DiMartino Booth, Big Boys, CRE, Money Strong, Fed Up

The Big Boys of Summer

Do you feel it in the air? Is summer out of reach?

Many of us came of age, or thought we did, the first time we heard Don Henley’s mega-hit The Boys of Summer, released in October 1984. But can a song be reincarnated to mean even more? Can one brush with destiny change everything? This week more than any other, it’s right and true to look back and answer that question in the affirmative.

For those of us in New York 16 years ago, September 12th and 13th stretched on for many more than the 24 hours the clock conveyed. It wasn’t until the early morning hours of the 14th, when Dick Grasso announced the New York Stock Exchange would remain closed through the weekend, that many of us were released, on many levels. Walking the beach that weekend, looking for signs in the sand, Henley’s mournful song stopped me in my tracks. “Those days are gone forever” forever took on new meaning.

An old friend dropped me a line recently. His none-too-subtle message reminded me yet again of Henley’s song, but in yet a different way. It would appear the innocent boys of summer have departed the investing world as well, leaving in their stead conditions in which only “big boys” should engage, his words. Though this market veteran has been around long enough to know most asset classes are vulnerable, the article he shared spoke specifically to tail risks building in ccommercial real estate  (CRE), which we’ll get to in relatively short order.

Longtime readers of these weeklies know the two asset classes I foresee investors will grapple with the most in the next recession are high grade corporate bonds and apartments. The math and logic backing this warning are simple as they most resemble that which supported the explosion of subprime mortgage issuance during its heyday. Accept credit quality as a given, so long as it brandishes an investment grade rating, and green light record levels of issuance at just about any price. No, this will not end well.

But what about other CRE subsectors? After all, rent declines throughout the three most recent recessions were the deepest in office and industrial markets. Multifamily, meanwhile, was the least distressed sector. Retail is a unique case in point:  rent declines were near nonexistent during the 2001 recession, but worse than office and on par with industrials during the Great Recession thanks to pricing pressures accelerating the rise of ecommerce.

Since then, things have gotten mighty interesting in what has, by all accounts, been the lesser manipulated of the two types of domestic real estate markets. Hint: it isn’t housing. The Federal Reserve’s misguided policies and interest rate suppression tactics are manifest in residential real estate, where Morgan Stanley figures prices have recovered 90 percent of their peak-to-trough values (‘Peak’ is defined as 2007-2008 highs, while ‘trough’ reflects 2009-2010 lows).

As for CRE, it’s recouped nearly double that of residential – peak-to-trough prices are up 168 percent. Critically, these are the ‘headline’ figures that catalyze concerns among the superficialists. But it’s the subsectors that serve up the real smokin’ hot spice factor. A quick perusal of the nearby table highlights how haywire things have become in multifamily, which we already know, and about which you should consider yourself amply forewarned.

But look just beneath manic multifamily and you see that in any other world, what’s happened in major market and central business district (CBD) office properties would be garnering plenty of angst if not for apartments hogging the overvaluation limelight. And that’s purely through the prism of price behavior.

Factor in what’s driven those price gains and you really start to get worried. We’re talking the zero interest rate policy that the Fed has facilitated. At the extreme, we’re talking about $60 billion in 2015 CRE sales…in Manhattan alone, a record high and 14 percent above 2007’s prior peak.

Lending standards, of course, played their part and dutifully tanked, hitting their most lenient laxity in mid-2015. Foreign investors, in this cycle more than any predecessor, clocked record transaction volumes, which topped out at 18 percent in late 2015.

This highly favorable dynamic was most visible in capitalization, or cap rates, which is the net operating income of any given property divided by its price. The less in the way of income a buyer is willing to accept for a given price, the lower the cap rate. In 2015, cap rates sank to lower levels than they did at their 2007 lows. Valuations were, in other words, at unprecedented peaks, with the key word being ‘were.’

Since peaking, quarterly transaction volumes have slumped to around $100 billion from late 2015’s briskest pace, when sales hit $160 billion. In the meantime, standards have tightened for eight consecutive quarters and foreign investors’ share of transaction volumes has declined to 13 percent. And finally, as has been broadcast widely, the Fed has been in a tightening mode.

