Narcoleptic When Needed

8-24-22

Opening Comments

Great feedback on the last piece. A lot of sarcastic readers texted and emailed me to check my response times. I think the slowest was 4 minutes other than the overnight responses which were handled when I awoke. I did get some volunteers to help me with mentoring these young people I mentioned in my last piece. It is all in an attempt to help students and young professionals find their way with advice, counsel introductions and interview prep. I know some college students and young professionals read the Rosen Report-well smart ones do. Many reach out to me for help and guidance and I do my best to impart what little wisdom I have left. I had a half-dozen mentors sign up with specialties in Real Estate, Private Equity, Hedge Funds, Media, World Class Doctors… I can always use more mentors for those who want to help.

It was our 18th wedding anniversary the other day. Time sure flies by and the kids will be out of the house soon. Sundays in August in South Florida are challenging with lots of restaurants closed. We went to a very solid restaurant called, “Cafe Maxx,” which has been in Pompano Beach for 40 years. Definitely worth a look and wrote a prior review on it. I wanted to go to LPM in Brickell in Miami, but they only had outside seating available which is a non-starter in August. I hear this place is remarkable.

In my never ending injury update, I played tennis with my friend Ross on Monday, despite insane heat. I thought it went well until later Monday I could not walk. I threw my back out again. I am basically made of glass. Obese-3 pack-a-day smokers are injured less than I am and it is weighing heavily on my mind. I also just found out that my shoulder is torn again (had labrum surgery in 2008). For those old enough, I should star in the remake of “The Boy in the Plastic Bubble,” the 1976 TV film played by John Travolta, given I am so injury prone. I took 6 shots in the back today to reduce inflammation and pain.

It is the 30th anniversary of Hurricane Andrew which decimated South Florida as a Category 5 story with sustained winds of 165mph.

• Picture of the Day-$22mm Ferrari

• Narcoleptic When Needed

• Quick Bites

  • Markets

  • IPO Market and Performance

  • Electricity/Nat Gas Prices

  • Adam Neumann/Flow

  • Barron’s on Amazon from 1999. Oops.

  • Fauci Retiring

• Other Headlines

  • Crime Headlines

• Virus/Vaccine

  • Data Improving

• Real Estate

  • General Comments-Boca West Data-Slowing

  • US Boomtown Price Reductions

• Other R/E Headlines

  • Buyer’s Remorse

  • Home Price Declines

  • Bay Area Struggles

  • Australia Cracking

Picture of the Day-$22mm Ferrari

I do not know much about $22mm cars, but this one sure is beautiful and was once driven by the legendary race car driver, Carroll Shelby. Not unlike the preacher I mentioned in my last report who chastised his parishioners for not buying him a watch, I feel my readers should each contribute to buy me a $22mm car. It is only fair for the millions of dollars of value you each get from reading the Rosen Report. Be a good reader, and make a car like this the official car of the Rosen Report. In all seriousness, I did buy myself a new car for fun. It is coming from Arkansas in a couple weeks. It is slightly less than $22mm and will be in an upcoming report after I take delivery. It is a 1971 Olds Cutlass 442 convertible. Thank you to Gene for finding me the car.

Narcoleptic When Needed

I have a skill which most people wish they had in terms of sleep. I have the ability to fall asleep anywhere. I do not take naps (other than planes and MRI machines), but come bedtime, when the lights go out and it is time for sleep, I am out in 30 seconds.

I am not sure how to express just how skilled I am at falling asleep. My well documented travels to crap hotels across the country in search of Jack’s golf tournaments have rarely cost me a night of shut-eye. I have slept in smelly rooms with gunshots outside and found a way to crash. Although the sandpaper sheets are hardly comfortable, when it’s bedtime, it’s instant sleep-time for me. Below looks eerily similar to countless rooms from the past few years. In one funny exchange in a Motel 6 in small-town Pennsylvania, Jack asked, “Dad, am I safer above or below the comforter?”

I responded, “Bud, we are likely to catch a disease regardless. This room must be filled with countless bad things. No hiding in here.” Even that did not prevent me from crashing minutes later.

I have flown approximately 2,000,000 miles across the world. I have become adept at sleeping on a plane. Obviously, if you are fortunate enough to travel long distances in Business Class, it is easy to sleep. I can do better. I would guess on no fewer than 200 occasions, I have fallen asleep in coach prior to the plane taking off. Jack and I were flying back from Boston a couple weeks ago, and I dozed-off. I woke up convinced we landed in Palm Beach as the plane was taxiing. The flight was an hour late and I woke up as we were taxing to the runway, not to the gate in Palm Beach!

