Opening Comments
The last note, “Learn From My Investing Mistakes” received some of the best feedback yet. Interestingly, many of my readers who are quite successful financially made comments how they too were under-invested in the equity and real estate markets. Helps make me feel like less of an idiot, I suppose. If you have a chance, you may just want to read the title section of the last edition, as the rest of the news in there is dated.
My family went to Casa de Campo in the Dominican Republic for 5 nights, and the next full report will go over the trip. Short story, it is an undervalued property on many fronts and worth the trip, especially those from the Northeast or Midwest. Rent a villa as it is not offensively priced or better yet, grab two families and rent a big one. More in an upcoming report, but the amenities are impressive with incredible golf and the restaurants are shocking good.
I missed all the interaction with the readers in my time away and received a bunch of very thoughtful notes from many of my loyal followers. Thank you. Although I came back from the Dominican Friday night, I jumped on a plane Saturday morning to go to Costa Rica for two days, but wanted to get something out today. My BRAND NEW Dell laptop is not working well and am told the warranty won’t cover it. Any readers with pull at Dell that can help me out? My last one is 12 years old and in perfect condition. This one is on the fritz in 5 months as the screen cracked despite no drops and a perfect shell. Editing today was very challenging given a possessed cursor. Apologies. Sunset pic from Costa Rica on the property taken with an iPhone. I just love sunsets and the views from the property are amazing. We had dinner on the beach.
I must give a shout-out to Saint Peter’s, a 15th seed who made it to the Elite 8 in the NCAA Tournament. Saint Peter's has beaten No. 2 Kentucky, No. 7 Murray State and No. 3 Purdue, which is remarkable considering Saint Peter's spent $130 million less on athletics last year than Kentucky. Saint Peter's athletic director Rachelle Paul said the school's basketball operating budget, which does not include coaching salaries, is less than $250,000 and the lowest number, by far, in the Metro Atlantic Athletic Conference. A true Cinderella team making it this far is AMZAING. CONGRATS.
Pictures of the Day-Two Different Rates Examples
Eye on the Market-Mike Cembalest
Never Ask Andy Warhol For Advice on Art
Quick Bites
US Markets, Global Bond Yields
Dimon on Energy, Fertilizer Pricing
Midtown Office, Job Searches
Russian Disinformation
$837k for an LA Homeless Unit
Oscar Losing Its Way
Other Headlines
Virus/Vaccine
Data-Improvements Continue
Real Estate
General Comments
South Florida/Miami Examples
Costa Rica
Migration Patterns
Picture of the Day-Two Different Rates Examples
The first chart is from Jim Reid at DB. The recent move higher in global yields is rapidly reducing the total amount of global negative yielding debt. In December 2020 we had nearly $18.5tn across the world. This week this has dipped below $3tn for the first time since December 2015 when the ECB cut the Deposit rate from -0.2% to -0.3%. In percentage terms, we are now at just under 8% of the total, and down from a stunningly crazy peak of around 40% in September 2019. For global corporate bonds, this week has seen the percentage of negative debt dip below 0.1% for the first time since March-May 2020 when it went to zero at one point for bad reasons, namely a blow-out in spreads due to the pandemic. I had written about the $18.5 TRILLION negative yielding government debt at the time. Crazy, right?
The next chart is from Bloomberg and was sent by a loyal reader who is always trying to contribute with story ideas. Thanks Blair. The chart is pretty self- explanatory and shows 30 year mortgage rates. This coupled with what has been an insane rise in home prices should cool down many markets, especially those reliant on mortgages. The rate move in the last 18 months would result in over $1,500 a month more in interest charges for a $1mm mortgage. However, the monthly payment would be up $1,100 due to lower principal amortization. This CNBC article suggests lower home sales forecasts and shows an even higher average 30 year.
Eye on the Market-Mike Cembalest
This piece is entitled, “Surveying the Damage,” and discusses Russia, the equity market declines, energy prices and a host of other topics. I found this one to be particularly interesting.
Never Ask Andy Warhol For Advice on Art
There is a news article about one of the most famous Warhol paintings which reminded me of a great story about my father-in-law. The CNN article is entitled, “One of Warhol's Marilyn Monroe portraits could fetch a record $200 million.”
