Opening Comments
My last report, Iconic Rainmaker-Jimmy Lee-Teaches Me a Lesson, resulted in amazing feedback, new subscribers and lovely messages from people who knew Jimmy. The note brought back some great memories, and will likely tell more similar stories in the future based on the response. If you missed, it, I think you should read the theme story about Jimmy Lee.
The Golden Gate Bridge construction was finished in 4 years in 1937 under budget at $35mm ($600mm today). A suicide prevention net, costing $400mm on that bridge started 4 years ago and is half complete. Until the government can learn how to spend the hard earned tax receipts wisely, it is hard for me to believe in them. Remember, last week, the Defense Department failed its 5th audit unable to account for more than 61% of its assets worth $1.6 trillion.
Eye on the Market-Mike Cembalest YUCs, the MUCs, FTX and more
Pictures of the Day-Holiday Lights in South Florida
I am Going Bald. Wait. What?
Quick Bites
Markets
Salesforce Stock Slide
Election Update
Brightline Train South Florida
Other Headlines
Crime Headlines
Real Estate
NYC Market Intel
Boca House in Country Club up 5x since 2019?
Miami-$80mm Spec House for Sale on N. Bay Road
$66mm Southampton Land Sale
Virus/Vaccine-Deterioration Continues
Eye on the Market-Mike Cembalest YUCs, the MUCs, FTX and more
As usual, Mike displays his wit while going over the disasters outlined above. Lots of great charts too. He also outlines why he feels the criticism of the SEC is a bit unfair around the FTX debacle.
Pictures of the Day-Holiday Lights in Florida
I went for a 5-mile walk around my neighborhood on Sunday night and took some nice pictures of holiday lights. Installing these lights on the palm trees is shockingly expensive, but I think they look great. By the way, it was 72 degrees. It is a little strange to be in such warm weather for the holidays, but I’ll take it.
I Am Going Bald. Wait. What?
For as long as I can remember, my hair has been a calling card so to speak. I have been fortunate to have thick hair and generally wore it longer. As a kid, I went through some “strange” hair phases. There was the famous “mushroom head” look below in 6th grade. I recall the photographer laughing at my crazy hairdo.
I then went through my bad mullet phase, which was shockingly popular with the ladies. In hindsight, the fact that I ever had a date with this look is perplexing. Note the very impressive mustache. Just like Tom Selleck.
When I became a professional, I wore my hair longer than most. My partner at JPM, Bryan, tried to claim he had better hair, but we all know that was not the case. As you can see the in the pictures, there is a consistent theme with longer hair and lots of it. I have actually been to golf clubs which do not allow hats in the clubhouse and when I took mine off, someone came over and asked me to put it back on. Yes, my hair is that powerful.
Central American humidity brings out the curls. As a kid, I wanted to have straight hair when perms where all the rage. People thought I was nuts. Well, I guess they still do.
About two weeks ago, I was brushing my hair after the shower and a clump of hair came out. I almost had a heart attack. This has never happened. I ran to the shower thinking someone pranked me and put Nair in my shampoo. My hair is literally falling out in clumps. Photo below was from me grabbing a handful of my hair. I’m shedding like a German Shepherd, and it is not getting better. My hair is SIGNIFICANTLY thinned out in the past two weeks, and I was getting nervous. I have lost 40% of my hair, and to most, it looks normal, but I can feel it and see it. I am scared to brush or touch my head, as the hair just falls out.
My wife noticed I was losing my hair all of the sudden, which only added to my agita. I went to get a haircut and said to Beau, the haircut guy, “Check my hair, and if you think this is going the wrong way, just shave it off. I won’t be the guy with the comb-over.”
Beau laughed and said, “You had COVID recently, right? Pretty bad too?”
I said, “Yes. I was sick as a dog with 105 fever.”
He responded, “80% of my clients who had serious COVID lose their hair in clumps within a couple months of getting the symptoms, but it stops after a few months.” Turns out there is a name for it, “Telogen Effluvium,” and can be associated with drugs, trauma, serious illness, or stress. Some doctors recommended Fluocinonide Tropical Solution and Argan Oil. If any doctors have a view on this, I would love to hear it.
I was relieved to hear this is likely temporary, as I did not want to turn into Kojack (TV crime drama in the 70s) and felt I would likely die with a full head of hair. I guess I could pull it off If I had to do it, but my calling card would be gone. So, I am actually kinda going bald, but hopefully it is just temporary COVID hair, at least it better be.
