KOMMONSENTSJANE – ROSS RANT 10/25/2020

PELOSI KEEPS KILLING THE NEW STIMULUS DEAL. SHE IS THE PROBLEM NOT THE SOLUTION. What is it that Pelosi doesn’t understand – people need help now – not when she thinks it is advantageous for THE DEMOCRAT party. Vote every Democrat out of office and let us show America what we can do to clean out the swamp.

*******

Subject: Ross Rant Oct 25

There never was going to be a new stimulus deal. Pelosi did not want to do anything that might help Trump, and she was hoping to trap McConnell, and make him look like he killed it so they could argue the Dems need to control the Senate. My sense is that backfired. It is clear to most that she is the problem, and why, and that she does not give a damn about the people who are suffering. It is all about getting power. Unfortunately, Wall St kept being fooled thinking there would be a deal. So the market was up and down depending on which false rumor they believed. Classic Wall St. Buy on rumor and hope. Sell when it does not happen, then buy again. Trader’s dream.

Notice the ten year is now up about 10 BP. That is a direct reflection of the bond market recognizing that the economy for the most part is doing very well. The rate on the ten year is usually a good barometer of what is happening in the economy and with monetary policy. It is always good to pay attention to that rate. When GDP is announced this week at 33% or 35%, bond yields will rise again. I keep warning that if you hold bonds you lose. Trump wins, the economy improves, bond prices fall. Biden wins and deficits go through the roof and bond prices decline as yields rise in anticipation of inflation and massive deficits. Either way bondholders lose, and it does not get better for you from here.

The EU is now in the midst of a major virus surge and that will kill any hope of a near term economic rebound as lockdowns get put back on. While in the US there are a few stories of hospitals in rural areas getting to capacity, reality is, most of the US has lots of capacity. Cases are not hospitalizations. While those are clearly rising, they are able now to get people out of the hospital and well much faster. Joe can want to mandate masks all he wants, but that is not a federal possibility. It is a state action only. So Joe can say whatever he wants, but he can’t do it , and there is no shortage of masks, gloves, or anything else. You can buy all the masks you want in stores or online. Making more masks faster is not solving anything. Getting people to wear them is the issue, and in several parts of the EU there have been major protests against wearing masks, and lockdowns, so it is not US only or Trump problem. Dems tried to point to Europe as having done it all right, except on a per capita basis they are now much worse off than the US. Biden has said he might demand new lockdowns. There is now substantial proof that is the worst thing to do.

Reality continues to be that most businesses are doing very well now. 15 states have unemployment under 7% and it is likely that the US rate is under 7.5% now. Here is reality. Continuous jobless claims dropped by 3.6 million the past three weeks. This means workers are being hired much faster now. It may prove that the end of the $600 really did matter to get workers going back to work. In August the layoff rate was actually the lowest on record. The October PMI hit 55.5, the highest in 20 months. The service index hit 56. Business confidence is the highest since May 2018. Compare these numbers to the EU where the index declined to 49.4, and declining. The press, other than the WSJ, will never print this data. Most interesting, Yelp reported that there are more new restaurants opening in September than in each of 2016, 17, and 18. Hotels are starting to rehire. Q3 weekly wages increased 8.2% over 2019, and 9.2% for the lowest level workers. They were up 11.8% for Latinos and 9.3% for blacks. That will matter on Nov 3. Loan defaults are lower than banks expected, and credit scores, on average, are higher than any time since 2005. Savings remains very high at 14%. September retail sales were up 5.4%over 2019. Home construction is booming, creating more jobs than workers to fill them. Here in the Hamptons the only unemployed are people those who choose not to work, or are in jail. What all this says is the economy is rebounding very strongly. The biggest problem is CA, NV ,IL and NY and a few other blue states that did not reopen as much. Their unemployment rates were around 10.5% compared to red states which mostly reopened, and where the rate is around 6-6.5%. Cuomo and DeBozzo are killing hotels and restaurants and many ancillary businesses. Midtown remains a ghost town, whereas uptown has lots of people around who are working from home. Apartment rents are now down to the lowest in over ten years, and likely going lower. Commercial space, and especially retail in midtown is getting wiped out. With a vaccine being widely available still a few months away, and crime on the subway and streets way up, it will continue to be a tough road for office building owners well into 2021 and maybe into 2022 when we will have a new mayor. The conclusion is, reopening and getting schools open is the right thing to do, and giant fiscal spending is not needed. Some very carefully directed fiscal stimulus is needed, but it needs to go to PPP, some extra unemployment, aid to airlines, and some to schools. The rest of what Pelosi wants is waste. Getting schools open would put many women back to work at nil risk to the kids. Like last term, virtual teaching is not adequate and minority kids are getting set back badly. For the election, in battleground states that reopened, unemployment is not high, and wages are up, as are 401K values and home values. It is the economy stupid. Add on blacks who now realize Trump got them jobs and not welfare, and unanimous police officer support for Trump and Republicans at all levels, and Cubans in S FL, and you have the makings of a possible win for Trump and R’s keeping the Senate. There are large numbers of people I know who do not say anything, but who are voting for Republicans, and none of them are hicks from rural areas. We will see in a few days. The busiest occupation right now is estate lawyers. That should tell us who wealthy families are going to vote for.

