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The Rosen Report: Philadelphia Freedom

May 25, 2022
Eric Rosen

Opening Comments

I heard from an NFT fund manager who felt the data I cited from the WSJ and Forbes was one-sided and suggested I should quote from more different sources. I never thought I would hear that the WSJ and Forbes were not reliable sources on financial data. It does not change my view on art NFTs. I will not participate. They very well could become the next big thing, but not with my money. I continue to buy real art to hang on the walls in my real home. I will leave the NFT art and Metaverse real estate to everyone else. I do know that many believe there will be NFT art sales will dwarf traditional art in the next 10-15 years. It might, but I will be buying my favorite artists at discounts if that is the case. Given I correct mistakes, here is a link with charts which suggests the drop off I cited is not showing as steeply as it did the WSJ and Forbes links in my piece. This link is to a report which refutes the data from the WSJ and Forbes.

Jack flew with a friend to Memphis, Tennessee on Monday for a golf lesson. The round trip flight was $1,100. I do not believe I have ever spent over $1,000 for flights on the east coast in my entire life and have done so twice in the last month. If travelling, book early, it is going to be an expensive summer for vacations.

It is May 12th and the heat has been turned on. It was 91 the other day. I will tell you that Florida through May is doable. June is uncomfortable, but manageable. July, August, September and October are just horrific. Hot, humid, hurricanes, rain… If you move to Florida, do what you can to escape.

I had some doctors appointments (back issues) and meeting friends in Palm Beach, so the send is early and some of the #s were prior to the close, but are outlined in the charts. I am sure I missed something. SO MUCH GOING ON! Sorry for typos.

  • Picture of the Day-Shot Sage Blue Marilyn

  • Philadelphia Freedom

  • Quick Bites

    • Markets

    • Crypto Crash

    • Day Trader Losses

    • Credit Markets

    • Inflation

    • Power Grid Concerns

    • Hypocrisy DeSantis/AOC/Jewish Museum

    • Twitter/Trump Ban Will End With Musk

  • Other Headlines

  • Virus/Vaccine

  • Real Estate

    • My General Comments

    • Another Hedge Fund to South Florida

    • Florida Rents

    • Mortgage Refinances Plummet

Picture of the Day

I watched most of the Christie’s Auction on Monday night. The sales were strong on lower priced pieces (generally above the estimates), but not as impressive on the important artwork. I wrote the report about my father in law and his run in with Warhol in the 1970s and it was about the famous Blue Marilyn Monroe. He could have bought it for $100k or less in the mid 1970s. The 1962 piece just sold for $170mm (hammer price, but $195mm with buyer’s premium), under the estimate of $200mm. I was surprised it did not go for more than $200mm or even $300mm. It is that special. Famed art dealer Larry Gaggosian bought the Marilyn. I suspect he was fronting for a large collector, but do not know for certain. For perspective, 1962's "White Marilyn" sold for $41 million in New York in 2014. The White painting is inferior to the Blue by a mile in my opinion. It is not close, but judge for yourself below. Warhol painted these soon after Monroe's 1962 death by barbiturate overdose; it's part of a series of five portraits of Monroe he painted which became known as the "Shot" series. The nickname was born when a visitor to Warhol's "Factory" studio in Manhattan fired a gun at them, piercing the portraits which were later repaired. Of note, I read an email from a collector site which suggested the Asian art collector community was largely absent. Couple this with the broader market volatility and $11 trillion in stock losses and crypto winter and it could explain the weaker than expected sales at the high end. We know many large hedge fund managers are down sharply and the headline about spending almost $200mm on a piece of art would not sit well with investors.

Philadelphia Freedom

I happen to be a big fan of Elton John and although this piece has nothing to do with the song, Philadelphia Freedom (1975), it has to do with freedom and independence and how it has changed over time for teens. I felt the song title went along with freedom and independence given the Liberty Bell/Philly connection. Tradition tells of a chime that changed the world on July 8, 1776, with the Liberty Bell ringing out from the tower of Independence Hall summoning the citizens of Philadelphia to hear the first public reading of the Declaration of Independence by Colonel John Nixon.

When I was a teenager, everything was about having a car and being “free.” Free to drive to school (no bus). Free to go to the beach to surf. Free to go see your friends without having mom take you and free to get a job or go out on a date. Going to the movies or an arcade was a big deal 35 years ago. The pièce de résistance was mall time. Going to the mall in the 80s was super cool and a place to get some clothes and meet friends and have lunch at the super fancy Food Court. I have not been to a movie or major mall in years. Can anyone guess the 1980s movie from this food court picture? Does the character Jeff Spicoli help?

