Another Ross Rant and Opportunity Zone Breaks With Past Disastrous Progressive Legislation.

Stella loses first tooth.

Buy American - Restore America

And:

For those who want to watch a gripping series it is "The Spy" on Netflix.  True story of Eli Cohen an Israeli spy who penetrated Syrian Society.  6 videos.

Finally:

Have a meaningful Memorial Day.
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Ross continues to Rant:

The stock market continues to defy fundamental analysis.  It shoots up when it appears Moderna is advancing a vaccine even though it is far from clear if their vaccine will really work and be approved. Then a question is raised about the Moderna report and the market tanks. To be clear, it is very doubtful that any investors had any idea what the medical issues really were. Then on Wednesday it is back up. No rationale for any of it. Several stocks are at or nearing their all time high based on no information as to future earnings. We don’t even know how the economy will perform in Q3. This makes no sense. It is simply a lot of cash with no other place to go and then the algorithms start to chase each other. I am not suggesting you should sell here, I have not, but I just think the market may be fully priced and could suffer a downturn from here for a while. Or the economy may pick up faster than we all expect in July and after, and the market could take off and my 2800-3000 year end forecast could get buried. I have no idea at this moment. Clearly the tensions with China are going to escalate over the summer, and the battle over funding a new Phase 4 will get very nasty. Also clearly, doctors now understand much more and can treat the virus and deal with outbreaks, so maybe there will be no surge  of cases in the fall when they will know a lot more and have more therapies. Maybe enough of us will have formed community immunity and the virus will mostly go away. There are so many unknowns on top of Iran, N Korea, Afghanistan, Syria, and the economy of the EU, that any forecast about the stock market is just a dart throw. Until there is anew event on vaccines, or geopolitics, it is likely the market will just bounce around between 2800- 3000 for a while. S we know, that can change in a moment if some news happens.

The ten year has sat around .65% for a long time. That suggests the bond investors think it will be quite a while before there is a real recovery. A while is not definable. If the economy opens up more quickly as it appears may happen, then maybe the rate rises a little on optimism of economic growth returning. However, rates will remain ultra-low for the foreseeable time, and into next year. Powell made that clear when he said the economic recovery is fragile and has risk. 

This translates into a strong housing market for the rest of the year and into 2021. The problem as we know is no inventory so prices are  rising already. New York will likely see an exodus as the fiscal and now crime situation is very bad thanks to DeBozo and Cuomo letting expenses get way out of control, and raising taxes and regulations so that the major taxpayers are already moving out. Thanks to DeBozo crime is really spiking again as he has released many prisoners and the recent law re bail has let criminals know that even when they get arrested it is just for a few hours unless it is a real felony. All the real progress to make NYC the best place that attracted so many people, has been undone now and with the virus, it has made NYC a place many do not want to be anymore. Many companies are now considering having many more staff work virtually and maybe have some suburban offices.  Commuting in NYC is miserable for many in the best of times, and they now have gotten used to work from home or a satellite office and be much more productive by not commuting. One study suggests productivity rises by 40% because it saves commuting time and stress and there is little to no interruptions from co-workers popping in. Even if that number is 20%, it is a huge cost differential between no office expense for the person, and a big productivity increase.  

If there is  a mass opening of the economy very soon, then there will be much less need for another big PPP.  There will probably be some more cash for that, and some more to direct subsidies to individuals of some small number just because it is near the election, and  the Republicans need to look like they care. The fight with the Dems will be very noisy and the Republicans will be blasted in the press.  We already know the extra $600 has become a real problem, but some companies have told employees that want to stay out for another few weeks on enhanced unemployment, that they will  not have jobs to come back to. Mnuchin has said if you are offered your job back and refuse, you cannot collect unemployment. A new study shows 68% of laid off workers now earn more, 134% of regular wages,  not working than on the job. 20% make twice as much and the bottom 10% three times as much. The Dems, of course, are demanding that the $600 and unemployment pay be extended through year end.  The study showed the average worker is no making 42% more sitting home than working. Reality of business never interferes with their ideology, and political pitch to lure workers to think the Dems will pay them more to not work while the greedy Republicans deny it to them. Welcome to the Dem policies of socialism. This is called buying the election. McConnell is correct that there should be no more money for states and cities beyond the $150 billion they were already given unless it can only be spent on virus needs.  The rhetoric about having to lay off cops and firemen is already all over the press and it is the standard political rhetoric from Dem mayors to avoid having to deal with the real issues of pensions and over spending. Hopefully the Republicans will hold firm on this. It is the last chance to fix the fiscal mess in big cities and blue states. This is a big issue for November. If you wondered what happened to the extra unemployment dollars plus the $1200 subsidy, retailers report it went to buy big screen TVs, apparel, and other non-essential goods since mid-April. So if you listened to the media there are only stories of food banks and people who can’t make it. That is just media propaganda. Reality is, most unemployed are better off now than if they were working, and getting them back to work and off the free ride is the real issue.

