What I Miss About NYC

6-25-23

Opening Comments

The last piece saw the most opened link of the woman who fell down on the treadmill and lost her pants.

Jack and I were in NYC for a few days. I took Jack downtown for dinner on the subway, and we had no issues. We got off and walked up the stairs and men were waiting to aggressively sell us pot. They were hounding my 17-year-old son: “You want some weed? You want to buy? How about some pot…” Welcome to NYC where people smoke weed everywhere. It is virtually impossible to walk 3 blocks without smelling weed today. Also, when you go to a drug store, the entire place is on lockdown and you need to find a manager to buy anything. It is quite sad. This news story outlines how a thief used a blowtorch in a Walgreens in NYC to bypass the locks.

• Pictures of the Day-Junoon-Best Indian Food in NYC

• What I Miss About NYC

• Quick Bites

  • Markets

  • Lawyers Paid More than Bankers

  • Asset Managers and ESG Investing-Conflicts

  • More Concerning Revelations on Hunter/Joe Biden

  • Diamond Market Correcting/Lab Grown Diamonds Too

• Other Headlines

• Real Estate

  • Luxury Upper West Side NYC Apt Building in Special Servicing

  • Top Cities in the World to Live-US Not on List

  • Global Office Woes

Pictures of the Day-Junoon

• I am generally not much of a fan of Indian food, but when it comes to Junoon in NYC, I cannot get enough of it. I wrote a review a couple years ago, so I will only give some highlights. Junoon was a Michelin Star restaurant until the pandemic when it was forced to close for two years. It reopened a half block down on 24th Street and did not miss a beat in terms of quality of food, service and ambiance. Yes, the new place is 1/3rd the size, but it sure packs a punch. The menu is now pre-fixe and for $98 you get your money’s worth with appetizer, entrée, sides and dessert. There is also a chef’s tasting for $140. The food is beautiful, and I cannot recall a restaurant with so many amazing flavors. We literally leave nothing but empty plates scrapping the freshly baked naan bread into the remaining sauces. Trust me, this place is special and deserves a Michelin Star (lost it in pandemic). They make spectacular cocktails which are quite attractive as well.

  

  

  

What I Miss About NYC

For those readers who have been with me for a while, you know I have been critical of a lot of things about NYC and have never once questioned my decision to leave for Florida 6 years ago. The horrible policies in NYC have led to a major degradation in the quality of life for residents in my opinion. However, now that I have been gone for 6 years, I realize there are a couple things I miss about Manhattan.

The first is obvious, and that is the food scene. There are so many amazing places to eat from holes in the wall to Michelin Star eating establishments. On Wednesday, Jack and I walked into Junoon with no reservation.

After Junoon, Jack and I met a reader friend, John, and his girlfriend at Striphouse Steak for a drink. John is an Olympic Silver Medalist in short track speed skating and a motivational speaker. Striphouse on 12th Street is one of my favorite steaks, and the chocolate cake is decadent and massive.

I can go to a different place every night for a year and not run out of great places to eat. Even though the food game in South Florida has grown by leaps and bounds in recent years, it is not 5% of what NYC has to offer. Here is a list of some of the many restaurants I enjoy in NYC. The full list is 20 times this one.

On Thursday, I had an hour and a half breakfast with Whitney Tilson, former hedge fund manager and now newsletter author. We had a great conversation about a dozen topics ranging from markets, to Ukraine, charities, politics, family and sports. I am finding more interesting people in Florida today relative to my time in NYC, but here there are just more of them in NYC. As an aside, Whitney is doing a number of amazing philanthropic endeavors.

On Thursday, I got invited to a 3i Members dinner at Freemans Alley in the private room upstairs. Freemans opened in 2004 and I went shortly after it opened. Getting in nearly 20 years ago was impossible and required a kidney donation. It is hip and cool and in a crazy alley (see pic below taken Thursday night). I don’t recall the food ever being nearly as good as the scene and vibe. On Thursday, the food did not impress me, but the caliber of the people in attendance was remarkable. There were 18 people at the dinner. Many were founders and I was at the high end of the age range that evening. I was incredibly impressed by the accomplishments of the young crowd, many of which were women in their 30s. They had taken companies public, founded major companies, and were incredibly well educated, successful and interesting. Although Florida is attracting more successful and educated people, you just don’t see many uber successful younger folks down there. Don’t get me wrong, South Florida has come a long way, but when it comes to dinners like this one, Florida cannot compete.

