There Ain't No Such Thing As A Free Lunch

7/25/21

• Opening Comments

• Funny Text Exchange

• Picture of the Day-Olympic Failure

• There Ain’t No Such Thing as a Free Lunch (TANSTAAFL)

• Quick Bites

  • Stocks, Bitcoin, Restaurant Workers, M&T Bank

  • Biden Blunders, Pat’s Cheeesteak Murder, Harlem Beating

  • Brooklyn Mugging, SFO Gucci Garbage Cans

  • Story of a Lost Friend-Amazing-sent by a reader

• Virus/Vaccine

  • Data-Continued Deterioration

  • My View/Thoughts

  • Delta, Pfizer

  • Fauci on Funding Wuhan

• Real Estate

  • My Quick Comments

  • Palm Beach Insanity

  • Hamptons Market Update-No Inventory

  • Phoenix on Fire-Good Chart

Opening Comments

I took Wednesday off and was planning on taking a few weeks of down time, but a bunch of loyal readers sent me countless story ideas. I was so dumbfounded by some that I created a piece entitled, “There Ain’t No Such Thing As A Free Lunch." The examples in the piece are quite stunning and hope you enjoy it.

Other areas will be slightly abbreviated, given I am at Penn State for a golf tournament and then back on the road with limited time. Apologies in advance for the scattered nature of today’s Rosen Report. I put this entire thing together in about three hours, and I generally take closer to 10-12 hours.  Not sure when the next Rosen Report comes out, but want to thank all my readers as I received countless notes of appreciation in the past week as well as a ton of story ideas.

Connecting with new people has been amazing and a new friend hosted me for lunch at his house on the beach in Bridgehampton. WOW. It was an amazing place and I really enjoyed my time with him and his family. Making new friends from the Rosen Report has been great.

On Saturday, July 24th, I surpassed 6,000 miles of driving since May 21st. Jack and I were able to golf at Liberty National which has amazing views of the city and Statue of Liberty. Course is preparing for the upcoming professional tournament in a few weeks. Rough was long and Jack played the tips, which proved a bit much to handle with a 77.8 course rating and 155 slope. 

I received a funny text from a tennis pro from Boca

Tennis Pro: “U coming today?”

Eric: “I am in NY, not back for a while.”

Tennis Pro: “I saw another Roseanne on the crunchy. I thought you were the only one. LOL”

Eric: Roseanne on the crunchy? What does that mean?”

Tennis Pro: “I’m using voice text.”

Eric: “I thought you were smoking crack again. What did you mean to say?”

Tennis Pro: “Rosen on the court sheet, not Roseanne on the crunchy.”

I get some crazy texts between people using voice or spell check, but I had no idea what she was saying.

Picture of the Day

The Olympics are an unmitigated disaster. They were already postponed thanks to China’s lies and now Toyko is under siege with multiple athletes testing positive including golfers DeChambeau and Rahm (yes, again). No spectators other than athletes made for an awkward ceremony. The picture below is the opening ceremony with no crowds. This Market Watch article suggests the games cost Tokyo over $20bn compared with the original plan of $6.7bn in total revenues (far lower actual revenues with no fans). This WSJ article is entitled, The 2021 Olympics Are Turning Into a $20bn Bust for Japan. Given no crowds and weak ratings (16.7mm viewed opening ceremony, the lowest in 33 years), I cannot imagine this is a good thing for Tokyo. Will other cities take this experience into consideration when bidding on future Olympics? I also want to mention the USA Men’s Basketball team lost handily to France and the women lost 3-0 to Sweden. 

There Ain’t No Such Thing as a Free Lunch (TANSTAAFL)

The concept of TANSTAAFL is thought to have originated in 19th-century American saloons where customers were given free lunches with the purchase of drinks. From the basic structure of the offer, it is evident that there is an implicit cost associated with the free lunch: the purchase of a drink. 

I have written that I am concerned about inflation given what is going on with an accommodative Fed and asset prices. We have been over stimulating the economy in my opinion. Do not misinterpret my commentary. Initially, when the country was effectively closed and the economy was in a tail-spin, I felt the Fed pulled out all the stops and prevented a potential depression. I want to give credit where credit is due. 

However, today, all-time highs for home prices, stock markets, new and used cars, rental cars (Tahoe is $875/day in Wyoming), commodity prices remain high (I paid $4/gallon for gas), consumer prices increasing sharply, logistics/shipping costs are through the roof, food prices are rising, wages are increasing and people will not go back to work given they are getting paid to stay home. Yet many seem comfortable with additional trillions in stimulus. Biden quotes Moody’s in the video suggesting that passing additional stimulus will reduce inflation. Wait What?  There will never be a cost of over a decade of free money, trillions in stimulus, massive QE?  

