Zachary, Louisiana. Why?
6-8-22
Opening Comments
I received some great feedback on my Dimon to the Rescue piece. I have many readers who would love to see a real leader like Jamie run from President and they don’t tend to care which party he affiliates with. The country is screaming for a President who will push sound policies and live closer to the center. Interestingly, it seems that bad men’s bathrooms are a common theme and people from various companies including JP Morgan asked if I could help them get better facilities.
Off to Memphis tomorrow and then Ashland, Kentucky. Let’s not forget about Dothan, Alabama in two weeks. One can dare to dream that things get better than the story below.
Picture of the Day-Exotic Car Detailing for $28k
Mike Cembalest-Dearly Beloved
Zachary, Louisiana-Why?
Quick Bites
Markets
Gasoline, Nat Gas, Electricity Prices
Apple Product Launch
Musk/Twitter on Rocks
Inflation Peaking Charts
California Elections Turning Tide?
Saudi Golf League-My View
Other Headlines
Virus/Vaccine
Data
Real Estate
My General Comments
$93mm Miami Knockdown
Greenwich Update
NYC Population Flows
Housing Wealth Data
Apollo Buys Times Square Hilton
Video of the Day
Jack and I went out for dinner in Baton Rouge and sat at a bar. A young couple sat next to us and I started chatting. Turns out they are from Russia and Ukraine and the man, Alan, moved to Baton Rouge in 2008 and runs a HIGH-END car detailing service. By HIGH-END, I mean the full-service is $28k to do paint correction, wrap the entire car with self-healing paint protection film to prevent scratches, rock chips and other damage. The final step is to install ceramic coating over the film, wheel, sand windows. He handles dozens of Ferrari’s, Lambos, Porsche, and other exotic cars. He claims there are not a couple dozen people in the country who can do this work. Check out this crazy 1 minute video of what goes on to protect these cars. For $28k, it better do the dishes and the laundry too! Call Biragov Detailing if you need the services. I guess I was just shocked at the number of clients he has in Baton Rouge and the demand from CA to FL. People ship cars to him just to do the service. The wealth creation in the past dozen years has been incredible.
$23mm McLaren with steering wheel in center of car.
$2.7mm Pagani Huayra
Mike Cembalest-”Dearly Beloved”
Mike does a great job of explaining Jamie’s recent comments and giving his perspective. His big takeaway is markets lead the economy. I am putting in two charts to show it, but the piece gives many examples. Cembalest believes the market has more downside. He also gives a bunch of examples of assets down 40-70%.
Zachary, Louisiana Why?
My son, Jack, plays a lot of golf tournaments and they tend to take us to unremarkable places. They are never in amazing cities with high-end hotels and restaurants. They are always off the beaten path in towns one does not need to see. Our latest adventure took us to Zachary, Louisiana. I never understood why the nearby Baton Rouge LSU stadium was called “Death Valley.” Now I know.
I am not sure what I should discuss first, but let’s start with the Comfort Inn Hotel. We discussed the horrific smell and subsequent potpourri cleaning of our room in the last piece. Every time I walked in there, I felt queasy. Let’s check out the view. Is that a bullet hole in the window?
No internet or at best intermittent despite two hours with the staff trying to get the internet going. I had to give up my “grandfathered'“ 20 year old ATT plan to get “Hotspot” availability and was always told to never give up that plan. I needed to do it to write the Rosen Report. On Monday, now that the hotel was no longer full, I asked for a room change and I was refused by the manager. They came in and sprayed Glade this time in an effort to crush the mildew smell for the 6th time. The parking lot of the hotel is maybe 25% full. I decided to go to the headquarters to let them know how they put customers last. Whatever you do, run from Comfort Inn. We were moved to a room on the 3rd floor after my meltdown. Although the smell is better, I kid you not, the toilet is barely connected to the floor as can be seen in this video. They suggested maintenance would fix it for 3 days, but no such luck until 10 minutes prior to me hitting send. One needs a hard hat to sit on the commode!