On Friday, Jack was golfing late with a friend, and I headed downtown to meet a good friend for dinner. I put my name down at Rezdora (Michelin Star) and walked across the street to Grammercy Tavern (Michelin Star) and had a drink and the steak tartare. Easy to find amazing restaurants in NYC with 73 earning a Michelin Star and another 125 receiving the Bib Gourmand designation.

Yes, I then went to Rezdora and had a full meal. I won’t show all the dishes, but a few favorites. Rezdora is Northern Italian and I wrote a review on it last year. Going back-to-back Michelin Star restaurants within minutes is a strong move, but you need to be aggressive to get your fill of good food before its back to the culinary wasteland of Boca. The Gnoccho Fritto is a top appetizer in NYC and I was livid for a second when I missed it on the menu. The air-filled pastry shell coupled with the various meats (prosciutto di parma, mortadella & pancetta) is a remarkable and memorable dish that I strongly recommend. The food at Rezdora is as good as it gets. Yes, 25-year-old balsamic makes a big difference.

There are no plans to move back to NYC for me. I am very happy in South Florida, but it sure is nice to me back for a short stint and see impressive people and get some much-needed exposure to fine cuisines.

Quick Bites

• Stocks slid Friday, with Wall Street posting a losing week as a rally that carried the broader market in recent months appeared to run out of steam. All three major averages broke multiweek winning streaks. The S&P 500 lost about 1.4%, ending five consecutive weeks of gains. The Nasdaq dropped 1.4%, snapping an eight-week win streak and posting its worst weekly performance since March. Treasuries rallied on the stock weakness with the 2-year yield -5 bps to 4.75% and 10-year -6bps to 3.38%. I sure like these yields on the front end of the curve. Any of my short-dated maturities are rolled into 1-2 year Treasuries. Despite some equity market weakness, the VIX remains sub 13. I am a buyer of VIX in here. I just can’t see how much longer the volatility can stay so low. Bitcoin was +17% on the week and is at $31k in a positive sign that things could be turning. BTC is now +89% YTD and ETH is +60% YTD.

  

• Great WSJ article, “On Wall Street, Lawyers Make More Than Bankers Now.” Managing directors who aren’t in high-ranking leadership roles at banks make an average of between $1 million and $2 million most years, including bonuses often paid largely in stock, more or less unchanged from where it was two decades ago. 

  Equity partners at top law firms, meanwhile, can make around $3 million or more a year—more than triple what they were pulling in two decades ago. An elite group of partners who bring in exceptional amounts of business are earning north of $15 million at a handful of firms including Wachtell, Lipton, Rosen & Katz; Kirkland & Ellis; and Paul, Weiss, Rifkind, Wharton & Garrison. Some high performing lawyers at top firms earn more than $15 million, and an elite few get well over $20 million. Paul Weiss’s Scott Barshay and Kirkland’s James Sprayregen are often singled out as among the highest-paid lawyers on Wall Street. The big thing about Wall Street bonuses is the volatility. I have paid people up and down 50% from year to year based on performance. Lawyers have a much steadier income stream at the big firms. I spoke with lawyers at top firms who are concerned about large, guaranteed deals unrelated to performance to attract new talent. Also, what they do to morale of those loyal employees who are not under guarantees. Based on the legal fees I am getting charged, someone is getting rich.