My sister sent me these pictures from near her home in Hollywood, FL, which is located just north of Miami.  A neighbor around the corner had an open house on Saturday, and 35 people showed up prior to the start to see it. Over 200 potential buyers came in a day. In fact, there were so many people that the open house had to be extended an extra 2.5 hours. The house was built in 1960 and needs work with an asking price of $375k for 1,500 sq. feet ($250 per sq. ft.). This is one of the smallest and lowest priced houses in the neighborhood, with prices typically ranging from $500k to over $750k. It’s likely this price is the reason the open house drew such a tremendous crowd, as there are few affordable houses in South Florida for young buyers. I have to wonder if the Realtor priced it this way to draw the crowd and start this insane bidding war.  This particular house is 1 mile west of I-95 in Hollywood, Florida and is on a very busy corner with a lot of traffic. The lot is .24 of an acre and has 2 beds and 2 baths with a den. Hundreds of people show up for a 60 year-old, very small and outdated house?  

I called the broker posing as a buyer. To keep it short, here is a summary. She received six offers (site unseen) prior to the open house, with many above asking price, but contingent on her not having an open house. The open house produced 22 immediate offers, and almost all had no contingencies of any kind (financing, inspection or appraisal). Many offers were “well, well, well” above ask suggesting in the $430-450k range. I asked the broker if there were any known issues with the house. There is a large broken plate glass window which the owner will not fix. There are termite wings all over the house and there is a detached shed in the yard covered in mold. Termite damage could possibly be extensive here in the tropics, but without an inspection of the attic, you would never know the extent. What complete idiot is bidding on a house site unseen with no contingencies? How can this end well for the new buyer? I am looking forward to finding out the final sales price after closing and what the buyer’s may need to do to remediate termites and the extent of the damage, if any. Readers, I DO NOT RECOMMEND buying a house without an inspection. Please do not do this to yourself.

No one else thinks the Fed is contributing to the bubbles with low rates and buying tens of billions of mortgages every month which markets are already overheating with limited inventory? Homes are getting 30, 40 and 50 offers with no financing contingency and some are waiving inspection. No one else believes this is insanity? Is this not the definition of euphoria? I wrote of a home which sold for $185k or 67% over ask and received 76 offers ALL CASH OFFERS with 88 offers in total. 15 bidders never stepped foot into the home.

I am not suggesting the end of the world is coming like investor, Jeremey Grantham. Grantham cautioned that there has “never been a great bull market that ended in this kind of bubble that did not decline by at least 50%.” But he said the catalyst that triggers that drop is “much more difficult” to predict. Famed hedge fund investor, Stan Druckenmiller, is concerned too. Market participants will continue to ignore risks “until the Fed stops canceling market signals,” hedge fund pioneer Stanley Druckenmiller wrote Thursday. With the Fed at bay, Druckenmiller believes investors will continue to disregard looming signs of inflation and other market risks. He believes the Federal Reserve’s continued easy money measures have distorted asset prices and lulled investors into a false sense of security.  However, I do believe overly accommodative central bank policies are contributing to the euphoria and helping markets become addicted to the “morphine drip.” High end homes, low end homes, boats, cars, planes… everything is in short demand given zero rates and central bank support. 

I have now passed the 6,000 mile mark of driving since May 21st. I have driven through MA, PA, CT, NY, NJ going through big cities and tiny towns. The one consistent theme is help wanted signs and overworked small business owners who are begging for help. I spoke with a reader who has a 17-year-old high school son making $40/hr as a waiter. Gone are the days of $2/hr + tips like when I did the job. To attract workers, you need to pay up. Why go to college and go into massive debt and be subjected to overly woke teachings if you can earn more without a high school degree. Obviously, this path is not for everyone, but many kids do not need to attend a traditional four year college.  

A reader sent me this note the other day:

“JB HUNT put a bid out for two drivers to drive local routes- means they will sleep in their own bed instead of on the road. The posting was in northern New Hampshire.  JB Hunt started at $85,000 with full benefits and ended up at $115k with a 15k bonus. No takers. For perspective, the head of the local hospital makes $150k.” I questioned this, so I sent my massive research team (me) on a mission to JB Hunt’s website and found countless postings for $15k signing bonus and $86k salary. I also found these postings requiring 3 months driving experience. Rosen Report readers, if you do not hear from me for a while, it is because I took a job as a truck driver for JB hunt to afford camp for Julia, golf for Jack and my wife’s 26 daily Amazon orders.  Are you kidding me? I am asking if driving a Chevy SUV qualifies as 3 months driving experience. The jobs below require you own your own truck.

