Looking Backwards …
LB #1
I usually find politics distasteful, I think it is a bought and paid for sordid business, but sometimes it just leaps out and demands your attention and this is one of those weeks. There are some very courageous people who are pushing back against their federal governments and the institutional creep of control and regulation that has been happening for decades and boy is it coming to a head.
This week Canada’s highest court declared Justin Trudeau to be out of line when he punished the truckers that were protesting his Covid policies. Remember, Trudeau? He was the one that froze the bank accounts of the truckers who were protesting and backing up the highways. He reached into the banking system and froze his citizen’s bank accounts because they dared to protest against his dictatorial policies. Zerohedge’s quotes Justice Richard G. Mosley in his ruling, “Trudeau’s regulations had violated Charter rights – particularly against freedom of thought, opinion and expression. The Emergencies Act order was also found to infringe on the right to security against unreasonable search and seizure.” I’m glad that the courts were reasonable but very concerned that it took over two years to decide this. I’m even more concerned that Trudeau is still in power.
Mosley isn’t the first person to push back against fascist leanings coming from Ottawa as Tom Luongo wrote for Zero Hedge the provinces are quickly tiring of Ottawa as well. “We saw the beginnings of this last year with Alberta Premier Danielle Smith declaring she would not be collecting carbon taxes to send to Ottawa to fund Chrystia Freeland’s dreams of destroying the country… But this is a big deal. Smith isn’t the only one here. Saskatchewan’s Scott Moe is following her lead on carbon taxes.”
These issues north of our border are interesting insights to centralist government overreach, but we have a potential powder keg that flared up this week in the US that could have massive ramifications.
Lauren Camera writes for usnews.com and explains the position that Texas Governor Gregg Abbott has taken against the federal government. Now, we have discussed how Chicago and New York are being overwhelmed with bussed in immigrants that Abbott has been sending to their sanctuary cities and they are begging him to stop. Well his state has a far bigger problem and now he is acting. Texas has begun putting up razor wire fencing to stem the tide of illegal immigrants entering the country. However, the Biden administration told him to take it down and he refused. It went to the Supreme Court where they ruled that he must take it down and he refused. Camera quoting Abbott, “The federal government has broken the compact between the United States and the States,” Abbott charged in a statement issued on Wednesday, citing Article IV of the Constitution, which guarantees to states that the federal government “shall protect each of them against Invasion.”
“The Executive Branch of the United States has a constitutional duty to enforce federal laws protecting States, including immigration laws on the books right now. President Biden has refused to enforce those laws and has even violated them,” Abbott said.
He went on to accuse Biden of being a “lawless president who does nothing to stop external threats like cartels smuggling millions of illegal immigrants across the border.”
Now 25 states have signed on to defend Texas’ right to secure their border. We are right back to 1860 and arguing states rights versus federal rights and I am dying to know what the founding fathers must be thinking. They built and bestowed us with a limited federal government for a reason. We have discussed the federal government, the wasteful spending and debt, and the unconstitutional overreach that they have assumed for at least a century and a half. The federal government now represents what the colonists fought to get away from and here we are. They have assumed powers that were not given to them by the Constitution but one of the few powers that they were bestowed with, which is to secure the borders, they have shirked. Remember the movie Armageddon when they said that if you detonate a nuclear device on the surface of the asteroid it won’t solve the problem, but that you have to drill down deep into the asteroid and then it will explode and destroy itself properly to save earth. The destruction of the United States will come from deep within, and traditional media, social media, and the school systems are the tools being used to polarize this country and only we can destroy ourselves, and it is happening unless we are recognize that we are beholden to those that came before us to maintain and better the system they left us. Being an American is winning the lottery on this planet, and we are not being good stewards of that privilege, but some are, and they are challenging those that would destroy it. They likely need our support.
The US and Canada are not alone. Germany, Argentina, and Ecuador are all going through their own growing pains.
