Druckenmiller vs the Basket Regarding Inflation-I Take Druck
Druckenmiller vs the Basket Regarding Inflation-I Take Druck
5-30-21
Opening Comments
Washington Square Park-Drug Den
Druckenmiller vs the Basket Regarding Inflation-I Take Druck
Quick Bites
Markets, AMC stock, Costco Inflation, Biden Budget/Tax
Biden/Hamas/Palestine Authority Funding, Rutgers Woke
Cyber Attacks, Fans Back, China/Wuhan Lab/Fauci
Smoking, Mice in Australia, MGM/Trump/Bezos
Mass Shooting(s), Stamp Prices Rising, UFO Radar Citing
Virus/Vaccine
Opening Comments
I was in PA and Jack is getting his golf fix. People are extending hands for shakes again, less masks and things feel back on a trajectory to normal. PA was far more restricted than Florida and now feels as though it has eased a great deal. I attended a party at my club and there were 300 people, no masks and it was the 1st time since last February I felt that things were back to pre-pandemic. TSA #s are are 76% of pre-pandemic with almost 2mm cleared at TSA on Friday. Only 327k cleared last year on the same day for perspective.
At the party, I had three women and two men tell me I looked like Matthew McConaughey. I would say 15 people have said this to me in the past six weeks, but it is only when I am not wearing a hat, which is rare. I see almost zero resemblance other than our long curly hair, which is not even close in color. Initially, I thought McConaughey was much younger than me, so I was fired up people thought I looked young. Turns out, we are the same age, which was a bit disappointing. He is a movie star who turned down $15mm for a film. For all you movie/tv producers and directors reading the Rosen Report, I am available with my good hair and all. I will work for far less than $15mm, I will be respectful to the crew and wont make outrageous demands like the stars or Bernie Sanders and I won’t second guess the writing or directing, even if it is awful. I am a very good, cheap option with arguably better hair. Matthew wants to run for Governor of Texas and I can fill in as he will be busy with his 30mm constituents.
After my last note, I received a ton of responses about various parking apps which help you find spots. Given I never have issues in Florida, I was unaware they existed. THANK YOU.
As an aside, it is freezing here. High 40s and raining. What the hell is going on, it is almost June and South Florida weather looks amazing. I am not coming up to the northeast until later in the summer going forward.
I have written extensively about inflation for months and put in pieces from thought leaders whenever I can including Cembalest’s last piece in my prior note. In today’s Rosen Report, I am keeping it shorter so my readers will take the time to watch the video I am posting from my hero, Stan Drukenmiller. However, given a weekend story about Washington Square Park, I had to insert something on the subject below.
Washington Square Park
I lived on 5th Avenue and 9th Street (2 blocks north of Washington Square Park) for 10 years. Our children were born there and we brought them to the park almost daily. They played on the swings, slides, monkey bars and in the fountain in the summertime. Jack played chess and even played guitar and sang for the crowd. Some of my fondest memories of Jack and Julia growing up were in the Washington Square Park. They had an annual Halloween parade and the kids loved participating. Don’t get me wrong, there were drugs being dealt, but nothing like what is happening today. Separately, walking around NYC, people are smoking weed EVERYWHERE and no one cares. I have been in NYC for a total of two days and have smelled pot already dozens of times walking down the street.
Today, Washington Square Park is a complete and utter mess of heroin and crack addicts with used syringes and crime exploding. What are the politicians thinking here? The people who pay the taxes are being victimized by this new softness around crime and desire to allow drugs to flow with no consequences. I was very saddened to read this article about the state of the park today and the impact the lack of leadership has on families in the area. THANKS DeBlasio. Keep up the great work. I sure hope you run for President again. It was such a successful endeavor last time with ZERO percent of the vote despite being the mayor of the most populated city in America. Here are pictures from the article as well as photos of Jack and Julia hanging in the park as kids. These people are doing drugs and shooting up in the middle of the day.
Compare the pics above with my kids growing up in the park.
Julia as Elmo for Halloween in the park.
Jack loved to fall asleep on the swings in the park.