While I have monetized a portion of my portfolio, I am sitting still for the moment, but monitoring the market each day ready to sell more. The problem is GDP will be announced Thursday and will very possibly be up 35%. There are a lot of earnings reports this week, and they will be almost all very good. Many in Wall St think a Biden win means huge fiscal stimulus and they like that. Many who would want to sell if Biden wins will hold due to tax issues. I think that is a mistake since their taxes on cap gains will, in many cases, be 60% all in if they wait. In summary, it is not at all clear to me the market will decline in the very short run even if Biden wins. That is counter intuitive for me, but that seems to be what the market is going to do. So I wait day by day, and if Biden wins I still get out, but when becomes the question. If Trump wins and the R’s hold the Senate, I am all back in.

I have a sense that many hotels might get back to making money sooner than many think. A lot of economy and select service hotels are now close to break even before debt service. Air travel is now deemed safe, and I think by early summer, with the vaccine available to many, that travel will resume faster than expected. Luxury resorts will do well next summer. People are fed up being cooped up. If the economy continues to thrive, consumers will have plenty of cash to travel. All that savings and unspent credit will start to get spent next summer. It is very possible that by summer of 22, after there will have been billions of doses of vaccine administered across the world, most people will have taken the vaccine shot and tourists will be here again from Europe and Asia. Big box conference hotels are a different story. They likely will take until into 22 to even begin to get back to at least a break even level. To make a real return on investment will be 23 or 24. The key is to get people to take the vaccine, and that will only happen if the press and Newsome and Cuomo stop pushing fear. If Biden and the Dems get control, then the story changes as the economy and taxes will be worse by 22, and that means the stock market will be down, energy prices will be up, crimping corporate, and possibly consumer travel. The election matters to the travel industry. If Trump wins, buying select service hotels at good discounts may become a good investment if you have the capital to make it to mid- 2022. There is huge pent up demand to travel, and consumers have cash and unused credit now despite what Biden and the press say. As with any deal-it is all in the price you pay going in. I still think buying a big box hotel at almost any price is a bad investment. By the time you make a decent return cash flow, your IRR will suck, and that is when you will need a lot more capital for a PIP.(major renovation)

