Hidden Fees-Son of a....
2-27-22
Opening Comments
A lot is going on in the world between Ukraine and markets, so I will keep my opening comments brief. I want to be clear that I believe Russia is the aggressor and despite propaganda, Ukraine and its citizens did not deserve this. I am shocked at the resolve of the Ukrainian people and the strength of the President. More throughout the report. Stock futures are down 2-3% tonight and discussed in the markets section. I am sure I missed some things as there is so much news to digest.
During Art Basel, I had dinner with a reader, Jason, at an Italian restaurant, Call me Gaby. We sat outside and enjoyed a nice meal. On Thursday night, an elderly woman was trying to parallel park her Bentley in front of the restaurant and hit the gas instead of the break and ran over 7 people. At least one died during the incident. From the pictures, it appears she ran over the area where we sat not so long ago. Incredibly scary. Life is fragile. There is a video of the incident on Instagram, but am not attaching it as it is a bit troubling. It can be found under the name, BillyCorben.
I was at an event with a friend and an attractive woman came up to me and said, “You are Eric Rosen.” I did not recognize her. I smiled and said, “Yes, I am.” My friend looked at me in disbelief and then she said, “You write the Rosen Report, and I love the Rosen Report.” This made me smile and laugh while my friend shook his head. I wish I had a video of this fantastic exchange. My friend said I was “beaming,” and I am sure I was as well. Remember, if you like what you read, forward it to friends. I don’t advertise and the growth is 100% word of mouth. Also, hit the heart button under my name.
I kept the last note shorter and the response was mixed on going shorter or longer. Today’s is clearly a full version given the events in the world, but going forward, I will try to edit the piece down a little more.
Picture of the Day-Optical Illusion
Eye On the Market-Mike Cembalest - Russia/Ukraine and US LNG: energy implications
Hidden Fees-Son of a....
Quick Bites
US Markets, Russian Markets, Ukraine Explained
Russia/Ukraine Military-Head to Head
US/German Aid to Ukraine-Defying Putin?
Putin Health? Picture of 2020 vs 2020
PCE, NPR/PBS Biden Poll (Great Charts)
Other Headlines-Many Ukraine Headlines
Virus/Vaccine
Data-Improvements Continue
CDC Relaxed Mask Guidelines
CDC Data Not Being Released
Real Estate
My General Comments
Panther National
Double Line to Tampa
Pictures of the Day-Optical Illusion
Look at the pictures first and think about what you see in them before reading the answers below the pictures. The link to the full story is here including a short video.
When I looked at the first picture, I immediately saw a man playing a saxophone. I never saw a woman’s face and still do not see it. “If you ended up seeing the woman first, this means the right side of your brain is more developed than the left, so you’re more creative and artistic.” He went on to say that viewers who saw the saxophone player first have brains that are better developed on the left side, meaning they are likely to be more logical and analytical. In the second picture, I saw a tree, but after staring for a second, I saw two faces looking at each other. “If you ended up seeing the tree first, this means you have a very high attention to detail and you’re also really good at reading people’s moods,” ItsMeFuzz claimed. However, those who saw the two silhouettes are allegedly “much better at staying calm and dealing with people, even if they’re nervous.”
Eye On the Market-Mike Cembalest - Russia/Ukraine and US LNG: energy implications
I always insert Eye on the Market into the Rosen Report and I believe 100% of the time, they are the most opened link when included. It was sent out midday Thursday, so obviously markets have moved violently, but as always, the piece is informative. I have written about the European reliance on Russia for energy and Cembalest cites this early in the piece. Read the piece for all the details. I thought the paragraph on page 4 which explained an essay entitled, “Why the Ukraine Crisis Is the West’s Fault: The Liberal Delusions That Provoked Putin,” was an interesting take.
Hidden Fees-Son of a....
The hidden fees in hotels, rental cars and airplanes is incredibly frustrating to me and I would like there to be Federal laws which require transparency. I have countless examples, but the one in today’s report put me over the edge. Given the pandemic, the Rosen Family has not done much travelling lately. When we do, it has been a Jetblue flight to NY, which is straightforward as I am Mosaic, and the app is easy to use.
