Opening Comments
I will be travelling a bit this summer with Jack’s tournaments, and it will take us to Zachary, LA, Memphis, TN, Ashland, KY, Philly, PA, Hershey, PA, Dothan, AL, Chicoppee, MA and around NYC among others. If ANYONE has any hospitality recommendations, let me know. We are at the Spring Hill Suites and Comfort Inn at Hershey and Zachary. Help me! If anyone has been to any amazing NYC restaurants recently, let me know as I am always looking to try the good ones, and I will be in and out of NYC a few times this summer. Jack will be eating at Rezdora and Junoon, two amazing restaurants. My daughter, Julia, is off to camp again in Vermont.
In speaking with readers, I am uncovering concerning themes. People have lost a great deal of money in stock, bond, crypto markets and are pulling back spending as a result. On Wall Street, clearly bonuses won’t be what they have been, as banking revenues have plummeted. Even my wealthy friends are making adjustments. One said, “I don’t recall ever thinking I needed to seriously cut back spending, and now I am far more conscious of my bills and spending given mounting losses and what will be reduced pay.” He went on to tell me about how much it cost to fill up his car and that inflation has him and many others thinking twice about discretionary spending. His summer travel will be reduced.
There was a fishing tournament here last weekend. In 2021, there were 140 boats, and his year there were 81 boats. What do you think the biggest driver of the 42% decline was? Maybe $6.5/gallon gas for your boat had an impact. The other notable comments are around the desire to work and the number of young professionals who are “burnt out” due to stress from the pandemic, isolation, mandates, lockdowns… They realize they prefer work from home and do not want to go back in full-time. The result is a willingness to “walk” even though they are in peak earning years. I am getting increasing calls from younger professionals from NYC, Chicago, SFO… who want to relocate to Florida. I am referring to 27-34 year old highly educated workers who no longer want to live in these cities and maybe willing to take a step back professionally to leave.
Picture of the Day-Oil and Diesel Charts
Akira Back
Quick Bites
Markets
Palantir CEO Interview
Interesting Charts
Biden Foreign Policy Mis-Step
Goldman Sachs Banker Killed on Subway
Last Payphone
Texas School Shooting
Other Headlines
Virus/Vaccine
Data
Real Estate
General Comments
New Home Sales Slowing
Migration to Florida from Tri-State Continues
Commercial R/E-Midtown Exodus
Picture of the Day
Despite Strategic Petroleum Reserves being released, the chart below suggests oil prices are not crashing near term absent a major shock. As of Tuesday, average gasoline prices were $4.6/gallon (new high) and Diesel was $5.6/gallon (pennies off the high). We are going into peak driving season. The US is closing refining capacity despite increased demand. The US is producing approximately 18mm barrels a day equivalent between oil (11.2mm), natural gas liquids (5.4mm), biofuels (1.1mm) and the refinery processing gain (1mm). However, the US is consumed 19.8mm/day in 2021 and slightly more in 2022. Until the US is far less reliant on oil, this is a recipe for disaster. We are trying to transition to cleaner sources without a viable alternative. We effectively are transitioning without a transition plan. The Diesel & Jet Fuel charts (Distillate) are even worse, which will impact logistics expenses and farming costs (2nd chart).
Akira Back
I have been incredibly critical of the culinary wasteland of South Florida, and things are finally getting better. New openings in Miami are making it far more palatable to despite some crazy prices. However, things have been a bit slower to grow in terms of good eats in Broward and Palm Beach counties. With the influx of wealth relocating to the Sunshine State, food choices are improving, even away from Miami. We have a LONG way to go to compare to NYC, Chicago, LA or SFO on the food scene, but I am excited about this new opening, Akira Back, in Delray at the Ray Hotel.
Together with The Ray Hotel, chef Akira Back opened his first Florida namesake restaurant in Delray Beach. Drawing on inspiration from his Korean heritage and travels around the globe, chef Back has created a menu that blends modern Japanese cuisine with authentic Korean flavors. Akira Back is a Michelin Star chef.
The biggest thing I miss about NYC is the food. I wrote restaurant reviews for many years and prided myself on trying the new places and uncovering gems. There was always a hot new place to go and find a great menu, interesting crowd and beautiful scene. Arika Back made me feel excited about the food and presentation, a rarity in Palm Beach County.
At Arika Back, the room is well decorated, but the noise levels are obscene. I felt I needed to raise my voice for the people at the table to hear me, and we were a four top. The crowd was a strange mix if attractive younger people (30s and 40s) and an older, grey haired crowd.
