Opening Comments
Eye on the Market-Mike Cembalest
Mind Blowing Crypto
Quick Bites
Markets, GS Market Thoughts,
China Expanded Military Presence?
Russia and China vs US, Bitcoin Lawsuit
NY Honors Math, Chicago Chaos
NYC Bail Reform Strikes Again, CEO Fires 900 via Zoom
Other Headlines
Virus/Vaccine
Data-Significant Deterioration Across the Board
Fauci “Encouraging” Omicron Data
Omicron Reduces Antibodies
NYC Private Company Vaccine Mandate-DeBlasio
Real Estate
Indian Creek Thoughts-Beautiful and Pricey
Miami R/E Article (Good Pictures)
Rent and Amenities
Refinancing Data
Opening Comments
Readers seemed to get a big kick out of the Picture of the Day of the horrific art from Art Miami. I only saw one unsubscribe, so that means we only had one serial killer in the readership. For those readers who missed the last Rosen Report, here is the painting which created quite a bit of commentary. You just cannot unsee this horrific work offered at $75k. It is like a car accident, you want to look away, but can’t. I hope this artist gets the mental help he or she needs.
There was a bad link in the last report regarding a WSJ article on Hedge Fund Losses in Biotech. Not sure what happened. Apologies.
I had a charity event in Miami today for the Community Police Relations Foundation which limited my ability to get every story in for the piece, so Quick Bites is abbreviated and I am scrambling to proof it again. Given the environment of police hate, 7 chiefs in Miami have resigned or retired this year. Generally it is 1-2 per year.
Please look at the Virus/Vaccine section today. The data is deteriorating just as holiday travel, parties and family gatherings are going into full steam. However, Omicron appears less harmful than initially feared.
Eye on the Market-Mike Cembalest
Cembalest always puts together thoughtful research and I will not summarize it for you as it only dilutes his great work. The subjects in the piece include: Equity markets, the Lombards, SPAC investors, Bone-setters, George Washington, COVID bots and Omicron. I have been speaking more about crypto and wanted to include two charts from his piece which partially explains why the crypto market has taken off so much since the pandemic. I always learn something reading Cemblast’s research.
Mind Blowing Crypto
Disclaimer. I am new to crypto and am not presenting myself as an expert in any way. This content is provided for general information purposes only and does not constitute professional or financial advice.
I wrote the story, I am a Crypto Idiot a few weeks ago and I was run over with emails wanting to learn more by other “Crypto Idiots.” I have a Crypto Sensei who has taken me under his wing. He is a long-time reader who connected with me for the first time about one month ago. He is an expert in all things crypto and has started to shine the light on it for me. He gave me hours of his time to help me navigate the convoluted waters of crypto trading, investing and staking. Staking is a way to put your crypto to work and earn rewards on it. Staking cryptocurrencies is a process that involves committing your crypto assets to support a blockchain network and confirm transactions. It's available with cryptocurrencies that use the proof-of-stake model to process payments. I am planning on doing a podcast with my Sensei to help to educate my readers, so expect something soon on this topic.
I want to be clear about something, this is incredibly confusing. Even after doing this with the assistance of a pro, I could not re-create it to help you do it. I told Sensei, “If Bezos called me right now and offered me $1bn to do what you just did for me there is no chance I could do it again.” I am not kidding, I had a dozen tabs open between various programs and bridges to transfer crypto to a myriad of accounts to buy and stake. I want Rosen Report readers to be educated on the crypto world and what is in the art of possible. Despite a lot of noise, I believe many things within the crypto world will be here for the long haul.
With the help of Sensai, I did a handful of swaps and staking arrangements, but do not want to go into all of them given the complexity. Today, I am going to write about one staking arrangement where I am receiving 19.51% on my money. Upcoming reports will focus on others crypto related themes where you can earn 150-70,000%, but take a great deal more risk. I did them in small size to get a better understanding.
Bought Luna, borrowed a USD stablecoin (UST) against it & lent UST at 19.51%
No, there are no typos above. Yes, there is risk which is why I sized it accordingly with each staking arrangement sized so I could start to understand without losing too much. I am going to walk through what happened with Luna and how it works. It is deemed “safer,” yet pays approximately 19.51% per annum relative to my bank accounts paying me 12-20 basis points. Because my Sensei believes in Terra $LUNA (on the Terra Blockchain), I borrowed against it to lend UST (stablecoin fixed to the US $). I could have lent more of the value of my Luna, but I will be at greater risk of Luna volatility. I kept my Luna and borrowed UST in the amount of 25% of my Luna and re-lent it making 19.51%. The reason Luna may increase in value is every time UST is purchased to stake it on the Anchor App and earn 19.5%, Luna is burned to create UST to lend.
