Opening Comments
Video of the Day-Man on Bicycle Robbing SFO Walgreens
Tennis Big Three-This is No D-Joke
Quick Bites
Markets, More Hawkish Fed, Housing Starts
PJT/Dimon On Inflation, Burry on Markets
Pockets of Falling Prices, Corporate Debt Levels
China Shipping Costs, Patriot Tax, AirBnB Safety
Woke Articles, PC on Wash Square Violence
Trump Emails on Election, Trump DOJ Info
Hunter Biden Art
Virus/Vaccine
Delta Variant
Former CDC Director believes Lab Leak
China Leak-More Evidence
Jon Stewart on Lab Leak
Real Estate
US Rents Climbing
Frothy Global Housing Markets
NYC
Mall Owner Bankruptcy
Opening Comments
I spoke with a consumer product company CEO. Containers from China pre-pandemic were $2,700 to ship goods to the US. Today, the latest quote was $16,000 for the same size container. The company I questioned imports 2,000 containers a year. That alone is over $26mm of increased costs/yr. The company is delayed by months for orders given they can’t find containers. He is hopeful that the container shipping costs normalize over next 9-12 months. (More on this in Quick Bites).
I spoke with a contractor in the Hamptons. His costs are +30-40% vs pre-pandemic. materials-lumber, tiles, cabinets, appliances.. and labor. He can’t find labor. An inexperienced laborer is $25 an hour and experienced people are $35-40 if you can find them. There is so much demand for contractors that laborers leave to start their own companies and get plenty of business. Pre-pandemic, it took 6-8 weeks for cabinets and today it is double that amount. Pre-pandemic, total building costs were $475/ft and now $650/ft. He cannot find laborers to finish jobs and is struggling to deliver. He too feels prices will normalize over next year as things have become too expensive and many clients are putting off building or remodeling given sticker shock. Lumber was - 18% last week and he believes other input prices will fall as well. He is suggesting clients hold off on projects.
Travelling continues. My family will have traveled 2500 miles in 24 days. We are in CT golfing with friends at Glen Arbor and Winged Foot. We are lucky to have well connected readers who are members of nice courses.
We played Glen Arbor today with our friend, Ned, who is an amazing golfer. The course is quite challenging and in remarkable condition. I set a course record, but unfortunately in the wrong direction. I dug myself a hole early. Thank goodness it was not on video and the scorecard was burned.
Tomorrow, we are getting to play Winged Foot with my friend, Bill. I am hoping for a swing change overnight, as I cannot handle another blow up like today.
This week, we have been able to get together with a bunch of long-time friends. I don’t like to say, “old friends,” because now we are all older, it makes me sound old. We connected with my friend, Jeff and his wife as well as Mike and Sarah in CT. It was a good time to see people now that it is not a crime to socialize.
Given golf and travel, I might have missed a story, but did my best to get most.
Video of the Day
A video emerged on social media on Monday that showed a man on a bicycle fill up a garbage bag with items inside a San Francisco Walgreens and leave the store without being stopped. The video is very short and people are watching a man steal a garbage bag full of goods while a security guard stands there and watches. What does this do to Walgreens profit margins? What about the impact on prices for the people who decide to make an honest living and work? I understand in the new world, many want to look the other way to help those less fortunate. To me, this is not the answer. I took Jack on a golf trip a couple years ago and we went to SFO and Stanford. Let me tell you, SFO was disgusting back then and things have only deteriorated since. We went to Palo Alto and played the Stanford course. We went out to lunch in town and three homeless people came into the restaurant with shopping carts begging for money. It was quite a concerning experience.
Tennis Big Three
Some months ago, I wrote a comment trying to compare tennis players and it received a shocking amount of feedback from the RosenReport readers. After watching the Joker win his 19th Grand Slam event, it got me to thinking about how dominant Federer, Nadal and Djokovic have been since 2004. These stats are remarkable. Since 2004, there have been 69 Grand Slam tournaments (Wimbledon 2020 cancelled for Covid) and the “Big Three” have won 59 of them. They have a winning percentage in the majors of 85.5% for the three of them combined since 2004. Federer (20), Nadal (20) and Djokovic (19). In 8 of the years from 2004-2021, the Big Three won all of the Grand Slams and in 6 years, they won 3 out of 4 Grand Slams. This is incredible dominance. In 14 out of 16 years, they have a combined of at least 3 out of 4 and in 2021, the Joker already has two and I am sure one of the big three take at least one of the other two remaining titles.