Halloween Parade in Washington Square Park with matching elephant costumes.
Below are excerpts from a concerning article about Washington Square Park and the drug and prostitution zone it has become. Remember, it has a playground and kids can easily pick up a dirty syringe.
A lawless, drug-infested Washington Square Park is horrifying even famously free-spirited Greenwich Village residents.
“We may be liberal but this has gone too far,” lamented Steven Hill, who has called the neighborhood home since 1980. “There have always been drugs in the park, mostly pot, but what’s emerged this spring is like nothing we’ve ever seen before.”
Washington Square Park’s northwest corner was overtaken in recent months by a crack-and-heroin-filled “drug den,” while boisterous, booze-soaked raves around the central fountain have kept neighbors up until the wee hours and left the historic green space trashed each morning.
A resident commented following a recent 8 a.m. stroll to the park’s dog run, reporting a female giving oral sex to a drug dealer, with other men “lined up for their turn” with their pants open.
NYPD data shows robbery is up 73 percent this year in the 6th Precinct, which covers the park. Sex crimes have surged 36 percent. Drug enforcement across the city has all but disappeared during the de Blasio administration. New York City reported just 5,372 drug arrests last year, by far the lowest on record. The decline is largely connected to the 2019 decriminalization of pot and last month’s legalization of weed, but not entirely. The number of drug arrests have declined every year under the de Blasio regime. There were nearly 20,000 drug arrests in 2013, the year before de Blasio took office, and more than 38,000 in 2000, under Mayor Giuliani.
My hope is that constituents of this area speak up and demand action to take back the park to allow families to use it safely and create memories like the ones I have of Washington Square Park.
Druckenmiller vs the Basket Regarding Inflation-I Take Druck
Any reader of the Rosen Report knows I have a big man crush on Stan Druckenmiller. In my opinion, he is the best investor of our time with a 30 year track record of 32% annual returns with no down years. Think about that for a second. The S&P averaged about 12% during this time and had 6 negative returning years during the span. He has been wrong before, but the guy has been right a ton. Stan and Soros famously "broke the Bank of England" when they shorted British pound sterling in 1992, making more than $1 billion in profits, in an event known as Black Wednesday.
A loyal Rosen Report reader, GL, sent me a link to a Druckenmiller discussion. A few weeks ago, Stan was interviewed at USC and did a great presentation about his market views and why he has inflation concerns. I have done my best to educate the readers about the subject, but after listening to this speech, feel it is important for you all to take the time to listen. Yes, for those ADD readers, I am putting down a handful of charts and a few key points for you, but ask you to watch this presentation. He speaks for maybe 25 minutes and takes questions. If you have limited time, just listen to his remarks. He also talks about position sizing in the British Pound trade discussed above and says Soros was not a great stock picker, but an amazing person to size risks which pushed Stan to upsize the Pound trade given the risk/reward dynamics.
As promised, here are some of Stan’s slides explaining his concerns about inflation and the amount of government support/stimulus. There is an informative video for you to see and hear for yourself. I believe that Stan is right and Yellen and Powell are wrong. Remember, the Fed was dead wrong about the housing market and subprime being “contained” in 2007.
As you will hear in the video, Stan is very concerned about the continued stimulus and QE which has continued despite stocks at high levels, housing booming retail sales, and overall economic recovery. Quick summary points from the video:
Covid Impact-5x the post WWII recession decline in 25% of the time-Steep and quick decline
Policy response extremely aggressive-In 3 months last spring, the budget deficit was increased more than the past 5 recessions combined. The Fed did more QE in 6 weeks last spring than the period from 2009-2018 combined. The peak month during the GFC saw $85bn of QE and today, there is still $120bn of securities being bought despite the pace of the recovery. Powell is not contemplating ending such purchases according to Druckenmiller, but clearly all Fed Presidents do not agree. See below.
Dallas Federal Reserve President Robert Kaplan cited potential excesses in the housing market as a reason for the central bank to start easing back on its monthly asset purchases. Kaplan told CNBC the $120 billion a month in asset purchases may be having “unintended consequences.”
