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My oldest daughter (Debra), her husband (Martin) , their son and his wife (Elliot and Elizabeth) and our two great grandchildren (Olivia and Leah) are spending a few days with us, beginning next week, to celebrate Passover so I will not be posting any memos for awhile.
Again I want to wish my Christian friends, and their respective families, the Happiest and Safest of Easters. I hope the weather will prove accommodating.
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I always spend too much time worrying about things that never happen so I hope this proves to be another "dud" concern.
There have always been enough patriots to volunteer for service because they felt it was their duty to protect their fellow person and nation, because it was both the right thing to do and because they believed America was worth saving/protecting.
As America radically changes from being what our "founders" intended it to be will there still be such patriots who are willing to make the ultimate sacrifice?
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Even Ross is confused:
______If you can't make any sense of the markets
try this. Draft Kings just did a convertible bond issue of $1.1 Billion, 0%
coupon, convertible over 7 years at a 40% premium to current stock price. If
anyone can explain why anyone would invest in this bond let me know. It fully
sold out.
I don't care what the mayor of Miami says, Bitcoin
is just a wild speculative thing. It is not currency. Institutions are taking
small positions because they see it as a speculative investment, not because
they consider it currency. Don't be caught up in the hype.
Now that Powell has made it clear he will not push
up rates for another 18 months at least, and the massive fiscal stimulus is in
people's hands, the equity markets should have a good run up for a while as
vaccines should reach near herd immunity in May or June at latest according to
Johns Hopkins, and near full reopening. See below for the counter argument. The
problem is there is this annoying thing called the market which has run up the
ten year to 1.75%, earlier than I or others thought likely, so tech stocks may
move up more slowly, or not at all. You do not want to be in bonds. While there
might be some blips down in the ten year, rates are trending up, and possibly
faster than we expected. That does not help housing. The combo of higher rates,
much higher home prices, and much higher lumber and other component costs, will
slow the housing market which will be a potential drag on economic growth. Keep
in mind that a house is like a bond in some ways. Raise mortgage rates, and
demand drops and prices slow or drop. I am having my roof redone, and I had to
prepay for the cedar shingles 3 months early to hold the cost of the job. Just
one example. Lumber alone has added $24,000 to the cost of a typical new home,
and all other components are up near record amounts. I expect the equity
markets to do fairly well for the next few months, but that could fail to occur
if we see the ten year spike further. A test will be if the Republicans can
stop the next bills flooding out of the House-$4 trillion
"infrastructure" including a massive tax increase, plus HR1, plus the
labor bill, plus an immigration bill. All would be disaster for the economy,
and for fair elections. You cannot count on Manchin to hold out no matter what he
claims now. He has already said he is for "reform" of the filibuster.
McConnell is all that stands between disaster and stopping them.
Only about $600 billion +- of the $1.9 trillion is
actually to be spent this year, and of the portion going to individuals, only
about 35%+- is expected to actually get spent into the economy. The rest will
be saved or invested into the stock market, or used to pay down debt. It is a
one moment small boost that goes away quickly. One good boost is that there
were far fewer defaults on commercial loans this time due to the fast bounce
back in many places, and banks being willing to work with borrowers. So the
massive reserves held by banks are now going to be reduced, and that money will
be freed up for more loans and bank earnings will improve.
