Opening Comments
We are out in Hamptons for the week. Sure is beautiful, but the crowds are heavy and prices high. I went grocery shopping and paid $15 for a pound of Boar’s Head Turkey ($10 in South Florida) and waited over 15 minutes in the deli line on Monday afternoon to get it. This article is called, “Bread for $10 is the New $5 Gas,” and discusses lower bread sales as people can’t afford it.
My daughter, Julia, finally made it back from camp, and it was great to see her for the first time in 5 weeks. However, this summer, the camp experience was not amazing. She had a “cutter” in her bunk, and it was a frightening experience. How the camp did not do more about this is beyond me?
I had a bunch of meetings this afternoon and may have missed a story. Big R/E section today.
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Picture of the Day-A Tree Fell and Almost Hit By Car
I Despise Call Centers
Quick Bites
Markets
Rates Market Intel-Oppenheimer
Strong Dollar
Newsom for President?
World’s Best Restaurants for 2022
Other Headlines
Virus/Vaccine
Data
Real Estate
General Comments
Homebuilder Sentiment
Mortgage Demand Plummets
Greenwich, CT Update
Office Market-NYC and Miami
Picture of the Day
On Monday, I went to Hill Street Boxing in Southampton and saw a friend of ours from South Florida. She invited me for drinks with her family, and I drove the 10 minutes Monday night to say hello. After a lovely time and my second dinner, I drove home on the dark, backroads of Southampton (north of 27). I was on the phone with my son, Jack, and a large tree fell out of the blue, only feet in front of me while doing 30 mph and blocked the road completely. I slammed on my breaks given my cat-like reflexes, and my heart was pounding at about 200 beats per minute. I called 911 to be sure no one hit it as it was just around a bend on 7 Ponds Towd Road. I was shaken by it which can be heard in my voice in the short video.
I Despise Call Centers
I have had a few incidents recently and wrote about my customer service woes a couple months ago. I bought a fancy new Dell Inspiron 7702 laptop from Best Buy. Within a few months, the screen cracked. The computer was not dropped. I merely closed the screen and due to the nature of the design, it cracked easily. There is not a scratch on the outside of the computer. My other laptops lasted 10 years with no incident.
Dell has no stores. When you call customer service, you are routed to India, and many of the people barely speak English. It takes an uncomfortably long time to get to the right part of customer service to assist you. I was told they will not cover my laptop, and I am required to pay will. They will send me a box to return it to be fixed. The cost was $236 ON A BRAND NEW LAPTOP. Ten days later and no box came as promised. I called and it took 45 minutes to get someone on the phone. When I finally got a person on the line, I could not understand anything he was saying. It was a disaster. Eventually, my laptop was fixed at my expense and I was without it for over one month. It was just too hard of a process, and the communication with India made it more frustrating. I had at least 10 calls with customer service for a simple problem.
My latest disaster was with Avis. I rented a car for a month and it turns out the NY State Inspection has expired months ago.
I tried getting Avis Customer Service on the phone, and it is impossible. They are closed or suggest one hour+ wait times. I finally spoke with someone after my 7th attempt and let them know where I was located in the Hamptons and needed to replace the car given the inspection issue. I wanted the closest Avis. She said it would take time and she would text me where I can pick up the car. I received a text an hour later that my car is ready at JFK Airport. There is NO chance I am driving 1.5 hours+ each way to return a car that has an issue due the fault of Avis.
I have since tried to get them back on the phone, and it is impossible. I went to the Avis in Southampton Tuesday morning and the lady behind the counter said, “We have no cars. I could use another 50 cars and have them fully booked.” She said she would reach out to me to try to help and I eventually suggested to get the car inspected myself. Don’t get me started about getting an inspection in the Hamptons without an appointment. Hours of time on hold wasted. I would happily pay a premium for better customer service with people who speak discernable English and can actually understand my issues or problems.
Quick Bites
We have seen some decent volatility as earnings season kicked off in recent days. There has been a combination of big disappointments and beats. Goldman beat expectations on strong bond trading results, but 2nd Q profit fell 48% to $2.8bn. Today, Netflix posted better than expected 2nd Q results. At one point during Tuesday’s big rally, the most short stocks were +4.64%, while the S&P was +1.92%, so shorts were massively outperforming. Stocks rose on Wednesday, fueled by a rally in tech stocks, as all major averages reached their highest point since early June.
