Opening Comments
Eye on the Market-Help Wanted
The World Has Gone Mad
Quick Bites
Markets, Icahn/PTJ On Inflation, P&G Inflation/School Food Shortage
Used Cars, US-Top 10% own 89% of Stocks, China Growth/Huge Film
Clean Energy, Powell’s Key Principles/Trump on Powell
NYC Subway Crime, AMZN Legal Troubles
Other Headlines
Virus/Vaccine
Data-Continued Improvement
Florida Cases Dropped Sharply
Valneva Effective Vaccine
Mix & Match Boosters
Real Estate
My General Comments-Boca & NYC
Douglas Elliman Update
Greenwich Update-Remains Hot-Record Low Inventory
Opening Comments
I lost internet for 6 hours today and just got it back. I love Xfinity! Cable companies in general have amazing customer service and always work. No sarcasm here. I might have missed some late stories as a result.
I am hopeful that my readers will take time to carefully read the title piece today as I believe it is important. There is a four-minute video of Brian Seltzer interviewing Bari Weiss which is worth your time. Use the table of contents to find the headlines you have interest in reading. I cover a lot of ground and understand many readers only want to focus on a handful of stories.
My son, Jack, and I are leaving Monday for Memphis and I want my feet 10 feet off of Beale (Marc Cohn Song-”Walking in Memphis”). Jack will be taking golf lessons and I will be bass fishing, as I am told the bass there are quite large. I will also be eating BBQ to the point where I need pants with an elastic waist. If anyone has good recommendations for Memphis, I am ready to listen.
A reader told me about a hot new social club in downtown NYC called Casa Cipriani which looks amazing. Restaurants, rooftop pool, spa and 47 rooms. I am told it is $5,400/yr in dues, which does not seem stupid to me. I was paying $1,100/month to park my car 5 years ago and private high school is about $60k in NYC, so this seems like a bargain. I was also told the wait list for the club is insane. I would try to join if I lived in NYC.
Most reports I have read from people who closely follow DC suggest that the “Build Back Better” package will be shrunk sharply. Most are in the half of original ask camp and some feel it could be cut even more. I am also cautiously optimistic about the Biden Tax Plan being slimmed down sharply and most notably, the step up basis will likely not be removed.
Michael Cembalest-Eye On the Market
Labor shortages, the issue of Taiwan and an update on the most over-indebted US states/Cembalest believes the bottlenecks will resolve themselves in coming months. He does feel labor markets will take longer to normalize and I agree. As always, it is an interesting read. Lots of good charts as usual.
The World Has Gone Mad
I have been writing about the power of the media and the massive bias within it for 18 months. I have written about the cancel culture and I am concerned about the fact that the news has gotten so many facts wrong recently due to blatant bias. Bari Weiss is an impressive writer who famously resigned from the NY Times in July of 2020 with a great resignation letter. Due to concerns about the direction of the paper, she cited hostile culture and a lack of ideological diversity. She describes herself as a “left-leaning centrist.” She now has over 100,000 subscribers on Substack under the title, “Common Sense with Bari Weiss.”
I found Bari’s conversation with Brian Seltzer (CNN) interesting and agree that the world has “gone mad.” Bari Weiss confronted Steltzer about his network’s coverage of the COVID-19 lab leak theory when listing examples of why the world has gone mad during Sunday’s edition of Reliable Sources. Weiss has written that many Americans "feel the world has gone mad," so the CNN host asked her what she meant by that comment. "Where can I start? Well, when you have the chief reporter on the beat of COVID for The New York Times talking about how questioning or pursuing the question of the lab leak is racist, the world has gone mad. When you're not able to say out loud and in public there are differences between men and women, the world has gone mad. When we’re not allowed to acknowledge that rioting is rioting and it is bad and that silence is not violence, but violence is violence, the world has gone mad," Weiss said. "When you're not able to say the Hunter Biden laptop is a story worth pursuing, the world has gone mad. When, in the name of progress, young school children, as young as kindergarten, are being separated in public schools because of their race, and that is called progress instead of segregation, the world has gone mad. There are dozens of examples." then asked, "Who's the people stopping the conversation?" Weiss responded with a jab at CNN. "People who work at networks, frankly, like the one I'm speaking on right now, to say it was racist to investigate the lab leak theory," Weiss said. I took a photo of the video to show Seltzer’s face when she called out CNN.
