried about catching waves on such a little board but did it with ease. My horrific surf session ended on a positive note.

Yes, all the pictures and videos of surfing are me. This is a two-minute video edited by my daughter Julia. It includes snippets from some waves. Although I am hardly the surfer from my younger days, I was happy with the outcome, especially given that I have one usable arm after suffering a torn labrum in my shoulder.

The next morning, I had the 8 am time slot. The temperature was 45 degrees, and I excitedly grabbed the 5’7” weapon and went to town. It turned out to be one of the best surf sessions I have had in years. I made it out of four barrels but managed to get eviscerated on one due to being in a poor position.

The adage is that size matters. It does for many things…including surfboards. I was shocked that the 2-inch board difference made such an impact on my experience. On the smaller board, I generated far more speed and handle the more critical parts of the wave with ease after struggling on the large board.

As an aside, the KSW Surf Ranch is the best man-made wave in the world. It is hard to get there and expensive, but if you are an intermediate to advanced surfer, I highly recommend the experience. The staff is so welcoming, and the surf crew helps to improve your skills. The food is solid (best waffle I ever had), and the memories last a lifetime. Hanging with your friends and making new connections are other reasons to take trips like this one. Thank you to Johnny P (the most interesting man in the world) for organizing the event and including me every year. He won wave of the day and deserved it. He is a true waterman from Hawaii.

Quick Bites

What a week of volatility in the markets. Despite good inflation data, stocks sold off again on Thursday over economic growth concerns. The inflation rate eased to 2.4% in March, lower than expected; core at 4-year low, but was not enough to stop equities from a sharp sell-off. Also of note, the 10-Year Treasury remains elevated despite economic worries, and yields continue to climb, which should be setting off alarm bells. The US Dollar was on fire not long ago, but has since been crushed as it seems foreigners are selling US assets. Some are of the view that US exceptionalism is waning and a recession is coming. Not surprisingly, consumer confidence fell again to 50.8 from 57.0 and expectations of 54.6. The damage done to the system is real. Bank earnings were generally good (JPM & MS), citing strong trading revenues, but Wells was mixed. Despite the tumultuous week, the three major averages notched solid gains in the period. The S&P 500 posted a 5.7% advance for its best week since November 2023. The Nasdaq rose 7.3% during the week for its best performance since November 2022. The Dow gained nearly 5% over the week. Although oil is down sharply due to economic fears, WTI closed +2.3% to $61.5 on news that the US could end Iran’s oil exports.
During the melee from the past couple of weeks, I had suggested that the tariffs would not last. Yes, I bought stocks near the lows on Monday, but not nearly enough. I was waiting for more carnage. You need to take a long-term view, and when you see 20%+ sell-offs in short order, especially on high-quality companies, you need to put capital to work if you have a long term view. We may have seen the lows, but I am also not convinced that the path is clear. Trump’s questionable tariff policy damaged confidence in the system and relationships with other countries. The likelihood of a recession went down from earlier in the week but remains elevated. If the moronic trade policies create a healthy recession, we could see stocks decently lower. Yes, have dry powder, but you also have to nibble on big down days. Also of note, viscous rallies happen, and it does not mean the coast is clear. Of the 25 best days for the Nasdaq, including Wednesday, 22 took place during the dot-com collapse, the 2008-09 financial crisis or the early days of Covid. One occurred on Oct. 21, 1987, two days after Black Monday. The other was in November 2022. I grabbed the chart below from a Doug Cass note about big rallies. Most were in bear markets. Interesting headline: Highest tariffs since the ’30s to trigger recession, S&P 500 decline to 4,200-4,500, says BCA Research.
In my last note, I wrote about my concerns about the bond market volatility, and the three articles below echo my sentiments. The bond market sell-off was signaling calamity, and some article suggests Japan was unloading US Treasury bonds. Trump said he had been “watching” the bond market — known for forcing the hand of political leaders attempting major economic overhauls — in his Wednesday announcement of a tariff pause, calling it “very tricky” and acknowledging “people were getting a little queasy.” With his tariff policy widely considered likely to be inflationary, a sustained rise in yields could lead to a combination of higher prices, higher borrowing costs and much weaker economic growth or even a recession. The bond market sell-off escalated again on Friday with the 10-year hitting 4.58% before settling at 4.50%. This cannot continue for long. Dimon believes the Fed may need to step in and I agree. This WSJ article suggests that Bessent also helped persuade Trump to pause tariffs to negotiate. The big takeaway is that Trump will not let markets get completely out of control. He is a madman, but not a complete idiot. This article shows that one trader lost $140mm in April while trading Treasury Bonds at Tudor Investments. Do you think he is the only one who lost big?
Global commodities have been selling off and this CNBC article suggests it is a warning sign for the global economy. Global commodity prices are getting hammered, as trade war tensions once more fester between the world’s two largest economies — and recession signals are flashing red. The S&P GSCI index, which tracks global commodities across the energy, metals and agriculture sectors, shows that prices have declined over 8% since April 2, when U.S. President Donald Trump announced a slew of “reciprocal” tariffs. That was despite the slight recovery in prices after the White House leader announced a tariff U-turn Wednesday. “The collapse in commodities [prices] is a circuit breaker, a sign that a global recession is afoot,” said Marko Papic, a macro and geopolitical expert at BCA Research. However, gold is hitting record highs and is now trading at $3,254/oz or +22% YTD.
This car loan data is concerning. Almost 20% of auto buyers are getting 84-month loans, an all-time high. Payments of $1,000/month or more are 17.7% of purchases, and the average amount financed is $41.4k. With higher interest rates, zero percent finance deals accounted for just .1% of all new vehicle loans, relative to 3% of loans one year prior. The average payment was $741/month with $6.5k as a down payment. The delinquency data is not updated for March yet, but the chart below outlines the latest information, which shows weakness. Car repossession rates in 2024 reached their highest level in over a decade at about 1.73 million. During the same year, 2,332,837 Americans defaulted on auto loans, which exceeded the number of defaults during the Great Recession’s peak.