What happens when the favorable dynamic that drove cap rates into the ground reverses? The only answer is rents will have to increase to justify keeping cap rates down.

Some caveats to the caveats. Financial conditions are actually easing as sabre rattling, DC stagnation and Mother Nature collude to suppress interest rates. And while sales volumes are well off their peaks, they did recover somewhat in the second quarter and are down just five percent over 2016 levels.

It should be added that Chinese investors would rather have their cash escape to our fair shores; they just can’t get past the state-imposed controls put in place to staunch capital flight. The Saudis and other crude-export-dependent countries would also prefer to have the resources to keep investing were it not for that sticking point of the lowly price of that sticky fluid they pump out of the ground. In all, Middle Eastern investment is down 73 percent over last year; Saudi investment in particular has crashed by 96 percent.

And so, you have sellers thinking their still- nosebleed prices could be validated and buyers thinking recent trends will deteriorate further and thus refusing to budge. That brings us to where we are today – a virtual standoff.

To bring the extreme back into the picture to prove a point, CRE volumes in Manhattan are expected to end the year at $19.8 billion, matching levels last seen in the dark year of 2008. Not surprisingly, expectations for commercial leasing and the future rental market in New York both hit four year-lows in the second quarter.

The good news is the froth coming out of the market should reintroduce rationale among owners. Let’s just say that’s not exactly how the outcome appears to be evolving, which brings us to that article referenced at the outset, the one that disturbed and inspired at the same time.

The Bloomberg article is easy enough to Google, which you should: “NYC Landlords That Can’t Find Buyers Turn to Borrowing Instead.”

The gist of it speaks to the intersection of easy financial conditions not being reflective of the Fed being in a tightening mode, which actually speaks to the disconnect plaguing many asset classes. As it pertains specifically to CRE, think in terms of how cash-out refinancings increased investor losses in securities backed by subprime mortgages way back when.

Recall it wasn’t until John Thain attached a price tag of 22-cents-on-the-dollar to Mother Merrill’s subprime book that anyone truly knew the Street value of the toxic waste. Though things are certainly not nearly so bad, it is the spirit of owners’ behavior that resonates.

This from Bloomberg, per CBRE: “In a building where building sales are few and far between, it can be challenging to find a comparable transaction to get a reading on prices for an appraisal. There are other ways to calculate a property’s value, but it’s impossible to account for changes on a real-time basis.” (Let their painfully diplomatic wording plant its own seed next time you’re contemplating going long or short CRE on a macro level.)

Pardon the digression. Back to the matter at hand of what exactly entrapped owners should do? Why not seek out buyers for your property and simultaneously take out a mortgage on the property. That way you’re effectively refinancing at an inflated value, what my old friend who’d just as well stay in the private domain for, like, ever, terms the “perfect crime in CRE,” assuming you’ve cordoned said property into its own little LLC.

“If things go well, the property value goes up, no harm, no foul,” he observed. “If the market tanks, you hand the keys to the lender, but you still have the cash from the recapitalization.”

Let’s be clear, we’re not talking traditional lenders here. Indeed, second quarter originations fell two percent for life insurers and a steep 21 percent for commercial banks. The flip side is they rose by 26 percent for government sponsored enterprises and an eye-watering 126 percent for commercial mortgage backed securities.

For the record, retail was the only sector to see a decline in quarterly originations, so that’s something. As for multifamily, Morgan Stanley warns that, “investors are more willing to purchase and lenders more willing to finance, resulting in less deleveraging.” Cue the understatement considering the Bloomberg story referred specifically to apartment landlords though the cash-out contagion is sure to spread to other overvalued sectors by yesterday.

Notably, the Morgan Stanley data did not elaborate on the behavior of the most go-go cowboys in the land of lending, that is, private equity (PE). Disregard for a moment, as difficult as it is, the near trillion-dollar pile of dry powder PE sits atop. Ruminate rather on the quarter of that pile earmarked for real estate, some $255 billion, a record if there ever was one.