The food is meant to share and we ordered a ton of items including sushi, a handful of rolls, tuna pizza, rock shrimp tempura, edamame, miso soup, brussels sprouts, miso cod and short ribs.
In general, the food was quite good and presented beautifully. The service was top notch and highly recommend our waiter, Justin. I felt the sushi was about as good as I have had it in Florida, but not on par with my favorites in NYC. The sushi is served as two pieces for $12-30+. The rock shrimp tempura was solid and had a nice “kick” to it.
Although I felt the miso cod and short ribs were very good, I believe the price point is not commensurate with the portions. They served 4 oz of cod ($42) with no sides, and I could have eaten 12 oz by myself. The short rib portion was tiny and cost $49. As you can see in the picture, they give 6 Godiva Chocolate sized pieces of short rib with a tiny quail egg. I could have eaten 25 myself. Why is it that high end restaurants feel as though they are the portion control police? Your food is good. I am hungry and want to eat and feel the “price per ounce” is a bit steep despite the beautiful presentation and quality service. I want to leave stuffed and it would have caused me to take out a jumbo mortgage to make the spandex in my waistband get put to work.
Miso Cod
Short Ribs
One roll which stood out to me as different (not my favorite on the menu) was the Pop Rockin’ roll with spicy crab, cucumbers, asparagus and POP ROCKS. Apparently, when Akira Back was a kid, he would not eat fish or sushi, and his mom put Pop Rocks on his sushi to get him to eat it. The result is a dish after his mother’s cooking and adds quite a bang to the taste buds. However, I felt the Perfect Storm roll with shrimp tempura, spicy tuna, salmon belly, aburi and chipotle mayo was better.
Do I feel this is a Michelin Star experience, not quite, but it is a top Broward/Palm Beach County restaurant in my book, despite the high cost per serving. For my family of 4 (2 kids and a wife with a small appetite), it was $500 with two glasses of wine. If I ate alone at the bar, I could have easily spent $300+. There is a 100% chance I go back here on a special occasion and hope they put some noise dampers on the ceiling prior to my arrival. Hopefully, the portion control auditors allow the kitchen to increase the amount of food served as well. I would try to get in this summer with crowds thinning. Come September, it will be impossible to get into Akira Back. They have valet parking for $20 with a validated ticket.
Food-A
Service-A
Room B (Loved the décor, but the noise levels were offensive)
Wine-B+
Cost-Pricey for the portions
Quick Bites
I’m quite confused by these markets. Today, the Fed Minutes suggested more 50 bps raises than the market was considering and the market rallied on the news. The minutes from the Fed’s May 3-4 meeting showed officials saw the need to raise rates quickly, and possibly more than the market has priced in, to quell the recent inflationary pressure. “Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” the minutes stated. In addition, Federal Open Market Committee members indicated that “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.” I believe the Fed mis-judged the situation and should have ended Quantitative Easing and started raising rates last year. The Dow jumped 193 points, or 0.6%, to 32,122. The S&P 500 rose 0.1% to 3,979 and the Nasdaq advanced 1.5% to 11,435. All of the major averages are currently on pace for a winning week. This is after almost two months of consecutive down weeks. The move in natural gas was concerning as it is up to $8.98 after being as low as $7 a few weeks go. David Givens, head of natural gas and power services for North America at Argus Media, pointed to three key catalysts fueling the rally: little production growth, high liquified natural gas exports, and storage levels that are roughly 17% below the five-year average. The 10-year Treasury was little changed at 2.75% and crypto was largely flat on the day with BC+.9% and ETH -.4%.
In Davos, Andrew Ross Sorkin interviewed Palantir CEO, Alex Karp on a host of issues. Karp became agitated and aggressive about his stock price and the bigger driver which is more important. The question was Palantir stock has been crushed and what does that do to Palantir employees and investors. The suggestion was the stock being off 74% from its 52 week high would be devastating to the company. Karp responded quickly suggesting the biggest change is not the stock, it is the ability to keep talent as the fundraising spigot has been turned off from the venture community and his employees won’t leave for the promise to find the next Palantir given the funding has dried up. He crushed the “loose” venture dollars and start-ups which were getting easy money and now cannot. The clip starts at 1:50 minutes and worth the 2 minute listen. I have spoken about this in recent reports, but hearing it from the CEO of Palantir carries a bit more weight. Karp was bullish about what the company is creating and suggested that in a couple years all will look great.
This bullet is just going to be charts which I feel are self-explanatory and interesting.
