JWB moving headquarters downtown after buying historic Greenleaf building

The move will result in long-time tenant Jacobs Jewelers moving to a new location......»»

Category: topSource: bizjournalsJun 24th, 2022

Pandemic-Induced Relocation Wave Receding in Current Market

At the onset of the pandemic, a common narrative was that the masses were hightailing it out of cities and heading to greener pastures. From historically low mortgage rates to having the freedom to work from anywhere, people were suddenly allowed to reevaluate where and how they wanted to live, laying the foundation for the… The post Pandemic-Induced Relocation Wave Receding in Current Market appeared first on RISMedia. At the onset of the pandemic, a common narrative was that the masses were hightailing it out of cities and heading to greener pastures. From historically low mortgage rates to having the freedom to work from anywhere, people were suddenly allowed to reevaluate where and how they wanted to live, laying the foundation for the “Great Migration” that countless real estate professionals capitalized on over the past two years.  Fast forward to today and a lot has changed. Buyers are competing for a constrained supply of homes and affordability has taken a turn for the worse. RISMedia spoke with several real estate and relocation experts to get their insights on what the future holds for buyer relocation patterns in the housing market’s current state. “It’s a mixed bag in terms of how this may impact migration patterns now and into the future,” says Kate Reisinger, CRP, executive vice president, Member Services, Leading Real Estate Companies of the World®. Lifestyle-Based House Hunting The outbreak of the COVID-19 pandemic and the response by the federal government and employers catalyzed a renewed focus on family and lifestyle needs among buyers and homeowners. According to a National Association of REALTORS® (NAR) report, buyers and sellers continued prioritizing family and lifestyle during their house-hunting process last year. Behind the quality of the neighborhood, NAR’s 2021 Profile of Home Buyers and Sellers indicated that the second-most important factor to buyers when choosing a neighborhood was the convenience to loved ones. Reisinger doesn’t expect a significant deviation from that trend in the coming years, as remote work has continued to offer flexibility in the workforce. “For some, it’s a great time to transition from that big home with a lot of acreage to a downsized property in the city,” she says. “Buyers see prices in many urban markets have normalized, so they are taking advantage of that to return to the city—or in some cases, to try it for the first time. We see others who moved into bedroom communities because of COVID and loved it, with some people now opting to move even further out.”  According to George Ratiu, manager of Economic Research at®, many of the shifts in migration plans and housing preferences during the pandemic were undercurrents building for at least half a decade. “A lot of young professionals found themselves in very expensive cities after ten years of building a career and still unable to purchase a home,” Ratiu says. “So, what we saw through the pandemic was an acceleration of a trend that already saw young professionals looking for more affordable houses in the suburbs.” Donna Deaton, an office manager at RE/MAX Victory + Affiliates in Ohio, echoed similar sentiments, adding that persisting demand for more space will still influence buying decisions. “I think many people have realized they like staycations more than they thought they did,” Deaton says, adding that the Liberty Township-based brokerage has seen a mix of buyers exiting the downtown Cincinnati area to head over to suburban markets. “We will still see that because people have seen its advantage, but I’m also seeing some younger people coming in that still want the urban lifestyle,” Deaton adds. A Different Market  While many of the migration trends of the past couple of years are likely to stick around, buyers that are continuing their home search have a few factors to contend with if they want to tap into the American dream. Housing affordability is still one of the most prominent factors influencing buyers in the market, with lack of inventory adding another hurdle for people searching for listings in their price range. Mortgage rates have climbed from historic lows in late 2020 to surpass 5% in recent weeks. This has added to the challenge for many aspiring buyers—particularly entry level and first-timers—who are being priced out of the market amid last year’s surge in home costs. According to Ratiu, the widening affordability gap will play a part in many buyers’ decisions if they haven’t been squeezed out. “I don’t see housing becoming affordable in the next six months or even in the next 24 months, so I think for a lot of homebuyers, the search for affordability will mean pushing out the boundaries of the city to find affordable housing,” he says. Ratiu went on to say that he has seen a range of buyer and builder preferences leaning toward suburbs and small-to-mid-sized cities, with the latter seeking cheaper land  on which to develop. “When we look at a lot of the construction taking place now it’s farther out, in part, because in the last decade and a half {{builders}} focused on infill development near downtowns since the narrative was that everyone wanted to live there,” he says. Remote work became a prominent aspect of the “new normal” of the pandemic, and many house hunters were able to break from the age-old tradition of living closer to where they worked. According to Matthew Gardner, chief economist at Windermere Real Estate, that trend could change as employers start calling workers back to offices. “The return to work was supposed to have been decided by many companies more than a year ago, then the Delta variant came along and most businesses pushed that  decision-making process back,” Gardner says. “They’ve really been kicking the can down the road for quite some time, however, slowly, we are starting to get some companies with hybrid plans”. “Most of what I’ve heard as I’ve spoken to different CEOs is that they want to start to come back, but most of them seem to suggest that the work from home will be more of a hybrid model,” he says. The hybrid workplace paradigm—people working in offices and at home—is quickly growing into a dominant model for several companies. According to a January 2022 Future Forum Pulse Survey, the percentage of people working in hybrid arrangements increased to 58% from 46% between May and November 2021. In another Microsoft survey of more than 31,000 workers and leaders, more that 52% of people in leadership roles said their companies were likely to shift to a hybrid work model. The remaining portion said that their companies would bring workers back full time. As companies implement hybrid work environments en masse, workers will still have opportunities to cast a wider net for their home searches, according to Ryan Carrell, director of Relocation and Client Services at Carpenter REALTORS® in Indiana. Carell is also a board member of the Relocation Directors Council, an association of “recognized leaders in the relocation industry” nationwide. “I think the shift out was much more dramatic than the shift in because I think a lot of people (will elect to work from home),” he says. “I think we will see people commute a greater distance for a shorter time in the office versus a relocation.” Carrell also notes that business relocation and expansion have contributed to a long-term shift in where people can live. This has been evident in how tech giants like Google, Apple, Meta—formerly Facebook—have expanded their footprint into markets throughout the U.S. “They are building headquarters in the highly desirable suburban markets versus a high rise downtown to be closer to the community where their people live,” he says. “If you’re Microsoft and Google and you have these large campuses that you’ve already committed to, bringing people back to those campuses is probably a high priority.” Staying Prepared While many of the relocation trends that took hold during the pandemic are likely to persist amid different market conditions, real estate professionals looking to stay productive will need to leverage their relationships. “The two items that we are always coaching our agents on are communication and staying in touch with their sphere,” Carrell says. “We’ve been presented with some macroeconomic trends like inflation, but those will affect families differently. The only way the agent is going to know which one of those families will need them the most is to stay in contact with them.” Carrell suggests that real estate professionals prioritize being proactive when reconnecting and interacting with their sphere, especially as the supply of homes in the market is still low. “As the trends change and as buyer demand continues to remain strong, it’s the agents who can find inventory—finding listings that aren’t on the market—that will win,” he says. “Reach out to potential sellers who maybe haven’t thought about selling. If you educate and help them understand their equity position—it’s 50% higher than it was three years ago—all of a sudden, they might be motivated.” It also doesn’t hurt to have a robust agent and broker network, according to Gordon Miles, president and COO of Berkshire Hathaway HomeServices Nevada, Arizona and California Properties. Operating in Palm Springs and Southern California, along with Arizona and Nevada, he has witnessed the impact of outmigration from coastal markets to less expensive markets inland. According to Miles, building and leveraging a network will also be an essential tool. Miles says that first, REALTORS® should be networking and interfacing with those in transitioning areas on a regular basis. “The second part is just being aware of pricing and what’s going on, and being aware of the environment and trends happening in their local markets,” he adds. Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to The post Pandemic-Induced Relocation Wave Receding in Current Market appeared first on RISMedia......»»

Category: realestateSource: rismediaApr 25th, 2022

The pandemic"s housing crisis splintered the American Dream into 4 different versions. Say goodbye to the white picket fence.

After 75 years of wanting a white picket fence, COVID changed it all. The American Dream home comes in four shapes now and so do attitudes about life. The pandemic has created four different versions of the American Dream: a suburban, exurban, urban, and mobile lifestyle. At the core of each is the idea of a better life. Marianne Ayala/Insider Bye, bye white picket fence. Remote work and the housing crisis splintered the postwar American Dream into four different versions. Americans are realizing a better life on their own terms: in the suburbs, exurbs, cities, or on the go. It's what the American Dream was originally about, anyway. It's been 13 months, 15 bids, and two signed contracts, but Ashley Nader still isn't a homeowner.The 27-year-old product manager began house-hunting in October 2020 after she moved from the Bay Area back to her South Florida hometown during the pandemic. She'd been bouncing between the two coasts until her workplace reclassified her as a Florida employee and she began enjoying the tax perks of the Sunshine State, inspiring her to invest in a house.After going into contract the first time, the seller ghosted her. The second one forced her out and threatened her escrow funds. "I can write a book on all the horrors of first-time home buying," she told me.Nader is looking for the "good life" that many Americans have been seeking since the 1950s, when the US emerged as an economic superpower and a house, yard, and white picket fence emerged as the ideal lifestyle.This 20th-century fantasy has had a lot of ups and downs in the 21st. First, the dream of homeownership curdled for millions during the Great Recession. And then, after a long and slow economic recovery, the pandemic untethered people from the city and the office, providing workers with freedom and flexibility to chase the dream again. But this boom morphed into a historic housing shortage that has boxed many aspiring first-time homeowners out of the market.In hopes of upping her homebuying odds, Nader expanded her search from Florida to Colorado, North Carolina, Washington, and California. She said she put in offers without even seeing some of the houses in person. "That's how competitive the market is."Larry Samuel, the founder of Age Friendly Consulting and author of "The American Dream: A Cultural History" told me that homeownership was never what the American Dream was about anyway. "While considerable numbers of folks are still convinced that having the proverbial white picket fence will signify they've achieved the American Dream, many others are realizing there are other perfectly valid interpretations of the concept," he said. A healthy 59% of Americans still aspire to be homeowners, a sign of the lingering allure of the post-World War II vision. But in 2021, it turns out that instead of one alluring dream of a better kind of life, Americans now have four of them. Version 1: An exclusive suburbia for those with postwar dreamsSuburbia became a pandemic-era utopia, as outdoor access and spacious rooms for remote work appealed to a locked-down nation. But the number of Americans snapping up their piece of the pie proved no match for a market that had been underbuilding since the Great Recession. America began running out of houses. The suburbs became ground zero for bidding wars as competition sizzled. Boomers with equity and wealthier millennials emerged victorious with all-cash offers. The losers were often everyday millennials, like Nader, for whom a second housing crisis was just the latest in a long line of economic bad luck. Nader said she originally wanted to buy a house under $400,000 so she could pay it off quickly and "actually own it," but the lack of starter homes caused her to up her budget by $200,000. "It's really a cash buyer market," she said. "If you have the cash, you can buy whatever you want right now." Houses have become so overpriced that suburbs have become exclusive. GeorgePeters/Getty Images Alyssia Cinami thought she'd have more cash to house-hunt after paying off her student loans. The licensed family therapist has been looking in northeast Connecticut for the past 14 months. She says the "insane" market has left her exhausted and discouraged as a first-time buyer. Over the course of five bids, she increased her original maximum budget of $260,000 by $20,000, and even added an additional $20,000 to some bids. "Looking for a house is like another part-time job," she told me.The suburbs are now mostly attainable for the wealthy, becoming less accessible to the 68% of millennials who have their sights set on homeownership. That's created other versions of the house with the picket fence, somewhere farther out or farther in. Version 2: Finding affordable housing in the exurbs Cinami is hoping to buy her starter home in Woodstock, Connecticut, a relatively rural town offering privacy, good schools, and safety. It's a good example of the rural idyll that some have embraced because of remote work, a trend that encompasses the "exurb," a rural community that is distantly commutable to a big city.Americans moving from urban areas to the exurbs marked the biggest population shift in the pandemic, Jefferies analysts said in an August note, citing USPS mail-forwarding data. In May through June, 40,000 Americans exited cities and suburbs for the exurbs. While pandemic population shifts have been waning, exurbs and rural areas were the only regions to add households in those months.Urbanist Richard Florida told me that the rural fringe has seen a "real, new growth spurt" as the pandemic opened up rural areas that bridge to existing metros, like the Hudson to New York City. Driving the trend is what Florida has long called the creative class. Some Americans are seeking more rural pastures. Getty Images/Cavan Images As he explains it, this cohort of young knowledge workers once sought a "real authentic, urban experience" in big cities, but as big box and chain stores moved in, many of those experiences have disappeared. Now, they're finding that authenticity in the rural fringe. It's become an endpoint for a new type of American Dream."The new picket fence is a farm," Florida said.To solve the housing shortage, builders should focus on these areas, Ali Wolf, chief economist at homebuilding prop tech company Zonda, told Insider. They should "move further to the outskirts, or start additional building in parts of the country with more developable land," she said. As homes are built farther from downtown, she added, amenities will likely improve, creating new gathering places and hotspots.Version 3: Reviving cities as places of connection, not workFor all the migration to the suburbs and exurbs, cities are not dead. Bank of America Research said the narrative of an urban exodus was more myth than reality, and a Zillow report found that of people who moved, 19% moved within their metro area, and nearly 40% stayed in the same city but switched neighborhoods. Consider NYC, where USPS data found that more Manhattanites moved to Brooklyn than anywhere else between March 2020 and February 2021.In fact, rents are skyrocketing and 60% of wealthy millennials plan to buy a home in a big city within the next year. As prominent economist Enrico Moretti recently told Bloomberg, remote work gave urbanites the freedom to live in the part of the metro area they'd rather be in while still reaping the fun of city life. So really, when zooming out to consider the whole metro area, these thriving urban cities just got larger. People who live in cities live there because they want to, not for work. Alexi Rosenfeld/Getty Images What the pandemic did, Florida explained, was accentuate a demographic divide among urbanites by accelerating pre-pandemic behaviors: young families headed to the 'burbs as cities became less attractive to them, while starry-eyed young professionals flocked back as soon as they could, continuing a trend that began in the 2010s. Plus, some pre-pandemic homeowners who profited from the housing boom, can now afford to trade their small-town digs for city living.That means many city residents today are living there because they want to, not because they need to for work. It's ushered in a new era for cities, one no longer centered around an office but instead on personal interaction that facilitates spontaneity and creativity."I think we've mistaken cities as containers for people to work," Florida said. "That's not what cities are. Cities are connectivity machines with new generations of connections and meeting spaces."Version 4: A lifestyle on the goFinally, not everyone wants to stay put. Alternative lifestyles that flourished during the past decade, like #vanlife and digital nomads, boomed during the pandemic. Tiny house sales skyrocketed in 2020. In 2018, 53% of Americans said they would consider living in one, according to a National Association of Homebuilders survey. By late 2020, 56% of Americans said the same in a poll conducted by financial company IPX 1031. More Americans also decided to try out life on the road. Makers of camper vans, RVs, and travel trailers have been updating on existing builds or creating new floor plans to accommodate the growing market. Van sales for Mercedes-Benz US increased by 22.5% in 2020, even as the brand's overall sales fell by 8.9%. Alternative living boomed during the pandemic. picture alliance / Getty Khanna, a globalization expert and author of "Move: The Forces Uprooting Us," said he's seen elevated youth mobility during remote work. "The picket fence is, 'Hey, look at my view, when I'm in Seattle,' and 'look at the one where I'm in Boise,' or 'I've got my tiny home and now I'm in Tahoe,'" he said.The demographics fueling these trends sit at two different ends of the spectrum. Some buyers are digital nomads, with the means and desire to live a more mobile lifestyle. This growing movement is hopping from locale to locale for extended periods of time, giving rise to the "workcation," in which people move to some of the world's most remote places and turn Airbnbs into office spaces. For others, the upfront cost of a van or a tiny house is a more affordable alternative to the housing crisis. "Even before the current housing crisis, many millennials were bypassing debt-based home ownership in order to pursue a more present-focused, mobile lifestyle," Samuel, the generational consultant, said. "Given the cost of buying a home, that lifestyle has gained even greater cultural currency, further eroding the postwar version of the American Dream." Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 14th, 2021

Homebuying ‘unicorn’ takes 107,000 s/f at 195 Broadway

Cushman & Wakefield arranged a long-term lease for Orchard Technologies, Inc. at L&L Holding Company’s 195 Broadway. Orchard, a technology company founded in NYC that simplifies the home selling and buying process, will occupy 107,443 s/f across the entire 26th and 25th and partial 24th floors. Orchard’s nearly 200 New York based employees will be... The post Homebuying ‘unicorn’ takes 107,000 s/f at 195 Broadway appeared first on Real Estate Weekly. Cushman & Wakefield arranged a long-term lease for Orchard Technologies, Inc. at L&L Holding Company’s 195 Broadway. Orchard, a technology company founded in NYC that simplifies the home selling and buying process, will occupy 107,443 s/f across the entire 26th and 25th and partial 24th floors. Orchard’s nearly 200 New York based employees will be moving into the new space in early 2022, with hundreds of new jobs expected to be filled in the year ahead. “Keeping innovative tech leaders and their employees in New York City is important to our recovery. It’s great that Orchard is committed to the city and to keeping jobs here. We know their workers will be engaged and thrive in Lower Manhattan’s Financial District,” said New York City Economic Development Corporation President and CEO Rachel Loeb. “We celebrate Orchard’s success and one more proof point that tech is making its future here.” Cushman & Wakefield’s Peter Trivelas and Gary Ceder represented the tenant in the transaction in coordination with the firm’s Project & Development Services and Workplace Consulting professionals.  L&L Holding was represented in-house by Vice President and Director of Leasing Andrew Wiener. 195 BROADWAY “We are thrilled to have found Orchard an office space that achieves its near-term objectives while also allowing for future growth and flexibility,” said Trivelas. “195 Broadway is surrounded by transportation and retail options, offering Orchard an ideal location to continue expanding and bringing new jobs to New York City, the very place the company was founded.” Orchard is simplifying the home buying and selling experience, making it stress-free, fair and simple. Launched in 2017, the company recently achieved “unicorn” status, achieving a $1 billion valuation, after its recent $100 million funding round. “We’re thankful to have worked with the team at Cushman & Wakefield to find an office where we can continue to grow our team,” said Court Cunningham, CEO and co-founder of Orchard. “FiDi is a vibrant community and we look forward to the benefits of in-person collaboration with our team as we continue to transform home buying and selling.” “We are excited to welcome Orchard to 195 Broadway, which continues to attract a diverse variety of tenants seeking modern and collaborative office spaces in the heart of Downtown,” Wiener said. “195 Broadway has proven to be a magnet for innovation economy companies that value distinctive architecture, open floorplates and unrivaled connectivity via two 21st century transit hubs.” The galleria is home to restaurant Nobu Downtown. 195 Broadway – the former world headquarters of AT&T – is a class A, landmarked office building that spans approximately 1.1 million square feet across 29 stories. In 2017, L&L completed a massive renovation and redevelopment that transformed the building’s historic William Welles Bosworth-designed lobby into a retail galleria. The galleria is now home to acclaimed restaurant Nobu Downtown and retailer Anthropologie. Other major office tenants at the property include global marketing and communications firm Omnicom, publishing house HarperCollins, and luxury fashion brand Gucci. The post Homebuying ‘unicorn’ takes 107,000 s/f at 195 Broadway appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyOct 12th, 2021