Economists say it will be in June before unemployment numbers will not turn until sometime in June. Maybe it will be early June as small companies defy the shut down, and just start to open, and as big companies reopen like the auto companies.  Most important is it will be sometime in June and then things should improve quickly as we get to August September and things are fully open. Rules that there cannot be full reopen until there is a vaccine like in some Dem states will be ignored more and more as that is just stupid. Businesses in those Dem states are not going to stay closed while the states next door are fully open. The mantra of the press and Dems that some people may die is simply ignoring that if the economy is not fully functioning, more people will die from that.  These governors will pay a big price in November.

Friends in the hotel space; bankers, managers, analysts and owners, etc have all said big conference houses are toast well into next year, at best. There is no way big meetings are going to happen except in a few cases. Even if there is a vaccine by January, it will take months for a lot of people to get the shot. Just approving it is not the same as widespread application. Owners of these assets are usually large entities and they are paying the debt service to the banks now, but that is not going to last a lot longer. These are big loans so the banks will have to take big reserves once payment are missed or modified. At some point, maybe not until late this year, everyone has to face the truth, and these hotels will likely need more equity and debt reduction.  The last thing lenders want is to foreclose on these assets. They can’t run them and can’t sell them for anything close to the loan amount, so the solution is best to find a workout with the existing owner if that is a major company or REIT.  It will be very messy for months or maybe years. Then there are the smaller assets in CMBS pools where the owner is not able or willing to invest new equity.  These assets will get foreclosed and bought at deep discounts by vultures. There are already a quickly growing number of foreclosures of multifamily assets in the B and C quality category. As properties owned by good borrowers and REITs are doing  well in rent collections, 94% vs 87% for lesser assets. Most people have simply written off retail. 

Leveraged loans are the subordinated loans to highly levered companies usually in levered buyout deals. As of today 1600 bonds that are leveraged loans are on watch by S&P.CLO’s- Collateralized Loan Obligations-bond issues holding a lot of leveraged loans are in trouble as a result. As I keep saying, don’t assume bonds are low risk.  Depends on the bond. You can lose a lot of money investing ion bonds of the wrong type.

There is a boatload of capital ready to buy distressed assets, but the pain has not yet ramped up enough to transact. It will take a few more months before banks and borrowers work through defaults and forced sales start to happen. It is likely to be late this year before the sorting really gets to the point where deals make sense to the vultures, so don’t rush to buy anything yet.  There is plenty of time. The pain will be terrible for some and the deals will be there in time. The banks have barely begun foreclosure, or workouts.

There is now a letter from 600+ doctors to Trump demanding an end to the lockdown as it is doing a lot of damage, as many of us predicted. Even Dr Fauci says continuing the lockdown will be detrimental if it goes too long. It is causing a much bigger health crisis than the virus. In Vermont there are 3 people in the hospital with the virus, but they still have shut down commerce. That is nuts. Trump has been right-the cure is worse than the disease. Shutting the economy for this long has done real damage both economically and to people’s health. In March I said if the shutdown goes past mid-April it will do severe dam age to the economy.  So here we are in late May. The Dem governors who are keeping their states shut, are literally killing people by doing so, according to the 600 doctors, but they are determined to ty to harm the economy in places like MI to ty to hurt Trump. That is simply stupid. Those governors will not get reelected. The governor of MI is an idiot, but she is supposedly in the running to be VP. Good match for Joe. There are also multiple reports that kids being kept out of school is doing a lot of damage to their education.  Especially for minority kids who do not have the advantage of a parent who has the ability to do home schooling. 

