Opening Comments
Picture of the Day
Husband of the Year
Inflation Report
Quick Bites
Markets, Tech Stocks, Stan Druckenmiller
Ray Dalio/Inflation, Simon Property, Car Inflation, Gas Shortage
Labor, Newsom Stimulus, Hamas, Iran, Catholic School Closings
Golden Globes,Bill Gates, Keys to Successful Kids
Virus/Vaccine-Big improvements in cases, hospitalizations and deaths
Real Estate
NYC
Lake Tahoe/Martis Camp
Montana Property
Low End US Housing Market on Fire
Opening Comments
The Rosens are heading to the tri-state in a week. We have a house sitter to watch the place. Given the heat, humidity, rain and storms, it is best to have someone in your hose or check it regularly. If you get a leak and don’t address it quickly, things get ugly in a hurry down here. I was out of pocket most of the day and had written a majority of this piece last night. I tried to check for the big stories, but may have missed something. A lot of time spent on inflation, yet again.
Substack is starting to grow on me. Readers can sign up easily and see my old reports written on Substack. I continue to have a delivery problem and not sure how to solve it and open rates are well down from peak. Many claim to not get my emails. Nothing I can do at this point.
Many of my loyal readers will recall the last time the Rosen family was on a flight on August 31st 2020. It was the famous “Haz-Mat Suit” incident where I disowned my family on the flight. I literally acted as though I did not know who they were out of embarrassment. Here is the 30 second video from the airport with my wife and children looking like astronauts at the airport and on the plane. No, I did not wear one. My wife is a germaphobe and was convinced we would die due to COVID exposure. The airport was empty and maybe 20 people were on the flight. Here is what my kids looked like below. No, the Rosens will not be dressed like this at the airport next week.
Picture of the Day
Cryptocurrency has hit a significant milestone: It’s now worth more than all US dollars currently in circulation. Cryptocurrencies hit a valuation of $2 trillion on April 29, according to The Wall Street Journal. That’s about the same valuation as all US dollars in circulation. However, it has since hit as high as $2.25 trillion — and in the process actually exceeding dollars in circulation.
Husband of the Year
Almost 10 years ago, my family decided to go to Costa Rica over winter break. Julia was four and Jack was 6. The family was excited to get out of the cold weather and spend time on the beach and in pools in the heat in Central America. We arrived at JFK and I inserted the passports into the ticket machine and Jack’s kept being declined. Son of a… Although adult passports last 10 years, children’s passports only last 5 years and Jack’s had expired. I am a moron and did not realize the rule difference at the time. Complete panic, lots of profanity and tears given our trip was on hold. I suppose we could have left Jack at JFK to fend for himself for 10 days, but he was maybe a year too young for that treatment. Given passport rules require you need to have BOTH parents there, we all left JFK and had to find the 24 hour passport service. The rules require both parents in case there is a divorce or something and one is trying to take the child out of the country without permission from the other parent. Once Jack’s passport was being processed, Julia and I hopped a flight to Costa Rica and Jack and Jill (yes, I said “Jack and Jill”), came the next day.
We stayed at the Westin Playa Conchal near Tamarindo. I had never been to an all inclusive place before and note to self, never again. It is for people who want to consume 30 drinks a day and get wasted. The kids ate like they have never seen food before. Given it is included they kept ordering slushies and pizza. The food was below average.
I have mentioned Jill is not a big fan of dirt or germs (note picture and video in opening comments) and after a flight, clothes need to be kept aside in a bag and a shower is required. I am running on the beach with the kids and looking for shells. Jill came out after showering in long pants, long sleeve shirts and a huge hat.
Costa Rica has a great deal of interesting wildlife and about a billion monkeys. I was pointing to the trees and showing the kids the howler monkeys which are quite loud (yes, they wake you up). Jill was walking under the tree when a monkey took a crap and threw it on Jill. As a husband, I should have been upset, but I basically needed oxygen because I laughed so hard I could not breathe. I laid on the sand howling with tears flowing and the kids were hysterical. As you know, young kids find poop funny. i am not sure why I lost it, but man, I lost it. It could have been the single funniest thing I have ever witnessed. I only wish I had a camera to photograph Jill’s reaction and face, as she was horrified and had to run back in for yet another shower, and her clothes went int the garbage. Obviously, if it happened to me, it would be far less funny, but it happened to Jill, so it was beyond hilarious. I am up for the Husband of the Year Award. Please vote for me.