Kushner Breaks Ground on One Journal Square in Jersey City 

Kushner has broken ground on its ambitious One Journal Square project in Jersey City, beginning work on a nearly $1 billion mixed-use development that will create more than 2 million square feet of residential, retail, amenities, parking and open space in the heart of the historic and well-connected Journal Square... The post Kushner Breaks Ground on One Journal Square in Jersey City  appeared first on Real Estate Weekly. Kushner has broken ground on its ambitious One Journal Square project in Jersey City, beginning work on a nearly $1 billion mixed-use development that will create more than 2 million square feet of residential, retail, amenities, parking and open space in the heart of the historic and well-connected Journal Square neighborhood. One of the largest development undertakings in the region, One Journal Square will comprise 1,723 rental residences, 45,000 square feet of upscale amenities, and 40,000 square feet of ground-floor retail space that has been fully pre-leased by a AAA tenant to provide goods and services to the surrounding community.  The collective elements will be situated in two 64-story glass towers, affording dramatic views of the Hudson River, Statue of Liberty, Ellis Island, and downtown Manhattan. The transformational project, which is being developed by Kushner directly adjacent to the Journal Square PATH Station and built by AJD Construction, will include a new sprawling public plaza at its base facing John F. Kennedy Boulevard that will feature green space and seating areas, allowing the buildings to seamlessly mesh into the urban fabric of the neighborhood.  The entire development is expected to be completed in 2026. Principals of Kushner hosted Jersey City Mayor Steven Fulop, fellow municipal officials and other dignitaries to celebrate the start of the multi-faceted project that is expected to further reenergize Journal Square and cement its place as one of the most dynamic places to live in the New York metropolitan area. “When you look at what’s happening in Journal Square, you’d be hard pressed to find another city in the country that can point to the amount of development in this two-block radius,” Mayor Fulop said.  “This project is bar none the most significant project we have in Jersey City and probably the most significant project in New Jersey.  Its 900 units in the first phase, its 64 stories tall and we’re already close to 100 feet above the flood plain level so you talk about the size of this building and what it’s doing to the skyline is really significant.  If you can imagine this being completed in the next 36 months and all the other things in Journal Square moving forward simultaneously you can get a little bit of a glimpse of what it will be in three short years and the most important project to make that a reality is One Journal Square.” “Today’s groundbreaking for One Journal Square has been several years in the making for us, and we are thrilled to begin the physical build-out of what we believe will be the crown jewel of this resurgent neighborhood and an important asset for all of Jersey City,” said Laurent Morali, CEO of Kushner. “Our steadfast commitment to moving this pivotal project forward was founded in our strong belief in Journal Square, both in its present and in its future, and we look forward to bringing our vision to life.” Bordered by the Journal Square PATH Station, John F. Kennedy Boulevard and Sip Avenue, One Journal Square will place residents just steps from the neighborhood’s extensive transportation network anchored by PATH service to lower and midtown Manhattan, Jersey City, Hoboken and Newark.  NJ Transit and private buses also serve the neighborhood daily, providing convenient access to major employment and recreation centers on both sides of the Hudson River. Designed by global architectural firm, Woods Bagot, One Journal Square will express a slender verticality while a series of stepped volumes gracefully transitions the towers to the scale of the surrounding context. “One Journal Square will offer an unparalleled lifestyle experience for residents through thoughtful design, upscale finishes and appointments, state-of-the-art amenities enhanced by our partnership with Restoration Hardware, and a well-connected location brimming with culture and diversity,” said Nicole Kushner Meyer, President of Kushner. “It also reflects our commitment as developers to transform neighborhoods and invest money that positively impacts communities.” A robust suite of amenities will feature an Olympic-size indoor pool, cold plunge pool and whirlpool spa, sauna and steam rooms, bowling alley, golf simulator, multiple lounges, co-working space, chef’s kitchen and a kid’s club.  Health and wellness will be fostered by a fitness center, yoga/multipurpose room, spin cycle suite, full-size indoor basketball court, rock climbing wall and squash court.  Coveted outdoor spaces will include two landscaped rooftop terraces and an outdoor lounge pool with a hot tub. “One Journal Square will offer every lifestyle element one looks for in a convenient and culturally-rich destination,” said Michael Sommer, Executive Vice President – Development and Construction at Kushner.  “We look forward to the day approximately three years from now when Jersey City will have a new, iconic residential development to be proud of when we begin welcoming our first residents who will call One Journal Square home.” One Journal Square builds on the enormous investment pouring into Journal Square as the City’s nearly 100-year-old neighborhood undergoes a noteworthy return to its former glory days as a business, arts and shopping hub.  For validation of its growing prominence in art and culture, one must look no further than the city’s partnership with world-renowned Parisian art museum, Centre De Pompidou, which will open a museum in Journal Square directly adjacent to where One Journal Square is rising.  The Pompidou x Jersey City will be the institution’s only satellite in North America, joining other locations in Shanghai, Brussels, and Malaga. Jersey City’s vibrant arts scene, which is bolstered by small independent galleries, traveling pop-up installations, a city-wide mural arts program, and Journal Square’s own Mana Contemporary, is being embraced and supported by Kushner through its development activity. At One Journal Square’s groundbreaking, the developer announced a collaboration with the JCArts program to showcase an installation created by local high school students with a mission to promote mental health awareness within the classroom and workplace. The series of 36 black and white portraits, which are now displayed along the One Journal Square property, is in support of the Inside Out Project, a participatory platform launched by French artist JR that helps individuals and communities make a statement and raise awareness. The post Kushner Breaks Ground on One Journal Square in Jersey City  appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyJun 18th, 2022

Futures Rebound, Yen Crashes To End Turbulent Week On $3.4 Trillion Quad-Witch Day