The Nasdaq jumped 1.58% to 11,898, and the S&P 500 advanced 0.59% to 3,960. Meanwhile, the Dow was up 48 points, or 0.15%, to 31,8745 lagging the other two benchmarks and alternating between gains and loses during the session. Oil fell 1.5% to 102.6 on lackluster US summer gasoline demand. Crypto has rallied recently with BTC hitting as high as $24k today.
Market note from Oppenheimer after the close Tuesday regarding the rates market: Rate hike expectations shifted a touch hawkishly today, as odds of 100 bps hike in July rose to 23% from 16% yesterday and odds of 8 more hikes in 2022 went from 74% yesterday to 95% today. 2s10 curve inverted further today, another 2.4 bps to -23 bps. Also 3m10y flattened pretty materially, down 10 bps to 52 bps, at the flattest levels of the cycle. For perspective, it was 210bps in May I follow 2s/10s more closely and ever time it has gone negative since 1980, there has been a recession. Now, the 3m/10year spread is collapsing too.
I have written about the strong US Dollar quite a bit as I believe it is an important issue which will have a big impact on the global economy. Fears of a global recession and deepening woes in Europe are pushing the dollar higher, and few on Wall Street expect to see a change in its trajectory soon. After the U.S. currency’s strongest first half in over a decade, investors sheltering from falling stocks and betting on U.S. economic resilience have helped power a continued rapid ascent. The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, hit a new 20-year high last week and is up nearly 2.5% this month. The euro traded below parity with the dollar for the first time since 2002, and the Japanese yen is depreciating to lows unseen since the end of the 20th century. The dollar’s strength is a double-edged sword for U.S. consumers and businesses. It boosts purchasing domestically but weighs on multinational firms’ revenue. Microsoft cut earnings guidance in June, after saying in April that the strong dollar had reduced its revenue by around $300 million in the first three months of the year. The rising dollar has hit commodities from oil to copper, which are priced in dollars, wounding emerging-market economies, whose dollar-denominated debt also becomes more expensive to service when the U.S. currency strengthens. The charts are a couple days old, but you get the drift. Serious implications for the Fed to continue to raise rates to stave off inflation as the dollar continues to strengthen against the basket of currencies. This article is from Bloomberg and discusses the Dollar Doom Loop and the implications (last picture).
In a run-up to what is likely to be a 2024 presidential bid, California Gov. Gavin Newsom hit upon the bizarre idea of boasting in commercials that California is America’s true “free” state. Part of his campaign is to attack Florida — run by Newsom’s possible rival, Florida Gov. Ron DeSantis. Yet, with the most burdensome regulations and high tax rates, Newsom’s California is arguably the most unfree state in the union. In return for these steep costs, the state’s public institutions, infrastructure and services are among the country’s worst. California’s once-vaunted freeway system is near the bottom of all state comparisons. More than half of the nation’s homeless crowd the state’s major cities. One-third of America’s welfare recipients have flooded into the state. A fifth of the resident population lives below the poverty line. California public school test scores fall among the bottom 10 states. San Francisco has the highest per capita property crime rate in the country. Newsom has done nothing to remedy his state’s soaring gas prices (highest in nation), terrible schools and infrastructure, or spiking crime. I will just say, business and people, especially well-educated, wealthy ones are leaving CA for TX, NV, MT, and FL. I do not believe CA is the state it once was given overly woke leadership, bad crime policies and overly burdensome pandemic mandates. Horrific District Attorneys are not helping matters. The homeless issue, massive tax rates and constant natural disasters (fires, earthquakes, floods, droughts) don’t help either. On a positive note for Newsom, he is young and does not appear to have Dementia.
The world’s best restaurants for 2022 were revealed the other day and the details are in this CNN article. The pictures are stunning and making me hungry. I was surprised that the top list is generally in Europe or Latin America. The first US restaurant is Atomix (NYC) at #33, followed by Le Bernardin (NYC) at #44 and SingleThread (Healdsburg, CA) at #50. Only three in the top 50 for the US? The list is in the link. I feel I can cook quite well, but for some reason, my food never looks like the works of art below. Once the kids leave the house, I very well may go to a formal cooking school. I have always wanted to do it. Italy?