My wife is a nervous flier. She gets livid that I sleep as she is frantically praying for a safe flight, while she is wiping down everything in her path with disinfectant. I don’t want anyone to know I am with her and her crazy ways, so I just fall asleep. My long time readers won’t forget our pandemic travel experience from two summers ago, when my wife made my kids wear hazmat suits on the plane and I acted as though I was not with them. This 30 second video is of the airport plane experience for those who do not believe what my wife does on a plane.

I am less comfortable taking a nap during the day at home (don’t recall ever doing this in my adult life), but put me on a plane, and I am drooling in no time. I don’t even need to recline my seat.

This past Sunday at 7am, I got two MRIs (lower back and shoulder) as I am considering doing stem cell therapy (to be discussed in an upcoming report). The tech said, “It is important that you don’t move.”

I responded, “I just don’t think that will be a problem as I will be sleeping.” Mind you, the magnets are blaring and smashing and I was out like a light. I only awoke when he pulled me out of the tube to reposition me for the next one. Guess what, I did it again despite being contorted for my shoulder scan. The technician said, “You sure are quite skilled at sleeping. How in the hell did you fall asleep back to back like that?”

With few other skills under my belt, looks like sleeping in awkward places champion of the world is the best title I am going to get.

Quick Bites

• Stocks rose Wednesday, snapping a three-day decline in the Dow and the S&P 500, as investors awaited more clarity on the Federal Reserve’s fight against inflation. The Dow gained 60 points, or 0.18%, to 32,9693. The S&P 500 climbed 0.29% to 4,141, and the Nasdaq advanced 0.41% to 12,432. Energy, real estate and financials were the best-performing sectors in the S&P 500. Meanwhile, information technology, health care and consumer staples lagged. Investors are awaiting the three-day Jackson Hole economic symposium that starts Thursday with Federal Reserve Chair Jerome Powell slated to speak Friday morning. The 10-year Treasury is back p to 3.11% after hitting 2.6% 8/1. The Eur/USD is now at .997 after starting the year at 1.13. Euro vacations are cheaper with the better exchange rate, but inflation will offset that a bit.

• I have written about the slowdown in IPOs this year. YTD, $5.1bn has been raised relative to this time last year of over $100bn and a YTD average historically of $33bn. The last time the IPO market was this bad, it was 2009. The IPO performance is not helping matters (2nd chart). Also hit is total Venture Capital for late stage startups (3rd chart). I would be very concerned about business plans which are not funded to break-even levels.

  

  

  

• I have written about European natural gas and electricity prices and the havoc on consumers and industry as a result. Right now, one-year forward electricity prices in Germany are Euro 666 MwH. For perspective, the US one-year forward is 98 MwH which is almost 85% less than the German forward. Think of the impact to the consumer and manufacturers of goods. Natural gas prices continue to rise based on the heat wave and the turmoil in Europe/Russia. The US natural gas inventories (2nd chart) are a growing concern. In the US a, “Tsunami of Shutoffs’ is coming as 20 million homes are behind on energy bills according to Bloomberg (3rd chart) showing a doubling of past due electric bills since 2019. If prices in Europe are 5-8 times higher, what about them? Today, European nat gas prices were the equivalent of $87 MMBtu and the US is $9.3. Houston, we have a problem. European consumers and businesses are absolutely getting crushed. Policies matter. Elections matter.

  

  

  

• I wanted to write about Adam Neumann’s new venture, Flow, on Sunday, but my agenda was full. I am shocked that Andreessen Horowitz funded him to the tune of $350mm. I will start with a positive. Neumann is a visionary with good ideas. However, his moral compass is just a wee-bit off for me to ever give this guy one dollar. His self-dealings were epic at WeWork. I also don’t back people who buy property and then lease it back to the company where he was CEO at inflated rates. Anyone else see a conflict here? Newmann trademarked the word, “We” and sold it to the company for $5.9mm. Adam later gave back the money because the deal was rightly criticized. WeWork raised $22bn and is worth $3.1bn today, despite a peak valuation of $47bn. Flow wants to revolutionize the housing industry by having branded apartments and a consistent experience focusing on remote workers. I like the idea, I just don’t believe I would pay a huge premium to be in a branded apartment. I would rather have a larger apartment elsewhere. I have a great deal of respect for Andreessen and his investment acumen (see portfolio here), but here I question the judgement to back Neumann. I believe Newmann walked away with $1.7bn from WeWork despite the chaos and massive losses caused under his watch. There are stories of rampant drug use as well. This one is entitled, “WeWork's ex-CEO smoked so much weed on his jet that crew wore oxygen masks,” and his behavior and treatment of employees is also in question.