Don't be at all surprised to see inflation
including food and energy shoot up over 2% and maybe as high as over 2.5% by
summer. Food and energy is what matters most to consumers. The Fed seems to be
living in a dream world believing inflation is no risk for two more years, and
so rates will stay low. They believe that once the next few months of consumer
spend is past, then globalization will allow prices to moderate. There is a
good chance they are wrong, but we will have to see. Supply chains are choked
up, consumers will increase demand in May onward through over the summer. Wages
are going up because they have to compete with the vast Congressional give away
to lower wage workers which will keep them from reentering the job market, plus
a marked shortage of skilled workers exists now. It is to be seen if producers
can raise their prices to keep up with rapidly rising costs. Either we get
inflation from price increases, or lower earnings due to not being able to pass
on cost increases. Neither is good. Given the huge pent up demand, and the
massive savings and good balance sheets of consumers, I assume prices to
consumers can be raised now. If inflation in the summer does rise much above
2.0%, then the ten year will be above 2%, and tech stocks will tank. Earnings
across the board might be disappointing if costs continue up and end prices are
not able to be raised sufficiently to offset the cost increases and proposed
corporate tax increases. A lot of this is speculation, but you need to not just
assume Powell knows better. The Fed has been wrong rather often. The most
glaring example is they completely missed forecasting the crash in 2008 when
many of us in the capital markets saw it coming as early as mid-2007. The other
side of this is the giant $3 Trillion of excess savings and low debt of
consumers, and the reopening of the economy, all of which should bring strong
growth of 7% or more to GDP. Maybe the port backlogs will get cleaned up
bringing a lot more supply to markets, maybe the workers will come back in the
fall when the excess unemployment runs out, maybe the chip shortage will get
dealt with by year end, maybe OPEC will increase production, and maybe costs
will then stop increasing. Maybe. Maybe the world economy revives and commodity
prices rise faster or labor costs rise offshore. We don't know what will
happen, but just be aware, things might not go so well in the stock market as
the market seems to expect right now. I am all in equities for the moment, but
watching the ten year and inflation carefully. A lot of ifs and lack of
clarity. The steep drop in stocks this week does not portend well since it came
the day after Powell said don't worry, I have it under control. In short, I am
optimistic about the market for now but I do expect a bad problem in 2022 when
all this debt comes home to roost. Even Moody's Analytics, the modeler for the
White House, expects a major drop in stock prices by mid-2022. It is unclear
now what will be the right investment in early 2022. Maybe it is quality real
estate to get a yield. We will see. Depends on rates.
REITs are performing better now. They are selling
on average at 102% of NAV vs usual 100%. Yields are 3.53%, a 1.72BP spread over
the ten year and -33 BP to BAA corporates. Dividends are 208 BP above yields on
stocks. One has to be very careful which REITs to invest in. For example strips
are down while manufactured housing is up.
If they raise corporate taxes to 28% then when
combined with city and state taxes, US companies again become not competitive.
Back to the Obama days of companies moving offshore and GDP estimated to drop
1% per year from trend, and wages down 1% per year from trend. Economists
estimate that low wage workers will lose 1/5% of their wage increase they would
have had. 64% of voters are against higher taxes. Objective research has shown
now that the Trump tax cuts benefited the lowest income workers the most
through 9% growth in their wages and 3.5% unemployment. It is not the tax
savings that matter to low income workers, but the economic growth tax cuts
bring which then means more jobs and higher wages. So claims that the tax cut
only went to the wealthy and corporations is missing the whole point.
Revpar is still down 43% from 2019, so don't look
at comparisons to 2020. They are meaningless. However, hotels will boom
starting in June. Here in Longboat the hotels are already jammed. Big box
conference hotels still have a very long way to go to recover to positive cash
flow
The Dems are planning a sneak attack on fracking
through what they planned as a secret legal maneuver. Normally they would have
to run new regs through an administrative process. Instead they intend to have
left wing groups file fake law suits that EPA then settles with strict limits
on ozone-then that becomes severe limits on carbon, and that becomes shut down
fracking to limit ozone issues. Then EPA says we are just complying with the
legal case settlement and have no choice. This is a sneak around the legal
process for new regs. It was created by the new deputy director of EPA and some
Harvard lawyers. Shows you how dishonest they are. It was discovered, and
revealed by the WSJ, so probably it will be able to be stopped. Having those
225 Trump judges will matter now.
Many of you are feeling desperate to find a way to
stop the runaway Pelosi legislative and Biden EO flood. Have faith. There are a
large group of very tough Republican State AGs. The lawsuits are coming soon.
