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The Rosen Report: Waze Or Else

May 4, 2022
Eric Rosen

Opening Comments

I received many positive responses about Julia’s song and video. For those who missed it, my daughter is 14 and wrote her own song about 18 months ago. Thank you for the words of encouragement and support and I forwarded all of them to her to see for herself. The link to “I’m Not Even Sorry” can be found here. Please send it around and share it with friends. Julia was so excited when kids in the school started singing the song randomly when she was walking down the hall. I received dozens of great emails about Julia’s song, but this was one of my favorites and was from a former colleague.

I went to Boston for a day and will make a couple comments about the trip as it was the 1st one since the mask mandate was lifted. On both flights, 50% of people were wearing masks and interestingly, none of the flight attendants wore one on either plane. I would guess 25% of people in the airport wore them. The other thing of note at both Hartford and Logan were the number of restaurants who now use computers to take your order (no live people). You put your order in on a screen, insert your card and they call your number when the order is reader. Given the cost of labor, massive turnover and lack of work ethic in that industry, it makes sense. I can see this trend picking up steam as the cost of labor and lack of available talent remains challenging.

Another shorter note today. I am taking a group fishing this am and have a board meeting this afternoon and then coaching my daughter’s golf team. After that, is board meeting drinks if I make it in time. I was up at 5am. There is a 100% chance I missed some stories from Wednesday as this was primarily written Monday and Tuesday.

  • Picture of the Day-Musk/Twitter

  • Waze or Else

  • Quick Bites

    • Markets

    • IB Strategist Market Calls

    • Manchin/Schumer Tax Increases?

    • Melvin Capital Bad Idea

    • Shanghai Shutdown/Supply Chains

    • FBI Director on Attacks on Cops

  • Other Headlines

  • Virus/Vaccine-Case Growth Accelerating

    • Data

    • Charts

  • Real Estate

    • General Comments

    • NYC/Hamptons-Color from Jared Halpern

    • Case-Shiller Home Prices

Pictures of the Day-Twitter/Musk

To me, the biggest news of the week is the Twitter sale to my hero, Elon Musk. I am not sure I have written more about any topic than media bias in my two plus years of the Rosen Report. I have been critical of both sides, but given social media is very left leaning, I have been disappointed by the one sided views and policies of Facebook and Twitter. This picture (from a prior Rosen Report) captures the hypocrisy perfectly as does the comment by many in the liberal press including the WaPo, owned by billionaire, Bezos. This article outlines some reactions by right and left politicians on the subject. Bezos had some Tweets suggesting Musk would be controlled by the Chinese given they make his batteries. No conflicts for Bezos with China and Amazon, right? I love Elizabeth Warren’s take on this. Remember, she lied about being American Indian when registering for the Texas state bar exam as well as when she applied to Harvard and UPenn. Sen. Elizabeth Warren, one of the biggest advocates for breaking up major technology companies like Amazon, Facebook and Google. She called Musk's purchase of Twitter "dangerous for our democracy."

I felt Musk’s was a very credible offer, and I actually believe he is significantly over paying at $44bn (cash) for a company with $5bn in revenues and $818mm in EBITDA (54x EBITDA). The PE is -177 and the forward PE is 63 for TWTR. The stock was at $38/share just prior to the Musk announcement. The stock went public @ $26 in November of 2013. I do not think a 46% return in 9 years in the tech space is impressive ($26 to $38). I do not believe any other credible parties came in at anywhere near the $54.2/share price. Despite the board’s lack of desire to sell to Musk, they had a fiduciary duty to take it seriously. Of note, TSLA was down 12% on Tuesday wiping out over $114bn of market cap. I understand TSLA shareholder concerns about Musk’s bandwith and potential sales of stock for margin calls for the purchase of TWTR. Again, thank you Elon for your courage.

I just hope Musk evens the playing field and keeps it fair for all parties, and his Tweet below suggests as much. I just feel uncomfortable with the amount of influence the media/social media has on major outcomes such as elections and pushing opinions as facts to millions or billions of people in the world. Banning Trump and right leaning, but allowing Ayatollah Khomeini, Putin, Louis Farrakhan and others is absolutely wrong in my opinion. Ban them all or none of them. Banning the Hunter Laptop story was wrong by the media and social media and thankfully, Musk agrees. I am very excited this deal is going through and appropriate the fact that Musk is making lives better through all his work. Despite his huge accomplishments, pushing free speech will be my favorite of his many successes. You go, Elon.

