Opening Comments
Happy Father’s Day to all the dads out there. I hope you spend quality time with loved ones on this special day.
After leaving the miserable town of Zachary, LA, going to Memphis and then getting my tire slashed in Lexington, KY, we went to Ashland, KY for another golf tournament. From there, we drove almost 10 hours back to NYC. Those who left the tournament and drove to Ohio to fly back to NYC did not beat us back. Cancelled flights galore led to a travel disaster. Of note, one-way flights were almost $500 for coach for a short flight only to be cancelled largely due to limited crews and weather.
In driving 2,500 miles since May 30th, I saw a lot of the US. I saw hundreds of signs posted by companies looking for workers. They are at restaurants, retailers, contractors, golf courses, home builders and everything in between. We have a real problem in this country where extra pay is not attracting talent. One person told me that $20/hr+ was not attracting people despite minimum wage of $12/hr in the small town of Colliersville, TN.
Walking around NYC for a couple days a few takeaways. Maybe a few less homeless people than I expected, but pot smoking is on virtually every corner. Storefronts are vacant everywhere as well. People wear masks walking down the street and a shocking number wear them in stores. I just left Louisiana and Kentucky where I did not see a mask in two weeks.
Early send. Left NYC for Carlisle, PA Sunday morning for a practice round and one day qualifier on Monday. Piece is a little longer today. Apologies. Hope to get it shorter for upcoming reports. A lot of Other Headlines were too relevant to cut.
Picture of the Day-Julia’s 15th Birthday
Conversations in an Ahsland, KY Laundromat
Addendum to Conversations in an Ashland, KY Laundromat
Quick Bites
Markets
Exxon Response
Recession Probabilities
Steve Ross on Return to Office
Influencer Economics-WOW
Other Headlines
Virus/Vaccine
Data
Israel Spike
Vaccine for Tots
Real Estate
Back in NYC
$175mm Palm Beach Estate Sale to Ellison
Price Reductions Growing
Three Headlines on R/E Slowing
Pictures of the Day
Saturday was my daughter, Julia’s, 15th birthday. Hard to believe she is well into her teen years. Seems like yesterday we brought her home from Weill Cornell Hospital. Happy Birthday Julia! Have a great time at sleep-away camp and good luck in high school. Julia, trust me when I tell you that high school goes by in the blink of an eye. Enjoy the ride. I am very proud of you. Julia likes Tate McRae and there is a concert in Miami with Shawn Mendes on October 8th. Anyone have any pull with good seats or getting her backstage?
Conversations in an Ahsland, KY Laundromat
Given the continually expanding readership, I want to give people a quick background as it is important to the story and getting to know me. My father passed away when I was 5 years old, he died of a heart attack. He left my mother as a widow with three children including me and my two sisters, Debbie and Shelley, who are 9 and almost 11 years older than me respectively. I grew up with limited means and started washing dishes and delivering newspapers by 11 years old. I had every job you could imagine including busboy, waiter, host, delivery, painter, valet parker. I went to public school and was a “latch-key” kid as my mother worked and my sisters were off to college. I came home from school on my bike alone which is why I wore the key around my neck. Despite achieving success, I never forgot my roots and feel nothing is beneath me based on my upbringing.
Unfortunately, my son, Jack’s golf takes us to off the beaten path places. I try to figure out what to pack to limit time in disgusting laundromats. I miscalculated given the 112 heat index, as Jack went through multiple shirts a day and I ran out despite having done laundry 5 days prior. In Ashland, KY I looked up laundromats near me, and found “Checkers Tanning and Laundromat.” Brilliant idea. Get a tan while doing your laundry.
I ran over at 7:30am at the opening and given the amazingly horrific stench of our clothes from record breaking heat, decided to do three loads to get it all clean. The place was clean but pricey.
I am generally in tune with what things cost and was taken aback. I was surprised to find the large machine was $7.50 for a load. I spent a total of $25 between machines, soap and fabric softener. I made a comment out loud about the price without realizing it. A man piped up in a Southern drawl and said, “Everything is going up in price other than my paycheck.”
He asked me if I was from up north. I was perplexed at how he knew as I barely spoke and had golf clothes on with my hat backwards. Turns out, my rental car had NJ plates even though I picked it up in Kentucky. I told him NYC was a long time home, but live in Miami area now. He said, “I heard that some apartments in NYC can cost $1,800/month. Is that true? How can anyone afford that much money in a month? How many bedrooms is an $1,800/month apartment?” I was careful how to respond as I did not want to come across in an obnoxious manner. Mind you, the average Manhattan rent for a 1-bedroom is $4k.
