Opening Comments
Picture of the Day
Morphine Drip
Quick Bites-Markets, Big Get Bigger, Bridgewater
Berkshire Meeting, Lockdowns, NYC Back to Life, College Teaching
Border Crossing, Attacks on Police, CA Inmate Release, UFOs
Virus/Vaccine-Data is improving in the US, but hot spots remain globally
R/E-Greenwich Color from Mark Pruner
Opening Comments
I went fishing on a friend’s boat the other day and we got some nice blackfin tuna, but I have never seen more sharks in the water. We lost 8 tuna and snapper to sharks as we were reeling in the fish. Mid April to the end of May is the best fishing down here as the blackfin tuna and dolphin migrate through our waters, while you can still catch sailfish and wahoo. The seas tend to be calmer, but the sharks are thick. At one point, 6 sharks were hoovering around the boat looking to steal our catch. I mean bull sharks over 8 ft were there. Here is a picture of my friend with a nice tuna of approximately 32 lbs. Note how close we are to shore. When you are fishing this time of year, speed is critical. You need to put some “heat” on the fish as you reel them in to prevent the toothy predators from stealing your catch.
Junior golf in Florida is quite competitive. I wrote about a young man, Dean Greyserman, who won the Florida Men’s Amateur at age 17 by shooting a final round 62 (8 birdies and an eagle) on a 7,000 yard course to win the tournament on the final day. He will play at Stanford after he graduates high school in 2022. He came in 5th today in a big tournament. I mentioned his older brother, Max, who graduated from Duke and is now on the Korn Ferry Tour and playing quite well. He finished top 7 late this afternoon. It does not end there. The youngest of the three brothers is Reed, a 15 year old high school freshman, can play too. He shot 64 (8 birdies and no bogeys) on Saturday to take a commanding lead at an AJGA event in Palm Beach from 6,850 yards. The AJGA tournaments are the best of the best kids. Reed won the tournament against a stacked field as a 15 year old. Trust me, many of the AJGA kids will play golf at the top golf schools in the country. VERY impressive. What a day for the Greyserman family.
I called up Alex, the father and a good friend, and asked if Jack could move in with the family for a while. Clearly, there is something in the water over there. If that does not work, I suggested a blood transfusion by taking a bit from Dean, Max and Reed and giving it to Jack. I think he needs some assassin blood in him. Jack sure ain’t getting blood from me which can help him shoot a 64.
Picture(s) of the Day
I have spoken recently a bit about my inflation fears and they have not subsided. Here are another few examples. This Bloomberg article is entitled, “The Price of the Stuff That Makes Everything is Surging.” This article outlines that soaring lumber prices are adding $36k to the cost of a new home. Another article is about chlorine shortages which are causing prices to double just in time for the summer time use of pools. I have written repeatedly about consumer products price increasing high single to low double digits and here we go again. Diapers rose 8.7% for the year ending April 10th and Kimberly Clark and Product & Gamble will increased prices mid to high single digits. There is a global shortage of computer chips which are impacting phones, cars, computers, appliances and consumer electronics. GS is forecasting a 20% shortfall of computer chips and remember, GS is also calling for significant commodity price increases. Don’t get me started on the price of education, insurance, food or home services/maintenance, as all have gone up sharply. This WSJ video link outlines price increases in coffee and more price hikes are coming due to bean shortages. I have never tried coffee in my 51 years and I have a feeling my readers would prefer it that way. The Rosen Report on caffeine would be far too much for anyone to take.
Morphine Drip
I do not tell this story lightly and although it is comical in hindsight, it could have ended poorly for me. About 20 years ago I needed a procedure in NYC and it turns out it would be the first of many (sucks getting old). I had to be “put under” for it. I was given a drug called, “Demerol,” an opioid. I had never taken it and thought nothing of it at the time. After the procedure, I was quite out of sorts. I was supposed to have someone pick me up at the hospital and I told them my ride was waiting in front. I lied.
I stumbled into a taxi and asked him to take me to the Upper West Side. I did not think to look at my license in my wallet and could not remember where I lived. I asked to be dropped off on Broadway and 79th as it looked very familiar to me in my confused state. At the time, I lived at 424 West End at 81st Street a couple blocks from where the taxi left me. I was walking around looking for my apartment building and having an out of body experience. Supposedly I walked passed my building a few times and the doorman was concerned and stopped me on my 3rd pass and asked if I was ok. I told him I just had a procedure and was a bit out of it. He helped me get to my apartment and I went to sleep…. for 27 hours. If a nuclear bomb went off in NYC, I would not have heard it. Holy guacamole, I slept like a hibernating bear. In my life I have never been out cold like that. For example, today, I was up at 4:30am to write this piece, a far cry from 27 consecutive hours of deep sleep. After this incident, I often thought about Demerol when I could not fall asleep, but the risks far outweighed any benefit of taking it.
