Opening Comments
My last piece was entitled, “Cocaine Hippos,” and I thought the Escobar angle was fascinating and concerning at the same time. I was alerted by two dozen eagle-eyed readers that I spelled, “Colombia” wrong. I spelled it, “Columbia.” I hate making mistakes, but it is so hard to catch everything. The most opened links were the Harvard expert on one food to prioritize and the Double Line paper on the R/E market. In a crazy coincidence, I wrote about the car accident where I helped a women get out of her flipped vehicle. The man who helped me get her out of the car is the son of one of my most active readers. Small world. The reach of the Rosen Report is far and wide.
I had mixed feelings about the Super Bowl. I wanted Purdy to show his worth given it is such an amazing story (the last person picked in the draft), but wanted KC and Mahomes to solidify their legacy. I thought the best commercial was the Dunkin Donuts with Ben Affleck, Matt Damon, Tom Brady and J Lo. This story outlines $58 nachos as the Super Bowl. I guess if you pay thousands for a ticket you don’t care. It seems 123.4mm watched the Super Bowl in 2024, a new high other than the historic 1969 moon landing.
Southern Italian Restaurant Review
I am almost reluctant to write this review, but feel the need to share a secret Southern Italian restaurant that was far better than I expected. It is in Pompano in a little plaza off Atlantic and I-95. The place is called Sea Mario. The chef is from Sicily and his wife is from Milan (waits tables). I did not expect to have such high-quality food. This is not a hip/cool place. Just a mom-and-pop establishment to have a very good meal. My red snapper with claims, garlic and white wine was incredibly impressive. Jack loved his chicken parm and Julia felt her Paccheri in a pink cream sauce was fantastic. I tried everything and am 100% going back. Don’t let the strip mall exterior fool you. The place is solid.
I have two shout-outs from impressive readers today.
The Tax Whiz With the Strangest Hustle on Wall Street
Great article about a reader, Andy Lee, who recently took me to dinner at Cafe Maxx. Very interesting niche of investing in tax receivable agreements. Good WSJ article about him and his returns. He is an impressive young man.
Reshaping our understanding of granular systems
My niece, Rachel Glade, has her PhD and is an associate professor of earth and environmental sciences at the University of Rochester. She had the first paper out of her lab published and she is doing amazing things.
The glitches on the Rosenreportjobs.com website have been fixed. Please check. There are multiple internships available.
Markets
AI To Monitor Employees
Deficits
Diversity in the Workplace
Obesity in America
NYC Rent Stabilized Downturn
Jeff Bezos FL Tax Benefits
2024 Commercial R/E Maturities
Buffett Protégé Buying San Fran Office Buildings
Video of the Day-Jaguar Catches a Crocodile
Nature is amazing and this video proves it. The photographer says, “I think I am going to retire now,” after watching the action. I would not be comfortable being that close to the jaguar in the wild.
Crazy Casein Allergy Story
It was 2011 and my daughter, Julia, was 4-years-old. She was a nightmare regarding anything being tight to her skin (clothing, shoes, car seat, hats, gloves…). Her shoes would be untied and she would scream about them hurting her feet and the shoes were the right size. When you put her in a car seat, it was bedlam. I mean screaming. She would unbuckle the car seat because it was “too tight.” My wife and I were losing our minds about her antics. My wife found an AMAZING allergist, Dr. Leo Galland. Within 1 minute of the description he says, “Casein allergy.” I knew that casein was the protein in milk, butter, and cheese, but I did not know that was the cause of an allergy that would cause this restrictive reaction.
The fine doctor suggested taking casein out of Julia’s diet for a week. This meant no dairy, butter, or cheese. I was in shock. Within two days, “Julia said, “Dad, can you tie my shoes tighter? They are loose. Dad, can you tighten my belt for the car seat?” I thought this was a joke and could not be true. After a few more days of the amazing turn of events, I needed to make sure it was the casein.
In my infinite wisdom, I put her back on casein and within 24 hours, the madness was back about everything being too tight again. The doctor diagnosed the issue in minutes. It shows that when you find a remarkable physician, they can get to the right answer in a hurry.
To this day, Julia still drinks almond milk and although will have a little dairy in her diet, she largely stays away. She no longer feels the discomfort after eating dairy, but limits it nonetheless. I wish we had found Dr. Galland earlier, as it would have saved us a lot of fights battling little Julia about clothes and seatbelts.
