Hamptons-Bloom is Off The Rose
8-8-21
Opening Comments
Picture of the Day-Medal Counts By Country
Hamptons-The Bloom is Off the Rose
Quick Bites
Markets, Employment, Inflation Reports, Container Rates
Nat Gas, Gasoline, WFH, China Spamouflage
Denver Spending, Fentanyl Scare, Fantasy Island
Virus/Vaccine
Data-Continues to Deteriorate Interesting Charts
Florida
Delta Impacting Kids
Austin in Trouble
Vaccine Mandates
Vaccines Make a Difference
Boosters are Back in Play
Only One Jab If Previously Infected
Real Estate
South Florida Craziness
Greenwich, CT
Austin, TX
Retiring in Mazatlán, Mexico On The Cheap
Summer is coming to a close and I am ready to sleep in my own bed again. We are approaching 7,000 miles driven and I am sick of hotels and eating out 3x/day. We had a crazy family incident last week. I took Jack and Julia golfing and my wife, Jill, came to watch. We were on the 17th fairway and I saw a car with flashing lights on the 18th tee box with a crowd of people. A man was giving CPR very aggressively. Given I have been trained, I am always quick to lend a hand. I saw the crowd and lights and presumed they were all set and did not need my help. Minutes went by and they were still giving CPR. Julia was nervous that someone was dying and so I finally ran over. Oops. It was a mock drill and the CPR was being given to a plastic torso which fit in a large briefcase. Crisis averted. Was funny in hindsight, but truth be told a little scary. Given how long chest compressions were going, I was convinced someone was a goner.
My family went out to eat the other day and had a reservation for dinner. The restaurant was less than half full and someone walked in for a table, but the manager turned them away because the do not have the kitchen or serving staff to accommodate more customers. There are unintended consequences for government stimulus and paying people to stay home. Small businesses are getting hurt. I have never seen more “Help Wanted” signs in my life.
Expanded Virus/Vaccine section today. Lots going on there. Also, some interesting tidbits in the R/E section.
Jack has a tournament in Westchester next week and then Windham, NY in late August. Shortly after that, we are heading back in Boca. Jammed up this afternoon, so hitting send super early today.
Picture of the Day
I hear a lot being made of medal counts by country. I want to put something into perspective. When high schools or colleges play each other, there are divisions and it is generally based on size of the school. A huge state school with tens of thousands of students such as Penn State, Michigan, Alabama… should not be in the same division as a small liberal arts school with a few thousand students. There are a few exceptions as I consider Notre Dame in football or Butler or Gonzaga in men’s basketball, but most of the big D-I successful athletic programs tend to be quite large.
When I look at China and the US, I found that China has 1.4bn+ people and the US has 330mm. China has 4.25 times more people than the US, yet the US has 25 more total medals, including one more gold than China. I ask all the haters out there, why do you not make some apples to apples comparisons and do some normalization for the size differences in the populations. Australia has 25mm people, yet is winning over 1/2 the medals of China despite a population which is less than 2% of China’s. Australia really punches above their weight in the Summer Olympics as does the US and a few other countries.
I despise the Chinese government and their lies, creating the virus, killing of millions globally, cover ups, child labor camps, mass detention and torture of Uyghurs and other Turkic Muslims, theft of IP, cyber attacks, insane pollution…. the list is endless. Chinese officials are at it yet again blaming the pandemic on the US Army. For the record, on a population adjusted basis, China is horrible at the Olympics. To have the same ratio of medals to population as the US, China would have to win over 5x the medals China won in this Olympics and to match Australia, they would have to win 25x more than they have thus far. Some countries punch above their weight, while China punches far below its weight.
I do not know what the right answer is for the world to hold China accountable for their role in the pandemic and constant lies, but I believe it needs to be aggressive, coordinated and devastating to China. I believe the world will be living with COVID for years and the disruptions, destruction, loss of life, trillions in damages…are beyond imagination. Yes, I am a firm believer China is to blame, not Trump or Biden or Desantis or Fauci. It is on China. Another topic, the media was relentless on crushing Trump when things got bad for all that he did not do. I barely hear a peep about Biden today on the topic. To be clear, the virus is neither of their fault, but I find it interesting how it is portrayed in the media.