“Yes, New York City is quite expensive. Shockingly, you can’t get much for $2,000/month,” I said. He and the lady working at the laundromat were apoplectic about my comment. I did not have the heart to tell them the true prices as I know a college student spending $7,000/month for a one-bedroom in the Village to attend NYU. Coincidentally, it is in the same building that my apartment cost $20k/month in 2008, which I also left out of the discussion. Other than a doorman, no amenities in the building when I lived there (no gym, pool, storage, parking, restaurant…).
I was struggling with the washing machine and inadvertently put the soap in the bleach compartment and the manager helped me straighten it out 10 minutes into the cycle. Embarrassing, given I have done laundry all over the country. I guess I was in a hurry. The conversation flowed and I was fielding a barrage of questions as though I were an alien from another planet. “How much is a nice dinner in NYC for two people,” the manager asked. Did you have a car in the city? Where do you park it and how much does it cost? The questions were almost endless and I kept muting my answers as I realized I my perspective was so jaded.
I got to know the man over the next hour and he was a hard working maintenance man and painter (works two jobs). He was in decent shape despite missing a handful of teeth. He was a polite and articulate man, but a bit hard to understand with the heavy Southern accent.
His childhood (starting at 5 years old) was working in the cotton, cucumber and tobacco fields of North Carolina. Apparently his step-father was strict and not too kind requiring that he work. He quit high school at 15 years old to support his mother. He was a proud man with street smarts who believed in respect and was upset by the kids today speaking rudely to adults/parents.
The man needs to take a half-day off work every three weeks to do his laundry, as he lives 27 miles from the closest laundromat. The one near him burned down. He was very critical of the work ethic of people today and claimed to enjoy working hard each day and could not imagine doing a ‘half-assed” job in anything.
He kept going back to the idea around living in a big city such as NY and asking why anyone would live there. He talked about his simple life and not needing much to be happy. He asked me a question about money. He said, “Why do you think those people want one million dollars? You cant spend it. Why do you need it? You know, you can’t take it with you.” I let him know that the cost of living is high in the city and there is pressure to make money in Manhattan without going into specifics.
I was reminded of my childhood being a fortunate one despite my early setbacks. I was happy despite not having the finer things in life and was a much better childhood than my new laundromat friend. I did not have a bunch of material things, but a loving mom and sisters as well as my dog, Char. I did not understand wealth until I watched the show, “The Lifestyles of the Rich and Famous,” and was mesmerized. I had no idea people lived like that. It helped to drive me to want to be successful.
Although I could not live in Zachary, LA or Ashland, KY, I felt the conversations I had in the laundromat, local restaurants and golf course was a bit refreshing and concerning at the same time. People are hurting and struggling. Inflation is taking a toll and there is something to be said for less focus on the the fancy things. If you have your health and family, you have a lot. In a world crumbling, a country divided, inflation soaring, risky assets imploding and crazy geo-political risks, I felt putting things into perspective made some sense. Be thankful and understand that everyone may not be as fortunate, especially with the economic backdrop we have today.
Addendum to Conversations in an Ashland, KY Laundromat
On Saturday am, I took the family to Sarabeth’s for breakfast in NYC. It is a well known restaurant with a handful of locations. The food is fine, but the prices are obnoxious. What would my friends from Ashland think about this menu and the prices? In Ashland, we at at Bob Evans (BOBE). Jack ordered 3 pancakes, 2 eggs, 3 pieces of bacon and home fries for $9.99. At Sarabeth’s, it would be $78 as you can see on the menu below. French Toast $27, two Eggs $24, Bacon $14, and Home Fries $13. Jack thought BOBE better, but may have said that just to upset his frugal father. Eight times more in price? Seriously? I don’t care how much money you have, I find NYC offensive and this is just one of 1,000 examples. Sarabeth’s was packed with a 35 minute wait. How can people afford this? As an aside, the OJ was undrinkable for $13 a glass. Ill take BOBE and for 1/8th the price. Better service, nicer wait staff and free parking!