My father-in-law, Stephen, was an amazing man. He grew up in the Bronx, attended Taft High School and went to Ohio State, despite losing his mom when he was a teenager. In a crazy situation, he had a crush on a young lady, Nan, who was an art student at college. Knowing zero about art, he went to her teacher to ask what book he can read to dazzle her. He read the suggested book and asked Nan on a date, and she was impressed with his effort. Long story short, they were married for 55 years before he passed away.
Stephen came to work on Wall Street in the 1960s when he graduated college and bumped into the professor who turned him on to the book in college. The professor invited Stephen and Nan to his art show. Stephen was memorized and could not believe what he was seeing. People were standing around looking at art and drinking free wine and appetizers. He was hooked.
Stephen had a great eye for art and in the 1960s and 1970s, art was very cheap relative to today. Great pieces like Wahrol, Picasso, Lichtenstein, Johns and others went for thousands, NOT millions. Stephen started collecting and took the blue, original Warhol painting of Marilyn Monroe on loan to see it in the apartment. Yes, the same one which will be auctioned in May for approximately $200mm. I presume this was the early to mid 1970s. Stephen actually got Andy Warhol to come over to ask him what he thought of the piece.
Stephen was surprised to see that Warhol was bouncing off the walls of the apartment. Andy was picking up ashtrays and asking how much they cost. He looked at books and would not focus on the question at hand: “Should Stephen buy this artwork?” Stephen was getting frustrated, and Warhol would not focus. Warhol was a legendary hoarder and found the oddest things of interest. Stephen kept asking Andy to focus on the Marilyn. Finally, Andy said, “How much do they want for it?”
Stephen replied, “They are asking $100k.”
Warhol went crazy and said, “Are you out of your mind? $100k for this? Buy the print.” Stephen was convinced that Warhol thought this was not a good piece of art and decided not to pursue the work as a result. He returned it to the gallery and never bought it.
Well, the blue Marilyn from Warhol is going for $200mm or more, so that tells you why you should not take advice from Andy Warhol. As a result of the miss, Stephen got upset when Andy Warhol was mentioned until the day he died. Despite the fact that I love Warhol’s 1960s works, I will never be able to afford one and now, not many people in the world can either.
Stephen taught me a lot about many subjects. Our time together was eventually spent a great deal on art education. I knew ZERO about art before my time with Stephen and with his assistance educating me, I started collecting over 15 years ago. I am thankful for many things Stephen taught me and our time together. He was a father I never had, but for too short of a period of time. We shared many good bottles of wine which led to fantastic debates and discussions. For the love of Stephen, I cannot speak highly of Andy Warhol, but if any billionaire reader gives me one, preferably from the 1960s (best work), I promise, Stephen will understand.
Quick Bites
The S&P 500 rose Friday to close out a winning week even as investors weighed interest rate hikes and war in Ukraine. The Dow rose 153 points, or 0.4%, to 34,861. The S&P 500 added 0.5% to close at 4,543. The Nasdaq dipped about 0.2% to 14,169. All three major averages notched second consecutive winning weeks. The Dow ticked up 0.3%. The S&P 500 gained 1.8%, and the Nasdaq rallied nearly 2% week to date. The S&P 500 is now up about 3.9% higher in March, more than erasing its losses since Russia invaded Ukraine late last month. Oil closed at $113 (up slightly on week) after some volatility. The 10 year Treasury touched 2.5%, but settled at 2.49%, despite hitting 2.3% earlier in the week. Crypto markets improved with equities and BTC closed at $44.6k and ETH at over $3.1k. The 2s/10s yield curve is trading at 18bps. Some will say to look at the front end relative to the 10 year, but for some reason, I continue to focus on 2s/10s. As you can see, every time 2s/10s go negative, we have had a recession since 1980. The grey vertical bars are recessions.
This story goes nicely with the pictures of the day and gives even more perspective on the rate moves. Global bond markets have suffered unprecedented losses since peaking last year, as central banks including the Federal Reserve look to tighten policy to combat surging inflation. The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt total returns, has fallen 11% from a high in January 2021. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. It equates to a drop in the index market value of about $2.6 trillion, worse than about $2 trillion in 2008.
