Opening Comments
Facebook Face-plant
Quick Bites
Markets, AMZN Early Black Friday
Shrink-Flation, Mortgage Rates, 3 Day Work Week
CF Ind-Nat Gas, British Shortages, CA Oil Spill
French Clergy Abuse, Sam Brown Cancelled
NYC Subway Attack
Virus/Vaccine
Data-Continued Improvement
8 States with Limited ICU Beds
Pfizer Effectiveness
Organ Transplants Requiring Vaccine
Tel Aviv Coming Back to Life
Gottlieb Headlines
Real Estate
My General Comments-So. Fla. Madness Continues
Manhattan Record Sales
Warburg Charts on NYC
Opening Comments
A friend of mine took Jack to an amazing golf course called Pine Tree and I was incredibly impressed with it. I was unable to play as I am resting my back, but plan on playing again next week. The guy who hosted bought a Lamborghini SUV for $250k 5 months ago. Last week, the dealer called him and asked if he would sell the car for $300k. Nothing to see here guys. It is opposite day where depreciating assets actually appreciate. The issue is, if he sells it back, it is an 8 month wait to get another one.
I’m solo this week as my wife, Jill, is in NYC visiting her family. Between driving Jack golfing and pick up and drop off at Julia’s school and all her activities, I may as well have an Uber sign on my car. No joke, I will fill up 3x this week. Today’s note is short given my Uber duties. Also, I want to get feedback on a shorter Rosen Report.
No picture/video of the day, because it is embedded in the Facebook story below. Please watch.
Facebook Face-plant
Rosen Report readers know I have been critical of the media and social media. I have been very hard on companies such as Facebook, Twitter, and Google as I believe they have too much power and do not have a consistent manner in who they “cut off” from the platform (FB and TWTR). I also fear the impact social media has on kids and adults and the social media companies place profit over safety far too often.
I included a large WSJ article on FB/Instagram and it detailed the negative impacts on teens. In my last report, I wrote about the whistle blower who turned out to be an incredibly articulate, impressive and believable woman named Frances Haugen. She was on 60 Minutes and also testified before the Senate and Congress on Tuesday. I watched the 60 Minutes and found Haugen to be incredibly authentic and impressive. Oh yeah, she had a ton of documents proving every point she made which only added to her credibility. FB stock fell over 6% between Friday afternoon until Monday and then rebounded a couple percent. This Washington Newsday article does a great job of summarizing Haugen’s five key points in a short piece.
Here is an excerpt from the CNBC article on her testimony. The former Facebook product manager for civic misinformation told lawmakers that Facebook consistently puts its own profits over users’ health and safety, which is largely a result of its algorithms’ design that steers users toward high-engagement posts that in some cases can be more harmful. Though she stopped short of accusing top executives of intentionally creating harmful products, she said that ultimately CEO Mark Zuckerberg had to be responsible for the impact of his business.
Haugen also said that Facebook’s algorithm could steer young users from something relatively innocuous such as healthy recipes to content promoting anorexia in a short period of time. She proposed a solution for Facebook to change its algorithms to stop focusing on delivering posts that create more engagement and instead create a chronological feed of posts for Facebook users. That, she said, would help Facebook deliver safer content.
Along with her disclosures to the U.S. Senate and the Journal, Haugen also filed complaints with the Securities and Exchange Commission, claiming Facebook misled investors and advertisers by omitting or misrepresenting what it knew about how its platforms were being used, such as to spread misinformation, and the measures it was taking to combat that.
I have a well-known reader named Whitney Tilson (newsletter link attached to his name). He sends regular emails regarding my Rosen Reports and often takes the side near very left leaning politicians. I have criticized him for being too biased and not calling out both sides. He sent me a letter he sent to Sheryl Sandberg (COO of FB) and I was happy to see he called them out for what is clearly a dangerous platform. Whitney’s letter can be found here and is a short read, but quite powerful, as it is coming from someone who is very critical of things that are not on the left and we know FB is very left on the political spectrum with 92% of 2020 employee contributions going to Democrats. Here is a short excerpt from Whitney’s letter:
While I don't doubt that you, Mark, and pretty much everyone else at Facebook is well-intentioned and the company does much good (my family and I all love and use Facebook, Instagram, and WhatsApp every day), it's clear that you have unwittingly created a monster that is doing enormous damage to individuals, institutions, societies, and governments around the world. If you don't rein this in yourself, then the government is going to do it for you, which is something neither you nor your shareholders will like. In addition, you and Mark are personally at risk of becoming the next Sacklers, shunned and scorned by all.
