Opening Comments
Today’s Podcast-20 minutes. More focused. Less topics. I am going to start interviewing people and move away from summarizing my newsletter.
I was taught how to add anchor links so you can click from the table of contents on an underlined section and it will bring you to that part of the newsletter. If this actually, works, I will continue to improve it and it will help readers go to sections of the report.
I went to see my eye doctor at Delray Eye Associates. It is near all the retirement communities on Military Trail on the Boca/Delray border. I am not exaggerating; I was the youngest person by at least 30 years. They call your name and ask for your birthday. The guy before me said, “June 15th, 1930.” The guy before him, said, “December 10th, 1932.” I looked like a puppy next to the walkers, wheelchairs and Velcro shoes. No joke, this place has legit eye care. The doctors actually went to real colleges, a rarity in South Florida.
Markets
Goldman Profit Disappointment
New Wealth Tax Proposals: CA, CT, HI, IL, MD, NY, WA
SFO Reparation Proposal of $5mm/Person
Will Miami Escape the 2023 R/E Correction?
SFO Commercial Vacancies. Wow
Picture of the Day-Painful Gambling Loss
I have seen some pretty stupid bets in my life. There was the time a guy on the trading desk tried to eat 3 gallons of ice cream in 30 minutes only to puke everywhere. However, this bet is really idiotic from a risk/return perspective. Never let this bettor manage your money. When the Chargers were up 27-0 against the Jaguars, a man bet $1.4mm that the Chargers would win. IF he was correct, he would make $11,200 in net profit. Betting $1.4mm to win $11,200? Kids, gambling is dangerous. Just watch the movie, “Uncut Gems,” and you may never gamble again.
Marea Has Lots of Flava
I have suggested Marea is a top 10 restaurant in NYC for me previously. I have been there at least three-dozen times since it opened in May of 2009 on Central Park South, just east of Columbus Circle. I do not recall ever being disappointed in a meal, service, ambiance or experience and have many fond memories of celebratory dinners including anniversaries, birthday parties, and closing dinners. I have sent dozens of readers there and have never heard a bad review.
Last month, I was in NYC during 38-degree rain which made the trip less than ideal, but one of the bright spots of the trip was lunch at the bar at Marea, which means tide. When I first started going to Marea, there was an expectation of an upscale dress code, and I was not convinced jeans were allowed. Well, that ship has sailed, and although the dining room tends to be slightly dressier, the bar area is super casual. I met my friend Nick at the bar, and we had a fantastic lunch.
I start with crudo (literally means “raw”) which is similar to sashimi. I enjoyed the tuna crudo- yellowfin tuna with oyster crema and crispy artichoke and the hamachi crudo-pacific yellowtail with Meyer lemon bergamot and basil aioli, pistachio. As an aside, I cook a great deal with Meyer lemon which is sweeter than a traditional lemon and you can eat the rind.
For the main courses, I always have the fusilli with red wine, braised octopus, and bone marrow covered with homemade breadcrumbs. For me, it is a show-stopper. The flavors are spectacular, though I originally never thought this would be a dish for me. The breadcrumb topping adds to the texture and makes it more memorable. I am happy the waiter insisted on it the first time I went to Marea a dozen years ago. We also ordered the gnochetti with shrimp, chili, and rosemary oil. Both were fantastic. I will say the fusilli is my favorite thing on the menu and is a special pasta dish-one of the best pasta dishes NYC has to offer.
The presentation is stunning for all the dishes and the desserts look like a work of art but are priced accordingly at $19. My favorite is the bombolini-cinnamon spiced doughnuts, chocolate sauce, and maple anglaise.
The service is always very attentive and the staff is incredibly knowledgeable. For me, the room is well appointed and stylish. They have an ample wine list by the bottle and the glass, but it does not come cheap. Marea lost its Michelin Star this year in what I believe is a travesty. At one point, it had 2-stars, went to 1-star in 2020 and now zero. They are expanding locations to include Palm Beach and was told that the raters don’t view such expansion kindly. The downside of Marea is it is not inexpensive. The small crudo are $34-38, small pasta dishes are $42 and the entrees are $40-85. The sides are great, but are $17 each and my favorite are the potatoes with rosemary and Parmesan. I strongly recommend ordering and sharing to give everyone a taste, the overall experience is out of this world. If it is just you and a friend, sit at the bar, I prefer it that way.
Food-A+
Service-A+
Ambiance-A
Wine List-A (EXPENSIVE)-Glasses are $20-$200. Yes, glasses, as they use Coravin access the expensive bottles for you to taste.