So, the trip started with a passport crisis and then in Jill’s first 10 minutes of her time since arriving at the hotel, she was doused with howler monkey crap. Clearly, the trip did not begin on the right foot. The kids ended up having a great time and Jill stayed clear of the trees with the monkeys. Anytime I think of the look on Jill’s face when she was hit by monkey crap, I lose it. Not sure why, she does not think it is quite as funny as I do.
I took all these pictures, but the ones with me in them. I try to take sunset pictures everywhere I go. All these were of our first Costa Rica adventure. We went back a total of 10 times to the country, but not to the Playa Conchal. I love to surf and fish there and the kids are fluent in Spanish, so they get to improve language skills with the locals. The picture with the kids in the hammock was at the JW Marriott, a much nice hotel. My kids were little and cute and one point. Time sure flies. Enjoy it while you can. The second photo is one I always had taken of me holding the kids while I tickled them on every vacation. I now have a better chance of them holding me then me holding them!
Inflation Report
Any Rosen Report reader has been hit over the head with constant messaging about my inflation concerns over the past couple months. Virtually every report gives examples and my thoughts around inflation. Unfortunately, I was out of pocked until 530pm today and do not have enough time to go through everything which transpired with the report, but I am not shocked at the print. This is an excerpt from a CNBC article. Markets were braced for a hot consumer inflation report, but nowhere near the 4.2% headline increase reported for April. Economists had expected a big number, of 3.6%, because of base effects accounting for last year’s weakness. But the CPI’s surge took markets by surprise, sending Treasury yields higher and stocks lower. The report raised concerns that the Fed’s view that higher inflation will be transitory is wrong, even though Fed Vice Chairman Richard Clarida reiterated that view after the report.
This is an exceprt from an “Asia Times” article. A 10% surge in used car prices pushed the “core” US Consumer Price Index (CPI) up by 0.9% in April – an annualized rate of increase of more than 11% – in the highest inflation print since the Great Financial Crisis of 2008. There’s worse to come, as higher housing costs feed into consumer prices. The consensus forecast called for an increase in the “core” rate (excluding food and energy) of just 0.3%. Bureau of Labor Statistics data released at 8:30 am New York time shows a 5% annualized rate of increase of the cost of shelter. Home prices are rising at a 12% annual rate and the asking rent on the median apartment has jumped 17% over the past year, according to private surveys.
I do believe part of the pop in inflation is transitory, but not all of it. I believe a big part of this pop in the numbers was due to the pandemic recovery, but make no mistake, I fear that inflation is showing more widely as well. I have been against this round of stimulus which pushes people to stay at home and not find jobs. I feel it has added fuel to a fire already burning hot. I have stated before that despite the fact that the Fed has far fancier degrees than me, they are dead wrong far too often. Just ask Ben Bernanke and his view on Subprime in 2007. I have a good Quick Bites story on my hero, Stan Druckenmiller, and his views on the Central Bank activities and adding to a hot market. My surprise was that the market did not see this one coming. I do not believe this is Armageddon by any stretch of the imagination. I can see tech continuing to under perform a little. I heard on CNBC that as of last night, Google searches for “inflation,” were up massively over previous years.
When I look at the costs of the things I am consuming regularly, they are generally going up sharply (food, gas, housing, education, healthcare, technology, semiconductors, cars, consumer products, commodities, services, labor…….).
I will continue to write about this topic extensively, but based on my recent writings and today’s report, I feel my readers should be well informed.