  

• I feel this is a topic which needs to be addressed. I have thought about it for some time, but this article by the Hill, “A lawsuit waiting to happen: ESG violates fiduciary duty,” is very interesting to me. For decades, the concept of fiduciary duty has been a legal cornerstone of the asset management and investment world, because it basically ensures that fund managers have to act solely in the economic interest of plan beneficiaries, also known as shareholders. Fiduciary duty, as historically applied and practiced in the U.S., has been primarily concerned with maximizing investment returns on behalf of plan participants. However, with the rise of stakeholder capitalism, and the mass implementation of environmental, social and governance (ESG) investing, a new crop of asset managers is seeking to blur the lines of fiduciary duty to include social justice causes. So here is the problem: By engaging in stakeholder capitalism and using ESG to shape how companies operate, regardless of the impact on their bottom line, these institutions are breaching their sacred fiduciary duty. More importantly, they are violating the law. It should be noted that ESG investing has historically underperformed its non-ESG counterparts, which violates the “Duty of Care” and “Duty of Loyalty” elements of the fiduciary duty menu of responsibilities. There is clearly a conflict here.

  

• I have written about concerns over government agencies left bias and these reports do nothing to dissuade that view. The FBI “verified” the authenticity of Hunter Biden’s abandoned laptop in November 2019 and a federal computer expert assessed “it was not manipulated in any way,” IRS supervisory agent Gary Shapley told Congress in explosive testimony released Thursday Remember, the laptop was reported by mainstream media to be Russian disinformation (“no one could be that careless to leave a laptop with this information on it”)  based on (i) leaks from among other now disgraced former Head of the House Intelligence Committee Adams Schiff and (ii) a campaign orchestrated by then Biden campaign official (now Secretary of State) Anthony Blinken to former acting Head of the CIA and Mike Morell which culminated in an open letter by over 50 former high level intelligence and national security executives (including John  Brennan and James Clapper) had all the “classic earmarks of a Russian information operation.” Biden referenced the letter in the debate with Trump. Polls suggest this laptop information would have impacted the 2020 election. The laptop showed Hunter making $8.3mm from foreign sources and not paying over $2mm in taxes. Hunter also deducted payments to prostitutes and sex clubs on his taxes. Once again IRS whistleblowers were not allowed to see all the documents together to do a “complete” review. Shapley (whistleblower), who sat for a six-hour deposition with the committee on May 26, took over the Hunter Biden case in January 2020 and said that investigators had turned up fresh evidence of Joe Biden’s involvement in his family’s overseas income. “[W]e obtained a July 30th, 2017, WhatsApp message from Hunter Biden to Henry Zhao, where Hunter Biden wrote: ‘I am sitting here with my father and we would like to understand why the commitment made has not been fulfilled. Tell the director that I would like to resolve this now before it gets out of hand, and now means tonight. And, Z, if I get a call or text from anyone involved in this other than you, Zhang, or the chairman, I will make certain that between the man sitting next to me and every person he knows and my ability to forever hold a grudge that you will regret not following my direction. I am sitting here waiting for the call with my father,'” Shapley recounted. Sorry folks, there is enough in these documents to warrant a more serious investigation into VP Biden being involved and getting paid. The fact that the popular media spends ZERO time on it is wrong. As Americans, we need answers, not coverups. It gets worse; these whistleblowers allege the Secret Service was tipped off by the FBI about upcoming actions which led to more obstruction. These are very serious allegations which make Watergate look like nothing if proven true. Americans deserve to know the truth. 

  

  

• I am hardly a diamond expert but thought this was an interesting article after diamond prices exploded during the pandemic. I was shocked to learn about the growth in lab grown diamonds. Diamond prices are down 18% from their all-time highs in February 2022, and are lower 6.5% year-to-date, according to one Global Rough Diamond Price Index. And their value is about to dive further, market watchers predict. “A slightly better-than-average-quality 1-carat natural diamond was $6,700 a year ago, today this same diamond is selling for $5,300,” Paul Zimnisky, the CEO of Paul Zimnisky Diamond Analytics, told CNBC. “The share of lab grown diamond sales versus natural diamonds is rising. In 2020, they were just 2.4%. In 2023 to date they are already up to 9.3%,” he said. Prices of lab-grown diamonds have been “nosediving,” said Edahn Golan, the CEO of Edahn Golan Diamond Research & Data, with prices sinking 59% in the last three years. According to the article, Lab Grown prices went from 80% of traditional down to 25-30% of regular diamond pricing.