The beat looks set to go on and on. According to Canaccord Genuity’s Brian Reynolds, in the five-week period through mid-August, pensions directed an incremental $9 billion into some form of private equity fund. A few tasty offerings illustrate a particular penchant for that hard asset which, by the way, has become one of retirees’ most crowded trades, as you, but not they, can see:

  •   Boca Raton Police and Fire Pension allocated $10 million into distressed real estate fund
  •   Vermont state pension $30 million into value-added real estate fund
  •   Illinois Municipal Pension put $75 million into a value-added real estate fund
  •   Wisconsin state pension sank $395 million into real estate funds
  •   Kansas Public Employees’ Pension allocated $50 million to a real estate fund

And that’s just pensions. All manner of investors continue to herd into the divine diversification on offer with PE funds. As for the founders of PE funds, they’re taking buyouts and getting the heck out, at least according to the Wall Street Journal. Lovely.

“A majority of aggressive CRE recap deals are with real estate funds chasing yield,” my friend further added. “Banks can’t touch their rate and terms, so big boy rules apply.” Lovelier.

In the event you think some egregious omission has taken place, safe assured, the $300 billion in hurricane damages will indeed make a different kind of impact. But no one is sure how prominent that role will be just yet.

What can be said of Houston in particular is nearly a fifth of office space in the city stood vacant as of June while 11 million square feet were free for sublease pre-Harvey, the most since at least 1998. Oh, and the vintage of loans with the greatest exposure? That would be 2015.  For any of you vultures out there, can you please get back to me with a stronger word than ‘emptor’ to put after ‘Caveat ______” before you go off half-cocked?

In the meantime, this chart from Hoya Capital Real Estate highlights office real estate investment trusts (REITs) that have largely been given a pass vis-à-vis their brethren in the battered retail (mall) and massed multifamily spaces. You’ll note one REIT found its niche in low quality properties in Houston.

OFFICE REITS

 

Don Henley’s song reminds us that we can never look back. Perhaps it’s best to then look forward, knowing that time as we know it often compresses and that any summer can come to an abrupt end. With any luck, unforeseen events make us stronger in the end. As investors, the best we can do is be positioned for the likely and unlikely outcomes, those that arrive after even the big boys of summer have gone.

 

9/11, Danielle DiMartino Booth, Money Strong, Fed Up

Angels Manning Heaven’s Trading Floors

Dear friends,

Time heals, or so they say. Indeed, one more year has come and gone making today the 16-year anniversary of the most horrific day in modern U.S. history when life as we know it was forever altered, when innocence died. This year, we not only have the distance of 365 more days past to help fade memories and heal wounds, we have a multitude of distractions, both natural and man-made.

The onus was thus on me to make an extra special effort to honor all those Angels looking down on us as we go about our day to day lives. To do so, I watched Man on Wire with my nine-year old, my youngest, just he and I. I can tell you I will forever cherish spending those 94 minutes with him as we were swept away by something so much larger than anything we could have imagined, in a good way.

The Oscar-winning 2008 documentary follows Phillippe Petit’s fulfillment of his greatest dream, walking a high wire between the Twin Towers. The brazen illegality of the caper led to the 1974 feat being coined, “the artistic crime of the century.” To those of us for whom the majesty of the World Trade Center never failed to awe, Petit’s film will always stand as a magnificent monument to the fallen. If you haven’t seen it, perhaps today is the right day to do so.

Thursday, August 30, 2001 was the last day I stood and stared up at those beautiful beasts of buildings. I prefer to carry that image with me. Or that of my youth, when I would make day trips from Connecticut into the city with my grandparents. Or 1994, the first time I as a future New Yorker laid eyes on the Towers as a determined young woman with ambitions that matched the skyscrapers’ height. Anything but how they looked 16 years ago today, the day they collapsed, taking down so many Angels with them.

Many of you will have read today’s special installment in years past. This is the third year I am publishing my personal retrospective. If it is the case, that you’ve read it before, I ask that you take a moment to reread it and then pay it forward. As a proud People, we must make every effort, today at 8:46 am, 9:03, 9:37, 9:59, 10:07, and 10:28, and every minute of every day to #NeverForget.

With that, I give you what little I can, in all the humility I can muster. I give you Angels Manning Heaven’s Trading Floors.