Quick Bites
Wednesday’s inflation report caused a tired market to sell off sharply. The Dow fell 681.50 points, or 2%, to 33,587, posting its worst day since January. The benchmark tumbled as much as 713 points at its session low. The S&P 500 lost 2.1% to 4,063 for its biggest drop since February, while the tech-heavy Nasdaq slid 2.7% to 13,031 bringing its weekly decline to more than 5%. The VIX is now at 26+ after being over 28 intraday. The previous close was 21.8 for VIX. The 1st chart is today’s action and the 2nd is YTD. Note the underperformance of NASDAQ after a long period of out performance. YTD, Dow +9.7%, S&P +8.2%, and NASDAQ+1.1%. The 10 year Treasury is at 1.7% or +7bps. I believe the intraday pandemic lows were 32 bps. Musk announced TSLA will not accept Bitcoin as a form of payment due to environmental concerns. Bitcoin is now $53k or -6% over the past 24 hours.
Tuesday was one of the wildest days of the year for the U.S. stock market with technology shares as the battleground. Big Tech took a big hit to start the day on concerns about rising inflation and high valuations. The selling eventually spread to the rest of the market as the day went on. But in an odd twist, tech shares rebounded in the afternoon as investors went back into names like Amazon and Netflix and left the rest of the market in the red. The tech-heavy Nasdaq Composite eventually ended the roller-coaster session down less than 0.1% at 13,389 after shedding 2.2% at its low of the day. The Dow dropped 473 points, or 1.4%, to 34,269 for its worst day since February 26. The S&P 500 slid 0.9% to 4,152 as 10 out of 11 sectors registered losses.
(This was written before Wednesday’s move lower). The rotation out of tech stocks continues to hammer cloud companies the hardest, as investors sell out of last year’s best performers. While the Dow Jones Industrial Average is trading just below a record, an index of cloud-computing companies slid to its lowest level in six months. The WisdomTree Cloud Computing Fund, consisting of 56 stocks, dropped 2.4%, its seventh drop in the past eight days. The tech sell-off began in February and has picked up steam in the last couple of weeks. The central theme to the market rotation has been concern about rising interest rates, which have traditionally hurt high-growth companies, coupled with a move into stocks that tend to outperform in periods of inflation, such as financials, commodities and industrials. Cathie Wood’s Ark Innovation ETF plunged to a six-month low, with all but five of its 58 holdings retreating in a broad tech selloff. The ARKK exchange-traded fund that makes concentrated bets on tech companies aiming to disrupt industries fell 5.2% Monday, double the loss in the Nasdaq 100 Index. It’s now down more than 30% from its February peak.
The Rosen Report readers know I am growing concerned about inflation and the loose monetary and fiscal policy which does not seem to be commensurate with the economic or market backdrop. My hero and favorite money manager of all time, Stan Druckenmiller, was on CNBC and made some articulate comments on the subject. NO, he is not always right. YES, he had 32% returns over 32 years (best in my opinion). For perspective on where we are yet still stimulating the economy. As of Monday, yields on the triple-C-rated component of the Bloomberg Barclays High Yield Index reached a record low 5.66%, with the 479 basis point spread over Treasurys marking the narrowest premium over “super safe” government bonds since July 2007. “I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one,” the chair and CEO of Duquesne Family Office said. Though he agreed with the early steps the Fed took during the pandemic, he said the policies have continued for too long. He believes that we can see interest on the US government debt total 30% of GDP annually. He is also concerned about the US dollar. He gives lots of examples and charts. He is a legendary investor and brilliant macro mind. Worth a listen. Based on his comments, I would almost believe he was reading the Rosen Report. Trust me, if it came in under his name, I would know. Maybe he is using an alias so I don’t stalk him. He is even smarter than I thought.
On the inflation topic, Ray Dalio is sounding the alarm bells too. Ambitious government spending raises the risks of inflation and a devaluation of the U.S. dollar, Ray Dalio, founder and co-chairman of Bridgewater Associates, said Tuesday during The Wall Street Journal’s Future of Everything Festival. Mr. Dalio said the Biden administration’s economic agenda, which includes the $1.9 trillion Covid-19 relief bill signed in March and a proposal for $2.3 trillion in infrastructure spending, risks creating a bubble with too much money flowing into the economy. He also predicted there wouldn’t be enough demand from bond buyers to purchase new government debt, which would lead the Federal Reserve to continue its expansionary policies.