Hamptons-The Bloom is Off the Rose
My first trip to the Hamptons was in 1994. Truth be told, I did not really get it. I felt it was a little anti-climactic. Leaving the city on Friday afternoon, sitting in bumper to bumper traffic for hours and then hanging by a pool or beach seemed uneventful and not worth the headache to get there. I grew up in Florida and a beach was easy access, so I was far less impressed than most. I was surprised that people were so excited to be in the Hamptons only to scramble to get back to the city for work in a couple days. It seemed like a great deal of trouble for hours of serenity. The Hamptons eventually grew on me and I have some fond memories with my family, but I am back to questioning it again given a combination of crowds, chaos, traffic and cost.
Given work from home and the exodus out of the city, the Hamptons are booming. A couple weeks ago, I went to take the boxing class (mentioned in last report) .7 miles from where I was staying. Twenty-five minutes into the journey, I parked my car on the side of the street. I had to run to get to class, and was late despite leaving 25 early. think about that for a second. I only was able to drive 1/3rd of a mile in 25 minutes while in the suburbs.
I had to take my son, Jack, two miles and it took 35 minutes on a Tuesday afternoon. Note to self, don’t head West on 27 in the afternoon. I took my daughter, Julia, to town at 2pm on a Thursday afternoon and I could not find a parking spot. This is worse than 4th of July or late August traffic. The infrastructure was just not made for these crowds. I drove from Bridgehampton to Southampton on Friday @ 3pm. Talk about a bad idea. Trying to make a left turn onto 27 is akin to winning Powerball…three weeks in a row. Instead, I made a right and a quick U-turn. Disaster. One road in and one road out.
Now let’s talk about cell service. I touched on this before. It is as though I am in the mountains of Mongolia. You can’t even send a text. I was trying to meet someone and my text would not go through. Every time I tried to call, my phone said, “Call Failed,” despite being in the town of Bridgehampton in front of Pierre’s. The irony here is there are countless millionaires and billionaires and virtually no cell service. Can you hear me now?
Are there some amazing estates out here and are there pockets of beauty? You bet. I was fortunate to have lunch at a beautiful modern home on the beach of a new friend I met through the Rosen Report. I enjoyed connecting, and the ocean looked amazing from the deck. Do I ever see myself moving back for the summer? Nope. Now add the cost of R/E and the cost of upkeep with the lack of infrastructure, and I am out. I spoke with a pool cleaning company. The price to take care of a pool is 5x or more than the price in Boca. For landscaping, it is triple the price on an annual basis and 4 months a year there is nothing to do, given it is frozen. I understand prices in South Florida for R/E have gone up, clearly they were far too cheap on a relative basis when you factor everything in (cost of home, upkeep, income taxes..). Try joining a golf course in the Hamptons (Atlantic, Sebonack, The Bridge, Friar’s Head…). Prices range from $500k to $1.5mm to join assuming you can get into them as most are full with multi year wait lists. How many months a year do you really golf in NY?
This Vanity Fair article is entitled, “Rich People of the Hamptons Have a New Headache: Even Richer People.” The article discussed Hamptons prices and I agree. When I go out there, I feel as though I am a pauper and I retired young. Go to a restaurant, try to get a tennis lesson, check out the prices at a farm stand or grocery store and you won’t believe it. Then, go see how much a decent house cost and you will really lose it. Try getting into restaurants. I am hearing stories of big bribes and have read multiple articles on the subject. This article goes into details on the crazy things being done to secure tables. Although the food has improved over the past 20 years, I hardly call the food in the Hamptons memorable.
Local companies cannot find help out here and business demands are up massively since the pandemic. The local sporting goods store is up over 100% since pre-COVID-19. The driving range is up 75%. I spoke with a local farm stand. They were up well over 100% in 2020 as restaurants were closed and most farm stands were as well. They are down from last year, but up sharply from 2019. The owner is dying for a vacation and in dire need of staff, which cannot be found.
I really want a small second home, but Jack’s tournaments make it hard to be anywhere for more than a couple days. Given the ridiculous price run up in second homes since the pandemic, looks like it home is a combination of Springhill Suites, Homewood Suites, Comfort Inn and whatever other hotel is in the Podunk town where the junior golf tournaments are held. Serenity Now!