Red lines crossed in terms of assets backstopped with corporations increasing debt over $1 trillion while during GFC, corporate balance sheets shrunk.
The policy was good and effective in the spring of 2020, but a lot has changed and we no longer need such aggressive polices. The economy has recovered and these policies are no longer needed. I agree 100% with these statements.
Why are we buying $40bn of mortgages a month while housing is in short supply? Why are rates promised to stay low through 2023? I have written extensively about the housing issues and short supply. Fed policies are creating a bigger problem in my opinion.
Stan is worried about bubbles being created and compared this to both the bubble prior to the Great Depression and the housing bubble which preceded the GFC.
He mentioned Dogecoin and NFTs as other examples of bubbles. Stock market to GDP is well above any levels in the last century. He is also worried about loss of the US as reserve currency status.
I cannot tell you when this unravels. I can only tell you that I fear inflation and feel the amount of stimulus in its various forms based on where we are economically from a markets, housing and employment perspective is dangerous. Too much fuel is being added to the fire, which seems imprudent in my mind and Druckenmiller articulates it very well in the video. The charts below were all taken from Stan’s USC presentation.
Personal income grew the fastest in 20 years despite elevated unemployment.
Note how long it took after the GFC to get back to the pre-crisis sales levels for Retail Sales. Note how quick it was this time, yet stimulus keeps coming despite being 15% above pre-Covid. We are booming and above trend with the help of all the stimulus.
Stan comments on the large sell off in Treasuries after the 1st stimulus was announced. It turns out it was foreigners selling US Treasuries causing an 18 point decline. Generally, in risk off periods, US Treasuries rally. China represents 20% of world GDP and represents 1.6% of global portfolio, while the US represents 25% of GDP and 28% of global portfolios.
His point here is with any normalization in rates, a quarter of Federal spending will go to debt service. Stan is very worried about entitlements and Debt/GDP. Stan wants to raise the age of Medicare with people living longer (I agree with this). The Biden Administration wants to lower the age of Medicare to 60 which will create a $400bn hole. The chart is concerning and shows 27% of GDP could be spent on interest on debt. Currently, 85% of the world’s transactions are done in dollars. IN THE 1ST TIME IN STAN’S CAREER, HE BELIEVES THE US WILL LOSE RESERVE CURRENCY STATUS IN THE NEXT 15 YEARS AS WELL AS ALL THE BENEFITS WHICH COME WITH IT.
Stan is currently positioned as follows:
Short the dollar and believes the dollar bounce is unsustainable as the vaccine roll out improves around the world
Short global fixed income 1.6% on 10 year is ridiculous based on history
Long oil, copper, grains, and other commodities
Long equities, but expect to be out prior to year end and questions the new regulatory and tax plans
Quick Bites
The S&P 500 climbed slightly on Friday to close its fourth straight positive month amid growing optimism over the U.S. economic recovery. The broad equity benchmark ended the session up 0.1% to 4,204, sitting just 0.8% from its record high. The Dow gained 65 points to 34,529. The tech-heavy Nasdaq inched up 0.1% to 13,748. The blue-chip Dow and the S&P 500 advanced 0.9% and 1.2% this week, respectively, both breaking a two- week losing streak. The Nasdaq rose 2.1% to post its best weekly performance since April 9. For the month of May, the 30-stock Dow and the S&P 500 gained 1.9% and 0.6%, respectively, posting their fourth up month in a row. The Nasdaq, however, suffered a 1.5% loss this month for its first negative month in seven. Small-cap Russell 2000, which is more leveraged to the economic reopening, eked out a slight gain this month, posting their eighth straight positive month for the first time since 1995. A key inflation indicator — the core personal consumption expenditures index — rose 3.1% in April, faster than expectations of a 2.9% increase but not as hot as many on Wall Street had feared. Meanwhile, the savings rate remained elevated at 14.9% last month, while consumer spending rose 0.5%, in line with estimates.
Investors shorting the meme stock AMC Entertainment are estimated to have lost $1.23 billion over the last week. Shares of the movie theater chain rallied more than 116% since Monday. The more than 1,100% jump in AMC’s stock since January has defied Wall Street analyst predictions. AMC was the most active stock on the New York Stock Exchange by far on Friday as more than 650 million shares changed hands. Its 30-day trading volume average is just above 100 million shares, according to FactSet.