 

Never forgetting and always wishing you well,

 

Danielle

 

Angels Manning Heaven’s Trading Floors

He could have passed for Yul Brynner’s twin if it wasn’t for those eyes. He was 57 years old, 6’2” tall, tan and handsome with a shining bald head. But his eyes, those elfish eyes dared those around him to partake of anything but his infectious happiness. It was those eyes I will never forget.

It was Labor Day weekend, 2001. One of my best friend’s college buddies from UCLA was in town and his uncle had a boat. So we had the good fortune to be invited to take a cruise around Shelter Island on that long holiday weekend 16 years ago. I was 30 years old at the time and I can tell you there was no “boat” about this Yul Brynner look-a-like’s 130-foot yacht. The crystal champagne flutes, the hot tub on the deck, the full crew – none of these accoutrements faintly resembled the boats I’d been on as a middle class girl spending summers off Connecticut’s stretch of Long Island Sound. The thing is, our friend’s uncle was none other than Herman Sandler, the renowned investment banker and co-founder of Sandler O’Neill.

I wasn’t sure what to expect of Sandler and I had no idea that this chance meeting would make a soon to happen unspeakable act that much more real. Would Sandler exude that same pomposity so common among the Ivy League investment bankers who had underwritten the Internet Revolution? In a word, hardly. Sandler personified self-made man. After introducing me to his family, of whom he was immensely proud, he graciously offered me something to eat or drink. And then, he told me a story about a man who knew the value of never straying the course. It haunts me to this day.

It was a good old-fashioned American Dream story about a man and some friends who started an investment bank to banks and built their firm to the top of the world. Literally. The secret to his success, which he enjoyed from his place in the clouds, on the 104th floor of the south tower of the World Trade Center was simply hard work, he said. He prided himself, relaying to me in what I could tell was a tale he’d repeated time and again, not only on making it to the top of the tallest building in the city, but on beating the youngest and hungriest to the office in the mornings and turning off the lights at night. Never forget where you come from. Never take for granted what you have.

In 2001, I had been on Wall Street for five years and was enjoying my own success and experiencing firsthand what money could buy. Given the choices my world offered, most would not have chosen night school. But I was determined to fulfill a lifelong dream and attend Columbia where I was to earn my master’s in journalism to complement my MBA in finance from the University of Texas. I guess I was not like most others. I wanted something tangible to open the next door in my career, which I knew would involve both the markets and writing. I called it my retirement plan.

Throughout this Wall Street by day, student by night chapter of my life, the minute the stock market closed at 3 pm, I would rush to the west side subway lines to trek north to Columbia’s campus. Just before Labor Day that year, I had turned in a class project, exploring the world of the famous Cornell Burn Center at New York-Presbyterian Hospital. During my time on the project, the unit was quiet save a few occupants, which apparently was not the norm. So those brave nurses had to paint a picture for me of what it was like when the floor was bustling with victims of fire-related disasters. Many of the stories of pain and suffering were so horrific I remember being grateful for the relative calm and saying a little prayer the unit would stay that way.

I returned to work on Tuesday, September 4, after that long weekend that proved to be fateful, with a new perspective on life and work, inspired by Sandler’s humility. Little did I know we were all living on precious borrowed time. It was impossible to conceive that one short week later, Sandler’s inspirational tale and those nurses’ surreal stories would collide in a very real nightmare.

It’s the Pearl Harbor of my generation. Most Americans can tell you where they were on the morning of September 11, 2001. I had walked part of the way to work that day, so picture perfect was the blue of the blue sky. I was in my office at 277 Park Avenue in midtown watching CNBC’s Mark Haines on my left screen and pre-market activity on my right screen. As was most often the case, it was muted as live calls on economic data and company news came over the real life squawk box on my desk. My two assistants were seated outside my office going through their pre-market routine, fortified as was usually the case with oatmeal, yogurt and coffee. In retrospect, the mundaneness of the morning’s details are bittersweet.