Futures Rebound, Yen Crashes To End Turbulent Week On $3.4 Trillion Quad-Witch Day Ending a rollercoaster - but mostly lower - week for risk assets around the globe which saw the Fed hike the most since 1994, a shock Swiss National Bank hike and the latest boost in UK borrowing costs, as well as a bevy of central banks surprising hawkishly, stocks in Europe finally rebounded after hitting an 18 month low earlier this week, while US equity futures were bid Friday after a rout triggered by fears of recession pushed the S&P into a bear market on Monday. S&P futures rose 1% and Nasdaq futures rebounded 1.2% signaling steadier sentiment compared with Thursday’s plunge in US shares to the lowest since late 2020, after the BOJ refused to change its Yield Curve Control conditions, sending the Yen plunging, and helping the dollar snap two days of losses as Treasury yields were flat with the 10Y around 3.21%. The Stoxx Europe 600 index jumped about 1.2% after hitting its lowest level in more than a year. Friday also brings an absolutely massive triple-witching, and although Bloomberg believes that the roughly $3.2 trillion in options expiry may lead to short covering, which could bring temporary relief for the stock market... ... we disagree, as the bulk of open interest is around 4,100 or several hundred points above spot, meaning moves today will have little impact on "derivative tails wagging the dog." In any case, absent a massive 5% rally today which sends stocks into the green, the S&P is looking at being down 10 of the past 11 weeks, a feat that has been repeated just once in history: 1970. Let's go Brandon! In premarket trading, Revlon surged after a report that Reliance Industries Ltd. is considering buying the company. Major technology and internet stocks were higher, rebounding from Thursday’s rout. Apple Inc., Microsoft Corp. and Meta Platforms Inc. were among those advancing. US-listed Chinese stocks also soared in the premarket, a day after the Nasdaq Golden Dragon China Index’s 4.4% slide, with e-commerce giant (JD US) leading the pack ahead of the closely watched 618 online shopping event. Additionally, Chinese tech giants such as Alibaba surges on a Reuters report that China’s central bank has accepted Ant Group’s application to set up a financial holding company. Alibaba shares surge 11% following the report. Among other large- cap Chinese internet stocks, +9.3%, Pinduoduo +7.5%, Baidu +5.6%. Here are some of the biggest U.S. movers today: Adobe (ADBE US) shares fall 4% in premarket trading on Friday after the software company cut its revenue forecast for the full year as it expects currency fluctuations, seasonal shifts in demand and the decision to end sales in Russia and Belarus to weigh on its business. Roku (ROKU US) shares climb 3.9% in premarket trading after the company and Walmart said they entered a pact to enable streamers to purchase featured products fulfilled by Walmart directly on Roku. US Steel (X US) shares rise 5.2% in US premarket trading after the metal giant’s 2Q22 guidance came in well above consensus estimates, according to Morgan Stanley analysts led by Carlos De Alba. Rhythm (RYTM US) shares are 13% lower in US premarket trading after the company’s Imcivree injection failed to win approval for one of the two supplemental indications it sought and the company announced a financing agreement with HealthCare Royalty Partners. Revlon (REV US) shares surge 65% in premarket trading after Reliance Industries is considering buying Revlon in the US, ET Now reports, citing people familiar with the matter. Markets are rounding off a turbulent week buffeted by interest-rate increases which are rapidly draining liquidity, sparking losses in a range of assets. Global stocks face one of their worst weeks since pandemic-induced turmoil of 2020. The question is how far assets have to sink before the tightening cycle is fully priced in. Bucking the global hawkish trend, Japan, retianed super-easy monetary policy and yield curve control, defying pressure to track the global trend toward tighter settings. As a result, the Japanese yen is on course for its biggest fall against the dollar since March 2020 while Japan’s 10-year bond yield retreated below the Bank of Japan’s cap of 0.25%, after earlier hitting 0.265%, the highest since 2016. The Swiss franc surged to its highest level against the yen since 1980. “Investors have to ask themselves how long the rate-hiking cycle will go and how deep the economic slowdown will be,” said Michael Strobaek, global chief investment officer at Credit Suisse Group AG, which is overweight equities and recently closed its underweight position in bonds. “Peak hawkishness, i.e. the peak in expectations repricing, might be close. Once we are there, it is not only possible but likely that we will see a rebound in both equities and bonds. However, this rebound will be very difficult to time.” Despite the ongoing slow-motion crash, US stocks attracted another $14.8 billion in the week to June 15, their sixth consecutive week of additions, according to EPFR Global data. In total, $16.6 billion flowed into equities globally in the period, while bonds had the largest redemptions since April 2020 and just over $50 billion exited cash, the data showed. European equities climbed after a choppy start. Euro Stoxx 600 rallied 1.4%. FTSE MIB outperforms peers, adding 1.7%. European real estate companies are among the best performers, rebounding after several days of losses following concerns higher interest rates will weigh on the sector’s financing abilities. Sweden’s Samhallsbyggnadsbolaget i Norden (SBB) rises as much as 10%, Aroundtown +6.5%, Wallenstam +5.9%, Vonovia +4.9%. Here are some of the biggest European movers: Nokian Renkaat shares gain as much as 11% after the Finnish tire manufacturer raised its net sales guidance for 2022 while also keeping its profit guidance intact. Italy’s FTSE MIB index rises as much as 2%, leading gains among major European stock markets; Italy-Germany 10-year bond yield spread falls to one- month low. Best performers on the index include Campari +5.4%, Pirelli +5.3%, DiaSorin +5.1%, Recordati +4% Ferrari gains as much as 2.4% in the wake of upgrades from Intesa Sanpaolo and Banca Akros after the luxury carmaker unveiled its electrification strategy on Thursday. Glencore climbs as much as 3.9% in London after the commodities group said its first-half trading profit will be bigger than it typically reports for an entire year. Playtech rises as much as 6.4% after the gambling operator announced the deadline for TTB to make a firm offer has been extended to next month. Lisi advances as much as 9.6% after Kepler Cheuvreux upgraded the Boeing supplier to buy, saying its post-Covid recovery isn’t yet priced in. Volvo Cars falls as much as 5.4% to the lowest since April after DNB cut its recommendation on the shares to sell due to falling demand, also noting risks related to the Polestar SPAC listing. Rexel drops as much as 3.9% as Kepler Cheuvreux analyst William Mackie cuts his recommendation to hold from buy, citing the “rapidly rising probability of a recession.” Italian bonds led a rally in European debt after European Central Bank President Christine Lagarde pledged that borrowing costs of more indebted nations in the euro-area won’t be allowed to spiral out of control. Italy’s 10-year yield fell 20 basis points and German equivalents dropped six basis points. Asian stocks tumbled to a two-year low as traders fear the global rush to hike interest rates may result in a steep economic downturn.  The MSCI Asia Pacific Index slumped as much as 1.5% Friday. The measure has fallen every session this week, and is on track to post its largest weekly drop since since the early days of the pandemic in March 2020. Asia stocks have fallen along with global peers as concerns over the potential for more jumbo rate hikes by the Federal Reserve, which raised its benchmark by 75 basis points on Wednesday, triggered a broad market rout. As the global campaign to rein in decades-high inflation continues, investors worry policy tightening may become overdone and throw major economies into recessions.  Japanese shares led Friday’s slump in Asia, with the decision by the Bank of Japan to keep its ultra-loose monetary settings unchanged providing limited fillip as volatility in the yen grows. Stocks in China and Hong Kong bucked the regional selloff, as Beijing’s pro-growth policy lends support to views that Chinese equities can keep outperforming.    Read: Yen Tumbles as BOJ Stands Pat, Makes Rare Reference to FX Market “In the immediate short term (next 2-3 months), we continue to expect Asian stocks to remain volatile,” Chetan Seth, Asia Pacific equity strategist at Nomura Holdings in Singapore, wrote in a note.“However, we do expect some stabilization into late 3Q as equity valuations reset and positive catalysts emerge.” The catalysts Nomura is looking for are the Fed turning less hawkish as US inflation shows signs of softening and China loosening its Covid-Zero stance. Equity benchmarks in Australia and Vietnam were the other big losers in Asia on Friday, with each dropping more than 1.5%. Japanese stocks trimmed losses as the yen weakened after the Bank of Japan’s decision to maintain its easy-money policy.  The Topix fell 1.7% to 1,835.90 as of market close, while the Nikkei declined 1.8% to 25,963.00. Both gauges had been down more than 2.6% earlier in the day. The yen was down 1.3% to around 134 per dollar. Toyota Motor Corp. contributed the most to the Topix Index decline, decreasing 3.6%. Out of 2,170 shares in the index, 423 rose and 1,689 fell, while 58 were unchanged. The Topix fell 5.5% this week, its worst since April 2020. BOJ Holds Firm to Deepen Outlier Status, Keep Pressure on Yen “If the yen further weakens, this will help the Nikkei 225 to remain firm to some extent,” said Makoto Furukawa, chief portfolio strategist at Mitsubishi UFJ Morgan Stanley. “The Japanese stock market is not so different from the global trend, and monetary policy that comes out from the US and Europe is much more important for Japanese equities.” Key stock gauges in India completed their worst weekly declines in more than two years as spiraling inflation and rate hikes by central banks dampened the outlook for business recovery.     The S&P BSE Sensex slipped 0.3% to 51,360.42 in Mumbai, bringing its weekly decline to 5.4%, the most since May 2020. The NSE Nifty 50 Index dropped 0.4% on Friday, taking its tumble to 5.6%. Tata Consultancy Services lost 1.7% and was the biggest drag on the Sensex, which had 22 of the 30 member stocks trade lower. Fifteen of 19 sectoral indexes compiled by BSE Ltd. declined, led by a gauge of oil and gas companies.  Among central bank monetary-policy measures this week, the US Federal Reserve made its biggest increase in policy rates since 1994. India’s markets “are largely taking cues from the global markets, in absence of any major domestic event,” Ajit Mishra, vice-president research at Religare Broking Ltd. wrote in a note. Foreign institutional investors have withdrawn $25.7 billion from Indian stocks this year through June 15, and the sell-off is headed for its ninth consecutive month. “We reiterate our negative view on markets and suggest continuing with the ‘sell on rise’ approach,” according to the note. In FX, Bloomberg dollar spot index rose by around 0.4% as the greenback advanced against all of its Group-of-10 peers apart from the Swiss franc. Treasury yields rose by up to 9 bps, led by the front end. The yen was the worst G-10 performer and slumped as much as 1.8% to 134.63 per dollar after the Bank of Japan kept policy on hold, defying speculation it would follow its global peers and move toward tightening. The BOJ made a rare reference to the currency market, saying it needed to watch its impact on the economy and markets. The euro fell below $1.05 before paring, after touching an almost one-week high yesterday. European bond yields fell and investors rushed back to Italian debt for a third day after ECB President Christine Lagarde pledged that borrowing costs of more indebted nations in the euro-area won’t be allowed to spiral out of control. Sterling eased against a broadly stronger dollar, giving up some of its sharp gains made the previous day, when the Bank of England’s pledge to take a more aggressive stance against inflation boosted the UK currency. Market awaits speeches by BOE policymakers Silvana Tenreyro and Huw Pill later in the day for possible clues into the outlook for inflation and monetary policy. In rates, Treasuries are cheaper across the curve with losses led by front-end following flurry of block trade in 2-year note futures over the European session. US yields cheaper by up to 5bp across front-end of the curve, flattening 2s10s spread by 2.5bp on the day; 10-year yields around 3.22%, cheaper by 2.5bp and underperforming bunds by 7bp Italian bonds outperform after ECB President Christine Lagarde’s pledge to support borrowing costs of indebted nations in the euro-area.  Bloomberg notes five block trades in 2-year note futures for combined 25k were posted between 3:25am ET and 4:36am ET appeared skewed toward sellers, helping front-end of the cash curve underperform. IG dollar issuance slate empty so far; at least six IG issuers are said to have stood down over the past couple of days, as investors wait for market calm before re-launching deals. The German cash curve bull steepens, trading richer by ~12bps in 5s. Gilts bull flatten, with 10y yields down 8bps around this week’s lows near 2.4%. US 2s10s narrow 3bps. Peripheral spreads tighten to Germany with 10y BTP/Bund narrowing ~14bps to a one-month low near 188bps. In commodities, crude futures advance. WTI drifts 1% higher to trade near $118.75. Base metals are mixed; LME tin falls 0.9% while LME nickel gains 1.1%. Spot gold falls roughly $7 to trade near $1,850/oz Bitcoin is currently modestly firmer, but the overall sessions range is in proximity to USD 20k with the current trough at USD 20.19k. Looking at the day ahead now, and data releases include US industrial production and capacity utilisation for May, along with the final Euro Area CPI reading for May. Central bankers include Fed Chair Powell, the ECB’s Simkus and the BoE’s Tenreyro and Pill. Of note, Jerome Powell gives welcome remarks before the Inaugural Conference on the International Roles of the U.S. Dollar at 845am ET. He is not expected to discuss monetary policy. Market Snapshot S&P 500 futures up 1.0% to 3,703.75 MXAP down 1.2% to 157.22 MXAPJ down 0.4% to 521.87 Nikkei down 1.8% to 25,963.00 Topix down 1.7% to 1,835.90 Hang Seng Index up 1.1% to 21,075.00 Shanghai Composite up 1.0% to 3,316.79 Sensex little changed at 51,457.72 Australia S&P/ASX 200 down 1.8% to 6,474.80 Kospi down 0.4% to 2,440.93 STOXX Europe 600 up 1.2% to 407.54 German 10Y yield little changed at 1.66% Euro down 0.4% to $1.0502 Brent Futures up 0.5% to $120.35/bbl Brent Futures up 0.5% to $120.39/bbl Gold spot down 0.4% to $1,849.84 U.S. Dollar Index up 0.75% to 104.41 Top Overnight News from Bloomberg A small tweak to the BOJ’s bond purchase plan this week blew up an arbitrage strategy popular with overseas investors known as the basis trade. It exacerbated a supply shortage of government bonds that has ramped up pressure on domestic financial institutions, leading them to turn to the BOJ for help to relieve the strain President Joe Biden said a US recession isn’t inevitable and acknowledged that aides warned him about the inflationary risk of his flagship relief bill, while insisting that he won’t soften his stance on Russia even if it costs him re-election The WTO clinched a historic package of accords including on vaccine production and fishery subsidies, ending the trade body’s seven-year negotiating drought China’s local governments are caught in an unexpectedly severe budget squeeze, creating a dilemma for officials over whether to boost debt or tolerate weaker economic growth A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks mostly suffered firm losses amid the global risk-aversion after the recent flurry of central bank rate increases and with weak data in the US stoking recession fears. ASX 200 was led lower by underperformance in tech and the commodity-related sectors, although gold miners have weathered the storm after the recent upside in the precious metal. Nikkei 225 was pressured and failed to benefit from the BoJ decision to keep policy settings unchanged. Hang Seng and Shanghai Comp. pared opening losses amid virus-related optimism after Beijing reported zero cases outside of quarantine and with US-China defence meetings showing signs of cooling tensions. Top Asian News China in Talks With Qatar for Gas Field Stakes, Reuters Says Kuroda Deepens BOJ’s Outlier Status, Keeping Pressure on Yen ByteDance Disbands Shanghai Games Studio in Expansion Setback BOJ Offers to Buy Cheapest-to-Deliver JGBs for Extended Time Gold Heads for Weekly Drop as Traders Weigh Rate Hikes, Growth European bourses are now firmer across the board, Euro Stoxx 50 +1.2%, as performance picks up following a mixed open amid comparably quiet newsflow. Stateside, US futures are performing similarly, ES +1.0%, though the complex is cognisant of commentary from Chair Powell later. Note, today is Quad Witching; recently, GS’ Rubner highlighted “literally massive” USD 3.2tln notional open interest of US listed options which expire on June 17th, writing that the passing of this may allow the market to move more freely. Top European News UK is to set out new data rules which diverge from the EU on Friday as it seeks to ease pressure on businesses, while it believes the new rules will maintain free flow of data from Europe and does not expect the EU to object to its data reforms, according to Reuters. German Finance Minister Lindner told ECB President Lagarde that the ECB's talk regarding fragmentation threatens to dent confidence, according to FT. Hungarian Chief of Staff Gulyas says the idea of a global minimum tax is not accepted by the Hungarian government. Central Banks BoJ kept policy settings unchanged as expected with rates at -0.10% and QQE with yield curve control maintained to target 10yr JGB yields at around 0% with the decision on YCC made via an 8-1 vote as Kataoka dissented. BoJ repeated its April guidance that it will offer to buy 10yr JGBs at 0.25% every business day unless it is highly likely that no bids will be submitted and it also reiterated guidance on policy bias that it will take additional easing steps without hesitation as needed with an eye on the pandemic's impact on the economy. Furthermore, the BoJ said the economy is picking up as a trend though some weakness has been seen and they must carefully watch the impact of FX moves on Japan's economy and prices. BoJ's Kuroda says upward pressure is being seen in bond yields, and it is important for FX to move stable reflecting fundamentals, no change to the concept that YCC strongly supports the economic recovery; does not see a limit in YCC. Recent rapid JPY weakness is a weakness for the economy.. Does not see a need for further policy easing now. Not thinking about raising the cap on the BoJ's long-term yield target above 0.25%, as it could result in higher yields and weaken the effect of monetary easing. BoJ purchases JPY 70.1bln in ETFs. BoJ offers to purchase the cheapest-to-deliver issuance for an extended time as of June 20th. ECB's Knot says that several 50bps rate increases are possible in the event that inflation worsens, via BNR; does not see hikes reaching 200bp before early-2023. BoE's Pill says markets will have to make their own judgement on whether the BoE is considering a 50bp hike, via Bloomberg TV; stresses the conditionality around the inclusion of "forcefully" in the statement, in the context of "if necessary". Trying to signal that we may need to act further, looking at the persistence of inflationary pressure. Price pressures becoming embedded would be a trigger for more aggressive BoE action. FX Yen recoils after racking up big risk averse gains as BoJ sticks rigidly to ultra accommodative stance with additional measures to maintain YCC, USD/JPY hovers just under 135.00 vs 131.49 low on Thursday. Buck benefits after extending post-FOMC retreat in wake of weak US data and pronounced bounce in Treasuries, DXY extends recovery to 104.540 from 103.410 low. Franc maintains SNB hike momentum to rally further across the board, USD/CHF around 0.9650 compared to par-plus peaks earlier in the week. Euro underpinned by decent option expiry interest and hawkish ECB commentary, but Aussie undermined as Government gives authorities power to stop coal exports; EUR/USD on the 1.0500 handle and above 1+ bln rolling off between 1.0500-1.0495, AUD/USD capped just under 0.7000. Kiwi gleans some traction from a rise in NZ manufacturing PMI and RBNZ rate hike calls; NZD/USD straddles 0.6350, AUD/NZD cross sub-1.1050. Lira lags following latest CBRT survey showing higher inflation forecasts and USD/TRY rate, latter at 18.8874 by year end vs 17.5682 previously and circa 17.3200 at present. Fixed Income Debt extends intraday ranges as volatility remains high on Friday. Bunds veer from 142.56 to 144.99, Gilts between 111.83 and 112.91 and the 10 year T-note within a 116-19/115.28+ range. Hawkish comments from ECB's Knot largely discounted as EZ periphery bonds outperform on anti-fragmentation dynamic, but BoE's Pill rattles Sonia strip. Commodities WTI and Brent are currently set to end the week with gains in excess of USD 1.00/bbl overall, though the benchmarks reside towards the mid-point of the over USD 11.00/bbl range for the week. Newsflow has been comparably limited but primarily focused on familiar themes. US Energy Secretary called an emergency meeting with oil refiners next week to discuss steps companies can take to increase refining capacity and output, according to Reuters citing a DoE spokesperson. White House is reportedly considering fuel export limits as pump prices surge and options such as waiving anti-smog rules are also being discussed, according to Bloomberg. Qatar Energy set August Al-Shaheen crude term price at a premium of USD 9.24/bbl above Dubai quotes which is the highest in 3 months, according to traders cited by Reuters. Brazil's Petrobras is to announce a fuel price increase today, according to Reuters citing local press. China's national oil majors are reportedly in advanced discussions with Qatar around investment in North Field East LNG and for long-term contractual purchases of LNG, according to Reuters sources. Australia has invoked measures to give authorities the power to prevent coal exports if needed in an attempt to avert the risk of blackouts, according to the FT. Spot gold is rangebound in European hours having successfully surpassed the cluster of DMAs between USD 1843-1848/oz during Thursday’s blockbuster session.   US Event Calendar 09:15: May Capacity Utilization, est. 79.2%, prior 79.0% 09:15: May Manufacturing (SIC) Production, est. 0.3%, prior 0.8% 09:15: May Industrial Production MoM, est. 0.4%, prior 1.1% 10:00: May Leading Index, est. -0.4%, prior -0.3% DB's Jim Reid concludes the overnight wrap The Bank of Japan (BOJ) continues to buck the global trend of monetary tightening, as this morning the central bank decided to maintain its purchases of government bonds and equities. The decision was widely anticipated but the BOJ indicated that it must “pay due attention” to foreign exchange markets, following the yen’s rapid weakening to its lowest level in 24 years earlier this week. The Yen has weakened around -1.3% to 134/USD as we type. Meanwhile, Japan’s benchmark 10yr bond yields hit a six-year high of 0.268% at one point, moving beyond the BOJ’s 0.25% cap ahead of the policy decision. However, yields retreated to the 0.25% after its daily unlimited fixed-rate purchasing operations. This just continues what has been a very expensive week for the BoJ in terms of JGB QE after having had to buy $9.6tn yen worth. As one of our Asian FX strategists Tim Baker highlighted this morning, that's US$72bn. Tim highlighted that this is almost what the Fed and ECB were doing in an entire month last year, for economies 5-3x larger than Japan's. Japan's QE this week has been running more than 20x the pace of the Fed's QE in 2021, adjusted for the size of the economy. Can they continue to hold this line? You wouldn't think they could but it depends on global yields and central banks, the Yen and Japanese inflation. See my CoTD (link here) on this earlier this week. Watch out for the BoJ press conference after this goes to print this morning for any hints as to how determined they are to continue their policy settings. The BoJ caps an array of central bank meetings over recent days, and markets have experienced another rout over the last 24 hours as multiple headlines added to investors fears about an imminent recession. It marked a big shift from just a day earlier, when the initial focus after Chair Powell’s press conference had been on his comment (when referring to +75bps) that he didn’t “expect moves of this size to be common”. But futures swiftly turned negative as growing doubts were cast on how firm that commitment really was, not least since we’ve all seen just how swiftly the Fed have shifted posture over the last week in response to worse-than-expected data. On top of that, the latest decisions by the SNB and the BoE (more on which below) only added to the hawkish drumbeat that much higher rates are in the offing, whilst weak US housing data served to aggravate those fears about an imminent growth slowdown. With all said and done, you were hard-pressed to find a major asset that didn’t lose ground yesterday. The major equity indices slumped heavily on both sides of the Atlantic, with the S&P 500 (-3.24%) losing more than -3% for the second time this week, as it also hit its lowest level since late 2020. Indeed, just 14 companies in the entire index moved higher on the day. Elsewhere, the NASDAQ saw an even larger decline, falling -4.08% to have now lost more than a third of its value since its all-time closing peak back in November. It’s lost -9.96% since Friday’s CPI and -6.12% this week. And it was a similar story in Europe too, as the STOXX 600 (-2.47%) fell to a one-year low of its own. Whilst equities were selling off, sovereign bonds continued to trade with elevated volatility, a function of continued central bank surprises, murky forward guidance, and heightened uncertainty around the near-to-medium-term outlook as economic data gets worse. In short it was a wild, wild ride yesterday. The sell-off initially accelerated after the SNB became the latest central bank to surprise. They hiked rates for the first time in 15 years, executing a 50bps move, combined with a change in FX policy, that our strategist Robin Winkler argues marks a once-in-a-decade policy regime shift (link here). In turn, that led to a massive reaction in the Swiss Franc, which strengthened by +2.91% against the US Dollar on the day in its biggest daily appreciation since 2015. Then we had the Bank of England, where they hiked rates by +25bps as widely expected, with 3 of the 9 committee members continuing to vote for a larger 50bp increment. Notably, their statement sent a stronger signal on inflation, saying that the Committee would be “particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.” In turn, that saw investors reappraise the path of future rate hikes in a more hawkish direction, and are now expecting more than +150bps worth of hikes over the next 3 meetings, so equivalent to at least a 50bp move at each one. Our UK economist writes in his reaction note (link here) that he expects the BoE to hike by 50bps in August and September now, which for reference would be the largest single hikes since they gained operational independence in 1997. Against that backdrop, sovereign bond yields whipped around yet again. European yields were much higher on tighter policy and then Treasury yields moved higher in sympathy during European trading but gradually fell after another batch of underwhelming housing data lent new fears that growth was on unstable footing. Yields on 10yr Treasuries fell -8.9bps to 3.20%, but at their intraday peak they’d been up +20.7bps, so some sizeable moves in both directions. The move in nominal yields traced real yields, which were as high as +21.7bps intraday at the 10yr point, before finishing the day just +1.1bps higher. 10yr breakevens fell -10.4bps on the prospect of slower growth, which drove nominal yields lower on the day. In Asia, this morning, 10yr yields are witnessing a reversal with yields up +4.33bps to 3.24% while 2yr yields (+6bps) also moved higher to 3.15% as I type. Our US rates strategists have updated their views in the face of some large forces in both directions with the 10yr now expected to hit 3.85%. They also updated their year-end 2yr call to 3.85%, so a flat curve. See the full update here. Meanwhile in Europe, 10yr bunds gained +7.2bps (+28.3bps at the peak) in a very choppy session. However, there was a considerable tightening in peripheral spreads for a second day running, with the gap between Italian and German 10yr yields down -13.7bps to 202bps, which followed comments from Italian central bank governor Visco that the spread should be under 150bps based on economic fundamentals. The heightened uncertainty and wild swings in yields also translated to heightened currency volatility, where the Euro traded in its widest intraday range since March 2020, which was as low as -0.60% and as strong as +1.50% against the dollar before ultimately appreciating +1.01%. As mentioned, sentiment was further dampened by weak US housing data yesterday, with both housing starts and building permits in May falling by even more than expected. Housing starts were down to an annualised rate of 1.549m (vs. 1.693m expected), their lowest level in over a year, whilst building permits were down to an annualised rate of 1.695m (vs. 1.778m expected). We also got a sign of how tighter monetary policy was affecting the market, with Freddie Mac’s data showing that a 30-year fixed mortgage rate for the week ending yesterday rose to 5.78% (vs. 5.23% in the previous week). That’s the highest level since November 2008, as well as the largest weekly increase in the rate since 1987. And it just shows how the much more rapid pace of Fed hikes now expected by investors over the last week is already filtering its way through to the real economy. Those moves lower in the US and European equities have been echoed in Asian markets this morning. The Nikkei (-1.59%) is the largest underperformer with the Kospi (-1.08%) also trading sharply lower. Elsewhere, the Hang Seng (+0.78%) is recovering from earlier losses while mainland Chinese stocks also turning around with the Shanghai Composite (+0.15%) and CSI (+0.26%) both trading up. Outside of Asia, stock futures in the DMs are bouncing with contracts on the S&P 500 (+0.52%), NASDAQ 100 (+0.67%) and DAX (+0.31%) all heading higher. Looking forward, Russian President Putin will be giving a speech today at the St Petersburg Economic Forum, which his press secretary Peskov has tried to build anticipation for, and could offer a flavour of how combative the Kremlin plans to be in its international approach. That came as German Chancellor Scholz, French President Macron and Italian PM Draghi endorsed Ukraine’s EU candidacy in a visit to the country yesterday. Otherwise, European natural gas futures pared back their significant increases in the morning to close -1.94% lower, marking a change in direction after their massive increases over the previous 2 sessions. To the day ahead now, and data releases include US industrial production and capacity utilisation for May, along with the final Euro Area CPI reading for May. Central bankers include Fed Chair Powell, the ECB’s Simkus and the BoE’s Tenreyro and Pill. Tyler Durden Fri, 06/17/2022 - 08:12.....»»

Category: blogSource: zerohedgeJun 17th, 2022

SJP Properties and Scotto Properties Break Ground on Valley National Bank’s New HQ in Morristown, N.J.