I am a big Bari Weiss fan and she knows a little something about censorship from her days at the NYTimes. Here is her brilliant take on the Twitter/Musk marriage.

Musk announced board members won’t be paid. Elon, I have been screaming about this topic and have the proof (prior reports). I will take a board seat for free. Hit me up. I love the way another hero of mine put it below.

Waze or Else

I use Waze when I am trying to get somewhere new. I think it is a brilliant technology which I find incredibly useful other than around NYC. If I know where I am going, I have not used the app, as I know how to get there. After last week’s insane debacle trying to drive home, those days are over. I am using Waze everywhere I go now.

I had to take Jack up to Palm Beach Gardens for some putting work with Stephen Sweeney, an incredible putting instructor for many PGA Tour players. We went straight up I-95 and it took 41 minutes door to door. I had a bunch of stuff to do that day and we drove home the way we came. All was going swimmingly until traffic screeched to a halt .5 miles short of the Congress Exit in Boca Raton. I am talking a standstill. As I understand it, there was a bad accident with a fatality, and they closed I-95 forcing all traffic off at Congress. It took 1 hour and 25 minutes to go .5 miles to get to the exit and then another 20 minutes to get through the light.

We all know about my lack of patience and I was in rare form. Great news, my son was there to calm me down. YEA RIGHT. The little guy was egging me on with constant chirping about how frustrating it was to sit in traffic and not move. Just what I needed to hear as my blood was boiling.

Had I used Waze, it would have told me to get off at the prior exit and maybe would have added only 5 minutes to my trip. The total time of my nightmare was 2:28 or almost 2 hours more than the ride to Palm Beach Gardens. Lesson learned. Waze or else.

This photo was off the internet, but you get my drift.

Quick Bites

  • I have made plenty of mistakes in my life and do my best to take responsibility for them. I do not know Gabe Plotkin, but believe his track record was solid prior to the Reddit beat down. I was shocked that he planned to start charging performance fees again despite being down over 50%. In hedge funds, there is a “high water mark” and funds generally don’t charge performance fees until they make up for the losses. To me, this was a horrific idea by Plotkin and am surprised he tried to get away with it. On a positive note, he wrote to clients, “I am sorry. I got this one wrong.” Gabe Plotkin scrapped a plan to start charging performance fees again at his beleaguered hedge fund, Melvin Capital Management, after encountering backlash from investors. Mr. Plotkin on Thursday told clients he planned to shrink the size of Melvin’s hedge fund by several billion, to $5 billion, and resume charging performance fees even though his investors are still sitting on steep losses. Those who had been invested at the start of 2021 have lost 51.8% through March, after a big hit Melvin suffered in January of last year due to the meme-stock rally.

  • FBI Director Christopher Wray addressed the skyrocketing rate of murders against police officers Sunday, saying the surge is far outpacing general violent crime. Wray made the comments during a "60 Minutes" interview on Sunday, saying murders of police officers rose 59% in 2021. The total murder rate rose 29% last year, and the U.S. lost 73 police officers to such attacks in 2021. "Violence against law enforcement in this country is one of the biggest phenomena that I think doesn't get enough attention," Wray said, adding that officers are being murdered at a rate of nearly "one every five days." "Some of it is tied to the violent crime problem as a whole. But one of the phenomena that we saw in the last year is that an alarming percentage of the 73 law enforcement officers killed in the line of duty last year were killed through things like being ambushed or shot while out on patrol. ... Wearing the badge shouldn't make you a target," he continued.

Other Headlines

Virus/Vaccine

  • The case growth continues to escalate and passed 50k/day after being as low as 27k/day in late March. Now, all the regions in the US are seeing case growth generating +61% case growth from the prior two-week period. The number of hospitalized patients is +5% after declining since January. On the ominous front, deaths continue at just under 400/day, but given the US is at 990k total deaths, it looks as though we will hit 1mm by early June. The 2nd and 3rd charts below show the cities/territories with the largest case growth over the prior two weeks and Puerto Rico is getting slammed. On the positive side, this CNBC article suggests at least 58% of the population has natural antibodies from previous infection according to the CDC. Everything I have read suggests natural immunity is the longest lasting and best form of protection.