Quick Bites
The consumer price index increased 0.3% for the month. On a 12-month basis, that came out to 3.1%, down from 3.4% in December. The hotter-than-expected inflation report sent stocks tumbling on Tuesday -1.4-1.8%. The Russell under performed and fell almost 4.0% on the day. Treasury yields were sharply higher on the inflation data with the 2 Year+19bps and the 10-Year +15bps. The VIX popped 31% at one point before closing +14% on Tuesday. However, markets rallied and won back some of the losses on Wednesday. The S&P and Nasdaq were up 1%+ other than the Russell 2000 which outperformed (+2.4%). Treasury yields were down as bonds rallied slightly after the rough day Tuesday. Bitcoin (+17% YTD) approached $52k on Wednesday and has a market cap over $1 trillion again. Ether is approaching $2.8k and is also +17% YTD.
I thought this CNBC article entitled, “How Walmart, Delta, Chevron and Starbucks are using AI to monitor employee messages,” was interesting and concerning. Depending on where you work, there’s a significant chance that artificial intelligence is analyzing your messages on Slack, Microsoft Teams, Zoom and other popular apps. Aware, an AI firm specializing in analyzing employee messages, said companies including Walmart, Delta, T-Mobile, Chevron and Starbucks have hired it to track sentiment and weed out toxicity. Using the anonymized data in Aware’s analytics product, clients can see how employees of a certain age group or in a particular geography are responding to a new corporate policy or marketing campaign, according to Schumann. Aware’s dozens of AI models, built to read text and process images, can also identify bullying, harassment, discrimination, noncompliance, pornography, nudity and other behaviors. BIG BROTHER IS WATCHING!
I have been on the deficit/spending/debt subject for 18 months. In the past couple of weeks, we have seen growing concern from major market players. Dimon, Sternlicht, Talib (Black Swan), Druckenmiller, Gundlach, and countless others feel it is an issue. I did a speech in Vegas and spoke about it in some depth last week. This article outlines some of my concerns. We are running deficits of 6%+ of GDP and the CBO just forecast $20 trillion of deficits over the next 10 years (averaging $2 trillion/year). Last year, we ran a $1.7 trillion deficit with 3.5% unemployment and stocks at all-time highs. What happens in a recession? Our deficits as a percent of GDP are higher than the recessions from the 1990s and 2000, but lower than 2008 or 2020 recessions. The population is aging and the next generation is having fewer children. We must start means testing and raising the retirement age IMMEDIATELY for entitlements. We also must cut spending dramatically. Foreigners are buying less US Treasuries and banks are buying less as well. The idiots in DC spend like drunken sailors. I believe deficits/entitlements/spending will be the biggest issue of the 2028 Election. In 1973, discretionary spending was 53% of the budget and in 2023 it was 28% and falling fast as entitlements and interest expense are ballooning. With these CBO projections, I cannot expect there will be much room for discretionary spending in the coming years.
For the chart below, the 2001-2023 data is actual. CBO projections for 2024-2027 and I used the CBO data to estimate each year from 2028-2034. The end result of 2028-2034 is the same as CBO; they just never gave the breakout of each year. CBO projects $20 trillion in deficits over the next 10 years. Yes, I made the chart using Excel. My skills ain’t what they used to be.
The Nikkei (Japan’s stock index) was decimated for decades and is finally approaching an all-time high. The Nikkei peaked in late 1989 and largely headed lower until 2012. The chart speaks volumes.
I thought this WSJ article entitled, “40% of Lawyers Are Women. 7% Are Black. America’s Workforce in Charts,” was interesting with a ton of great charts. Almost 96% of all dental hygienists are women. Six out of seven lawyers are white. And the racial and ethnic makeup of paralegals, hairdressers and dietitians closely mirrors that of the overall U.S. workforce. The Bureau of Labor Statistics each year publishes data looking at the gender and racial composition of hundreds of occupations, offering a snapshot of how workers sort themselves into many of the most important jobs in the country. One clear conclusion: Many occupations skew heavily toward one gender or race, leading to a workforce where 96.7% of preschool and kindergarten teachers are women, two-thirds of manicurists and pedicurists are Asian, and 92.4% of pilots and flight engineers are white.