The new state of the art headquarters for Valley National Bank (NASDAQ:VLY) — one of the largest and most prestigious banking institutions in the country — broke ground today and was celebrated with a ceremony hosted by SJP Properties, Scotto Properties, and The Donnelly Family Trust at the future site of... The post SJP Properties and Scotto Properties Break Ground on Valley National Bank’s New HQ in Morristown, N.J. appeared first on Real Estate Weekly. The new state of the art headquarters for Valley National Bank (NASDAQ:VLY) — one of the largest and most prestigious banking institutions in the country — broke ground today and was celebrated with a ceremony hosted by SJP Properties, Scotto Properties, and The Donnelly Family Trust at the future site of the building in downtown Morristown, N.J. One of the only new office projects of significance under construction in New Jersey, Valley’s new headquarters is expected to bring more than 660 professionals to Morristown’s dynamic downtown upon its estimated completion in the spring of 2023. The ceremony was attended by project partners, Valley executives, Morristown Mayor Timothy Dougherty, and Town officials. “Breaking ground on this milestone commercial development — the second new headquarters building for Morristown in just the last two years — cements our town’s stature as an in-demand hub for corporations that want to offer their workforces more than just a great building, but an entire community rich with culture and connectivity,” Mayor Dougherty said. “We’re eager to welcome Valley into the fabric of our renowned community and enjoy the enriching symbiotic relationship that Valley’s corporate workforce presence will share with our downtown businesses, associations and institutions.”  A modern build-to-suit office building designed by global architecture firm Gensler, Valley’s new headquarters marks the second corporate headquarters that SJP Properties has brought to Morristown in just the past two years; later this month, SJP will complete construction of Deloitte’s New Jersey headquarters at M Station, a multi-phase, mixed-use office and retail development situated within steps of the Morristown Train Station. These two projects collectively solidify Morristown’s position among the most coveted office markets in the region, offering industry-leading companies and their workforces a transit-oriented, amenity-rich community teeming with activity.  “This new headquarters is a critical facet of Valley’s commitment to creating a world-class experience for our professionals that inspires and energizes them every day,” said Valley CEO Ira Robbins. “Modern, tech-enabled and sustainable in design, our new home will reflect our values as an organization. Perhaps most importantly, it will enable our people to be part of the vibrant Morristown community, where we have established valued relationships with numerous local organizations and nonprofits over many years. We’re eager to make the move and have full confidence in the very capable development team led by SJP Properties to realize our vision.”  Valley’s new headquarters along Speedwell Avenue is a modern interpretation of the masonry tradition of historic Morristown, with a balance of glass, metal, and warm brick tones that embraces the character of the neighborhood. Designed to achieve LEED certification and create an urban environment that appeals to today’s discerning workforce, the building reflects SJP Properties’ longstanding commitment to creating healthy, sustainable and inspiring office ecosystems. The building’s technological advances include improved air quality using a combination of enhanced MERV filtration and UV light purification, advanced digital controls, energy-efficient base building systems that feature variable frequency drives, solar reflective roofing, low flow water fixtures, energy and consumption metering, and energy-efficient lighting. By integrating meaningful technology, sustainability measures, and concierge-style services that bolster the employee experience, the building will be ideally suited to help Valley attract and retain top talent that demands more than a traditional suburban office building. “Having a forward-thinking, best-in-class office environment is only half the battle when it comes to staying nimble and competitive in today’s recruiting market — connectivity to a vibrant community that serves as its own lifestyle amenity to the workforce is just as crucial,” said Steve Pozycki, CEO of SJP Properties. “The ability to leverage a desirable residential area that’s also a center of commerce with a population of skilled professionals is key to creating a headquarters for Valley that sets them up for the future. We’re privileged to work with the Town of Morristown and our colleagues at Scotto and Newmark to bring this project to fruition.”  SJP Properties shared its vision for Speedwell Avenue’s redevelopment with Newmark Vice Chairman David Simson, who ultimately helmed the search for Valley’s new headquarters and represented the national bank in its lease.  Valley will relocate its operations from Wayne, N.J. to its new headquarters in Morristown, which offers approximately 120,000 square feet of office space that features floor-to-ceiling windows and abundant natural light. Operable glass walls open to outdoor terraces, creating an indoor-outdoor environment that makes Morristown’s pastoral landscape part of the workplace. The ground floor features a dramatic lobby entrance with soaring ceilings, along with 14,500 square feet of available retail space, a portion of which is planned as a retail community cafe. Valley’s new headquarters sits directly across the street from the recently renovated Hyatt Hotel, Top Golf and 1776 On the Green restaurant — well positioned to offer access to Morris County’s highly-skilled labor pool, amidst the breadth of shops, lifestyle amenities, restaurants and cultural experiences that make Morristown one of the most livable townships in Northern New Jersey.  In addition to offering its employees immediate access to Morristown’s amenities and conveniences, the building is in close proximity to public transit options, including the Midtown Direct NJ Transit service to New York Penn Station, creating a suburban office building that confers the benefits of a premier downtown location and making it accessible to Valley associates throughout the region.  The post SJP Properties and Scotto Properties Break Ground on Valley National Bank’s New HQ in Morristown, N.J. appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyJun 13th, 2022

Black Monday: All Hell Breaks Loose As Stocks Plunge Into Bear Market, Curve Inverts, Cryptos Crater

Black Monday: All Hell Breaks Loose As Stocks Plunge Into Bear Market, Curve Inverts, Cryptos Crater For all those claiming that stocks had priced in 3 (or more) 50bps (or more) rate hikes, we have some bad news. All hell is breaking loose on Monday, with futures tumbling (again) into bear market territory, sliding below the 20% technical cutoff from January's all time high of 3,856 and tumbling as low as 3,798.25 - taking out the May 10 intraday low of 3,810 - before reversing some modest gains. S&P 500 futures sank 2.5% and Nasdaq 100 contracts slid 3.1%, in a session that has seen virtually everything crash. Dow futures were down 567 points at of 730am ET. The global selloff - which has dragged Asian and European markets to multi-month lows and which was sparked by a hotter than expected US CPI print which heaped pressure on the Federal Reserve to step up monetary tightening - accelerated on Monday as panicking traders now bet the Fed will raise rates by 175 bps by its September decision, implying two 50-bp moves and one hike of 75 bps, with Barclays and now Jefferies predicting such a move may even come this week. If that comes to pass it would be the first time since 1994 the Fed resorted to such a draconian measure. The selling in stocks was matched only by the puke in Treasuries, as yields on 10-year US Treasuries reached 3.24%, the highest since October 2018, yet where 2Y yields sold off more, sending the 2s10s curve to invert again... ... for the second time ahead of the coming recession, an unprecedented event. The US yield curve appears destined to invert again in coming weeks after Wednesday’s CPI data: BBG We'll get two concurrent recessions — zerohedge (@zerohedge) May 12, 2022 Meanwhile, the selloff in European government bonds also gathered pace, with the yield on German’s two-year government debt rising above 1% for the first time in more than a decade and Italian yields exploding and nearing 4%, ensuring that another European sovereign debt crisis is just a matter of time (recall that all Italian net bond issuance in the past decade has been monetized by the ECB... well that is ending as the ECB pivots away from QE and NIRP). The exodus from stocks and bonds is gaining momentum on fears that central banks’ battle against inflation will end up killing economic growth. Inversions along the Treasury yield curve point to fears that the Fed won’t be able to stave off a hard landing. “The Fed will not be able to pause tightening let alone start easing,” said James Athey, investment director at abrdn. “If all global central banks deliver what’s priced there are going to be some significant negative shocks to economies.” Going back to the US market, big tech stocks slumped in US premarket trading as bets that the Federal Reserve hikes rates more aggressively sent bond yields higher, and Nasdaq futures dropped. Cryptocurrency-exposed stocks cratered as Bitcoin continued its recent decline to hit an 18- month low, precipitated by news that crypto lender Celsius had halted withdrawals... ... which sent Ethereum to the most oversold level in 4 years. Here are some of the biggest U.S. movers today: Apple shares (AAPL US) -3.1%, Amazon (AMZN US) -3.4%, Microsoft (MSFT US) -2.8%, Alphabet (GOOGL US) -3.7%, Netflix -3.8% (NFLX US), Nvidia (NVDA US) -4.5% Tesla (TSLA US) shares dropped as much as 3.1% in US premarket trading amid losses across big tech stocks, while the electric-vehicle maker also filed to split shares 3-for-1 late Friday. MicroStrategy (MSTR US) -18.4%, Riot Blockchain (RIOT US) -15%, Marathon Digital (MARA US) -14%, Coinbase (COIN US) -12.5%, Bit Digital (BTBT US) -10%, Silvergate Capital (SI US) -11%, Ebang (EBON US) -4% Bluebird Bio (BLUE US) shares surge as much as 86% in US premarket trading and are set to trim year-to- date losses after the biotech firm’s two gene therapies won backing from an FDA advisory panel. Chinese education stocks New Oriental Education (EDU US) and Gaotu Techedu (GOTU US) jump 8.3% and 3.4% respectively in US premarket trading after peer Koolearn’s endeavors into livestreaming e-commerce went viral and sent its shares up 95% in two sessions. Astra Space (ASTR US) shares slump as much as 25% in US premarket trading, after the spacetech firm’s TROPICS-1 mission saw a disappointing launch at the weekend. Invesco (IVZ US) and T. Rowe (TROW US) shares may be in focus today as BMO downgrades its rating on the two companies in a note saying it favors alternative asset managers over traditional players as a way to hedge beta risk against the current macro backdrop. In Europe, the Stoxx 600 also extended declines to a three-month low, plunging mover than 2%, with over 90% of members declining, as meeting-dated OIS rates price in 125bps of tightening, one 25bps move and two 50bps hikes by October.  Tech leads the declines as bond yields rise, with cyclical sectors such as autos and consumer products also lagging as recession risks rise.  The Stoxx 600 Tech Index falls as much as 4.3% to its lowest since November 2020. Chip stocks bear the brunt of the selloff: ASML -3%, Infineon -4.2%, STMicro -3.6%, ASM International -2.9%, BE Semi -2.8%, AMS -5.3% as of 9:36am CET. As if inflation fears weren't enough, French banks tumbled after a first round of legislative elections showed that President Emmanuel Macron could lose his outright majority in parliament. Here is a look at the biggest movers: Atos shares decline as much as 12%; Oddo says the company’s reported decision to retain and restructure its legacy IT services business in a separate legal entity is bad news for the company. Getinge falls as much as 7.6% after Kepler Cheuvreux cut its recommendation to hold from buy, cautioning that headwinds and supply chain challenges may intensify as Covid-related tailwinds abate. Elior plunges as much as 15% amid renewed worries over inflation and rising interest rates impacting a caterer that’s still looking for a new CEO following the unexpected departure of the previous one. Valneva falls as much as 27% in Paris after saying its effort to salvage an agreement to sell Covid-19 shots to the European Union looks likely to fail. Subsea 7 drops as much as 13% after the offshore technology company lowered its 2022 guidance, with analysts noting execution challenges on some of its offshore wind projects. French banks decline after a first round of legislative elections showed that President Emmanuel Macron could lose his outright majority in parliament. Societe Generale shares fall as much as 4.5%, BNP Paribas -4.2% Euromoney rises as much as 4.4% after UBS raises the stock to buy from neutral, saying the financial publishing and events firm’s “ambitious” growth targets for 2025 are broadly achievable. Earlier in the session, Asian stocks also declined across the board following the hot US CPI data and amid fresh COVID concerns in China. Nikkei 225 fell below the 27k level with sentiment not helped by a deterioration in BSI All Industry data. Hang Seng and Shanghai Comp. conformed to the downbeat mood with heavy losses among tech stocks owing to the higher yield environment and with mainland bourses constrained after the latest COVID outbreak and containment measures. The Emerging-market stocks index dropped about 3%, falling for a third day in the steepest intraday drop since March, as a fresh high in US inflation sparked concerns that the Fed may need to be more aggressive with rate hikes. In FX, the Bloomberg dollar rose a fourth day as the dollar outperformed all its Group of 10 peers apart from the yen, which earlier weakened to a 24-year low with NOK and AUD the worst G-10 performers. In EMs, currencies were led lower by the South Korean won and the South African rand as the index fell for a fifth day, the longest streak since April.  The onshore yuan dropped to a two-week low as a jump in US inflation boosted the dollar and China moved to re-impose Covid restrictions in key cities. India’s rupee dropped to a new record low amid a selloff in equities spurred by continuous exodus of foreign investors. The euro fell for a third day, touching an almost one-month low of 1.0456. Sterling fell after weaker-than-expected UK GDP highlighted the risks to the economy, with a global risk-off mood adding pressure on the currency, UK GDP fell 0.3% from March. The yen erased earlier losses after earlier falling to a 24-year low while Japanese bonds tumbled, prompting a warning from the Bank of Japan as its easy monetary policy increasingly feels the strain of rising interest rates globally. Bank of Japan Governor Haruhiko Kuroda said a recent abrupt weakening of the yen is bad for the economy and pledged to closely work with the government hours after the yen hit the lowest level since 1998. Bitcoin is hampered amid broad-based losses in the crypto space with the likes of Celsius pausing withdrawals/transfers due to the "extreme market conditions". Currently, Bitcoin is at the bottom-end of a USD 23.7-27.9 range for the session. In rates, the US two-year yield exceeded the 10-year for the first time since early April, an unprecedented re-inversion. The 2-year Treasury yield touched the highest level since 2007 and the 10-year yield the highest since 2018. Treasuries continued to sell off in Asia and early European sessions, leaving 2-year yields cheaper by 15bp on the day into the US day as investors continue to digest Friday’s inflation data. Into the weakness a flurry of block trades in futures added to soaring yields. Three-month dollar Libor jumps 8.4bps. US yields remain close to cheapest levels of the day into early US session, higher by 13bp to 6bp across the curve: 2s10s, 5s30s spreads flatter by 5bp and 5.5bp on the day -- 5s30s dropped as low as -16.6bp (flattest since 2000) while 2s10s bottomed at -2bp. US 10-year yields around 3.235%, remain cheaper by 8bp on the day and lagging bunds, gilts by 2.5bp and 5bp in the sector. Fed-dated OIS now pricing in one 75bp move over the next three policy meetings with 175bp combined hikes priced by September, while 55bp -- or 20% chance of a 75bp move is priced into Wednesday’s meeting. A selloff of European government bonds gathered pace as traders priced in a more aggressive pace of tightening from the ECB, with traders now wagering on two half-point hikes by October. The Bank of Japan announced it would conduct an additional bond-buying operation, offering to purchase 500b yen in 5- to 10-year government bonds Tuesday after 10-year yields rose above the upper limit of its policy band. In commodities, oil and iron ore paced declines among growth-sensitive commodities; crude futures traded off worst levels. WTI remains ~1% lower near 119.30. Spot gold gives back half of Friday’s gains to trade near $1,855/oz. Base metals are in the red with LME tin lagging While it's a busy week ahead, with the FOMC meeting on deck where the Fed is set to hike 50bps, or maybe 75bps and even 100bps, there is nothing on Monday's calendar. Fed Vice Chair Lael Brainard will discuss the Community Reinvestment Act in a pre-recorded video and an audience Q&A; she is not expected to discuss monetary policy given the FOMC blackout period. Market Snapshot S&P 500 futures down 2.4% to 3,803.50 STOXX Europe 600 down 2.0% to 414.12 MXAP down 2.7% to 161.61 MXAPJ down 2.8% to 534.45 Nikkei down 3.0% to 26,987.44 Topix down 2.2% to 1,901.06 Hang Seng Index down 3.4% to 21,067.58 Shanghai Composite down 0.9% to 3,255.55 Sensex down 3.2% to 52,585.17 Australia S&P/ASX 200 down 1.3% to 6,931.98 Kospi down 3.5% to 2,504.51 Brent Futures down 1.9% to $119.71/bbl Gold spot down 0.8% to $1,857.56 U.S. Dollar Index up 0.39% to 104.55 German 10Y yield little changed at 1.54% Euro down 0.3% to $1.0484 Brent Futures down 1.9% to $119.69/bbl Top Overnight News “Sell everything but the dollar” is resounding across trading desks as investors reprice the risk that the Federal Reserve hikes rates more aggressively than previously thought Investors rushed to price in more aggressive Federal Reserve rate hikes Monday as the US inflation shock continued to reverberate, sending two-year Treasury yields to a 15-year high and strengthening the dollar UK Prime Minister Boris Johnson risks reopening divisions that tore his Conservative Party apart in 2019, with his government set to propose a law that would