It was almost 9 am and out of the corner of my eye, I noticed that a live picture of the World Trade Center had popped up on CNBC. Haines reported, as did many initially, that a small commuter plane had hit the north tower of the World Trade Center. As distracting as the image was, I tried to go back to my own morning routine, preparing for the stock market open in what had ceased to be one-way (up) trading after the Nasdaq peaked in March 2000.

And then, at 9:02 am, time stood still. A scream pierced the floor as one of my assistants watched a second plane, a second enormous plane, fly straight into what appeared to be Morgan Stanley’s office floors in the south tower, where her father was at work. As things turned out, it didn’t matter where the plane had hit for the employees of Morgan Stanley that morning. They had Rick Rescorla, the firm’s Cornish-born director of security and a Vietnam veteran who had been preparing for this day for years. He knew the Twin Towers were an ideal target for terrorists. Thanks to his efforts and years of constant drilling – every three months, which some thought overzealous — all but 13 of Morgan Stanley’s 2,687 employees and 215 office visitors survived that day. With the evacuation complete, Rescorla heroically reentered the buildings to continue his rescue efforts and in doing so, paid the ultimate price.

Ironically, as was the case with Morgan Stanley’s Rescorla, some at Sandler O’Neill had lived through the first attack on the World Trade Center. When the young firm had outgrown its previous office space, it chose the south tower as its new home, moving in the same week it was bombed on Friday, Feb. 26, 1993. Many who struggled their way down over 100 flights in crowded stairwells, through seas of discarded women’s shoes, learned the lesson that they would have been just as well staying put. It was that very hesitation, borne of that lesson, that cost many of the firm’s employees their lives.

In the 16 minutes between the time the first and second planes struck the towers, the Port Authority had announced over the south tower’s intercom system that the issues were isolated to the north tower and to stay put. That didn’t mean the scenes across the way at the north tower were any less horrifying as rather than suffocate or burn to death, some leapt to their deaths before the very eyes of those across the way in the south tower. Amid this mayhem, Jennifer Gorsuch, a Sandler employee, emerged from the ladies room just in time to hear Sandler shout, “Holy shit!” Gorsach rushed to find a friend and fellow Sandler employee who had survived the 1993 ordeal and knew of an escape route. Together, the two set off down an open stairwell.

Sandler, though, going off his 1993 experience, told one investment banker who did survive 9/11 that the safest place to be was in the office. He added, though, that anyone who wanted to leave was welcome to do so. Of the 83 employees in the office that morning, 17 chose to leave right away. The bond traders and most of those on the equity desk chose to remain. Only three other Sandler employees would make it out alive. The rest, including Sandler himself, were never aware that one, and only one, open staircase offered them safe passage; the building’s intercom system had been knocked out at the time of the second plane’s impact.

From the little we know, many that day above the crash site tried to get to the roof. Though it would not have made a difference in the end, it is nevertheless deeply disturbing that the door to the roof was found to have been locked. The towers were exempt from a city code that required roof access to remain unlocked. The Port Authority and Fire Department had agreed that the safest evacuation route was down, not up. Plus, enforcing the exemption delivered a loud and clear message to vandals, media-mongering pranksters and those contemplating suicide.

For me, the sweetest sorrow came down to the nobility of those brash, boisterous traders. Many that day, at Sandler O’Neill and Keefe, Bruyette & Woods and Cantor Fitzgerald, among others, were among the 1,500 who could have possibly escaped but chose to do right by their firms’ clients. You see, once it was understood that the attacks were an act of terror, the markets began to flash angry red, promising to crash at the open, handing certain victory to the evil, soulless weaklings who took aim at the economic heart of this great country. It is the traders who chose to man their stations I mourn to this day, those I have always called, with utter reverence, the real Masters of the Universe

The helplessness I felt when the buildings fell was matched only by my horror at the silence that followed. At some point between 9 am and 10 am that morning, I found myself praying the deafening fire engine and ambulance sirens tearing down Park Avenue would just stop blaring. The cacophony had filled the 102 minutes that followed the initial plane striking the north tower at 8:46 am. But then the buildings did fall. Although the second to be struck by a plane, the south tower was the first to fall at 9:59 am. In the 29 minutes that followed, we all prayed the north tower would escape the fate of its sister to the south. But it was not to be. The unthinkable, the impossible happened, not once, but twice. And then it was quiet, quiet for days and months and now, 16 years.