This is a good article entitled, “Bill Ackman marvels at 1930s video showing ‘no obese people’: ‘Look at how lean everybody is’.” I have written extensively about obesity in the US. The 1st chart is a little dated, but you get the picture. Corn syrup, sugar, fried foods, fast food, and video games keeping kids inside… are all contributing to these staggering numbers. Obesity puts a huge strain on the healthcare system (diabetes, high blood pressure, stroke, cholesterol, asthma, sleep apnea, heart disease…). A total of almost 70% of Americans are deemed overweight. A BMI of over 25 is overweight and over 30 is obese. This is not the best measure in my mind, but you get the idea. My picture from 1977 shows me with a bunch of sporting equipment. No technology. I wanted to play outside. Check out those shorts! Kids play on phones and iPads or video games. Not enough physical activity and too many processed foods.
Israel
IDF conducts intensive strikes on ‘significant’ Rafah targets; Hamas: Over 50 killed
Court Orders Netherlands To Halt F-35 Parts For Israel As EU Says "Too Many People" Are Dying
After Moody’s downgrade, government urged to rethink wartime budget priorities
Moody’s late on Friday cut Israel’s credit rating by one notch from A1 to A2 and said it expects the country’s “debt burden will be materially higher than projected.
Israeli soldiers and Gaza medical workers capture 20 Hamas terrorists hiding in hospital
This man needs to be institutionalized. He apologizes one minute and trashes Jews the next. He is not well.
NYPD hunts for antisemitic creep who pounded man with bat, called him ‘dirty Jew’
Swiss antisemitism shock at Davos shop sign saying no skis for Jews
Broadway Cares charity group ripped for channeling $400K of donations to Gaza
I have no problem if a charity is giving its money to Gaza. I do have a problem if they are not telling the donors (many are Jews) where the money is going when they collect it. My friend, Rabbi Erica Gerson, is in the article.
Other Headlines
Private wages are growing at half the pace of inflation; only government wages are surging
Private Equity Returns Plunge to Global Financial Crisis Levels
This is not about returns, but distributions back to investors.
How China Miscalculated Its Way to a Baby Bust
China’s one-child policy started in 1980 and the population started to fall in 2022. Last year, births fell by over 500k and the projections are concerning. By 2100, the population is set to fall by almost 1bn if the forecasts in the WSJ article are correct.
I have no problem with this new law.
JetBlue shares jump 15% as activist Carl Icahn reports stake and calls shares undervalued
Sadly, IEP stock (Icahn’s baby) is at $19/share, slightly off the lows and -64% over the past year.
Lyft CEO takes blame for ‘extra zero that slipped into’ earnings release
Hasbro reports 20% revenue drop, issues downbeat 2024 outlook
Cisco cutting 5% of global workforce in restructuring move
Last I saw, Cisco has 85k employees.
Majority of Americans think Biden and Trump are too old for another term
According to the poll, conducted using Ipsos' Knowledge Panel, 86% of Americans think Biden, 81, is too old to serve another term as president, while 62% feel Trump is too old. I agree. New blood, please.
Biden campaign joins TikTok after admin purged app from federal devices over security concerns
I am sorry. A test should be mandatory. We have an 81-year-old President that the DOJ report showed had cognitive concerns. If he is so confident he passes with flying colors, why not take it? Power move for Trump is to take a cognitive test and post the score publicly…assuming he can pass!
House Republicans impeach Homeland Security Secretary Mayorkas
First time since 1876. Chart speaks volumes.
How many companies in CA would go bankrupt under this plan?
Democrat Tom Suozzi wins N.Y. special election to replace George Santos
Her texts to the bailiff were making fun of trial participants during a MURDER trial.
Migrant teen accused in Times Square attack on cops is arrested again for Macy’s robbery
He must be deported and banned from ever entering the US.
An alleged gang rape shocks Italy, and provides fodder for an ascendant far right
Italy has been shaken by the alleged gang rape of a 13-year-old girl in front of her boyfriend in a public park in the Sicilian city of Catania, the latest in a string of shocking sexual attacks in the country.
10 people shot after gunfire erupts at Kansas City Chiefs' Super Bowl parade
Here’s the average net worth of Americans ages 35 to 44
I believe Median is the right column to follow.
Can Vending Machines Help Curb STDs?
A study of test-dispensing machines in England points to an innovative way to expand sexual health services.
Researchers make progress toward developing blood tests for psychiatric and neurological disorders
A dating app with credit scores: what’s not to love?
Score, a new US dating app has you show your credit score on the dating app. People will misunderstand that credit score does not equate to wealth necessarily.
This matchmaker’s fee can top $500,000. Here’s her best advice to find love
Her siblings are quite impressive as well.
