Google is trying to cram their new block-editor on my format so they can edit our blogs. I don’t like it and this is my blog, I am paying for it. So, leave me alone. They also are running words together as you will note. This is the type of service we get as conservatives. When is the government going to do something about them?
June 8, 2020
We are now dealing with a pandemic, the worst shutdown of the US economy and world economy in history, a new cold war with China, and now rioting and looting. Other than that Mrs. Lincoln how did you enjoy the show? One would have thought the stock market would be cratering again. It seems apparent that investors are focused on the future, and the money assumes Trump is reelected. If all of this does not negatively impact the stock market it is unclear what could. We have two takeaways. Either the market is totally irrational, which it often is, or investors are betting that 2021 will be a very good year when much of this will be behind us with Corona being just another disease, the riots long over, a continuation of Trump deregulation and pro-business and the economy back on a positive growth trend. For the moment I am in betweenand remain fully invested in US large cap equities. I take the marketaction to indicate that generally most investors feel confident we willovercome this period and return to growth. That being the case, for themoment I remain fully invested. My portfolio is up almost 5% over Dec 31by just being patient and sticking with my investing philosophy of longterm strong companies, and not quick profits on the latest ho9t stock ofthe week. Goldman and other pundits have now reversed their pessimisticforecasts and now seem to agree that the economy will recoup much fasterthan they predicted.
There is a huge difference between howRepublicans attack a massive economic slowdown and the way Obama Biden didit. Obama had his make believe shovel ready $800 billion program ofstimulus that spent pretty much zero on real infrastructure, andblew the rest. None went to consumers or small business. Trump gaveconsumers $1200 into their bank account directly and then excessunemployment direct to consumers, and then over 4 million small companiesgot $650 billion directly into their bank accounts. None of any of theseprograms were through government supposed to spend it inefficiently as inthe Obama Biden program. There is no Solyndra which was a massivepolitically driven fraud. This is the difference between Republicansletting the private sector decide how to spend the money, and Dems “government knows best” where to spend money policies. It is the taxpayersmoney so let them spend it themselves how they see fit. The Dems think itis their money.
38 states now have declining unemploymentclaims. There is a concentration of claims in Nevada, and the in the oilpatch. The red states are opening much faster than blue states and thisshows up in the claims numbers. The Midwest and some western states arerebounding much better as they reopen faster. MI being the standoutexample of bad decisions and harm to their economy as the governor makescontinued stupid decisions. As time goes on the decisions made by redstates as they rebound will be an obvious contrast with coastal bluestates. The overall economy would rebound faster if the blue states wouldopen faster. It will be interesting to see what happens with thevirus now in places where the riots took place.
I believe the economy is going through amajor transition, from basic ways to do business and live, to one in whichtechnology is the dominant force and driver of growth. The pandemic andnow riots, have simply greatly accelerated this trend by wiping out theweak old time companies like JC Penny, and seeing companies like Microsoftboom. Just look at which companies are thriving and which are dying. Thebig tech companies have giant cash loaded balance sheets, and littleexposure to hard assets, and to a single market. Amazon and Wal Mart selleverything to anyone. They make it easy to buy from your couch. JC Pennynever went for online and is dying. Netflix brought the movie theater toyour living room. Verizon and Apple make it easy to talk to anyoneanywhere, anytime, or to look up any kind of information about anythinganytime. As more young people enter the workforce and start companies, thefaster technology will infuse into everything we do. AI is makingeverything from simple tasks to research move to a much higher qualityplace, and with incredible speed of the analytical powers. This is a hugeaccelerant of the US ability to lead the world in the future. The EU hasonly minimal abilities in technology compared to the US. Only China, andIsrael are a competitor. The Arab world has none of this ability and willfall further and further behind Israel. China is the real threat to us.Russia simply does not have the financial nor population capacity tocompete. What is key, is that it is the US is so far ahead ofeveryone other than Israel and China that they cannot catch up ever. Thatmeans inequality in the world only gets more pronounced and one daythat will lead to some bad event. It is essential that the US continue tohave minimal regulation and a very pro-business policy to encourage thetechnology sector to thrive and to have thousands of young people startnew companies. Under Obama Biden new start-ups were verydiminished. Under Trump they are booming. That tells you much ofwhat is key to policies.
China has now stopped its agreed agpurchases of soybeans and hogs. Reality was they had not yet really mademany large buys, so there was a question if they were ever going to fullyabide by the agreement. Supposedly they have an adequate supply at themoment and they may buy more, but that is unclear now.