I am concerned, and despite carefully watching the newest Delta wave, want to take a step back. The euphoria around risky assets is concerning.  In Florida, Hamptons, Southern CA, Tahoe, Austin, Phoenix, and countless other cities, the inventory has never been lower and have never sold faster.  In my community, we are down to 13 homes for sale out of over 750.  Since the start of the community 60 years ago, the average has been over 70 homes for sale at any time.  In other communities, there is less than 1% for sale.  Many homes on the market today are horrific or massively overpriced. I would love to sell my home, but I cannot find anything to buy.  Make no mistake, there will be a price to pay eventually for these loose policies from Central Banks, as There Ain’t No Such Thing As A Free Lunch. TANSTAAFL.

Quick Bites

• U.S. equities rose Friday with the the major averages hitting new records as they overcame concerns about economic growth from earlier in the week. The Dow closed above 35,000 for the first time ever, bringing its gain for 2021 to more than 14%.The blue chip average rose 238 points, or 0.68%, to 35,061, gaining for a fourth straight day. It made the 1,000-point trek rather quickly, having closed above 34,000 for the first time ever back in mid-April. The S&P 500 gained 1.01% to 4,411 and the Nasdaq Composite climbed 1.04% to 14,836, both new closing highs for the benchmarks.

• Bitcoin traded above a crucial technical level over the weekend for the first time since early May, after comments from Ark Investment Management LLC’s Cathie Wood and Tesla Inc. Chief Executive Officer Elon Musk helped boost its momentum. The largest cryptocurrency rose above its 50-day moving average on Saturday for the first time since May 12. It rose again Sunday, its fifth consecutive day of gains, to as high as $34,609.

• Restaurant workers are overworked and are literally quitting in the middle of their shifts.  I went to a restaurant recently and two young men were being very vocal about how miserable they were while on break as I was walking towards the door. I stopped to speak with them and they were talking about no days off, limited breaks, and no quality of life.  This CNN article goes into details of what many restaurant employees are going through today Jack and I went to breakfast today and it was pandemonium. The front door had signs begging for employees for all jobs full and part time. They needed help. Line out the door.

  • In a related story, I was told that three summer camps had mass counselor issues as some quit in the middle of camp and some camps had to cancel. I did not have time to do all the research on this, but there is a NY Times article discussing it.

• Analyst expectations aside, M&T Bank enjoyed a profitable second quarter. The same can’t be said for the homeowners who count the firm as their lender. Yet over the past year, M&T reported that late-stage delinquent loans — composed predominantly of residential real estate debts — more than doubled. As of June 30, 2020, M&T held $535 million in loans over 90 days past due; this year the firm reported $1.1 billion. The surge brings the number of late-stage delinquent loans serviced by M&T to a level four times as high as it was before the pandemic.

• I said prior to the election Biden had cognitive issues and was certain of it. NOTHING has changed my view, but if anything, I am only more convinced of it. Please watch this video. It happens virtually every time the President of the USA speaks if he does not have cue cards. No one else thinks this is a problem? Don Lemon should be asking if he was ok. Here is the clip. This is the leader of the free world. Rep. Ronny Jackson, the former White House physician-turned-congressman, says he’s "terrified for our country" in the wake of President Joe Biden’s televised town hall this week — and doubts whether the commander in chief has the cognitive ability to make it through a full term. "He’s completely LOST it!" Jackson, R-Texas, tweeted Saturday, along with a video clip in which Biden answers a reporter’s question about defunding the police by claiming that Republicans accuse him of "sucking the blood out of kids." "Needs a cognitive exam NOW!" Jackson posted. Obviously he is a Republican, so take it with a grain of salt, but watch Biden without help and it will be hard to argue. Remember, he is not supposed to take random questions any more according to the press secretary. Yes, the President of the US.

• Given I did a big write up on Pat’s and Geno’s Cheesesteaks recently, I had to include this story sent by a reader. An argument over football between a New York fan and a Philadelphia supporter turned deadly outside a famous cheesesteak joint in the City of Brotherly Love on Thursday, a report said. The two fanatics were in line at Pat’s King of Steaks early Thursday when they got into an argument partly about football, the Philadelphia Inquirer reported.