I do not take drugs and have never tried pain pills. Based on my Demerol experience, I can see how they can be addictive. I now feel as a country, we have been on a drip of addictive drugs for too long. It started with the Global Financial Crisis, massive quantitative easing, zero rates, bail outs, TARP… and with the pandemic, we have seen far more. Low rates, trillions in market liquidity, stimulus checks, PPP, rent abatement, mortgage relief, grants, infrastructure spending and the list goes on. Was some necessary, 100% yes. Do we need the levels we are seeing today with home prices at all time highs, stocks at all time highs, inflationary pressures showing in many products and services and a savings rate approaching 30%? I don’t think so. What would have happened if I hit the Demerol button a few more times? I would have become addicted with 100% certainty. As a society, we are hitting the button and cannot stop. I have countless friends trying to hire people and cannot find willing workers. They are being paid to stay home, why work? Restaurants are paying people to show up for interviews as they struggle to find workers.
In some of my earliest Rosen Reports a year ago, I wrote about transfer payments and how they would be around for a while and Guaranteed Basic Income could be the new mantra. Well, here are some interesting charts. Transfer payments such as unemployment benefits and welfare are annualized at $8.1 trillion, which is $5 trillion higher than the pre-pandemic levels. The US Government now is responsible for 33.8% of all income. For perspective, in the 1960s, the US was at 6-7% and in the 70s got up to 13%. We stayed below 15% until the GFC where we started approaching 20% and then fell back to the mid teens. Does anyone have a problem with these #s? I sure do. When I was young and cleaned toilets, washed dishes, bused tables, valet parked cars and delivered pizza, I felt good about getting a check and paying my bills or having money for a date. The work was not always fun, but I earned it. When I became incredibly fortunate and got big jobs after graduating from the University of Chicago with an MBA, I earned a good deal of money and helped build what became substantial businesses. I again felt good about my value add and getting paid. Sure, I will take money if you want to give it to me, but I personally would rather earn it. I am trying to teach work ethic to my kids who are growing up in a far better economic situation than I did 40 years ago.
Unfortunately, as a nation, we are setting ourselves up for a bunch of addicts needing to hit the button for the morphine drip based on what is going on. Where does it end? At what point do the markets start to question the insane debt loads? I don’t know why, I like to look at the US Debt Clock from time to time. Lots of data on there and today, the US Debt is over $28 trillion and growing by the second. What happens when rates back up and the cost of the debt increases? The US Debt Clock page has lots of info and also shows US Unfunded Liabilities of almost $150 trillion (Social Security, Medicare, Federal Debt, Federal Employee and Veterans Benefits. I know some people believe we are helping our kids. I am not so convinced.
Quick Bites
The major averages slipped on Friday as investors took profits amid a flurry of earnings results and a robust profit beat from e-commerce giant Amazon. The S&P 500 fell 0.7% to 4,181, while the Dow shed 185 points to close at 33,874. The Nasdaq dropped 0.9% to 13,962. Despite Friday’s weakness in equities, the S&P 500 notched its third straight month of gains in April, adding more than 5% to the index as investors bet on a big economic and profit recovery from the pandemic. The S&P 500 is now up 11% for the year. The benchmark closed at record levels on Thursday, on the heels of blowout earnings results from Apple and Facebook. The Dow rose about 2.7% this month, while the Nasdaq Composite gained 5.4% in April. Bitcoin is back up to $57k and Ethereum is at $3k after trading at $2.2k a week ago.
WSJ article outlining FB, MSFT, GOOG, AAPL, AMZN stock prices and market capitalization. The past week of quarterly financial results from the big 5 and put that dominance on vivid display. Each of these companies—already juggernauts pre-pandemic—recorded revenue growth near or above its fastest pace in years.
Good Bloomberg article with an interview of the Co-CIO of Bridgewater who sees a “Fair Amount” of the stock market in a bubble. One example given in the Greg Jensen interview is as follows. “So, as an example today, there’s something like 10% of stocks that are pricing in more than 20% revenue growth and margin expansion. If you look at history, 2% of stocks actually achieved that. That’s an extremely hard thing to do.“
Readers seem to love the Berkshire Hathaway annual meeting. The company is sitting on $145bn in cash. Here is a link to the CNBC summary. I have outlined the highlights. 1) Buffett and Munger issue dire warning on Robinhood gamifying trading. 2) Charlie Munger calls bitcoin ‘disgusting and contrary to the interests of civilization.’ 3) Buffett and Munger not worried about potential tax hikes. 4) Munger defends buybacks: ‘Highly moral act.’ 5) Buffett says the SPAC craze won’t go on forever. 6) Munger says unchecked federal spending will ‘end in disaster.’ 7) Buffett said selling some Apple stock last year was ‘probably a mistake.’ 8) Buffett and Munger never had an argument over the past 62 years. 9) Buffett says he has no issue owning Chevron, other fossil fuel companies. 10) Buffett still doesn’t want to own airlines.11) Buffett says the world can change in drastic ways so invest in index funds. From my perspective, I firmly agree with points 1, 4, 5, and 6 big time. However, I disagree with the Bitcoin commentary.
