Looking Backwards …
LB #1
We have lots of distractions right now which require us to put our heads down and focus. There are elections, BRICS meetings, UK economic instability, German recessions, Chinese stimulus, and a bond market that is not behaving how the US government wants, at all. These are all worthy subjects but today I just want to talk about basics, the basics of bad investments. Let’s start by going to the therealdeal.com, where Elizabeth Cryan writes, “The sale of a nearly 1 million-square-foot Manhattan office building listed on the online auction site Ten-X was completed Tuesday for only $8.5 million.
That’s 97 percent less than the $332.5 million that the seller, Swiss bank UBS, paid for the Midtown property in 2006. The loss on the building at 135 West 50th Street was minimally offset by a $6 million gain UBS realized by buying and selling the ground beneath it in the interim.” Banks, even Swiss banks can’t handle too many $300 million dollar losses. Remember UBS was the bank that took over Credit Suisse when that bank was on the brink of failing. How much crap is sitting on the bank’s balance sheet you ask? Trillions. The losses are growing every day; the 10 year bond rises as it has done since Powell cut interest rates almost two months ago. Bad commercial real estate deals, they are still sitting on there at least many of them. Now we have car loans made to pandemic people that couldn’t afford them, still sitting there. Don’t think for a minute that banks are ok. They are not.
Real estate isn’t going anywhere
LB #2
Speaking of loss, California just lost two major refineries. This from Kenneth Schrupp at Justthenews.com, “Short on the heels of another major refinery closure, Valero signaled it is considering closing its two California refineries that produce over 14% of the state’s gasoline. Refinery closures already have the state importing 8% of its gasoline supply, which means the state could soon have to significantly increase its imports of refined products such as gasoline, on top of its existing reliance on the Middle East and South America for the majority of its crude oil. “When California Governor Gavin Newsom said in 2021, he didn’t see a future for oil in CA, I didn’t know 2024 would be the year he ended it at lightning speed,” said State Assemblymember Joe Patterson, R-Rocklin, on X. “Today, another refiner said “all options are on table” with refineries here. We can thank Newsom’s legislation.”
Just last week, Phillips 66 announced it is closing its massive Los Angeles refinery complex, which alone has 8% of the state’s refining capacity, right after the new legislation was passed.
New laws making it more difficult to drill for oil in California have brought production levels to half of what they were in 2008.”
This is why our United States are so special. We have 50 states with supposed states’ rights, although that is debatable considering the levels of federalism these days, but in theory, one state can decide to do these things. Their citizens are happy paying $8 a gallon for gas and electing such climate zealots. Those are choices that they get to make and live with. If they don’t like it, again in theory, they can vote them out. We have talked about how liberal governing has destroyed the once prosperous city in America Detroit recently and now we are getting to see California, the once most prosperous state destroy itself, by choice. These are great learning experiences of what not to do if, your goal is economic success. The best part of this lesson is it keeps on giving. This also from Shrupp.
“Should California adopt more strict Low Carbon Fuel Standard requirements in November, which could include having more strict requirements on refineries and raising their costs, even more refineries may shut down rather than continue operating in California. Under the Low Carbon Fuel Standard program, refiners must either produce low carbon fuels, or purchase credits; should the new standards pass in, California estimates they would add another 47 cents to the cost of each gallon of gasoline and 59 cents in 2025 to each gallon of diesel.”
LB #3
We have an historic situation unfolding in the automotive markets due to malinvestment. This from Zero Hedge regarding Volkswagen, “Europe’s largest carmaker, expected to report dismal third-quarter results on Wednesday, has been crushed by the auto market downturn while competition intensifies from China.
On Monday, Volkswagen’s top labor leader, works council chief Daniela Cavallo, who also sits on VW’s supervisory board, was quoted by Bloomberg as saying three factories are slated for closures. Cavallo warned that tens of thousands of jobs could be eliminated, and remaining workers could face 10% pay cuts and scaled-back hours…VW’s restructuring would be historic and mark the first closure of German-based plants in the company’s 87-year history. This comes amid intensifying competition from China and slowing auto sales across the West. The transition to EV has proved nothing short of disastrous, leaving VW with little choice but to push itself into restructure mode. Maybe VW should’ve stuck with petrol-burning cars.”
This is what malinvestment looks like. Companies will be punished by the market, which is always right. Media and government gaslighting don’t change the transaction decisions made by consumers unless done by mandate. We aren’t quite there just yet, despite the illegal rebates that the government has handed these EV companies in hopes of getting consumers to adopt shoddy or should I just say shitty products for no affluent consumers. These EVs, made by American and European companies, should simply be noted for what they are: playthings of the rich and those aspiring to be rich. If they want to compete against Mercedes, Porsche, Lexus etc great, but as a mass market consumer automobile the only country making that is China and BYD specifically. That is why Europe and America are so desperate to put tariffs on them. They will destroy the automobile markets in those respective jurisdictions.