Quick Bites
Stocks tied to the economic recovery rose after a stronger-than-expected jobs report on Friday, sending two key market averages to all-time highs. The Dow rose 144 points, or 0.4%, and closed at an all-time high of 35,208. The S&P 500 rose nearly 0.2% to clinch its own record close at 4,436, while the tech-heavy Nasdaq dipped 0.4% to settle at 14,835. For the week, the Dow rose 0.7% for its second positive week in three. The S&P 500 rose 0.9% for the week and is now up 18.1% for the year. The Nasdaq rose 1.1% for the week. Friday’s jobs report showed that the U.S. economy added 943,000 jobs in July, according to the Labor Department. Economists expected the economy to have added 845,000 jobs last month, according to estimates from Dow Jones. The unemployment rate dropped to 5.4%, below the estimate of 5.7%. The 10 year Treasury is at 1.3% and oil is at $68/barrel.
There are 8.6 million people considered out of work in the U.S. and nearly 10 million job openings. Employers are using a number of incentives, including pet insurance and signing bonuses, to fill those positions. “One of the biggest factors is employers are essentially having to buy back job applicants’ Covid lifestyle,” said one HR executive. Companies have been using a variety of techniques, including signing bonuses, higher salaries and flexible working arrangements, to entice people. That likely will have to continue as the Covid-19 pandemic changes the jobs market, perhaps permanently. No one else believes this is a problem or inflationary? Is all of this “transitory?”
With fresh evidence the labor market is on the mend, investors’ focus shifts to inflation in the coming week and whether it will continue to heat up or show signs of abating. There is a series of inflation data expected: the consumer price index and the producer price index, released Wednesday and Thursday, respectively. Jobs and inflation are two key factors that influence the Federal Reserve in making its decisions on policy. Markets are hanging on anything that will help determine when the central bank will start to step away from the measures it took to support the economy during the pandemic, including its $120 billion per month purchases of Treasury bonds and mortgage-backed securities.
Container shipping rates have skyrocketed as the global economy bounced back from the Covid-19 pandemic and commodity demand recovered, while a shortage of containers exerted pressure on supply chains. Rates from China to the United States, for instance, have scaled fresh record highs above $20,000 per 40-foot box, up more than 500% from a year ago, according to freight-tracking firm Freightos. Here is another concerning article which goes into details on the shipping topic. I am not sure readers understand the consequences of this bullet with respect to impacts on goods you consume. I was told about consumer products company which manufactured in China. Pre-pandemic. They made a product in China and it was $5 to ship each one (large boxed item) and would take 20 days to arrive in the US. Today, the cost to ship the same box is almost $20/box to ship and takes 60 days. The shipping is now more than the cost of the good. What does that do to the price you pay for the goods? No inflation to see here. Once the goods arrive, try getting trucks to take it from the port to the final destination. Costs have exploded as has the time to get to the final destination. Over time, these elevated shipping costs will push manufacturing back to the US.
The era of cheap natural gas is over, giving way to an age of far more costly energy that will create ripple effects across the global economy. Natural gas, used to generate electricity and heat homes, was abundant and cheap during much of the last decade amid a boom in supply from the U.S. to Australia. That came crashing to a halt this year as demand drastically outpaced new supply. European gas rates reached a record this week, while deliveries of the liquefied fuel to Asia are near an all-time high for this time of year. “No matter how you look at it, gas will be the transition fuel for decades to come as major economies are committed to reach carbon emission targets,” said Chris Weafer, chief executive officer of Moscow-based Macro-Advisory Ltd. “The price of gas is more likely to stay elevated over the medium-term and to rise over the longer-term.” More inflationary pressure on something we all consume. Everywhere I look, I see inflation: homes, cars, boats, consumer products, commodities (gasoline, natural gas, metals..), food, services, chips, car rentals….
With respect to gasoline prices, I paid $3.59/gallon the other day and it cost me $70 to fill up the car. A reader in CA sent me this picture. Basically, $6/gallon. This will cost you over $100 to fill up your car.