Abbott pushes back against Feds
LB#2
Speaking of pushback, a state that is not joining Texas and a city that is the furthest thing from supporting Texas is finding itself pushing back in its own way against the technology creep. San Francisco has filed a lawsuit against a state commission that allowed Google and GM’s autonomous car companies to expand and put driverless cars on the street. Trisha Thadani writes for the Washington Post, “The lawsuit, which has not been previously reported and was filed in December, sends a strong message from the nation’s tech capital: autonomous vehicles are not welcome here until they are more vigorously regulated. It’s yet another blow for the rapidly evolving self-driving car industry, which flocked to San Francisco hoping to find a prominent testing ground that would legitimize it around the United States. Instead, the two major companies — Google-owned Waymo and General Motors-Owned Cruise — have largely been cast aside by the city as an unwelcome nuisance and a public safety hazard.” Well, we nailed that one. Remember that the California Public Utilities Commission approved this, and they were all appointed by Governor Gavin Gruesome. When liberal ass San Francisco is pushing back against your policies then you know that you are out there on the edge of crazy or bought and paid for by big business at the expense of the citizens that you are there to represent and their safety. I don’t know if they will win their case, but seeing people push back against an appointed panel of bureaucrats that are affecting their lives warms me up on this cold winter morning.
LB#3-
From driverless cars to cars with drivers, the demise of Vroom is now official. Vroom was a competitor to Carvana, which will soon have its own demise day, and they were going to revolutionize how cars were sold. They raised a bunch of money and were valued at $2.5 billion, and you know how much I love these valuations. Here is another company that was good at raising money and not running an actual business. The days of raising money as a business are coming to a close and here is another example. Claudia Assis writes for Market watch “The company planned on raising additional capital. “Despite significant efforts to do so, we ultimately were unable to raise the necessary capital in the current market,” Chief Executive Thomas Shortt said in a statement.”
40% of the companies in the Russell 3000 index of small cap companies are unable to cover their interest expense with their company profits. They are dependent on being able to roll over their debts and get new financing. Now financing is getting tighter, and it is way more expensive than 3 years ago when companies like Vroom got their last round of financing completed. They are called zombies because they are the walking dead. Vroom is no longer among the walking.
Looking Forwards…
LF#1
Speaking of zombies and the walking dead, we look to the real estate market and in particular the Airbnb bust that is quickly developing across the country. Jack Fleming writes for the LA Times, “In Palm Springs, a cap on short-term rentals in specific high-demand neighborhoods has all but frozen the market in those communities. Sales are down. Homes languish on the market for months. And investors who bought up Palm Springs properties during the COVID-19 pandemic are facing hundreds of thousands of dollars in losses.”
Communities are tired of the party atmosphere that comes with Airbnb, and they are passing local ordinances to get the riff raff out of their neighborhoods. New York City requires the host to be present during the entire stay. Palm Springs capped the number of rental permits meaning the housing value is directly tied to whether or not it has a permit. If you sell your house, you go to the bottom of the list for a new permit. Fleming continues “Two years ago, YouTube star Luan Palomera paid $1.5 million for a chic vacation home in Palm Springs. Today, he’d be lucky to get $1 million for it.”
An investment is only as good as the future string of cash flows that it represents so if you take away the future cash flows these houses are waaay overpriced. That isn’t good. If you have to go to the bank and say I bought this place for $1.5 million with 20% down and now I can sell it for $1M, the bank is going to say ugh oh, where is the other $200k? That’s right the poor bank is sitting or shitting more specifically on another set of bad investments. Commercial real estate, bonds that they bought when interest rates were 3% less, and now yes the residential real estate market is poised for a huge downturn due to overinvestment, supply and shadow inventory which is houses like Palomera’s. It isn’t and wasn’t a $1.5M place, only when all of America got stimulus checks and were travelling after the government locked them down and they were paying outrageous prices for Airbnb’s. That ship has sailed. That price point has sailed and when you combine the short term rental market, which can’t get refinanced, there it is again remember these are business loans not 30 year owner occupied loans, and the dealer inventory that is sitting completed but not listed. The housing shortage is a huge myth. Huge. We have a demand problem, a problem of people able to afford these prices and these mortgage rates. When the prices and rates drop then more people can afford them and the markets will come into balance, but right now this shadow inventory is a ruse that is waiting on the Fed to lower rates and allow them to refinance and extend their charade and wait for higher prices to bail them out. We can’t hide behind these shadow prices forever, eventually someone has to tell the emperor that he isn’t wearing any clothes. And a naked Joe Biden is something that no one wants to see.