This is exactly what is wrong with GenZ. The need for instant gratification overwhelms the desire to save. Social media is to blame.
Oregon's first case of human plague in 8 years likely came from a pet cat
Iran’s Former Nuclear Chief Alludes to Tehran’s Nuclear Weapons Capability
Real Estate
Icon Realty Management failed to pay off $172 million in multifamily loans at maturity last month. The debt is now headed to special servicing, according to Morningstar Credit. The Soho-based firm didn’t borrow at a floating-rate and financed the properties at a low leverage, according to Morningstar. So what went wrong? Icon did not respond to a request for comment. But the smart money’s on the 2019 rent law. The legislation made it nearly impossible to raise rents in regulated buildings. Owners, in the aftermath, have struggled to afford maintenance, utilities, taxes and insurance, and more recently, debt payments. Many commercial properties are hurt due to interest rates and cap rates. Others are due to rent laws which are crushing landlords.
Jeff Bezos’ $2 billion stock sale last week came with an added perk: no state taxes.
Last year, Bezos announced on Instagram that he was leaving Seattle after nearly 30 years to move to Miami. He said the move was to be closer to his parents and his rocket launches at Blue Origin. The timing also suggested another reason: taxes. In 2022 Washington state imposed a new, 7% capital gains tax on sales of stocks or bonds of more than $250,000. Washington state doesn’t have a personal income tax, so the new levy marked the first time Bezos would face state taxes on his stock sales. Florida has no state income tax or a tax on capital gains. So on the $2 billion sale last week, he saved $140 million that he would have paid to Washington state. On the entire sale of 50 million shares over the next year, he will save at least $610 million. Think about the lost state taxes when Bezos, Ellison, Musk, Icahn, Ken Griffin, Scott Schleifer, Barry Sternlicht, and countless others relocate to more tax-efficient states. This only adds to the massive budget deficits many states are seeing today. You cannot tax your way to prosperity. Look at the deficits in the highest tax states (CA, NY, IL…) and look financial positions of the tax-free states (FL, TX, NV, TN…). On a related note, this article is entitled, “Wealthy Californians are ditching the state for the 'Beverly Hills of Arizona.'“
I am a big fan of Peter Boockvar, the CIO Bleakley Financial. I read his notes religiously and he often contributes to my newsletter. I found this Bloomberg story on commercial R/E maturities in his newsletter with his thoughts. Nearly 20% of outstanding debt on US commercial and multifamily real estate — $929 billion — will mature this year, requiring refinancing or property sales. The volume of loans coming due swelled 40% from an earlier estimate by the Mortgage Bankers Association of $659 billion, a surge attributed to loan extensions and other delays rather than new transactions. An estimated $85.8 billion of debt on commercial property was considered distressed at the end of 2023, MSCI Real Assets reported, citing an additional $234.6 billion of potential distress. Assume too that the interest rates on the loans maturing are less than half the rates on the loans on offer now. There is a long slog ahead for CRE and much more pain to come. And maybe likely realism of this could compress the bid and offer spreads which remain wide and which could help to get some transactions done in order to get through this with a lot of fresh needed equity but at much lower valuations. The breakdown of the amount coming due this year is about $440b owed to banks, about $234b "securitized in CMBS, CLOs and asset backed securities" and there is also about $170b lent by debt funds. Asset type, about 25% is in office. I agree with Peter’s thoughts on this and have written about it extensively.
Good WSJ article entitled, “A Buffett Protégé Makes an Offbeat Bet: Buy San Francisco Real Estate.” Ian Jacobs is a 47-year-old heir of the Reichmann real estate dynasty. He is buying up San Fran office space at large discounts. Ultimately, he hopes to buy 3 million square feet of office space for prices about 70% below what it would cost to build the properties, according to marketing materials for the project viewed by The Wall Street Journal. Recent building sales in San Francisco averaged between $200 and $300 a square foot, implying total purchases of $600 million to $900 million.
© 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™ #656©Copyright 2024 Written By Eric Rosen
Thanks. La Buca was fine. New owner. MUCH MUCH BETER! Ill try Di Farina.
Next time you are in Pompano you should try Di Farina on Atlantic Blvd. They have awesome homemade pasta. I recommend the squid ink seafood linguini special, which always seems to be available and is different from the squid ink seafood linguini on the menu (the special has lobster and is made with a different sauce). I've never been to Sea Mario, but went to that location many times when it was Cafe La Buca. I wonder if the owner is the same.