That’s ok with the newly green affluent crowd though. James Rickards writes about this specifically at Daily Reckoning, “They’re early investors in windmills, solar modules, lithium car batteries, EVs, charging stations, carbon credits and other infrastructure of the climate scam. They stand to make billions of dollars off the narrative with help from extravagant government subsidies.
They don’t really care if it all collapses in the end (which it will) as long as they get rich at taxpayer expense in the meantime. All of this behavior is clear as far as it goes. What is not clear is the extent to which the Green New Scammers are doing this with your money. A major part of the climate agenda includes electric vehicles (EVs). I’ve been warning for years that EVs aren’t feasible as a transportation solution for more than relatively few Americans and that they are little more than glorified golf carts despite the $70,000-and-up price tags…Resale values of EVs are close to zero because buyers of used EVs have to shell out $25,000 or more for new batteries after the vehicle is about seven years old. The list of drawbacks goes on…A fairly recent survey by consulting firm McKinsey and Co. shows that 29% of EV owners in nine major economies want to return to ICE vehicles. When the sample is narrowed to just the U.S., 46% of those surveyed want to return to ICEs.
The McKinsey officials who conducted the survey claimed to be “surprised” by those results. That probably says something about the fact that McKinsey experts were just as deluded about EVs as the buyers surveyed…The truth is that the EV was invented in 1837 and reached the peak of its popularity in 1910 just before the mass production of internal-combustion cars by Henry Ford. The American public got it right when they flocked to the Model T.
It sounds like they’re getting it right again after a brief infatuation with the false promise of the EV. The bottom line is that the Green New Scam is falling apart.
It can’t happen soon enough.”
I don’t think I can say it any better, Jim. It will be disappointing to see these green investors and operators become rich peddling narratives at the expense of the many, but like California and Detroit, decisions must have consequences.
Looking Forwards…
LF#1
It seems like the honeymoon period is over at the coffeehouse. Daniela Sirtori, Matthew Boyle and Bloomberg write for Fortune magazine, “Starbucks Corp. is telling its corporate staff they could be fired if they don’t come to work at the office three days a week. Starbucks is the latest company to shift from carrots to sticks in the ongoing return-to-office battle that has been playing out at workplaces. Last month, Amazon.com Chief Executive Officer Andy Jassy surprised employees with a memo ordering them to start reporting to their desks five days a week, beginning in January… Amazon currently lets many of them work from home two days a week. Earlier this year, Dell Technologies told workers who chose to remain remote that they wouldn’t be eligible for promotion, and Wall Street banks have also warned that working from home could jeopardize employees’ career prospects. Still, offices in the biggest US cities remain half empty compared to pre-pandemic levels, according to security firm Kastle Systems… Early last year, when Starbucks tried to enforce its hybrid-work mandate, dozens of corporate workers signed an open letter pushing back.
Starbucks CEO Bryan Niccol’s own work arrangement, which allows him to live in California and travel 1,000 miles to Seattle on the company’s corporate jet, sparked backlash by some workers and outside critics. Starbucks has said that Niccol will spend most of his time in Seattle or visiting stores. Several staffers had said they didn’t care where the CEO was based, as long as he didn’t crack down on in-office requirements.”
Do you know what Bryan Nichol just got to sign with Starbucks? $85 million, do you know what Andy Jassey is worth after working for Amazon for 20 years? More than someone who wants to work from home so they can take their dog for a walk on company time. What about Michael Dell? That’s right, billionaire.
These numbnuts employees are gong to have to realize that everyone isn’t equal. They aren’t valuable enough to have these demands. These are lessons that 5-year-old soccer coaches should have instilled in them regarding the better players play and those that suck don’t. The goal is to win not just play the game, but the worst generation of parents in the history of this country taught their kids bad lessons and those kids are going to have to learn the lesson later in life and at a far larger expense. Again, such is the nature of bad decisions.
LF#2
On Wednesday recent Russell index superstar that was moved to the S&P 500 Super Micro Computer continued its meteoric fall. Super Micro Computer rose twentyfold in the last couple of years to earn inclusion into the S&P 500 index on the back of its AI technology. This from Kif Leswing at CNBC, “Super Micro Computer is joining the S&P 500 following a historic rally in the stock that has pushed the company’s market cap past $50 billion. The shares, up more than twentyfold in the past two years and over 200% just since the start of 2024, climbed another 8% in extended trading on Friday. Super Micro is replacing Whirlpool, according to a press release.” That was in March.
This from ZeroHedge on Wednesday, “Super Micro Computer says Ernst & Young resigns as auditor amid a review after EY communicated concerns about several matters relating to governance, transparency and completeness of communications in July.
EY stated in resignation letter that: “…we are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management’s and the Audit Committee’s representations and to be unwilling to be associated with the financial statements prepared by management, and after concluding we can no longer provide the Audit Services in accordance with applicable law or professional obligations”
This news triggered an almost 30% collapse in the tech company’s shares… Is this a sign of things to come for other tech giants?”