Biden had another foreign policy mis-step in his comments about Taiwan. President Joe Biden said Monday that the United States would intervene militarily if China attempts to take Taiwan by force, a warning that appeared to deviate from the deliberate ambiguity traditionally held by Washington. The White House quickly downplayed the comments, saying they don't reflect a change in US policy. Within hours, China had expressed its "strong dissatisfaction and firm opposition" to Biden's comments, saying it will not allow any external force to interfere in its "internal affairs." "On issues concerning China's sovereignty and territorial integrity and other core interests, there is no room for compromise," said Wang Wenbin, a spokesman for the Chinese Foreign Ministry.
Goldman CEO says ‘devastated’ by fatal subway shooting of employee, Daniel Enriquez. The senseless violence must stop. Political leaders need to take a much harsher stance to bring back safety to the streets. A GS banker being shot on a subway is not the messaging NYC needs to get back its mojo. How about consequences for bad acts? The victim’s partner suggested Daniel took the train due to surging Uber prices. Goldman Sachs’ New York employees griped that they increasingly face becoming targets of violent crime during their commutes after a coworker at the megabank was tragically gunned down on the subway. “Can Goldman lead the pack for banks on issuing Kevlar vests?” one fed-up Goldman banker wrote on the popular corporate message board Wall Street Oasis. There have been 18 victims of subway homicide since March 2020. Mayor Adams wants Jamie Dimon to ride the subway. Sure, that happens if he is flanked by 8 armed guards and wears Kevlar. What will that prove. Adams and Bragg, how about doing something about crime. Consequences for bad actions. Make examples out of criminals because right now, they are all laughing at you and hurting your constituents.
NYC removed the last public payphone this week. “Just like we transitioned from the horse and buggy to the automobile and from the automobile to the airplane, the digital evolution has progressed from payphones to high-speed Wi-Fi kiosks to meet the demands of our rapidly changing daily communications needs,” Commissioner Matthew Fraser said in the release. It got me to thinking about all the technological advances which have taken place in the recent history and how much better our lives have become. This link is to 39 obsolete technologies. What is the new one which will disrupt in a good way? As a kid, I always had a quarter on me in case I needed to make a call.
Another senseless school shooting in Texas on Tuesday killed 19 children and 2 adults. The latest figures come from Travis Considine, a spokesman for the Texas Department of Public Safety. The gunman also died. An 18-year-old gunman opened fire Tuesday at a Texas elementary school, killing at least 18 children as he went from classroom to classroom, officials said, in the latest gruesome moment for a country scarred by a string of massacres. The attacker was killed by law enforcement. The massacre at Robb Elementary School in the heavily Latino town of Uvalde was the deadliest shooting at a U.S. grade school since a gunman killed 20 children and six adults at Sandy Hook Elementary in Newtown, Connecticut, almost a decade ago. Tuesday’s school shooting is on the heels of the Buffalo supermarket attack. The Texas massacre had plenty of warning signs. The shooter cut up his face with knives for fun. He used a BB gun on people and was known to cops as well. Just prior to the shooting, he posted on Facebook of his deadly plot as well. Elon Musk backs ‘tight’ background checks for all gun sales in wake of mass shooting in Texas
Other Headlines
Bill Ackman says a more aggressive Fed or market collapse are the only ways to stop this inflation
Ackman is hardly my favorite fund manager, but he has made himself quite a nice living. Although I don’t take his rhetoric too seriously, he can move markets. I personally believe inflation is peaking in coming months, but also believe the Fed is behind the curve. I am not convinced inflation crashes, but does stop climbing.
CBO boosts U.S. GDP growth estimates, says inflation has topped and will cool to 2% by 2024
I agree we are peaking on inflation and said that recently. I am not sure how quickly it recedes, but based on earnings revisions, maybe faster than I thought.
Snap plunges 38% after CEO warns company will miss revenue and earnings estimates, slow hiring.
Abercrombie & Fitch shares fall over 32% after retailer posts loss, offers weak outlook
Electronics are set to get even more expensive as chip giants hike their prices
The foundries are increasing their prices because it’s becoming more expensive for them to fund their growing operations.
Policies have consequences and moving to cleaner solutions before you have the capacity is proving to be devastating. Relying on Putin does not help either. Note, Trump warned Germany in 2018 of energy dependence on Russia and they literally laughed at him. Watch the 30 second video.
Klarna to lay off 10% of its workforce as souring economy hits buy now, pay later space
Layoffs are coming and will be picking up steam in coming months.
Credit Suisse CEO Says We’ll Never Go Back to Office Full Time
‘Unrealistic’ to expect staff to go back to office full time
Swiss bank only has 37% of global employees in the office
The Top 50 Richest People Have Lost More Than Half a Trillion Dollars This Year
The 4 minute video shares an interesting perspective.
