Looking Backwards …
LB #1
Today we see that the ratings agency have finally gotten the pigeon shit out of their eyes and taken a more objective look at these countries that they are supposed to be monitoring. This from ZeroHedge, “Alas, after Marine Le Pen toppled Barnier’s government in a dispute over deficit reduction one week ago, Moody’s no longer could pretend that France is anything but a flaming dumpster fire of a political circus, and late after the Friday close, in a downgrade that came outside of Moody’s regular review schedule for France, Moody’s cut its rating of the euro area’s second biggest economy to Aa3 from Aa2, three levels below the maximum rating, and with a “stable outlook”, for now. Moody’s was the last holdout: France has already been cut to equivalent levels by Fitch and S&P”
Hello Moody’s, welcome to the party. We covered France recently because this stress is spilling over everywhere right now. France has a ceiling on their debt ratios put in place by the Euro, that they voluntarily joined and currently belong to. In theory, if they don’t abide by these ratios they have to cut. Cut spending or they could raise taxes, aka either way recession in the Avenue des Champs Elysees.
“The downgrade comes hours after President Emmanuel Macron named on Friday veteran centrist politician and early ally Francois Bayrou as his fourth prime minister this year. His predecessor Michel Barnier failed to pass a 2025 budget and was toppled earlier this month by left and right-wing lawmakers opposed to his 60-billion-euro belt-tightening push that he had hoped would rein in France’s spiraling fiscal deficit. The political crisis put French stocks and debt under pressure, pushing the risk premium on French government bonds at one point to their highest level over 12 years, with the yield on French bonds surpassing that of Greece. Ironically, back during the peak European sovereign debt crisis, it was France that was among the countries that came to Greece’s rescue. Alas, nobody in Europe is big enough to rescue France. Expect the EURUSD to tumble when trading reopens on Monday, on its way to parity with the dollar.”
LB #2
The stress isn’t merely abroad. We are seeing some new pockets emerge. Remember when we were ridiculing GM’s Cruise robotaxis. Well, eventually as we said it will be time to cut your losses Mary Barra. This from Lora Kolodny and Michael Wayland at CNBC, “After spending more than $10 billion on its robotaxi unit, General Motors
is abandoning its Cruise driverless ride-hailing service… “Cruise was well on its way to a robotaxi business — but when you look at the fact you’re deploying a fleet, there’s a whole operations piece of doing that,” GM CEO Mary Barra said on a call Tuesday. Barra said GM would instead focus on the development of autonomous systems for use in personal vehicles.
GM cited the increasingly competitive robotaxi market, capital allocation priorities and the considerable time and resources necessary to grow the business as reasons for its decision.”
The increasingly competitive robotaxi market? Where does this exist at? There is no robotaxis and there won’t be one for a while. Elon Musk promised this in 2018 and we still don’t have it. Cruise was at least driving around bumping into things for a while. That is why going downtown any city is too stressful for me right now.
We haven’t mentioned Seattle as a stressed out Real Estate town, but the commercial real estate market is evidently starting to unlock some real awful sales there. This from Anna Edgerton and John Gittelsohn at Bloomberg, “One of Seattle’s most prominent developers is warning its lenders that stubbornly high vacancy rates are making it impossible to pay off its debt.
Martin Selig Real Estate disclosed it will be unable to pay off a $379 million loan tied to nine properties in and around downtown Seattle by April, when the debt matures, according to commentary from the servicer on the commercial mortgage this week. The office buildings, which span more than 1.6 million square feet, are about 33% vacant on average.
The notice comes a month after the firm, run by Martin Selig, got a 60-day forbearance on a $239 million commercial mortgage backed by seven buildings, after the loan came due in May, according to separate filing this week. The total value of those buildings, which span more than 1 million square feet, has plummeted by 43.7% in the decade since the loan was originated, according to a March appraisal. Selig is trying to modify the loan before the end of the year, the filing added…Defaults on commercial mortgage-backed securities backed by US office buildings swelled to more than 10% in November, up from 5.7% a year ago, according to data compiled by Bloomberg.”
This is going to be a problem. Do you remember in the movie The Big Short when no one could understand that the bonds fail at 8% at the failure rate was already at 4% and rising. Are you sure about the math? Well, what was the failure rate for the mortgage backed securities? We are at 10%? No one thought commercial real estate could take that kind of a hit. Where is this stress going to seep into next.