I do not know what it takes for the idiots in DC to actually do something right for a change. FB and others need to pay the price. What more proof is needed than what the courageous whistle blower, Frances Haugen, did to shed a light on the dark spaces inside Facebook. The cost of allowing FB and others to continue on the path is too high to society and inflicts too much harm on our youth. I have written extensively on social media and will again write in the future about the impact on teenagers given I have two and have seen first hand the trauma many of these platforms create. Too many companies have become too powerful and controlling too much of the narrative to be considered safe in my opinion. Hopefully, Frances can help effect change. In my ideal situation, the government outlines rules for the large social media companies to have equal treatment of stories (not just blocking the right) and having some type of regulations and rules around children to help protect them. I would like to know who was involved in the suppression of the Hunter Biden laptop story and the role Haugen played if any on that story.
To be fair, I am including Zuckerberg’s comments and a link to his side of the story:
Facebook Inc. Chief Executive Officer Mark Zuckerberg addressed a recent series of negative stories about the company for the first time by saying accusations that it puts profit over user safety are “just not true.” “It’s difficult to see coverage that misrepresents our work and our motives. At the most basic level, I think most of us just don’t recognize the false picture of the company that is being painted,” he wrote in a note to employees on Tuesday that he also posted publicly.
Sorry Zuck, I don’t believe you. All credibility has been lost. Don’t get me wrong, you are one smart and successful person, but you have lied and been disingenuous for too long. I am hopeful that the regulators step in and give you a tighter box to operate in as what FB and other social media companies have been doing is not ok.
Quick Bites
Markets have been quite volatile as seen in the 5 day chart below of the S&P 500, but ended up rallying on the day after a tough morning session. Despite wild swings over the past 5 days, the S&P is down only slightly in that period. Stocks staged a comeback on Wednesday as investors grew optimistic about a debt ceiling deal and bought into technology stocks. The Dow rose 103 points, earning back a 459-point loss. The S&P 500 advanced 0.4%, after falling 1.27% at its session low. The technology-focused Nasdaq rose about 0.5%., after dropping as much as 1.2% earlier in the session. Stocks reversed course on news that Senate Minority Leader Mitch McConnell told a closed meeting of Republicans that he would offer a short-term debt ceiling extension later Wednesday. That would help relieve some pressure on Congress to avoid a U.S. default currently expected on Oct. 18.
You know supply chain issues are serious if AMZN is having problems. Black Friday isn't for another 53 days. For Amazon, however, it started Monday. Amazon has begun rolling out "Black Friday-worthy deals" to jumpstart the holiday shopping season that's expected to be chaotic because of shipping and supply chain issues. Amazon announced Monday "deep discounts across every category" including fashion, home goods, toys and electronics that will be available on a special webpage. Popular brands, such as Apple (AAPL), KitchenAid and Hasbro (HAS), will also be discounted on "select days" in October and November. New deals will also be added every day throughout the next two months. I checked out the website. Lots of deals from the “special webpage” link above.
I wrote about this a couple months ago, but wanted to hit on it again. I love the word, “shrink-flation,” and feel it will be more prevalent over time. Shrinking products and rising prices. From cereal to soap, paper towels to pretzels, you might have noticed you’re not getting as much as you used to at the grocery store. Consumer blogs pointed to products like oatmeal packets of 10 cut to eight for some varieties, tuna cans from seven to five ounces, and some family size cereals slimming down from 19.3 ounces to 18.8 ounces, all evidence of what’s known as shrinkflation. Kim Sovell, a marketing professor at the University of St. Thomas, says companies have learned how consumers don’t like to pay more. “It’s really a way to conceal higher prices,” Sovell said. “We’re very deterred by price increases. We’ll switch brands. … We focus on cost over quantity. Cost over quality.” Unless you have an old box in your cabinet at home to compare, you might not notice. “We check prices every time we shop but we rarely check weight,” Sovell said.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.14% from 3.10%. Refinance demand fell to the lowest level in three months. Mortgage applications to purchase a home declined 2% for the week and were 13% lower than the same week one year ago. It will be interesting to see if rates continue to move higher and the impact on the housing market which has defied gravity. If rates continue to back up, I would imagine we would see a correction in housing prices.
Don’t be surprised if this comes to a theater near you soon. A shortage of technology talent has Indian companies offering sweeteners like more vacation time and gender-neutral parental leave as they compete for graduates and professionals. One Bangalore startup is trying a more dramatic solution: a three-day work week. Fintech company Slice is offering new hires a three-day week with salary at 80% of the going market rate. This is a win-win approach that frees the workers to pursue other passions or interests -- or other gigs -- while still locking in a steady pay and benefits from Slice, said Rajan Bajaj, the company’s founder.