Quick Bites
The S&P 500 and the Nasdaq bounced on Friday as Wall Street attempted to find its footing following a brutal week of selling. But all the major averages ended the week in the negative, with the S&P 500 posting its worst week since 2020. The Dow slipped 38 points, or 0.13% to 29,889, while the S&P 500 gained 0.22% to close at 3,675. The Nasdaq jumped 1.43% to 10,798. Several key pieces of economic data fell short of forecasts this week, ranging from May retail sales to housing starts. Additionally, the Federal Reserve raised its benchmark interest rate by the most since 1994. The S&P 500 closed down 5.8% for the week, with all 11 of its sectors finishing more than 15% below their recent highs. The Dow closed down 4.8% for the week, its 11th negative week in 12. The tech-heavy Nasdaq also slipped 4.8%. YTD, the Dow is -17.8%, the S&P-22.9% and Nasdaq -31.0%. The JPM High Yield (HY) Bond Index yield rose 102bps on the week and now totals 8.8% with a spread of 563bps over Treasuries and an average price of $86. $5.7bn of outflows out of the High Yield market was the 3rd largest on record. The HY market is -12.3% YTD and the Investment Grade market is -14.6% YTD. Crypto remained under pressure with among the worst week of headlines I can recall with BTC -19% for 5 days and is trading at $18.2k (November 2020 levels). Another crypto lender, Babel, is freezing withdrawals. A Singapore hedge fund, 3 Arrows Capital failed to meet margin requirements due to Luna Token investments. My crypto bets are -85% now. Oil fell 6% to almost $110/barrel on concerns over the slowing economy on the heels of the big Fed move. The 10-year Treasury yield declined 7bps on Friday to 3.23, while the 2-year was unchanged at 3.17%. The much watched 2s/10s Treasury curve is barely positive. The VIX, volatility index, hit 35 this week, but settled at 31 Friday. Below is a chart of YTD poor stock performers. I am taken by the diversity of industries. Even the mighty JPM stock is -30% YTD despite higher rates which help grow the Net Interest Margin (NIM). KKR and Carlyle down closer to 40% YTD and Apple is -28%. The 2nd chart is YTD US IPOs which are down 80% in terms of number and down 94% in terms of proceeds. Third chart shows IPO performance sharply underperforming the S&P for the past year.
In my last note, I wrote of my disappointment of the current energy policy and Biden’s letter to oil executives questioning profits and calling them “unacceptable.” ExxonMobil fired back at President Biden after he threatened them with "emergency powers" if they don’t boost supply to temper surging gas prices. In a statement released Wednesday from the company, ExxonMobil said it has been in regular contact with the administration providing updates on how it has been investing "more than any other company to develop U.S. oil and gas supplies." "We kept investing even during the pandemic, when we lost more than $20 billion and had to borrow more than $30 billion to maintain investment to increase capacity to be ready for post-pandemic demand," the company said. I do know the oil businesses is boom/bust and you cannot take the recent profits as the norm. I have been critical of Biden for various reasons and the vilification of the recent oil industry profits is wrong. What about when the industry lost billions? Here is part of the letter from Exxon responding to Biden’s moronic vilification of the oil industry. Biden, that is the sound of Exxon dropping the mic.
Soaring prices are hurting Americans. The cure is going to hurt, too. It may take a recession to stamp out inflation -- and it’s likely to happen on President Joe Biden’s watch. A downturn by the start of 2024, barely even on the radar just a few months ago, is now close to a three-in-four probability, according to the latest estimates by Bloomberg Economics. The mood has turned sour at an alarming pace -- putting Biden at risk of joining an unenvied club. From Jimmy Carter to George H.W. Bush to Donald Trump, one-term US presidents of the past half-century all had their re-election hopes fatally injured by the lingering effects of a recession. This Bloomberg article shows NY Fed model suggests a 10% chance of a “soft landing,” and 80% chance of a hard landing. This CNBC article entitled, “36% of high earners are living paycheck to paycheck,” is a bit concerning and has good stats in it.
Real estate billionaire Stephen Ross says companies struggling to get workers to return to offices could see a flood of employees heading back if a recession hits the US. “Employers have been somewhat hesitant because they didn’t want to lose their employees, but I think as you go into a recession and people fear that they might not have a job, that will bring people back to the office,” Ross said in a phone interview. “The employees will recognize as we go into a recession, or as things get a little tighter, that you have to do what it takes to keep your job and to earn a living.” The article suggests 38% of people back in the office and I agree with Ross that fear of layoffs should bring more into the office. I do see increasingly layoffs coming given the economic backdrop, and if I was concerned about being laid-off, I would want to have face time with the bosses.