I turned 16 on November 25th, 1985 and took my driving test that day. I actually saved up for a car and bought it just before I turned 16. It was torture having a car in front of my townhouse and not being able to drive it alone. It was a 1980 brown Toyota Celica stick shift which I paid $3,000 for and overpaid by approximately $2,800. The thing was a complete lemon. I did not have a mechanic look at it with me, given I knew everything (all teens do) and the seller took advantage of an idiot 15.9 year old. The trunk leaked so badly in the rain that I had to bucket out the water. It was a complete disaster. Had I not been so stupid, maybe I would have looked at the trunk prior to buying it and would have realized it was leaking. What happens in South Florida when water gets into a car in the heat of the summer? Did you say mold and mildew? My car smelled like death. However, the ugly, smelly, brown Toyota gave me the ability to be independent and I did not care that it was a piece of crap. Could I have possibly picked an uglier car and color? No matter, it gave me the freedom I so badly desired, even though it required heavy air freshener and open windows to handle the smell.

Thanks to my sister, Debbie, teaching me how to drive a stick shift, I started delivering pizza and valet parking cars which changed my life. It gave me the ability to earn real money to not be reliant on my mother and gave me more confidence. You are far cooler to the girls when you have a car and some cash to take them out on a proper date. Nothing screams confidence like an early bird dinner at TGI Fridays or Bennigan’s and the $4.99 meals. Tuesday’s had 10 cent chicken wings at Landlubbers in Cooper City and you could be sure I was there in my sweet ride buying those wings for my lady friend. I sure knew how to impress. Some things never change.

Within 9 months, I saved enough for me to trade in the lemon for a newer and cooler car. It was a silver 1985 Toyota Corolla hatchback with 8,000 miles for $6k. I also learned that when you over pay for a car, you get smoked on the trade-in. I learned the valuable lesson about depreciation. 

Today, I find more kids are not as anxious to get a license and a car the minute the turn 16. Is it because of the independence of a smart phone, social media, car services and the have less need for in-person interaction. Does a car no longer represent the “freedom” it once did, while the teens can connect with more people and go to more “places” on smart phones? Does the phone give kids access to a world that is currently cooler than the mall? When the Metaverse takes off, what then? My daughter had a friend over and they were sending each other some sort of messages sitting together on the couch. I lost it. LOOK AT EACH OTHER AND HAVE A CONVERSATION!

My son turned 15, and thought he would want his learner’s permit ASAP. He never mentioned it, so I left it alone. He took his test just a couple months prior to his 16th birthday. Oops! The rule in Florida is you need to have your permit for one year prior to getting your official driver’s license. I am not sure if Jack knew, but I don’t think it would have changed his desire to take the test earlier. He can “chat up” his friends on Instagram, Snapchat, Twitter… He can Facetime, text or Direct Message (DM), play a video game…. Regardless of whether or not we think those connections are quality or not, this is what they know. Teens have Uber or Lyft too which offers freedom not available in the Stone Age when I grew up.

When I was a kid and wanted to speak with a friend or a girl on the phone, inevitably, my mother would pick up the land line and say something embarrassing. “Eric, time for bed… Eric, take out the garbage. Eric, you need to take a shower and wash your hair…” Nothing kills a teenage boy’s mojo like mom embarrassing you in front of a potential girlfriend. I did not have my first cell phone until I was 27 years old in 1997, for perspective.

I am not here to pass judgement on pushing a kid to drive. I am just here to tell you motivations are different and I think technology, our willingness as parents to coddle and the ease of getting by without a car today all play a part. What do you think?

I still believe if I were turning 16 tomorrow, I would be 1st in line at the DMV to take my test. However, this time, I would opt for a cooler car in a better color and would open up the trunk to check for water. Oh to be a moronic 16-year-old. Seems like yesterday, but my physical ailments remind me that it was almost 40 years ago.

Quick Bites

  • I spoke with some folks in the equity markets and the theme was consistent. Panic, crowded longs hit hard and crowded shorts rallying. The GS basket was down over 5% Monday, easily under-performing the broader market. More chatter on some major funds down 30-50% YTD. I just don’t know how you recover from that in this tape. Even fund managers who have small (net) exposures are losing on long and short positions. To show how far we have fallen, look at Amazon, clearly one of the few stock market darlings. It has given back 100% of its pandemic gains and is off more than 44% from the highs from July 13th 2021 when it hit $3,773. It is trading at $2,107. I had a friend run equity market cap data for me. The Bloomberg Developed Market Large and Mid-Cap Index was $71.5 trillion on 12/31/21 in the early afternoon today it is $58.2 trillion today for loss of $13.3 trillion. This does not include the trillions in losses in fixed income products or crypto curriences/NFTs in recent months which would bring the total losses higher by trillions.