As bad as we had it, a family I met on Sunday had it worse. This is the email I received Monday am from someone staying at a nearby hotel: Good luck today! By the way, as bad as your hotel is, I bet you didn’t have your car stolen last night like we did….. what a $hit hole of a town…. At least it was a rental…..We have clubs, but no shoes or push cart….
Now, on to the restaurants. The “BEST” recommendation was called Walk-Ons, a sports bar which had a line out the door. 10 out of 10 locals call Walk-Ons the best restaurant in town. Does anyone know a good gastroenterologist? I felt death was knocking after that one. I was up all night with cramps convinced I was possessed and may be delivering an alien baby. The restaurants in general have an over-abundance of fried choices and the “healthy” salad had about 4,000 calories of full-fat dressing on it. It looked more like a cream soup with leafy greens. Major mistake I made trying to go healthy in Zachary. You know you are in trouble when the top 10 list in the town includes Smoothie King and a Le Blanc’s Drive Inn.
Now let’s talk about the local grocery store, Rouses Market. I would pay for a video of my wife from NYC going to Rouses. If it did not have 1 billion views in 2 days, I would be shocked. Nothing organic in the store and almost zero healthy options. If Whole Foods is on one end of the spectrum, Rouses is on the other. The food quality was worse than anything I have seen. They sold sushi in the Rouses Market. I am not sure what it would take for me to eat a piece of said sushi, but Elon Musk at his peak net worth approaching $300bn is one of the few in the world who could afford my price. On a positive note, the staff was INCREDIBLY friendly and they sold an 8-Pack of Gatorade for $5.
I am just getting started. It is Africa hot here and it is doing a number on my hairdo. The heat index suggests 105 degrees (below). I will take the over on that one. The local police have made it clear that I am required to wear a hat 24-hours a day, including in my hotel room given the hair monstrosity due to high humidity.
What is next? Jack played a practice round on Saturday afternoon. As the sun started to set, Pterodactyls which they call mosquitoes, came out to hunt my blood. Jack tried to hit a golf shot from the fairway and started running like Usain Bolt as a swarm of monsters were eating his flesh. He was swinging his club wildly to knock out the prehistoric predators and everyone got a good laugh. These are big mosquitoes with teeth.
In the qualifier on Sunday, a father of another player said, “Eric, did you see that humongous water moccasin back there?” These are incredibly poisonous snakes and he claimed he saw the biggest one in his life. He went on to say, “The viper had a head bigger than my fist.” He is 6’2” with a size 13.5 shoe for perspective, played pro hockey and he was shaken by the citing. If I saw that thing, I would have stained my pants.
I need to talk about some good things too. The locals are incredibly friendly. They all say, “Sir or Ma’am” and are hard-working people in the town of approximately 20,000. The best three places to work according to an article I read are: Trade Construction (small construction company), Superior Ford (dealership) or the Bank of Zachary (privately held bank with 50 employees). The largest employers are Georgia Pacific despite laying off many people in the last year and Exxon which has a plant in town. The cost of living in this town must be on an asymptotic line approaching zero as I do not know where you can spend money. Average rent is about $1,250/month for just under 1,000 sq ft. I saw a new D.R. Horton community called Meadow View and advertising homes starting in the mid-$200s. How is this possible? Are the walls made of matzah? How can you build and sell a house for under $150/ft? The pictures don’t look bad at that price point. The kitchens look decent.
Despite these positives, I believe this is the last time I will be in Zachary unless Ryan Seacrest wants to produce a reality show starring my wife called, “Jill Rosen moves to Zachary.” Much of the show would be around food shopping at Rouses Market and then going out to dinner at Walk-Ons. If I have ever been sure of anything in my life it is the fact that this show would be the single biggest hit in the history of reality TV. Kim K, watch out, Jill is coming for you.