• A group of lowlifes was caught on camera this week savagely beating a woman who uses a walker to get around — before fleeing with the device and $22. Surveillance footage of the appalling attack Tuesday evening in Harlem showed three women and a man roughing up the 61-year-old victim — punching her repeatedly while she’s on the ground and stomping on her, police said Thursday. At one point, one of the female attackers was seen beating the helpless victim with a cooking pot, according to the NYPD. This is where I lose my $hit. I want these scumbags put in jail. No bail, no probation. I do not want to hear the words, “Bail Reform,” on this crime. I want them in Rikers making new “friends” who beat the crap out of them. What possess people to beat an older handicapped person? In NYC, there does not seem to be many consequences for bad acts, so I guess they feel it is ok. We have video. There is no story which can be told which will get me to suggest the criminals should get less than 20 years in jail for this crime.

• In a separate attack, a mugger beat up a 68-year-old man in broad daylight in Brooklyn Saturday morning — with the brutal attack caught on video. A 17-second clip tweeted by the NYPD Sunday shows the perp, in all gray, punching the victim about 10 times — after the wounded man had been forced to the ground. DeBlasio, how about making some examples of these violent criminals rather than letting them go. Your constituents need you. What is your next job? What will you do for a living after helping to create utter chaos in NYC? I can’t wait to see. Maybe you should run for President again in 2024. It worked so well for you in 2020. I need a good laugh. Please do.

• San Francisco is hoping to replace the long despised green trash cans littered throughout the city, as a Board of Supervisors committee voted Wednesday to approve using new designer prototype bins by GUCCI. However, there’s a catch: Each new can will cost between $12,000 and $20,000, according to the San Francisco Chronicle. Are we serious here? I agree the old school cans are ugly and these are nice, but is SFO going to spend millions on Gucci garbage cans? What about spending money to fix the homeless problem? Shoplifting? There is a reason I despise politicians and don’t want my taxes raised. These bumbling idiots will just throw away my hard earned money.

• An avid Rosen Report reader is an Olympic silver medalist (short track speed skating) and impressive Stanford grad.  He has an incredible personal story which can be found in this link from Stanford Magazine.  In summary, John Coyle had a best friend at Stanford named Kevin Bennett and eventually Kevin was John’s best man at his wedding. Unfortunately, they lost touch and Kevin had some mental issues and ended up homeless in New Orleans without medication. John searched for him tirelessly and the story shows how they were miraculously reconnected after a photographer posted a photo of Bennett.  It is a touching article and scary how far Kevin fell before his best friend was able to lift him back up. Have some tissues nearby, no chance you can read the story without shedding a tear.

Virus/Vaccine

• Data continues to deteriorate as 83% of US cases are the Delta Variant as of a few days ago according to the CDC. Only 32% of cases were Delta on June 19th for perspective. Over the past two weeks, cases are up 172% to 51k. They were down to 11k a few weeks ago, but peaked at 260k in Jan. Hospitalizations continue to climb as well and are +57% in the past two weeks and total 29k after being down to 16k. Peak hospitalizations were 135k. Deaths increased by 19% over the past two weeks and now average 267/day for the past 7 days. Recently, the average was 275, but peaked at 3.4k/day. More than 3.82 billion doses have been administered across 180 countries, according to data collected by Bloomberg. The latest rate was roughly 32.9 million doses a day.In the U.S., 341 million doses have been given so far. In the last week, an average of 548,914 doses per day were administered. Unfortunately, the US vaccine data continues to underwhelm with an average of 550k/day down from 3.4mm/day in April.

• My take. I can see mask mandates returning and schools requiring it. I am fearful that the fall spike could lead to remote learning again regardless if it is justified. My daughter learned nothing when the brick and mortar went remote. She is enrolled back at physical school and I am concerned given the case growth, especially in FL. Thankfully, it tends to be in less vaccinated areas in North Florida, not near me. I am yet to give my kids the vaccine (14 and 15 years old), but expect to do so in coming months. Some of the side effect stories had me put it on hold, but expect to give them one-shot only most likely (not J&J). Israel started giving one-shot to kids. I am speaking with doctors and researchers and will revert when I make my final decision. An overwhelming majority of the severe cases are in unvaccinated people. I do suggest the vaccine for adults. My wife has been sick (crazy hives everyday) and has not be able to take it yet, but she is finally getting better after four months and should be able to get a shot next week.

• Dr. Anthony Fauci on Sunday warned that the US is heading in the “wrong direction” as COVID-19 cases driven by unvaccinated people continue to surge across the nation. “I’m not so sure it would be the worst-case scenario, but it’s not going to be good. We’re going in the wrong direction,” Fauci said on CNN’s “State of Union” when asked about a model predicting that the country could reach 4,000 virus-related deaths a day if vaccination rates don’t improve. I was sent a message that Fauci may be recommending masks for fully vaccinated people this week as well.