I should make 19.51% on my UST and theoretically, make money on my Luna as over time the price will increase in value despite meaningful volatility. The loan is fully collateralized by other borrowers pledging Luna or Eth as collateral meaning it is secured and if the borrower does not pay as the collateral falls in price, the collateral is sold to make me whole. There is no lock-up. Obviously, there are risks of the protocol being hacked and your money being stolen or the price of Luna collapsing, but is viewed as safer in the crypto world. Additionally, you can buy protocol insurance for 2.6% per annum if you so wish. If I go big here, I would 100% buy insurance to get my yield down to a measly 17%! I have not earned 17% interest since I had a $500 CD with my birthday gifts in 1980. My Sensei believes a 19.51% return is pittance, so he focuses on higher yielding opportunities. Oh to be young and a computer science whiz who understands this crap. I would be happy as a clam if for the rest of my life I only earned 19.51% on my money. I believe Scaramucci is doing a fund to effectively do what I did with Terra $LUNA.
The reason for this note is to educate you on what is in the art of possible in the crypto space. Other, higher yielding protocols are riskier (not 100% collateralized and the coin is less stable). The teams behind them are impressive, but obviously the risk to earn hundreds or thousands of percent are high. Some of my friends have hired young crypto experts to help them navigate and feel that is a good idea.
When we start talking about Axie Infinity (game) and the implications, your head will spin. The ramifications of a decentralized world are serious and feel it will lead to many opportunities in coming years. In fact just today, Ubisoft announced they would be creating in game NFts on the Tezos blockchain.
The engineers and programmers who are in at ground stages are making a KILLING on these markets and are known as “Crypto Natives.” I will be taking baby steps until I feel more comfortable, but plan on going bigger as I better understand the process, risks and opportunities and capitalizing on market corrections which will inevitably take place.
I suggest people start spending time on the crypto space and if they want to start investing in this way, have some small allocation to it in some capacity. I suggested this over one year ago and feel the same today. In hindsight, I sure wish I was at least a minor in computer science or had some programming skills. You also need to expect substantial drawdowns in the crypto space. Just last week, Bitcoin fell 20% in a couple days. My Sensei has an overwhelming majority of his net worth in cypto. That is aggressive, but some allocation (2-4% of net worth) over time and put to work on pull-backs makes sense to me.
Just today, Sequoia Capital (big venture firm) replaced Company in the Twitter profile with DAO (Decentralized Autonomous Organization) and the head of Sequoia China said, “We are all in on Crypto.” Like it or not, the crypto market has legs and the smartest investors in the world are going “all in.”
Quick Bites
Markets rebounded sharply given Omicron appears to be less harmful than originally feared. However, the market seems to be discounting what appears to be growing geo-political risk discussed in some bullets below. U.S. stocks were slightly higher Wednesday as investors continued to bet the impact of the omicron variant of Covid-19 would not be as threatening as many previously thought. The Dow reversed higher near the end of the trading day, adding 35 points, or 0.1%, to reach 35,755. The S&P 500 inched 0.3% higher to 4,701 and sat 0.9% from its record. The tech-heavy Nasdaq Composite rose 0.6% to 15,787.
Some of the comeback was validated by vaccine news Wednesday. Pfizer and BioNTech said three doses of their vaccine are effective at neutralizing the omicron variant, citing their own preliminary lab tests. They also said two doses may still protect against severe disease. Pfizer shares, which are up 6.3% in the last month, fell slightly. Many had already anticipated the new variant would be manageable, an expectation that helped drive the rebound Monday and subsequent rally Tuesday. This week’s gains have put all of the major averages back within striking distance of their record highs. The Dow is about 2.2% from its record and the Nasdaq is roughly 2.6% from its all-time high. The 5 day S&P chart is below. The 10-Year Treasury is 1.52%, oil is $72, Bitcoin $50.3k and Ethereum is $4.4k
Goldman Sachs Group Inc. is issuing words of caution for dip buyers plunging back into stocks: The December volatility breakout has room to run -- and risk gauges aren’t yet flashing buy signals. The hawkish tilt from the Federal Reserve just as the omicron variant spreads will continue to create all manner of trading challenges in the near-term, according to Christian Mueller-Glissmann, managing director of portfolio strategy and asset allocation at the firm.