At the end of the interview, Bari gave a powerful example of a geophysicist, Dorian Abbot, at the University of Chicago who was slated to give a Lecture at MIT. However, MIT cancelled the lecture due to a Newsweek op-ed Abbot co-authored with a Stanford professor. “The Diversity Problem on Campus,” published August 2021, co-authors Abbot and Stanford Professor Iván Marinovic wrote that Diversity Equity & Inclusion (DEI) in academia seeks to increase the representation of some groups through discrimination against members of other groups, violates the ethical and legal principle of equal treatment, compromises the university’s mission, and undermines the public's trust in universities and their graduates.
Abbot and Marinovic further stated in the op-ed that Germany 90 years ago had the best universities until “an ideological regime obsessed with race came to power and drove many of the best scholars out, gutting the faculties and leading to sustained decay,” in reference to the rise of Adolf Hitler and the Nazi Party.
They wrote that this is a “warning of the consequences of viewing group membership as more important than merit, and correct our course before it is too late.” Not only did MIT cancel the lecture, a group of University of Chicago students and post docs called on the faculty to denounce Abbot’s views. Weiss goes into detail on the downstream effects of cancelling people such as Abbot which causes other people to be less likely to speak up against the mob.
Remember, last week, I wrote about the UCLA professor, Gordon Klein, who refused to grade his students differently who may be undergoing “racial trauma.” Because he would not grade differently based on race, he was suspended and sued the school.
Do we live in America? How is it possible that a respected professor from a respected academic institution is cancelled for suggesting a merit based system or another is suspended for not grading based on race? Abbot was interviewed after being cancelled and his views can be found in this short Youtube link. I contacted Professor Abbot and he confirmed everything I wrote.
No, I do not always agree with Bari Weiss, but do agree that the world has gone mad. I hope you listen to the four-minute exchange between Seltzer and Weiss in the second paragraph. The power of the media and the cancel culture should be a concern for everyone who reads the Rosen Report. It impacts all of us and fear it is taking this country down the wrong path. Now, your job as readers is to help me get to 100,000 subscribers like Bari Weiss.
Quick Bites
The Dow jumped to a record on Wednesday as investor sentiment was boosted by better-than-expected earnings reports and a new record for bitcoin.The Dow gained 152 points, or 0.4%, to about 35,609, touching an all-time high of 35,669 earlier in the session. While it surpassed its high from August on an intraday basis, the 30-stock average was 0.1% from its record close. The S&P 500 added 16 points, or 0.3%, to 4,536 and was less than 0.2% from its own record. The Nasdaq retreated 0.05% to 15,121. The market climbed a wall of worries over the last two months. Fears over the delta Covid surge, supply chain hiccups, a China property crisis, the Federal Reserve signaling the removal of stimulus and surging inflation reports rattled investors. But the Dow’s pullback from records was not that severe, reaching about 5% at its lowest closing point. TSLA beat after the close $1.86 vs 1.59 with record revenue and profits for the quarter, but the stock was -1% when I checked. Bitcoin closed above $66k for the first time as well. The 10-year Treasury is up to 1.65%.
I LOVE Carl Icahn and one of my all-time favorite dinners was with him as I considered joining his firm as a portfolio manager. His stories are hysterical and his memory and investing skills are remarkable as his returns speak for themselves. For perspective, at one point, his annual returns averaged around 30% over some decades. Longtime activist investor Carl Icahn said Monday that the U.S. markets could see major challenges over the long term in the face of excessive money supply and rising inflation. “In the long run we are certainly going to hit the wall,” Icahn said Monday on CNBC’s “Fast Money Halftime Report.” “I really think there will be a crisis the way we are going, the way we are printing money, the way we are going into inflation. Another famed investor is chiming in with similar concerns to Icahn. Billionaire hedge fund manager Paul Tudor Jones believes that inflation is here to stay, posing a major threat to the U.S. markets and economy. “I think to me the number one issue facing Main Street investors is inflation, and it’s pretty clear to me that inflation is not transitory,” Jones said on CNBC’s “Squawk Box” Wednesday. I have been speaking about inflation for months and have been worried about the accomodative policies throwing too much gas on a hot flame.