Of course, there were miraculously 12,000 who walked away, mainly those who had evacuated the floors beneath the impact zones in both buildings. No doubt, the survivors paved a pathway of hope to help the country heal. But the dearth of rescues was nevertheless heartbreaking as we collectively sat vigil praying man and dog would pull a survivor from the pile. Hence the devastation wrought by the silence. It was unfathomable to contrast those who had braved the fires and lost, and the mere 22 survivors admitted to the no longer nearly vacant Cornell Burn Center of my Columbia class project experience. As if to punctuate the pain, four hospital EMS employees had been lost along with 408 other rescue workers that dark day.

Normalcy was suspended in the days and hellish nights that followed. We financial markets survivors, weighed down by guilt as we were, were told to do what those in those towers had done so bravely. We stayed on call in the event Dick Grasso and the other powers that be were able to open the markets for trading. We were prepared to be the calm in the stormy market seas that were sure to follow the initial open.

Unlike the markets, Columbia resumed classes on Wednesday, September 12th. The moment I stepped out of my cab on 125th Street that evening, the memories of the sounds of 9/11 were lost in the overwhelmingly toxic smells of its aftermath. Buffered as I was, at home in the middle of the island on Fifth Avenue, I had only experienced the tragedy’s aftermath from the nonstop playback news images of the towers that were, and then ceased to be. But Columbia, with its proximity to the Hudson, is an inescapable spot to take in what the winds carry. That evening it was the sad novelty of the smell of burning computers, steel and God knows what else, something I hope to never know again.

On Friday, September 14th, I was set free to travel north to Connecticut to the loving arms of my family who were worried so. They tried to bolster my spirits, what with my 31st birthday set to arrive on Monday. But I was in no place to find the will to celebrate. I was short the markets, poised to profit the minute trading opened on Monday morning and beating myself up as a traitor to my country for being so. The moment I was able to do so on the morning of September 17th, I closed out my position. And I manned my station.

That night, most of my friends dragged me out to my favorite Italian restaurant. But one of us was absent from the table. My dear friend, whose UCLA friend had introduced us to Herman Sandler, found herself in the right place at the right time to begin to help the healing process. At the time, she was working at Bank of America in midtown. The very day the towers fell, the bank had offered Sandler O’Neill survivors temporary office space in the same midtown office at which my friend worked. Jimmy Dunne, who found himself running Sandler O’Neill in the flash of an eye, gratefully accepted. Dunne had been out of the office on 9/11 trying to qualify for the U.S. Mid-Amateur Classic; he survived by chance and chance alone. So devastated was my friend that she chose to stay late every night, on her own time, to help Dunne write condolence letters to the families of the 66 Sandler employees who had lost their lives. She would eventually end up working at Sandler.

On my birthday, six days after 9/11, my friends insisted that robbing us all of joy, the very ability to celebrate life’s little occasions, would represent yet another feather in the caps of the cowards who attacked our fearless traders, our Masters of the Universe who were now all, and would be forever, on heavens’ trading floors. We raised our glasses to them that September evening and I remember thinking I hope Smith & Wollensky delivers in the celestial realm.

But I don’t digress. I never do on 9/11. I never shy away from remembering the worst day of my life. To do so would be an unforgivable dishonor to the 2,759 victims who gave their lives on that painfully beautifully September morning. And so, I never will.

ICYMI.housing, dimartinobooth, money strong, ICYMI

 In Case You Missed It— September 8, 2017

Dear friends,

It’s hard to watch the news these days, but for different reasons than a few weeks back when it was warfare in our streets by the looks of things. Now it’s Mother Nature who appears to be in quite the foul mood of late. To make matters worse, my beloved Longhorns did not have what I would call an auspicious start to their season. I’m running out of happy distractions here folks!

What I haven’t run low on is words – of the written and spoken variety. Please enjoy my latest Bloomberg Prophet (clever play on words if there ever was one) columns and TV interviews. And send me a signal if your team happens to win this weekend. I’ll live vicariously through your victory!