Chappelle 'attacker' says he was inspired by Will Smith's slap
Maybe if Will Smith was booted from the Oscars and was arrested, he would not have “inspired” such actions. I ask this question. What would have happened if Mel Gibson, Tom Cruise, Robert Downey Jr, or Hugh Jackman did what Smith did?
Madison Cawthorn Under House Investigation Over Crypto Promotion
This guy is a disaster and was voted out of office.
I really don’t know what is wrong with people, but this woman deserves it. I call it Social Darwinism.
Starbucks will exit Russia after 15 years, closing 130 licensed cafes
Henry Kissinger: Ukraine must give Russia territory
I was surprised by his stance.
Ukraine invasion may be start of ‘third world war’, says George Soros
Veteran philanthropist tells World Economic Forum civilization ‘may not survive’ what is coming
Virus/Vaccine
The good news is case growth is slowing slightly, but remains growing at an aggressive pace. Hospitalizations and I.C.U.s are growing sharply while deaths continue to fall.
Real Estate
The Royal Palm community in Boca is back up to 17 listings. It got down to 6, I believe. Recall when I moved down 5 years ago, there was 71 listings for an average of $4.9mm. Today, the average listing is $16.0mm. Most of the homes listed are new or newer with just a few older homes. The listing prices range from $8-35mm today. A horrific lot on a busy street which is blocked by bridge traffic 3 times an hour is under contract. I do not know what motivated someone to buy it as I would need sedatives to live there. I do feel some of these houses seem to have stretch offers, and the market will be cooling.
$35mm listing on a canal with 166’ of water frontage. Don’t get me wrong. The house looks amazing, but $35mm seems crazy to me. Someone suggested they turned down a $30mm offer, but I have not confirmed it.
The annualized rate came in at 591,000 units, seasonally adjusted. Analysts had been expecting 750,000. That is the slowest sales pace since April 2020, when everything shut down at the start of the Covid pandemic. Mortgage rates, which have been rising since January, really shot up in April. The average rate on the 30-year fixed loan began the month at 4.88% and ended it at 5.41%, according to Mortgage News Daily. Consumers are being hit by rising interest rates and four-decade-high inflation. That is making it even harder for them to afford today’s higher home prices. The median price of a new home sold in April was $450,600, an increase of nearly 20% from the year before. The near term peak is in on housing in my opinion. Higher rates, wealth destruction, coming layoffs, consumer confidence and inflation reducing purchasing power are all playing a role. I am hearing less stories of bidding wars and idiots bidding with no inspections.
New York has fully reopened after the strict restrictions imposed during the COVID-19 pandemic — but migration from the Empire State to Florida has accelerated this year, according to new data. A total of 21,546 New Yorkers swapped their driver’s licenses for the Sunshine State version during the first four months of this year — a 12% increase from the same period in 2021.
The 2022 totals are 55% higher than the first four months of the last pre-pandemic year of 2019. Mayor Eric Adams has speculated that the Florida exodus would wane — and that some evacuees would return — once the city reopened. A total of 61,728 New York state residents switched to Florida licenses last year — a figure that will be surpassed in 2022 if current trends persist. Migration from New Jersey to Florida has also increased this year by 9%. Rounding out the tristate, official Connecticut departures to Florida this year are up by 4%, going from 3,950 in the first four months of 2021 to 4,119 this year. I was an early adopter moving to South Florida 5 years ago from NYC. I did not like the direction of the city, the quality of life, cost of living, weather, taxes..Now the flood gates are open and people realize that being charged $500 for Taco Bell ain’t so interesting.
Interesting WSJ article entitled, “Exodus From Midtown Manhattan Led by Tech and Banks.” Gives a lot of examples of companies relocating to newer buildings downtown from midtown. Companies are bypassing prime blocks in Midtown Manhattan for neighborhoods further west or downtown, as Park Avenue fades from prominence after decades as a magnet for some of the world’s biggest companies. With many employees preferring to work remotely or from home, companies are giving priority to state-of-the-art office towers with outdoor space and buildings in trendier neighborhoods in an effort to lure workers back to their desks. Many businesses today—and their employees—are also increasingly concerned about their offices’ carbon footprint. Newer buildings are constructed with energy use in mind, while renovating older buildings to reduce their carbon emissions requires a significant investment, developers say. The result: More companies are shunning the older, staid office buildings that line the avenues of corporate Midtown for developing neighborhoods across town.