Classified American intelligence reports suggest China intends to establish its first permanent military presence on the Atlantic Ocean in the tiny Central African country of Equatorial Guinea, according to U.S. officials. The officials declined to describe details of the secret intelligence findings. But they said the reports raise the prospect that Chinese warships would be able to rearm and refit opposite the East Coast of the U.S.—a threat that is setting off alarm bells at the White House and Pentagon. The President of Equatorial Guinea has a son who is the VP and is accused of amassing $300mm “through corruption and money laundering.” I read elsewhere the median income in Equatorial Guinea is under $9k/year with over 70% of the nation in poverty and 40% in extreme poverty and has a GDP of $11bn - or 4% of Musk’s net worth.
This is a concerning Newsweek article about a Russia and China working together. I don’t believe Biden has done an amazing job on the foreign policy front, and this piece suggests things could become more challenging. Markets seem to be discounting near term crisis here as low given we are back to close to all-time highs. These geo-political risks seem to be mounting and the Putin Biden call on Tuesday appears to be relatively tense. As crises mount over Ukraine and Taiwan, an unprecedented bond between Russian President Vladimir Putin and Chinese President Xi Jinping has allowed the United States' two top rivals to force President Joe Biden into a two-front crisis that could spread his administration too thin to respond adequately to either. "I don't think the United States is prepared to go to war in Ukraine. I don't think the United States is prepared to go to war over Taiwan," Lyle Goldstein, an expert on China and Russia who served for 20 years as a research professor at the Naval War College up until October and now holds the position of director of Asia engagement at the Defense Priorities think tank, told Newsweek. Today, Biden ruled out unilateral force even if Russia invades Ukraine.
This is a Fortune article about the Bitcoin lawsuit over the creation of the crypto. The Australian computer scientist who claims he invented Bitcoin was told by a U.S. jury to pay $100 million in damages over claims that he cheated a deceased friend over intellectual property for the cryptocurrency. The brother of Dave Kleiman, a computer security expert who died in 2013, alleged that the late Florida man worked with Wright (supposedly Satoshi Nakamoto) to create and mine Bitcoin in its early years. As a result, the plaintiffs claimed the estate was entitled to half of a cache of as many as 1.1 million Bitcoins worth some $57 billion, which are thought to be held by Satoshi. Some cryptocurrency investors see Wright as a fake, and years-long litigation in Florida has done little to quiet the skeptics.
Hundreds of prominent professors — including top names from CUNY, NYU, and Columbia — have signed a letter blasting the erosion of math rigor in grades K to 12. Arguing that curtailing advanced math programs puts American kids at a global disadvantage, the coalition called the movement “the height of irresponsibility.” Some school districts — including in New York — have slowly eliminated advanced math options for some students as a means of easing achievement gaps. City parents have revolted in several Department of Education schools where administrators discontinued accelerated math options. A total of 746 math teachers and professors across the country signed the new missive, warning that enfeebled math curriculum would have dire consequences down the line. I am not sure the idiots who believe ending honors math is a good idea, but it is yet another example of wokeness gone awry.
It’s becoming a familiar sight: chaos in the Loop. It happened again Saturday night with large crowds, a shooting and beatings. In Chicago, an officer was left with a broken arm, and police arrested more 21 young people. Dozens flooded the streets near Millennium Park in a similar sight to last summer. A Chicago Transit Authority bus driver was beaten in the road and injured. A teenager was shot in the arm when a gunman fired after the victim bumped into him. A convenience store worker was also punched in the face. In a separate incident, a Chicago bus driver stopped to check a noise and was beaten by a 15-year-old boy. I will continue to reiterate to the Progressives who believe being soft on crime will win elections-you are wrong. Chicago, NYC, LA, SFO, Portland, Seattle, Minneapolis… are not what people want. I lived in Chicago and worked in the area of this chaos. I cannot fathom my home city in the current state. I cannot find one Chicago reader (I have dozens) who are happy or want to live there. They feel unsafe despite living in high-end neighborhoods. Another amazing Mayor, Lightfoot had this comment, “These kids have to take responsibility, but I’m going to say the parents have to take responsibility,” she said. If you recall, the CEO of McD said effectively blamed the parents of the children who killed others and he was eviscerated for it.