let UK ministers override parts of the Brexit deal he signed with the European Union Crypto lender Celsius Network Ltd. paused withdrawals, swaps and transfers on its platform, fueling a broad cryptocurrency selloff and prompting a competitor to announce a potential bid for its assets French President Emmanuel Macron has a week to convince voters to give him an outright majority in parliament to ease the way for the controversial social and economic reforms he promised. Shares in France fell on the results A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks declined across the board following the hot US CPI data which rose to a 40-year high and amid fresh COVID concerns in China. Nikkei 225 fell below the 27k level with sentiment not helped by a deterioration in BSI All Industry data. Hang Seng and Shanghai Comp. conformed to the downbeat mood with heavy losses among tech stocks owing to the higher yield environment and with mainland bourses constrained after the latest COVID outbreak and containment measures. Top Asian News Beijing government said the scale of Beijing’s latest outbreak linked to bars is ferocious and explosive in nature after the city reported 166 cases in a bar cluster and with 6,158 people determined as close contacts linked to the bar cluster, while Beijing announced to halt offline sports events from today and the district of Chaoyang is to launch mass COVID testing on June 13th-15th, according to Reuters. Shanghai re-imposed a ban on dine-in restaurant services in most districts and punished officials for a management lapse at a quarantine hotel, according to Business Times. At least three Chinese cities of Beijing, Nanjing and Wuhan are trialling a shorter quarantine period of 7+7 days for international arrivals at entry points, according to Global Times. Beijing government spokesperson says that the Beijing COVID-19 bar outbreak still presents risks to the community; Beijing City reports 45 new local cases of 3pm, according to a health official, via Reuters, adding that the COVID-19 bar outbreak is still developing and epidemic control is at a critical juncture. Chinese Defence Minister Wei said China firmly rejects accusations and threats by the US against China, while he added the US Indo-Pacific strategy will create confrontation and that Taiwan is first and foremost China’s Taiwan. Wei also said those that pursue Taiwan's independence will come to no good end and that China will fight to the end if anyone attempts to secede Taiwan from China, according to Reuters. Furthermore, Wei reiterated that Beijing views the annexation of Taiwan as a historic mission that must be achieved which its military would be willing to fight for but added that peaceful unification remained the biggest hope of the Chinese people and they are willing to make the biggest effort to achieve it, according to FT. China urges local governments to raise revenue and sell assets to resolve debt risks, via Reuters. Urges local govt's to lower the debt burden; adding, they will crackdown on illegal debt raising. Japanese Defence Minister Kishi met with his Chinese counterpart in Singapore and said Japan and China agreed to promote defence dialogue and exchanges, while Japan warned China against attempting to alter the status quo in the South and East China sea, according to Reuters. Australian and Chinese defence ministers met in Singapore on Sunday for the first time in three years at the sidelines of the Shangri-La Dialogue summit with the talks described as an important first step following a period of strained ties, according to AFP News Agency. European bourses are hampered across the board, Euro Stoxx 50 -2.5%, in a continuation of the fallout from Friday's US CPI and amid fresh COVID concerns in China. US futures are in-fitting with this price action, ES -2.4% (sub-3800 at worst), ahead of the FOMC where the likes of Barclays now look for a 75bp hike after the May inflation release. Sectors in Europe are all in the red and feature Travel & Leisure as the underperformer given further cancellations going into the summer period. Top European News UK Northern Ireland Secretary Lewis said the government will publish legislation on the Northern Ireland Protocol on Monday and that the bill will rectify the issues in the protocol, according to Reuters. Reports suggest that the new law could see European judges blocked from having the final say on Northern Ireland-related disputes, according to the Telegraph. UK Tory MPs accused PM Johnson of ‘damaging the UK and everything the Conservatives stand for’ as he plans to release legislation on Monday to tear up the Northern Ireland protocol, according to FT. UK government ministers are drawing up plans to cut the link between gas and electricity to help reduce household bills for millions of families, according to The Times. UK Foreign Minister Truss says she has spoken to EU VP Sefcovic about the Nothern Ireland protocol and the preference is for a negotiated solution; adding, the EU needs to be willing to change the protocol. French President Macron’s majority in parliament is at risk as an IFOP initial estimate showed that Macron’s centrist camp is seen qualified for winning 275-310 out of 577 seats after the first round of the French lower house elections, while the IPSOS initial estimate shows the centrist camp is qualified for winning 255-295 seats, according to Reuters. Note, 289 seats are required for a majority FX Greenback extends US inflation data gains as near term Fed hike expectations crank up; DXY hits 104.750 to eclipse May 16 high and expose 105.010 YTD peak. Pound undermined by negative UK GDP and output prints plus NI protocol jitters, Cable perilously close to 1.2200 and EUR/GBP tops 0.8575. Aussie hit by heightened Chinese Covid concerns and demand implication for commodities, Kiwi feeling contagion and Loonie lurching as oil prices retreat; AUD/USD sub-0.7000, NZD/USD near 0.6300 and USD/CAD just shy of 1.2850. Euro and Franc make way for outperforming Buck, but Yen claws back losses on risk dynamics allied to technical retracement; EUR/USD under 1.0500, USD/CHF above 0.9900 and USD/JPY below 134.50 vs 135.20 apex overnight. Yuan falls as Beijing suffers ferocious and explosive virus outbreak and Shanghai reimposes restrictions in most districts, USD/CNH pivots 6.7500 and USD/CNY straddles 6.7350. Commodities WTI & Brent are hampered amid the broader market pressure; though, did experience a fleeting move off lows during a break in the newsflow. Currently, the benchmarks are lower by circa. USD 2.00/bbl given Friday's CPI, China COVID, geopolitics around US-China-Taiwan and Iran-IAEA developments (or lack of) following last week's camera removal. Iraq set July Basrah medium crude OSP to Asia at a premium of USD 3.30/bbl vs Oman/Dubai average and set OSP to Europe at a discount of USD 7.60/bbl vs dated Brent, while it set OSP to North and South America at a discount of USD 1.70/bbl vs ASCI, according to Reuters citing Iraq’s SOMO. Libya’s Minister of Oil and Gas Aoun said Libya is currently losing more than 1.1mln bpd of oil production and that most oil fields are closed except for the Hamada field and the Mellitah complex, while the Al-Wafa field continues operations from time to time, according to The Libya Observer. QatarEnegy signed an agreement with TotalEnergies (TTE FP) for the North Field East expansion project, while it will announce subsequent signings with partners in the gas field expansion in the near future and possibly at the end of next week, according to Reuters. Norwegian Oil and Gas Association reached an agreement in principle with three unions of offshore workers to avert a strike although two of the unions will ask members before signing a deal, according to Reuters. Spot gold is pressured by circa. USD 15/oz amid a stronger USD and pronounced yield action; however, the yellow metal is yet to drop below USD 1850/oz and the 10-, 21- & 200-DMAs at USD 1852, 1847 & 1842 respectively. Fixed Income Bond bears still in control and pushing futures down to fresh troughs, at 145.85 for Bunds, 112.33 for Gilts and 115-30+ for 10 year T-note. Cash yields test or breach psychological levels, like 1.50%, 2.5% and 3.25%, while 2-10 year US spread inverts briefly on rising recession risk. Monday agenda very light, but big week ahead including top tier data and multiple Central Bank policy meetings. Central Banks BoJ announces new offer for bond buying programme in which it is to purchase JPY 500bln in 5yr-10yr JGBs tomorrow and will increase amount of offers for its bond buying as needed. BoJ fixed-rate bond purchases exceed JPY 1tln, at their highest since 2018, via Bloomberg; Further reported that the BoJ accepts JPY 1.5tln of bids for the daily offers to purchase 10yr bonds. BoJ Governor Kuroda says they must support the economy with monetary easing to achieve higher wages; adding, the domestic economy is still in the midst of a COVID recovery. Increasing raw material costs are increasing downward pressure, recent sharp JPY dalls are undesirable. Additionally, Japan's Finance Minister says a weak JPY has both merits and demerits. BoJ buys JPY 70.1bln in ETF, according to a disclosure. DB's Jim Reid concludes the overnight wrap This week is squarely and firmly all about the FOMC meeting on Wednesday. We go into it with the 2yr US note up +25bps on Friday and another c.+10bps this morning in Asia. The 2s10s curve has flattened around 20bps since Friday morning to c.2bps as we type. So some dramatic moves. The problem as we enter the next couple of Fed and ECB meetings is that the central banks haven't quite been able to let go of forward guidance and are a little trapped. To recap, forward guidance has prevented the Fed and the ECB from hiking as early as they needed to, largely because both saw the need to gradually wind down asset purchases over several months first as promised. However this hasn't deterred them, and they have continued to try to flag their intentions to the market in advance with the Fed having previously all but signalled a 50bps this Wednesday, as well as in July, with the ECB now signalling 25bps in July and a strong possibility of 50bps in September. Providing clarity is admirable but in the wake of another shocking US CPI print on Friday, should a 75bps hike not be a serious consideration? It seems strange that most think policy needs to be restrictive but that it's going to take several meetings to get there from a still highly accommodative position. Without the recent Fed guidance, 75bps would be firmly on the table for Wednesday. This is highly unlikely this week, but our economists think they could break cover from their own guidance and leave the door open for 75bps in July. DB Research has long been at the hawkish end on inflation and the Fed, and on Friday our US economists further raised their hiking expectations. In addition to 50bps at the next two meetings they have now added 50bps in September and November, before a return to 25bps in December (to 3.125%). They now see the peak at 4.125% in mid-2023. This is closer to the 5% view in the "Why the upcoming recession will be worse than expected" (link here) that David Folkerts-Landau, Peter Hooper and myself published back in April. If we do have a terminal Fed rate approaching a 5-handle it does raise the question as to where 10yr yields top out. My guess would be a slightly inverted curve but it would likely mean the 4.5-5% range discussed in the note from April, mentioned above, is within reason. We'll recap details of the big US CPI print in last week's recap in the second half of this piece, but it wasn't just this that was the problem on Friday, as the University of Michigan long-term inflation expectations series hit 3.3% (3.0% last month) which was the highest since 2008. This series first hit 3% last May so has actually been range trading for a year, which has been a hope for the doves. However it now risks breaking out to the upside. It's not just the Fed this week as the BoE (Thursday) and the BoJ (Friday) will also meet. For the UK, a preview from our UK economists can be found here. The team expects a +25bps hike this week and have updated their terminal rate forecast from 1.75% to 2.5%. Staying in the UK, labour market data releases will be out tomorrow with retail sales on Friday. The week will conclude with a decision from the BoJ and how they address pressures from the yen hovering around a 20-year low, as well as the growing monetary policy divergence between Japan and other G7 economies. Our chief Japan economist previews the meeting here. He expects a shortening or even the abandonment of yield curve control in H2 2023. In data terms we go back to the US for the main highlights, with PPI (tomorrow) and retail sales (Friday) the main events. China's key May indicators on Wednesday will also have global implications as we await industrial production, retail sales and property investment numbers. Elsewhere in the US, we have June's Philadelphia Fed business outlook (Wednesday), and May industrial production and capacity utilisation (Friday) numbers. April business inventories will be out on Wednesday and provide markets with a check on corporate stockpiling after Target's renewed warning last week. Finally, a slew of housing market data is due. This includes the June NAHB housing market index (Wednesday) and May building permits and housing starts (Thursday). The impact of rising mortgage rates will be in focus. In Europe, Germany's ZEW survey for June (tomorrow) is among the key data highlights. We will also see April industrial production and trade balance data for the Eurozone on Wednesday and Eurozone construction output and April trade balance data for Italy on Friday. ECB speakers will also be on the radar for investors as they tend to start to break the party line on the Monday after the ECB meeting. A lengthy line up includes ECB President Lagarde on Wednesday and six other speakers. Asian stock markets have started the week on a weaker footing with all the major indices trading deep in the red after a rough week on Wall Street. The Hang Seng (-2.81%) is leading losses across the region in early trade amid a tech sell-off whilst the Shanghai Composite (-1.20%) and CSI (-1.07%) are both sliding as a resurgence of Covid cases in China is threating global growth. Elsewhere, the Nikkei (-2.64%) is also sharply down this morning, with the Kospi declining as much as -2.50%, hitting its lowest level since November 2020. As discussed at the top, 10yr USTs (+2.81 bps) have moved higher to 3.18% while the 2yr yield (+9.8 bps) has exploded higher to 3.16%. Will we see a fresh inversion in the hours and days ahead? Oil prices are lower with Brent futures -1.36% to $120.35/bbl and WTI futures -1.48%, falling below the $120/bbl mark. On the FX side, there is no respite for the Japanese yen from rising Treasury yields as the currency hit a fresh 24yr low, declining -0.50% to 135.08 versus the dollar. DMs equity futures point to further losses with contracts on the S&P 500 (-1.33%), NASDAQ 100 (-1.87%) and DAX (-1.37%) all trading in negative territory. Moving on to the French legislative elections. In the first round, exit polls indicate that President Emmanuel Macron is at risk of losing his outright majority after a strong showing by the left-wing alliance in the first round of the country’s parliamentary election. According to the official results, Jean-Luc Mélenchon's left-wing NUPES alliance (+25.61%) finished neck and neck with Mr Macron's Ensemble (+25.71%), in terms of votes cast in Sunday's first round. An average of 5 pollsters expect Macron to win 262-301 seats, with 289 needed to keep his majority. So a nervy wait ahead of the second round. Turning back to review last week now. The business end of the week had two huge macro events that sent markets into some degree of upheaval. On Thursday, the ECB met, confirming the end of net APP purchases this month, paving the way for liftoff in July. Beyond July they opened the door for 50 basis point hikes if inflation persists or deteriorates. Judging by their upgraded forecasts, they are now in the ‘persists’ camp. President Lagarde in the press conference took great pains to commit to fighting inflation in a hawkish tone shift. The bigger market reaction was on the apparent lack of progress on any implementation tool designed to avoid fragmentation. President Lagarde tried to downplay the lack of new tool, leaning on PEPP reinvestment flexibility, but the market wasn’t comfortable that this would be enough. All told, 2yr bunds increased +30.9bps (+13.6bps Friday) on the tighter expected policy path, with the end-2022 policy rate implied by OIS markets ending the week at 0.99%, a new high and in line with our Euro economists updated call (their full review and new call here). The lack of an immediate anti-fragmentation tool saw peripheral spreads underperform, moving to new post-Covid wides, as 10yr BTPs increased +35.9bps (+16.0bps Friday) with 10yr Spanish bonds increasing +34.0bps (+15.6bps Friday), versus a 10yr bund increase of +24.3bps (+8.6bps Friday). The Friday moves above were given a further boost by yet another above consensus US CPI report, with YoY inflation gaining +8.6% in May versus expectations it would stay consistent with the prior month’s +8.3% reading. FOMC officials have consistently cited deceleration in MoM readings as necessary to find clear and convincing evidence that inflation was stabilising and returning to target, evidence which they surely didn’t get on Friday, as MoM inflation increased +1.0% from +0.3% in April, beating lofty expectations of +0.7%. The dramatic beats drove the expected path of Fed tightening sharply higher, with 2yr Treasury yields increasing +40.9bps on the week after a +25.0bp gain Friday, it’s largest one-day move since June 2009. The expected fed funds rate by the end of the year reached a new high of 3.22%. The curve aggressively bear flattened, as the reality that the Fed will have to induce slower growth to tame inflation set in; 10yr yields gained +22.0bps on the week and +11.2bps on Friday, with almost all of the increase coming in real yields. That brings 2s10s to 8.8bps, its flattest since its early-April rebound after its brief inversion. The sharp global policy repricing weighed on equity indices. All major transatlantic indices fell, including the STOXX 600 (-3.95% week, -2.69% Friday), DAX (-4.83%, -3.08%), CAC (-4.60%, -2.69%), S&P 500 (-5.05%, -2.91%), NASDAQ (-5.60%, -3.52%), FANG+ (-2.87%, -3.37%), and Russell 200 (-4.26%, -2.60%). That brings the STOXX 600 -14.49% below its YTD highs reached in the first days of the year, with the S&P 500 -18.40% below the same corresponding metric. Both indices ended the week hovering just above YTD lows. US CDX HY and Euro Crossover were +58bps and +47bps on the week and around +30bps and +25bps wider on Friday. Both are now at their post covid wides. Tyler Durden Mon, 06/13/2022 - 07:57.....»»