  

Other Headlines

• Bank of England surprises with 50 basis point rate hike to tackle persistent inflation

• Junk-Rated Companies Accept Tougher Terms to Borrow

  • Good WSJ article on the growth of secured bonds and investors demanding more protections.

    

• Markets guru David Rosenberg says the tech-stock frenzy reminds him of the dot-com bubble – and warns the US economy is barreling towards recession

• Why China's faltering economy could soon become a top-of-mind concern for the US stock market

• Fed Chair Powell says smaller banks likely will be exempt from higher capital requirements

  • Suggestion is only banks over $100bn in assets. What do you think higher capital requirements due to ability and willingness to lend?

• Goldman Sachs faces big writedown on CEO David Solomon’s ill-fated GreenSky deal

  • More consumer related losses and exits from senior people. Solomon’s days gotta be numbered.

• Siemens Energy shares plunge more than 37% as wind turbine worries deepen

• 'Do not go to law school': This fund manager warns that the legal field is in 'big trouble' — says folks are using ChatGPT for complex contracts. Time to get into trades?

• The U.S. Population Is Older Than It Has Ever Been

  • The median age in the United States reached a record high of 38.9 in 2022. It’s a rapid rise. In 2000, the median age was 35, and in 1980, the median was 30. I keep writing about the consequences of an aging population and the massive entitlement hole which cannot be filled. America is screwed without tough decisions on entitlements. In 22 years, our median age is +9 years. With rising Federal Debt levels and mounting unfunded liabilities, we are at a critical juncture for leadership to make some tough choices.

• Chaos erupts on House floor after Adam Schiff censured for ‘misleading American public’ over Trump-Russia

• Old Navy to Nordstrom: Half of retailers fleeing downtown San Francisco

  • At least 22 big-name businesses have closed or announced plans to flee the area around San Francisco’s Union Square since January 2022, including trendy retailers like Anthropologie, Banana Republic and Crate & Barrel, as well as the investment firm that owns two of the city’s biggest hotels. Since 2019, 47% of businesses in the area have closed, according to the San Francisco Standard.

• Mob of teens ransack LA McDonald's with chaos caught on tape

  • I am a believer in fixing broken windows. What we have today in many deep Blue cities is pandemonium with no consequences. We have District Attorneys who brag about not filing charges against repeat offenders. No wonder chaos ensues. I was taught early by my mother that there are consequences for bad behavior. I guess she was wrong.

• Straphanger sucker-punched in wild NYC attack

  • Watch this disgusting video. The attacker should get 10 years in Rikers.

• Networks Spend 491 Minutes On Trump Indictment, 0 Seconds On Biden Burisma Bribery

  • The Trump Indictment is HUGE and should have a ton of coverage. No issues there, but ZERO on what would be even a bigger story. No mention of it?

• NYC e-bike store fire ‘rekindles’ three days after claiming lives of four elderly residents

• "A Non-Negotiable": UPenn Swimmer Says Team Was Silenced From Speaking Out About Transgender Teammate Lia Thomas

  • Nothing like Freedom of Speech at Ivy League institutions. I am adamantly opposed to transgender athletes competing with women. The fact that one of the finest academic institutions in the world will not let its students share a view is unconscionable.

• As U.S. military recruiting crisis worsens, armed forces find competition around every corner

  • The article suggests higher wages in the private sector are causing recruiting issues. I feel that is part of it. Vaccine mandates and overly woke programs play a role. A young man I know went to sign up and his required reading was four overly woke books. He never went back. He wanted to serve his country and is now in the private sector.

• I’ve written 10 books on happiness—here are 5 tiny habits that make me feel happier and healthier every day

• Mark Cuban: Why effort is a 'huge competitive advantage' for success

  • Great thoughts here from Cuban. I agree with him. I take a hard work over high IQ every time.

• Titanic sub passengers died instantly in ‘catastrophic implosion’ as wreckage from doomed vessel discovered on ocean floor

  • Sad. Based on my research, this is not a shocker. The CEO was a clown and refused to hire seasoned people. Accounts from those who were on the sub were not positive experiences. The WSJ reported that the explosion happened days before it was reported.