  

• A reader sent me this picture of the cover of Barron’s from May 1999, “Amazon.Bomb.” I find Barron’s to be a thoughtful publication, but I am not sure they could have been more wrong. The 148,000% return since 1997 suggests maybe Bezos is on to something and his idea is not so “silly.”

  

  

• At the end of the year, Fauci is stepping down as chief medical advisor after more than 50 years of service. If you recall, I suggested it was time for him to go over 18 months ago. On June 6th of 2021, I wrote a piece entitled, “Fauci Ouchie,” and made my views clear for the 20th time. Nothing has changed in my mind. I appreciate his years of service and dedication, but question his judgement, conflicts, flip-flopping, overly burdensome lockdowns which he continues to defend and support of gain-of-function research. Of note, his pension is higher than the salary of President Biden. I believe Fauci has a $480k/year salary.

  

Other Headlines

• Credit Suisse Investment Bankers Are Bracing for Brutal Cutbacks

  • Staff anticipate deep cuts from the latest emergency restructuring, as the Swiss bank gives up its ambitions to be a titan of Wall Street.  I believe layoffs will mount and help to cool the R/E markets in the Hamptons and NYC.

    

• Ford to eliminate 3,000 jobs in an effort to cut costs

  • I am reading about far more layoffs across sectors in recent weeks.

• Twitter whistleblower alleges execs misled board and public on spam, security

  • Scathing allegations against Twitter management which will make Musk’s case better in my opinion.

• Dick’s Sporting Goods boosts 2022 outlook after second-quarter earnings top estimates

• Nordstrom cuts full-year forecast, citing slowing customer demand

• Zoom pares back annual forecast as revenue growth slows to single digits

  • How quickly things change. In 2021, revenue grew over 325%! The stock is -87% from the all-time high and was -16% post earnings.

• UK inflation could peak at 18%, warns Citi

  • I think it is safe to say that Europe is in serious trouble.

• Biden cancels $10,000 in federal student loan debt for most borrowers

  • The total relief is approximately $360bn between debt and Pell Grant relief according to the article. I paid all my loans back in full. What is the impact on inflation here? This WSJ Opinion piece is clearly concerned about the inflation impact.

• 10 companies that will let you work from anywhere and are hiring now

  

• Biden signed off on FBI review of Trump records, National Archives letter reveals

• Trump appears to concede he illegally retained official documents

• Trump's legal team asks for 'special master' to go through Mar-a-Lago evidence and determine if some should be returned

• Nancy Pelosi's husband Paul Pelosi pleads guilty to DUI

• Women are registering to vote in Pa. in numbers far exceeding men since the Supreme Court abortion decision

• Marijuana and hallucinogen use among young adults reached all-time high in 2021

• Steven Spielberg's private jet has burned $116,000 worth of jet fuel in two months

  • I am all for going green, but must call out the “environmentalists” who are “terrified” by global warming, yet own a G650.

• Before and after: These glaciers lost an area the size of Manhattan every 10 years since 1931. Cool interactive picture in the link.

  

• Quiet quitting is the latest workplace trend, but it doesn't mean what you think

  • I had never heard of the term, “Quiet Quitting.” Turns out people just don’t work as hard and decide to no longer go above and beyond. They stop doing the extra work and just complete the required tasks. I just cannot fathom this concept. I either give 120% or zero. For example, I spend 35 hours a week on a newsletter which I GIVE AWAY. I feel guilty if I do something half-assed.

• A Christian school in Florida told parents that gay, transgender, and nonbinary students will be forced to 'leave the school immediately'

• Maryland School District Prohibits Faculty From Disclosing Children’s Use of Pronouns From Parents

• New test can detect genetic disorders in unborn babies

• Almost half of Americans are holding on to $21 billion in unused gift cards, store credits

  • I recommend that you use gift cards as soon as you get them. I find they expire more than I use them.

• Following are great stories about heroism. I talk so much about crime and bad people, it is only fair to point out some good folks too.

