How You Respond to Adversity Defines You

11-1-23

Opening Comments

I think people misunderstood the title of my last piece, "It's Not the End of the World, But You Can See It From There." The comment was something a boss (Pete Vaky) said to me prior to my Series 7 examination when I asked what would happen if I failed in 1994. It is a funny story about over-preparing, not a statement on the world today. I should have called it “A funny interaction where the boss scared me to death.” Please read the theme piece, as those who did, loved it. The most opened links were the young man getting verbally smacked after asking why the Palestinians have no freedom and before and after pictures of Gaza destruction.

• Picture of the Day-Halloween with the Eric & Jill

• How You Respond to Adversity Defines You-Brian Koppelman/Billions

• Quick Bites

  • Markets

  • Druckenmiller on Yellen-Not Positive Commentary

  • GDP Growth Examples Prior to Recessions

  • Farm-Raised Salmon Escape and Cause “Eco-Disaster”

• Israel Headlines

• Other Headlines

• Real Estate

  • Cost and Affordability to Buy Home-Amazing Charts

  • Overvalued Housing Markets

  • Fancy LA Has No Buyers

  • Government Waste with Empty Office Space

  • Rebuilding Ft. Myers

Pictures of the Day-Halloween Costumes

• I try to celebrate Halloween with some fun. Our dear friends, Kara and Josh throw a great party every year and it is always a blast. This year, the theme was Barbie, and I found these “box” costumes at Party City. I had to put them together and did not appreciate the downside of being in a plastic box at a party in South Florida. My well-intentioned costume nearly killed me. It is impossible to eat or drink in this thing and it was about 200 degrees. I was sweating like a pig in short order and had to take off the box only to put it on upon request for photos. Jill lasted 30 minutes longer than I did, as she is far tougher than I am. Some other pictures from prior parties. My brilliant idea of going as Borat and making my wife go as Ali G may be an all-time best. When I sent the picture to my mother-in-law, she asked, “Where is Jill?” She did not believe her daughter was in the yellow jacket. I bought my polyester suit at the thrift shop in the Village for $8. The shirt was $1 and the tie was 50c. I will say polyester is not very comfortable, but I look a heck of a lot like Borat.

How You Respond To Adversity Defines You

I had the pleasure of interviewing Brian Koppelman and David Costabile in New York. It was a great time, and Briand and David are world-class people and entertainers. As everyone on my distribution can attest, a career trajectory is not a straight line. We all have had setbacks. It is how we respond that defines us. I am keeping my comments short so you will watch the 5-minute video clip.

I have told my children about being sure you are not afraid to fail. It is how we respond to failure and take what we learn in the process to better ourselves and improve our chances of success is what growing is all about. I have failed on multiple occasions and bounced back stronger and the ultimate success is made sweeter due to the struggles. I have been passed up for promotions, felt down about myself, and questioned many career decisions. However, I kept fighting and creating opportunities which turned into something more.

I had seen an interview with Seth Godin and Brian Koppelman where “Dips” were discussed, and asked Brian about the interaction. Brian spoke about making a movie that bombed and then being fired by his idol, Martin Scorsese, in a public manner. He mentioned his big career “Dip,” and how he responded. “If it is something that matters deeply to you and if you believe you have to do it, you need to find a way to ride out the dip,” he said.

The 5 minute clip is here and he gives me some flack for the way I phrased the question. It was a message we can all relate to in terms of overcoming career obstacles. Brian’s following comment really resonated with me. “Your low point is right next to your high point, but you just have to recognize it and be willing to chase it,“ Brian Koppelman.