LF#2
Speaking of America’s fearless leader, jabbering Joe Biden is now upsetting the defense industry. Tom Ozimek writes for the Epoch Times via Zerohedge, “A coalition of 17 retired military officials led by retired U.S. Army Maj. Gen. James Marks have warned that President Joe Biden’s push for mass electric vehicle (EV) adoption is a threat to national security. Since taking office, President Biden has signed a number of executive orders to boost the sales of EVs, while outlining a plan that seeks to have 50 percent of new vehicles be either plug-in hybrids or fully electric by 2030. At a nearly tenfold increase over current electric vehicle sales, this proposed rule is a clear example of tone-deaf policymaking that favors the geopolitical advantages currently held by China in this market,” the retired military officers wrote.”
So production of these vehicles is playing right into our adversary’s hands because they took the rare earth materials production out from under our noses two decades ago. Now we are dependent of them for auto production? Furthermore, America has a demand problem, Ozimek continues, “More than 3,800 auto dealers wrote in the letter that EV demand isn’t sufficient, even though they said they believe that EVs “are ideal for many people” and that “their appeal will grow over time.”
“The reality, however, is that electric vehicle demand today is not keeping up with the large influx of BEVs [battery electric vehicles] arriving at our dealerships prompted by the current regulations,” the dealers said. “BEVs are stacking up on our lots.”
We have been talking about this issue for months. Todd Bucholz writes for Marketwatch, “In the early 1990s, every self-respecting American yuppie and retired suburban couple bought an electric bread maker, with sales hitting 4 million units. But the fad soon faded as these amateur bakers discovered that stuffing a precise quantity and ratio of flour, eggs, butter, yeast and salt into a metal box takes time and costs much more than strolling to the corner bakery.
Are plug-in electric vehicles the bread makers of our day?” What a great comparison. I don’t know the answer, but I have seen fads come and go and this will be one of the most expensive if it goes. I know the stock of GM, Ford, and Tesla are suffering due to their investments in EVs while Toyota is flourishing focusing on internal combustion engines and hybrids. Ozimek continues talking about Toyota’s leader, “Chairman Akio Toyoda declared last October that people are “finally seeing reality.”
This is a clear example of why the government shouldn’t determine the direction of an industry. We have investigated many of the great industrialists that built this nation, and the people wanted the products and services they offer. No one has to get a subsidy to buy an iPhone, Chick-Fil-A, or a Taylor Swift ticket. They vote with their dollars. Ozimek again, “EVs face obstacles even beyond physics and consumer inertia: Namely, a faulty electrical grid. More Americans today are spending more hours sitting in the dark. The U.S. Energy Information Administration reports that between 2013 and 2021, the average duration of a blackout doubled, from 3.5 hours to more than seven hours, while their frequency jumped by nearly 20%. No wonder people are reluctant to tie their mobility to a wall plug, especially given doubts about the reliability of renewable-energy sources like solar and wind, which will always be vulnerable to clouds and stagnant air.”
LF#3
We close with the results of the Wednesday 5-year treasury auction that was abysmal. There is no other word for it. Every day I wake up and look out my window and see the sun coming up and I think of that yellow ball of fire as the national debt rising but instead of staying at a constant distance and traversing the sky, I see the sun coming toward us on a direct trajectory of doom, fire, and brimstone. Some of you aren’t nihilists and proceed throughout your day with hope, love, and optimism. I envy you, but that doesn’t mean I am wrong. The debt is requiring larger and larger auctions to cover ever growing debt. We are now paying more on interest expense on the national debt than defense. Just let that sink in over a bagel and lox. Interest rates are bouncing, and the one constant is the federal deficit. It is growing and growing and all the parlor tricks that the Treasury, Congress and the Fed throw at it, don’t stop Santa Ana’s debt soldiers. We have talked about how desperately many industries need lower interest rates, and that is the one thing that can’t happen because Congressional spending has set us on this course at full speed into the iceberg field. Forgive me if I don’t sing Bobby McFerrin with you.
The Dow Jones finished trading at ….38,109.
The 10 year Treasury bond is at …4.139%.
The price of Brent Crude is …$83.55 per barrel.
The price of gold is … $2,018/oz.
The price of silver is ….$22.90/oz.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.