Jack needs to go to Atlanta (Reynolds Plantation) to get fit for golf clubs, and I went on line to look for tickets. Being Mr. Frugal, I found something on Frontier Airlines for $71.05 for one way. WOW, I was all over that as it seemed incredibly reasonable.
Well, NOT SO FAST.
Wait, you actually want a seat INSIDE the plane and not on the wing? That costs more ($70/seat).
You want to take a carry-on bag? That costs more ($42/bag).
You want to check a bag? That costs more ($37/bag).
Oh, to get the $71.05 airfare you need to be a member of the “Discount Den” which costs $59.99 to sign up and a $40 “Enrollment Fee.” Now you have to add Transportation Tax ($5.33), Carrier Interface charge ($23), Passenger Security Fee ($5.60), US Domestic Flight Segment Tax ($4.5), ATL Passenger Facility Charge ($4.5). All is outlined below. What I thought would cost $142.10 ended up costing $546.95. What the hell? How can the consumer protection agencies not do something about this crap? Just advertise what it is going to cost. The hidden fees have my blood boiling.
Quick Bites
Stocks climbed Friday to close out a volatile week of trading, as investors continued to assess the financial risks stemming from Russia’s invasion of Ukraine. The added 835 points, or 2.5%, closing at 34,059. The blue-chip average notched its best day since November 2020. The S&P gained 2.2% at 4,385. The Nasdaq rose 1.6% to 13,695. Stocks are coming off a whipsaw trading session Thursday in which the major indexes staged a massive comeback from steep declines earlier in the day. The Dow on Thursday erased a more than 800-point decline to close higher. The Dow posted its third-straight losing week despite the two-day surge, however. The S&P and the Nasdaq finished the week 0.8% and 1.1% higher, respectively. I was personally caught off guard by the incredible rally after the sharp sell-off on Thursday. What an insane ride the markets have seen in a short time. The Dow is -6.3% YTD, S&P-8%, and NASDAQ-12.5%. The volatility index, the VIX hit 37 on Thursday as markets were tanking, but is back to 28 with the substantial rally. The 10-Year Treasury closed at 1.97% and the 2s/10s is at 40 bps. BTC and ETH rallied and were at $39k and $2.7k respectively. These assets are too correlated to the broader market in my opinion. I thought they would be far less correlated and Cembalast touches on it in the report attached above. There is an interesting article in the WSJ about commodity prices, with the 2nd and 3rd charts below from the piece. Oil is at $91.6, Brent at $97.9 and Natural Gas at $4.5, all off last week’s high levels.
This is the Russian Stock Index, the MOEX. As you can see, it fell sharply, but rebounded on Friday. The drop erased $150bn in value and the market was down about 50% from the October highs prior to Friday’s sharp rebound. The index is now down 30% from a week ago. The Ruble also was hit against major currencies. I am surprised the Ruble is not down more against the dollar. The fact that broader markets including Russian stocks have rebounded so quickly suggests to me the market believes this is not a long war. However, as I will outline in the next bullets, maybe this lasts a bit longer than I originally thought. I would think with the updated sanctions and Swift news, we may see further deterioration in markets, bank stocks and the Ruble.