China is now stepping up the confrontation with the world with their effort to completely control Hong Kong.  Months ago I said Hong Kong was the inflection point, and that is about to happen. The UK and the US cannot allow this to just happen. Companies operating in China will realize things are getting messy, and will be even more incented to move out. I believe China is building up its military to prepare to attack Taiwan in a few years. They know the US cannot stop a mass attack on Taiwan, and China will take the risk that the US will not retaliate.  Depends who is president. If it is Biden they will do it. If Trump they will wait, but it is going to happen one day. They will also increase their build up in the S China Sea and seek to control the sea lanes in the Spratley Islands located in southeast Asia. That will give them control over all trade routes in the Asia Pacific. If  they control the South China Sea and the Spratleys, take complete control of Hong Kong, and then take over Taiwan, they will have complete control of Asia, and they can then deny the US Navy access to the area. Only the US Navy stands in their way. If the US does not continue to make a major build up of its military, the world is going to be dominated by China in a few years. This is an existential contest and very dangerous.

There is a new kind of war in the Mideast.  Iran attacked Israel with cyber because they know they cannot launch any military strike while Trump is president. They hope Biden wins and will end sanctions as he has said he will do. Israel struck back much more effectively, and shut down Iran’s major port. The Iranian attack on water systems was not effective.  If Iran decides to do this again, Israel will wipe out with cyber, many other parts of Iranian infrastructure. Israel is probably the best at hacking and cyber defense in the world.

CA is about to pass a law which allows commercial tenants freedom from termination and eviction for non-payment. If this passes then nobody- residential and commercial has to pay rent for a while. CA seems to think landlords are all bad people and should subsidize their tenants. They are also now about to give $100 million of CA tax dollars to illegal aliens.  Why you ask would anyone in business live in CA anymore. They are becoming a true socialist state. 

University of CA has decided to scrap SAT and ACT tests to make it easier for minorities to get accepted since their scores are, on average, materially lower, and indicate many are not qualified for schools like Berkley or USC, or UCLA. A faculty committee did a study of the issue and determined that the problem is the minority kids are often not completing all of the courses in high school that are needed, and so are not prepared to do the work, which is what the tests show . They conclude that the SAT and ACT “add substantially to UC’s ability to predict student success”, and  are needed to make the system retain its quality level, and to not accept kids unable to do the work. They also clearly stated that the SAT and ACT have no discrimination in the test.  The study also found there is a lot of grade inflation in wealthy high schools, so the tests are needed to weed out those kids. So of course that conclusion that the tests are important and needed, was rejected, and the tests are eliminated. So the UC system will now teach to a lower level so the minority kids can be given inflated grades. And we wonder why China is surpassing us.

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Wake up Blacks, smell the flowers!

If one judges our presidents by accomplishments, Trump will probably be considered one of our greatest. It will take time for the Trump Hatred Syndrome to pass/fade and historians to do an objective look back.

About a year ago I wrote about what he, Sen. Scott from SC and Ben Carson were doing for our underclass citizens who were living in blighted areas and it was a new program that challenged private money, benefiting from tax relief, to invest in housing and was called "Opportunity Zones."

Friday, Biden told blacks they had to vote for him to be black and that Democrats had been their saviors.  If you read Amity Shlaes: "Great Society" and the chapter pertaining to Johnson's housing disastrous solutions/failed programs you will learn how Democrats and their  progressive legislation destroyed the black family, drove husbands/fathers away, destroyed churches and replaced communities of homes with  terrible high rise buildings infested with gangs.

Biden implied blacks cannot think for themselves and sadly there is a great degree of truth in his comment because blacks have been dutiful slaves to the Democrat party for years.  Perhaps they will wake up and finally realize this fact and mend their voting ways.

The Opportunity Zone legislation  has just begun to have an impact  and the benefits of over 75 billion dollars of private money is going to eventually turn projects and living conditions around.  Based on results and not personality, Trump , I repeat, will go down as one of America's great presidents because of what he accomplished or tried to against great odds and purposeful roadblocks.

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