Tony Will, the chief executive of CF Industries, one of the world’s largest fertilizer producers, described how this year the price of the gas used at the company’s two British plants more than tripled, until CF was losing $300 on each ton of ammonia produced. The losses ballooned into “something so big and so negative” that the company could not continue under those terms, and he shut the two plants down, causing headlines throughout Britain. Since then, Mr. Will agreed to a short-term fix: He has reopened one of the plants with the government covering the losses. The government is helping pay CF’s bills because the manufacture of ammonia results in a valuable byproduct: carbon dioxide, vital to the British meat processing industry as well as for carbonating drinks. In a related matter, Saudi Aramco said the natural-gas crisis was already boosting oil demand and reiterated plans to increase its production capacity. Crude consumption’s risen by around 500,000 barrels a day, according to Amin Nasser, chief executive officer of the world’s biggest oil company. That’s roughly the same as OPEC member Venezuela’s total output. I am very concerned about the impact of elevated commodity pricing. If we have a cold winter, based on inventory and usage, we can see sky high natural gas which will cost consumers a great deal to heat their homes.
British military personnel in combat fatigues arrived on Monday at a BP storage depot after the government ordered the army to help deliver fuel to tackle an acute shortage of truckers, a Reuters reporter said. Britain's supply chains for everything from pork, petrol and poultry to medicines and milk have been strained to breaking point by shortages of labour in the wake of the Brexit and COVID crises. Shortages are mainly due to a lack of heavy goods vehicle drivers and overseas workers — with the shortfalls largely exacerbated by the Covid pandemic and Brexit, but also due to other factors such as low pay and working conditions. Britain has experienced shortages of fuel at gas stations due to the shortage of specialist tanker drivers, while farmers are warning that tons of food produce could go to waste, and thousands of animals may have to be destroyed as there are not enough farm or abattoir workers to process the meat. The labor shortage has highlighted how dependent Britain has been on overseas, seasonal workers. Approximately 22% of gas stations have no fuel. The articles suggest things should get back to normal in the next couple weeks.
Crews raced Sunday to contain the damage from a major oil spill off the Orange County coast that left crude spoiling beaches, killing fish and birds and threatening local wetlands. The spill, first reported Saturday, originated from a pipeline off the coast of Huntington Beach connected to an offshore oil platform known as Elly. The failure caused at least 126,000 gallons of crude to spill into coastal waters creating a slick that spanned about 8,320 acres— larger than the size of Santa Monica—and sent oil to the shores of Newport Beach and Huntington Beach early Sunday. I have surfed the Huntington Beach and Newport areas since I was 15 years old. I have countless fond memories of my time there. Unfortunately, some of these beaches have been impacted.
I have written extensively about the cancel culture and the growing hatred of the police. Yes, there are bad apples, but the massive majority of law enforcement are heroes to risk their lives to save people and help. I found this story interesting. The headline: French Report: There have been estimated 330,000 victims of child sex abuse within France’s Catholic Church over 70s years. The report says an estimated 3,000 child abusers -- two-thirds of them priests -- worked in the church during that period. Sauve said the overall figure of victims includes an estimated 216,000 people abused by priests and other clerics. Remember, the population of France is approximately 20% of the USA for perspective. So, do we suggest cancelling all clergy due to the bad acts of some of them? I would argue there are more bad actors as a percentage in the church than the police based on these #s. I do not suggest we cancel either, but do suggest bad actors pay the price and serve time.
This piece is along the lines of my FB theme story today. What percent of the time are left leaning politicians and writers blocked relative to right leaning? Sam Brown in a war hero and served his country proudly. Republican Senate candidate and retired Army Capt. Sam Brown is firing back at Twitter after he woke up Monday morning to see that his account was "permanently suspended," which Twitter has since acknowledged was an error. "Big Tech is waging an all-out attack on conservative voices — using unequally applied 'rules' to censor or suspend anyone they disagree with," Brown told Fox News in an exclusive statement. "This summer, they censored my tweets as 'potentially sensitive content.' This morning, they suspended my account without warning or cause." Brown is running in the Republican primary in Nevada hoping to unseat Democratic incumbent Sen. Catherine Cortez Masto in 2022. "Big Tech knows their days of one-sided censorship and divisive influence are numbered with conservative voices like me in the Senate," Brown said. "I will not back down from this fight - Twitter has messed with the wrong soldier."
The straphanger who was hurt Monday when a woman randomly pushed her into an arriving train at Times Square said she “never thought it would happen to me.” Lenny Javier, 42, of New Jersey, told WCBS-TV that the Monday morning rush-hour attack left her with serious injuries. “My face is swollen, I have a broken nose, a fractured chin,” Javier told the network. The assailant, Egegbara, of Far Rockaway, has a lengthy criminal record dating back 10 years — including busts for assaulting three other women, ages 18, 40, and 57, according to police. She was charged with attempted murder, according to police. The video of the incident is here. Two readers were involved in subway issues in the past week where there was aggressive behavior towards them. I sure hope Eric Adams is tougher on crime and puts dangerous criminals behind bars with NO Bail. Adams has it right, if you are going to charge a premium to live in NYC (taxes and cost of living), you better give a premium service and NYC is not close on giving you what you pay for today.