• Good Bloomberg article which answers countless questions on the Delta Variant. The delta Covid variant is one of the most infectious respiratory diseases seen by experts. “I think people are underestimating how bad this is going to get,” said Dr. Ashish Jha, dean of Brown University’s School of Public Health.

• Pfizer Inc.’s Covid-19 vaccine provided a strong shield against hospitalization and more severe disease in cases caused by the contagious delta variant in Israel in recent weeks, even though it was just 39% effective in preventing infections, according to the country’s health ministry. The vaccine, developed with BioNTech SE, provided 88% protection against hospitalization and 91% against severe illness for an unspecified number of people studied between June 20 and July 17, according to a report Thursday from the health ministry.The data could be skewed because of different ways of testing vaccinated groups of people versus those who hadn’t been inoculated, according to the report.

• Dr. Anthony Fauci on Sunday defended the US giving hundreds of thousands of dollars for research at a Wuhan lab studying whether bat coronaviruses could be transmitted to humans — saying that it would have been “negligent” not to do so. “It was a… proposal that was peer-reviewed and given a very high rating for the importance of why it should be done,” Fauci told CNN anchor Jake Tapper on “State of the Union.” “[The proposal was] to be able to go and do a survey of what was going on among the bat population because everyone in the world was trying to figure out what the original source of the original SARS CoV-1 was,” he continued. The National Institutes of Health earmarked $600,000 for a nonprofit linked to Wuhan Institute of Virology, which has been at the center of lab-leak theories about the origin of the COVID-19 pandemic. My view. Fauci got caught and is doubling down to make himself look like the good guy. This tactic won’t work with me. I appreciate your decades of service, but you have too many conflicts of interest here and need to go. You have lied too many times.

Real Estate

• R/E everywhere seems to be on fire. It is really insane. My theme piece today has a crazy example and below are more. It seems to be across most markets. The velocity of residential home sales is impressive in that houses sell in hours hour days, not months or years.

  • On the commercial side, I spoke with a big NYC landlord who is now up to 25% rate of people in the buildings. He is hopeful that come September the number more than doubles. His big concern is public transportation and people feeling comfortable on a subway/bus/train to get to the office between COVID-19 and crime concerns.

• Great WSJ article on high end Palm Beach home activity.The link includes 5 detailed examples with pictures. Seems as though markets everywhere are on fire. In Palm Beach, it is more clear that some additional GS front office are heading down there. Brokers are getting more calls and I am hearing about it. I believe it is hundreds, not thousands, but in a tight market with limited inventory, it suggests to me the direction of South Florida R/E is not reversing tomorrow. Over the past roughly 16 months, buyers have poured billions of dollars into property in Palm Beach, a 16-mile barrier island off Florida’s Atlantic coast with roughly 2,500 homes. Since March 2020, there have been at least 22 sales north of $40 million in Palm Beach County, with two over $100 million and about 35 over $30 million, according to property records and data compiled by the Corcoran Group and Miller Samuel. Notable buyers include casino mogul Steve Wynn, software billionaire Larry Ellison, designer Tommy Hilfiger and finance-sector bigwigs such as hedge funder, David Tepper and investment-services entrepreneur Charles R. Schwab.

• Hamptons home prices reached a record high as New Yorkers stepped up their bidding for a dwindling supply of listings in the Long Island resort towns.The median price of homes that changed hands in the second quarter jumped 30% from a year earlier to $1.405 million, the highest in data going back to 2005, according to a report Thursday by appraiser Miller Samuel Inc. and Douglas Elliman Real Estate. Of the 675 deals in the period, 21% were for more than the asking price. This gets back to my theme today, no inventory and homes selling in hours, not months for low, mid priced and high end homes. Let’s add more fuel to the fire, right? Look at the 2nd cart of time to sell homes in the Hamptons. Insane. Record stock markets, free money, desire to get away from DeBlasio and ability to work remotely more frequently all contributing. Upcoming piece will be about Hamptons and the lack of infrastructure to handle the people year round. It is a disaster. Don’t get me started on traffic.

• Interesting WSJ article on Phoenix with a great chart below. The Phoenix-area median existing-home price was $399,900 in June, up 31.1% from a year earlier, according to the Arizona Regional Multiple Listing Service. That’s more than $100,000 below the median home prices in San Francisco, Los Angeles, Seattle, Portland, Ore., and Denver. “When people come here from Seattle and Portland, they are thrilled at what they can buy,” said Alan Jones, division president for home builder Lennar Corp. “And from California, they go beyond being thrilled.” Even problematic cities like Chicago are actually selling homes.