LB #3
If stress is in Europe and stress is in Seattle, what about China and how are they dealing with their stress. They are the subject of immediate tariffs according to the wee orange man president elect. Well, they responded by saying do you really want to get in a battle of tit for tat. I know you think tat will get you this tit but in reality, those who have the tit can always get tat. Let me explain. China is the world’s factory, not the US anymore. Statista’s Felix Richter has a chart shown via ZeroHedge, China has 31% of the value-added manufacturing in the world or almost double the United States’ share of 16.3% and China’s share is larger than the next 7 countries output combined. China just stopped exporting some rare earth minerals last week and this week they have held back key components for making drones. We have talked about how reliant the US military is on China supply chains, how reliant the pharmaceutical industry is, and how reliant the American consumer is. If Don T. wants to bring manufacturing back home to America I just have one question. We have a 50 year low in unemployment give or take? Don, you want to ship all the illegal workers of which there are what 5-10 million maybe 11? Who is going to work in these newly built factories? Who is going to build them? The decision to outsource manufacturing was made 50 years ago Don. Unless you want a pair of Nikes to cost $1500 or an iPhone to cost $10,000, I would try to work with China versus working against them. Playing hard ball against China when they hold all the cards is a bad decision.
Looking Forwards…
LF#1
Here is another good example of what bad decisions look like. After Hurricane Helene, instead of offering sympathy I offered up some common sense. Why are people rebuilding in a flood zone of a river? This thing floods every 20 years or so and wipes out large portions of the community. Every 100 years or so, it wipes the valley floor clean of everything. If people want to rebuild there on their own dime, I am 100% completely fine with it, but I don’t want my tax dollars going to rebuild something that will just be destroyed again. Why are banks even lending to anyone in this location? Banks should refuse to give mortgages, construction loans, etc or make the interest rates high enough to make sure that they receive adequate compensation for the risk to offset their future losses. This would be the invisible hand of capitalism telling these folks to move to a better long term investment location, but if they get bailed out by the government, federal, state local whomever they will just repeat mistakes. This is stupid.
This from Jeff Louderback at the Epoch Times via ZeroHedge, “Even before Thanksgiving, the town square was decorated for Christmas. Antique shops, cafes, and coffee houses dot Main Street, bustling with activity. On the surface, it appears to be a typical holiday season, but all is not as it seems. Two months after Hurricane Helene struck the region, Burnsville and Yancey County are still on a long path to recovery…
Crystal Capps, a real estate agent whose family has lived in Yancey County for several generations, said immediate and long-term assistance is essential for ensuring locals’ safety and enabling them to remain in the region.
Bradley Honeycutt was born and raised in Yancey County. His parents live on a 48-acre mountainside property and have cattle and horses. Honeycutt contacted friends who had experience with search and rescue after disasters. They traveled to Yancey County to help.
Friends in Dallas, where he is finishing a degree in architecture and design with the intent to return to Burnsville and open a business, established social media accounts under the name “Bradley Loves Burnsville.”
The accounts gained followers, and Honeycutt outlined the area’s immediate needs to them. Honeycutt helped start the Appalachian Disaster Coalition just days after the storm. He was born and raised here and graduated in 2006 from Mountain Heritage High School.” The current priority is getting displaced residents into campers and temporary homes, Honeycutt said. The group has partnered with other nonprofits to expand their capabilities. Eventually, they plan to build 30 three-bedroom, two-bath, single-family homes for locals in Yancey County. Appalachian Disaster Coalition and other independent groups are important in ensuring the town isn’t forgotten, Honeycutt said.”
If Honeycutt wants to build or rebuild in this area with funds that he has raised, then this is a wonderful expression of charity and persistence. If the sentimental value of geography moves him to action, then that should be admired. This was how disasters were managed before the government intrusion into our lives. He should be the sole standard, not the addition to…
LF#2
Now it’s a currency again so investors don’t have to pay tax on it…
Bitcoin is back in the news again recently after broaching the $100,000 mark per Bitcoin. The industry was a large contributor to Donald Trump’s campaign and now he owes them for the backing. Bitcoin has morphed from digital gold, to a store of value, to money, and an asset which means that as it goes up when it is sold the owner must pay capital gains tax on it. This from Mark Mason in Bitcoin Magazine, “President Trump himself has indicated a willingness to rethink Bitcoin taxation. “They have them paying tax on crypto, and I don’t think that’s right,” he said in a recent interview, echoing the frustrations of millions of Americans who find it absurd to pay capital gains taxes after using Bitcoin to purchase something as small as a cup of coffee. “Bitcoin is money, and you have to pay capital gains tax if you use it to buy a coffee?” he asked rhetorically, highlighting how current laws discourage everyday transactions.”
Let’s go to the New York Post and Hannah Sparks who tells us a famous Bitcoin story, “In May 2010, California student Jeremy Sturdivant, then 19, noticed a bizarre request on a cryptocurrency internet forum: He could receive 10,000 bitcoins, at the time reportedly valued at $41, in exchange for the delivery of two large pizzas to Florida resident Laszlo Hanyecz, 28.” Those 10,000 Bitcoin are now worth a billion dollars.