Category: blogSource: zerohedgeJun 13th, 2022

Futures Drop As Yields Push Higher, Hawkish ECB Looms

Futures Drop As Yields Push Higher, Hawkish ECB Looms After yesterday's bizarro rally, US futures and European bourses dipped ending two days of gains, as yields reversed Tuesday's slide and climbed ahead of highly anticipated CPI data on Friday and a hawkish ECB meeting tomorrow, as traders try to predict the Federal Reserve’s policy path. Nasdaq 100 futures were flat at 7:30 a.m. in New York, with contracts on the S&P 500 and Dow Jones also modestly lower. European markets also dipped, with Credit Suisse shares tumbling after the Swiss bank announced that it expects a loss in the 2Q and is weighing a fresh round of job cuts. Meanwhile, Asian stocks rose as Beijing’s move to approve a slew of new video games bolstered bets that the outlook is improving for the Chinese technology sector. The yield on the 10-year US Treasury resumed its advance, climbing to 3%, while the dollar rose as the yen cratered to fresh 20 year lows, flat and bitcoin traded around $30K again. Among notable premarket movers, energy companies’ extended their Tuesday gains with Imperial Petroleum rising 8.3% and Energy Focus adding 20%. Western Digital shares climbed 4.1% in US premarket trading after the chipmaker said that it’ll consider splitting its main units as part of a review of “strategic alternatives” following talks with activist investor Elliott. US-listed Chinese stocks jump in premarket trading, on track for a third day of gains, after China approved a second batch of video games this year, providing a signal of policy support to the the country’s internet sector; Alibaba (BABA US) gained 5.8%, (JD US) +4.4%, Pinduoduo (PDD US) +5.9%, Baidu (BIDU US) +2.7%. Other notable premarket movers: Intel (INTC US) shares fell 1.9% in premarket trading as Citi lowered its estimates on the chipmaker after the company’s management mentioned at a conference that circumstances are worse than expected during the quarter. Altria Group (MO US) stock slid 2.4% in premarket trading as Morgan Stanley downgraded it to underweight, citing increasing macro pressures and competitive risks. Western Digital (WDC US) shares rise 4.1% in premarket trading, after the chipmaker said that it will consider splitting its main units as part of a review of “strategic alternatives”. Smartsheet (SMAR US) stock fell about 7% in premarket trading as analysts said the software company delivered a mixed set of results with billings growth decelerating to top estimates by a slimmer margin than in previous quarters. Novavax (NVAX US) shares jump as much as 22% in US premarket trading after the company’s coronavirus vaccine won support from an FDA advisory panel. DBV Technologies ADRs (DBVT US) gain as much as 22% in US premarket trading after a trial for the biotech firm’s peanut allergy treatment met its primary endpoint. Sentiment remains fragile on concerns rising rates will spark a recession as corporate earnings are set to slide. Thursday the ECB is set to wind down trillions of euros of asset purchases in a prelude to a rate hike expected in July that will mark the end of eight years of negative interest rates. "Higher yields will inevitably resume the pressure on valuations,” said Roger Lee, head of UK equity strategy at Investec Bank. Inflation now exceeds 8% in the euro area, and is expected to stay above that level in the US when May data comes out on Friday, increasing pressure on central banks to stick to aggressive rate hikes. “Recent bouts of optimism can only be short-lived for now, as they were based on the wrong assumptions, that lower growth would push central bankers to ease their aggressive path,” Olivier Marciot, a portfolio manager at Unigestion SA, wrote in a report. Yet some argue that central banks will be forced back into dovish mode, among them hedge fund founder Ray Dalio. The billionaire said central banks across the globe will be required to cut interest rates in 2024 after a period of stagflation. On Friday, focus will turn to the US CPI reading for hints on the Fed's tightening path following the central bank’s outsized hike on May 4. The data is expected to show inflation picked up from a month ago, but slightly slowed from a year earlier. Complicating the task of policy makers trying to arrest runaway inflation without choking off growth, the war in Ukraine shows no signs of ending. That’s ignited higher food and energy prices across the world, despite the best efforts of central banks to use higher rates to cool economies. In Europe, the Stoxx 600 Index was down 0.4%, with shares of basic resources companies and financial sector stocks leading the drop,  while the region’s bonds fell as traders braced for a crucial European Central Bank meeting. Credit Suisse shares tumbled as much as 7.6% after the Swiss bank announced that it expects a loss in the 2Q. In addition, people familiar with the matter said that the lender is weighing a fresh round of job cuts. European mining stocks also underperformed the Stoxx 600 benchmark as copper declines, while iron ore fluctuates with investors weighing signs of demand recovery against caution that China may seek to stabilize commodity prices. The Stoxx Europe 600 Basic Resources sub-index slid 1.1% as of 9:45 a.m. in London after rising to the highest since April on Tuesday. Here are the most notable European movers: Prosus’s shares jump as much as 8.6% in Amsterdam trading after China approved its second batch of video games this year, with a total of 60 titles. Naspers, which holds a 29% stake in Tencent through Prosus, up as much as 9.8%. Inditex shares gain as much as 5.3% after the Zara owner reported 1Q results. Analysts were impressed by the sales beat, with Bryan Garnier calling the company a “safe-haven choice” in the retail sector. UK and European retail stocks rise after Inditex’s results helped boost sentiment, with the retail segment the biggest gainer in the Stoxx 600 Index. Asos gained as much as +3.9%, Boohoo +3.1%, JD Sports +2.5%. Voestalpine shares rise as much as 4.5% after the company reported strong results for the business year, even as its guidance for FY23 points at a lack of visibility for fiscal 2H, according to analysts. Haldex shares rise as much as 45% after SAF-Holland offers SEK66 in cash per share for the Swedish brake and air suspension products maker, representing a 46.5% premium to its closing price on Tuesday. Wizz Air shares fall as much as 8.6% after the company reported results that were in line with expectations but flagged an operating loss for the 1Q of fiscal year 2023. European mining stocks underperform the Stoxx 600 benchmark as copper declines, while iron ore fluctuates. Anglo American shares fell as much as 1.7%, Rio Tinto -1.8%, Glencore -1.7%, Antofagasta -3.3%. Orpea shares declined as much as 5.9% as the company said that French police investigators began an evidence-gathering raid on Wednesday at its headquarters. Asian stocks rose as Beijing’s move to approve a slew of new video games bolstered bets that the outlook is improving for the Chinese technology sector.  The MSCI Asia Pacific Index advanced as much as 1.1%, with Alibaba and Tencent providing the biggest boosts. Benchmarks in Hong Kong outperformed on the approvals news, while Japanese equities climbed as the yen continued to weaken. Stocks in India fell after the country’s central bank raised interest rates as expected while Thai shares inched up after the Bank of Thailand kept its benchmark rate unchanged.  China approved more games in a step toward normalization after a months-long freeze amid the government’s crackdowns on the tech sector. The news follows a report earlier this week that regulators are preparing to conclude an investigation of ride-hailing giant Didi. “We think the significant dangers have passed” in Chinese equities markets, said Eric Schiffer, chief executive officer at California-based private equity firm Patriarch Organization, which holds positions in Alibaba and JD. “The approval on the game titles signals that policymakers are following through on their intention to back off tech regulation and reverse the pain that caused investors to leave the sector."  Optimism toward a less-harsh regulatory environment and China’s post-Covid economic reopening has helped Hong Kong’s tech stocks outperform US peers recently. The Hang Seng Tech Index is up more than 17% the past month compared with little change in the Nasdaq 100. The rebound in Chinese equities also helped the MSCI Asia Pacific Index stage a bigger recovery than the S&P 500 in the same period. Japanese equities advanced for a fourth straight day, as the yen’s weakness provided support for the nation’s exporters.   The Topix rose 1.2% to 1,969.98 as of market close, while the Nikkei advanced 1% to 28,234.29. Toyota Motor Corp. contributed the most to the Topix gain, increasing 1.8%. Out of 2,170 shares in the index, 1,646 rose and 435 fell, while 89 were unchanged. Stocks in India declined as the Reserve Bank of India said it would withdraw pandemic-era accommodation to quell inflation after raising borrowing costs for a second straight month.  The S&P BSE Sensex dropped 0.4% to 54,893.84, as of 2:46 p.m. in Mumbai, while the NSE Nifty 50 Index fell 0.6%. Both gauges erased gains of as much as 0.8% reached during the central bank’s briefing and are heading for a fourth day of declines. Of 30 shares in the Sensex, 13 rose and 17 fell. Sustained high prices could unhinge inflationary expectations and trigger second-round effects, central bank Governor Shaktikanta Das said in an online briefing, emphasizing that preserving price stability is key to ensuring lasting economic growth. Reliance Industries was the biggest drag on the Sensex, while State Bank of India gave the biggest boost. All except two of BSE’s 19 sector sub-gauges declined, with telecom and energy groups the worst performers as realty and metals gained In FX, Yen weakness extends in European trade, with JPY hitting the weakest level since 2002 at 133.77/USD after BOJ’s Kuroda reiterated easing stance. The dollar strengthened against all its group-of-10 peers with the yen and Australian and New Zealand dollars as the worst performers. The euro fluctuated around the $1.07 handle while bunds and Italian bonds fell alongside Treasuries, paring some of Tuesday’s gains. Australian and New Zealand dollars both weakened amid greenback strength and falling US stock futures. Aussie further was weighed by local yields giving up Tuesday’s RBA-driven gains. In rates, Treasuries drifted lower, giving back a portion of Tuesday’s gains and following bigger losses for bunds, which underperformed ahead of Thursday’s ECB policy meeting.  Yields are cheaper by 2bp-3bp across the curve with front-end marginally outperforming, steepening 2s10s spread by ~1.5bp and building curve concession for the auction; bunds underperform by 1.5bp in 10-year sector.  Focal points of US session include 10-year auction, following soft results for Tuesday’s 3-year. $33b 10-year reopening at 1pm ET is second of this week’s three auctions; $19b 30-year reopening is ahead Thursday. WI 10-year yield ~3.015% is above auction stops since 2011 and ~7bp cheaper than May’s, which tailed by 1.4bp. JGBs little changed, with benchmark 10-year bonds trading again after no transactions on Tuesday. Peripheral spreads widen to Germany; Italy lags, widening ~3bps to core at the 10y points ahead of the ECB on Thursday. In commodities, WTI drifts 0.6% higher to trade at around $120. Most base metals are in the green; LME tin rises 2.8%, outperforming peers. Spot gold falls roughly $5 to trade at $1,848/oz. Looking at To the day ahead now, and it’s a fairly quiet one on the calendar, but data releases include German industrial production and Italian retail sales for April, as well as the UK construction PMI for May and the final reading of US wholesale inventories for April. Market Snapshot S&P 500 futures down 0.4% to 4,144.00 STOXX Europe 600 down 0.3% to 441.39 MXAP up 0.8% to 169.14 MXAPJ up 1.1% to 559.98 Nikkei up 1.0% to 28,234.29 Topix up 1.2% to 1,969.98 Hang Seng Index up 2.2% to 22,014.59 Shanghai Composite up 0.7% to 3,263.79 Sensex down 0.4% to 54,907.55 Australia S&P/ASX 200 up 0.4% to 7,121.10 Kospi little changed at 2,626.15 Brent Futures up 0.3% to $120.92/bbl Gold spot down 0.3% to $1,847.71 U.S. Dollar Index up 0.34% to 102.67 German 10Y yield little changed at 1.33% Euro down 0.2% to $1.0686 Top Overnight News from Bloomberg Boris Johnson plans to press ahead with legislation giving him the power to override parts of the Brexit deal, three people familiar with the matter said, a move likely to anger some of his MPs and the EU The yen’s historic weakness is spreading from the dollar into other currency crosses as the Bank of Japan’s policy isolation grows. Bloomberg’s Correlation-Weighted Currency Index for the yen -- a gauge of its relative strength against a broad basket of Group-of-10 peers -- slumped to a seven-year low Wednesday Japanese investors sold US Treasuries for the sixth consecutive month in April, underscoring waning appetite for the securities as the Federal Reserve sticks to its aggressive monetary tightening path Inflation in Hungary exceeded 10% for the first time in more than 20 years, putting pressure on the central bank to tighten monetary policy further and prop up the forint Australian inflation is likely to breach 6% and potentially could go “well above” that level and remain there for the rest of the year, Secretary to the Treasury Steven Kennedy said Wednesday Economists and investors criticized Australia’s central bank for confusing communications after it raised interest rates by twice as much as expected, having previously signaled a preference for quarter-point moves The RBI delivered a 50 basis-point rate hike as predicted by 17 of 41 economists in a Bloomberg survey A slew of China video game approvals is giving stock bulls renewed hope that a nascent rebound in tech shares could become a sustainable rally. The Hang Seng Tech Index jumped more than 4% Wednesday after the government approved 60 licenses A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly higher following the gains on Wall St and optimism of China easing its tech crackdown. ASX 200 recovered from the prior day’s RBA-induced selling with nearly all sectors in the green, although financials underperformed. Nikkei 225 extended further above the 28k level on currency weakness and with Q1 GDP data revised upwards to a narrower contraction. Hang Seng and Shanghai Comp. traded mixed with tech fuelling the gains in Hong Kong after China’s NPPA approved the publishing licences for 60 games this month, while sentiment in the mainland gradually soured despite support efforts as an official also warned that China's foreign trade stabilisation faces uncertainties and large pressure. Top Asian News China Vice Commerce Minister Wang said China's foreign trade stabilisation faces uncertainties and a large pressure from domestic and external factors. Furthermore, he sees global demand growth as low, while he added that China will accelerate export tax rebates and MOFCOM will assist foreign trade companies in securing orders, according to Reuters. Chinese Retail Passenger Car Sales (May) +30% M/M, according to PCA's Prelim data cited by Bloomberg. Japan's CDP has, as expected, submitted a no-confidence motion against the governing administration within the Lower House, motion will be put to a vote on June 9th, via Asahi; Asahi adds that the move is not expected to go anywhere European bourses have trimmed initial upside, Euro Stoxx 50 -0.2%, with macro newsflow limited and the initial strength primarily a continuation of APAC/Wall St. leads. In specifics, Credit Suisse (-5%) issued a Q2 profit warning for the group and its Investment Bank division while noted Retail name Inditex (+4%) provided a positive update. Stateside, futures are modestly pressured overall but well within overnight ranges ahead of a slim docket; ES -0.4%. DiDi (DIDI) is in advanced discussions to own a one-third stake of Sinomach Zhijun, a China state-backed EV maker, according to Reuters sources. Top European News Euro-Zone Economy Grew More Than Estimated at Start of Year Even the ECB’s Most Dire Forecast May Have Been Too Optimistic Euro Options Point to Most-Pivotal ECB Meeting Since 2019 Ireland Accuses Johnson of Acting in ‘Bad Faith’ on Brexit Deal Saudi Wealth Fund Makes Second $1 Billion Bet on Swedish Gaming Central banks RBI hiked the Repurchase Rate by 50bps to 4.90% (exp. 40bps hike) via unanimous decision and dropped mention of "staying accommodative", while RBI Governor Das noted that inflation has increased above upper tolerance levels and they remain focused on bringing down inflation. Das added they will control inflation without losing sight of growth and that further monetary policy measures are necessary to anchor inflation, as well as noted that upside risk to inflation had intensified and materialised sooner than expected. RBI Governor says they dropped the word "accommodative" from their stance, but they remain accommodative; liquidity withdrawal going forward will be calibrated and gradual. BoJ's Kuroda says rapid weakening of JPY as seen recently is undesirable; various macroeconomic models show that a weak JPY is positive. I It is important for FX to move stably, reflecting fundamentals. BoJ is expected to maintain its view that the domestic economy is picking up as a trend and will likely continue improving, according to Reuters sources. PBoC international department official Zhou said the PBoC will keep guiding financing costs lower, while the PBoC also announced that China will extend the trading hours of the interbank FX market, according to Reuters. FX Buck bounces as Yen rout continues after soft verbal intervention from BoJ Governor and Japanese Economy Minister; DXY back around 102.500 axis, USD.JPY climbs to circa 133.86 at one stage. More Lira depreciation on multiple negative factors including unconventional easing policy stance aimed at returning inflation to target, USD/TRY touches 17.1500. Aussie and Kiwi undermined by Greenback rebound and fade in general risk sentiment; AUD/USD loses 0.7200+ status again, NZD/USD sub-0.6450. Franc and Pound down, but Euro and Loonie resilient as former awaits ECB and latter leans on strong crude prices; USD/CHF just shy of 0.9790, Cable under 1.2550, EUR/USD probing 1.0700 and USD/CAD pivoting 1.2550. Forint and Zloty underpinned post-strong Hungarian CPI metrics and pre-NBP that is expected to hike 75bp; EUR/HUF & EUR/PLN around 389.60 and 4.5700 respectively. Fixed Income Bunds and Gilts pare some losses after testing round and half round number levels at 149.00 and 114.50 respectively, with added incentive after solid demand for 10 year German and UK supply. US Treasuries await 2032 issuance with caution given a lukewarm reception at 3 year auction. 10 year note just off base of 118-03/13 overnight range. Commodities WTI and Brent have been moving in-line with broader risk; however, following the UAE Minister the benchmarks have extended to the upside and post gains in excess of USD 1.50/bbl. US Energy Inventory Data (bbls): Crude +1.8mln (exp. -1.9mln), Cushing -1.8mln, Gasoline +1.8mln (exp. +1.1mln), Distillates +3.4mln (exp. +1.1mln) Brazilian government is considering measures to monitor fuel prices at distributors, according to Reuters sources. UAE Energy Minister says situation is not encouraging when it comes to the amounts of crude OPEC+ can bring to the market, via Reuters; Notes conformity with the OPEC+ deal is more than 200%, are risks when China is back, in talks with Germany and other nations to see if they are interested in UAE natgas. Spot gold is essentially unchanged, and continues to pivot its 10-DMA, while base metals are primarily tracking broader risk sentiment. US Event Calendar 07:00: June MBA Mortgage Applications -6.5%, prior -2.3% 10:00: April Wholesale Trade Sales MoM, prior 1.7% 10:00: April Wholesale Inventories MoM, est. 2.1%, prior 2.1% DB's Henry Allen concludes the overnight wrap A reminder that Jim’s annual default study was released yesterday. His view is that while nothing much will change for the remainder of 2022, we might be coming to the end of the ultra-low default world discussed in previous editions. First, there’ll likely be a cyclical US recession to address in 2023, and after that, a risk that various trends reverse that have made the last 20 years so subdued for defaults. See the report here for more details. It’s been another topsy-turvy session for markets over the last 24 hours as investors look forward to the big macro events later in the week, namely the ECB tomorrow and then the US CPI print the day after. Initially it had looked like we were set for another day of higher rates, not least after the hawkish surprise from the RBA we mentioned in yesterday’s edition as they hiked by a larger-than-expected 50bps. But more negative developments subsequently dampened the mood, including an unexpected contraction in German factory orders, and then an announcement by Target (-2.31%) that they were cutting their profit outlook for the second time in three weeks. But then sentiment turned once again later in the US session, with equities seeing a late rally that put the major indices back in positive territory for the day. Against that backdrop, equities swung between gains and losses, but the S&P 500 rallied to a broad-based gain after the European close, finishing the day +0.95% higher after being as much as -1% lower following the open, with only the consumer discretionary (-0.37%) sector finishing in the red after Target updated their guidance again to now expect Q2’s operating margin to be around 2% amid price reductions to reduce inventory. For the index as a whole, it was also the first back-to-back positive start the week since in a month, that’s also seen it recover all of last week’s declines. Energy (+3.14%) was the biggest outperformer in the S&P amidst a further rise in oil prices, with Brent Crude (+0.89%) moving back above the $120/bbl mark. However, Europe’s STOXX 600 (-0.28%) missed the late rally and eventually settled in negative territory. Whilst equities had a mixed session, sovereign bonds put in a more consistent performance ahead of tomorrow’s ECB decision, with decent gains posted on both sides of the Atlantic. Yields on 10yr Treasuries were down -6.6bps to 2.97%, moving back beneath 3% again, although this morning’s +2.8bps rise has taken them just back above that point to 3.001% at time of writing. Yesterday’s moves lower in yields were more pronounced at the long end of the curve, with the 2yr yield essentially flat as investors’ expectations of the near-term path of Fed rate hikes remained fairly steady. Indeed, the futures-implied rate by the December meeting was also down just -1.5bps to 2.84%. It was much the same story in Europe too of lower yields and flatter curves, as the amount of ECB tightening priced in for the rest of the year fell a modest -1.4bps from its high of 125bps the previous day. Yields on 10yr bunds (-2.9bps), OATs (-3.6bps) and gilts (-3.3bps) all fell back, and there was a noticeable decline in peripheral spreads thanks to even larger reductions in the Italian (-12.1bps) and Spanish (-7.4bps) 10yr yields. Interestingly, another trend over recent days that continued was the fall in European natural gas prices (-3.57%), which fell for a 5th consecutive session to hit its lowest level since Russia’s invasion of Ukraine, at €79.61/MWh. Those late gains for US equities have carried over into Asia overnight, with the Hang Seng (+1.70%) the Nikkei (+0.85%) both advancing strongly. The main exception to that has been in mainland China however, where the CSI 300 (-0.41%) and the Shanghai Composite (-0.70%) have just taken a tumble this morning. We’ve also seen that in US equity futures too, with those on the S&P 500 down -0.335 this morning. On the data side, the final estimate of Japan’s GDP for Q1 showed a smaller contraction than initially thought, with GDP only falling by an annualised -0.5%, which is half the -1% decline initially thought. However, the Japanese Yen has continued to weaken overnight, and is currently trading at a fresh 20-year low against the US Dollar of 133.13 per dollar. It’s also at a 7-year low against the Euro of 142.19 per euro. Here in the UK, Brexit could be back in the headlines shortly as it’s been reported by multiple outlets including Bloomberg that legislation will be introduced that would enable the UK government to override the Northern Ireland Protocol. That’s the part of the Brexit deal that avoids the need for a hard border between Northern Ireland and the Republic of Ireland, but has been a persistent source of tension between the two sides since the deal was signed, since it creates an economic border between Northern Ireland and Great Britain that Northern Irish unionists are opposed to. Irish PM Martin said yesterday that Europe would respond in a “calm and firm” way, and Bloomberg’s report suggested the draft bill could be presented to the House of Commons tomorrow. Looking at yesterday’s data releases, German factory orders for April unexpectedly saw a -2.7% contraction (vs. +0.4% expansion expected). That was the third consecutive monthly decline, and was driven by a -4.0% decline in foreign orders. On the other hand, the final PMIs from the UK for May were revised up relative to the flash readings, with the composite PMI at 53.1 (vs. flash 51.8), helping sterling to strengthen +0.48% against the US Dollar. Finally, the World Bank yesterday became the latest body to downgrade their global growth forecast, now projecting a +2.9% rise in GDP for 2022 compared to their 4.1% estimate put out in January, and openly warned about the risk of stagflation. To the day ahead now, and it’s a fairly quiet one on the calendar, but data releases include German industrial production and Italian retail sales for April, as well as the UK construction PMI for May and the final reading of US wholesale inventories for April. Tyler Durden Wed, 06/08/2022 - 08:09.....»»

