The Most Interesting Man In The World

3-30-22

Opening Comments

I’m back from my travel and it is good to be home despite enjoying my time away. I am off with Jack to Memphis to see his golf coach from Friday-Sunday. Hope to get something out Sunday if I have internet access and my computer allows. I’m back to my 12 year old laptop given the cracked screen on the brand new one.

Of note, I no longer receive my own newsletter. My emails do not get through, so I totally understand when people reach out that no longer receive it. I have spent far too much time trying to solve the problem. Remember, you can always go to Substack to find my writing under the Rosen Report. I generally publish on Wednesday and Sunday. If you like what you read, forward it to a friend and hit the like button

With respect to the “Slap heard and seen around the world,” by Will Smith, I am absolutely appalled. He has serious anger issues and this is the 2nd time he has done it. When you are a star, it comes with the territory to be the butt of jokes. In the scheme of things today, I did not think the joke was horrific by Chris Rock, but felt Smith’s actions were terrible. A CNN analyst tried to blame Smith’s actions on Donald Trump which is just ludicrous. Two out of Three people surveyed believe Smith should be charged with assault, but 62% thought it was justified (I do not). My fear is actions like Smith’s will make it “ok” for patrons to become physical with comedians on stage. Smith brings a lot of this on himself. Excerpts from his new book talk about open marriage, his non-stop sex for months, tantric sexuality healing, dreams of having a “harem” of women, anger issues over his father’s abuse of his mother….. He is a rapper, TV star, movie star… He needs to have thicker skin and be less rageful.

• Pictures of the Day-Rates Divergence

• The Most Interesting Man in the World

• Quick Bites

  • Markets, Tax Hikes

  • Russia Selling Oil for Gold, not US $

  • Biden on Putin

  • PPP Fraud

  • Poll on Americans “Thriving”

  • Russia/Ukraine Peace Progress

• Other Headlines

• Virus/Vaccine

  • Data-Improvements Continue

• Real Estate

  • General Comments

  • Golf Course Memberships

  • Case Schiller

Picture of the Day-Rates

I keep talking about this as it is not as much in the mainstream media and want my readers to be sure they understand it. Again, this picture is from Jim Reid at DB who puts out a nice daily note with some interesting graphs. The divergence is between the 3 month/10 year relationship vs the 2 year/10 year relationship. Historically, they have mimicked each other until late last year when the 3 month/10 year steepened and 2 year/10 year collapsed. 2s/10s inverted briefly on Tuesday at a level of about 2.39% and today the spread is 4bps as of the close. It was 159bps a year ago. Anytime it has closed negative since 1980 there has been a recession. There has never been such a directional divergence possibly because the Fed have never been as behind the curve as they are today. If market pricing is correct, they will rapidly catch up over the next year so it’s possible that in 12 months’ time this measure will be flat. Much will depend on the 10-year yield but as a minimum the directional divergence should be at its widest this month. I’ve had a lot of questions about whether this time is different because of QE and other reasons keeping the term premium artificially flat, and thus reducing the recession signalling properties of 2s10s and other yield curve measures. However, for me I think about it very differently. When a curve is steep it should encourage entrepreneurial behavior as borrowing costs at the front end are low relative to potential returns. (The chart below is a couple days old). This article is entitled, “8/9. That's the Fed’s record on triggering a recession while trying to fix inflation. As the Fed begins a new round of rate increases to combat the worst inflation in 40 years, the central bank is once again sparking concern that it's doing too little too late.”

Tuesday’s Inversion of 2s/10s Treasuries

The Most Interesting Man in the World

There was a great Dos Equis Beer commercial with the title, “The Most Interesting Man in the World.” I thought the ads were clever, but the actor, Jon Goldsmith, who plays the character has NOTHING on the man I am talking about today. The Dos Equis guy is the last kid picked on the kickball team on a relative basis.

I have been fortunate to make friends in many places in the world and my network is amazing and improved due to the Rosen Report. I have many great friends and have been blessed with many fascinating people. Through these friends, I am always meeting other fun and interesting individuals. My friend, Chris Burch, had me and my wife over for dinner last year and we met a bunch of amazing people including a young couple, Kim and John. They are both incredibly interesting. She is a very successful entrepreneur who is a ton of fun who is brilliant and her husband is the single coolest cat I have ever met in my life. He too sold a company he founded. I just spent a weekend with Kim and Johnny P, and I am dubbing him the REAL most interesting man in the world. Why, you ask?

I pride myself and being in shape and doing fun things. I surf, fish, snowboard, play guitar, boat, travel the world and do things most think are cool and interesting. I am a complete boring moron relative to Johnny, who grew up in Hawaii. As a Haole (Hawaiian word for people who are not Native Hawaiian or Polynesian), he was picked on and had to defend himself as a kid. He surfs 40-foot+ waves like I surf a 6-foot wave. He surfed Teahupoo in Tahiti. Death is on the table surfing that wave (Not Johnny P below). He also surfs Jaws which is another monster wave in Hawaii.