I am a big believer in Brian’s message. Out of his failures came the hit show, “Billions.” It is responding to adversity that defines you, not the failures that created the disappointment. Look at the life of Abraham Lincoln. What would have happened to our country if Lincoln let his 10 big failures define him as seen below:

Quick Bites

• Markets rallied sharply Monday after a rough week. There were fears of a weekend event that did not materialize and the S&P and Nasdaq were each up over 1%. The market rally continued on Wednesday after the Fed left rates unchanged in a range of 5.25% to 5.5%. The Dow advanced 0.7%, while the S&P 500 climbed about 1%, and the Nasdaq added 1.6% on Wednesday. Information technology stocks outperformed, gaining more than 2%. Semiconductor companies Advanced Micro Devices and Micron Technology added 9.7% and 3.8%, respectively. Nvidia shares were higher by 3%. Doordash posted earnings and the stock was +7% after hours. Fed Chair Jerome Powell at the post-decision press conference would not rule out a hike in December, saying that the idea that it would be difficult to raise rates after pausing for two meetings was wrong. Treasuries rallied on the dovish Fed talk and we saw the 2-year trade to 4.96% and the 10-year down -11bps to 4.76%. Oil has eased from recent highs and is back down to $ 81, despite the ground invasion of Gaza over the weekend. I believe it is a statement on economic concerns. I have written a bit about the lack of market breadth as a concern and a note about the weight of MSFT and Apple driving nearly 40% of the market capitalization gains this year is worth a look.

  

• I have been critical of the Fed and US Treasury for their role in inflation and their awful “Transitory,” call. I wrote a half dozen articles on the matter (May 2020-Druckenmiller vs the Basket Regarding Inflation-I Take Druck, July 2021-There Ain't No Such Thing As A Free Lunch, June 2022-There Is No Such Thing As A Free Lunch-Part II) and constantly bashed them for leaving the fire on too long and not refinancing the US debt by locking in low rates. Yellen and Powell should not have jobs. It has cost US citizens trillions. If you read the Rosen Report, you know my investing hero is Stan Druckenmiller (30%+ returns for 30 years with zero down years). Listen to what he had to say: "When rates were practically zero, every Tom, Dick, Harry, and Mary in the United States refinanced their mortgage," Druckenmiller said. "Unfortunately we had one entity that did not, and that was the US Treasury." "Janet Yellen — I guess because political myopia, whatever — was issuing two years at 15 basis points when she could have issued 10 years at 70 basis points or 30 years at 180 basis points," Druckenmiller continued, referring to the terms of the debt issued by the Treasury. The prior comment was from when, Druckenmiller was interviewed by Paul Tudor Jones the other day and the 30-minute exchange can be found here. Druck is negative and brings up a bunch of points I have made. It is almost like he reads the Rosen Report. Yes, he is just as worried about Entitlement spending as I am. He feels given the growth in the interest expense on the Federal Debt, Entitlement Spending will be slashed. He calls out both Trump and Biden for careless spending and deficits despite full employment. “We are spending like drunken sailors,” he said. All the morons in DC better listen. Stan is long 2 Year Notes and short the long end of the Treasury curve.

• I often cite Peter Boockvar’s notes because they are filled with amazing information. Peter has become a good friend and contributor to the Rosen Report. In Monday’s note, he outlined David Rosenberg’s historical perspective on strong GDP prints that were quickly followed by recessions:

  • "We had 4.6% annualized real GDP growth in the third quarter of 2019 and we had a recession (with our without the pandemic) two quarters hence."

  • "We had a very nice 3.5% growth quarter in 2006 Q4, and the recession may have been deferred, but still crept on us a year later."

  • "We had a 7.5% growth quarter in the 2nd quarter of 2000 and the recession was just over two quarters down the road."

  • "We had a 4.4% pace posted in 1990 Q1 and yet, somehow, the recession began two quarters later."

  • "We had a 4.9% growth pop in 1981 Q3, and we were already in recession."

  • "We had a whopper of a 10.3% annualized GDP surge in the first quarter of 1973; one of the worst recessions ever recorded took hold two quarters after that blowout (the problem of borrowing too much growth from the future)."

  • "We had a 6.4% print in 1969 Q1. A leading indicator? I think not. The recession began three quarters after that blowout."

  • "We had a monster of a 9.3% growth rate in 1960 Q1, and the recession began the very next quarter."

  • "We had a huge 7.7% GDP surge in 1953 Q1...the recession? It started two quarters after that print." 