Quick Bites
The S&P 500 fell for a fifth day as traders weighed the possibility of a recession, and the likelihood of a longer-than-expected hiking cycle from the Federal Reserve. The S&P slipped 0.19% to close at 3,934. The Dow closed flat to finish at 33,598, while the Nasdaq fell 0.51% to end at 10,959. I have been surprised by the resiliency of stocks up until recently given the rate backdrop and my views on 2023. I have recently sold stock exposure partly due to my views and for tax related issues. Clearly, I have some losses (crypto). Economic growth fears sent Bank of America stock down sharply in recent days (-13% in prior 5 days) and many bank stocks are lower as well. CEO Brian Moynihan stated he expects to see negative economic growth in the first part of 2023, but it will be mild. Wells Fargo CEO agreed that the consumer is cooling. The US Dollar has given back a chunk of this year’s gains, as it is down 7% in the past month against the broader basket (DXY), given inflation is coming down and the belief that rate hikes are slowing and recession fears are mounting. The 2s/10s curve which I have spoken about at length is -84bps, a level not seen since 1981. Every time since 1976 that we have been negative, we have seen a recession. I recommended buying 3-year Treasuries recently at 4.22% and was a few weeks early. Now, the yield is at 3.99%, so it looks like I made the right call. The 10-year yield is now 3.42% and was 4.22% one month ago today.
Turbulence in the upper ranks at Salesforce isn’t sitting well with Wall Street. Last Wednesday, Salesforce co-CEO Bret Taylor, who orchestrated the Slack deal, said he was leaving —exactly a year after getting promoted to share the top job with Marc Benioff. In the three trading days since the Taylor news landed alongside Salesforce’s third-quarter earnings report, the stock has had two of its three worst days of the year, plunging 8.3% and 7.4%, respectively. Salesforce has now lost 47% of its value for the year, compared to the Nasdaq’s 28% drop, and is trading at its lowest since March 2020, the early days of the Covid-19 pandemic. This is important as Salesforce bell-weather for the SAAS (Software As A Service) segment. The stock is now trading at 4.4x sales relative to 12x a year ago. Salesforce Annual Recurring Revenue is down by almost 70%, while expenses remained high. The company now has 155 months of Customer Acquisition Cost (CAC) payback. This means it takes 10 years+ to payback the acquisition costs of a customer. It was 2.5 years previously according to David Sachs (All-In Podcast) at the 1:26 minute mark. Sales multiples have been crushed as I pointed out, and now SAAS top line is correcting. Expenses must be cut.
Warnock won in a close race over Walker, a candidate backed by Trump. The Democratic win gives them a 51/49 Senate majority, something unimaginable a month ago. It would be hard for me to vote for either of these two GA candidates. The message sent to Trump is loud and clear in my mind and am hoping he bows out. On the House, the Republican majority is 222/213, much lower than anticipated and a Red pick-up of only 8 seats. In a related headline, Bidens Toasted a 2024 Campaign With Macron at the State Dinner. I am really hoping neither elderly candidate will be in the White House after the next election. Let’s get some new candidates for both parties.
The Boca Raton Brightline Train Station will be opening soon. The train will run between Miami and Palm Beach at 79mph and go from Palm Beach to Orlando at 110mph. It will be great to zip down to Miami avoiding traffic. When you compare South Florida Mass Transit to other places such as NYC and Chicago, it is quite weak. The Brightline will be a welcome addition to the area, and I am looking forward to using it. It will be great to get from Palm Beach to Miami (72 miles) and believe a lot of people will use it to take advantage of restaurants and nightlife in the Miami area. Miami to Palm Beach is 1:12 minutes and prices start around $22 each way. As an aside, I am shocked at how quickly the Boca station is being built.
Other Headlines
Dan Niles sees a ‘last gasp’ rally between now and Christmas before things get ugly again in 2023.
He sees earnings issues which are impacted by higher rates and impacting consumer demand. He believes the lows will be re-tested.
Jamie Dimon says inflation eroding consumer wealth may cause recession next year
Here’s what America’s top CEOs are saying about a possible recession in 2023
Consistent themes of CEOs believing a slowdown is happening driven by higher rates and a squeezed consumer.
Ken Griffin’s hedge fund Citadel rises again in November, bringing 2022 gains to 32%
These returns are REMARKABLE. Think of the amount of tax savings of the corporation and Griffin going from Illinois to Florida and the amount of tax revenues lost for IL. For comparative purposes, YTD S&P-17%, High Yield-10%, 7-10 yr Treasury -13%.
Carvana shares tank as bankruptcy concerns grow for used car retailer
Walmart CEO says shoppers are being more selective as they deal with inflation
Rising thefts at Walmart could lead to price jumps, store closures, CEO says
The impact of soft-on-crime policies makes products more expensive, companies to close stores, jobs lost and hurts the law-abiding citizens.
Manufacturing orders from China down 40% in unrelenting demand collapse
TEU (Twenty foot equivalent unit)
FTX Founder Sam Bankman-Fried Says He Can’t Account for Billions Sent to Alameda
He has done a tour and been interviewed countless times with most giving softball questions. He needs to shut up and spend some serious time in jail.
PepsiCo to Lay Off Hundreds of Workers in Headquarters Roles
Highly compensated workers are being laid off in tech, banks, corporate America and there will be ramifications. Morgan Stanley announced 2% of global staff being cut. BuzzFeed cutting 12% of workforce.
ChatGPT: Optimizing Language Models for Dialogue
This is a little over my head, but the technology allows interaction in a conversational way with AI. The dialogue format makes it possible for ChatGPT to answer followup questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests. Many different potential applications here and disruptive to jobs.