He is going to the Kelly Slater Wave pool soon with a bunch of pros. I have been dying to go. Son of a …He was also one of the top in the world at Hawaiian outrigger racing.

He is an expert at stand up paddle boarding, kite surfing and basically anything on the water. He is a big scuba diver, but better yet, a free diving expert. I asked if he spearfished. Of course, he does. He can hold his breath for almost 6 minutes. I cannot hold my breath for two. I tried this morning and thought I was going to die. He was a competitive snowboard racer. Rides motorcycles like a nut as well. (All these pics are Johnny).

Oh wait, there is more. He is a helicopter pilot and trained with Chuck Arron, the Redbull pilot doing stunts and flips. He opened up a bottle of beer with his helicopter in this video. In this video, which has had millions of views, he pilots the helicopter for a skateboarder to jump off of onto a massive ramp. You can see Johnny P clearly at 2:42 and the craziest trick is at the 3 minute mark. At 4:21, I almost crapped myself at what the skateboarder does on the helicopter. More you ask? He flies jet fighter planes. What else does this irritating man do other than make me look bad? I don’t have time for everything, but let’s just say the list is pages. Below Johnny is flying a crazy fighter jet where he does stunts which would make me lose my lunch.

The best part about Johnny is he is very unassuming. You have to pull it out of him that he can do all these insane things. He is very matter of fact about doing loops in a helicopter or surfing massive waves and being top in the world at an uncomfortable number of things. He is so low key that it makes him even cooler. Johnny, I love you dude, but I need to be better than you at something. I feel completely unworthy in your presence. No, I will not surf Teahupoo, hold my breath for 6 minutes or jump over the Grand Canyon on a motorcycle. Next time we hang, I am bringing Backgammon, Tiddlywinks, Monopoly and then going golfing with you. We are also playing Wordle. I am going to kick your ass in some things to make me feel better about myself. I won’t be so humble. I will be finger wagging in your face when I bankrupt you in Monopoly.

I would ask you to take me flying in the helicopter or plane, but unless I am wearing Depends and you have great ventilation, I think it is best that I don’t go. I will clearly soil myself. Johnny can handle 6.5 Gs before passing out. He knows this because he has done it. I am not sure what I can handle and don’t want to find out, but I am guessing 3 Gs. Again, Johnny wins. I am not worthy. You are indeed the most interesting man in the world and your humility only makes you even cooler.

Quick Bites

• U.S. stocks slid on Wednesday, ending a winning streak for the market, as investors monitored developments in Ukraine and the bond market.

  The S&P 500 fell 0.63% to 4,602, and Nasdaq lost 1.21% to 14,442. The Dow dropped 65 points, or 0.19%, to 35,229. The Dow and S&P 500 each snapped a four-day stretch of gains. Crude prices, which have soared since the war in Ukraine began, climbed more than 3% to top $107 per barrel on Wednesday. Germany warned of potential rationing of natural gas due to disputes with Russia, and U.S. crude stockpiles fell. BTC closed over $47k and ETH is approaching $3.5k. Gas prices are averaging $4.24/gallon relative to the high of $4.33 on 3/11/22. CA gas is averaging $5.91/gallon

• Biden is proposing various tax hikes, and I am concerned. At this point in the cycle, with slowing growth, rising rates, treasury markets screaming recession, inflation abound, I do not believe it is wise to raise taxes. The 1st proposal is hiking the top marginal income tax rate to 39.6% from 37% as part of his 2023 federal budget. Higher rates may apply to married couples with taxable income over $450,000, heads of household above $425,000 and single filers making more than $400,000. The other Biden proposal is a 20% tax on unrealized gains of those with a net worth over $100mm. The plan -- called the “Billionaire Minimum Income Tax” by the White House -- represents the most aggressive proposal by the administration yet in Biden’s efforts to increase taxation on the wealthiest Americans. Under Biden’s plan, households worth more than $100 million who do not already pay 20% tax on their so-called “full income” would be subject to the additional tax. The idea of taxing on unrealized gains is horrible and impossible to police. How do you value illiquid assets/companies, art, real estate? Paying taxes on unrealized gains will cause massive liquidity issues. Example: You have a public stock which goes through the roof during the year and have a huge gain. You don’t sell, but need to pay a tax by borrowing against the shares. You then see the stock plummet (happened hundreds of times this year) and have loans against the stock. Disaster. I know many very wealthy people who are asset rich and cash poor. This will require the liquidation of shares, massively disrupt many companies, real estate businesses… I cannot be more adamantly opposed and hope Congress votes down both ideas. Raising taxes in a slowing economy is just a bad idea.