I don’t mean to continually put these horror stories in the Rosen Report, but it is important that my readers vote for politicians who will make the right decisions. There is nothing and I repeat nothing which will get me to change my mind about bail reform when it comes to violent individuals. We are learning about the costs that the innocent tax payers bear due to this woke policy. A homeless man charged with beating a guy last year was dumped back on the street thanks to so-called bail reform, only to allegedly pummel two women in Upper West Side attacks Thursday — and be freed again. Darrell Johnson, 23, left one of his random female victims so brutally beaten that she suffered a “disfiguring laceration” to her face, law-enforcement sources told The Post on Monday. Last year, Johnson — who has more than a dozen arrests on his rap sheet dating to 2014, according to sources — was hit with assault and harassment charges in the man’s beatdown. He allegedly punched his victim “about the face with a closed fist multiple times” in a Harlem building, according to a court complaint. Johnson then allegedly “used his feet to kick and stomp” the man in the Aug. 3, 2020, attack. Why should this person not be in jail for life? How many chances should a violent person get?
The CEO of Better.com fired more than 900 employees at once in a Zoom meeting last week, reportedly accusing them of "stealing" from their colleagues and customers by being unproductive and only working two hours a day. Just in time for the holidays... "If you're on this call, you are part of the unlucky group that is being laid off," the CEO, Vishal Garg, told the staff. The 900 layoffs, which included the firm's diversity, equity and inclusion recruiting team, amount to about 9% of the workforce. He told the employees they could expect an email from HR detailing benefits and severance. Although I am not against firing unproductive people, I feel this situation could have been handled a bit differently, especially right around the holidays.
Other Headlines
‘6% inflation is devastating’ to everyday Americans, rising prices need to be curbed, expert says
GameStop shares fall as video game retailer reports widening losses in third quarter
Amazon Web Services outage brings some delivery operations to a standstill
Switzerland Approves Assisted ‘Suicide Capsule’
I am supportive of this concept for those dying in a painful manner
This is a WAPO article, so to me, it has more weight if it is negative about the evacuation.
Cases of anorexia among teens aged 13 to 16 jumped 65% during first wave of pandemic, study finds
I am adamantly opposed to this type of competing and feel it should be banned.
Nearly 80% of U.S. Students Have Had to Choose Between Paying for Food or School
CNN Won’t Pay Chris Cuomo Severance; HarperCollins Pulls Former Anchor’s Coming Book
Omicron Variant Sends Some Office Holiday Parties Back to Zoom
Over half of young adults are obese or overweight, study says
New York billionaire Michael Steinhardt surrenders $70 million of stolen ancient art
Fox News Christmas tree set on fire in Midtown Manhattan; suspect identified
Virus/Vaccine
The deterioration continues across the board and it is largely driven by Delta. Cases are +27% for the prior two-week period and are now averaging 120k/day relative to October lows of 71k/day. The peak in January was 250k for perspective. The cases are exploding in CT+109%, RI+87%, NJ+84%, MO+77%, DC+68%, MA+67%, IL+58%, KY+56%, DE+54%, IN+52%. What is interesting is states such as CT, NJ, RI, MA, DC are well above the US average of 60% in terms of vaccines. In the top 10 biggest growth states, only three are below average in terms of vaccination rates. Hospitalizations were +19% and are now at 61k relative to November lows of 47k. The peak was 137k in January. Deaths were +13% to almost 1.3k/day versus the November 29th lows of 908 day. The January peak was over 3,200. All regions are showing increased cases with the Midwest and Northeast seeing the largest increases (2nd chart).
Preliminary data is starting to emerge that could give us a clearer picture of what we’re dealing with as experts pore over early omicron observations.
The White House’s chief medical advisor, Dr. Anthony Fauci, said Sunday that early data was “encouraging,” but cautioned that more information was needed to fully understand the variant. The World Health Organization designated the new Covid omicron variant as being “of concern” less than two weeks ago.