I think it is fair to say that my social media game is weak. Apart from Linkedin, I do not have a Twitter or Instagram game to speak of. I keep hearing about the money these “influencers” get paid and am getting increasingly jealous. This Yahoo article outlines Addison Rae and how much she makes on TikTok and Instagram and discusses others as well. Rae made $8.5mm from TikTok with 88mm followers. Charli and Dixie D’Amelio earn $17.5mm and $10mm respectively on TikTok. Rae makes $156k per Instagram post, but far less than Kylie Jenner or Ariana Grande who make $1.5mm for a post. Let me be clear people. I am available to post, dance, pose or whatever you like for $1.5mm. This is envy speaking here. These women have millions or hundreds of millions of followers. Son of a….Many highly paid influencers are people I have never heard of and do things with makeup. My daughter went to dinner with an influencer recently and the young lady basically pays for nothing. Brands send her clothes and free vacations. Maybe I am in the wrong business. Now, if I could just get my Instagram followers up from 36 that would be a nice start. Not 36 million. 36! I don’t think I have ever posted. Here is another interesting headline: Warren Buffett’s Last Charity Lunch Auction Draws Record $19 Million Bid. I too am available for lunch if you want to donate money to charity. Unfortunately, I think my lunch price may be slightly less than $19mm, but maybe a billionaire Rosen Report reader wants to make a statement?
Other Headlines
Fintech Giant Klarna Slashes Fundraising Ambition
The SoftBank-backed, buy-now-pay-later startup is discussing raising cash at a valuation around $15 billion, down from 2021’s near $46 billion valuation.
Brex drops small business customers as Silicon Valley adjusts to new reality
Big ramifications for start-ups which will find it increasingly difficult to find funding. Do not touch an under-funded business plan today.
SpaceX reportedly fired employees behind letter criticizing Elon Musk
So many things went against Musk this week. Wow. Being the world’s richest comes with some serious headaches.
Elon Musk says Biden, Democratic Party 'controlled by unions': 'Next-level insanity'
Musk brings up a lot of good points and it is yet another example of this administration’s ineptitude. Not inviting Musk to an EV summit? Seriously?
Apple workers in Maryland vote for company's first unionized store in U.S.
Not a headline you expect to see in the USA.
Biden sends every signal he is running again
A concerning WaPo headline. He would need to be demented to run again. Yes, I meant to say it because I gave my view 18 months ago that I felt his mental capacity was diminished. He will be 82 in 2024. For perspective, Bill Clinton is 75 and has not been President for over 21 years.
Biden disapproval hits new high as more Americans say they would vote for Trump. Another headline-6 in 10 Americans say Trump should be charged for Jan. 6 riot
You know it is bad if you are polling under Trump and your approval ratings are crashing and 60% of the polled voters feel Trump should be charged.
Joe Biden falls off bike as he rides near Delaware beach home
I would generally not feel a President falling off a bike is newsworthy, but he is 79 and not exactly a bastion of stability.
CNN's Don Lemon defends questioning Karine Jean-Pierre about Biden's mental fitness: 'It's our job'
You know it is bad when Don Lemon is asking tough questions about Biden’s mental fitness. Good on you, Don.
Analysis: Could House Democrats lose 70 seats this fall?
CNN article with interesting stats. No, I don’t believe 70 is likely. Dems lead by 11 today and can easily see the Republicans lead by 20 after the mid-terms.
DeSantis on Musk tweet: ‘I welcome support from African Americans’
I thought DeSantis’ response was quite cleaver as Musk is from South Africa. I think he will prove to be the Republican front runner and hope that Trump does not run.
Lee Zeldin’s law & order blueprint: I’m gonna fire DA Bragg on Day 1
I know nothing about this gubernatorial candidate for NY, but based on this statement alone, he is my pick.
What to know about Juneteenth now that it's a federal holiday
Detransitioned teens explain why they regret changing genders
Wait, allowing young children to transition turns out to have consequences? Who could have predicted that one?
Biden Directs HHS To Expand Access To Trans Sex Change Surgeries, Including For Children
China’s Xi says trade with Russia expected to hit new records in the coming months
An evil partnership from hell, but that does not stop the US from doing business with China.
China launches high-tech aircraft carrier in naval milestone
FBI says fraud on LinkedIn a 'significant threat' to platform and consumers
Electronic-sniffing dog helps in pedophilia arrest in Mexico
The canine sniffs out triphenylphosphine oxide, or TPPO, a chemical coating used in electronic devices like flash drives and memory cards.
California cop killer Justin Flores received slap on wrist after weapons arrest
I wonder why Californians are upset with the leadership, DAs and crime policies? Maybe they should legalize murder and see how that goes. No consequences for bad behavior. My house was the exact opposite.
Career shoplifter Laron Mack arrested, set free again
Mack has an extensive rap sheet, including: six felony arrests, 65 misdemeanors, 31 failures to appear and two parole violations. Elections matter. DA’s make decisions which impact the community.