This bullet has two related stories, P&G statements and food shortages in schools and restaurants. Procter & Gamble on Tuesday reported quarterly earnings and revenue that topped analysts’ expectations, but higher costs weighed on the company’s profits. The consumer giant also raised its forecast for commodity and freight costs for the remainder of the fiscal year, warning that it believes inflation is still increasing. P&G raised its forecast for inflation, predicting that higher commodity and freight costs could hit fiscal 2022 earnings by $2.3 billion, up from its prior outlook of $1.9 billion. Price hikes helped offset higher freight costs but couldn’t keep up with climbing commodity costs. In Denver, public-school children are facing shortages of milk. In Chicago, a local market is running short of canned goods and boxed items. But there’s plenty of food. There just isn’t always enough processing and transportation capacity to meet rising demand as the economy revs up. More than a year and a half after the coronavirus pandemic upended daily life, the supply of basic goods at U.S. grocery stores and restaurants is once again falling victim to intermittent shortages and delays. “We’ve been struggling with supply-chain issues with different items since school started,” said Theresa Hafner, the Executive Director of Food Services at Denver Public Schools. “It just continues to pop up. It’s like playing whack-a-mole.”
This chart and data is from Jim Reid (Deutsche Bank). Kia sent me a letter asking me to sell them my car. The market is crazy. Yesterday we saw another spectacular increase in the Manheim used car index for the first half of October which could easily lead to this month seeing the largest increase in prices ever. The index was up +8.3% in the first 15 days of the month. The record is the +8.9% and +9% mom rate seen in May and June 2020 after a -11.3% monthly fall in April 2020 immediate after the pandemic hit. Although used cars and trucks make up only about 4% of the core US CPI index, they have added nearly 1pp to YoY core CPI inflation recently.
The wealthiest 10% of Americans now own 89% of all U.S. stocks, a record high that highlights the stock market’s role in increasing wealth inequality. The top 1% gained more than $6.5 trillion in corporate equities and mutual fund wealth during the Covid-19 pandemic, while the bottom 90% added $1.2 trillion, according to the latest data from the Federal Reserve. The share of corporate equities and mutual funds owned by the top 10% reached the record high in the second quarter, while the bottom 90% of Americans held about 11% of stocks, down from 12% before the pandemic. I do not believe these statistics are good or sustainable. I also do not believe that taxing the wealthy to oblivion is the answer as I have zero faith the government will spend it wisely. It is imperative that our tax policies are competitive.
With its pandemic recovery in the rear-view mirror, China now faces a prolonged period of slower growth with increasing policy uncertainties as Beijing attempts to carry out ambitious long-term reforms. China’s economy recorded a steeper-than-expected economic slowdown in the third quarter of the year, expanding 4.9% from a year earlier. The disappointing growth rate reflected a host of headwinds: Tighter rules on the property market that have chilled activity in the sector, widespread power shortages and continued concerns about Covid-19 that have weighed on consumer spending. The downturn in the real-estate market will continue to “weigh substantially on growth” in coming months, said Louis Kuijs, head of Asia economics at Oxford Economics. The research firm has slashed its growth forecasts for the fourth quarter and for the full year to 3.6% and 8%, from earlier forecasts of 5.0% and 8.4%. The first link is WSJ and this link is to a Bloomberg article on the same topic. Given I am a firm believer China was the cause of the global pandemic, I still want them to pay a price for the deaths, disruption of life and trillions in damages.
Interestingly, a Chinese state-backed propaganda epic about the defeat of US troops is on track to become the country’s highest-grossing movie of all-time. The film hit Chinese cinemas on September 30 - the day before China's week long National Day holiday - and has made $769mm to date, Variety reported. "The Battle at Lake Changjin" cost $200mm and generated $769mm in two weeks.
I am all for clean energy, lowering emissions, recycling and helping to reduce any and all pollution. However, I am also a realist. I have been critical of some of the theories and the claims in the Green New Deal (GND). I do not believe the GND is achievable or realistic. What is happening globally in the energy space is outlined in this well done WSJ article. I cannot summarize everything, but the author discusses various energy alternatives and spending trends. I happily own a Tesla, but remember with electric cars, they need to be charged from the grid and require a lot of energy to manufacture them. Also, the batteries require rare earth elements which depend on mining and disposing of the batteries is not clean. We will be buying another electric car in the next two years, I am just not convinced it will be a TSLA as other companies seem to have superior battery technology. I prefer to drive the TSLA rather than most other cars. The acceleration is awesome. An energy price shock is serving as a reminder of the world’s continued dependency on fossil fuels—even amid efforts to shift to renewable sources of energy. Demand for oil, coal and natural gas has skyrocketed world-wide in recent weeks as unusual weather conditions and resurgent economies emerging from the pandemic combine to create energy shortages from China to Brazil to the U.K. The situation has laid bare the fragility of global supplies as countries drive to pivot from fossil fuels to cleaner sources of energy, a shift many investors and governments are trying to accelerate amid concerns about climate change. Still, fossil fuels make up the majority of power generation globally. Renewables accounted for 26% of global electricity generation in 2019, according to IRENA.