Let’s put it into perspective and look at golf for that same period. Since 2004, the top 3 major winners are Tiger (7) Phil (6) and either Koepka (4) or Mcilroy (4). Combined, the top 3 won a total of 17 out of 69 Majors for a winning percentage of 24.6% or over 60 percentage points less than the level of the Big Three in tennis. Together the three best golfers have 17 majors vs 59 in tennis. For golf, in only two years did the Big Three golfers control 3 out of 4 titles and in no year since 2004, did they control all 4.
What is my point? We are living in an unbelievable period of the three greatest tennis men’s tennis players ever and getting to watch them play against each other with regularity. Given Djokovic’s win last weekend, he now has a chance to win all the majors consecutively if he can win Wimbledon and the US Open. Federer has not won a major since Australia in 2018 and although is clearly an amazing champion, he will be 40 in August and is almost done. He has only won one French Open. Nadal has not won a major other than the French since 2017 and has battled numerous injuries. At 35 years old, his dominance is fading and 65% of his Grand Slams came at the French Open. Nadal has only won one Australian Open. Djokovic is 34 and now has two career grand slams and two consecutive majors in 2021. Absent injury, it seems to me the D-Joker is poised to have well over 20 Grand Slams over the next few years and be the all-time leader during a time of incredible competition in the sport of tennis. I now believe Djokovic will go down as the best in history when he retires and with two career Grand Slams, no one can question his versatility while playing the best of the best. He has also now beaten Nadal twice at the French Open and is the only man to beat Nadal in all four majors. With respect to Novak and Roger, they have contested 50 matches between 2006 and 2020, with Djokovic leading the head-to-head 27–23. Djokovic leads 13–6 in finals and 11–6 in Grand Slam matches. Novak also leads head to head against Nadal. Lastly, Djovic has the the most career money by over $20mm. Case closed.
Quick Bites
U.S. stocks dropped on Wednesday after the Federal Reserve raised its inflation expectations and moved up the time frame on when it will hike interest rates next. The Dow closed the day 264 points lower, or 0.8%, to 34,034. The blue-chip average turned sharply lower after the Fed’s statement, falling as much as 382 points. The S&P 500 dipped 0.5% to 4,223. The broad equity benchmark dropped as much as 1% in volatile trading as all 11 sectors fell into the red at one point. The tech-heavy Nasdaq dipped 0.2% to 14,039 after falling 1.2% at its session low. The 10 year Treasury sold off 8 bps and is now at 1.58%. Bitcoin fell 3.6% to $38.6k
The policy making Federal Open Market Committee indicated that rate hikes could come as soon as 2023, after signaling in March that it saw no increases until at least 2024. “This is not what the market expected,” said James McCann, Aberdeen Standard Investments’ deputy chief economist. “The Fed is now signaling that rates will need to rise sooner and faster ... This change in stance jars a little with the Fed’s recent claims that the recent spike in inflation is temporary.” To me, this is good news and the Fed will be less accomodative in light of the data. Of course markets don’t like it. Morphine feels good, even though it kills you.
U.S. homebuilding rebounded less than expected in May as very expensive lumber and shortages of other materials continued to constrain builders' ability to take advantage of an acute shortage of houses on the market. The report from the Commerce Department on Wednesday also showed permits for future home construction falling to a seven-month low. Housing completions also declined while the number of homes authorized for construction but not yet started rose to the highest level since 1999, indicating supply will likely remain tight for a while and boost house price inflation. Housing starts rose 3.6% to a seasonally adjusted annual rate of 1.572 million units last month. Data for April was revised down to a rate of 1.517 million units from the previously reported 1.569 million units.