    

• Given I fish quite a bit, I don’t buy a ton of fish for myself other than salmon as it is not indigenous to the waters in South Florida. I catch a lot of wahoo, tuna, snapper, grouper, mahi, yellowtail…I love salmon and buy it a couple of times a month to make my famous ginger/garlic-crusted salmon which is always a hit. Reading this story, I was shocked that farm-raised salmon that escaped could severely damage the ecosystem, as farm-raised salmon have real sexual maturity earlier and if they spawn with wild salmon, it will cause early death. According to the article, 3,500 salmon escaped and they are calling it an ‘environmental catastrophe.”

  

Israel Headlines

• Sadly, I am being asked by parents if they should bring their college kids home. So many schools are seeing protests, calls for violence, hate… against Jews. I cannot make that decision for anyone. If my kid was in college and he or she felt unsafe, I would bring them home. FBI says terrorism threat hits ‘a whole other level’ after Hamas attack. Patrick Dai, 21-year-old engineering student, arrested in ‘horrendous’ Cornell University anti-Jewish death threats. I hope he gets mandatory jail time for a hate crime. Note the chart which shows how much global hate of Jews there is in the world. It is from Lee Bressler’s newsletter.

I also want to remind people that there are 15mm Jews in the world (.2% of the global population) and 1.8bn Muslims (24%). This map is pretty telling. You can barely see Israel in the sea of green.

• Hamas blocks foreign nationals from leaving Gaza

• Rockets fired from Lebanon at north; IDF strikes terror cells, Hezbollah sites

• Inside Hamas' tunnels of terror as Israel vows to destroy 300-mile underworld

  • The tunnels were built starting in the mid 1990’s and are where rockets, fighters and over 200 hostages are believed to be held.

• Mob of Russians stormed an airport in search of Jews

  • The video is quite concerning.

• Israeli officials identify Shani Louk's body, beheaded by 'sadistic animals'

  • I don’t get beheading babies and innocent women. Check out this headline: 'We will repeat October 7 again and again' - Hamas official

• Pro-Hamas protesters beat Black Hebrew Israelites with Palestinian flags — in Chicago

• Antisemitic Comments Increase Across Chinese Social Media

• Yale campus newspaper censors pro-Israel writer’s column on Hamas beheading men, raping women

• Jewish Columbia students slam university’s ‘inaction’ against antisemitism: ‘I don’t feel safe’

• Over 100 Columbia professors sign letter defending students who supported Hamas’ ‘military action’

  • The list of schools I will send my kids narrows each and every day. If this trend continues, I will send them to vocational school and with the money saved, start a business for them.

• Nevada man federally charged after allegedly threatening to kidnap, assault or murder Jewish US senator

• George Soros funded over $15 million to groups behind pro-Palestine protests

  • I am not sure why Soros hates America. He has funded the worst DAs in America who are soft on crime and lead to cities of disrepair (SFO, LA, Chicago, Philly, NYC, St Louis, Loudoun County, VA…) and now he funds Jew hate protests. His family survived the Holocaust.

• Swastikas and ‘Free Palestine’ found spray-painted in tony Montauk

• Jewish homes have Stars of David painted on them in Paris

• Yes, Hamas Committed Unspeakable Atrocities

  • Hamas put a baby in an oven. Despite this, many news organizations refuse to call them terrorists.

• Arab Funding of American Universities: Donors, Recipients, and Impact

  • You must see this story about the BILLIONS of donations to American colleges/universities from Arab nations. The #s are staggering. I recreated charts in the link as they were too hard to read.

    

Other Headlines

• This tech CEO who earned $29 million last year doesn’t care where his staff work—he’s one of the bosses leading the return-to-office resistance by example

• Tesla shares drop 5% on Panasonic battery warning, down 18% since Q3 earnings report

  • Another story suggests market fear that given Twitter issues, Musk may need to sell blocks of TSLA stock to help secure bank lending agreements. Stock is -34% since July highs of $299.

• Shares of ON Semiconductor fall 21% as fourth-quarter guidance disappoints Wall Street

• AMD gives soft fourth-quarter guidance but expects to sell $2 billion of AI chips next year

• Aston Martin shares plunge on volume target cut, lingering debt

• Pinterest jumps on better-than-expected third-quarter results

• McDonald’s revenue soars as it hikes menu prices: ‘$18 Big Macs’

• Microsoft releases big Windows 11 update with Copilot AI assistant included

• Shipping industry could lose $10 billion a year battling climate change by 2050

• Sam Altman Warns That AI Is Learning "Superhuman Persuasion"

  • He's worried it "may lead to some very strange outcomes."