Mall owner Simon Property says shoppers are getting back to malls, but that it’s hard to predict what traffic trends are going to look like one year from now. “There’s clearly some level of euphoria,” CEO David Simon said.
I have written about price increases across the board. Here is a WSJ article about car prices. Car prices were cited in the CPI data today. The average price paid for a preowned vehicle hit a record of $25,463 in April, about $2,800 higher than in the same month last year, according to research firm J.D. Power. It also was the first time ever that the average used-car price had exceeded $25,000, the firm said. The climb, which began last year, has surprised some dealers who say they don’t see the trend ending soon.“What is normally a depreciable asset has been appreciating,” said Phil Maguire, who owns Maguire Family Dealerships, a group of 13 stores in New York state. “It’s certainly surreal, and I guess we can all agree that it’s an anomaly.” Dealers say they are having to pay more to keep their lots stocked.
North Carolina declared a state of emergency due to fuel supplies due to hack of pipeline systems. “Today’s emergency declaration will help North Carolina prepare for any potential motor vehicle fuel supply interruptions across the state and ensure motorists are able to have access to fuel,” Cooper said in a release, the report said. Gas stations along the U.S. East Coast are beginning to run out of fuel as North America’s biggest petroleum pipeline races to recover from a paralyzing cyberattack that has kept it shut for days. From Virginia to Florida and Alabama, stations are reporting that they’ve sold out of gasoline as supplies in the region dwindle and panic buying sets in. An estimated 7% of gas stations in Virginia were out of fuel as of late Monday. There are up to 5 hour gas lines now according to Bloomberg. According to Gas Buddy, 20% of Atlanta stations are out of gas. Additionally, Monday, in GA, FL, SC, NC, and VA, gasoline demand increased by over 40%. As of Wednesday afternoon, the pipeline restarted, but it should take some time before levels resume back to normal.
In my last couple Rosen Reports, I have discussed the labor market and my concerns about finding workers. President Biden on Monday pledged to enforce unemployment insurance laws so that no American can "game the system" to get paid not to work – but maintained that sweetened jobless benefits are not to blame for the lackluster April jobs report. "We’re going to make it clear to anyone collecting unemployment who is offered a suitable job they must take the job or lose their unemployment benefits," Biden said during prepared remarks from the East Room.
California Gov. Gavin Newsom on Monday proposed a $100 billion economic stimulus plan that would triple the state’s direct cash assistance program to reach an estimated two-thirds of residents. The announcement comes as Mr. Newsom said the state is expecting an unprecedented $75.7 billion state budget surplus, due largely to booming tax revenues from wealthy residents. The budget proposal, if passed by the Legislature, would send $600 tax rebate checks to households making up to $75,000 and an additional $500 to families if they have children. The cost of the new checks is about $8.1 billion. “California’s recovery is well under way, but we can’t be satisfied with simply going back to the way things were,” Mr. Newsom said in a statement.
The Hamas militant group on Monday launched a rare rocket strike on Jerusalem after hundreds of Palestinians were hurt in clashes with Israeli police at an iconic mosque, as tensions in the holy city pushed the region closer to full-fledged war. Israel responded with airstrikes across the Gaza Strip, where 20 people, including nine children, were killed in fighting. More than 700 Palestinians were hurt in clashes with Israeli security forces in Jerusalem and across the West Bank, including nearly 500 who were treated at hospitals. The IDF warned Hamas that all options, including a ground operation, were on the table after over 160 rockets were fired towards Jerusalem and southern Israel as thousands of Israelis were parading through downtown to celebrate Jerusalem Day. Three Israelis killed Tuesday. Over 700 rockets fired at Israel since Monday as of Tuesday night and I believe things continued to deteriorate Wednesday. Israel killed as many as 10 senior Hamas military figures Wednesday. One AP article suggested the recent fighting has triggered the worst Jewish-Arab violence in decades. A reader received a video from a friend’s house from Israel of the rockets coming. Because my tech team is off today (I don’t have a tech team), I could only figure out how to take a photo. No clue how to attach a video from What’s App. Scary. I had plenty of issues with the former President, but do not believe these attacks would be happening if he were in office. It was clear to me, that he stood with Israel. I am far less convinced of this administration and the world knows it. I hope I am proven wrong here. I don’t know about you, but if I were sitting in my back yard and saw this above, I would need to change my pants.