Don’t tell Costco executives that inflation is low. The big-box club chain said it’s been seeing accelerating prices across a range of products, including shipping containers, aluminum foil and a 20% spike in meat prices over the past month.“Inflationary factors abound,” CFO Richard Galanti said on the company’s fiscal third-quarter earnings call Thursday. “These include higher labor costs, higher freight costs, higher transportation demand, along with the container shortage and port delays … increased demand in various product categories some shortages, various shortages of everything from chips to oils and chemical supplies by facilities hit by the Gulf freeze and storms and, in some cases, higher commodity prices,” he added. I continue to talk about inflation and give examples and other expert advice on the topic. The Fed and Yellen are the only parties not seeing inflation concerns. I’m sure some is transitory, but not all of it.
President Biden’s $6 trillion budget proposal unveiled Friday charts his vision of an expansive federal government role in the economy and the lives of Americans, with big increases in spending on infrastructure, public health and education along with tax hikes on corporations and the wealthy. The Biden administration is seeking $1.52 trillion for the military and domestic programs in fiscal year 2022, which begins Oct. 1, an 8.6% increase from the $1.4 trillion enacted last year, excluding emergency measures to combat the Covid-19 pandemic. The proposal would shift more federal resources from the military, which would see a 1.6% rise in spending next year, to domestic programs such as scientific research and renewable energy, which would get 16.5% more funding under the president’s plan in 2022.
From Bloomberg-President Joe Biden’s budget on Friday revealed a blueprint for addressing long-standing inequities in the U.S. economy, rather than serving as a game-changer for the nation’s weakened economic-growth trend of recent years. Biden’s program breaks with recent presidents’ budgets, which promised that policy proposals would turbo-charge gross domestic product. Biden’s central goal is instead societal change -- attempting to reverse decades of widening income and wealth gaps that often fall along racial lines. While the tax system would be more progressive, it would not fully pay for the proposed spending plans over a decade, according to the budget proposal.
I know many are not Trump fans. He made plenty of questionable choices and spoke/Tweeted far too much despite some sound policy decisions. He sure went out on a sour note. Biden has not been President very long, but I am not a fan of his support for Hamas and the Palestine Authority. Biden dropped the Trump policy of refusing aid to the Palestinian Authority until it ends its support of terrorism, promising $250 million in assistance — in potential violation of the Taylor Force Act, since the PA continues to pay “salaries” to imprisoned terrorists and the survivors of ones who died in the act. This week, Secretary of State Antony Blinken promised more aid, upping the total to $360 million, theoretically to help rebuild in Gaza. Yet even State admits there’s “no guarantee” Hamas won’t divert the money to, for example, rebuilding its tunnels for terrorists to sneak into Israel. Thousands of rockets come down on Israel and they defend themselves and now Biden is funding the attackers. I had more than my fair share of issues with Trump, as did most people. On the topic of Israel and those trying to destroy it, I side with Trump over Biden. Bill Maher is now actually a voice of reason from the left on the subject, which is telling. Please watch this two minute video from George Deek, Israeli Ambassador to Azerbaijan on the topic.
A Nashville, Tennessee store name hatWRKS has promoted its sale of a wearable yellow Star of David, a Nazi-era anti-Jewish emblem, bearing the words "NOT VACCINATED." The store advertised the item in a now-deleted Instagram post showing the store's owner, Gigi Gaskins, smiling and wearing the star on her chest. The post mentioned that the stars cost $5. People protested the store over Gigi’s decision to sell a Star of David in this manner. I am at a rare loss for words here. There are multiple incidents not being reported in NYC and Florida about hate crimes against Jews. This is getting out of control.