In light of Colin Powell’s death, highlighting some of his key principles of success was warranted. I happen to agree with quite a few of them. Colin Powell accomplished his goals by adopting a handful of key life principles along the way. Thirteen of them, in fact. On Monday, Powell — the country’s first Black Secretary of State, chairman of the Joint Chiefs of Staff and national security advisor — died from complications from Covid-19, his family wrote on Facebook. He was 84 years old. Powell, a four-star U.S. Army general, was fully vaccinated against Covid, but also suffered from multiple myeloma, a type of blood cancer that hurts the body’s ability to fight infections.
It ain’t as bad as you think. It will look better in the morning.
Get mad, then get over it.
Avoid having your ego so close to your position that when you position falls, you ego goes with it.
It can be done.
Be careful what you choose: You might get it.
Don’t let adverse facts stand in the way of a good decision.
You can’t make someone else’s choices. You shouldn’t let someone else makes yours.
Check small things.
Share credit.
Remain calm. Be kind.
Have a vision. Be demanding.
Don’t take counsel of your fears or naysayers.
Perpetual optimism is a force multiplier.
Why must Trump say such inappropriate things? Say something nice and bite your tongue or don’t say anything in this instance. "Wonderful to see Colin Powell, who made big mistakes on Iraq and famously, so-called weapons of mass destruction, be treated in death so beautifully by the Fake News Media," Trump said in a statement released Tuesday morning. "Hope that happens to me someday. He was a classic RINO, if even that, always being the first to attack other Republicans. He made plenty of mistakes, but anyway, may he rest in peace!" This is what a different former President had to say on the topic. "Laura and I are deeply saddened by the death of Colin Powell," said George W. Bush. "He was a great public servant, starting with his time as a soldier during Vietnam." Come on man! Trump, you can do better.
Come on, Eric Adams. Can’t you become mayor any faster? Obviously, not all NYC crimes were reported and have heard from over a dozen readers about incidents which were unreported in the past few months. A 50 percent surge in thefts targeting city straphangers drove an overall increase in felony subway crime in September, according to new NYPD stats set to be shared at Monday’s MTA board meeting. There were 96 grand larcenies in the subway system last month compared to 64 in August and 55 in July, according to the NYPD. Subway robberies also jumped in September by 18 percent, to 52 robberies from 44 in August, the stats show. The crimes helped fuel an overall 25 percent increase in felonies committed in the system from August to last month.
A bipartisan group of lawmakers is accusing Amazon leadership -- including former CEO Jeff Bezos -- of misleading or lying to Congress in the wake of reports from media outlets that they say "directly contradicts the sworn testimony and representations" from Amazon about its business practices. In a letter sent to Amazon CEO Andy Jassy on Monday, lawmakers on the House Judiciary Antitrust Subcommittee are asking the e-commerce giant to correct the record and provide "exculpatory evidence" to corroborate prior testimony and statements made to the committee. The lawmakers reference investigative journalism pieces from Reuters and The Markup that alleged Amazon used data from individual sellers to create similar items and boost its own products in India, and that Amazon places products from its own brand ahead of those from competitors even on the U.S. site. I just feel the data Amazon has is so powerful that something needs to be done here. It will be interesting to see how this plays out.
Other Headlines
Kids shoes cost the most in 70 years and the supply chain mess isn’t helping
Atlanta Fed Says US Economy Suddenly On Verge Of Contraction
Katie Couric calls Matt Lauer “disgusting, abusive” in awkward Today return
Jan. 6 Committee Recommends Contempt Charge for Steve Bannon
Biden secretly flying underage migrants into NY in dead of night
Taliban Commander Who Launched Bombings in Kabul is Now a Police Chief in Charge of Security
NYC to Mandate Vaccines, Eliminate Testing Option for Workforce
Southwest drops plan to put unvaccinated staff on unpaid leave starting in December
Mayorkas admits “tragic rise” of delta variant at US-Mexico border “surprised” him
A new Quinnipiac poll shows that former President Trump's support among Republicans is growing. 78% of Republicans now think he should run for president in 2024, up from 66% in May.