“Delta is probably the final nail in the coffin of the five-day return to the office,” said Nick Bloom, an economics professor at Stanford University who has studied work-from-home trends. “The five-day return was still an option after the initial pandemic in summer 2020, but became increasingly unlikely when this stretched into 2021 and we all got used to working from home.” Some 65% of American workers who said their jobs could be done entirely remote indicated that they would be willing to see their pay cut 5% if it meant they could continue working from home, according to a new survey by Breeze, an insurance company. I do feel there was momentum to return to the office prior to the Delta Variant. Now, the more senior managers I speak with believe Work From Home has real legs. Lots of consequences for this for commercial real estate as well as residential.
Beijing is believed to use a massive "spamouflage" network to muddy the waters and promote its own interests to unwitting social media users - and its computer generated "people" are perhaps its most disturbing tactic. Twitter and Facebook profiles are being fronted by pictures of people who simply do not exist - but have constructed by AI software. These "people" have never been born - they are simply bundles of code with the illusion of personality, with varying ages, genders, facial shapes and ethnicities. Analysis shows all the photos appear to be built around the same 'frame' - results on all the eyes being exactly level. The AI "people" can help Chinese trolls beat standard checks on fake accounts, such as being able to trace stolen profile pictures using reverse image search. Fake accounts are also believed to be used to bolster Chinese state media on Facebook - with the state also deploying so-called "warrior trolls" to fight a pro-China PR battle in online spaces in the West. I said my piece earlier on my views on the Chinese government. You know my stance.
The city of Denver spends at least twice as much on homelessness per person as it does on K-12 public school students – and the spending crushes the veterans affairs budget in the state, a new study released Thursday found, according to a report. For comparison, the city reportedly spends between $41,679 and $104,201 on each person experiencing homelessness in a year while only $19,202 on each K-12 public school student over the same period of time. The amount spent on each homeless person in the area is comparable to the average income of area residents. The average rent for a person living in the area is $21,156 per year and the median per capita income is $45,000, FOX 31 of Denver reported. What is going on here? What is the fascination with spending so much on homeless relative to education. No, I am not supportive. With the pandemic, kids need more help as they have not learned a ton with remote learning. There are dire consequences for children falling too far behind.
I am not the most knowledgeable person on drugs. I don’t use any drugs but this story is remarkable. Heart-stopping footage shows a rookie deputy in California examining fentanyl during a drug bust — then keeling over and almost dying from an overdose just from being “too close” to it. San Diego sheriff’s Deputy David Faiivae was shown examining the white powder in a car last month, with his training officer, Corporal Scott Crane, telling him, “That stuff’s no joke, it is super dangerous,” according to a video put out by police as a warning. It is so deadly that particles of Fentanyl which get airborne can kill you? Sure sounds like a drug I want to stay away from given the consequences.
I am not sure which report I mentioned my Saturday night TV experiences as a kid, but it included the Love Boat and Fantasy Island. Well, I just read there is a new Fantasy Island remake coming in the fall. You can all be sure I will be watching, but missing Ricardo Montalban and Herve Villechaize, the original actors.
Virus/Vaccine
Data-The data continues to deteriorate with cases, hospitalizations and deaths going the wrong direction. Case growth has slowed slightly but remains elevated. Hospitalizations and deaths have increased signficantly. Cases are 108k/day for the 7 day average relative to lows of 11k in July and highs of 254k in Jan. Hospitalizations are up to 58k relative to lows of 16k in June and highs of 137k in January. Deaths started growing more this week and averaged 506/day relative to lows of 175 in July and highs of 3.4k in January. The second chart is interesting and shows states with the highest vaccination rates outperforming states with lower vaccination rates. The third chart is back and covers the John’s Hopkins US Positivity Rate. The rate was as low as 1.8% in July and has now risen to 11.2% and climbing. Another concerning sign we are losing the battle against Delta with more variants likely on the way.
Florida reported 134,506 new Covid-19 cases over the last week on Friday, more than any other 7-day period during the pandemic. Data published Friday by the state health department shows the state, which releases Covid-19 data on a weekly basis, reported an average of 19,215 cases each day. Covid-19 infections of vaccinated people are expected. But the unvaccinated are 'the big highway of transmission. The previous record high was set January 8, with 125,937 cases reported over seven days, for an average of 17,991 cases each day, according to data from Johns Hopkins University. This week's total is about 22% higher than last week, when the state reported 110,477 total cases, for an average of about 15,782 new cases each day.
