A world of make-believe.
Still dancing.
It does make me angry. It does. It’s not the jack-booted thugs who take away liberty, but a gradually whittling away for something that sounds - and often is - very nice.
The first time I really got angry is realizing how the world really works, increasingly works, and that was in 2008 with the bailout - the real honest to God bailout - of companies like Morgan Stanley or Goldman Sachs - the banking system. It was in that moment where I feel like the skin, the pleasant veneer, of what we like to tell ourselves about free markets and free elections, that pleasant skin was kind of ripped off. You saw the naked sinews of power and muscle that was beneath it.
When were you radicalized? So that was one of those moments for me, and I think that a lot of what we continue to see today is a reverberation or continuation of that.
- Ben Hunt
They’re still doing this “Stock Draft” thing. The fear is palpable.
Censorship is the last resort of desperate and unpopular regimes. It magically appears to make a crisis go away. It comforts the powerful with the narrative they want to hear, one fed back to them by courtiers in the media, government agencies, think tanks and academia. The problem of Donald Trump is solved by censoring Donald Trump. The problem of left-wing critics, such as myself, is solved by censoring us. The result is a world of make-believe.
History doesn’t rhyme, it repeats exactly. March 23, 2000.
''It is a fever that has gripped the country,'' said Harry Cohen, manager of the Smith Barney Appreciation Fund, referring to demand for computer and other high-technology stocks that has generated huge wealth and added urgency to the Federal Reserve's efforts to cool off the supercharged American economy so inflation remains in check.
Noting that the Fed, headed by Alan Greenspan, raised interest rates again just the day before, Mr. Cohen added: ''The market is spitting in his eye.''
The SPX was up 2% today, and almost 8% year to date. The stock market right now is spitting in Jerome Powell’s eye.
"In the past 90 years there have been three financial crises on Wall Street that required emergency operations by the Federal Reserve. Two of those three crises occurred in the past 12 years...Wall Street is bleeding the system dry."
Pam Martens and Russ Martens, April 27, 2020
I think we’re up to at least four now.
Grant Williams and Bill Fleckenstein with Steve Eisman
“I would not have bailed out the depositors in Silicon Valley.
You’re big boys, you’re the guys who keep saying, “We don’t want government in our business. We’re capitalists.”
So reap you what you sow.”
Maybe it’s time for some reversion to the mean?
Corporate profits after tax as a share of GDP:
I thought this was pretty good - Nick Gerli and Amy Nixon on residential real estate. (I almost never watch Youtube videos - I’ll find the podcast audio, or if I have to I’ll convert Youtube videos to mp3 format.) I know some give Gerli a hard time, but in this interview he seems reasonable to me (i.e., not hyperbolic.). As always, your mileage may vary.
Sam Zell in the house. (I was amused by the ad for Global Real Estate ETF (BLDG) in the middle of the interview.)
Some Zell quotes:
When Blackstone or Starwood or somebody else creates a quote “non-traded REIT,” as far as I’m concerned, the word non-traded means no price discovery.
I think that so far in the real estate space, I don’t think there’s been much opportunity created, and frankly the opportunities won’t get created until the regulators force everybody to mark to market
As far as the overall real estate market is concerned, I’ve been a seller for probably seven or eight years except for a few examples in our public companies. Most everything we’ve done has been done with the objective of liquidating our positions because we couldn’t justify the prices that were being paid for existing real estate.
I mean, here in Chicago, 25% of Michigan Avenue, which was the number one retail space in the city, is vacant. Go to Madison Avenue, New York and take Madison from 52nd to 83rd and the amount of vacancy is alarming. I think they have the same situation in parts of LA.
About six years ago we took over a public REIT that had 12 billion dollars’ worth of assets called Commonwealth. It had 145 assets of which we’ve sold 141. I’ve sold 141 assets. And I don’t have one regret. I don’t have one scenario where I said, “God, I wish I could get that back.” I don’t want any of it back because people paid me prices that I just couldn’t understand.
Some of the best deals I ever made occurred during periods when there was stress.
Chart of the Day
Now here’s some price discovery...
Fire Sale: $300 Million San Francisco Office Tower, Mostly Empty. Open to Offers.
That building now is for sale, with bids due soon. They are expected to come in at about $60 million, commercial real-estate brokers say. That’s an 80% decline in value in just four years.
So it’s a $60 million office tower, not a $300 million office tower. Price Discovery.
Stan Druckenmiller at Norges Bank's Annual Investment Conference on April 24, 2023. Video (Druckenmiller comes on around 2 hours and 6 minutes in).
Here are some of his comments that jumped out at me:
I've studied a lot of economic history, but I've never had a situation where you had free money for 11 years, a very broad asset bubble followed by jacking up rates 500 basis points in 12 months.
I will say that, the response to Silicon Valley unnerved me a little because in four days, they printed enough money, [that] they basically wiped out the entire reduction of the balance sheet they had done, for five or six months. [So much for QT - rh]
So if I'm trying to look ahead and anticipate I don't have a lot of faith in these guys, should we get into a hard landing that they're gonna hold the line and not do something maybe worse than Arthur Burns?
let's just say we're gonna have a hard landing and a bad recession in the U.S. What does that mean for Nvidia? I don't know. I mean, oils and chemicals went up in '73 and '74. Staples have gone up in bad recessions in the U.S. historically.