Do you want to live in a world where two pizzas cost $1 billion after 14 years? That’s the world that Bitcoin hodlers live in. Hodl means hold on for deal life. That means buy and hold. That means don’t ever sell, that means the money velocity of Bitcoin is encouraged to be next to zero. Do you know what caused the Great Depression, a lack of money velocity…Bitcoin hodlers would be rich in a house with nothing to eat but would have a digital collectible risk asset which is what Bitcoin is. Why do I know that?
Let’s go back to our pizza example. Let’s say the US dollar is losing value which it is and let’s say those $41 pizzas now cost $100 because they are in California where everything is expensive and for round numbers. That means that Bitcoin as a currency is super strong. The pizzas are worth a billion dollars. The pizzas didn’t change, the dollar hasn’t gone down that much only the Bitcoin currency, if you want to believe that, has gone up. How much stronger has this currency gotten? Well current Bitcoin prices are $100,000 roughly and the pizzas are $100 so that is a 1,000 times larger and it took 10,000 Bitcoin to buy two pizzas so 1,000 times 10,000 equals 10,000,000 times stronger. 1 Bitcoin bought 1/20,000th of a pizza and today it would buy 500 pizza pies. In 14 years, do you know any currencies that went up 10 million times in value over 14 years? What a strong currency! So if you and I both hold a bitcoin we can make 10,000,000 times on our money? Are we sure we don’t need new suckers at the card table to push our bitcoin higher?
Forget pizza, let’s be oil tycoons instead. Bitcoin today buys 3,333 gallons of gas at 100k per coin and $3 per gallon so if I wait 14 years, I can buy 33 billion gallons of gas? That is enough gasoline to fuel the United States for 3 months at 2020 usage levels of 125 billion gallons of gasoline used. If I believe this will continue, I should go buy Bitcoin now and open a gas station in the future. But wait, I don’t want 33 billion gallons of gas if I give up my magic beanstalk that grows 10 million x in 14 years. I will just hodl my bitcoin. Wow, that is pretty great and that is what has happened to anyone who has invested in Bitcoin so far. The extrapolation of bubbles sure is fun.
LF#3
Just when it seems the Boeing whistleblowers are all dead, we have a new company to worry about. This from Lauren Acton-Taylor who writes for the Daily Mail, “A former OpenAI researcher turned whistleblower was found dead in his San Francisco just months after making damning claims about the company.
Suchir Balaji, 26, was found dead on November 26, three months after he accused the company of violating copyright laws in their development of ChatGPT…Over the past two years, companies like OpenAI have been sued by various individuals and businesses for claims on their copyrighted material. His role and knowledge in legal proceedings against the company was considered ‘crucial.’ The New York Times was involved in their own lawsuit against OpenAI and its primary partner, Microsoft, who both denied claims that they had used millions of published articles to inform the intelligence and began competing with the outlet as a result. On November 18, the outlet filed a letter in federal court that named Balaji as a person with ‘unique and relevant documents’ that would be used in their litigation against Open AI. X and Tesla CEO Elon Musk reacted to the news of his death on his platform, writing a cryptic post that said: ‘Hmmm’.”
Whoa Nellie. We have got the death of a saint, and you can’t spell dead saint without the AI. Musk, of course, had to weigh in on OpenAI because he has a competitor, and he has a real feud. We have profiled him lately because of his flip flop on Trump. How fortuitous that just this week OpenAI released emails of why Musk is feuding with his competitor. This from Hayden Field at CNBC, “OpenAI on Friday clapped back against Elon Musk, one of its co-founders, after the billionaire asked a federal court in November to stop the ChatGPT maker from converting to a fully for-profit business.
In a blog post on the OpenAI website titled “Elon Musk wanted an OpenAI for-profit,” the startup alleged that in 2017 Musk “not only wanted, but actually created, a for-profit” to serve as the company’s proposed new structure.
“When he didn’t get majority equity and full control, he walked away and told us we would fail,” OpenAI wrote in the blog post. “Now that OpenAI is the leading AI research lab and Elon runs a competing AI company, he’s asking the court to stop us from effectively pursuing our mission.”
Musk was trying to do to OpenAI what he did to Tesla? Take over control? He got Musked by Sam Altman? That is too funny. Hayden writes the whole story and reveals what a charlatan Musk is. Open AI released the emails where Musk wanted to roll OpenAi into Tesla as well. Sam, he was just trying to help. Somewhere Martin Eberhard is laughing. Damn, you can’t trust that guy any further than you can throw him. I am sure glad he is deciding what sections of the government don’t suit his needs and he can discard them…On the day more information about the deceitful character of Elon Musk is revealed, Tesla stock closed at an all time high of 436 and a P/R ratio of 119.6. What stress?
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 43,828.
The 10-year Treasury bond is at …at 4.395%
The price of Brent Crude is … at $74.49 per barrel.
The price of gold is … at $2,665/oz.
The price of silver is … at $31.00/oz.
I leave you with this from the information superhighway, what do Alexander the Great and Winnie the Pooh have in common? They both share the same middle name.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.