• Some interesting developments on Russia’s attempts to price its energy in gold rather than US dollars. I do not want to get into all the gory details here, but this link done by Craig Shapiro, outlines some of the issues. Add to this the fact that China wants to buy oil from Saudi Arabia in Yuan instead of US Dollars, and there could be consequences over the medium and long term. I just feel it is interesting to watch how this develops as clearly China and Russia are trying to get the world to move away from the US dollar as the reserve currency. One article suggested BTC for payment for some commodities. In a related note, I found this US natural gas inventory chart interesting and concerning.

  

  I have been critical of President Biden and I was critical of Trump as well. Although I agree that Putin should go, I do not believe Biden should have said it in his ad lib speech last week. There has been a lot of walking it back by the White House staff. President Biden held a "cheat sheet" of prepared answers for a key question during his White House news briefing Monday – a question about why his remarks on Saturday suggested support for regime change in Russia. I fear in dealing with an unhinged leader like Putin, the comments made by Biden could be destabilizing. This Yahoo article outlines concerns. We sorely need a real leader. I continue to push for Jamie Dimon. I know he sees my stuff, so let’s go in 2024! Do I hear chief of staff or janitorial services? I’m in. We need you.

• Many who participated in what prosecutors are calling the largest fraud in U.S. history — the theft of hundreds of billions of dollars in taxpayer money intended to help those harmed by the coronavirus pandemic — couldn’t resist purchasing luxury automobiles. Also mansions, private jet flights and swanky vacations. “Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney from Michigan who is now with Honigman LLP. “It is the biggest fraud in a generation.” I wrote about this at the time money was being given away. I feel the US Government did what they felt they had to do in order to prevent a catastrophic economic event. I will give them some credit. However, the lack of verification needed to gain millions was troubling. It is another sign the government lacks the ability to handle complex situations. Why not use the prior year’s tax returns as a guide?

• The percentage of Americans who evaluate their lives well enough to be considered "thriving" on Gallup's Live Evaluation Index was 53.2% in February, the lowest since January 2021. Since reaching the 14-year high mark of 59.2% in June, the thriving rate has declined six percentage points.

  

• Ukraine and Russia said they made progress in talks to end the war, with Kyiv presenting its proposal for a neutral status and international security guarantees as Moscow continued deadly strikes across Ukraine despite promises to focus its campaign on the eastern Donbas region. Though the latest round of negotiations, opened by Turkish President Recep Tayyip Erdogan in Istanbul, made advances toward drafting a peace treaty, violence continued unabated, with dozens of reported civilian casualties. Today, the AP is reporting Russia is shelling areas (Kyiv) in Ukraine where it vowed to scale back. Also, it appears Ukraine struck a Russian Military camp for the first time on Tuesday.

Other Headlines

• White House records turned over to House show 7-hour gap in Trump phone log on Jan. 6

  • This is concerning if true.

• Judge finds Trump 'more likely than not' committed felony obstruction in effort to overturn election

• ‘Significant’ evidence suggests Trump Organization misstated asset values for more than a decade, NY AG says

  • I am not surprised here. There are some glaring examples in the article. I will say, the three bullets here in total do not look so good for the Donald.

• 'Dam is about to burst' on Hunter Biden scandal

  • Federal tax probe into Hunter Biden's foreign business dealings gains momentum

• The Fed Has Made a US Recession Inevitable

  • Dudley explains his case on how the Fed got it wrong and why a recession is likely.

• Fed’s Patrick Harker says he thinks the U.S. can avoid a recession, even amid troubling signs

• There are now a record 5 million more job openings than unemployed people in the U.S.

• Positive Drug Tests Among U.S. Workers Hit Two-Decade High

  • 3.9% are testing positive which is up more than 50% since 2017.

• Saudis May Hike Oil Price to Record as War Reroutes Flows

• 'Israel is dealing with a new wave of terrorism'

• Apple and Meta Gave User Data to Hackers Who Used Forged Legal Requests

• Mortgage refinance demand plunges 60%, as rates hit their highest level since 2018

• Bill Ackman is done with activist short-selling, will focus on quieter, long-term approach

• Meme stocks GameStop and AMC swing wildly Tuesday on heavy trading volume

• No Mention of ‘Boys’ and ‘Girls’ Allowed in Disney Parks

• Hackers Steal About $600 Million in One of the Biggest Crypto Heists

• 70-year-old who kidnapped a bus full of children in 1976 has been approved for parole

  • He buried the kids alive for ransom. They lived.

• Ex-con fails to show up for ankle bracelet after judge frees him without bail

• Gangbanger who dragged NYPD cop with stolen car in 2017 is arrested — and freed — again

• Former Yale Administrator Pleads Guilty To Embezzling $40 Million In Massive Fraud

• The 'Holy Grail' of gambling could break American sports betting wide open

  • Voters in the nation's most populous state will get a chance in November to unleash a massive new industry in California — and provide a jolt to other holdout states.