Other Headlines
Goldman CEO David Solomon says inflation is ‘deeply entrenched’ in the global economy
GS is looking at reinstating year end job cuts as economic outlook deteriorates. I feel layoffs in tech and finance/real estate will be mounting. Banking should be hit hard.
Inflation Has Outpaced Wage Growth. Now It’s Cutting Into Spending.
Lots of great charts in the link.
Most middle-class households say income falling behind cost of living
Biden approval rating hits all-time low, majority of Dems don't want him to run in 2024, poll shows
Quinnipac University Poll shows a 31% approval rating and 71% of Americans don’t want Bident to run for President.
It's not just Hunter Biden: Prepare for a 2023 packed with House GOP investigations
This is going to be a very challenging period for Biden and the Dems assuming the Red Wave comes to fruition.
Russia nears gas shutdown in Europe as Germany rejects claims it can't fulfil contracts
I have written extensively on this topic and suggested the Russians may play hardball. Gazprom is calling “force majeure” on its supplies. Putin has commented that the flows could be sharply reduced as well.
Khamenei adviser says Tehran 'capable of building nuclear bomb'
Amazing news. Another unhinged government will have nuclear capabilities.
Harris, Newsom engage with donors as possible 2024 bids loom if Biden doesn’t run
No, Biden cannot run at 82 years old. He won’t be able to walk by then. No, Harris cannot be the next President. She has been awful with bad approval ratings.
Media Confidence Ratings at Record Lows
The President, Vice President, Congress, Media… all have horrific approval ratings.
UK Royal Air Force halts flights to military base due to melted runway caused by heatwave
Major crime skyrockets 37% in NYC, NYPD data shows
It is crystal clear to me that the Progressive approach to crime is ineffective. NYC, LA, SFO, Philly, Chicago and many others are shining examples. Bragg (NYC) must go. Gascon (LA) must go. Krasner (Philly) must go. Foxx (Chicago) must go.
‘Law & Order: Organized Crime’ Crew Member Killed in New York in Early Morning Ambush
As violent crime in Chicago soared, arrests fell to historic lows
I was born in Chicago, worked in Chicago, and attended the University of Chicago for B-School. I believe it is now uninhabitable, and am glad Citadel is leaving. I disagree with the policies and the impact on the law-abiding citizens. Homicides, shootings, carjacking, robberies.. are going higher and arrests, lower. I just cannot agree with the Progressive Crime Agenda. If only 12% of crimes are solved, seems to me that criminals get away with murder!
San Francisco mayor 'worried' residents leaving, working from home
Gender transitions at school spur debate over when, or if, parents are told
I have read at least a half dozen stories of schools not reaching out to parents to discuss children and their identities/pronouns. Seems crazy to me that parents are the last to know.
Betsy DeVos calls for the Department of Education to be abolished
Davos was the former Secretary of Education!
Mom Blasts Sesame Place for Racist Treatment of Black Daughters
This does not read well. The character told the Black kids “No,” but hugged the White kids.
So, a guy who shoots at his neighbors with kids in the house and is killed by the police is fine to raise money for his family ($20k raised), but the bodega worker attacked by a serial criminal is blocked on GoFundMe. Nothing to see here folks. Look away. Add Minneapolis to the uninhabitable city list.
Move thousands of homeless people into landmark L.A. Sears building? Some say no way
Bill de Blasio drops out of Congress race after dismal polling
Let’s review: DeBlasio was a horrible mayor for NYC. He bombed with ZERO percent of the vote in the Democratic Primary and BOMBED again in the Congressional race. Take the hint dude. You are awful.
Postmortem Sperm Retrieval Is Turning Dead Men Into Fathers
In Israel, parents of slain soldiers are pushing for their right to be future grandparents. Critics call it planned orphanhood.
I raised $50 million to grow the world's sweetest strawberries
I am not sure what it would take for me to buy $50 strawberries, but I am thinking winning Powerball….3 weeks in a row.