Interesting WSJ article on housing shortfall. Construction of new housing in the past 20 years fell 5.5 million units short of long-term historical levels, according to a new National Association of Realtors report, which is calling for a “once-in-a-generation” policy response. The 5.5 million-unit deficit includes about two million single-family homes, 1.1 million units in buildings with two to four units and 2.4 million units in buildings of at least five units, the report says.
Paul Tudor Jones said he would “go all in on the inflation trades” if the Federal Reserve is nonchalant this week regarding rising consumer prices. “I’d probably buy commodities, buy crypto, buy gold,” the billionaire hedge fund manager said. “If they course correct,” he continued, “then you’re going to get a taper tantrum. ”JPMorgan Chase has been “effectively stockpiling” cash rather than using it to buy Treasuries or other investments because of the possibility higher inflation will force the Federal Reserve to boost interest rates, Dimon said Monday during a conference. “We have a lot of cash and capability and we’re going to be very patient, because I think you have a very good chance inflation will be more than transitory,” said Dimon, longtime JPMorgan CEO. The bank now expects $52.5 billion in net interest income in 2021, down from the $55 billion it disclosed in February, as the firm stockpiled cash and on lower credit card balances.
Below is a Tweet from “The Big Short” guy, Michael Burry.
Salaries for junior lawyers are rising above $200,000 at many top law firms for the first time, following a year of record-breaking profits in the legal industry and competition to retain a workforce that has billed long hours at home during the pandemic. Corporate law firms are unique among businesses in that they typically increase pay in tandem, with a few market leaders triggering moves throughout the industry.
With investors anxious to hear the Federal Reserve’s latest take on inflation after last week’s hot reading, certain corners of the market are already simmering down. Take lumber, one of the biggest gainers among commodities in the past year as stuck-at-home Americans poured money into remodeling. It’s slumped 40% since its peak in May. The booming housing market has also cooled, with an index that measures consumer plans to buy homes tumbling last month. And copper has eased from an all-time high. The slowdown in price gains in some key inputs doesn’t mean the surge in headline inflation numbers is a false signal -- there remain numerous areas of the economy where supply constraints and torrid demand have left prices at multiyear highs. But for a central bank deciding whether and when to scale back policy assistance, some of the market signals offer reason to continue to be patient.
Interesting WSJ article on corporate debt levels due to the pandemic. Before the pandemic, U.S. companies were borrowing heavily at low interest rates. When Covid-19 lockdowns triggered a recession, they didn’t pull back. They borrowed even more and soon paid even less. After a brief spike, interest rates on corporate debt plummeted to their lowest level on record, bringing a surge in new bonds. Nonfinancial companies issued $1.7 trillion of bonds in the U.S. last year, nearly $600 billion more than the previous high, according to Dealogic. By the end of March, their total debt stood at $11.2 trillion, according to the Federal Reserve, about half the size of the U.S. economy. For the charts below: *2021 data through June 10 Sources: Dealogic (issuance); Bloomberg Barclays (yield); Federal Reserve Bank of St. Louis (corporate debt)
I wrote in my opening about shipping costs from China. This CNBC article suggests it is not going away near term. Businesses and consumers are bracing for another shipping crisis, as a virus outbreak in southern China disrupts port services and delays deliveries, threatening to drive up costs again. “The disruptions in Shenzhen and Guangzhou are absolutely massive. Alone, they would have an unprecedented supply chain impact,” said Brian Glick, founder and CEO at supply chain integration platform Chain.io. Waiting times for vessels to berth at the Yantian International Container Terminal in Shenzhen have “skyrocketed” from an average waiting time of 0.5 days to 16 days, according to Shehrina Kamal at Everstream Analytics.
Rep. Thomas Suozzi (D-N.Y.), a member of the tax-writing House Ways and Means Committee, said that he’s exploring the idea of a one-time tax on the wealth of the richest Americans as Democrats seek to increase taxes on the rich in order to pay for spending priorities. In an interview with The Hill on Friday, Suozzi said he’s in the early stages of looking at what he called a “patriot tax.” This would be a one-time surcharge of 2.5 percent on wealth between $50 million and $100 million and a 5 percent tax on wealth above $100 million. Wealthy people would be able to pay the tax over five years. Research provided by Suozzi’s office estimates that such a tax could raise about $450 billion. He said that for wealthy people, the surcharge would be “a way to help your country to build back better.” I do not believe this will pass, nor do I believe it should pass, but wanted to folks to know it is out there.