The Covid omicron variant significantly reduces antibodies generated by Pfizer and BioNTech’s vaccine, according to a small preliminary study released Tuesday. However, people who have recovered from the virus and received a booster shot will likely have more protection from severe disease, the South African researchers said. They found a 41-fold drop in the ability of the antibodies to neutralize the omicron variant compared with the original virus. The preprint study, which has not yet been peer-reviewed, tested 14 plasma samples from 12 vaccinated people, 6 of whom were previously infected.
“We in New York City have decided to use a preemptive strike, to really do something bold to stop the further growth of COVID and the dangers it’s causing to all of us,” de Blasio said in an interview with MSNBC. “So as of today, we’re going to announce a first-in-the-nation measure. Our health commissioner will announce a vaccine mandate for private sector employers across the board.” The mandate takes effect December 27th.
Real Estate
I went to Indian Creek Island in Miami for a charity lunch for the Miami Police. The island is arguably the most fortified place in the US absent the White House. Indian Creek Island is a 300 acre island on Biscayne Bay. It is for the UBER wealthy including Julio Iglesias, Tom Brady, Don Shula, Carl Icahn, Jeff Soffer, Norman Braman, Ivanka Trump, Eddie Lampert…There are 41 homes and right now, three are for sale between $31-55mm. The island is meticulous and the security is no joke. Boats patrol the waters around the homes and there is security everywhere. When I was looking to move here, I was shown a lot for $18mm. It would have been a great investment, but too rich for my blood. I was a little underwhelmed with the homes as many are dated, but it is beautiful. The banyan tree in front of the clubhouse is stunning.
On a separate note, I was told of a house on North Bay Road in which the land was bought for $20mm and a home built for $10mm a few years ago. I was told the owner was offered $150mm recently. I will reiterate my frustration with the traffic on a Wednesday afternoon in the Miami area. I just cannot take it. The infrastructure of South Florida was not built to handle this many people. It is akin to the Hamptons during the pandemic.
But in Miami, those newcomers are demanding permanent family digs rather than beachfront vacation condos — which is sending prices in suburban neighborhoods soaring. That’s not an issue for those lucky few who arrive absolutely loaded. They’re shopping for spreads like 8 Star Island: a nine-bedroom, 11-bathroom mansion on 2 acres of land spread across one of Miami’s most coveted cays. It hit the market this August with an astounding $80 million ask — making it the priciest listing in town. For that kind of cash you get 20,000 square feet of fun with views of the Magic City skyline, an oval pool and one of Miami’s most in-demand amenities: a huge private dock. Elizabeth Lima of Berkshire Hathaway HomeServices has the listing.
Rent prices in the U.S. typically start to cool around wintertime, but this year demand has pushed costs higher. Asking rents for new leases rose a record 13.9% in November compared to a year ago, housing site RealPage notes. Prices last month were 0.6% higher than in October. One reason for the spike: amenities. Demand is strong right now, “especially for the luxury product,” Greg Willett, RealPage chief economist, told CNBC. “As the economy has recovered, we’ve done a better job in high-paying employment than we have in the lower-paying jobs.” An in-building gym could add 10% to your rent, for instance, while a garage adds 6%, according to Apartment Advisor. The analysis examined over 250,000 two-bedroom apartments listed for rent in metro areas nationwide to determine the average price impact of certain amenities.
This story from the Real Deal was interesting to me. Many people refuse to go back to work and to me, it is a combo of free government money, increase in home values and subsequent refinanings, money made in stocks and crytpo and the desire to work from home. Real Deal is free if you download the app to your phone, but you need to pay on your computer. As home values continue to climb, owners eager for extra cash are seeing their dreams come true. Borrowers extracted $70 billion from their home equity through cash-out refinances in the third quarter, according to mortgage data provider Black Knight. Cash-outs accounted for 54 percent of all refinances, the highest quarterly rate in 14 years. But homeowners are not partying like it’s 2005. The $70 billion represented just 0.8 percent of tappable equity at the start of the quarter. “For context, that’s less than a third of the rate at which people were pulling cash out of their homes at the peak of such activity in 2005,” said Black Knight’s Ben Graboske. Graboske, president of the firm’s data and analytics arm, noted that underwriting standards have increased, with the average credit score of cash-out borrowers 50 points higher than in 2005, and lower loan-to-value ratios.
Great article. Couple of questions 1) are you planning to detail the purchase, borrow and re-lend process for luna 2) I don’t understand the economics here, you are borrowing UST (what is cost) and lending at 19% (how is sitting on the other side of that trade and paying that much?!?) . Thx