In Florida, which has the second-highest rate of new cases per capita after Louisiana, children's hospitals and staff are "overwhelmed," said Dr. Aileen Marty, an infectious disease expert at Florida International University. "The numbers of cases in our hospitals in children and our children's hospitals are completely overwhelmed," Marty told CNN's Jim Sciutto on Friday evening." Our pediatricians, the nursing, the staff are exhausted, and the children are suffering. And it is absolutely devastating ... our children are very much affected. We've never seen numbers like this before," she said. "We have not seen kids pile into pediatric ICUs across the South like we're seeing right now," Dr. Peter Hotez, dean of the National School of Tropical Medicine at Baylor College of Medicine, told CNN on Friday. This is very concerning. Earlier strains of COVID-19 seemed to have very little impact on younger people without co-morbidities. The Delta strain (90%+) of cases in the US seems to be having a more detrimental impact on many children just as kids are going back to school.
With ICU beds down to a single digit, Austin sounded the alarm Saturday, using its emergency alert system to let residents in the Texas capital city know that the local state of the pandemic is “dire.” The Austin area -- with a population of almost 2.4 million people -- has just six intensive-care unit beds left, state health data show. A total of 313 ventilators are available.
As soon as the FDA issues a full approval for a COVID-19 vaccine, there will be "a flood" of vaccine mandates at businesses and schools across the nation, Dr. Anthony Fauci told USA TODAY's editorial board on Friday. Mandates aren't going to happen at the federal level, but vaccine approval will embolden many groups, he predicted. "Organizations, enterprises, universities, colleges that have been reluctant to mandate at the local level will feel much more confident," he said. "They can say, 'If you want to come to this college or this university, you've got to get vaccinated. If you want to work in this plant, you have to get vaccinated. If you want to work in this enterprise, you've got to get vaccinated. If you want to work in this hospital, you've got to get vaccinated.”
President Joe Biden continues promoting coronavirus vaccine mandates for American citizens, but the White House still struggles to explain why that standard is not applied to migrants crossing the Southern border. In McAllen, Texas, 7,000 migrants who were positive for the virus have been released into the city since February, including 1,500 people in the last seven days. McAllen declared a state of disaster in response to the crisis, opening up funding allowing them to tackle the crisis. I am a bit surprised by the stance on this topic. The Federal government is pushing vaccines on citizens and Federal employees, but not for illegal immigrants? In San Diego, illegal immigrants were getting in person teaching while US citizens were only allowed remote learning. I keep suggesting we are living in an alternate universe, but almost everyday I see more news which makes no sense to me.
In the first big test of Covid-19 vaccines during a Covid-19 surge, places with higher vaccination rates are dodging the worst outcomes so far, while cases and hospitalizations surge in less-vaccinated areas. There are more tests yet to come, including when cold weather forces people in the well-vaccinated Northeast back indoors. But as the highly contagious Delta strain tears through the country, the trends thus far suggest vaccines can turn Covid-19 into a less dangerous, more manageable disease. “Vaccines definitely make a difference,” said David Dowdy, an epidemiologist at the Johns Hopkins Bloomberg School of Public Health.
There has been some flip-flopping on the booster issue and now Fauci suggests it is soon to be back on for some. Anthony Fauci, the U.S.’s top infectious-disease doctor, said Covid-19 vaccine booster shots should be given “reasonably soon” to people with weakened immune systems. “We need to look at them in a different light,” Fauci said on CNN’s “Fareed Zakaria GPS” on Sunday. “We would certainly be boosting those people before we boost the general population that’s been vaccinated, and we should be doing that reasonably soon.”
People who had COVID-19 may only need one dose of Pfizer’s vaccine to be “sufficiently protected” against getting the virus again, a new study says. The research, published in JAMA Network Open on Friday, compared the antibody levels of people who’d previously been infected with those who hadn’t been, after one and two doses of the double-dose Pfizer. “We observed higher SARS-CoV-2 antibody levels in previously infected individuals after one dose of BNT162b2 (Pfizer) compared with infection-naive individuals after two doses,” said researchers from Chicago’s Rush University, who conducted the study.