Real Estate

  • The more real estate people I speak with in South Florida, the more I am hearing about companies who want to have a South Florida office. The most common location requests are Miami or Palm Beach. I do not have names confirmed, but household names in finance keep getting bantered about in looking for space in the Sunshine State. Although I am getting concerned about housing prices given a combination of the insane run-up in prices and the move in rates, I feel as the migration continues, the flows will benefit FL, TX, NV, MT, TN and the Carolinas. I feel that the most exposed homes will be $1.5mm and less which are more interest rate sensitive and in blue states. I am hearing more about homes and rentals staying on the market longer in various markets. For Florida, some of it may be seasonal, some aspirational pricing and some is a slowdown. Prime properties remain in strong demand. Marginal product is starting to slow down. My biggest concern for those moving down is finding a house and a school. South Florida lacks the infrastructure to handle so many families. I continue to have people call me and they literally cannot find a rental for their family or a reasonable house. AND these people are willing to spend $5mm-10mm! I was shown a very interesting presentation recently by a big R/E investor who suggested that housing starts in the decade from 2010-2019 were so low that the US is “under housed.” I do not have his chart but found this one which shows a similar trend. Basically, from 1950-2010, we had a robust housing start market, then in the last decade, due to the Global Financial Crisis, starts crashed sharply which has helped lead to the predicament today. In 2009 through early in the last decade, housing starts basically fell 80% from pre-crisis levels. Obviously, the Fed and over stimulus from the government have contributed to the issues today in addition to the limited starts. Chart below from St. Louis Fed and shows housing starts and you can see the massive decline starting at the end of 2006.

  • Color from Jared Halpern (NY R/E Broker from Elliman)

    • NYC-Sales inventory is tight. Last few weeks buyers of mine that weren’t in much of a rush and wanted to see what pricing was going to do throughout spring / summer have become more engaged due to the rates increasing. Think we will continue to see buyers come off the sidelines as rates keep increasing. Market definitely a little slower than it was but still transacting. We have been fairly busy across all of our listing price points. And just heard two stories of bidding wars for a 2 bed and 3 bed on UES. No rental inventory. I have had several rental clients become buyers as they feel they are completely priced out of the rental market. Good one bedrooms right now are minimum $4,000-$4,500. 2 bedrooms that used to be $5,500-$6,500 are now around $7,000-$8,000 and though to find even at those prices!!

    • Hamptons we remain busy but there is no inventory. Friends of mine just listed their house for $8.25M to test the market and see if someone would pay “their number.” It last left the market unsold in 2020 pre-covid asking $5,250,000. 7,000sqft new build in 2017, has a nice pool and room for tennis in a B location in Southampton. 

  • A unit in Manhattan’s 432 Park Ave. skyscraper has freshly become NYC’s priciest sale of the year, after selling for $70 million, according to Crain’s.

    The condo on the 82nd floor of the tony, 96-story Billionaire’s Row building was last listed for $79 million and entered contract on April 20th, according to StreetEasy.  I do not like this location and there is a $125mm lawsuit against the developers for major issues in the building. The building does have great amenities and views.

  • Home prices increased 19.8% in February year over year, according to the S&P CoreLogic Case-Shiller national home price index. The 10-city composite annual increase came in at 18.6%, up from 17.3% in the previous month. The 20-city composite was up 20.2%, rising from 18.9%. Phoenix, Tampa, Florida, and Miami saw annual home price gains of 32.9% 32.6% and 29.7% respectively. Sun Belt cities continued to see the highest gains. Phoenix, Tampa, Florida, and Miami saw annual home price gains of 32.9% 32.6% and 29.7%, respectively. All 20 cities reported higher price increases in the year ending February 2022 versus the year ending January 2022. Minneapolis, New York and Washington, D.C., saw the smallest price gains, although they were still in the double digits.

Eric Rosen
The Rosen Report