  • Uber driver paused mid-ride to rescue people from burning Brooklyn building

  • Veteran who pulled mother, daughter from burning car in Liberty County recounts dramatic rescue

  • Bystander rescues 4 kids from fire, then jumps out window to save a 5th

Crime-Common theme. Many repeat offenders. Time to make some changes and force criminals to pay for their actions.

• Video shows NYC dollar-store shoplifters putting worker in choke hold

  • Scary video where shoplifters attack store workers. This violence will only end when the consequences begin. Long jail sentences for these violent attackers are necessary.

• Sickening video shows suspect sucker punch stranger from behind, knock him out in NYC mall

  • Guy is knocked out cold. The criminals should rot in jail for life.

• 64-year-old NYC man savagely beaten with rock in subway attack

• After 40 arrests, subway-worker attacker continues his crime spree

  

• NYC straphanger stabbed on train at Rockefeller Center

• 3 Bronx women robbed men of their clothes at knifepoint: NYPD

  • They look like teens to me.

    

• Reckless ATV rider accused of intentionally striking NYPD deputy chief — & he was still freed without bail

• UN diplomat dodges NYC rape rap thanks to diplomatic immunity

  • This is crazy. Diplomatic immunity is a free license to violate laws.

    

• 'It's nothing personal': Scooter muggers rob 4 vics in about half-hour in Bronx

• Footage shows man fatally beat senior citizen in Seattle

  

• 3 Arkansas officers suspended after video of violent arrest emerges

• Arizona suspect smashes store worker’s face with a brick

• California county saw 70% of criminal suspects released on $0 bail commit new crimes: DA

  • Of the 595 individuals released without bail in Yolo County between 2020 and 2021, 420 were rearrested. I am struggling mightily with the new bail reform policies and soft on crime antics in many states.

Virus/Vaccine

• Improvements continue across the board, and a clear recent peak has been set. Cases are down to under 92k relative to 130k in July. The positivity rate is down to 15% from 19% in July. Hospitalizations are down to sub 40k from over 43k in July and ICUs are down to 4.7k from 5.1k. Deaths finally started to fall more and are averaging 465/day relative 494/day in early August.

• Pfizer asks FDA to authorize Covid booster shots that target omicron BA.5 for people ages 12 and older

Real Estate

• In Boca West, Central Boca gated community, there are 79 homes are for sale today out of a total of over 3,500 condos, townhomes and homes. Those long-time readers may recall I wrote that condos were for sale for $1 (no typo). Boca West is primarily an older community. It is expensive to be a member of the club, and dues are high. When the older people passed, the kids did not want the condo (had to pay the then $70k initiation (now $90k) and dues of $30k+. The result was they put the condo for sale in 2019 for $1 and some sellers were willing to pay the buyer $35k towards the initiation fee given they did not sell. Now, some of those same units are selling for $300k. Not a bad return, even if you factor in the initiation fees. However, now more units are for sale. No bargain basement $1 units to be had. In December, I am told there were 8 units for sale in Boca West and now there are 79. Pre-pandemic, there were well over 200 for sale. Edmund Bogen of Douglas Elliman (Instagram @edmundbogen) has the highest priced sale ever in Boca West at $5,750,000. He told me that 4 months ago, there were 465 total listings and today there are over 1,200 listing in all of Boca. It is just another data point that things are slowing down.

• Another example of the US R/E market cooling with price reductions. This Bloomberg article is entitled, “Home Sellers Are Slashing Prices in Pandemic Boomtowns.” Redfin found that 70% of homes for sale in Boise, Idaho, had their price cut in July, the highest share of 97 metros. Denver, which attracted hordes of remote-friendly Silicon Valley tech workers during the pandemic, saw 58% of homes for sale slash prices in July compared with 36% the year prior. In Salt Lake City, 56% of listings cut their asking prices followed by Tacoma, Washington, at 55% and Tampa at 52%. The share of homes with a price drop increased in all but three of the 97 metro areas surveyed by Redfin, and all of those were in Illinois: Lake County, Elgin and Chicago. The chart is telling.

Other R/E Headlines

• 72% of recent homebuyers have regrets about their purchases. As the market cools, these steps can help you avoid disappointment

  • Was it overpaying, no contingency, no inspection?

• Home prices fell for the first time in 3 years last month – and it was the biggest decline since 2011

• Bay Area logs biggest price, sales drops in nation

• Australia’s Slumping Property Market Raises Risk of a Recession

  • Households’ record debt-to-income ratio squeezed by rate hikes

  • Major risk is fallout on consumption that makes up 60% of GDP