Trump did it mostly right this time, and Biden made a huge mistake. He said he was going to transition out of oil and all fossil fuels, and he challenged Trump to show the video of him saying no more fracking. So Trump is doing that at every rally on giant screens. It may turn out to be the dumbest thing any candidate ever said, and what changes the election outcome, which is why I now think Trump has a chance to win. Now New Mexico is in play since oil is a major jobs source there, and key to that state economy. Biden likely just lost PA no matter what games the Dems play with ballots, and no matter how much the state courts help them cheat-now the signatures do not have to match ???and ballots get counted if arrive days after the election even if there is not a valid postmark. Why didn’t the judge just say they can count any ballots that a Dem operative delivers after election day. I am now more in the view now that Trump could win. I believe he turned it around, and the Hunter scandal will matter, despite the press hiding it, and claims it is not real. I also believe the black and Latino vote for Trump will be much larger than anyone is predicting, and that gives him FL, AZ, OH and maybe PA. Think about this scenario: Biden wins, but R’s hold Senate. Barr appoints special council before he is out of office to investigate Biden family. Sometime in 2021 they have the proof Joe got benefits-Hunter and James paid his bills out of the foreign money-same as the foundation paid Clintons over $100 million, and many of their bills with foreign money. Senate demands House move to impeach. Special counsel indicts Hunter for money laundering and child porn. The House refuses to impeach. Constitutional crisis. Or, Joe is forced to resign and heels up Harris is president. Very unlikely, but not impossible.

I am trying to understand Biden economics. He says he is going to get a lot of companies to bring their operations back to the US, but then he is going to raise their taxes by 7% to a rate near the highest in the world, plus raise payroll taxes, eliminate some deductions, institute a minimum 15% tax on “Book income”, and materially increase regulations. Got that. He is going to shut down fracking which produces very cheap gas for utilities, which is why the US leads the world in carbon decreases at 15%, but he is going to reduce carbon by ending gas production. Gas from fracking is ultracheap, so energy is ultracheap in the US. How does all that work when there is no more cheap gas. He is going to employ 10 million by having them build auto chargers, windmills and retrofitting buildings. Who is paying to retrain all these people and then relocate them to where these supposed jobs will be. And what will be the wages for guys installing insulation vs what they earned as a worker on an oil rig. Small issue is, there are not 10 million of these people to hire. Who pays them while they are between jobs and getting retrained. Who is paying to change utilities over from gas to wind and solar, and what do we do with all those closed power stations. I assume the consumer pays. Oh yeah-then there needs to be all those batteries for night time power transmission if you do not have fossil fueled power stations as backup. I guess the thousands of miles of new transmission lines to bring the power from wind farms and solar farms get paid for by -consumers? Taxpayers? We will ignore the thousands of dead birds from windmills. Then there is a little issue of energy independence from fracking which has given the US the ability to shut down Iran and strong arm OPEC. Not to worry- old Joe is going to get everyone to love us again, and by reinstituting the Iran nuke deal we will buy all that oil during the “transition” from Iran so they can build their missiles, and nukes, and launch terror plots. Obama did it, so why not Joe. Someone who is an engineer needs to explain to me how you lubricate equipment without oil based products, or make plastics, or other products, or what do we do with the tens of millions of gas powered cars, and machines. Oh, and those pesky farmers who produce ethanol. We will just have them grow and process pot. And then there is that annoying huge fiscal deficit which causes interest rates, inflation, and middle income taxes to rise. I think I need to go back to Wharton to learn how all of this works.

Periodically I try to give encouragement to those of you getting older by telling stories from my tennis club. I have a regular Friday game. My partner is 85, has two replaced knees, an inoperable benign tumor below the brain, and damage to a muscle in his tennis arm. I will match him against any 40 year old. He runs faster across the court, and moves quicker than most guys half his age, and he can hit and place the ball as well as any much younger guy. We call him the Energizer bunny. Two days a week he goes into the city and works at his vet practice doing surgeries- often 5 a day. Age and infirmities are all in the mind. The calendar is not relevant. Make the most of every remaining minute.

About kommonsentsjane

Enjoys sports and all kinds of music, especially dance music. Playing the keyboard and piano are favorites. Family and friends are very important.
This entry was posted in Uncategorized and tagged . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s