I never considered safety when doing an AirBnB or VRBO home, but this article is concerning and clearly, there are safety issues. Read the entire story through the link for yourselves. Incredible. Airbnb paid a tourist $7 million after she was allegedly raped in a Manhattan rental — a massive payout that is part of the firm’s widespread push to hide such shocking incidents, a new report claims. The stunning sum doled out over the previously unreported alleged crime is just part of an estimated annual $50 million that the vacation company coughs up to pay guests in legal settlements and to cover damage to hosts’ homes, according to Bloomberg. The alleged Manhattan rape occurred early New Year’s Day in 2016 after the unnamed 29-year-old Australian victim and several of her friends rented a first-floor apartment on West 37th Street a few blocks south of Times Square, said the report published Tuesday.
I have written extensively about the “Woke” culture. I found a few more examples of the craziness. The 1st story is interesting about a North Korean defector and her views of attending Columbia. The 2nd story is about a VA commencement speech at a high school suggesting students remember their “Jihad.” The 3rd story is about the all-girls school in NYC, Spence, showing a video, “tar and feathering White women.” I strongly believe as a country, we are heading down a dangerous path on wokeness. I keep writing about the insanity taking place in the US and within the education system and each week more stories happen. The issue is, it is happening across the country (NY, CA, VA, FL…). The education system is off the rails as far as what is being taught in many schools.
Yeonmi Park viewed the US as country of free thought and free speech – until she went to college here. She attended Columbia University and was immediately struck by what she viewed anti-Western sentiment in the classroom and a focus on political correctness that had her thinking “even North Korea isn’t this nuts.” “I expected that I was paying this fortune, all this time and energy, to learn how to think. But they are forcing you to think the way they want you to think.” “I realized, wow, this is insane. I thought America was different but I saw so many similarities to what I saw in North Korea that I started worrying.” “I literally crossed the Gobi Desert to be free and I realized I’m not free, America’s not free,” she said. “Every problem, they explained us, is because of white men.” Some of the discussions of white privilege reminded her of the caste system in her native country, where people were categorized based on their ancestors, she said.
A Fairfax County, VA Board Member, Abrar Omeish, delivered the keynote address before a graduation ceremony for Justice High School in Falls Church, Virginia, on June 7. She warned the graduating – mostly minority – high schoolers that they are about to step into a capitalist world filled with racism, White supremacy and "extreme versions of individualism." "Our world is overwhelmed with need. We struggle with human greed, racism, extreme versions of individualism and capitalism, White supremacy, growing wealth gaps, disease, climate crisis, extreme poverty amid luxury and waste right next door. And the list goes on," Omeish said, pointing out that the school is on land stolen from the Manahoac people, a Native American tribe. At another point in the address, Omeish told the students in Arabic to remember their "jihad."
An ex-top trustee of Manhattan’s elite Spence School says she yanked her daughter out over her growing disgust with its racial indoctrination — capped by a class video that “tarred and feathered’’ white women. Hispanic tech exec Gabriela Baron fired off a scorched-earth letter to the prestigious Upper East Side institution last week seething that the video — shown to her eighth-grade daughter and classmates on graduation day — “openly derides, humiliates and ridicules white women. I know multiple people who have pulled their children out of this school due to overwokeness. I am tired of hearing the ridiculousness being taught and many of our schools.
Police Commissioner Dermot Shea denounced the mayhem and violence overrunning Washington Square Park as “abhorrent” on Tuesday — just one day after Mayor Bill de Blasio said the unwanted behavior would resolve itself naturally. Shea made his comments on NY1 after a weekend of pandemonium at the Greenwich Village landmark, in which two people were knifed, a man was robbed, and a cook was assaulted at a nearby diner. Anti-police rhetoric, including “Cops Kill,” was also scrawled along the park’s iconic arch, while cops have routinely been peppered with vulgar insults by the unruly crowds.