Category: dealsSource: nytJun 8th, 2022

L+M Development Partners announces 13,215 s/f headquarters lease at historic Newark building

L+M Development Partners (L+M), Prudential Financial (Prudential) and Goldman Sachs Urban Investment Group (UIG) announced today a 13,215-square-foot lease with SBM Management at the Hahne & Co. building, the 400,000-square-foot redeveloped former Hahne’s Department Store at 609 Broad Street in Newark, NJ. JLL executive vice president Peter Ladas represented the... The post L+M Development Partners announces 13,215 s/f headquarters lease at historic Newark building appeared first on Real Estate Weekly. L+M Development Partners (L+M), Prudential Financial (Prudential) and Goldman Sachs Urban Investment Group (UIG) announced today a 13,215-square-foot lease with SBM Management at the Hahne & Co. building, the 400,000-square-foot redeveloped former Hahne’s Department Store at 609 Broad Street in Newark, NJ. JLL executive vice president Peter Ladas represented the tenant in the 10-year lease. A JLL agency team led by managing director Blake Goodman and vice president Christopher Masi represented building ownership. Headquartered near Sacramento CA and with offices in five countries around the globe, SBM Management Services is a leading facilities management provider whose clients include some of the world’s premier Fortune 500 companies. It will relocate and expand its New Jersey headquarters operation from Edison, NJ, to occupy 13,215 square feet across the 2nd floor of Hahne & Co. Prudential, L+M, and UIG opened the restored Hahne & Co. Building in 2017 following a multi-million-dollar redevelopment that included an arts and cultural center operated by Rutgers University-Newark and approximately 75,000 square feet of retail space on Broad Street occupied by Newark’s first Whole Foods and a Marcus Samuelson restaurant, Marcus B&P, among others. In addition to retail, commercial and community space, the development includes 160 new apartments, one third of which are affordable homes for low-income and working families earning between 40 and 60 percent AMI. Fronting Military Park and located steps from the NJ Transit station at Newark Broad Street, tenants of the fully leased property include lending platform Credibility Capital, co-working operator LaunchPad and City National Bank. “After an extensive site selection process, SBM Management Services was drawn to The Hahne Building’s tremendous location in the heart of Newark’s growing transit hub for their new East Coast headquarters. Amongst the thriving community of multinational companies, the area offers plenty of amenities and attractions, plus having Rutgers University footsteps away will help the company recruit and retain new talent to grow their business,” said Ladas. “We are excited to establish our new headquarters in a historic downtown Newark property,” said Dave Sweet, senior vice president of Operations at SMB Management Services. “The relocation will allow us to better serve clients and provide a comfortable and convenient work environment for our employees as we continue to grow and elevate our service platform nationally.” “The adaptive reuse of this historic property provides tenants with dynamic, non-traditional office space, best-in-class connectivity and the enhanced amenities that today’s workforce demands,” said Jake Pine, senior director at L+M Development Partners. “We are pleased to welcome SMB Management Services to the community of leading tenants in the building.” The Hahne Co. building is also located several blocks from Walker House, the mixed-use development in the restored historic Art Deco NJ Bell building at 540 Broad Street in Downtown Newark. The 21-story building includes 264 units of mixed-income housing and a UPS store, along with a brewery called Newark Local Beer and Newark’s first climbing gym, Method Climbing.  The post L+M Development Partners announces 13,215 s/f headquarters lease at historic Newark building appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyMay 29th, 2022

Top-Producer Roundtable: Superstar Agents Discuss How They Win

After a year that resulted in historic highlights, the real estate industry is still as competitive as ever. As many of the sector’s top companies look to outdo last year’s performance, the path toward achieving those goals rests on the shoulders of their agents, who are undoubtedly aiming to do the same. While there is… The post Top-Producer Roundtable: Superstar Agents Discuss How They Win appeared first on RISMedia. After a year that resulted in historic highlights, the real estate industry is still as competitive as ever. As many of the sector’s top companies look to outdo last year’s performance, the path toward achieving those goals rests on the shoulders of their agents, who are undoubtedly aiming to do the same. While there is no silver bullet for improving your performance as an agent, an old saying states, “success leaves breadcrumbs.” RISMedia spoke with several high-performing real estate professionals at some of the top brokerages listed in its 34th Annual Power Broker Survey to pick their brains on their strategies to maintain the solid momentum they built last year. Speakers:  Leonard Steinberg, Compass (#1): Touting 25 years in real estate, Steinberg wears many hats at the tech-focused brokerage that topped RISMedia’s 2021 Power Broker Rankings—based on sales volume. A veteran at the company, Steinberg tallied an impressive 2021 performance with more than $200 million in sales volume. Tim Allen, Tim Allen Properties at Coldwell Banker Realty/Realogy (#2): Allen has earned his fair share of recognition from Coldwell Banker and Realogy—now Anywhere Real Estate—as one of their top producing agents. Accounting for $465 million in residential sales last year, he was named Coldwell Banker’s No. 1 agent in the U.S. last year. Elizabeth Riley, Luxe Property Group, brokered by eXp Realty (#3): A 17-year veteran in real estate, Riley has leveraged her marketing savvy to serve her community and clients. Recording  $34,039,604 in sales last year, she spends a great deal of time educating fellow eXp agents on topics that span the entire real estate industry. Lauren Muss, Douglas Elliman (#5): A native New Yorker, Muss has been in real estate since 1994, achieving more than $6.5 billion in sales. In 2021, she reeled in nearly $243 million in sales volume. Jordan Grice: How do you measure productivity and what are you doing to stay productive when it comes to sales, lead generation and networking?  Tim Allen: I’ve sold a couple thousand houses and if I was just selling houses I would’ve retired or gone out of business long ago. It’s just boring to me, sitting in front of someone and going out with a scripted line or coming in there with an agenda. What I really like to do is meet people. I want to get to know them. I want to know about their life, their family, and their goals. That’s what is most important to me. I love what I do, and I still get excited about it, I get excited about being with my team. Elizabeth Riley: For me, I don’t focus on the numbers, and I don’t focus on the goals. I say that because if I’m doing what I’m supposed to be doing day in and day out. If I’m treating my clients like they are my one and only client, if I’m showing up and delivering and exceeding expectations, then I’m helping them reach their goals which in return helps me reach my goals. Last year was my best in all of my 17 years in the business, and I think it’s really because I went back to relationships and building a rapport with people. They know me, like me and trust me, and when I’m treating them really well and doing the best service I can for them they tell everyone they know. JG: Competition for listings is as fierce today as it’s ever been. What’s your approach to locking down listings? ER: I was in the business in 2008, and I moved from Atlanta to Austin, Texas and started up my real estate business again and people thought I was crazy. I think people have choices. You can either look at the negative and the challenges, or you can look at the opportunities. I looked at the opportunities in that situation and I look at the opportunity now. People are still selling, buying and moving. It’s not that the whole market is shut down. You just have to be a little more creative, and focus a little differently on how you generate business. For me, it’s relationships and consistency. I stay in contact with my clients or my sphere consistently—whether or not they’ve ever bought a home from me—for times like this. What’s happened is I’m top of mind consistently. I’m not just talking about just sold or just listed. I’m adding value in some way, and it’s on the way to the trash can that I’m making an impact. It’s having those relationships but it’s also about being consistent. Leonard Steinberg: Let’s assume I have a lead and someone wants to sell or is thinking about selling. When I meet with them, I can’t just tell them “I want to list your home,” and “I will get the most money for it.” That’s not good enough anymore. Today, to be successful in a very competitive environment, you have to showcase everything that you are doing. I’m showing them all the tools, tech, systems and the different avenues that we take to get the message out about their homes. It’s always healthy to have consistency in your history of doing real estate. When you sit down with your clients they want to feel confident that you have the confidence in yourself and your abilities to produce and you have to show them in great detail everything that you will do. JG: What do you do to create a client experience that leads to referrals and repeat business? Lauren Muss: It’s back to that 24/7 service. We’re in the service business, so service is service. They are not looking for you to get back to them tomorrow, they want feedback. Even if you have nothing to say, say something. Make sure every week if there are no showings all week, still email them and reach out to keep them in the loop. It’s just constant communication is the most important thing for the client experience. TA: My phone is on all the time because my cell number is on all our ads, and I engage that person and I find out a little bit about them, but then I drop knowledge on them. Most of my clients and team are smarter than me, but in this one little niche that I handle, I don’t care if you’re a billionaire or a mogul, I’m an expert in this. You drop these little tidbits of knowledge on them and they’re like ‘oh, Tim knows what he’s talking about.’ There’s so much that we do that’s nuanced, so I think getting this engagement, a rapport falls into a relationship. LS: You have to first know who your clientele is. Then, as important, you have to know your personality and style of doing business. I’m not a broker that can show up to a showing in torn jeans and a t-shirt, but there are agents of whom that is very attractive to their audience, and it works for them. For my style of business, I dress up and I’m very friendly, but I’m professional. It’s not about trying to become a client’s best friend as much as it is to say that I’m providing you with professional services and here are all the things I will do, and I’m available to you anytime all the time.  Then, showcase to them because talking about what you will do is one thing, but demonstrating it is what gets the referrals from the clients and their family and friends. JG: We are certainly living in an era where technology and innovation are fixtures within the industry, so what tools and resources do you find most valuable to your business and why? TA: I’d say social media. I remember I was behind in that, but social media is everything now. It’s a form of entertainment and communication and getting followers. These are things I’m learning from my team. We actually worked with an influencer down in L.A. at one of my homes. We wanted to get it rented, and we went to this influencer who shot it out to all those people and we rented it to an incredible athlete. That’s how we got that client. If we put an ad in the paper that client would’ve never seen it. ER: Being a part of a company that is very tech-forward was foreign and new to me so I had to figure out how to right that, but technology and I were never really good friends. But we all have to evolve. I know some people talk about their CRMs and lead conversion insights, but for me, I really love Trello. It’s very visual and I’m a visual person that wants everything in front of me. I use Trello more than I use my CRM and then another app that I love is called Reach. JG: What advice would you give to agents that are looking to follow in your footsteps and step up their game this year? TA: It doesn’t happen overnight, and I think first and foremost, you have to have a plan. My plan is less scripted than others, but have a plan and stick to it. Surround yourself with great people, and prioritize character, skill set, work ethic, and the right attitude. Then put those people in positions to succeed. When you have that, get creative and take risks. Be available, pick up your phone and know when you hang up your phone too. Those are the basics, you gotta stick with the basics. LM: My advice is more of a list. This is not a part-time business. If you don’t respond in two hours someone else will. If you think not to send something because it’s not exactly what they asked for, they will find out on their own or from someone else. Know your facts and what you are talking about. Listen to what your client needs and wants. Listen to every sales meeting and market update. Know the stats and know what’s moving in the market and what’s not. You have to know your building. The more you know the more you can help someone. Lastly, learn to withstand the punches in the bad times because it’s not easy. ER: Building a foundation is also critical for agents. Many times people just jump in and run with it, which can lead to being reactive for the rest of your career. Make sure you build that foundation and don’t be a secret agent and don’t compare yourself to others. As an agent, you have to figure out who you are as a person and business and determine who you want to be. Too many times people want to be like someone else, but it comes across as very forced. If you’re genuine and authentic you’re going to attract the kind of business and people you are meant to work with, and I truly believe that comparison kills joy. LS: Take this business seriously. When you take this business seriously you should really buy into it and become an expert not just in transacting but also in the market, the trends and news, your properties, real estate design, etc. The day I started to dig in deep and really entrench myself into real estate and embrace it that’s when I began to love it. Everyone says to follow your passion. Well, you become extraordinarily passionate about something when you’re successful at it and I’m successful at real estate and, in fact, my success has fueled my passion rather than the reverse. The post Top-Producer Roundtable: Superstar Agents Discuss How They Win appeared first on RISMedia......»»