Radical Group ‘Jane’s Revenge’ Vows to Escalate Acts of Terror against Pro-Life Groups
Universities that lie about their foreign students are putting America at risk
Serious allegations against Columbia here.
Two White Men Arrested After Viral Vids Capture Terrifying Attack on Black Teen
DISGUSTING video. I truly hope these racists die in jail.
Another person who should die in jail. Hate should not be tolerated. Let’s make some examples out of these idiots. 1st, have the injured women pepper spray the assailant for 10 minutes. Then, not allow her to get any aid for one hour. Then, throw her in jail and throw away the key.
Portland resembles an 'open air drug market' after legalizing hard drugs
Wait. You legalize hard drugs and things deteriorate? Who would have thought it a bad idea to legalize hard drugs.
Herschel Walker says he didn’t try to hide his other three children
He has been critical of absentee fathers.
Lightyear' movie ban won't have major impact on global box office
The cartoon shows girls kissing and some countries (China, Saudi Arabia, Egypt, Indonesia, Kuwait, Malaysia, Lebanon and the United Arab Emirates) were named and have banned it as a result. 14 countries in total.
Virus/Vaccine
The numbers are stabilizing a bit with new cases largely unchanged. However, the positivity rate is at 13.8% after being at 2.1% in March of 2022. However, it was as high as 29% in January of 2022. Deaths have been either side of 300/day for weeks, but are trending slightly up again.
Israel sees 70% spike in number of seriously ill COVID patients within a week
Israel is among the most vaccinated countries and started the 4th dose in Jan 2022.
CDC advisors recommend Covid vaccines for children as young as 6 months
No data could get me to vaccinate my 6 month old for Covid.
Real Estate
When I was single and making major career moves in NYC, I loved it. I thought it was the best place for me to be professionally and socially. I left in 2017 as I stopped enjoying my time, the challenges of raising a family in the city and was ready for a change. I do not regret my decision. However, when I come back, I am reminded of some of the good things. Most notably the restaurants and culture. I took a walk with my daughter around Central Park on Friday, and we walked up Madison Avenue.
I do not recall a time with more “For Rent” signs between 59th and 63rd including the vacant old Barney’s Building. In speaking with a broker, the high 60s on Madison is very challenged, but lower 60s is starting to see leases signed. Rents between 65-70th are now sub $500/ft or 50% of pre-pandemic levels. In the lower 60s, rents have stabilized at $700-800/ft or 50% of pre-pandemic levels. With respect to the pictures, Jimmy Choo on Madison had a smash and grab at 2am on Saturday where they actually ripped the doorframe off and stole purses (picture 1). Think about the ramifications to businesses with the property destruction and theft. Between 62/63 and Madison, 8 out of 10 storefronts are vacant on the West side of the street (picture 2). Between 63/64 and Madison, 5 out of 10 storefronts are vacant on the East side of the street including the two corner spaces.
A pending home sale near Palm Beach for roughly $175 million is expected to shatter the record for the most expensive Florida property transfer in history, according to a report. The WSJ said Wednesday that billionaire internet entrepreneur Jim Clark has secured a buyer for his 16-acre spread on a barrier island off Manalapan. The sale would easily eclipse the nearly $140 million paid in cash by a mystery buyer for a 21,000-square-foot Palm Beach property in February 2021. Given Clark paid $94mm one year ago, he is roughly doubling his money. Not a bad investment when you consider what would have happened if he put it in Bitcoin, Stocks or Treasuries instead.
Turns out, Larry Ellison of Oracle fame bought it despite having bought another big spread recently a little north of this one. The other interesting thing is the age difference between the seller (Jim Clark) and his wife, Kristy (see below). Must be True Love. At the highest end of the market, the lack of properties dictates and the prime properties remain in demand.
Yet another sign of the broad real estate market cooling. Home sellers are slashing prices as the housing sector cools, according to a research from a real-estate data firm. More than 25% of homes on the market right now have cut their price, Altos Research found, which is in stark contrast to how prices have been climbing over the last two years. “Rising rates and the shift in the economy has slowed down the super-eager buyers,” Mike Simonsen, co-founder and CEO of Altos Research, a real estate analytics firm, told MarketWatch. “And what we’re feeling is the speed of the shift.” Put bluntly: “We’re shifting from a real buying frenzy to much more normal conditions,” he added. Adding to the cooling off: On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 0.75 percentage point, the biggest increase since 1994 as it tries to tame rising inflation from a 40-year high.
A few other concerning headlines on the real estate market.