Worst performing stocks on MOEX YTD (red column)
There are two articles which explain the Ukraine situation. One is from the WSJ, “Why is Russia Invading Ukraine and What does Putin Want” and one is from CNN “What does Putin want in Ukraine? The conflict explained.” I am hardly an expert on Eastern European geo-political issues, but have read dozens of articles, spoke recently with both Russians and Ukrainians and been watching the news to piece things together. Both articles are informative. Questions I ponder: Would Putin have invaded Ukraine if Trump were in Power? This poll suggests a majority of Americans do not believe he would have done so. Did the Ukrainian decision to give up nuclear weapons in 1994 come back to haunt? No other country will give up nukes now, and they should not as a result of this debacle. No chance Iran or North Korea gives up nuclear arsenals or soon to be capabilities now given the Ukraine situation. The Budapest Memorandum of 1994 in which Ukraine gave up nukes (thousands) in return for security assurances from the UK and US clearly did not play out as planned. Who will believe the West and promises after the failing of the Budapest Memorandum? How big of a factor was the European reliance on Russia for natural gas in the decision to invade? What is the endgame and is there anything which brings the West into the mix to fight the war? Is Ukraine the beginning? I will note that Putin’s crazy speech including neo-Nazis is a bit fresh given the President of Ukraine is Jewish. I fear this gives a green light to China on Taiwan (Xi has refused to call the attack on Ukraine an invasion)? On Friday, Xi offered his “support” for Putin as Russian troops were bombing Ukraine. I am concerned this new evil partnership may come back to haunt the US. However, China may be distancing itself as there was a call to halt the violence according to this Bloomberg article. How much higher can oil go and what are the impacts on the global economy given already tight supply chain issues? Vladimir Putin has appeared to threaten nuclear strikes if any country tried to attack Russia in retaliation in a terrifying speech. The president said the “consequences” of any attempt to strike back following the country's invasion of Ukraine would provoke a response “never seen in history.” In 2019, Biden said, “imagine what can happen in Ukraine' under Trump.” Well, I am not sure how much worse it could have been under Trump.
I was flipping stations and this chart came on the screen. Based on these numbers, I am very impressed that Ukraine has lasted this long. This does not seem like a fair fight or one which will last a great deal longer without reinforcements from the West. There is a story floating around about the “Ghost of Kyiv,” a rumored fighter pilot who has shot down 6 Russian jets. I don’t know if this is true, but would be incredible if it were the case. Russia has reported limited causalities, something I struggle to believe. Ukraine has claimed 4,000+ Russian troops have been killed (this link suggests 4,300) and many planes, tanks, and vehicles destroyed. This number seems incredibly high. For perspective, approximately 7,000 American troops were killed in Iraq and Afghanistan over 20 years. According to CNN, Putin has more than 50% of his total assembled power inside of Ukraine, but it seems to me, he underestimated the Ukrainian resistance and needs reinforcements. The attacks are now hitting the capital, Kyiv, but it seems it has not fallen to Russia. This article suggests that Russia intends to install its own government in Ukraine. No fewer than a half dozen articles I have read suggest Putin in furious that the Russian army has not been more successful in defeating the Ukraine and the war is costing Russia $20bn/day. The articles suggest he felt Ukraine would fall in a couple days and his troops are ill prepared. “Russian forces are not making the progress they had planned. They are suffering from logistical challenges and strong Ukrainian resistance,” the U.K.’s Ministry of Defense. In a disturbing update I read in the middle of the night Saturday suggests that “gas masks” are being handed out to Russian forces and the fear is chemical weapons may be used given the Russians are faltering. This just seems amiss to me that the mighty Russian army would be ill prepared. Reports suggest hundreds of Ukrainian civilians have been killed as well.