Price-Expensive for portions, but worth every penny
Quick Bites
Wholesale prices (Producer Price Index or PPI) fell .5% in December, far better than the .1% expected decline (1st chart). The inflation data is clearly cooling, but remains sharply higher than pre-pandemic levels. January Empire State Manufacturing survey disappointed with a reading of -32.9 from 22.1 (2nd chart) the prior month and far worse than the 8.6 estimate. Worst reading other than peak COVID fears in past 20+ years. On Wednesday, markets sold off, a move which caught me by surprise after better than anticipated PPI data. Given the PPI data, now there is only a 4% chance of a 50bps hike at the next meeting. The Terminal Rate is 4.85%. Fed President Bullard reiterated his desire for the Fed to remain Hawkish despite the improved inflation data and that pushed the markets lower. The market sold off sharply today with the Dow falling 614 points, or 1.81%, to 33,297. The S&P lost 1.56% to close at 3,929. The Nasdaq slid 1.24% to end the day at 10,957, snapping a seven-day win streak. Treasuries rallied sharply on the better than expected inflation data. The 10-Year yield fell 16bps to 3.37% and the 2-year fell 11bps to 4.08%. Oil fell 1% to $79 on recession fears, partially offset by China reopening.
Goldman said quarterly profit plunged 66% from a year earlier to $1.33 billion, or $3.32 per share, about 39% below the consensus estimate. That made for the largest EPS miss since October 2011. GS said operating expenses jumped 11% from a year earlier, to $8.09 billion, due to higher compensation, benefits and transaction-based fees, among other reasons. Goldman posted a $972 million provision for credit losses in the quarter, compared with $344 million a year earlier. The bank saw investment banking fees drop 48% to $1.87 billion on muted issuance activity in equity and debt markets and lower advisory fees. The stock fell over 6% on Tuesday. This is after $3bn in losses around attempting to build the consumer platform. More questions around the CEO, DJ Sol’s, longevity given the under-performance. Morgan Stanley reported a steep drop in trading and investment banking revenues, but was able to make up for the decline through its wealth management division. MS was +6% on Tuesday. This WSJ article, Stocks Drop as Bank Profits Tumble, outlines it in detail.
This WaPo article is entitled, “Billionaires in blue states face coordinated wealth-tax bills,” and outlines various proposals which will be introduced Thursday in CA, CT, HI, IL, MD, NY, WA. They range from wealth taxes to higher income tax brackets for the wealthy and high capital gains taxes. In HI, MD and NY, bills will propose a measure that would affect more significantly a middle tier of rich people, not just the ultrarich: lowering the exemption cutoff for the estate tax. In Maryland’s case, families would owe taxes on inheritances over $1 million rather than $5 million, as is the case today. The CA proposal would stay in effect for years after a resident moves out of the state. NY is trying to add on an additional 7.5% capital gains tax for married couples with income over $550k and a 15% additional tax for couples with over $1.1mm income. Just like AOC did not understand basic economics and the multiplier effect when she proudly booted AMZN, these politicians don’t get it. The wealthy spend a disproportionate amount and drive sales taxes and hiring. When they leave the state, they leave a massive budget deficit. You cannot tax your way to prosperity, and the wealthy have the ability to get up and move; just check the census data. The budgets in many states are in serious trouble, and either taxes will be raised or austerity measures will take place. This is a link for those who don’t pay for WaPo.
I want to begin with discrimination of any kind is not acceptable and the historic treatment of many races, religions, sexual orientations… has been awful. I do not condone it for a second. However, the draft proposal by the San Francisco reparations committee is a bit aggressive from my perspective. The proposal suggests $5 million to each Black longtime resident, total debt forgiveness and income supplements for low wages. The $5mm lump-sum payment for each eligible resident in addition to debt forgiveness due to decades of harm caused to the Black community is outlined in the draft. This is not for slave reparations. To be eligible, you must be 18, identified at Black on public documents for 10 years, be born in SFO between 1940-1996 and lived in SFO for at least 13 years. Page 30 of the link gives all the conditions for eligibility. My quick math based on population and age would suggest approximately 37k are Black and over 18. Let’s assume 50% are eligible under the requirements. That would result in 18.5k eligible or $92bn in reparations, not including debt forgiveness. Maybe I am off on my assumptions, but you get the idea. The entire San Francisco City annual budget is on the order of $14 billion per year! The Mayor claims there is a $700mm budget deficit over next two years. Remember, with the wealth leaving SFO, lower commercial R/E valuations, tech valuations crushed and IPOs not happening, the budget is already compromised. Where will the money come from?
Other Headlines
‘The year of inflection’: Top bank CEOs weigh in on inflation outlook
Kind of ironic that all the policies put in place to save the “little guy” helped the “big guy” make all the money and drove inflation to stratospheric heights. A total of $42 trillion in new wealth has been created since 2020, with $26 trillion, or 63%, of that being amassed by the top 1% of the ultra-rich.
Macro hedge funds end 2022 on high, many others lose big, investors say
Lists a bunch of funds and shows returns. I want to see where they have their private equity, private credit and venture positions marked.