So I think the equities are complicated. I mean, I'd say the one area, the way that I, I feel reasonably comfortable in is, I'm short the United States dollar. Currency trends tend to run for at least two or three years.
We had a long one here, over 10 trillion - something like 13 trillion - came into the U.S. dollar during the previous decade. I will say full disclosure, I missed the dollar, probably the biggest miss in my career in, in currency trade. I missed the last nine months’ run-up in the dollar. I just couldn't bring myself to own Joe Biden and Jerome Powell.
Historically, we could be trusted. We had a rule of law, a lot of things. So the only space I have any risk on right now is in the US dollar. Don't run out and short dollars, I could change my mind in a week. But, that's where I am right now. And I'm also long gold obviously for the same reasons.
I don't know who, but I heard a saying with analysis comes paralysis, and Soros used to say, "Invest and then investigate", which I was already doing before I met him…we're more in the camp of if we got a strong feeling, we'll cut the analysis short and then, by all means, do our analysis thoroughly and then just unload it if it turns out my thesis was wrong.
The last comment reminded me a bit of something Marc Cohodes said to a couple young analysts:
"You guys dig into all that stuff, and you get all sorts of data - I just like try to back-up, and go for a walk and just start to think..."
Brookfield’s Gas Company Tower goes into receivership
Brookfield defaulted on two senior loans attached to the property at 555 West 5th Street in February — one for $210 million and another for $140 million…Under the loan agreement, Brookfield was required to pay 3 percent in additional interest if it defaulted — on top of the interest rate Brookfield paid on the $350 million debt. The loans held an interest rate of Libor plus 1.89 percent…The company reported $27.3 million in yearly base rent at the tower in December, or about $2.3 million a month. That wasn’t enough to cover the new debt service payments, which shot up as interest rates soared in the second half of 2022.
The two lenders are Citibank and Morgan Stanley, two firms that probably should not exist post-2008. Meanwhile, Brookfield recently raised $17 billion more to buy real estate.
Fried Frank acted as counsel to Brookfield Asset Management in connection with the formation of Brookfield Strategic Real Estate Partners IV, Brookfield's latest flagship opportunistic real estate fund. The fund raised $17 billion in total commitments at its final close, making it the largest real estate fund to close in 2022. The fundraise was named "Capital Raise of the Year" by Private Equity Real Estate.
Under 184 pseudonyms, Columbia is the largest private landowner in New York City A Spectator analysis of publicly available Accounting and Reporting at Columbia documents found that under 184 pseudonyms, Columbia has property claims on at least 383 distinct addresses.
Someone mentioned the University of Michigan Consumer Expectations subindex:
Consumer Inflation Expectations Note it has never (in this data series) made it down to the Fed’s made-up 2% level.
United States Kansas Fed Manufacturing Index
Silicon Valley Startups Brace for a Summer of Pain
“We haven’t had a compression in values like this in more than 20 years. It’s an absolute bloodbath,” said Cameron Lester, global co-head of technology media and telecom investment banking at Jefferies
Poor Cameron. ‘Summer of Pain’ sounds like the worst thing to happen since Biden’s, “Winter of Severe Illness and Death.”
All these guys are the same - they had 20 years of a massive tailwind from irresponsible monetary policies and now that for a year we’ve begun to revert to a more historical “normal” they cry like babies.
“Some of these companies remind me of Scottish nobility that haven’t raised money in seven generations,” said Mathias Schilling, co-founder of venture firm Headline. “They sit and drink champagne while it rains through the roof.”
Schilling’s advice: “Get real, take the down round.”
the global count of so-called unicorns, or closely held firms valued at $1 billion or above, stands at 1,209 per CB Insights, up 11.6% year-over-year and more than double the tally seen in late 2020…
Venture capitalists kept the dream alive during the financial downshift, minting 77 new unicorns last year via early-stage, Series A or Series B funding rounds, data from Crunchbase show…Apart from the 107 baby unicorns created in 2021, that’s easily the highest tally on record, more than double the pre-virus peak of 38 established in 2018.
It seems to me that we’re still in the middle of a historic mania.
Great Moments in Hubris: Chuck Prince, July 9, 2007
Chuck Prince on Monday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, saying Citigroup was “still dancing”.
The Citigroup chief executive told the Financial Times that the party would end at some point but there was so much liquidity it would not be disrupted by the turmoil in the US subprime mortgage market.
He denied that Citigroup, one of the biggest providers of finance to private equity deals, was pulling back.
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,” he said in an interview with the FT in Japan.
Don’t forget - Citigroup had 1,038 employees who got bonuses of $1 MILLION or more in a year they lost $27.7 BILLION and got $45 BILLION in TARP Funds.
New bipartisan bill would let the U.S. Mint alter the metal content of coins to save money
They no longer even bother to hide the corruption anymore, its right in our faces, out in the open.
My eldest brother was chief compliance officer for Citigroup 2008-2015 iirc
In the Summer of 2009 we were at a family gathering for my dad's birthday. My brother was on a long conference call with Vikram Pandit. After he got done, I asked him about the robosigning scandal. I mentioned the figures for Citigroup fraudulently transferring mortgages in Florida. My brother said that Citigroup didn't robosign as many as Countrywide or others. I will never understand this view.