  • Today markets were volatile again with an am rally only to sell off post the inflation data which exceeded expectations. Couple this with the move in crypto (below) and it was a rough day. I bought technology stocks (small size) on the dip this afternoon for the first time in a long time. This is despite the fact that Apple fell 5%+ today and broke through $150, a key resistance level and is -20% YTD. How the VIX (measure of market volatility) is largely at 32.5 unchanged is beyond me. I had inserted the chart in the last piece and people liked it. It is updated. NOT ONE stock is up and I added a few more. Of note, as of the close today, ALL the FANG stocks are effectively in correction (-20% or more). Ranked from worst to best performers relative to all-time highs.

  • Stocks fell on Wednesday, stepping back earlier gains as investors continued to digest the latest U.S. inflation data. The Dow fell 327 points to 31,834, or 1.0%. The S&P 500 slipped 1.7% to 3,935 and the Nasdaq dropped 3.2% to close at 11,364. Tech shares struggled on Wednesday, tempering gains for the Nasdaq. YTD, Dow -12.4%, S&P -17.4%, and Nasdaq-27.3%. Market feels horrible and would have thought S&P down more YTD, but energy has clearly helped. There are now some very beaten up names which warrant attention. Do your homework as opportunities are being presented. I would love to see a flush. A limit down circuit breaker day in the next week would make me go in heavier. Meta, Apple, Salesforce and Microsoft fell 4.5%, 5.2%, 3.5% and 3.3%, respectively, as investors continued their movement out of growth areas. Information technology and consumer discretionary sectors fell more than 3%, dragging down the S&P 500. Disney and Rivian released after the close and both rallied, but I did not have time to digest the data. Beyond Meat shares were -24% after the close on disappointing earnings. Nasdaq- 11%+ over 5 days. The 10-Year Treasury yield fell 7bps to 2.92%. Oil rallied 5% to 105 and natural gas was +4% to 7.6.

  • A quick note on credit markets. The investment grade (IG) bond market has an average price of $93.8 and 78.9% of the index trades below 100, while 9.3% trades under a price of $80. The average yield is now 4.7% for IG bonds. IG bonds are highly rated and deemed safer, but riskier than government bonds. The move in rates is largely driving the sell-off, but can lead to opportunities. The High Yield (non-investment grade) market is now down 9.2% YTD. The average price is down to $90 and the yield is up to 7.8% for the JPM US HY index. Today, 37.9% of the HY market trades below 90 (2nd chart), relative to 2.2% at 12/31/21. I will just suggest that credit is finally starting to look interesting again and personally, I am going to be taking some of my cash and investing it into the IG and muni bond markets. Thanks to the JPM credit research team for sharing. Readers, be sure to call your brokers and start asking about cash alternatives with yield which can help you generate more income without taking crazy risk.

  • High Yield Bonds trading below $90. Not the sharp increase from below 5% to almost 35% since 12/31/21. The chart above must be a week or so newer data.

  • I started calling for inflation to peak by end of summer in reports from a few months ago. I believe that was a bit of a contrarian call. However, I modified that due to Ukraine invasion and China shutdown and worried inflation would persist longer. Now that the markets have been roiled, rates are higher, housing is showing cracks, layoffs are coming in tech and Wall Street, I again believe we are approaching peak inflation levels (wrote this Monday am). Also contributing to my view is tough comps meaning that we are no longer comparing the data to the 2020 lockdown lows. Today, CPI came out Wednesday am at 8.3%, higher than expectations sending stocks lower. However, April’s data of +8.3% is slightly better than March data of +8.5%. Core CPI, which excludes food and energy, also was higher than expected, rising 6.2%. Interestingly AAA US average gas prices are at an all-time high of $4.4 for regular unleaded and $5.6 for Diesel as of 5/11/22. One article I saw suggested major trucking firms are preparing for “Imminent Diesel Shortages” on the east coast.

AOC Crying over the US support of Israel for the Iron Dome

Other Headlines


  • Cases continue to grow, but the pace of growth is slowing and was +49% from the prior two weeks. Hospitalizations and ICUs grew at +20% and +12% respectively. Now deaths are growing, but at +2%. All regions in the US are seeing case growth, and the following states have case growth in excess of 100% from the prior two-week period. From worst to best: Missouri, Mississippi, Maine, Utah, Georgia, Hawaii, South Dakota, Iowa, Louisiana, Wyoming.

Real Estate

Eric Rosen
The Rosen Report