    

• 57% of people are uncomfortable with their level of emergency savings. Here’s how much they think they need

• 2023 NBA Draft: Twins Amen, Ausar Thompson become first brothers taken in top 10 of same class

  • The brothers attended a local private high school near me, but left early. First time brothers were taken in top 5.

• Elon Musk and Mark Zuckerberg agree to hold cage fight

  • I believe Musk will get eviscerated by Zuck now that he has been training for jiu-jitsu matches. Musk opened his mouth and hope Zuck shuts it despite not being a fan of the Facebook founder. This is another stupid move by Musk. Shut up and save the world and stop saying dumb things. Musk has 30lbs on him, but still think Zuck should take him down. This article suggested the fight could bring in $1bn.

• Lean green flying machines take wing in Paris, heralding transport revolution

  • Looks like they will be used at the 2024 Paris Olympics to shuttle people around. They look amazing, but no chance I get into one of them.

• Russia mutiny: Rebel Wagner leader 'to move to Belarus' after calling off advance on Moscow to avoid 'bloodshed'  

  • I can’t see Putin lasting a lot longer. Prigozhin (former Putin Ally) who ran the Wagner group was upset at the Russian military for under funding his group from a munitions and bodies perspective. He was very critical of the formal Russian Military and the performance against Ukraine and the loss of Russian lives. He basically staged a coup and stopped, but this is a clear sign of weakness for Putin. Prigozhin’s story is amazing. He went from hot dog vendor, to jail to successful entrepreneur to Putin’s butcher.

Real Estate

• A loan on a luxury apartment tower with views of Central Park has been transferred to special servicing ahead of a potential default despite record multifamily rents in Manhattan.  A&R Kalimian Realty’s 43-story glassy residential tower The Aire, which sits close to Lincoln Center on Manhattan’s Upper West Side and features amenities like a private party deck and courtyard, has struggled to make its debt payments ahead of its CMBS loan's maturity later this year. The $250M loan — split into a $225M senior loan and a $25M subordinate loan — was moved to special servicing on June 1 "due to imminent maturity default," according to special servicer commentary in the Morningstar Credit database. Approximately $195.8M is still due on the loan, which was originally provided by JPMorgan Chase. The loan had a trigger clause if the debt service coverage ratio at the property dropped below 1.05x. The loan matures in November and is secured against the 310-unit luxury towers at 200 West 67th St. Occupancy dropped to 70% during the pandemic but is up to 97% today. Sharply higher rates are clearly a factor. Losing a building which is effectively fully occupied with high rents is not something we normally see but expect it to become more prevalent given rates and the large pullback in lending/LTVs. The rising cost of running a budling with labor, taxes, gas are also contributing to challenging fixed charge coverage ratios. I don’t know how to solve the tax issues, as all the cities are so underfunded and need the incremental tax dollars even though the underlying building values are falling.

• CNN article on the world’s most livable cities. The EIU, a sister organization to The Economist, ranked 173 cities around the world on a number of significant factors, including health care, education, stability, infrastructure and environment. Vienna held onto its first place spot on the EIU’s Global Livability Index, winning praise for its reliable infrastructure, standout culture and entertainment and impeccable education and health services. The city, which has occupied the top position several times over the years, was closely followed by Denmark’s Copenhagen, which retained its second place position. No US cities were in the top 10. Honolulu, Hawaii’s biggest city was the highest US entry, coming in 25th place.

• Interesting Bloomberg article entitled, “The World’s Empty Office Buildings Have Become a Debt Time Bomb-From San Francisco to Hong Kong, higher interest rates and falling property values are bringing the commercial real estate market to a perilous precipice. The article discusses the dramatic drop in transactions from both a leasing and sale perspective in the office markets globally. Work from home, higher rates, pandemic mandates, layoffs, crime, quality of life all playing a factor. Multiple examples of buildings worth 20-30% of levels of just years ago. The outline issues across the globe and cite London buildings which were considered “trophy properties” recently and now turned back to lenders. The older buildings seem to not be conducive for alternative uses. Seems to me this problem is just starting and as more loans mature, defaults will rise sharply in the next 24 months.