 

WRITTEN WORD

Bloomberg Prophets Harvey Won’t Help Flagging Housing Market – Neither have low mortgage rates. — 9.8.17

Bloomberg Prophets — Fed Easing Isn’t as Crazy as It Sounds – Market watchers are wasting time debating tightening when lower rates could just as likely be the next move. — 8.24.17

Bloomberg Prophets — Autos Put Economic Downside Risks on Full Display – The revival of the auto industry drove the factory sector out of recession; the flipside doesn’t look promising. — 8.22.17

 

SPOKEN WORD

Boom Bust RT — The new U.S. consumer confidence numbers are out and to everyone’s surprise, they are positive! Why are we seeing these rising numbers? — 8.31.17

CNBC — How the Fed may interpret today’s jobs report — 9.1.17

The Street with Scott Gamm — Fed watcher Danielle DiMartino Booth sees balance-sheet tightening as more likely than another rate hike. — 9.5.17

RT Boom Bust — Stanley Fischer is resigning and Danielle DiMartino Booth is back to tell us what that means — 9.7.17

Price of Business Radio — Hurricane Harvey and the impact on the oil markets — 9.1.17

 

This weekend and every other, wishing you well,

Danielle

 

 

To Subscribe to Danielle’s weekly post, visit subscription@dimartinobooth.com.

DiMartino Booth

“Okay, Houston, we’ve had an opportunity here.”

Who doesn’t know that past perfect verbs are passé? Especially where drama is concerned.

Hence the thrice-taken artistic license in recanting the fateful conversation that took place April 13, 1970. An onboard explosion had just rocked those manning the Apollo 13 mission to the moon. In the pitch-blacked-out module, some 200,000 miles from home, the astronauts radioed mission control. You know what happened next – ‘Houston, we have a problem.’ Except it didn’t.

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Bonfire of the Vulgarities, Danielle DiMartino Booth, Money Strong, Fed Up

The Bonfire of the Vulgarities

Among other historic Wall Street milestones, this October marks the 30th anniversary of the release of Tom Wolfe’s Bonfire of the Vanities.

If you’d prefer, it also marks the 520th anniversary of the original Bonfire that took place in Florence, Italy. Back in the late 1400s, the powerful city was under the rule of the Dominican priest Girolamo Savonarola, who like Wolfe, was taken, though not in the best way, with the outward ostentatiousness of the local glitterati. The good father thus ordered the burning of sinful vices such as books and arts deemed devilish and even cosmetics and mirrors that vaunted the vulgars, at least in his eyes.

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The Currency Wars two years on: Shanghai Accord, Danielle DiMartino Booth, Money Strong

The Currency Wars Two Years On: The Shanghai Discord

“Nothing unimportant ever happens at the Plaza.”

So legend has it of one of the finest structures to emerge from foreclosure in the aftermath of a three-year depression that ravaged the U.S. economy through 1885. ‘Important’ no doubt describes what took place one century later, on September 22, 1985, with the signing of the Plaza Accord, so named for the grand hotel that stands proudly to this day at the intersection of Fifth Avenue and Central Park South.

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Sasquatch Syndrome

Commercial Real Estate: Sasquatch Syndrome

Things were tough for Moscovians back in the Ice Age day.

The Trans-Siberian Railroad was still about 20,000 years from construction completion. And dinner in the form of wooly mammoths had this nasty habit of migrating east, as in so far east, it landed in what would one day be the United States’ Pacific Northwest. Passage was arguably simplified via the Bering Land Bridge, which hypothetically connected the two continents.

Folklore has it that the mammoths were not alone, but were accompanied by the Gigantopithecus. In that Gigantopithecus fossils have yet to be found outside Asia, stalwart believers maintain that a small population managed to flourish in their new home.

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ICYMI.greenspan, Danielle DiMartino Booth

In Case You Missed It — 8.11.17

Dear friends,

Little did we know on this day in 1987 that a bad day in bedrock could last 30 years, and then some. But so it was to be with the Senate’s confirmation of one Alan Greenspan to chair the Federal Reserve Board. We can only hope this one man’s legacy has not exacted irreparable damage on our financial markets’ ability to fully function as uninhibited price discovery mechanisms.