I cite Jamie Dimon from time to time because I believe he has a lot of good thoughts and had the pleasure of working for him for some time. JPMorgan Chase CEO Jamie Dimon urged President Joe Biden in an off-the-record meeting this week to develop a "Marshall Plan" to fortify the energy security of the United States and Europe, a person familiar with the matter confirmed to CNN Wednesday. Dimon's comments came during a Monday meeting of business leaders and White House officials, which was spurred by Russia's invasion of Ukraine sending energy prices surging around the world. In a similar vein, Dimon urged Biden on Wednesday to ramp up US natural gas production to strengthen the US and EU's energy security, the person familiar with the matter told CNN. Jamie, yet again, I agree with you. Please don’t make me beg. I am asking you to run for President in 2024. Relative to these old farts, you are a child. I come cheap. I will do any job you ask and much to the dismay of my BILLIONS of readers, I will put the Rosen Report on hold for you to save the world. I begged Bloomberg to run in 2016 and he refused, but ran in 2020. The future of the world rests in your hands.
I was in shock at this WSJ article on fertilizer pricing. In his nine years selling fertilizer to corn and rice farmers in West Africa, Malick Niang says he has never seen such a severe supply crunch—or such high prices. Since Russia invaded Ukraine, shipping companies have avoided docking at St. Petersburg, Russia, to collect goods, Mr. Niang said. That, together with the impact of the West’s financial sanctions against Moscow, means fertilizer exports from Russia—the world’s largest producer—have fallen sharply. Mr. Niang contacted sellers elsewhere, such as in Senegal and Morocco, but was told their order books are full until the end of the year. Fertilizer prices were already high before the war. They have now reached record levels amid a precipitous drop in Russian supply, according to CRU Group, which analyzes commodity markets. At the same time, more-expensive natural gas, another Russian export and a crucial ingredient in fertilizer-making, has led European fertilizer factories to scale back production. This does not bode well for food prices as crop yields will fall sharply. I have read a half dozen articles, and the medium term ramifications of missing fertilizer are serious, as it impacts crop yields for years. Also, Biden recently spoke and said there could be global food shortages, “and it is going to be real.”
I enjoyed this WSJ article entitled, “Midtown Manhattan With Fewer Office Workers: Imagining the Unthinkable-New York officials face the reality that the district’s economy might never be the same.” People want to live in Manhattan as much as they ever have. The problem is that not enough people want to work there. And for Midtown Manhattan, a neighborhood built on the five-day-a-week commuter, that is a problem so momentous that after decades as the dominant office district in the country, real-estate developers and city planners are trying to imagine what else it can offer. On the residential side, Manhattan apartment rentals are booming and sales are reaching record levels. But offices in Midtown are attracting barely one-third of their pre-pandemic workforces. “There’s no question that Midtown is going to have to reinvent itself,” said Chris Jones, senior research fellow at the Regional Plan Association, an urban-planning group.
Almost half of employees are looking for a new job or plan to soon, according to a survey, suggesting the pandemic-era phenomenon known as the Great Resignation is continuing into 2022. To that point, 44% of employees are “job seekers,” according to Willis Towers Watson’s 2022 Global Benefits Attitudes Survey. Of them, 33% are active job hunters who looked for new work in the fourth quarter of 2021, and 11% planned to look in the first quarter of 2022. The demand for talent is incredible. The companies I consult for are battling for talent. Some of the non-compete agreements are crazy.
I try to call out hypocrisy from both sides. I have grown incredibly frustrated by media bias. This is not a right or left comment as both are at fault, but given most of the major media outlets and social media are quite left leaning, this story picks on them this time. But make no mistake, both sides are to blame. I am referring to the Hunter Biden laptop story which was banned from being discussed by the left absent being called, “Russian Disinformation.” Social media banned any mention and politicians and reporters alike including Leslie Stahl, Wolf Blitzer, Brooke Binkowski, Joe Scarborough, Brian Stelter, John Heilemann, John Brennan, Michael Smerconish, NPR, MSNBC, PBS, CNN, WaPo, NYT, NBC and countless others to scream that this was a hoax. Fifty-one former intelligence officials signed a letter claiming the NY Post story on the laptop was actually a “Russian Disinformation campaign.” Joe Biden called it a Russian Disinformation campaign countless times as well. After not accepting the laptop as real, the NY Times finally came out and admitted it was indeed legit. Although they hardly screamed it, I want to thank them for admitting a mistake. Why have others not followed? This is a very funny 4 minute video from Youtube showing many reporters questioning the legitimacy of said laptop. Now do the right thing and admit you were wrong. On a related note, Biden’s job approval is down to 40% according to the CNBC and 71% believe the country is “off on the wrong track.”