A US Coast Guard ship fired about 30 warning shots at Iranian military boats that came dangerously close to it and other American vessels in the Strait of Hormuz on Monday, the Pentagon said. Six US Navy ships were escorting a guided missile submarine through the Strait when at least 13 armed speedboats of Iran’s Revolutionary Guard approached from behind at high-speed.
Catholic schools across the country are struggling to keep the doors open, after a pandemic year that left many families unable to pay tuition and the church without extra funds to cover the difference. At least 209 of the country’s nearly 6,000 Catholic schools have closed over the past year, according to the National Catholic Educational Association. Nationwide, Catholic school enrollment fell 6.4% at the start of this school year, the largest single-year decline since the NCEA began tracking such data in the 1970s. I believe many smaller colleges will struggle as well given the rising price of an education, remote learning and the starting salaries after taking on so much debt. I personally believe less children should be going for a 4 year degree and more should be going to some kind of vocational program. The economics of school make less sense today for many in my opinion.
There will be no Golden Globes on NBC in 2022, as the besieged Hollywood Foreign Press Association continues to falter in reforming itself to the satisfaction of Hollywood studios and stakeholders. “We continue to believe that the HFPA is committed to meaningful reform,” the Comcast-owned network said this morning. “However, change of this magnitude takes time and work, and we feel strongly that the HFPA needs time to do it right. As such, NBC will not air the 2022 Golden Globes. Assuming the organization executes on its plan, we are hopeful we will be in a position to air the show in January 2023.” How far NBC has come as a network. Not long ago, it was widely know about problematic behavior by anchors such as Matt Lauer and nothing was done about it. NBC refused to report on Ronan Farrow’s #MeToo story on Harvey Weinstein. Now, NBC won’t air a big awards show making a statement about the HFPA. Ironic. Scarlett Johansson is speaking out against the Golden Globes. She claims, '“The HFPA’s behavior bordered on sexual harassment.” Wait, she is the same person who has defended Woody Allen.
Behind his image as a straight-laced tech mogul, Bill Gates was notorious for throwing naked pool parties with strippers and being a “womanizer” — even after meeting future wife Melinda, according to a biography. The Microsoft co-founder’s wild lifestyle was well known among his inner circle — but newspapers like the New York Times hid the unflattering reports to continue getting “spoon-fed stories,” James Wallace wrote in the 1997 biography, “Overdrive: Bill Gates and the Race to Control Cyberspace.” They “didn’t report on the wild bachelor parties that Microsoft’s boyish chairman would throw in his Seattle home, for which Gates would visit one of Seattle’s all-nude nightclubs and hire dancers to come to his home and swim naked with his friends in his indoor pool,” Wallace wrote. The power of the press never ceases to amaze me. They can make negative stories disappear if they like you and are powerful. Who would have believed the geek CEO of Microsoft would have an agreement with his wife to see his ex-girlfriend one weekend a year, throw nude pool parties and hang out with questionable people? Just think if Gates were someone the press did not like. Would they have kept a lid on the story?
A psychologist says parents of ‘exceptionally resilient and successful’ kids always do these 7 things:
They push their kids to play to their strengths
They demonstrate the link between hard work and extraordinary outcomes
They create a culture of striving and excellence
They encourage self-confidence
They are patient when their kids ask questions
They promote ‘early specialization’
They encourage competition and improvement
Virus/Vaccine
Cases fell 18.2% for the past 7 days and the 7 day average is now 38.1k cases/day. This is the lowest level since 9/20. For perspective, average testing is up 50% since 9/20. Hospitalizations fell 7.2% and now stand and 37.4k. Deaths fell 11.6% and aver 619 for the 7 day average. More than 1.36 billion doses have been administered across 175 countries, according to data collected by Bloomberg. The latest rate was roughly 22.3 million doses a day. In the U.S., 265 million doses have been given so far. In the last week, an average of 2.2 million doses per day were administered. We are finally seeing a small uptick in daily doses given after weeks of deterioration. It bottomed at 1.98mm/day and peaked at 3.4mm/day for the 7 day average. I felt herd immunity would take place in mid-June when vaccinations were growing regularly. This dramatic setback has pushed the timeline back by almost 60 days if we continue in the 2mm/day range.
