Looking Backwards …
LB #1
The bond market had a 20 year auction this week and it went off terribly. We talked in Bygone Relics this week about the massive turnaround and huge rally in stocks and bonds and what were some of the catalysts. Geopolitical risks, bond sales sleight of hands, maybe even the oil market, but the fundamentals never changed. Santa Ana’s soldiers are still coming, and the 20Y auction was this week’s reminder. People have rushed into bonds buying like crazy out of FOMO. Fear of miss out. Missing out on what? There are more bonds coming next week and even more the following week, and still more coming the following week and my god wait until next year. Inflation is coming in temporarily; the real fight hasn’t even started yet. We go to Zero Hedge where case in point, if we look at the San Francisco commercial real estate market the vacancy rate topped 35.9%. 1.4 million square feet of occupancy loss due to sublease spaces being emptied, remember when we talked about Wework. They are not weworking anymore and the overpriced commercial real estate market isn’t working anymore either. This is sitting like a cancer on bank’s balance sheets and when they are forced to mark to market these losses, the banks are in big trouble. Likely the Fed will have to come to the rescue with a new program like they did last March. This will be more government spending and long term- that’s right inflationary. Market crashes and depression or stagflation or worse, just choose. Nothing has changed.
LB#2
We have talked about government subsidies being the only thing keeping some of these green new businesses in operation, and it seems that the bloom is off the rose. Enphase Energy announced it was laying off 10% of its workforce. Claudia Assis writes for Marketwatch, “Shares of Enphase edged lower in the after-hours session Monday, after ending the regular trading day up 0.1%. The stock has lost 53% this year, contrasting with gains of around 23% for the S&P 500 index.
Earlier Monday, SunPower Corp. spooked investors with a going-concern warning related to debt coming due. Alternative-energy stocks have been under pressure this year amid dimmed demand and rising interest rates.”
This company makes microinverters and battery storage and in the middle of the greatest EV governmental spending boom, this stock is heading south like a Canada Goose on Thanksgiving Day. Malinvestment has yet to be washed out of our economy, but it is coming and there is likely only one thing that can stop it, governmental regulation. If we head across the pond and look at what the Swiss National Bank is dealing with, we can see our future in the US if we don’t push back. The bank is being urged to divest and not invest further in any oil or gas fracking companies. Tsvetana Paraskova writes for oilprice.com via Zero Hedge, “Last month, a study by SNB Coalition and Climate Alliance Switzerland showed that the Swiss bank had investments worth a total of $16.1 billion in fossil fuel companies… “Due to the broadly supported rejection of fracking by cantonal governments and the population, it can be considered a norm and value of Switzerland, which the SNB should also respect,” the climate groups said in November, noting that fracking violates the bank’s investment policy. “ Let’s be clear, the only thing keeping oil from $200 a barrel right now is fracking. If we continue down this regulatory road, then that is what will happen. In 2008 oil was at $140 a barrel and the US produced half as much. Now houses cost 70% more, the stock market is up 600%, and oil is worth 50% of its 2007 price now that fracking provides twice as much. We will discuss fracking on the next Bygone Relics.
Only regulation can make this work
LB#3-
Technology was sold to us as the key to our future like the Jetsons, everyone would beam through space, ignoring energy prices but using magic instead, we didn’t have to learn because we could magically make information appear, and all of our worlds would be keen. Russ Muscato writes for the Epoch Times via Zerohedge “After decades in the classroom, award-winning teacher Steve Gardiner, of Billings, Montana, became acutely aware of a new problem making it difficult for his high-school students to learn. “The phones were disruptive and distracting—the most disruptive and distracting thing in the classroom in my 38 years of teaching,” Mr. Gardiner, now retired… Mr. Gardiner takes teaching—and impediments to it—seriously. He holds a doctorate in education, served three years on the board of directors of the National Board for Professional Teaching Standards. He was Montana’s Teacher of the Year in 2008.” He isn’t the only one concerned about the use of cell phones in classes, many countries already ban them, and Florida recently became the first state to ban them under Ron DeSantis’ House bill 279. This is a good start, but we need to educate kids and that means getting their brains to work and that won’t happen while their brain is in their hand.
Looking Forwards…
LF#1
Now C Thomas, please go easy on the youth of America that didn’t grow up with the advantage that you did. Books, number 2 yellow pencils, cursive. I do relate to the plight of the modern adolescent with a tablet in one hand and a sugary snack in the other. They are kids and don’t know any better, but the adults are the ones who deserve my ire. Well here goes… “Chicago has basically given up. Eleven “high-achieving selective-enrollment schools” will be eliminated, according to Chicago Board of Education CEO Pedro Martinez, to reduce “stratification and inequity.” according to Jonathan Turley. We have written about how some school districts in Chicago and Baltimore don’t have a single student that can perform grade level work in their entire high schools. Not one in the entire school, but instead of raising their levels and increasing performance Chicago has decided to go the other way and pull down the top performers.