Even NBC is now saying out loud how come reporters are barred from the detention
centers for kids. The same ones, the same press called cages when it was Trump.
It is early yet. Give the AG's and others time to file their lawsuits. The
border disaster can no longer be hidden and covered up. Most people are against
higher taxes. Mothers are outraged kids are not in school yet, and won't be
until semester end. Most people stopped believing Fauci finally with his scare
mongering. The Dr Suess, and Teen Vogue situations were an inflection point in
cancel culture. Biden is clearly not fully able to mentally function, and it
will be more obvious as time goes on. I believe in another couple of weeks
things will start to happen to stop this radical Pelosi deluge of legislation.
People are fed up being called racist for every little manufactured victim
claim. Voters will in time realize the $1.9 trillion seemed nice when they got
their checks, but as they understand where all the rest of the money went, they
will not be happy when taxes are raised. I believe things have gotten so bad, and
so threatening to American values, despite the press trying to hide it, that
the pendulum has begun swinging back slowly.
It only took a day, and already the money to
reopen schools is being reallocated by some CA teachers to instead be paid as
bonuses. Why reopen the schools, or use it to help kids suffering mental health
issues when the teachers can use it to collect bonuses for not working. And
they wonder how some people lose all good sense, and get so angry that they do
violent things. Schools are now awash in cash, but not awash in students.
Between the $60 billion normal allocation to schools there has been three new
pandemic related batches of cash of which the unspent is now around $200
billion. The allocated $10 billion for "testing" is a sham. Little
thermometers are cheap, and lots of schools already have them. No school is
going to do nasal testing. Catholic schools and private schools, and Florida
schools showed it can be done for very little cost. The $10 billion is purely
for show. Obviously this was what I said, a massive payoff to the teachers
unions which will repay some of this with contributions to the Dems in 2022.
You thought DC was corrupt, this is just one egregious example. The $3,000 per
child credit, which is essentially a cash payment, is now being proposed to be
permanent. This is guaranteed minimum income come to life. There is no means
test or anything . A fully employed couple with two kids who earn $200,000 will
get $6,000 of your money for doing nothing. This is called buying votes in
2022. The $350 billion for states and cities is 4 times more than Moody's has
calculated they require to pay all budget shortfalls. CA has a $15 billion
surplus with no money from DC, but they get I think $40 billion. The Dems are
counting on states and cities to find ways to spend that money to juice the
economy which does not need any more juice if they would just leave it alone.
So Chicago has already decided to use some of that cash to institute a trial
guaranteed income program. The government pensions get bailed out. It goes on,
but you now understand a little of what is really in that bill. Massive payoffs
to Pelosi friends who contribute part of it back to her DNC Congressional
campaign fund.
I am trying to get this straight. I worked hard
and earned all of my money on which I have paid high taxes, which in NY all in
comes to around 50% or more given federal, city, state, property and income
taxes. I will leave out sales tax. Then I put that money at risk by investing
it so companies have the capital to expand and hire people. I risk losing some
or all of my invested capital. Now Biden has taken my hard earned tax money,
and given it, with no requirement for work or risk, to lower and middle income
people who did nothing at all to earn it, and they pay no tax on it. And if a
single mother has another baby we pay her even more for that. (We supposedly
ended that pay for babies thing in 1994). 45% of workers' pay zero tax. Yet
they say I am not paying my fair share. Maybe Liz Warren can help me understand
this unfairness thing where I pay around 50%, and 45% of people pay zero. The
US has the most progressive tax system in the world. Much of the rest of the
world has VAT which hits low income people hardest.
Connect the dots. Pay massive subsidies to most
voters and say the Republicans voted against this money you are getting from
us, and if you keep electing us we will keep giving it to you every year. Open
the border and let anyone in. Count illegals in the census so metro areas where
they tend to go will get more Dem seats in Congress. Then you get chain
migration and the whole family comes in and gets counted. Pass HR1 which does
away with voter ID, and allows last minute registration and ballot harvesting.