If you notice the protestors are allyoung college age for the most part. They learned all of this on campuswhere identity politics rules the day. They are taught we older whitesuccessful guys are all bad oppressors. Where are the protestors rallyingagainst the 87 blacks who were shot in Chicago last weekend 21 of whomdied. Did you hear about that on the mainstream media? Did anyone mournthe black guard who got murdered in a drive by in Oakland? Where isthe sympathy for the shop owners, many of whom are blacks who investedtheir last penny in their shops, who are no wiped out by rioters? As badas the cop was who killed Floyd, the rioters who destroyed the lives ofblack shop owners are almost as bad.
If there is no law and order, there is nofunctional society, there is just anarchy which is impossible to allow toexist. The constitution guarantees me life, liberty and the pursuit ofhappiness. I am being denied that by the looters, and the refusal of Demleaders in cities and states who failed to act. In NYC the 700 looters whowere arrested were almost immediately released due to the bail reform lawof Cuomo and the Dems. The government has an obligation to keep mesafe. If the mayors like DeBozzo do not protect me, and if the governorwill not do what is needed, then the president has an obligation to act.It is a fact that destroyed shopping areas in riots do not come back for10 years or more. Communities that get burned and stores destroyed justcreate more poverty and drug use, and more crime, which then makes lifeworse for poor blacks. That then leads to Dems demanding more wastefulcash for the area. When Trump chastises governors for being reluctant toact, he is doing the job he is there to do, bring law and order andpeaceful streets. I am tired of hearing from pandering CEO’s andHollywood, we need to come together, cops need to be retrained, or we needto do more for blacks. A black guy became president and one becameAG. And the result was worse race relations. More identity politics.And now we have a replay of 1968 as a result. Where are they demanding anend to the looting of their own stores? It is all really about culture.70% of black kids are born to unwed mothers. No father in the house. Badschools because disruptive kids are not tossed out. Charter schools aremade to jump through hoops to get started denying the kids from a bettereducation so the union can collect more dues to contribute to idiots likeDeBozzo. One cop in Minneapolis did an awful thing, but the other 800,000cops in the US are not him. 80 cops died last year, nine blacks got shotwho were unarmed. 40 whites who were unarmed were shot. 19 blacksdied last weekend and 80 were shot in Chicago who were shot by otherblacks. A 75 year old retied black police captain doing security ata pawn shop was murdered by looters. Where were the protestors,politicians or media on that? As I said with the virus-we need tolook at reality and proportionality. I was stunned this week when the CEOof BET Networks said we need a $41 Trillion reparations payment to all 44million blacks. He has lost his mind. He went on to claim Germany paidreparations to Jews. Not true. Is he really trying to equate the holocaustwith slavery or blacks in the US today. That is bizarre. We needpoliticians, CEOs, and the media to get some perspective. There is nocomparison between the opportunities blacks have today vs even 20 yearsago and surely vs 50 years ago. It is up to everyone to decide to makesomething of themselves or not. Blacks are no different. Thousands ofholocaust survivors went on to lead successful lives. There is nothingexperienced by blacks that is remotely similar. Thousands of poorAsians go on to be highly successful in school even when they go to lowerquality public schools in NYC. When I was young, Jews were badlydiscriminated against in jobs and where we could live. I just wasdetermined to be a success in spite of that. I got myself educated andworked hard to succeed in life. All you get in life is an opportunity tofail, or not, and then it is up to you to make it or not. Oprah, BenCarson and other blacks grew up in terrible conditions, but they made itto the top without government subsidies or help. So can everyone else,just like many of my white friends have done who also came from nothing,It is all up to the individual not the government or corporations. NowAsians and white males will be subjected to even more discrimination incollege admissions and getting hired so everyone can feel like they are “doing the right thing” to help blacks. Merit has just suffered a hugefurther setback. New anger will build up and more lawsuits by Asians willhappen. Someone other than Amy Wax and Heather MacDonald needs to stand upand say- it is culture and self-responsibility, not more governmentprograms and not more discrimination against white males and Asians.