I am so disturbed by the government and the ineptitude, that nothing shocks me anymore. My favorite line from Reagan was “The 9 most terrifying words in the English Language are I’m from the government and I am here to help.” LA is spending up to $837k per unit to house some of the homeless people. How stupid can politicians be to try to suggest they are doing their jobs? Many numbers of concern in the article and the problem seems to be getting worse. In 2016, the city of LA passed HHH authorizing $1.2bn to tackle the homeless problem.
This is a concerning story from LA Magazine regarding the direction the Oscars is heading. I was a big movie fan in my day. I do not believe I have been to the movie theater for 4 years and not sure how often I will return. I refuse to watch the Oscars and this story is not helping matters. Starting in 2024, producers will be required to submit a summation of the race, gender, sexual orientation, and disability status of members of their movie’s cast and crew. If a particular movie does not have enough people of color or disabled people or gays or lesbians working on the set—and what is “enough” will be determined by a knotty tangle of byzantine formularies—then that movie will no longer be eligible for an Oscar. I am all for inclusion and actually was on the “Inclusivity Committee,” starting in 2004 at JPM before it was front page news. However, these mandates to me are over the top.
Other Headlines
Beware the Bear Trap Disguised as a Stock Rally
I am not sure which way the market goes, but do remember some vicious rallies in 2007/8.
Consumer sentiment falls to new decade-long low as inflation fears soar
Biden to Propose 20% Tax Aimed at Billionaires, Unrealized Gains
I don’t like taxes on unrealized gains. This article suggests it would hit families with households worth more than $100mm. BAD IDEA.
Bernie Sanders Floats 95% Corporate Tax Targeting Biggest U.S. Companies
Do we live in America? Won’t pass, but the fact that it is being proposed shows the idiocy we face.
Instacart Slashes Its Valuation by Almost 40% to $24 Billion
The prior round from the best tech investors on the planet was $39bn. OOPS.
Credit Suisse flags potential hit from Bermuda court ruling
A likely $500mm range loss in the Private Bank. I am not sure there has ever been a worse run major bank. They find every catastrophe. Just disband it already or sell it to another bank.
Manchin says he will vote for Supreme Court nominee Ketanji Brown Jackson
China and Solomon Islands Draft Secret Security Pact, Raising Alarm in the Pacific
Someone please make this not happen.
These charts show how much it costs to charge an EV vs. refueling a gas vehicle
St. Louis prosecutors will not charge man arrested for trying to carjack police officers
What alternative universe do we live in where people who attack kids and cops are set free? People need to rethink who they vote in as DA.
Manhattan DA Bragg didn't issue warrant for man who later used gun in slaying: union boss
Lauren Pazienza may have opened parents up to charges:
This young woman who pushed a lady to her death sounds like a horrible person. I hope they throw the book at her.
Petty Thieves Plague San Francisco. ‘These Last Two Years Have Been Insane.’
Miami Beach declares state of emergency following multiple spring break shootings
I would never live in Miami. Traffic is horrible, there are too many events (Art Basel, Conventions, Boat Shows, Food Festivals and Spring Breakers) for me. I live 60 miles north and only go when the coast is clear or Art Basel. However, more high-end restaurants are opening in Miami and the food blows away Boca.
How this life coach gets students into Ivy League schools for $1.5K per hour
Very interesting article, and this guy’s results are quite frankly, ASTOUNDING. I am throwing up at the cost, but if Ivy is what your kid wants, take a look.
This one does not read so well. Virginia is the wife of Supreme Court Justice Clarence Thomas.
Biden says Putin 'cannot remain in power' in sweeping speech on Russian invasion of Ukraine
Biden said, “For God’s sake, this man cannot remain in power.” However, the WH is now suggesting no regime change is being sought.
Over 3.7 million refugees have fled Ukraine since Russian invasion began
I want to put this into perspective. Approximately 9% of the Ukrainian people have left their country. Approximately 2.5mm people have gone into Poland which equates to 6.5% of the Polish population. If we increased the US population by 6.5% in a month, it would mean an additional 21.5mm people.
Virus/Vaccine
Data improvements continue as seen in the chart below.