As things progressed this weekend, a new development took place in that the US and Germany are defying Putin and sending aid to Ukraine. The US is sending $350mm worth of weapons (anti-armor, small arms, munitions, and body armor. Germany is sending 1,000 anti-tank weapons and 500 Stinger anti-aircraft defense systems to Ukraine. The government has also authorized the Netherlands to send Ukraine 400 rocket-propelled grenade launchers and told Estonia it ship over send nine howitzers. Also of note, Germany announced a substantial policy shift in favor of a major spending for defense due to the Russia developments. In related news, Abe said, “Japan should consider hosting US nuclear weapons.” My point is Putin’s aggressive tactics are having major countries rally against him. Putin had warned that an attempt to interfere with the Russian action would lead to “consequences you have never seen." Does the US and German aid constitute interference from Putin’s perspective? Can the US and Germany get the weapons to the Ukrainians? What are the consequences of such actions? I hope it does not escalate further, but the winds are blowing for this to potentially mount to more than I had considered a few days ago. A geopolitically minded reader pointed out that this could be the beginning of something more if Putin is successful in Ukraine and lead to Latvia, Lithuania or Estonia which would likely result in NATO involvement. To me, the probability of this is very low, but Putin seems to be getting unhinged based on his comments and actions. The other potential breakdown could be within Russia as multiple articles are outlining mounting Russian casualties, and captured soldiers and growing Putin frustration. Will Russians begin to question the decision and push Putin into a corner? Over 1,700 Russians were detained during anti-war demonstrations. A few days ago, I was thinking this event would be short-lived and not require NATO or US involvement. As this escalates, my concern has grown slightly. Again, I am NOT an expert on Eastern European geo-political matters. I thought Ukraine would have fallen by now. As of Sunday, my likelihood of escalation with other countries involved has increased slightly from nearly zero last week. I understand that early reports are often wrong when it comes to war, suggesting things don’t seem right and everything now is speculation. This Sunday headline was a bit concerning: In 'unprecedented' action, Putin orders nuclear deterrent forces to be on 'high alert' amid spiraling tensions over Ukraine-The Russian premier said in a meeting of top officials that the move was in response to leading NATO powers making what he called “aggressive statements.” In a positive development, Zelensky agrees to talk with Russia, but rejected Belarus as the meeting place. Hopefully, cooler heads will prevail and we are in a better place Monday, but I just don’t see how Putin can be trusted at this point.
This map outlines NATO countries in Blue. Ukraine is in green. The small country above Ukraine is Belarus. As you can see, to the west and south of Ukraine are largely NATO countries. My geography game is not amazing when it comes to Eastern Europe and assume some of my readers are in the same boat, so I thought this would help to show it more clearly. I need to get some props for my newfound editing skills which were done on the iPhone. Below Russia is Kazakhstan, Mongolia and the Eastern tip of China.
A reader pointed out to me that Putin does not look well. I compared a picture from last week to one from November 2020. Putin is often pictured shirtless and prides himself on his strength. I am sure he is under a great deal of pressure, but to me, he looks much better only 14 months ago and his face looks fuller/heavier today. Might be nothing to it. What do you think?
Inflation as gauged by the Fed’s preferred core PCE measure rose 5.2% in January from a year ago. That was the biggest rise since April 1983. Consumer spending popped 2.1% for the month, considerably more than the 1.6% estimate. Orders for durable goods reflected the buoyant spending, rising 1.6% or double the expectation. Food and beverage giants say consumers aren’t balking yet at paying more for their Lay’s chips and Tyson chicken nuggets.
But those comments preceded the Russian invasion of Ukraine, which has already led to surging prices for oil and gas, metals and grains. Walmart said earlier this month that consumers are aware of rising prices but haven’t changed their behavior yet. This WSJ headline, A New Brand of Sticker Shock Hits the Car Market-With vehicles in short supply, prices are skyrocketing. Last month, 82% of new-car buyers paid more than sticker price. I do not go out to eat a ton, but am cutting back even more. I just get too upset at the prices relative to what I am eating. Every restaurant I go to now has price increases of 20-30% relative to pre-pandemic. $50 for a piece of fish just is not worth it to me when I can catch it myself.
This NPR story is entitled, “A majority says Biden's first year was a failure, a new poll finds.” Rising inflation, a continuing pandemic, a foreign policy misstep in Afghanistan and Democratic infighting all marred President Biden's first year, and now a majority of respondents to a new NPR/PBS NewsHour/Marist poll say his first year was a "failure." The president is clinging to just a 39% overall approval rating, a 36% approval for his handling of the economy and 47% for his handling of the coronavirus pandemic. Just 30% of respondents said they think the U.S. is headed in the right direction. Remember, this is NPR article and NPR/PBS poll. Inflation was cited as the largest concern for voters (see chart). Also of note, this poll was taken 2/15-2/21 prior to the Russian invasion of Ukraine. I would believe the polling numbers have deteriorated since. The fact that 60% of Independents view Biden’s Presidency as a failure and 29% of them approve, does not bode well for the mid-terms. Remember, in 2020, 52% of Independents voted for Biden and 43% for Trump according to Forbes. The State of the Union is coming up Tuesday at 9pm EST and this is an opportunity for Biden to lead the country and the world and turn around his declining approval ratings. I cannot recall a more important State of the Union in recent memory. Despite my view that Biden has done a poor job thus far, I am “pulling for the pilot,” as the consequences of failure are quite serious.