New emails from Justice Department and White House officials show how President Donald Trump's allies pressured then-acting Attorney General Jeffrey Rosen to consider allegations that the 2020 election had been stolen at the same time that Rosen was being elevated to lead the Justice Department in December 2020. The emails show how Trump's White House assistant, chief of staff and other allies pressured the Justice Department to investigate claims of voter fraud in the 2020 election -- and how Trump directed allies to push Rosen to join the legal effort to challenge the election result, according to a batch of emails released by Democrats on the House Oversight Committee on Tuesday.
Separately, the Democratic-led House Judiciary Committee will open an investigation into efforts by the Trump-era U.S. Department of Justice to seize metadata from devices belonging to members of Congress, journalists and the then-White House counsel. The department secretly subpoenaed Apple in February 2018 for account information of then-White House counsel Don McGahn and his wife, and secured a gag order that barred the tech giant from telling them about it, a person familiar with the matter told NPR's Ryan Lucas.
I try to be balanced and give my opinion. I have been a clear Hunter Biden hater. He was kicked out of the Navy for drug use (not dishonorably discharged), a crack addict who smoked Parmesan cheese, he had an affair with his dead brother’s wife, made $83k/month for a Ukranian company without speaking the language or knowing anything about the industry, uses racial slurs (yes, the “N” word), denied he was the father to the baby of a stripper and required a DNA test which proved he was indeed the father and the list goes on. However, apparently, Hunter is an artist and shockingly, his work is not terrible. See below.
Virus/Vaccine
US data is flat to improving with no major surprises. More than 2.42 billion doses have been administered across 180 countries, according to data collected by Bloomberg. The latest rate was roughly 35.1 million doses a day. In the U.S., 312 million doses have been given so far. In the last week, an average of 1.14 million doses per day were administered. We remain at vaccine doses levels below target and with the Delta variant, it is very important we get more people vaccinated.
The Delta variant is on its way to becoming the dominant strain of coronavirus in the US, raising concerns that outbreaks could hit unvaccinated people this fall.And a new study shows the Delta variant is associated with almost double the risk of hospitalization compared to the Alpha variant. The Alpha (B.1.1.7) variant, which is "stickier" and more contagious than the original strain of novel coronavirus, became the dominant strain in the US this spring. But health experts worry the Alpha variant could be trumped by the Delta variant, which appears to be even more transmissible and may cause more severe illness for those not vaccinated.
Public health officials in the U.K. say they are increasingly confident that vaccines offer significant protection against the Delta variant of coronavirus, a hopeful sign as the highly transmissible strain spreads across the world. Separate studies from researchers in England and Scotland published Monday found that while protection against infection was somewhat diminished against Delta compared with more established variants, two doses of vaccine offered considerable protection against severe illness and hospitalization. The findings are the latest indicating that Covid-19 vaccines are able to protect people against new variants, despite early concerns that the variants might be able to elude them.
Robert Redfield, the former director of the CDC, explained the reasoning behind his opinion that a lab leak was the most likely explanation for the COVID-19 pandemic’s origins, in a wide-ranging interview with Fox News. While Dr. Anthony Fauci and other leading members of the science community have long argued that human contact with an infected animal started the pandemic, calls to investigate the lab leak theory have intensified in recent days."When I said before that I didn't think it was biologically plausible that COVID-19 went from a bat to some unknown animal into man and now had become one of the most infectious viruses," Redfield said, "That's not consistent with how other coronaviruses have come into the human species. And, it does suggest that there's an alternative hypothesis that it went from a bat virus, got into a laboratory, where in the laboratory, it was taught, educated, it evolved, so that it became a virus that could efficiently transmit human to human."