Quick Bites
Stocks fell on Wednesday as investors kept an eye on the bond market and signs of an economic slowdown. The Dow shed 324 points, or nearly 1%. The S&P 500 dipped 1.1%, while Nasdaq ticked down 0.9%. The moves came as investors weighed updates from major companies and signs that economic growth may be slowing. Meanwhile, the Atlanta Federal Reserve’s GDPNow tracker now shows a growth rate of just 0.9% for the second quarter, down from 1.3% last week. YTD, the Dow is - 9.5%, S&P-13.6% and Nasdaq-22.7%. Action in the bond market may have hurt investor sentiment on Wednesday, as the 10-year Treasury yield jumped back above 3%. Oil continues to rally and closed at $122.2 which is +67.3% YTD and 91.4% for the past twelve months. Oil is +4.4% for the past 5 trading days and continues the drive up the price of gas to new highs. The UAE, key OPEC member suggests, oil is “nowhere near” peak yet given the supply/demand imbalance. Crypto was under pressure with BTC -2% to $30k and ETH -2.7% to $1.8k
I want to talk about gas, natural gas and electricity prices. Gasoline prices hit new highs virtually everyday with the US averaging just under $5/gallon for the 1st time. This is just as peak driving season is getting going. California is averaging $6.4/gallon and Alpine County is averaging $7.8/gallon. Yes, energy policy has consequences. Since Biden took office, gasoline prices are up 109%. Is it 100% on the administration, nope, but it ain’t all Putin either.
On natural gas, it is $9.5MMBTU and is +156% YTD and 238% over one year. In Europe, natural gas is was as high as almost $70 recently, but is down to $25MMBTU. As a result of the price differential, much of the US supply is heading overseas given the price disparity. From Bloomberg: The US sent nearly three quarters of all its liquefied natural gas to Europe in the first four months of 2022, with daily shipments to the region more than tripling from last year’s average, the US Energy Information Administration said. How about this headline: Germany doesn't want to be 'too successful' at replacing Russian natural gas because it wants to move away from the fuel in the long run, economy minister said. What are the ramifications for Europe for competitiveness, cost of living, quality of life given these prices? No wonder Europe is screwed. The decision to close the nuclear facilities prematurely was idiotic. Below is natural gas for 5 years as of mid-day Wednesday. However, it sold off late in the day and closed sub $9.
On electric/gas prices for the home, my usage was up 28% this month over last year, but my bill was up 48%. I can’t explain why my usage is up so much other than the temperatures. In Florida, peak prices are in the summer and bills are less than half in the winter.
Apple CEO Tim Cook kicked off WWDC with a pre-recorded presentation with execs revealing the latest versions of Apple’s software for iPhone, iPads, Mac and Watch. It also announced two new laptops that run on its new M2 chips, which were also revealed during the keynote, and much more. The stock was up slightly on the day. One interesting development: Apple will let iPhone users UNSEND or edit messages in the iOS 16 update.
Elon Musk is threatening to walk away from his $44 billion bid to buy Twitter, accusing the company of refusing to give him information about its spam bot and fake accounts. Lawyers for the Tesla and SpaceX CEO made the threat in a letter to Twitter dated Monday, and Twitter disclosed it in a filing with the U.S. Securities and Exchange Commission. The stock price is down to $40 relative to the $54.2 agreed take-out price. The price is now over $13bn below the Musk deal price. This either does not get done or happens at a lower price in my opinion. I told you I thought fair value was in the high $20s. If it turns out 20-25% of the users are bots, it is even lower. Ken Paxton, the Republican attorney general of Texas, said he’s investigating Twitter for possible deceptive practices when it comes to bots.
Three of the key supply-side factors driving today’s global inflation levels have already turned around, meaning relief could be on the horizon for shoppers worldwide. A bellwether semiconductor price -- a barometer of costs of finished electronics products as diverse as laptops, dishwashers, LED bulbs, and medical devices delivered worldwide -- is now half its July 2018 peak and down 14% from the middle of last year. I suggested inflation was peaking and continue to believe that was the case. The charts below are interesting. I do feel some of this is the demand destruction and consumer sentiment which has become increasingly negative. This goes in line with Target’s announcement on an aggressive inventory reduction hitting the bottom line sending the stock -4% on Tuesday.