Other Headlines
Beyond Meat shares tumble after reporting wider-than-expected loss, shrinking revenue
This is how Nike just sent Foot Locker stock plummeting
Nike focusing on Direct to Consumer sending Foot Locker down 35%.
Berkshire’s operating earnings surge as Buffett repurchases record $27 billion in stock during 2021
Biden nominates Judge Ketanji Brown Jackson to the Supreme Court
I am attaching two articles for you to read if you have interest. One is from Fox and is critical and one is from CNN and is more supportive. I continue to contend that the slate should have been more expansive and the best person should have been nominated for a life-time appointment.
CNN Probe Finds Allison Gollust Assisted Chris Cuomo in His Efforts to Help Andrew Cuomo
HBCUs Were the Targets of Bomb Threats Every Week During Black History Month
The Federal Bureau of Investigation said there were threats made against 57 institutions between Jan. 4 and Feb. 16, and that the agency would investigate them as racially motivated hate crimes.
How to Stand Out to Ivy Leagues and Top Tier Colleges: Virtual Event Highlights
Crazy story of a man who was in jail for murder and then for armed robbery and now an executive at Nike running the Jordan Brand.
What the hate crime verdicts in Ahmaud Arbery's death say about justice and race in America
LA Is Spending Up To $837,000 Per Unit To House The Homeless
Very concerning article which shows the ineptitude of the government.
These are the 20 most common passwords leaked on the dark web — make sure none of them are yours
A metaverse mogul is ready to make his move after buying $2 million in virtual land
Maybe I am just too old to get this land in the metaverse play. Why not buy a house that you can live in rather than land in the metaverse that you play in? Read the article, Second Life rents land in the metaverse for you to build on it, and it is now a $650mm economy.
EU, UK, Canada, US pledge to remove selected Russian banks from interbank messaging system SWIFT
This is a big development which should hit the Russian hard and remove Russian banks from much of the global financial system.
Facebook bans Russian state media from advertising and monetizing content on its platform
Finally, FB doing something good.
‘I need ammunition, not a ride’: Zelensky declines US evacuation offer
US braces for Russian cyberattacks as Ukraine conflict escalates
Ukraine invasion: Video purportedly shows tank running over moving car
This is incredibly scary.
Zelensky to EU leaders: "This might be the last time you see me alive"
Zelensky has been an impressive leader during what seemed to be a lopsided fight. He has stood his ground and rallied the troops.
Virus/Vaccine
Cases fell 63% over the prior two-week period and are averaging 66k/day from peak of 807k in mid-January. Hospitalization dropped 44% and are averaging 54k, while ICU cases fell 43% to just over 10k. Deaths remain elevated at 1.9k/day, but are -24% over the prior two week and down almost 30% from the recent peak levels.
This article is one I struggle with and despite the fact that it goes against my belief, I must include it in the report. New studies suggest the Wuhan market is the likely origin of COVID-19. A market in Wuhan, China, that sold live animals likely was the point of origin for the COVID-19 pandemic, according to a pair of studies released Saturday. “When you look at all of the evidence together, it’s an extraordinarily clear picture that the pandemic started at the Huanan market,” said Michael Worobey, an evolutionary biologist at the University of Arizona who co-authored both studies, told the New York Times.
The studies have yet to be published in a scientific journal. I have been of the belief that the origin was the Wuhan Lab, and until these reports are peer reviewed and confirmed more broadly, you will understand my hesitation.