I have talked about unintended consequences at least 100 times with respect to the virus and lockdowns. This NY Post article outlines some interesting data with respect to unemployment. The five states with the strictest lockdowns over the last year — Hawaii, California, Massachusetts, New Jersey and New York — have an average unemployment rate of 8.06 percent. In the five states with the lightest restrictions, unemployment sits at just 3.48 percent — lower than the 3.5 percent national rate before the pandemic hit the US. According to the government, the unemployment rate for Americans with a college degree was 3.7 percent in March, 6.7 percent for those with just a high school diploma, and 8.2 percent for those with less than that. According to the Economic Policy Institute, the US lost 11 million jobs last year with an hourly wage below $19.48 while gaining a million jobs with an hourly wage above $31.39.
This Bloomberg article is going over NYC coming back to life after a dreadful period due to COVID-19. It outlines rents stabilizing, more people coming back to the office, restaurants filling up, less people requesting deliveries as they are going out, more tourists… This Insider article sent by a loyal reader and good friend, BW, is entitled, “The urban exodus out of New York City and San Francisco is a myth.” While 19,000 Manhattanites moved to Florida, 10,000 said they plan to move back. In fact, more residents — 20,000 — moved to the neighboring borough of Brooklyn than to Florida. Some of those who left for northeastern suburbs are already returning to the city, and that's also happening in the Bay Area. While San Francisco saw rates of permanent moves increase the most, per USPS data, temporary moves also more than doubled in the area, compared to 17% nationally. From my perspective, I do not agree with Insider article. I am seeing a continuous flow of wealth come to Florida and establish residency and they are largely from the tri-state area or CA. These are people buying $2-25mm+ homes. Yes, they will spend time in the Northeast or CA, but wont be paying taxes there or consuming and driving those economies as they did previously. I spoke with yet another billionaire who told me he was establishing residency in South Florida after a lifetime in NYC. Is someone going to tell me that the countless people worth $10mm to 20bn+ who are now residents in tax efficient states won’t have a major impact on NY and CA from a budget perspective?
I have grown incredibly frustrated with the teachings at school becoming overly woke and political. I have written about this extensively. A college professor berated a student for calling cops heroes who come to your aid in a time of need. The video is disgusting and unfortunately, more examples of this are happening from elementary school to colleges across the US. The professor feels more in danger due to the police and would not call them in a time of need. The professor is on a leave of absence. Major cities are seeing substantial increases in police officer resignations and early retirements. Do you believe teaching students to hate police officers will make cops’ jobs easier or harder? Will it lead to less violence or more? In another interesting teaching moment, a Black professor at Barnard named Ben Phillipe wrote a book which included a fantasy of gassing white people. Wait. What? No joke. Could you imagine if a White professor wrote a book in the other direction? So this is what parents are paying $25-80k a year for their kids to learn? I am looking for balance. I don’t want the schools to teach overly conservative or liberal values.
This Washington Times article discusses the rise in attacks on police officers across the country. I have read about multiple cities seeing large increases in early retirements or resignations from the police force. What are the implications for the criminals and the law abiding citizens in these communities with a significant decrease in police presence coupled with disgruntled officers who are physically and verbally attacked with regularity? Does this end well? For example, Baltimore is down 300-400 officers below what is needed and they are discussing closing precincts as a result. Portland, NYC, Minneapolis, Seattle, Chicago are all seeing increased resignations or early retirements. How hard is it going to be to fill new police positions with the hate and risk in the job? Couple this with bail reform which allows criminals out without bail and prisons letting out violent offenders early and who pays the price? The law abiding, tax paying citizens are harmed.
I understand there is a debate about the border and allowing illegal immigrants into the US. I feel we need tighter regulations and should only allow those in who follow a formal process and are vetted. It is necessary for the safety of our citizens as well as the financial strain of supporting millions of immigrants. This NY Post article outlines notorious gang members coming to the US. Members of MS-13 and other gangs are slipping across the southern border, hidden in the waves of thousands of Mexican and Central American migrants who continue to surge into the US. Border Patrol officials detained five gang members in the last week near frontier crossings at Laredo, TX., said US Border Patrol Agent Chief Matthew Hudak. “They attempt to evade arrest by exploiting the influx of migrants attempting to enter our country,” Hudak tweeted. Among those caught was a member of MS-13 and two 18th Street gang members, he said.