Linked here is my latest Bloomberg View column, Greenspan’s Legacy Explains Current ConundrumsI’ve penned to commemorate this momentous day in our nation’s economy’s history.

Hopefully it won’t surprise you that I’ve continued to ruffle feathers about the Fed’s day to day business in the media, all in the hopes of making sure everyone is as Fed Up with the Fed as I am. Linked below is a smattering of my latest stops here and there.

TELEVISION

BNN Economics — Weekly host Andrew McCreath speaks with Danielle DiMartino Booth — 8.7.17

 

PODCASTS AND RADIO INTERVIEWS

Bloomberg P&L With Pimm Fox and Lisa Abramowicz — Retail Pain at 22:54  — 8.8.17

Cashflow Ninja with M.C. Laubscher Danielle DiMartino Booth, Author of Fed Up: An Insiders Take On Why the Federal Reserve is Bad for America

Futures Radio Show interviews Danielle on the changes coming to the Federal Reserve  — 8.8.17

The Lance Roberts Show — 8.8.17 Who will Replace Janet Yellen?
Segment 1   |   Segment 2   |  Segment 2 short

 

Wishing you well this weekend,

 

Danielle

ECONOMICS101, Danielle DiMartino Booth, Federal Reserve

Economics 101: Divining a New Mouse Trap

If only we had more rhabdic force to go around.

Not familiar with the term? It is the Greek derivative for the word ‘rod,’ as in the ones used by Diviners to direct them to riches of the mineral or water variety in ancient days of yore. The key is placement, into the right hands, that is. Before the gifted few were scientifically overanalyzed out of existence or persecuted as witches and subsequently burned at the stake, Diviners were romanticized as the rainmakers of their day.

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ICYMI.ddb, In Case You Missed It — August 4, 2017

In Case You Missed It — August 4, 2017

Dear friends,

Happy Nonfarm Payrolls Friday from Grand Lake Stream, Maine! Grand Lake Where, you may be asking? THIS is where you fish, for small mouth bass, that is, in paradise. It’s a bit tricky to get here from Dallas, but it’s worth the trek to spend time with David Kotok, who organizes the annual campout. I also get to visit with some of the brightest minds in economics and finance I’m delighted to now call friends seven years into this annual tradition.

About those jobs…there are still plenty of them in the making. And they continue to be ho-hum in the income generation department, you know the drill – in the eating, drinking and getting sick sectors. Janet Yellen will be encouraged by the folks who’ve come off the sidelines to get the paltry paying positions. And away we go, to debate even more vigorously how the Fed’s balance sheet unwind will affect the bond market, or not.

Believe it or not, it’s not easy to get to the easternmost county in the United States. So, I made a stop in New York on the way and co-hosted a special Friends of Fermentation with my great friend, UBS’ Arthur Cashin. Friends, new and old, joined us to discuss the prospects for the market to continue moving up in 1,000-point increments and whether the Fed really will have the gumption to pull the trigger on shrinking its balance sheet (we really need to get out more and find some new materials over which to marinate ice cubes).

The consensus, if you must know, is that yes, the melt-up will continue, and that yes, the Fed seems hellbent on shrinking its mammoth balance sheet. Mind you, we also agree that the balance sheet will be blown up again in about a year’s time or so. That’s when most of us figure the economy will be in recession.

In the meantime, I’ve enjoyed writing my weekly column for Bloomberg, linked below. The editors are top notch and the readers, well – they’re well read.

Bloomberg: Back to School Means More Retail Agony

 

I also made a brief stop at the New York Stock Exchange to chat with CNBC’S Kelly Evans and Bill Griffeth, two journalists who can always be depended on to do their homework.

CNBC — Closing Bell Exchange: Underlying feeling the market is getting top heavy

 

Earlier in the week, I did a longer form interview on the job market, also linked below.

RT — Boom Bust — Re-Examining the Jobs Market

 

Signing off for now as my guide is itching to get going. The lake and fish (aka lunch) are a calling!

 

How could I not wish you well?

 

Danielle