You’re damn right it is. The stock got crushed on Thursday and Friday as well. The stock is now down over 78% from its highs in March. The bubble in AI will do the same thing to that industry as EVs are doing to the auto industry. When the auditor walks away because they know your financials are full of shit, that’s a good thing. It’s something that is usually a red flag. It’s cheating when you lie, the stock price goes up, triggers your options, you sell, enrich yourself, and then say well we didn’t do so hot and the stock sells off, but you don’t care because you already cashed out. It is what lots of people are doing right now. Please act accordingly.
LF#3
The largest player of this playbook is Elon Musk. The man who has scammed the EV market with government credits and market manipulation for years now seems inside Don Trump’s pants more than Stormy Daniels. This is what makes this next item so hard to write about. Elon has enriched himself in ways because he is playing the game. He has played it well. It isn’t moral but it is very profitable. He has done so because the one thing he is, is smart. He overpromises and never delivers or under delivers but the stock and interest around him keeps rewarding him. It’s a game and he is a master. Like Don Trump, I don’t know whether to believe him or not about anything ever because I have seen and noted and remember all the lies. So when he comes out on Tuesday and says this, I don’t know what to think.
Here is Brett Arends from Marketwatch, “With just a week until the presidential election, Donald Trump’s close ally and major economic adviser Elon Musk is warning supporters to expect economic chaos, a crashing stock market and financial “hardship” — albeit “temporary” — if Trump wins. It sounds so extreme that Trump fans must either wonder why he had been so foolish as to say the silent part out loud, or maybe hope that the whole story is made up — “fake news.”
But it’s very real.
Billionaire Musk, Trump’s would-be budget-cutting and government-efficiency czar, also says there will be “no special cases” and “no exceptions” when he starts slashing federal spending after Trump takes office…Speaking Tuesday on a “telephone town hall” with supporters, Musk promised deep federal budget cuts, austerity and economic pain ahead in a new Trump administration.
“We have to reduce spending to live within our means,” Musk said. “That necessarily involves some temporary hardship, but it will ensure long-term prosperity.”
Describing government spending as “a room full of targets,” Musk said: “Like, you can’t miss. Fire in any direction, and you’re going to hit a target.” And, he added, “obviously a lot of people who are taking advantage of the government are going to be upset about that. I’ll probably need a lot of security.”
“Everyone,” he said, will be taking a “haircut.”
On his social-media platform X, the former Twitter, the Tesla CEO went further and agreed with a supporter who predicted “an initial severe overreaction in the economy” and that “Markets will tumble.”
“Sounds about right,” Musk replied.”
This is not the usual picture when a politician and his campaign promise austerity, hardship, deep budget cuts, a likely economic “overreaction” and a slump in the stock market. You usually hear those things proposed during a deep crisis, when desperate times supposedly demand desperate measures.
Instead, Musk’s agenda is like your new family doctor promising a major dose of brutal chemotherapy when you are perfectly healthy and cancer-free.
Wall Street economists are warning that Trump’s tax cuts and tariffs would add more to inflation than Harris’s proposals.
As reported here at MarketWatch just one day ago, Musk’s brutal budget-cutting math is way more severe than most Americans, including most MAGA fans, realize. Two-thirds of the entire federal budget already goes toward Social Security, Medicare, debt interest, defense, and veterans. (Note that does not include Medicaid.)
Everything else (including Medicaid) adds up to $2.35 trillion this year. So Musk’s promise to cut “at least $2 trillion” from the federal budget either means he is going to abolish pretty much everything else — Medicaid, Transportation, Justice, Homeland Security, Agriculture, the Food and Drug Administration, and so on — or he is going to cut Social Security and Medicare.
Or, as Musk put it, when it comes to cutting federal programs there will be “no special cases … no exceptions.”
Then Elon reached out to Ron Paul and said it would be great to have Ron Paul on his team. Ron Paul responded saying he would love to talk about it. That set off libertarians everywhere into Javier Milei government slashing fever dreams. I rolled over onto my back and reread that again and let Uncle Elon rub my belly while I purred like an alley cat sipping a saucer of milk. Then I stood up and said, do I believe this? Ron Paul, yes, the other two? I don’t know, but what Elon said was spot on. The problem is that Americans will hate it. If the stock market does a Super Micro Computer on steroids as the two trillion deficit gets taken away annually. Pensions disappear, endowments disappear, 401ks disappear, are they ready for that smoke? I have long believed that there are plenty of people that know what needs to be done, but no one is willing to be unpopular enough to do it. If and this is the biggest if in financial history, Don and Elon give us the government spending cuts that we need, the austerity that we haven’t taken for years, and the misery we deserve, then boy will I have to eat a lot of crow while I become lifelong disciples of two people I currently despise. Based on their body of work, I don’t believe them. But I would love to be wrong.
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 42,052.
The 10-year Treasury bond is at …at 4.386%
The price of Brent Crude is … at $73.10 per barrel.
The price of gold is … at $2,745/oz.
The price of silver is … at $32.57/oz.
I leave you with this from the information superhighway, A woman goes to the dentist and the dentist tells her ‘you need a root canal’. She says, ‘ugh I’d rather have another baby than a root canal!’ The dentist says, ‘well make up your mind as I will have to adjust the chair.’
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.