• 'Dirty bomb' ingredients go missing from Russian-occupied Chernobyl lab

• Putin and cronies 'flee to secret bunkers' in alarming sign war might turn nuclear

• Russia Begins Retreat from Kyiv in ‘Major Strategy Shift’: U.S. General

• Temporary blindness, peeling face skin, and trouble eating: Roman Abramovich reportedly suffered symptoms of poisoning after brokering peace talks between Russia and Ukraine

  • Telltale Russian move to poison people.

• JPMorgan Behind Moves to Detain Russian Billionaire’s Superyacht

• Is Banning Russian Tennis Players from Wimbledon the Right Call?

  • I am adamantly opposed to banning players who do not denounce Russia’s invasion of Ukraine. I am opposed to the invasion, but these people have families in Russia and denouncing it puts them at risk. I feel we are forcing innocent people into the mix needlessly.

Virus/Vaccine

• Positive trends continue and the ICU and Death improvements are accelerating. We are at the lowest case rate since last July.

• FDA authorizes fourth Pfizer and Moderna Covid vaccine doses for people age 50 and older.

Real Estate

• Last note I wrote about the Perigon on Miami Beach and the sales in the condo, which is yet to be developed. They just sold 40% in two weeks and raised prices by 15%. Original prices were about $2,800/ft. They are releasing units selectively. A unit of 4,900 feet sold for $15mm a week ago on the 14th floor. The same unit on the 11th floor is now asking $17.5mm. My community, Royal Palm, was down to 4 listings and today there are 10 for an average of $12.2mm including a knockdown listed for $12.5mm which was built in 1971. Recall when I moved down, there were 71 listings for an average of $4.9mm. On 12/22/20 this house sold for $9.43mm after being on the market for over a year with no takers. A large builder bought it and split it into two lots. The homes are new and modern. I do not see them listed, but presume the asking prices will be in the $30mm range. Each new home is approximately 10,000 feet on approximately 1/2 acre each. Let’s assume building costs were $800/ft. That means they are in both properties for approximately $26mm. Let’s just say, there is a little profit in it. In another situation, a reader asked me to find some commercial space for them. I called up some commercial brokers recommend to me and I was shocked at the response. I told him what we were looking for (warehouse type space) and he said, “I am sure your friend is a billionaire as that is all that is down here now. In Palm Beach county, 8,000-15,000 ft does not exist for commercial space for your use.  I have nothing to show them. IF you could find something, assume $20/ft or more between rent and common charges.  The market is insane, and I have nothing to show them."  He went on to give me this example. He said, "18 months ago, I struggled selling industrial at $600k/acre.  Today, I am having bidding wars at $1.8mm."  To me, it was his tone and unwillingness to even speak with my friends that was shocking. Brokers tend to oversell and do whatever it takes to get a client. In this market, this guy had no interest. I have not confirmed it, but was told in Palm Beach, an office leased for $100/ft recently. It was $50/foot pre- pandemic.

• On the golf front, nice courses are impossible to find that are looking for members. Memberships are going through the roof and the waiting lists are up to 10 years. Remember, pre-pandemic most courses were looking for members with a few exceptions. LaGorce in Miami Beach, for example was $200k, and it is $400k today and going up. The wait list is now 115 people and pre-pandemic it was zero. There is a new condo development in Hallendale Beach at the Sweet Bay (formerly the Diplomat). Steve Witkoff is developing it. He has done some amazing buildings in NYC including 150 Charles. I am told equity memberships are going for $700k. This is UNHEARD of historically in Florida. Great memberships were $100k pre-pandemic. I am told a couple dozen people have already signed up at friend and family rates (not sure the price). You get 80% back when you leave. At Michael Jordan’s new course, Grove XXIII, I believe memberships started at $150-175k range, and are up to $500k range and new memberships has closed. I know dozens are trying to get in right now. The single best thing which happened to the golf industry was the pandemic. Many courses were dying and now are thriving. Philly Fed President cited private golf course memberships as another example of inflation.

• After cooling off ever so slightly toward the end of last year, home price gains re-accelerated in January. Home prices nationally rose 19.2% year over year in January, up from 18.9% in December, according to the S&P CoreLogic Case-Shiller Index. The 10-city composite annual increase was 17.5%, up from 17.1% in the previous month. The 20-city composite rose 19.1%, up from 18.6% in December. Phoenix, Tampa, Florida, and Miami saw the biggest annual gains at 32.6%, 30.8% and 28.1%, respectively. Sixteen of the 20 cities reported higher price increases in the year ended in January 2022 versus the year ended in December 2021. Washington, D.C., Minneapolis and Chicago saw the smallest annual gains, although they were all still up double digits from a year ago. Given the rates move, I feel the home price appreciation will be slowing.