Trump Organization found guilty on all counts of criminal tax fraud
The Trump Corp. and Trump Payroll Corp. were found guilty on all charges they faced. Donald Trump and his family were not charged in this case.
Michael Avenatti sentenced to 14 years in prison for stealing millions of dollars from clients
Release of Twitter files on how Hunter Biden story was censored ‘not healthy’: White House
Wait. What? Musk letting the world know the Biden Team influenced the election by asking TWTR executives to squash true, but hurtful stories is “not healthy?” What about the act of the FBI and Biden Team having true stories censored? This is about right and wrong, not Left and Right. Dorsey wants Musk to release all files. I agree.
FBI warned Twitter of Hunter Biden 'hack' before censoring The Post
During weekly meetings before the 2020 election, the FBI warned TWTR of hack and leak operations which led to censoring of the Hunter Biden laptop. As an American, you need to be concerned about the collusion between media and the FBI.
Musk’s Neuralink faces federal probe, employee backlash over animal tests
California English teacher teaches kids grammar is part of White supremacy: 'Undermine that B.S.'
Germany Bans Farmers from Fertilizing Own Land to Serve EU “Green Agenda”
What do you think the medium and long term consequences are of not fertilizing? Massive reduction in crop yields at a time when inflation is soaring, largely due to idiotic energy policy.
Dementia risk may increase if you’re eating these foods, study says
Calls out ultra-processed foods such as frozen pizza as well as hot dogs, fries and sodas.
1,200 Iranian students poisoned ahead of mass protests
At least 5 universities were impacted. Maybe I invite Khomeini over for Thanksgiving next year. Anyone want to be my food taster?
Oxford Dictionaries Names 'Goblin Mode' Its Word of the Year
I consider myself pretty dialed in on world news and having two teenagers keeps me young. However, I never heard of the phrase, “Goblin Mode,” which means unapologetically self-indulgent.
Gotta watch this few second video.
Crime Headlines
Stranger drags woman, 25, off NYC subway bench in unprovoked attack
125% increase in NYC antisemitic hate crimes in November- NYPD
Thank you Kanye and Kyrie for being major anti-Semites. Nike dropped Kyrie Irving. The ass-wipe formerly known as Kanye tells Jews to “forgive Hitler.” Black hate crimes +500%, but off a base of 1, which seems quite low.
Home Depot worker, 83, dies after being tossed aside by shoplifter
North Korea Has Reportedly Executed 3 High Schoolers for Distributing K-Dramas
In the US, you can rape, steal and even murder and rarely get the death penalty. In North Korea, watching a South Korean TV show gets kids killed.
Real Estate
From a NYC broker, Jared Halpern, he is starting to see weakening in the rental market. He had given me all kinds of examples about $3,800/month studio apartments renting in 3 minutes some months ago. He is also getting more calls from people wanting to “trade-up” into larger units given weakness. He has a unit under contract for $500k less than the same floor plan a few floors higher which sold 4 months ago for $6.25mm. He was surprised by the substantial price difference. Attached is the November 2022 Elliman Report on New York. Lots of amazing charts and info. Sections on suburbs and CT too.
A friend of mine bought a 1,700 square foot home in Broken Sound in Boca in the summer of 2019 for $70k. It is a gated golf course community. He put in $20k and just listed the house for $525k. Of note, you need to join the club (non-refundable) and believe it was $100k. I thought it was funny that he paid more for the club than the house. Point is, even the lower priced homes have skyrocketed down here. The club is closed and going through a major renovation. Once it is done, he is raising the price to $600k if it is not sold before.
I have often written about the ultra-high-end street North Bay Road in Miami Beach. The waterfront homes are in HIGH demand and a home in the process of being built just came on the market for $80mm. It is in the good location at 4736 North Bay Road with good views and on .58 acres with a total of 12,552 ft. Hard to fathom it goes for less than $60mm in this market. Even though I do not care for the kitchen or counter tops, it is clearly high-end and in the highly desired, modern architecture. For perspective, the property sold 8/21/18 for $10mm. Let’s assume the developer has $20mm into the house (seems high), the profit is pretty good even at $60mm.
Alibaba President Sells Two Oceanfront Hamptons Properties for $66.25 Million
Over 8 acres on Meadow Lane in Southampton. Great Location, but I am over the Hamptons. Far too crowded relative to what it was 20 years ago. Great for a few days, not for long periods. If I am understanding correctly, these lots plus one more were bought in 2014 for $114mm. One lot was sold for $36mm and now two for $65mm. This means $13mm was lost + 8 years of carrying costs in a market which has been on fire. What am I missing?
Other R/E Headlines
Here’s why US homes were pulled off market at a record pace last month
270,000 homebuyers who bought in 2022 are underwater on their mortgage
Germany’s housing market is facing a serious downturn in prices, analysts say
Wait. Massive inflation and not having enough heat to keep your family warm is crushing housing prices? Who would have thunk it? Deutsche Bank expects 20-25% declines.
Greenwich, CT November Market Report-Inventory Falls, Sales Rise, but Below Average-Lots of good charts.
Virus/Vaccine
Data deterioration continues. Take a close look at the chart below. Note the severe uptick in the past couple months.