The FDA approved Pfizer and BioNTech’s request to allow their Covid-19 vaccine to be given to kids ages 12 to 15 on an emergency use basis. The agency granting use of the shot in younger age groups will accelerate the nation’s efforts to drive down infections, experts say. It will also allow middle school-aged students to get vaccinated before school starts this fall.
One of the many falsehoods spread on social media about vaccines for COVID-19 is they cause infertility. According to experts from John Hopkins Medicine, the likely origin of the myth is a false report that arose on social media claiming the coronavirus and the vaccines against it contain a spike protein called syncytin-1. This protein is vital in the development and attachment of the placenta during pregnancy, and damage to it can result in miscarriages as well as infertility. In truth, however, COVID-19’s spike protein and syncytin-1 do not share a similar genetic code, meaning that the vaccines do not include this heightened risk for infertility.
A new mutation of the highly contagious Brazilian COVID-19 variant has emerged in Florida, health officials said. The newest variant, dubbed P2 or P.1.1, has a slightly different sequence than Brazil’s P1 strain, which has been found to be more likely to reinfect people who have already had the virus, the South Florida Sun-Sentinel reported. The variant has been detected in a 74-year-old man in Broward County and a 51-year-old woman in Duval County, according to the state Department of Health. Scientists are monitoring the variant to determine how easily it spreads and whether it behaves similarly to the P1 strain.
Real Estate
NYC Data
For the week ended May 9th, 4 contracts were signed in NYC for $4mm or higher. This is the 5th straight week of 40 or more contracts signed about 4mm, the longest stretch since tracking began in 2006. YTD, 694 contracts at $4mm or higher have been signed, that is more than all of last year. Obviously, a big portion of last year the city was in shut down mode and showings were not allowed.
Lake Tahoe
I spoke with a large broker in the Tahoe area. He focuses on Martis Camp, an amazing community with tons of amenities (golf, fishing, hiking, skiing, tennis, pools, restaurants, gyms…). We looked there two years ago. There are generally 20 homes and 20 lots for sale. Today there are 4 homes and 3 lots. Almost no inventory. Sound familiar? He told me home prices are up 40% in 18 months. We loved it there. It is on the CA side, not NV side. Hard to get there, but so beautiful and Lake Tahoe is amazing.
Montana Ranch
A Montana ranch featured in the 1992 Robert Redford movie “A River Runs Through It” is in contract, less than a week after the listing was made public, the listing agent confirmed. The property, known as the Climbing Arrow Ranch, sold for around its $136.25 million asking price following a bidding war, according to two other people familiar with the deal. “Since our public release of the listing of the Climbing Arrow Ranch, we have received an extraordinary response from the market, with multiple parties stepping forth immediately,” listing agent Mike Swan of Swan Land Company said in a statement. “We can confirm that the sellers have engaged with a prospective buyer who is currently conducting their inspections of the ranch.”
Low End US Housing Market on Fire
Interesting WSJ article about the hottest section of housing being the cheapest.
The red-hot U.S. housing market is giving an extra boost to the cheapest houses, including many in historically stagnant neighborhoods that have suffered from a lack of investment.
It is pushing forward efforts to revive the local economies of Detroit, Cleveland, Youngstown, Ohio, and other areas where homes can sell for as little as a few thousand dollars but typically require a lot of work to fix up and can’t be financed with a mortgage.
U.S. ZIP Codes where the median home cost less than $100,000 in early 2018 have had a 42% rise in prices in the three years since then, according to a CoreLogic Inc. analysis for The Wall Street Journal. That is about double the rise for ZIP Codes where the median was between $150,000 and $200,000, and triple the rise in locales with $300,000-plus price tags.