Real Estate
I spoke with a few brokers about South Florida markets from Miami to Palm Beach. Most brokers are having record years. I am told multiple individual brokers in Miami and Palm beach have done OVER $500mm YTD and Teams (a few brokers together as a team) have done $1bn+. One broker friend told me in Miami, “Pre-pandemic, if you were spending $10-20mm, it was a big deal. Now it is $30mm+ to get any real attention. He has buyers for over $250mm in homes and cannot find anything to offer them. In my community, in the past couple weeks a record was set for a $24.5mm sale on a canal (small finger canal, not intracoastal), and I saw a new listing for $45mm (2012 build of 19,000 ft) on nearly one acre and just found the listing here.
I say it is insanity, but with no inventory, anything is possible. For perspective, when I moved here, you could buy an 18,000 ft intracoastal lot for $3.5mm. Do the math. Prices are up exponentially. It is mind numbing the prices down here and the changes I have seen over my four years in Boca. Real NYC people are moving from Miami to Palm Beach and working REAL jobs remotely. I am surprised at the flexibility of major companies to allow it, but trust me it is happening. The supply/demand imbalance across all market segments for South Florida R/E is truly remarkable and I just don’t see it changing near term. The newest “Delta” wave is certainly not helping people want to stay in NYC for the fall. Again, your two biggest problems in moving to Florida are finding a house and getting into a school. Both were easy two years ago and very challenging today.
Greenwich, CT Update by Mark Pruner
The headlines are we just had our biggest sales month ever with 142 sales and $448M in sales volume in one month. This sales number broke last month’s record of 135 sales and last year’s record of 118 sales in September 2020. Pre-pandemic you have to go back to June 2011 to find the previous record which was caused by an increased sales conveyance tax increase. The last record for market driven demand was 109 sales in August 2001. Prices are up about 18-20% in nearly all price levels. Backcountry and mid-country are seeing the biggest rebounds since these areas are the furthest from town and suffered in the most in the post-Great Recession years.
Contracts are down about 17% from last year when we were seeing a major acceleration in sales that peaked in September 2020. The demand continues to be high though not as frenzied as in the second quarter of 2021. The drop in contracts is partially due to summer vacation with buyers travelling as you found out in your trip from the TPC tournament and we’ve seen in both Park City, Utah and Nantucket twice this year. What is really driving the drop in sales is our shrinking inventory. As of this morning we are down to 295 listings, when were at 555 listings at this time last year.
While we have had low inventory all year, our total number of listings is up 60% for the year. Listings have just gone to contract as fast as they have come on, which has hidden this jump in total listings numbers. We are all hoping that we will see a major jump in inventory with the fall market which starts after Labor Day. If not the second half of the year is likely to see a sales drop.
Interesting article from the Hollywood Reporter on Austin, TX and the move from Hollywood. Home prices are +43% in a year. Elon Musk might have called it. The mogul — who is opening a Tesla gigafactory the size of 138 football fields just outside the Austin city limits — declared in February that the city is going “to be the biggest boomtown America has seen in 50 years.” I have not personally been to Austin in years, but am hearing amazing things about the city. I am told they have remarkbale food and music as well, but make no mistake, prices have sky rocketed.
I write a good deal about R/E markets and much of the focus has been on higher end stories. Although many of my readers are successful, I also have a growing reader base of teachers, school administrators, nurses, students and others who are not making millions of dollars per year. I found this article about retiring in Mexico interesting given how cheap it is today in some markets. From the article: Earlier this year, I relocated to a two-bedroom, 1,100-square-foot apartment with 10-foot ceilings, just a few minutes from one of my favorite beaches. The rent is $420 per month, not including utilities. In Mazatlán I’m able to do that. Water costs a fixed $4.50 per month. Electricity is highest at this time of year because of air conditioning; mine is hovering around $25, but is usually half that. I use propane for cooking; one tank costs $30 and lasts me about six months.
I paid to add some of my own touches to the apartment:
Painting one wall the same golden ochre color as the floor tiles: $15
Hand-built bookshelves for the office: $225.
I had cabinets made by a local carpenter: $350 (cost split with the landlord)