Evidence that includes newly unearthed Chinese government video continues to mount indicating the Wuhan Institute of Virology studied live bats in its lab, despite longtime lab collaborator Peter Daszak calling this a “conspiracy theory." Footage obtained and released by the Australian and Sky News was purportedly shot from inside the Wuhan lab and shows live bats kept in cages. The video was reportedly produced and released by the Chinese Academy of Sciences in 2017 to tout the opening and launch of the Wuhan lab’s then-new biosafety level four laboratory. The apparently Chinese state-produced video shows multiple bats in a cage, a researcher wearing a mask and gloves holding a bat and feeding it a worm, video of researchers in personal protective equipment out searching for and collecting bats, and a bat hanging off of a researcher’s hat as the person wears glasses and a surgical face mask. I have been consistent on this one and many news agencies refused to cover the story when anyone suggested a lab leak. Peter Daszak is a compromised individual who I wrote about at length in the past couple weeks. The Chinese Government cannot be trusted. I want to know what the punishment/fines/penalty will be for all the damage and lies.
Funny exchange between Jon Stewart and Colbert about the Wuhan Virus where Stewart basically suggests it comes from the lab. I find both of these guys funny in general.
Real Estate
US Rents Climbing
Single-family rents were up 5.3% year over year in April, rising from a 2.4% increase in April 2020, according to CoreLogic. That is the largest annual gain in nearly 15 years. Rents for single-family detached homes (not townhomes), were up an even stronger 7.9% compared with a year ago, as millennials in particular seek more outdoor space. Nearly half of millennials surveyed by Corelogic, and 64% of baby boomers, said they, “strongly prefer” to live in a single, stand-alone home. Regionally, by top 20 metropolitan markets, rent gains were highest in Phoenix.
Real estate prices around the world are flashing the kind of bubble warnings that haven’t been seen since the run up to the 2008 financial crisis, according to Bloomberg Economics. New Zealand, Canada and Sweden rank as the world’s frothiest housing markets, based on the key indicators used in the Bloomberg Economics dashboard. The U.K. and the U.S. are also near the top of the risk rankings. “A cocktail of ingredients is sending house prices to unprecedented levels worldwide,” economist Niraj Shah wrote in the report. “Record low interest rates, unparalleled fiscal stimulus, lockdown savings ready to be used as deposits, limited housing stock, and expectations of a robust recovery in the global economy are all contributing.” The analysis focused on member countries of the Organisation for Economic Co-operation and Development. Stay-at-home workers in need of more space and tax incentives offered by some governments to home buyers are also stoking demand, according to the research.
NYC R/E
Week 24 of 2021 saw 36 Luxury Manhattan contracts signed at $4,000,000 or more. This is the 19th week in a row where 30 or more contracts were signed, breaking the previous record of 6 weeks in a row in Q2 2015. This week was also the 3rd time in 2021 where the average price per foot was over $3,000, coming in at $3,103 per foot. There was only one week in all of 2020 that surpassed the $3,000 per foot mark which was coincidentally week 24 of last year, when there were only 8 contracts signed with an average price per foot of $4,032, the highest weekly average we have seen since 2020.
The same week last year saw 8 signed contracts, representing a 350% increase in weekly contract activity with 36 deals last week. Q2 2021 is currently averaging 41 weekly contracts, or a 32% increase from Q1 2021.
299 contracts were signed in the Base Level of Manhattan last week with the deals taking place within just 57 days on the market, the lowest DOM since week 22 when the average was 55 days on the market. For the third week in a row, the average DOM has shown less than 60 days. Only two weeks in all of 2020 saw fewer than 60 days, which were weeks 33 and 34 with 52 and 57 day averages, respectively.
Mall Owner Bankruptcy
Washington Prime Group, a major mall owner of more than 100 locations across the United States, filed for bankruptcy, citing pandemic-related shutdowns. The Columbus, Ohio-based company filed for Chapter 11 late Sunday, saying Covid-19 "created significant challenges" and that the move is "necessary." Washington Prime secured $100 million in new funding to support its day-to-day operations so it can "continue in the ordinary course without interruption." "The company's financial restructuring will enable Washington Prime to right size its balance sheet and position the company for success going forward," said CEO Lou Conforti. "During the financial restructuring, we will continue to work toward maximizing the value of our assets and our operating infrastructure." Shares of Washington Prime (WPG) plunged as much as 55% in early trading. The stock is down 60% for the year.