I have talked a great deal about the pendulum swinging too far left. Trump was a vote against the Clintons and Biden, a vote against Trump. The Progressives have taken over in many states and push high taxes, soft on crime, open borders, mandates, no homeless solutions and overly woke policy. The articles I am attaching are entitled, Los Angeles and San Francisco voters may rebuke left in primaries An ex-Republican billionaire could be the next mayor of Los Angeles-San Franciscans may oust their headline-grabbing reformist district attorney and California is about to experience a political earthquake. The 2nd article is from CNN, not exactly a right leaning news organization. The suggestion is high crime and homelessness are taking a toll on the constituents who are voting for change. On Tuesday, San Fran ousted liberal DA Chesa Boudin in a recall over soft on crime policies. The question is does this spell more trouble in the mid-terms for the Left? I think so. We need solutions, better gun laws, harder on crime, less porous borders, and a better energy polciy in a hurry.
On the golf front, I feel PGA players who are independent contractors should be able to play in the Saudi Golf League if they wish. The PGA and the Commissioner have been steadfast in the commentary that players will be banned if they play in the Saudi League. I don’t believe this is right or fair. I hope this goes to court and the players prevail. Lots of golfers are going over for big guaranteed money and massive purses. Phil Mickelson, Dustin Johnson, Kevin Na, Sergio Garcia, Lee Westwood, DeChambeau, Reed, Ian Poulter and others. I believe after the US Open other large names will follow suit. Rumors are that Tiger may have turned down $750mm to join the Saudi League. I do not condone what Saudi Arabia does in terms of behavior. The world seems fine with trading with China and they do horrific things (child labor, labor camps, treatment of Uyghurs, anti-gay policy…). This article suggest Apple sourced 90% from China. No one seems to care as everyone loves Apple products and stock. I just feel it is a double standard and the players have a right to earn a living in a challenging sport with no guaranteed money. Just like the USFL made the NFL better, I hope the Saudi League leads to improvements for the PGA Tour and its players. I don’t know many people who would willingly turn down tens or hundreds of millions in guaranteed money. Many more jump ship in my opinion. The prize money in Saudi is double the PGA Tour with 1/3rd of the field and 3 day events vs 4 day for the PGA Tour.
Other Headlines
White House worried about Jimmy Carter parallels to Biden presidency as approval rating remains low
Larry Kudlow: Regulations from the executive branch are an important cause of higher inflation
Stagflation Danger Sees World Bank Cut Global Growth Outlook
Pain of high inflation, slow growth could persist for years
Lender reduces 2022 economic growth forecast to 2.9%
Manchin wants to raise age to 21 for gun purchases, doesn't see need for AR-15s
I am for the 2nd Amendment, but do not see the need for assault rifles. I am not opposed to the 21-age limit, but you can join the military at 18.
Adams calls NYC’s criminal justice system ‘laughingstock of our entire country’
As someone who lived in NYC for over two decades, I want to see the city in a better place. My three days there just reinforced the fact that I do not believe it is worth living there unless you have to do it for work. Too many other great options today.
Man arrested after woman seen being shoved onto New York City subway tracks
This is such a scary story. Woman walking pushing a baby stroller and the car purposely hits them and drives off. He has a prior arrest for spiking a girl’s drink. I wonder why people want change in LA? I want him for attempted murder.
Another horrific story. Shot by an illegal immigrant in front of her father in San Fan. Of course, it is California.
Armed man who sought to kill Brett Kavanaugh arrested near Supreme Court justice’s home
Nicholas John Roske wanted to kill Kavanaugh over the leaked opinion.
Carolina Panthers hire NFL’s first openly transgender cheerleader
Pizza Hut features 'drag kids' book for children as young as kindergarten
Why are corporations so hell bent on this stuff. Sell pizza with stuffed crusts. Don’t push trans books on kindergarten students.
Paramount Sued for Releasing ‘Top Gun: Maverick’ Without Copyright License
Studio accused of snubbing copyright demand by author
Hunter Biden cavorts with hooker, illegal gun in latest mess for president
All I ask is that you consider what the press would have done with this if it were a Trump son. I want fair reporting, not so biased.
Overweight people lost 35 to 52 pounds on newly approved diabetes drug, study says
Every cancer patient enters remission after drug trial
Very promising, albeit small sample size on rectal cancer.