Statements by Obama and Biden and othersthat police are inherently racist is disgraceful, and that rhetoric iswhat has led to the extent of protests of today, and the rhetoric of thepress and others. It is suddenly the in thing to say that there needs tobe “change” etc. It was meant to inject anti-cop views into the newsand into universities, and has now permeated corporations. It is simplynot true. I am certain there are racist cops, but so are there racistpeople everywhere. Just as there are black who hate whites, and just asuniversities discriminate against white and Asian males in admissions.There is no such thing anywhere as total absence of discrimination in someway no matter the nation or ethnic group. Does not make it right, but doesmake it reality that blacks have no corner on the discrimination market.Almost all major US cities now have either black mayors, and or blackchiefs of police and many black cops. The black police chiefs weresupposed to be the difference. Yet the rhetoric has not changed. The factsare that most cops do not discriminate, and 60% of robberies and 53% ofmurders are committed by blacks which is why prisons have so many blackinmates. There were 1004 people shot by cops in 2019. Only 35% were black.Cops made 375 million contacts with the public in 2018, and only a fewended badly. Only 9 unarmed blacks were shot by cops in 2019, and we donot know the reason they were shot which may have been justified in somecases. That is down from 38 in 2015. There were 7400 homicides of blacksin 2018. Most were murdered by other blacks. Cops shot 9 unarmed blacks,and of that number there was a reason of a firearm being present. OnMonday night five cops were shot. Where is the press or mayoraloutrage. The criminals made it so, not the cops. Black leaders and leftwing mayors and governors need to show leadership and support cops, anddispel the Obama, Biden, Holder anti-cop rhetoric. There are the usualdemands for police reform and control panels etc. Fact- as cities clampdown on cops undertaking legal steps and reducing interactions with thepublic, crime goes up materially. Baltimore is a clear proof. After therewas so called reforms murders skyrocketed. In NYC as DeBozzo and Cuomo putin bail reform, crime has skyrocketed.
The media shouted that the police usedtear gas to clear protestors from Lafayette Park. The Bishop of thechurch claimed the same all over TV. It was a lie. The media just jumpedon that story without ever asking the cops what was used and why were theymoved out. There is nothing the mass media says today that can bebelieved- Russia collusion, tear gas, Flynn, and many more things.They are doing grave damage to democracy by failing to do their job andbecoming propaganda machines for the anti-Trumpers. Even if you hateTrump, this should upset you. Biden gave a speech, but he had 8 years tofix the issues, but made it worse. I think a lot of blacks now get it.
Dem governors demanded you cannot go tothe beach, a restaurant, haircut nor the doctor, because it wasdangerous due to virus. But they encourage you to go out in massivecrowds to protest. Someone explain that to me.
College students who post something onsocial media that is not in line with politically correct about theprotests or riots are being punished by their school for exercising theirfree speech rights today. Apparently the schools monitor the social mediain some way. FIRE, a non-profit devoted to free speech on campus, has beenburied by calls from students who are being punished for onlineposts. If you wondered how bad the stopping of free speech really ison campus, this is it. Fall semester on campus is going to be dreadful forany student who does not condemn cops and Trump. This may help explain therhetoric you hear these days in the press and the protests.
The hotel industry is about to go thrumassive changes. Brands may stop being managers due to the potential forliability issues arising from the shut-down. Managers control the bankaccount. Who gets sued for unpaid bills? Did they comply with the WarrenAct rules on advance notice of layoffs? Who gets hired back first? Someplaces have laws you need to hire the most senior first. Who owes theunpaid wages if there are some? Who covers vacation accrued pay?Were systems properly maintained during closed periods? Who is responsiblefor inserting more working capital to restart and to pay for the thingssome places need to do for social distancing and cleaning? Who replacesthe cap ex reserves if they were used to pay debt? Who will employ thestaff in future-now it is the manager. Maybe they no longer want tobe the employer. How do you forecast from here? Balance sheet lenders arebeing very conciliatory and CMBS lenders as well in some cases. The reasonis there are no real buyers yet for foreclosed hotels. There is lots ofmoney to chase deals, but the lawyers have made it clear the potentialliabilities with hotels is huge. Nobody has any idea how fast or slow thehotel recovery will be. There is no price discovery yet. What caprate did you use on what NOI projection? So everyone is taking a breatherfor 90 days to try to determine how to forecast what will be the situationin 6 or 9 months. There is universal agreement that big conventionhotels are in long term trouble. Select service and extended stayare in much better position as are drive to shore front resorts. Bottomline is nobody has any idea what to do yet, so almost no deals arehappening other than a few special situations. There are no lenders now,and CMBS is far away from restarting. So buyers are all equity which makesoffers very low. There is some rescue capital, but it will beexpensive-10%-14%. There is action in the note market with mezz and UCCforeclosure paper. We are months away from any real transaction volumewhen things will be more clear and when the whole liability issue willpossibly more clear. It is likely values will be down 30% or more whentransactions do restart. The entire industry will be permanently repriceddown for years to come. Capex will be suspended for years as it was in2009, but that just delays the day of reckoning for cash needs. What was a7%or 8% cap rate is much more likely to become 11%-12% for a long time. Ihave never thought owning a hotel is a good investment compared toalternatives if you are an investor. Now I have the proof of why. Blackswans are always circling hotels. I was heavily criticized in theaftermath of 2008-9 when I harped on the black swan risk. Here you have itin spades. There is far more risk adjusted returns to be made in the stockmarket, or other real estate assets such as multi-family, and riskadjusted returns is all that matters in investing.
If there is no major increase in thevirus in two weeks after all the protests, it will prove my point thatyoung healthy people are not at much risk, and the shutdown everywhere wasa mistake.