76,000 CA inmates are now eligible for earlier release according to this Fox News article. More than 63,000 inmates convicted of violent crimes will be eligible for good behavior credits that shorten their sentences by one-third instead of the one-fifth that had been in place since 2017. That includes nearly 20,000 inmates who are serving life sentences with the possibility of parole. The new rules take effect Saturday but it will be months or years before any inmates go free earlier.
Acclaimed diplomat Henry Kissinger said Friday that US-China tensions threaten to engulf the entire world and could lead to an Armageddon-like clash between the two military and technology giants. The 97-year-old former US secretary of state, who as an advisor to president Richard Nixon crafted the 1971 unfreezing of relations between Washington and Beijing, said the mix of economic, military and technological strengths of the two superpowers carried more risks than the Cold War with the Soviet Union. Strains with China are "the biggest problem for America, the biggest problem for the world," Kissinger told the McCain Institute's Sedona Forum on global issues. "Because if we can't solve that, then the risk is that all over the world a kind of cold war will develop between China and the United States." While nuclear weapons were already large enough to damage the entire globe during the Cold War, he said advances in nuclear technology and artificial intelligence -- where China and the United States are both leaders -- have multiplied the doomsday threat. "For the first time in human history, humanity has the capacity to extinguish itself in a finite period of time," Kissinger said.
Former Senator Harry Reid believes Lockheed Martin may have UFO fragments and tried to get approval by the Pentagon to learn more. He was refused. Lue Elizondo is the former head of the Advanced Aerospace Threat Identification Progam and is speaking about a document slated for release in June which may address some of the recent sightings. “There is something in our skies, we don’t know what it is, we don’t know how it works, we don’t know fully what it can do, we don’t know who is behind the wheel, we don’t know its intentions, and there isn’t a damn thing we can do about it,” he added. Elizondo made it clear in a press conference that UFOs have been observed to have qualities that are nothing less than otherworldly. He described vessels flying at 11,000 mph and being able to turn “instantly.” Providing a comparison, he explained, for our most advanced jets going at the same speed, “if you wanted to make a right-hand turn, it would take you about half the state of Ohio to do it.” Elizondo resigned from the AATIP as he sought to bring the discussion about the UFOs into the mainstream, describing them as a “national security issue.” There is a New Yorker article from 4/30 which I skimmed entitled “How the Penatagon Started Taking U.F.O.s Seriously.“ Literally, just as I was hitting send tonight, another story hit the tape with a new video from Florida with orbs of light caught on camera. Either the technology to trick everyone is improving, a foreign country has far superior technology than the US or there is something not of this world going on here.
Virus/Vaccine
The country’s case numbers are starting to fall after a month of stagnation. Outbreaks are subsiding in the Upper Midwest. MI, MN, IL are all reporting drops in new cases. Reports of new cases are increasing rapidly in Oregon, though the state’s recent infection rate is not yet among the country’s worst. In the US, cases are down 14.5% on the week with a 7 day average of 49.8k/day. Hospitalization fell 6.8% and is now at 41.9k. Deaths were also down 2.2% with a 7 day average of 691/day.
More than 1.15 billion doses have been administered across 174 countries, according to data collected by Bloomberg. The latest rate was roughly 21.1 million doses a day. In the U.S., 243 million doses have been given so far. In the last week, an average of 2.5 million doses per day were administered. The downward trend of vaccines in the US is concerning. We are down over 800k doses/day over the past few weeks. Lines are short in more places and people don’t seem to be running to get the vaccine. I drove by a vaccination center today at 4pm and there were ZERO people in line. A month ago, there were hundreds of cars backed up for 1/2 mile or more. Also, the J&J issues have hurt distribution, but believe the bigger problem is people not going to get the shots.
Good CNN article on the virus and hotspots:” India, Turkey, Iran, Brazil, for example.
The Biden administration will restrict travel from India as that country grapples with a gigantic surge in coronavirus cases, White House press secretary Jen Psaki said. The policy will take effect Tuesday, May 4, Psaki said.
Real Estate
Greenwich, CT-Update by Mark Pruner
You wouldn’t think that 3 days would make a big difference in sales for the month of April, but it does. You can read my weekly report at The Greenwich Real Estate Market from 2020 to April 2021. I finished it around 11 pm on Tuesday night. I just ran the sales number for April and instead of the expected 68 sales, we actually had 84 sales with an amazing 20 sales in the last 3 days of the month. On the flip side, we actually saw inventory go up. We ended the month with 340 listings, the most so far this year. Of those 340 listings, 128 of them came on the market in April, thank goodness.