Allow illegals to vote in local elections-initially, then who knows who is
really voting in Federal elections if there is no ID and they allow ballot
harvesting. This is exactly what is going on now. The dots all connect. All
these bills are inter-connected intentionally, as is open borders. They needed
to get rid of Trump at any cost so they could do all of this, and they used CA
courts to try to prevent Trump from stopping them. That was why getting 220 new
justices confirmed by Republicans was so critical, and why the death of RBG was
so pivotal.
It has been suggested by some, and is likely
correct, that this is really the third term of Obama. He is really acting as
president, and has all of his people in key positions in the White House and
several cabinet positions. It becomes more clear each day that Joe barely knows
what is happening, and they just give him a small script which he has on index
cards you might notice him refer to when he speaks. They kept putting off a one
man press conference for a while. Notice anytime Biden is in a meeting in the
Oval Office, or anywhere, and the press is allowed in, he has que cards in his
hand which he glances at. They hid him during the election, so they are doing
the same now. It is not unprecedented. They did it with Woodrow Wilson ,and at
the end with FDR. The Trump haters thought he was dangerous and Biden would
really be moderate, or so my centrist friends tried to tell me. Welcome to
reality.
Biden called Putin a killer and Putin came right
back with a challenge, and so Biden was "too busy" to take a call.
Putin already knows Biden can't handle a one on one. Biden looked very weak.
Blinken completely blew it with China by publicly attacking them, and then
having the Chinese call his bluff and launch a full scale attack quoting the
Dem attacks on America about racism and other things. It was a diplomatic
disaster. The White House is off to a terrible start in the world, and the
world is using all of the anti-American, anti-white rhetoric of the left
against us very publicly. It was a major propaganda victory for China.
Columbia is having 6 separate graduations-by race
and gender. You wonder how this can be true, but it is. Look it up. That is how
far academia has gone off the rails. I listened to a discussion between Jody
Shaw, the Smith College associate who just left, and Glenn Lowery, a well-
known black professor who is a moderate. She described how everything in
university is viewed through a racial lens and critical race theory. As Lowery
put it, it has become the genuflecting to the alter of race. There is no
discussion, only indoctrination now in universities. Calls to determine truth
through examination of the data or discussion is considered to be white power.
Just to show you how far off track universities are from their mission to seek
truth. The concept of get ahead through merit and hard work is considered white
oppression, and a way to keep blacks from getting ahead. This is really scary
because the kids actually start to believe this stuff, and then blacks demand
to get jobs and advancement because they are black, not because they worked
harder. They are taught to believe they are victims, as opposed to people with
opportunities for them to seize. A few other notes. Some are saying they need
to do away with bar exams so more people can become lawyers, as somehow bar
exams are racist. Great, we can have unqualified lawyers now. NY charter
schools are 95% minority students. So DeBozzo and the unions are trying to shut
them down which would deny these kids their only opportunity to get ahead in
life. 48,000 black kids are on the waiting list in NYC, and DeBozzo just
refused to provide space in Queens for the top charter school. Another outcome
of charters is it proves that black kids do not need to be in class with white
kids to do well. It is all about the non-union teachers, and a culture of hard
work leads to success. It has nothing to do with the race of the students.
They pack 3,000+ illegal immigrant kids into
Dallas conference center, as many as 50% may have Covid, but American kids
can't go to school with all sorts of protections. Hypocrisy at its height.
Watch DeSantis- he has begun his positioning to
run for president.
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I apologize for posting this challenged white dude for apologizing! Hell, I apologize for being an American these days because the Democrats are insane, our president is a Dufuss and his sidekick cackles like a hen but she promises to get down to that border one of these days now that everything is under control, ha , ha.
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