The chancellor and provost of Rutgers University apologized Thursday for issuing a statement that denounced the recent surge in anti-Semitic attacks because he said it “failed to communicate support for our Palestinian community members.” The initial statement from Chancellor Christopher Molloy and Provost Francine Conway Wednesday said they were “saddened by and greatly concerned about the sharp rise in hostile sentiments and anti-Semitic violence in the United States.” The Thursday statement, titled “An Apology,” included the message that “our diversity must be supported by equity, inclusion, antiracism, and the condemnation of all forms of bigotry and hatred, including anti-Semitism and Islamophobia. At the rate we are going, my children will not be attending college. If someone thinks I am paying almost $100k/year for WOKE crap in which schools cannot denounce anti-semitism, you got another thing coming. I denounce all forms of racism or hatred over race, religion, sexual preference. I wont apologize for suggesting anti-semitism is bad and don’t believe anyone else needs to either.
A series of major digital security breaches over the past year are serving as a wake-up call to Corporate America about the need to invest in cybersecurity. Friday brought yet another reminder of the risk of cyberattacks, when Microsoft (MSFT) said the hackers behind the 2020 Solar Winds breach launched a new attack on more than 150 government agencies, think tanks and other organizations globally. The takeaway from such security breaches, according to experts, is that it's high time for companies to start investing in robust controls and, in particular, adding cybersecurity professionals to their teams. The only hitch: There's a massive, longstanding labor shortage in the cybersecurity industry. "It's a talent war," said Bryan Orme, principal at GuidePoint Security. "There's a shortage of supply and increased demand."
The PGA Championship, MLB regular season, NBA playoffs and Stanley Cup playoffs have all returned with the one thing that was missing in 2020: the fans. Fans have packed stadiums and arenas over the last few weeks, and some pro athletes have noticed a palpable difference. Brooklyn Nets star Kevin Durant was among those who noticed the difference the fans made at the Barclays Center during their Game 1 win over the Boston Celtics on Saturday. UVA announced it will have 100% capacity at sporting events in the upcoming year.
A bombshell new study claims to have proof that Chinese scientists created COVID-19 in a lab and then tried to reverse-engineer versions of the virus to make it look like it evolved naturally from bats. British professor Angus Dalgleish and Norwegian scientist Dr. Birger Sørensen wrote they’ve had primary evidence “of retro-engineering in China” since last year, but were ignored by academics and major medical journals. Their 22-page study accuses Chinese scientists of “deliberate destruction, concealment or contamination of data,” and claims scientists who spoke out were silenced and disappeared. They say their conclusion is “beyond reasonable doubt.” Wait, this did not start in the “Wet Market?” I have been saying this from the beginning. Never trust the Chinese government. Nothing they say is true and there are no consequences for their lies, millions of deaths, trillions of economic destruction and pain and suffering. If the smoking gun exists, what are the consequences for China?
Fauci said what? National Institute of Allergy and Infectious Diseases (NIAID) Director Anthony Fauci defended “gain-of-function” research in 2012 — wherein scientists extract viruses from the wild and engineer them to infect humans in order to study potential therapeutics including vaccines — as research worth risking a pandemic over. “In an unlikely but conceivable turn of events, what if that scientist becomes infected with the virus, which leads to an outbreak and ultimately triggers a pandemic?” Fauci wrote in a paper reported on by The Australian. “Scientists working in this field might say — as indeed I have said — that the benefits of such experiments and the resulting knowledge outweigh the risks.” Well, that may not have gone as planned. How ironic is it that the face of the pandemic for the US suggested such research was worth the risk. Fauci, do you want to rethink your prior statement on this topic?
President Biden dropped an ominous note into his remarks to American service members at a Virginia military base Friday, telling them that his Chinese counterpart believes Beijing will “own America” inside the next 15 years. “We’re in a battle between democracies and autocracies,” Biden told troops at Joint Base Langley Eustis in Hampton. “The more complicated the world becomes, the more difficult it is for democracies to come together and reach consensus.
Smoking killed almost 8 million people in 2019 and the number of smokers rose as the habit was picked up by young people around the world, according to new research. A study published in the Lancet on Thursday said efforts to curb the habit had been outstripped by population growth with 150 million more people smoking in the nine years from 1990, reaching an all-time high of 1.1 billion. What is going on here? How is it possible that young people start smoking today? In my life, I have never tried a cigarette and never would consider it. What does a young person see in smoking that makes it compelling? What am I missing? I made it clear to my kids. If I ever find out they smoked, they are not welcome in my home.