Reported pediatric COVID-19 deaths plummet 24% after CDC fixes 'coding logic error'
Again, the lack of transparency and countless mistakes by the CDC and WHO are VERY concerning.
Cornell Outbreak-3% of Students Test Positive in 3 Days
Something to watch
Real Estate
I have a number of things on the R/E front, but will only talk about a few today. Despite the rates moves, the high-end Florida market remains hot. A Gulfstream ocean front home sold for $26.7mm or $10.8mm (62%) more than the sale price from 10 months ago. In a Miami land example, a 24,000 foot lot in the 20s on North Bay Road is in a bidding war. It will likely sell in the $28mm range ($3-4mm above ask). The 20s do not have great views as is the case blocks north. In another North Bay example, a home in the 40s sold for $11mm 18 months ago and is asking $28.8mm today. In a separate example, Barry Sternlicht is co-developing a new building, the Perigon, of 73 units (2-4 bedrooms) in Miami Beach. In less than a week, over 1/3 of the units have been reserved. My broker friend, Devin Kay, has reserved 3 units totaling $40mm in the building. His reservations range from $11-15mm and are approximately $2,800/ft. He has another buyer for a PH (starting at $30mm), and they are yet to release those units. Groundbreaking in December and moving into the units in early 2025. Here is the floorplan of a larger residence of 3,800/ft. Barry Sternlicht does remarkable work and his attention to detail is spectacular. Anything he builds is stunning. Some of the services and amenities on property include: over 15,000 sf of amenity spaces and fully serviced beach club and pool with food and drink service throughout; fitness studios, social rooms with wine lockers, screening room, game room, breakfast room, spa, small offices, board rooms, kids club, fully-attended beach club. On-site Michelin-starred restaurant with lounge upstairs only for residents & more. It is located at 53rd and Collins.
High-end Costa Rican properties are in high demand. The Ritz Reserve Costa Rica in Popagayo opened up 20 homes for sale and sold them in one day and there is a waiting list. The homes will start being available June of 2024. The prices for the 2,000 to 6,000/ft homes are in the $2,000/ft range. They are on cliff overlooking the ocean. Prices range from $3.5mm to $15m and $160mm sold in one day. The property is called NEK-ah-wee and will include hotels, homes, golf, restaurants, tennis center and a private owner’s club. There will also be a large sports complex with playgrounds, boulder walls, wave simulator, water park, dog park, 25 meter lap pool, yoga deck, pickleball..
There is a Discovery Property in Costa Rica as well called Zapotal. The sales are going gangbusters. The property opened, but has a lot of temporary buildings. The hard opening is not for a couple years. I am hearing the demand for properties is very high, and there are approximately 210 lots. I am not sure how many remain unsold. I can vouch that Discovery does it right and puts out the best product on the market. One lot (no house) sold for $16mm for perspective.
There is a NY Post article about people fleeing the city. Conditions in New York City have deteriorated so badly that a large segment of its private-sector workforce is thinking of fleeing rather than returning to the office, a new business survey released Thursday reveals. Forty percent of employees who reside in Manhattan said they’re thinking of leaving as did 48% — nearly half — of workers who live in the city’s other four boroughs, the online Morning Consult poll of 9,386 employees found. It was commissioned by the Partnership for The City of New York. My phone and email do not stop with bright, successful people wanting out of NYC. I set up a woman to speak with multiple families who relocated to Florida in the past two years. I received a call from a diehard New Yorker who is calling it quits. His job does not allow him to move to Florida, but he is going to the suburbs. Another highly compensated person sold his NYC apartment and bought a home outside the city. The #1 reason he is leaving is the safety of his family. Interestingly, he also told me that the need to entertain his clients with fancy dinners and cocktails is largely over, and they no longer want to do it nearly as much as prior to the pandemic. He will come in two or three times a week as needed.
New York County, which is the borough of Manhattan, and San Francisco County, which is the City of San Francisco, led the nation with the highest percentages of population decline from April 1, 2020 to July 1, 2021, according to data published today by the Census Bureau. New York County had a population of 1,694,251 as of April 1, 2020. By July 1, 2021, it had dropped to 1,576,876—a decline of 6.9 percent. I wonder why this is happening and who is leaving? Based on the never ending flow of wealthy people from CA and NYC, these cities and states will be in trouble come budget time.