Tariffs

Trump’s pausing many of the tariffs is a good thing for the economy and gives Trump and the team time to negotiate better deals. However, how will he now pay for the lost revenues associated with the extension of the tax cuts without the tariff revenue? The escalation of the trade war with China is hard to track given the numerous tariff increases. The US has a 145% tariff on China, and they imposed a 125% tariff on the US. The higher the tariffs go, the quicker a deal gets made, as it will now put too many companies out of business if it is not rectified quickly. The economic impact of such massive tariffs is substantial.

On a positive note, late Friday, Trump backtracked yet again by exempting phones, computers and chips from new tariffs. The guidance also includes exclusions for other electronic devices and components, including semiconductors, solar cells, flat panel TV displays, flash drives, and memory cards. This will lead to a nice rally, especially in impacted sectors. The aggressive tariffs and quick exemptions are creating havoc in markets and for corporate planning. Too many unknowns are weakening confidence as the economy was slowing without tariffs. This article puts into perspective the dire situation Apple was facing before the tariff relief Friday.

Real Estate

The real estate industry, and especially the commercial sector, remains the main driver of the New York City economy, according to data to be released on Monday by the Real Estate Board of New York. The trade organization reported that real estate-related tax revenue (RERT) increased to a record high $37 billion in 2024 and is on track to top $50 billion in the next fiscal year. RERT revenue far outpaced any other source, totaling nearly 50% of all municipal tax revenue in 2024 — a percentage just slightly under the previous year.
I was surprised by this Business Insider article on homeowners’ insurance. It suggests that America’s heartland is seeing insurance premiums rise faster than coastal states. The findings show that the home insurance affordability crisis extends far beyond Gulf Coast states prone to hurricanes and flooding or California towns vulnerable to wildfires — which often make the headlines. Extreme thunderstorms with wind, rain, and hail are also causing billions of dollars in losses in states between the slopes of the Rocky and Appalachian mountains. The disasters, combined with inflation and the rising costs of rebuilding homes, are driving up premiums and forcing some insurance companies to scale back coverage in risky areas or drop customers altogether. The consequences could be significant because most Americans can't get a mortgage without home insurance. Between 2021 and 2024, Utah premiums were +59%, Arizona +48%, Illinois +50%, Pennsylvania +44% and Nebraska +35%. However, Florida has the highest average premiums.
I was surprised by this Bloomberg story on mortgage application rejections. More than 4 in 10 applications over the past twelve months were rejected, according to the latest New York Fed survey — the highest share in data going back to 2014. It suggests that homeowners who qualified for the initial purchase are now deemed ineligible for a new loan on the same property. Higher interest rates and debt levels, along with pandemic-led disruptions to jobs and incomes, have made it more difficult for many US property-owners to tap home-equity loans and lines of credit, according to data from Point, a home-equity investment company.
A penthouse at a project under development on a cobblestoned Manhattan street is getting listed for $87.5 million, a record-high price for the area south of 14th Street. The duplex condo at 140 Jane St. in the West Village will offer views of the Hudson River from its floor-to-ceiling windows. The apartment, with a wraparound terrace and three balconies, is also one of the largest in the neighborhood with 9,532 square feet (886 square meters) of indoor space.

© 2025 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™ #777 ©Copyright 2025 Written By Eric Rosen.

Bigger is Not Always Better

4-13-25

Picture of the Day-Snake in the Yard

Bigger is Not Always Better

Quick Bites

Tariffs

Politics

Middle East

Other Headlines

Health

Real Estate

Discussion about this post