At night, the floors of sheds vanish beneath carpets of scampering mice. Ceilings come alive with the sounds of scratching. One family blamed mice chewing electrical wires for their house burning down. Vast tracts of land in Australia’s New South Wales state are being threatened by a mouse plague that the state government describes as “absolutely unprecedented.” I don’t hate mice, but sure don’t want millions of them scurrying around my house. The videos on line are insane.
The Amazon acquisition of MGM Studios may mean a potentially uncomfortable situation for former President Donald Trump thanks to alleged outtakes from "The Apprentice" now being in the hands of Amazon founder Jeff Bezos. Bezos was a frequent target of Trump during his presidency, which could come back to bite him now that the Amazon billionaire could control the release of outtakes and behind-the-scenes footage from the reality series that some, such as actor Tom Arnold, allege shows Trump making various lewd, demeaning and sexist language while on set and pointing out which contestants he would like to have sex with.
The suspected gunman who killed nine work colleagues at a California transit facility stockpiled an arsenal of weapons, thousands of rounds of ammunition and Molotov cocktails at his home before setting the residence ablaze the morning of the rampage, authorities said Friday. The Santa Clara County Sheriff's Office said a search of Samuel Cassidy's San Jose, Calif., home yielded multiple cans of gasoline, 12 firearms and 25,000 rounds of different types of ammunition. Authorities also found 17 Molotov cocktails inside.
According to the AP, so far in 2021, we've already seen 232 mass shootings including the incident in San Jose on Wednesday. According to the Gun Violence Archive, there were 417 mass shootings in 2019. The total number of people killed in America because of gun violence that year was close to 40,000. In 2020, there were 610 mass shootings across the nation. Roughly 43,000 people died because of gun violence in 2020. I am supportive of the 2nd amendment and own a firearm as a form of protection for my home after never firing a gun in my first 50 years. The gun is locked and I have been training to use it properly. However, the amount of mass shooting has reached pandemic levels and someone smarter than me needs to figure out a solution here. Schools, malls, movie theaters, restaurants, offices, concerts...no where is safe. This weekend over 20 people were shot in Miami by three gunman. Multiple deaths. When will this end?
The U.S. Postal Service said on Friday it plans to raise the price of a first-class postage stamp to 58 cents, from 55 cents, to offset falling revenues as volumes drop. In the past 10 years, mail volume has sunk 28%, USPS said in a statement, and is continuing to fall. I checked prices of stamps since around the time I was born (1969). In 1968, stamps cost 6c and are going to 58c over 53 years for growth of approximately 4.4%/year. Given the mounting losses for USPS, at what point does Amazon just buy it?
A UFO filmmaker shared a video clip on Thursday depicting radar footage he claimed shows a swarm of unidentified flying objects near a Navy ship off the coast of San Diego almost two years ago. Jeremy Corbell posted the 46-second clip on Twitter, saying it was taken from the USS Omaha on July 15, 2019 and said the footage showed a "significant UFO event series." In the clip, a radar screen is shown with several objects moving around the ship. At one point, an unidentified man is heard saying, "Holy (expletive)! They're moving fast. ... They're turning around." I have written extensively on this topic and am excited for more releases in coming weeks. I am more confident we are not alone and too many Naval officers have come forward with sightings. The video link attached shows a bunch of objects on radar and commentary from the crew.
Virus/Vaccine
All data continues to improve from cases, hospitalizations and deaths. Cases are down to 21k/day for the 7 day average (only 12k on Saturday), hospitalizations to 27k and deaths approaching 450/day. All are fractional to peak levels. More than 1.84 billion doses have been administered across 176 countries, according to data collected by Bloomberg. The latest rate was roughly 31.5 million doses a day. In the U.S., 294 million doses have been given so far. In the last week, an average of 1.39 million doses per day were administered. After peaking at a 7 day average of 3.4mm, the US is down to 1.4mm.