Elon Musk asks why DOJ hasn’t leaked Jeffrey Epstein’s client list
I agree 100%. The Supreme Court Opinion is leaked as are countless other items, but this list is nowhere to be found? I loved Musk’s Tweet below. Think of the powerful businessmen and politicians on this list. I can’t wait until it is finally out at some point.
DOJ moves to seize 2 planes worth more than $400 million from Russian oligarch Roman Abramovich
I am opposed to the seizure of all these oligarch assets. I believe this is a very slippery slope and am concerned where this leads.
Russia is weaponizing food supplies to 'blackmail the world'
'Nuclear war is coming' Putin's mouthpiece threatens west with 'World War 3' warning
Vladimir Putin’s pundit threatened NATO and the West as he claimed the weapons that are being sent in support to Ukraine
Virus/Vaccine
Dara still skewed by Memorial Day closures, but the chart gives you a rough idea of where we stand.
Real Estate
I spoke with Devin Kay, big real estate broker in Miami. He is seeing more price reductions in recent weeks. He believes some of the asking prices were ambitious to say the least, but I feel it is also a sign of the market slowing down. Higher rates, trillions in market losses, fears of layoffs, talk of recession, inflation and general consumer sentiment. “Up until recently, a market listing was met with a host of offers generally at or above listing price. That froth is gone, even in Miami for the most part. Yes, a very special home (below) on the water will still get attention, but the overall market is suggesting the top has been set for now. This CNBC article is entitled, “Mortgage demand falls to the lowest level in 22 years.”
Three homes on the ocean in Golden Beach, Fla., are selling for a combined price of roughly $93 million, according to agents involved in the deal. Taken as a single transaction, the deal will set a price record for Golden Beach and for the entire Miami area, the agents said. The buyer is Phillip Ragon, founder of the technology company InterSystems, according to people familiar with the sale. The three properties—located about 20 miles from downtown Miami—span a total of roughly 1.7 acres with about 275 feet of ocean frontage. The purchaser plans to raze all three residences, which are relatively modest beach houses, and replace them with a new single-family home. I mentioned things are softening, but ultra high-end, special properties remain hot.
I spoke with Mark Pruner (Greenwich, CT broker) who feels that market remains robust with limited inventory with just a little cooling. Inventory is down 75% from 2019, our last pre-Covid year. In addition our market continues to have new inventory go to contract about as fast as it comes on. There is clearly an attitude shift, but we have a lot of inventory to make up before we get back to anything like a normal market. Great charts in the Greenwich link. A reader, Brad, sent me these two pictures which are not surprising. What are the ramifications for lost income? Higher taxes or lost services or both? What do the wealth flight losers have in common? What about the winners?
Shockingly, this Bloomberg story is entitled "More People Are Moving to Manhattan Than Before the Pandemic.” However, overall, the New York metro area is still losing population, a trend that predates the pandemic.
Good charts in the link. The largest US city still faces a tough road ahead with overall population declining, low office return figures threatening business survival and fear of crime cited as a deterrent to moving to the city. But the data show how the most extreme migration patterns have already started to reverse, making last year’s dip seem like a pandemic-era blip.
CNBC article has interesting data on US housing wealth. I do believe the market is slowing and will continue to do so. The collective amount of money mortgage holders could pull out of their homes while retaining 20% equity rose by an unprecedented $1.2 trillion in the first quarter of this year, according to Black Knight, a mortgage software and analytics firm. In total, the nation’s so-called tappable equity stood at $11 trillion, or two times the previous peak in 2006. That boils down to an average of about $207,000 in tappable equity per homeowner. The housing market, however, is showing slight signs of cooling. Home prices, as measured by Black Knight in April, were up 19.9% year over year, down from the 20.4% gain seen in March. The slowed growth could be an early indication of the impact of rising rates. “April’s decline is more likely a sign of deceleration caused by the modest rate increases in late 2021 and early 2022 when rates first began ticking upwards,” Graboske said. “The March and April 2022 rate spikes will take time to show up in repeat sales indexes.”