Turley writes “Chicago is literally telling families of highly competitive students to leave public education or reduce their expectations. For those who can afford it, they must now look to private or religious schools. Most cannot afford such choices and the state has long been hostile vouchers. Indeed, the state (which has long been dominated by the far-left teachers union) recently became the first state to roll back on vouchers as other states are expanding such programs.” Now you are starting to see why states like Florida and Texas are growing so fast. Even previously dumb parents that lived in states with these policies are packing up from the Illinois and California and New Yorks and moving. When these states go hat in hand to the federal government again looking for money, these profitable states with common sense policies need to tell them hell nah. Turley leaves us with his plea, “As a proud Chicago native, it is hard to watch what is happening in the city under Johnson and this city council. I still hope that sanity will take hold in the city before they do irreversible damage, but this education plan hastens the decline of one of America’s greatest cities.” Well said sir.
LF#2
If you have ever enjoyed a sunny afternoon within eyeshot of the paddock and made a few wagers on a hound or two chasing a mechanical rabbit then you are a bygone relic. Those enjoyable sunny days of Florida past are long gone with Americans insatiable appetite to bring dogs in the house, dress them up, and substitute them for children. The natural instincts of many a species like the greyhounds are being as endangered as the bald eagle, but that might be a podcast for another time. The greyhounds I want to discuss today that are disappearing are a far less enjoyable, but necessary species. Nathaniel Meyersohn over at CNN writes “Intercity bus lines like Greyhound, Trailways and Megabus, an overlooked but essential part of America’s transportation system, carry twice the number of people who take Amtrak every year. But the whole network faces a growing crisis: Greyhound and other private companies’ bus terminals are rapidly closing around the country.”
When the bus system was used much more often a network of bus stops were built in downtown locations, but the profitability of bus stations has dropped and almost 2/3 of cities lost their routes.
Meyersohn writes, “Last year, Alden subsidiary Twenty Lake Holdings purchased 33 Greyhound stations for $140 million. Alden is best known for buying up local newspapers like The Chicago Tribune, New York Daily News and The Baltimore Sun, cutting staff, and selling some of the iconic downtown buildings.
Alden has started to sell the Greyhound depots to real estate developers, speeding up the timetable for closures. Artificially low interest rates are allowing commercial real estate to be purchased and repurposed, but only because interest rates are so low. No one was buying bus stations when the note would cost 10%, but now chich ching.
“I don’t know the specific details of each building, but it is clear what is happening here: an important piece of transit infrastructure is being sacrificed in the name of higher profits,” said Stijn Van Nieuwerburgh, a professor of real estate at Columbia Business School.”
Higher profits in the bus industry perhaps but let’s juxtapose that against a competitive rival that is prone to bailouts that often get subsidies allowing them to stay in business. I’m a capitalist so I am not interested in propping up dying industries if it is a fair fight. Thomas Pallini writes for Business Insider “The Department of Transportation’s Essential Air Service program incentivizes airlines to serve more than 100 American cities. More than $315 million in yearly contracts is doled out in the Lower 48 alone, and nearly $27 million is given in Alaska.” Many of these are smaller and regional cities that used to be served by the bus lines. Pallini continues, “Joey Gerardi, an aviation writer who has taken more than 40 EAS flights and has seen the best and worst of the program, told Insider. “At least 80% of the EAS flights I’ve been on have five or fewer people,” Gerardi said.” This is government interference at its worst. The government should not be picking winners and losers in the transportation industry. Can you imagine what the bus industry could do with that money? The fact is many of these bus passengers are low income, disabled, or minorities that can’t afford air travel. By subsidizing empty airplanes, the government is affecting its citizens negatively and abusing its position. If these displaced bus passengers would understand their government’s actions maybe they would choose different leadership. This is just air travel, don’t get me started on the subsidized inefficient mess that is Amtrak.
LF#3
Many of you dear readers and listeners must think that I hate this country, but in reality I only hate some of its policies, but as we discussed with Switzerland and its proposed fracking ban I still say our country is as good as any, but it could be worse we could be Canada. The country to our north that famously froze the private citizens bank accounts for disagreeing with the government regarding a trucker strike has overreached yet again. The frozen bastion of socialism is now mandating that all new passenger cars sold in Canada by 2035 will be zero emission EV vehicles. David Thurton from the BBC explains, “Manufacturers will earn credits based on the number of low- and no-emissions vehicles they sell, and those credits determine whether they’re in compliance with the regulations. Different vehicles earn different amounts of credits, depending on how close they come to a zero-emissions standard… Automakers can also earn more credits if they help build out EV charging infrastructure… The federal government wants 20 per cent of all vehicles sold to be zero-emissions vehicles by 2026. That target rises to 60 per cent by 2030, and 100 per cent by 2035… According to a 2022 government analysis, the total anticipated cost to consumers of zero-emissions vehicles and chargers will be $24.5 billion over 25 years, but Canadians can expect to save $33.9 billion in net energy costs…These estimates are part of a draft and may change when the government releases its final analysis.” Oh those net energy costs will change. If you don’t comply, the government will make you. This isn’t freedom to let the market’s invisible hand guide policy, this is fascism. I can see the frozen chargers and the frozen cars now while Justin Trudeau gets driven around in a diesel-powered Mercedes Benz with bulletproof windows. This is the world apathy is enabling.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.