Holiday sales fall short of expectations, set stage for tougher 2023 for retailers
NY oil tycoon lost billions with Enron, invested with Bernie Madoff, and struck out with FTX
Given all his mistakes, it is shocking he is worth billions.
I disagree. You need diversification. He is worth enough and has given billions to charity. I disagree that all your eggs should be in one basket. Should Musk have kept 100% of his TSLA or Zuck 100% of his Meta? I think not.
Elon Musk Warns of 'Massive Danger' Looming Over the World
He is referencing China’s population decline.
Iranian oil exports end 2022 at a high, despite no nuclear deal
EVs Made Up 10% of All New Cars Sold Last Year
7.8mm EVs sold globally, up 68%. Global new car sales were 80.6mm units.
Elon Musk Throws Shade on the Most Powerful Club in the World
I am starting to side with Musk on this one. A bunch of uber-wealthy flying in on private jets and telling everyone else to be mindful of climate change is a bit rich. This CNN article suggests World Economic Forum is becoming irrelevant. I swear that I am not negative here due to the fact that I have never been invited! Clearly, the invitation committee does not read the Rosen Report. I believe the picture was from 2022 when 1,040 planes came. Many short haul flights which could have been replaced with greener forms of travel like rail. The hedge fund mogul, Dan Loeb, a onetime fixture of the Davos scene who stopped coming a few years ago, joked, “I remember when going to #Davos was prestigious and elite. I’m sure it’s still fun however.”
New Car Inventory Buildup May Bring Back Incentives
“While new-vehicle supply rose 37% since September and is 66% above a year ago, the sales pace at the end of December had improved by a scant 2%,
More insurance companies pull out of Louisiana: 'We are in a crisis'
I am not kidding when I tell you getting good insurance in Florida is harder and more expensive after the hurricane this season.
90% of online content could be ‘generated by AI by 2025,’ expert says
I have written extensively about ChatGPT and believe it is a game changer, but thought this article was a bit aggressive. I do believe ChatGPT is a threat to Google.
Chicago Mayor Lori Lightfoot Faces Tough Re-Election Bid
I cannot fathom any rational thinker could vote for Lightfoot, and now there are eight rivals to choose from.
Four more Virginia schools admit to withholding National Merit notifications to students
I wrote about this two weeks ago in, “An Offer You Can Refuse,” in the last bullet in Quick Bites. It is disgusting for the name of “equity.” I want those who work hard to be rewarded. It is America, after all.
Bizarre obituary praises Utah dad Michael Haight, who killed wife, five kids
Sorry, if you kill your wife and 5 kids, your obit can’t praise you as a family man.
Ukraine strike deaths hit 40; Russia seen preparing long war
Crime Headlines
Scourge of Gramercy Park still terrorizing locals despite pleas to cops, City Hall
8 people shot in mass shooting during MLK Day event at Florida park
Teacher dies hours after being tased by LAPD officer
The video is included above and shows the teacher, Keenan Anderson, (related to founder of BLM movement) resisting arrest and officers tried to hold him down unsuccessfully. The video is disturbing, but it does appear the police were trying to keep him calm, the teacher was not cooperating and ran. The report suggests Anderson caused a collision, ran from the scene, tried to steal another vehicle and then resisted arrest. The teacher tested positive for cocaine and cannabis.
Real Estate
Miami to escape the home price correction in 2023 while ‘overheated’ housing markets like Austin get hammered, says Goldman Sachs. The paper suggests peak to trough of 10% in the US between June 2022 and end of 2023 for Case-Schiller Home Prices. This is after a 41% increase between March 2020 and June 2022. In 2023, Goldman Sachs sees double digit home prices in key markets such as Austin (-15.6%), San Francisco (-13.7%), San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%) is expected to decline. ), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%). Those markets are also the ones where the home price recovery was hardest hit in the second half of 2022. In fact, through November, Austin is down 10.4% from its 2022 peak home value. I contend the Great Migration will continue and despite elevated prices, high-end homes in South Florida should outperform, but I am sure many sales stall at these elevated levels.
San Francisco commercial real estate vacancies are hitting a record high as more and more commercial buildings are left empty. Commercial real estate vacancies have reached 27.2% as less commercial space is being rented relative to 3.7% in 2019. Some SFO sub-markets are well into the 40%+ vacancy rates. The data showed how the largest leap occurred from Q4 of 2019 to Q4 of 2020 when the pandemic happened.
Other R/E Headlines
Homebuilder sentiment in January rises for the first time in a year
Investors Seek to Pull $20 Billion From Core Real Estate Funds
JPMorgan and Morgan Stanley are among fund managers facing withdrawal requests as property values decline.
Inn-sanely sexy: Meet Miami’s newest hotel-branded condos
Virus/Vaccine
Data is improving slightly on cases, test positivity and hospitalizations, even though deaths continue to grow sharply, but are lagging indicators.