Virus/Vaccine
The data is beginning to deteriorate more rapidly now. Case growth was +24% over the prior to week period, while the positivity rate is back up to 18% (very high). Hospitalizations and ICUs were each +19% and deaths jumped 33% to an average of 436/day relative to 264/day in early June. This headline suggest Europe is struggling as well: WHO: COVID triples across Europe, hospitalizations double
Largest Study to Date Shows How COVID Vaccines Affect Periods
I wrote about this one year ago.
Real Estate
I have quite a few topics below, so I will keep my comments shorter today. When you are buying into a condo/co-op, be sure to spend time on the financials of the building and understand upcoming required maintenance and projects which may result in assessments to the owners. Check out these stories in Miami. Remember, after the horrific collapse of the condo building in Miami Dade last year, there are new, more stringent rules and older buildings are forced to spend money. Unit owners at at least two condo towers in Miami Beach are facing millions of dollars in special assessments to pay for restoration and renovation work, an issue affecting dozens of properties across South Florida. Phase 1 of the Murano at Portofino calls for $30mm in special assessments or an average of $160k/unit. The other building is the Murano Grande. Both buildings were built in early 2000’s. I am told and are nicer buildings. Of note, in the Murano Portofino example, no financing options given and the residents need to pay cash. The suggestion is some of the smaller unit owners may not have the capital and could be forced to sell.
I have written about the housing slowdown for a couple months. I thought the homebuilder sentiment story was interesting. Builder sentiment dropped 12 points to 55, according to a monthly survey from the National Association of Home Builders. That marks the largest single-month drop in the survey’s 37-year history with the exception of April 2020. Sentiment about current sales conditions saw the largest drop, while buyer traffic fell firmly into negative territory. Any rating above 50 on the index is still considered positive, but sentiment has now fallen 24 points since March, when mortgage rates began moving higher. The average rate on the 30-year fixed mortgage has nearly doubled since January and is now hovering just below 6%.
On a related note, Mortgage demand dropped to a 22-year low given higher interest rates and the impact of inflation on the consumer. Mortgage demand fell more than 6% last week compared with the previous week, hitting the lowest level since 2000, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications for a mortgage to purchase a home dropped 7% for the week and were 19% lower than the same week in 2021.
Mark Pruner is a large residential broker in Greenwich. I asked him for an update and this was his response Tuesday night. Here is my first half report for Greenwich (and also attached below). The market is much tighter than in 2021 due to our extraordinarily low inventory and very good demand. The low inventory means that sales are down, but not because of lack of demand. We have seen a fall off in demand shifting the market from a super-seller's market to a strong seller's market. Inventory is up from an all time low of 140 single family homes to 224 houses or an increase of 60% in 3 months, but it stills leaves us down 65% from normal inventory at this time of year. If you ignore all what we have seen in the last couple of years, what we have right now is more demand than we have supply. I expect that prices will continue to go up, just not in the big jumps that we have seen in the last two years. However, interest rates have not been a significant factor in Greenwich. People can get jumbo loans under 5% and only about a quarter of the deals have mortgage contingencies down from 50% pre-Covid. If we'd had this market in 2019, we would have been happy campers; it's just Y-o-Y comparisons that make this market look weak.
Empire Capital bought 1330 Avenue of the Americas in NYC for $325mm. Why is this a story? It sold for $498mm in 2006. This is a bad sign for NYC office valuations. The building has $285mm of debt on it today. The story is slightly different in Miami Beach where at least 8 office buildings with over 1mm square feet are in various stages of development. Miami Beach had about 850,000-square-feet of high-end office buildings before the current building boom, compared with about 10 million square feet in the City of Miami. 1330 Avenue of Americas Below:
Other R/E Headlines
The froth is off: Canadian houses now selling at $200K discounts
Miami-Dade Commissioners Approve 1% Property Tax Reduction
Given the increase in property values, the commission reduced the tax rates to help consumers. What a great idea.
car inspection: i live in NYC and winter in Boca. NYS inspection on my vehicle expired while in Boca. i could not get an appt anywhere in NYC for weeks. of course got a ticket. the next weekend i decided to check out an east hampton auto shop while visiting a friend. called ahead and got an appt. took 10min. that said, owner can't get any help, much less good help. u have written on this also.