Virus/Vaccine
The data continues to improve with the key statistics going in the right direction as seen in the charts below. Cases and hospitalizations are well off peak levels and deaths have started to decline more rapidly in recent days.
While much of the US is seeing a decline in hospitalizations for Covid-19, it's also evident the fight against the pandemic is far from over as eight states are reporting limited numbers of available ICU beds. Texas, Idaho, Alabama, Georgia, Oklahoma, Kentucky, Arkansas and North Carolina have 15% or less of their ICU capacity available to patients, according to data from the Department of Health and Human Services.
A new study of more than 3.4 million Pfizer jab recipients has confirmed that vaccination is 90% effective against severe COVID-19 illness for at least six months after the second dose. It’s the latest Pfizer-backed analysis of their remedy, published Monday in the Lancet medical journal and conducted by researchers with Kaiser Permanente Southern California. Their findings support preliminary studies of Pfizer’s success, including one shared last spring that also showed six months of protection against severe symptoms based on just 12,000 vaccine recipients. The ability of the Pfizer-BioNTech vaccine to shield against infection fell by nearly half — from 88% at one month following the second dose, down to 47% — after six months. However, despite the shot’s declining defenses against viral transmission, it remained still an average of 90% effective against hospitalizations due to COVID-19, including the more aggressive Delta variant of 2021. Everything I read suggests you need to consider boosters after 6 months. Personally, I do not want to get shots in perpetuity, but will start monitoring my own situation next month (6 months after my 2nd shot). Depending on the state of the pandemic and my antibody levels, I will consider boosters.
Interesting article about Tel Aviv, Israel giving booster shots and helping the city “come back to life.”
A few headlines from former FDA Commissioner Gottlieb
Real Estate
The South Florida market just refuses to calm down. I do not recall a market where HIGH END properties flip for 50% gains in 30 days, but it happens regularly in South Florida. The latest is from the hot handed developer Todd Glaser. I wrote about him in my last report and his sale of the Epstein land for a big profit. He bought the former Al Capone home which was on the market for years ONE MONTH AGO for $10mm and just sold it for $15.5mm. It was another tear down and a 30,000 ft lot with 100’ of water frontage. It was on Palm Island which has historically not been considered desirable, but given everything is so un-affordable, it is hot. The location is bad given it is just off the highway and you get a lot of tourist traffic on jet skis and boats. A broker told me that tourists on jet skis came up to a$50mm house and jumped into someone’s pool. You want to be on North Bay Road, but very few can touch a place on the water. NO inventory and SKY HIGH prices. A friend bought for $14mm a couple years ago. I would guess it is $50mm today. Can’t be less than $45mm. On this topic, one of my most loyal readers, Mike, sent me a WSJ story showing at least 22 homes in Palm Beach have sold for $40mm or more since Covid. The link here is a great interactive story with a bunch of high end homes with details. I could not get the picture below to save properly, so I took a photo. You can clearly see that this ain’t no joke. The second map was also from the article link above.
On a related topic, I met with a broker who specializes in South Florida (Boca and Palm Beach) and he told me, he would list my house for $12.9mm. I paid $6.3mm 4 years ago. He feels it sells above ask is likely and in a hurry and I must have another house lined up before I list it. His suggested ask is $1,700/ft (non-waterfront). I am just in shock and feel like an idiot for not buying everything down here 4 years ago when I moved here. Had I bought the place I was considering on the water for $9.5mm in 2017, I think it would be worth $24mm today. One of the reasons I passed on the home was the master closet was the size of a living room. There was no amount of clothes my wife could have bought to fill it up and I could not bring myself to have her closet be the size of a nice NYC 1 bedroom apartment.
Manhattan apartment sales surged to a record in the third quarter as buyers grabbed what they could while inventory remains high. Closed purchases totaled 4,523, the most for any quarter in data going back to 1989, according to a report Tuesday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The median price of all properties that changed hands climbed 1.4% from a year earlier to $1.12 million. Home shoppers who held back in Covid-19’s early days have returned in force, sensing a chance to secure a deal while the city is still recovering. Employers are gradually summoning workers back to the office as the recent rise in cases flattens and Broadway returns -- small measures of confidence that it’s a good time to invest. “There’s more optimism and a sense of safety in the market,” said Jonathan Miller, president of Miller Samuel. “And there’s a sense that Covid discounts are evaporating quickly. They’re not going to have a lot of life left in them.”
I received an update from Warburg Realty on NYC. It is in PDF form and cannot figure out how to attach it to this document. Here are a few good charts from the report. The report is positive and sites limited inventory.