• Hedge Fund Two Sigma Is Hit by Trading Scandal

• Zelenskyy aide on corruption in Ukraine: 'People are stealing like there's no tomorrow'

• Joe Biden's Pseudonym Emails—What We Know as 82,000 Pages Unearthed

  • This makes Hillary’s 33k emails look small. He said 100 times he never spoke business with Hunter. The emails on Hunter’s laptop suggest otherwise.

• Treasury to borrow $776 billion in the final three months of the year

  • Nothing to see here folks. The US Government is in good shape. They have over $100 Trillion of debt and unfunded liabilities. They spend like drunken sailors and continue to borrow to fund bad habits. Deficits to infinity. Interest rate expense of $1 trillion-plus. What could possibly go wrong?

• Biden administration has forgiven $127 billion in student debt. What to know about the relief options

• George Santos Faces Expulsion Vote in House

• Biden executive order imposes new rules for AI. Here's what they are.

• Hedge fund billionaire Leon Cooperman, in rare public rebuke of a Republican candidate, says Trump ‘belongs in jail’

• A thorough breakdown of California Gov. Gavin Newsom's viral basketball tumble in China

  • The video is clear. He runs over a little kid.

• Over 200 migrants set up ‘mini-city’ with ‘nighttime market’ under Brooklyn-Queens Expressway

• NYC opening encampment for 2,000 migrants at Floyd Bennett Field despite fire safety concerns

• Armed man found dead at Colorado amusement park with multiple guns and explosives identified

  • This could have been another mass killing but it appears he killed himself first.

• Teen admits to randomly sucker-punching strangers at Texas park for social media attention: ‘Everybody makes mistakes’

  • Randomly punches people while videoing it and he thinks “Everybody makes mistakes.” We have a major problem in America around violence and the lack of consequences.

• Taxing Wealthy Dynasties Seen Backfiring in States Like New York

  • Estate taxes prompt many super-rich residents to move to states without the levies, especially as they get older, according to a new study from economists Enrico Moretti and Daniel Wilson.

• Mark Cuban says an NBA legend taught him this 9-word mantra—it helps you ‘differentiate’ yourself from other people

  • “How you do anything is how you do everything.” I LOVE this quote.

• I need my 401(K) money now: More Americans are raiding retirement funds for emergencies

  • Hardship withdrawals from Fidelity Investments 401(k) accounts have tripled in five years. The share of plan participants withdrawing money rose from 2.1% in 2018 to 6.9% in 2023.

• Ken Griffin threw a party for 1,200 Citadel staffers at Disney Tokyo this weekend

  • Ken Griffin is a genius on so many levels. His funds are massively outperforming, his securities business crushes it, he has bought billions of R/E in NYC, Palm Beach, Miami, London… and knows how to treat his employees in terms of compensation and events. The issue is when you leave his firm, your non-compete terms are just a bit onerous.

• Missouri jury hits Realtors, real estate companies with $1.8 billion in damages

  • The case is over commissions and the finding was brokers conspired to drive up fees.

• Earn more than 5% interest on your money: The best high-yield savings accounts of November 2023

  • At least 20 times, I have included cash investment ideas. Could you please look into how your cash is invested to make sure you are not leaving money on the table? I am getting 5.7% on short-dated instruments.

• Longevity doctor shares No. 1 supplement he’s been taking every day to ‘slow down aging’—and how he feels now

• The No. 1 most ‘overlooked’ skill kids with high emotional intelligence all have, say parenting experts

• Deepak Chopra says inflammation is ‘the number one pandemic of our times.’ He suggests these 5 habits to help reduce it

  • I believe inflammation plays a big role in getting into trouble. I did a food sensitivity test which showed dairy products caused inflammation. I now use coconut milk yogurt. Initially, I thought it was gross and now I cannot eat regular yogurt.