More than 70% of Americans live in communities where wearing masks is no longer recommended under the new CDC guidelines. “With widespread population immunity, the overall risk of severe disease is now generally lower,” said Dr. Rochelle Walensky, director of the CDC. I am happy about this change. I just never felt masks bought at Coscto did much. Making kids wear them at school for 8 hours a day was more detrimental than the benefit in my mind. In the past couple weeks, my daughter’s school eliminated the mask mandate. Too bad it was after the school play where she played the lead role.
I have been critical of the handling of the pandemic and the lack of transparency on data. If the CDC has all this data, why can’t the public see it? The excuses in this NY Times article are very weak. For more than a year, the CDC has collected data on hospitalizations for Covid-19 in the United States and broken it down by age, race and vaccination status. But it has not made most of the information public. When the CDC. published the first significant data on the effectiveness of boosters in adults younger than 65 two weeks ago, it left out the numbers for a huge portion of that population: 18- to 49-year-olds, the group the data showed was least likely to benefit from extra shots, because the first two doses already left them well-protected. Kristen Nordlund, a spokeswoman for the CDC, said the agency has been slow to release the different streams of data “because basically, at the end of the day, it’s not yet ready for prime time.” She said the agency’s “priority when gathering any data is to ensure that it’s accurate and actionable.” Another reason is fear that the information might be misinterpreted, Ms. Nordlund said. This is unacceptable two years into the pandemic. Americans have the right to this data.
Real Estate
I spoke with an investor who bought a hotel in South Florida in February of 2020, just before the pandemic took off. It appeared to be the worst investment of his life given the $14mm price and the quick end to life as we knew it with the onset of the pandemic. Well, things have changed and he was offered $28mm recently. In 2020, he did not think it was worth $10mm. I was in Miami Thursday night and the Food & Wine Festival, Miami Boat Show and JPM High Yield Conference were in full swing. The traffic was beyond ridiculous. I like to go for dinner for a night out, but living there would put me over the edge. It is crowded enough without these events. There are multiple large events and conferences each month and then the winter holidays, spring break and long weekends put the city at capacity. Forget about Art Basel, Miami becomes a nightmare. All hotels were basically sold out. Someone tried getting a hotel late Thursday night and there was one for $21k/night with almost nothing available!
I went to the Panther National residential community groundbreaking ceremony last week. On the positive front, the facility sounds amazing. The golf course, practice facility, clubhouse, and amenity packages are incredible given they have plenty of land and won’t need to jam anything together. I believe they said the tips will be over 7,500 yards. Justin Thomas and Jack Nicklaus are co-designing the facility. The homes will have Tesla solar panels and a Tesla wall which will store power for over 10 days according to people involved with the project. This is a lot longer than I would have thought for back-up power and contradicts this article which suggests 3-5 days. The one drawback about the project for me was the location as it is 12 miles west of the beach and I surprised at how far west it was from I-95. Over time, there will be a bunch of restaurants and shops there. The price point seems high, but given the paucity of product, there are already 130+ reservations out of 218 homes. The home designs, amenities, golf, tennis, pickle, pools, gym, restaurants, bars…will make this sought after.
Another one bites the dust. All these high tax states need to understand the gravity of their decisions around taxes, crime, homelessness, mandates, lockdowns and how they impact the lives of the residents. The budget holes left due to exodus for Texas, Florida, Nevada, Montana… are going to be massive. Jeffrey Gundlach’s money-management arm, DoubleLine Capital LP, has moved its “principal office” to Florida. The relocation to Tampa from Glendale, California, was outlined in a recent regulatory filing. A spokeswoman didn’t say whether Gundlach himself relocated to Florida, which has no state income tax. “Key decisions impacting the policies and strategy of DoubleLine Capital” will now be conducted in the Sunshine State, as will regular meetings of its board of managers, the firm said in the filing. The billionaire fund manager has long complained about taxes and quality of life in California. Gundlach, 62, could save millions of dollars by moving to Florida. Many other wealthy financiers have already relocated there from locales including California, New York and New Jersey, where combined state and local levies can reach double digits. It does not seem Gundlach is moving to Tampa, but not positive. A reader sent me this bumper sticker. All those moving to Florida, should follow the sticker: Don’t New York My Florida.