Virus/Vaccine
Every metric continues to improve. Cases fell 22% and are now down 55% from the peak of the Delta wave. Hospitalizations dropped 19% and are down 44% from the Delta peak. Deaths dropped 14% and are down 25% from the recent peak.
One point of note. I wrote about Florida and the massive cases recently. In the past 6 weeks, cases went from a 3-day average of 25k/day and are now 2k/day for a decline of over 90%. The US in total is down 66% during that period. The media had no problem crushing Florida when things are bad, yet not a peep when things improve. Balance and fairness is what I ask. Crush em when they mess up, but you have to at least mention something when data is going the right way.
Valneva SE on Monday said its experimental COVID-19 vaccine demonstrated efficacy “at least as good, if not better” than AstraZeneca’s shot in a late-stage trial comparing the two, with significantly fewer adverse side effects. Valneva, among a handful of drug makers testing their vaccines against one already in use, is hoping its candidate, which uses more traditional technology than the mRNA vaccines, could be a more reassuring option for Europeans still reluctant to be immunized.
The FDA plans to allow vaccinated Americans to receive a different booster shot from the vaccine they originally received, a measure that health officials have petitioned for weeks, The Wall Street Journal reported. The agency will not recommend one booster shot over another, and instead allow individuals and their vaccine providers to choose a different brand at their own discretion, WSJ said. The paper said the panel is expected to authorize booster shots for the Moderna and Johnson & Johnson by Wednesday night this week, hoping to expand the booster shot opportunities to eligible Americans. The agency could approve the “mix and match” approach by then, according to WSJ. I am not opposed to this, but how much research has gone into it? How many patients have mixed booster shots? I understand there was a federally funded “mix & match” study, but would like to better understand the results and number of the patients….
Real Estate
I have written extensively about West Boca and communities such as Boca Bridges, Seven Bridges, Lotus… I was just told that model home in GL Homes new Boca Bridges community sold for over $7mm, but I am yet to confirm it with a second source. I would be in shock, but nothing in the South Florida market would surprise me at this point. I feel Boca Bridges is a nice, safe community with many amenities, but it is 8 miles+ west of the beach. For perspective, I would guess this price would be double from 18 months ago if models were offered then (they were not).
I spoke with a very high end broker from NYC today and asked him how the market felt. He suggested the high end ($10mm+) was not as robust as the press would suggest. He feels that if it is not updated, it struggles. If it is move in condition, it is one thing. However, people do not want to do heavy construction and that product is much harder to sell.
For NYC, Jared Halpern from Douglas Elliman sent me the following:
150 East 78th Street new Robert AM Stern building PH15 and PH16 combo went in to contract last asking $32,750,000. Robert AM stern buildings have historically been some of the most successful in NYC
$328,833,990 in $4M+ contracts signed last week, which is 257% higher than week 42 in 2020
$326,310,000 in $4M- contracts signed last week, which is 104% high than week 42 2020
I spoke with Mark Pruner from Compass in Greenwich. The market has sold more more houses in 2021 than all of 2020. YTD, units are +44% and volume is +66%. For over $5mm, unit sales are up 265% from 2019. A good year for Greenwich is 600 units or above. For perspective, the past 13 months 1,200 homes have been sold in Greenwich. Mark approximately that over 50% of the sales were families up-sizing within Greenwich. Fall is slower due to limited new listings and record low inventory of 257 homes. You can find the full details at Greenwichstreets.com. Below is from the website.
Greenwich Home Sales up 44% to New Record
Greenwich just had an all-time record third quarter with 319 sales which is higher even than the prior record in the Covid-driven third quarter of 2020. For the first 9 months, we saw 832 homes sold, up 44% over 2020, the prior record 9 months. Those 832 sales are more than a full year’s sales for any year, but 2 of the last 22 years.
Value of sales up almost $1 billion
Our total sales volume for the first nine months of 2021 increased by almost $1 billion from last year’s $1.495 billion sales to this year’s $2.478 billion, or an increase of $983 million. Last year total sales volume for the entire year of 2020 was $2.300 billion, so we are already $178 million ahead of total sales for last year, with 3 more months to go in the year.
All while inventory was low
Our inventory has been low all year as houses priced right went to contract almost as quickly as they came on. We had 993 new listings, which fueled our record sales in the first 9 months. Our sales are slowing down as listings are coming on at a slower rate. Our shadow inventory of people who had waited years to sell is gone, but luckily, we are getting listings from lots of upsizers in Greenwich selling their “smaller” houses.