• Here’s Americans’ net worth at every age—for people under 35, it’s up 142%

Real Estate

• For the first time in history, you need to make six-figures to afford a house in the US. The annual income needed to afford a house is now $111,000, according to Reventure. Meanwhile, the median household income in the US is just $78,000, ~30% below that threshold. Just 3 years ago, in 2020, you needed $60,000 of annual income to afford a house. In other words, the income required to own a home has risen by 85% in 3 years. The 2nd chart shows housing affordability over the last 52 years and the current period stands out in a bad way. Here is the gap between median income and income needed to afford a house. It's more than DOUBLE the gap seen in the 2008 crisis. No wonder mortgage demand is at its lowest since 1995.

• This article is about Idaho’s overvalued housing market and has some interesting and concerning examples. Its expansive ski resorts, low living costs and vast hot springs attracted an influx of homebuyers during the pandemic. But is Idaho's red-hot housing market coming to a fiery crash? Experts estimate homes in the Gem State are now more than 40 percent overvalued after soaring demand artificially pushed up prices.  And as mortgage rates also rise, it means residents are at risk of falling into negative equity.  Researchers calculated houses were currently selling for 41.8 percent above their true value. I will be buying in the mountains as the kids leave the house. Selling the Boca house and getting a condo in Florida and want to own out west. I love the summer weather in the mountains. I feel there will be a substantial correction in 2nd home prices after a sharp rise in prices. I am leaning towards Park City area (ease of travel, nice town, reasonable prices, not offensively priced and good skiing with a nice town. However, I have been studying various markets to find the best place to be for us.

  

  

• Good Vanity Fair article entitled, “Nobody Is Buying the Fanciest LA Real Estate.” “There is real, serious uncertainty all around, and these issues are major, major, major,” says Jenna Cooper, a real estate agent with Compass whose clients are writers, actors, talent agents, and creatives of all sorts (myself included), and who is one of the few agents with actual exquisite taste. “The strike is really a problem. The mansion tax is a real issue. The insurance situation is chaos. Add that to the fact that it’s all culminating in summer, which is a deader-than-dead time to sell in Los Angeles. No one who doesn’t have to sell right now is trying to sell right now.” The article paints a bleak picture of the high-end market in LA. The ridiculous “mansion tax” which I wrote about multiple times went into effect in April of 2023 pushing forward sales. Nearly 130 homes and condominiums over $5 million were sold in March, according to data from the Multiple Listing Service. The frenetic pace stopped on a dime by April 1. Between then and June 1, only three homes in LA sold above the $5 million threshold.

• Interesting Washington Times article about massive vacancy rates in government buildings. I have written often about government waste and ineptitude and my piece “I’m From the Government & Here to Help,” gives countless examples of waste by our elected officials. One official said their leadership is reluctant to share headquarters space with other agencies because it could lower their perceived standing as a cabinet-level agency. The article outlined utilization by taking the total amount of square footage available for employee use at an agency’s headquarters and then dividing it by the number of people who actually entered the building. It reported results for the 24 agencies broken down into four tiers. At the bottom, averaging just 9% capacity, were Agriculture, the Social Security Administration, the Office of Personnel Management, the Small Business Administration, the Department of Housing and Urban Development and even the General Services Administration, which acts as the government’s chief landlord. The second tier included the Education, Transportation and Veterans Affairs departments, the Environmental Protection Agency, the National Aeronautics and Space Administration and the National Science Foundation. They averaged a 16% use rate.

• Bloomberg article entitled, “Ravaged Florida Town Becomes a Magnet for Risk-Taking Homebuyers,” is an interesting read. A year after Hurricane Ian ripped through southwest Florida, wealthy risk-takers are transforming one beach town. In Fort Myers Beach, many of the middle-class cottages that once dotted the Estero Island town were wiped off the map. Ian killed 21 people and swept away a third of the homes and businesses on the narrow, 6.5-mile-long strip of sand, leaving a blank canvas for affluent newcomers — and a preview of what could take hold in other coastal communities as climate change spawns more intense storms. I had the displeasure of spending a few days in Ft. Myers a few years ago. I thought it was awful. Naples is stunning, Ft. Myers, not so much and this was before the storm. I am not sure what it would take for me to live in Ft. Myers, but it is a meaningful number.

Rosen Report™ #627 ©Copyright 2023 Written By Eric Rosen