Category: realestateSource: rismediaMay 18th, 2022

Saga Partners 1Q22 Commentary: Carvana And Redfin

Saga Partners commentary for the first quarter ended March 31, 2022. During the first quarter of 2022, the Saga Portfolio (“the Portfolio”) declined 42.4% net of fees. This compares to the overall decrease for the S&P 500 Index, including dividends, of 4.6%. The cumulative return since inception on January 1, 2017, for the Saga Portfolio […] Saga Partners commentary for the first quarter ended March 31, 2022. During the first quarter of 2022, the Saga Portfolio (“the Portfolio”) declined 42.4% net of fees. This compares to the overall decrease for the S&P 500 Index, including dividends, of 4.6%. The cumulative return since inception on January 1, 2017, for the Saga Portfolio is 112.0% net of fees compared to the S&P 500 Index of 122.7%. The annualized return since inception for the Saga Portfolio is 15.4% net of fees compared to the S&P 500’s 16.5%. Please check your individual statement as specific account returns may vary depending on timing of any contributions throughout the period. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Interpretation of Results I was not originally planning to write a quarterly update since switching to semi-annual updates a few years ago but given the current drawdown in the Saga Portfolio I thought our investors would appreciate an update on my thoughts surrounding the Portfolio and the current market environment in general. The Portfolio’s drawdown over the last several months has been hard not to notice even for those who follow best practices of only infrequently checking their account balance. Outperformance vs. the S&P 500 since inception has flipped to underperformance on a mark-to-market basis and the stock prices of our companies have continued to decline into the second quarter. In past letters I have spent a lot of time discussing the Saga Portfolio’s psychological approach to investing to help prepare for the inevitable chaos that will occur while investing in the public markets from time-to-time. It’s impossible to know why the market does what it does at any point in time. I would argue that the last two years could be considered pretty chaotic, both on the upside speculation and now what appears to be on the downside fear and panic. I will attempt to give my perspective on how events played out within the Saga Portfolio with an analogy. Let’s say that in 2019 we owned a fantastic home that was valued at $500,000. We loved it. It was in a great neighborhood with good schools for our kids. We liked and trusted our neighbors; in fact, we gave them a spare key in case of emergencies. It was the perfect home for us to live in for many years to come. Based on the neighborhood becoming increasingly attractive over time, it was likely that our home may be valued around $2 million in ~10 years from now. This is strong appreciation (15% IRR) compared to the average home, but this specific home and neighborhood had particularly strong long-term fundamental tailwinds that made this a reasonable expectation. Then in 2020 a global pandemic hit causing a huge disorientation in the housing market. For whatever reasons, the appraised value of our home almost immediately doubled to $1 million. Nothing materially changed about what we thought our home would be worth in 10 years, but now from the higher market value, the home would only appreciate at a lower 7% IRR assuming it would still be worth $2 million in 10 years. What were our options under these new circumstances? We could move and try to buy a new home that provided a higher expected return. However, the homes in the other neighborhoods that we really knew and liked also doubled in price, so they did not really provide any greater value. Also, the risk and hassle of moving for what may potentially only be modestly better home appreciation did not make sense. We could buy a home in a less desirable neighborhood where prices looked relatively cheaper, but we would not want to live long-term. Even if we decided to live there for many years, the long-term fundamental dynamics of the crummy neighborhood were weak to declining and it was uncertain if the property would appreciate at all despite its lower valuation. We could sell our home for $1 million and rent a place to live for the interim period while holding cash and waiting for the market to potentially correct. However, we did not know if, when, or to what extent the market would correct and the thought of renting a place temporarily for our family was unappealing. For the Saga family, we decided to stay invested in the home that we knew, loved, and still believed had similar, if not stronger prospects following the COVID-induced surge in demand in our neighborhood. Now, for whatever reason, the market views our neighborhood very poorly and the appraised value of our home declined to $250,000, below any previous appraisals. It seems odd because it is the exact same home and the fundamentals of the neighborhood are much stronger than several years ago, suggesting that the expected $2 million value in the future is even more probable than before. It is a very peculiar situation, but the market can do anything at any moment. Fortunately, the lower appraisal value does not impact how much we still love our home, neighborhood, schools, or what the expected future value will be. In fact, we prefer a lower value because our property taxes will be lower! One thing is for certain, we would never sell our home for $250,000 simply because the appraised value has declined from prior appraisals. We would also never dream of selling in fear that the downward price momentum continues and then hopefully attempt to buy it back one day for $200,000. We can simply sit tight for as long as we want while the neighborhood around us continues to improve fundamentally over time, fully expecting the value of our home to eventually go up with it. It just so happens humans are highly complex beings and do not always react in what an economist may consider a rational way. Our emotions are highly contagious. When someone smiles at you, the natural reaction is to smile back. When someone else is sad, you feel empathy. These are generally great innate characteristics for helping to build the strong relationships with friends and family that are so important throughout life. But it also means that when other people are scared, it also makes you feel scared. And when more and more people get scared, that fear can cascade exponentially and turn into panic, which can cause people to do some crazy things, especially when it comes to making long-term decisions. As fear spreads, all attention shifts from thinking about what can happen over the next 5-10+ years to the immediate future of what will happen over the next day or even hour. Of course, during times of panic, “this time is always different.” It may very well be the case, but the world can only end once. Historically speaking, things have tended to work out pretty well over time on average. I am by no means immune to these contagious feelings. My way of coping with how I am innately wired is by accepting this fact and then trying to know what I can and cannot control. A core part of my investing philosophy is that I do not know what the market will do next, and I never will. Inevitably the market or a specific stock will crash, as it does from time-to-time. This “not timing the market” philosophy or treating our public investments from the perspective of a private owner may feel like a liability during a drawdown, but it is this same philosophy of staying invested in companies we believe to have very promising futures which positions us perfectly for the inevitable recovery. Eventually, emotions and the business environment will normalize, and the storm will pass. It could be next quarter, year, or even in several years, but we will be perfectly positioned for the recovery, at which point the stock price lows will likely be long gone. The whole investing process improves if one can really take the long-term view. However, it is not natural for people to think long-term particularly when it comes to owning pieces of publicly traded companies. It is far more natural to want to act by jumping in and out of stocks in an attempt to outsmart others who are trying to outsmart you. When the market price of your ownership in a business is available and fluctuating wildly every single day, it is hard to ignore and not be influenced by it. While one can get lucky through speculation, the big money is made by investing, by owning great businesses and letting them compound owner’s capital over many years. As the market has evolved over the last few decades, there appears to be an ever-increasing percent of “investors” who are effectively short-term renters, turning over the companies in their portfolios so quickly that they never really know the business that lies below the surface of the stock. While more of Wall Street is increasingly focused on the next quarter, a potentially looming recession, the Fed’s next interest rate move, or trying to time the market’s rotation from one industry into another, we are trying to think about what our companies’ results will be in the year 2027, or better yet 2032 and beyond. The most significant advantage of investing in the public market is the ability to take advantage of it when an opportunity presents itself or to ignore the market when there is nothing to do. The key to success is never giving up this advantage. You must be able to play out your hand and not be forced to sell your assets at fire sale prices. Significant portfolio declines are a good reminder of the importance of only investing money that you will not need for many years. This prevents one from being in a position where it is necessary to liquidate when adverse psychology has created unusually low valuations. However, we do not want to simply turn a blind eye to stock price declines of 50% or more and dig our heals into the ground believing the market is just being irrational. When the world is screaming at you that it believes your part ownership in these companies is worth significantly less than the market believed not too long ago, we attempt to understand if we are missing something by continually evaluating the long-term outlooks of our companies using all the relevant information that we have today from a first principles basis. Portfolio Update Instead of frequently checking a stock’s price to determine whether the company is making progress, I prefer looking to the longer-term trends of the business results. There will be stronger and weaker quarters and years since business success rarely moves up and to the right in a perfectly straight line. As a company faces headwinds or tailwinds from time-to-time, the stock price may fluctuate wildly in any given year, however the underlying competitive dynamics and business models that drive value will typically change little. Regarding our companies as a whole, first quarter results reflected a general softness in certain end markets, including the used car, real estate, and advertising markets. However, the Saga Portfolio’s companies, on average, provide a superior customer value proposition difficult for competitors to match. Most of them have a cost advantage compared to competitors; therefore, the worse it gets for the economy, the better it gets for our companies’ respective competitive positions over the long-term. For example, first quarter industry-wide used car volumes declined 15% year-over-year while Carvana’s retail units increased 14%. Existing home sales decreased 5% during the quarter while Redfin’s real estate transactions increased 1%. Digital advertising is expected to grow 8-14% in 2022 while the Trade Desk grew Q1’22 revenues 43% and is expected to grow them more than 30% for the full year 2022. While industry-wide TV volumes remain below 2019 pre-COVID levels, Roku gained smart TV market share sequentially during the quarter, continuing to be the number one TV operating system in the U.S. and number one TV platform by hours streamed in North America. Weaker industry conditions will inevitably impact our companies’ results; however, our companies should continue to take market share and come out on the other side of any potential economic downturn stronger than when they went in. For the portfolio update, I wanted to provide a more in-depth update on Carvana and Redfin which have both experienced particularly large share price declines and have recent developments that are worth reviewing. Carvana I first wrote about Carvana Co (NYSE:CVNA) in this 2019 write-up. I initially explained Carvana’s business, superior value proposition compared to the traditional dealership model, attractive unit economics, and how they were uniquely positioned to win the large market opportunity. Since then, Carvana has by far exceeded even my most optimistic initial expectations. While the company did benefit following COVID in the sense that customers’ willingness to buy and sell cars through an online car dealer accelerated, the operating environment over the last two years has been very challenging. Carvana executed exceedingly well considering the shifting customer demand in what is a logistically intensive operation and what has been a tight inventory environment due to supply chain issues restricting new vehicle production. Sales, gross profits, and retail units sold have grown at a remarkable 104%, 151%, and 87% CAGR over the last five years, respectively. Source: Company filings Shares have come under pressure following their first quarter results, which reflected larger than expected losses. The quarter was negatively impacted by a combination of COVID-related logistical issues in their network that started towards the end of the fourth quarter as Omicron cases spread. Employee call off rates related to Omicron reached an unprecedented 30% that led to higher costs and supply chain bottlenecks. As less inventory was available due to these problems, it led to less selection and longer delivery times, lowering customer conversion rates. Additionally, interest rates increased at a historically fast rate during the first quarter which negatively impacted financing gross profits. Carvana originates loans for customers and then sells them to investors at a later date. If interest rates move materially between loan origination and ultimately selling those loans, it can impact the margin Carvana earns on underwriting those loans. Industry-wide used car volumes were also down 15% year-over-year during the first quarter. While Carvana continues to grow and take market share, its retail unit volume growth was slower than initially anticipated, up only 14% year-over-year. Carvana has been in hyper growth mode since inception and based on the operational and logistical requirements of the business, typically plans, builds, and hires for expected capacity 6-12 months into the future. This has historically served Carvana well given its exceptionally strong growth, but when the company plans and hires for higher capacity than what occurs, it can lead to lower retail gross profits and operating costs per unit sold. When combined with lower financing gross profits in the quarter from rising interest rates, losses were greater than expected. In February, Carvana announced a $2.2 billion acquisition of ADESA (including an additional $1 billion plan to build out the reconditioning sites) which had been in the works for some time. ADESA is a strategic acquisition to help accelerate Carvana’s footprint expansion across the country, growing its capacity from 1.0 million units at the end of Q1’22 to 3.2 million units once complete over the next several years. It is unfortunate the acquisition timing followed a difficult quarter that had greater than expected losses, combined with a generally tighter capital market environment. Carvana ended up raising $3.25 billion in debt ($2.2 billion for the acquisition and $1 billion for the buildout) at a higher than initially expected 10.25% interest rate. Given these higher financing costs and first quarter losses, they issued an additional $1.25 billion in new equity at $80 per share, increasing diluted shares outstanding by ~9%. Despite the short-term speedbumps surrounding logistical issues, softer industry-wide demand, and a higher cost of capital to acquire ADESA, Carvana’s long-term outlook not only remains intact but looks even more promising than before. To better understand why this is the case and where Carvana is in its lifecycle, it helps to provide a little background on the history of retail. While e-commerce is a more recent phenomena that developed from the rise of the internet in the 1990s, the retail industry has undergone several transformations throughout history. In retailing, profitability is determined by two factors: the margins earned on inventory and the frequency with which they can turn inventory. Each successive retail transformation had a similar economic pattern. The newer model had greater operating leverage (higher fixed costs, lower variable costs). This resulted in greater economies of scale (lower cost per unit) and therefore greater efficiency (higher asset turnover) with size that enabled them to charge lower prices (lower gross margins) than the preceding model and still provide an attractive return on capital. The average successful department store earned gross margins of ~40% and turned inventory about 3x per year, providing ~120% annual return on the capital invested in inventory. The average successful big box retailer earned ~20% gross margins and turned its inventory 5x per year. Amazon retail earns ~10% gross margins (including fulfillment costs in COGS) and turns inventory at a present rate of 12x times annually. The debate that surrounds any subscale retailer, particularly in e-commerce, is whether they have enough capital/runway to build out the required infrastructure and then scale business volume to spread fixed costs over enough units. Before reaching scale, analysts may point to an online business’ lower price points (“how can they charge such low prices?!”), higher operating costs per unit (“they lose so much money per item!”), and ongoing losses and capital investments (“they spend billions of dollars and still have not made any money!”) as evidence that the model does not make economic sense. Who can blame them since the history books are filled with companies that never reached scale? However, if the retailer does build the infrastructure and there is sufficient demand to spread fixed costs over enough volume, the significant capital investment and high operating leverage creates high barriers to entry. If we look to Amazon as the dominant e-commerce company today, once the infrastructure is built and reaches scale, there is little marginal cost to serve any prospective customer with an internet connection located within its delivery footprint. For this reason, I have always been hesitant to invest in any e-commerce company that Amazon may be able to compete with directly, which is any mid-sized product that fits in an easily shippable box. As it relates to used car retailing, the infrastructure required to ship and recondition cars is unique, and once built, the economies of scale make it nearly impossible for potential competitors to replicate. Carvana is in the very early stages of building out its infrastructure. There is clearly demand for its attractive customer value proposition. It has demonstrated an ability to scale fixed costs in earlier cohorts as utilization of capacity increases, providing attractive unit economics at scale. Newer market cohorts are tracking at a similar, if not faster market penetration rate as earlier cohorts. Carvana is still investing heavily in building out a nationwide hub-and-spoke transportation network and reconditioning facilities. In 2021 alone, Carvana grew its balance sheet by $4 billion as it invested in its infrastructure while also reaching EBITDA breakeven for the first time. The Amazon story is a prime example (pun intended) of a new and better business model (more attractive unit economics) that delivered a superior value proposition and propelled the company ahead of its competition, similar to the underlying dynamics occurring in the used car industry today. Amazon invested heavily in both tangible and intangible growth assets that depressed earnings and cash flow in its earlier years (and still today) while growing its earning power and the long-term value of the business. The question is, does Carvana have enough capital/liquidity to build out its infrastructure and scale business volume to then generate attractive profits and cash flow? Following Carvana’s track record of scaling operating costs and reaching EBITDA breakeven in 2021, the market was no longer concerned about its liquidity position or the sustainability of its business model. However, the recent quarterly loss combined with taking on $3 billion in debt to buildout the 56 ADESA locations across the country raises the question of whether Carvana has enough liquidity to reach scale. Carvana’s current stock price clearly reflects the market discounting the probability that Carvana will face liquidity issues and therefore have to raise further capital at unfavorable terms. However, I think if you look a little deeper, Carvana has clearly demonstrated highly attractive unit economics. It has several levers to pull to protect it from any liquidity concerns if needed. The $2.6 billion in cash (as well as $2 billion in additional available liquidity in unpledged real estate and other assets) it has following the ADESA acquisition, is more than enough to sustain a potentially prolonged decline in used car demand. The most probable scenario over the next several quarters is that Carvana will address its supply chain and logistical issues that were largely due to Omicron. As the logistical network normalizes, more of Carvana’s inventory will be available to purchase on their website with shorter delivery times, which will increase customer conversion rates. This will lead to selling more retail units, providing higher inventory turnover and lower shipping costs, and therefore gross profit per unit will recover from the first quarter lows. Other gross profit per unit (which primarily includes financing) will also normalize in a less volatile interest rate environment. Combined total gross profit per unit should then approach normalized levels by the end of the year/beginning of 2023 (~$4,000+ per unit). Like all forms of leverage, operating leverage works both ways. For companies with higher operating leverage, when sales increase, profits will increase at a faster rate. However, if sales decrease, profits will decrease at a faster rate. While Carvana has high operating leverage in the short-term, they do have the ability adjust costs in the intermediate term to better match demand. When demand suddenly shifts from plan, it will have a substantial impact on current profits. First quarter losses were abnormally high because demand was lower than expected. Although, one should not extrapolate those losses far into the future because Carvana has the ability to better adjust and match its costs structure to a lower demand environment if needed. As management better matches costs with expected demand, operating costs as a whole will remain relatively flat if not decline throughout the year as management has already taken steps to lower expenses. As volumes continue to grow at the more moderate pace reflected in the first quarter and SG&A remains flat to slightly declining, costs per unit will decline with Carvana reaching positive EBITDA per unit by the second half of 2023 in this scenario. Source: Company filing, Saga Partners Source: Company filing, Saga Partners With the additional $3.2 billion in debt, Carvana will have a total interest expense of ~$600 million per year, assuming no paydown of existing revolving facilities or net interest income on cash balances. Management plans on spending $1 billion in capex to build out the ADESA locations. They are budgeting for ~$40 million in priority and elective capex per quarter going forward suggesting the build out will take ~6 years. Total capex including maintenance is expected to be $50 million a quarter. Carvana would reach positive free cash flow (measured as EBITDA less interest expense less total Capex) by 2025. Note this assumes the used car market remains depressed throughout 2022 and then Carvana’s retail unit growth increases to 25% a year for the remainder of the forecast and no benefit in lower SG&A or increased gross profit per unit from the additional ADESA locations was assumed. Stock based compensation was included in the SG&A below so actual free cash flow would be higher than the chart indicates. Source: Company filings, Saga Partners Note: Free cash flow is calculated as EBITDA less interest expense less capex After the close of the ADESA acquisition, Carvana has $2.6 billion in cash (plus $2 billion in additional liquidity from unpledged assets if needed). Assuming the above scenario, Carvana has plenty of cash to endure EBITDA losses over the next year and a half, interest payments, and capex needs. Source: Company filings, Saga Partners The above scenario does not consider the increasing capacity that Carvana will have as it continues to build out the ADESA locations. After building out all the locations, Carvana will be within one hundred miles of 80% of the U.S. population. This unlocks same-day and next-day delivery to more customers, leading to higher customer conversion rates, higher inventory turn, lower risk of delivery delays, and lower shipping costs, which all contribute to stronger unit economics. Customer proximity is key. Due to lower transport costs, faster turnaround times on acquired vehicles, and higher conversion from faster delivery speeds, a car picked up or delivered within two hundred miles of a recondition center generates $750 more profit than an average sale. It is possible that industry-wide used car demand remains depressed or even worsens for an extended period. If this were the case, management has the ability to further optimize for efficiency by lowering operating costs to better match demand. This is what management did following the COVID demand shock in March 2020. The company effectively halted corporate hiring and tied operational employee hours to current demand as opposed to future demand. During the months of May and June 2020, SG&A (ex. advertising expense and D&A) per unit was $2,600, far lower than the $3,440 reported in 2020 or $3,654 in 2021. Carvana has also historically operated between 50-60% capacity utilization, indicating further room to scale volumes across its existing infrastructure without the need for materially greater SG&A expenses. Advertising expense in older cohorts reached ~$500 per unit, compared to the $1,126 reported for all of 2021, while older cohorts still grew at 30%+ rates. If needed, Carvana could improve upon the $2,600 SG&A plus $500 advertising expense ($3,100 in total) per unit at its current scale and be far below gross profit per unit even if used car demand remains depressed for an extended period of time. When management optimizes for efficiency as opposed to growth, it has the ability to significantly lower costs per unit. Carvana has highly attractive unit economics and I fully expect management will take the needed measures to right size operating costs with demand. They recently made the difficult decision to layoff ~2,500 employees, primarily in operations, to better balance capacity with the demand environment. If we assume it takes six years to fully build out the additional ADESA reconditioning locations, Carvana will have a total capacity of 3.2 million units in 2028. If Carvana is running at 90% utilization it could sell 2.9 million retail units (or ~7% of the total used car market). If average used car prices decline from current levels and then follow its more normal longer-term price appreciation trends, the average 2028 Carvana used car price would be ~$23,000 and would have a contribution profit of ~$2,000 per unit at scale. This would provide nearly $5.6 billion in EBITDA. After considering expected interest expense, maintenance capex, and taxes, it would provide over $4 billion in net income. If Carvana realizes this outcome in six years, the company looks highly attractive (perhaps unreasonably attractive) compared to its current $7 billion market cap or $10 billion enterprise value (excluding asset-based debt). Redfin I recently wrote about Redfin Corp (NASDAQ:RDFN) in this December 2021 write-up. I explained how Redfin has increased the productivity of real estate agents by integrating its website with its full-time salaried agents and then funneling the demand aggregated on its website to agents. Redfin agents do not have to spend time prospecting for business but can rather spend all their time servicing clients throughout the process of buying and selling a home. Since Redfin agents are three times more productive than a traditional agent, Redfin is a low-cost provider, i.e., it costs Redfin less to close a transaction than a traditional brokerage at scale. It is a similar concept as the higher operating leverage of e-commerce relative to brick & mortar retailers. Redfin has higher operating leverage compared to the traditional real estate brokerage. Real estate agents are typically contractors for a brokerage. They are largely left alone to run their own business. Agents have to prospect for clients, market/advertise listings, do showings, and service clients throughout each step of the real estate transaction. Everything an agent does is largely a variable cost because few of their tasks are automated. Redfin, on the other hand, turned prospecting for demand, marketing/advertising listings, and investments in technology to help agents and customers throughout the transaction into more of a fixed cost. These costs are scalable and become a smaller cost per transaction as total transaction volumes grow across the company. Because Redfin is a low-cost provider, it has a relative advantage over traditional brokerages. No other real estate brokerage has lowered or attempted to lower the costs of transacting real estate in a similar way. This cost advantage provides Redfin with options about how to share these savings on each transaction. Redfin has primarily shared the cost savings with customers by charging lower commission rates than traditional brokerages. By offering a similar, if not superior, service to customers compared to other brokerages yet charging lower fees, it naturally attracts further demand which then provides Redfin with the ability to scale fixed costs per transaction even more, further widening their cost advantage to other brokerages. So far, the majority of those cost savings are shared with home sellers as opposed to homebuyers. Sellers are more price sensitive than homebuyers because the buyer’s commission is already baked into the seller’s contract and therefore buyers have not directly paid commissions to agents historically. Also, growing share of home listings is an important component of controlling the real estate transaction. The seller’s listing agent is the one who controls the property, decides who sees the house, and manages the offers and negotiations. Therefore, managing more listings enables Redfin to have more control over the transaction and further streamline/reduce inefficiencies for the benefit of both potential buyers and sellers. Redfin also spends some of their cost savings by reinvesting them back into the company by hiring software engineers to build better technology to continue to lower the cost of the transaction. This may include building tools for agents to service clients better, improving the web portal and user interfaces, on-demand tours for buyers to see homes first, automation to give homeowners an immediate RedfinNow offer, etc. Redfin also invests in building other business segments like mortgage, title forward, and iBuying which provide a more comprehensive real estate offering for customers which attracts further demand. So far, the lower costs per transaction have not been shared with shareholders in the form of dividends or share repurchases, and for good reason. In theory, Redfin could charge industry standard prices and increase revenue immediately by 30-40% which would drop straight to the bottom-line assuming demand would remain stable. However, giving customers most of the savings through lower commissions has obviously been one of the drivers for attracting demand and growing transaction volume, particularly for home sellers. The greater the number of transactions, the lower the fixed costs per transaction, which further increases Redfin’s cost advantage compared to traditional brokerages, which provides Redfin with even more money per transaction to share with either customers, employees, and eventually shareholders. With just over 1% market share, Redfin should be reinvesting in growing share which will increase the value of the business and inevitably benefit long-term owners of the company. Redfin’s stock price has experienced an especially large decline this year. I typically prefer to not attempt to place an explanation or narrative on short-term stock price movements, but I will do it anyways given the substantial drop. There are primarily two factors contributing to the market’s negative view of the company: first, the market currently dislikes anything connected to the real estate industry and second, the market currently has little patience for any company that reports net losses regardless of the underlying economics of the business. Real estate is currently a hated part of the market, and potentially for good reason. It is a cyclical industry, and the economy is potentially either entering or already in a recession. Interest rates are expected to continue to rise, negatively impacting home affordability, while an imbalance in the housing supply persists with historically low inventory available helping fuel an unsustainable rise in housing prices. From a macro industry-wide perspective, the real estate market will ebb and flow with the economy over time, but demand to buy, sell, and finance homes will always exist. I do not have the ability to determine how aggregate demand for buying or selling a home will change from year-to-year, but I do know that people have to live somewhere and if Redfin is able to help them find, buy or rent, and finance where they live better than alternative service providers, then the company will gain share and grow in value overtime. Redfin has also reported abnormally high losses of $91 million in the first quarter for which the current market has little appetite. It feeds the argument that Redfin does not have a sustainable business model. While losses can be a sign of unsustainable economics, that is not the case for Redfin. There are several factors that are all negatively hitting the income statement at the same time, and all should improve materially over the next year or two. Higher first quarter losses largely reflect: Agent Productivity: First quarter brokerage sales increased 7% year-over-year, but lead agent count increased 20%, which meant agents were less productive, leading to real estate gross profits declining $17 million from the prior year. Lower productivity was a result of a steeper ramp in agent hiring towards the end of the year against lower seasonal transaction volumes. It typically takes about six months for new agents to get trained and start closing transactions and then contributing to gross profits. Any accelerated hiring, particularly during a softer macro environment, will be a headwind while Redfin is paying upfront costs before any revenue is being generated. Further, closing transactions has been difficult particularly for buyers, which is where most new agents start. The housing market has been unbalanced where there is not enough inventory. A home for sale will typically receive many competing offers which makes it difficult for a buyer to win the deal. Since Redfin agents are mostly paid on commission (~20% salary plus the remainder being commission), it has been more difficult for new agents to earn a sufficient income in the current real estate environment. In response, Redfin started paying $1,500 retention bonuses for new agents who could guide customers to the point of bidding on a home, regardless of whether those bids win. While the bonus may impact gross profits in the near-term before a customer closes a transaction, it will not impact gross margins in the long-term when a transaction eventually takes place. Going forward, agent hiring will return to more normal rates and the larger number of new hires from recent quarters will ramp up which will improve productivity and gross profits. RentPath: Redfin bought RentPath out of bankruptcy for $608 million in April 2021, primarily to incorporate its rentals on its website which helps show up higher on Internet real estate searches. Prior to the acquisition, RentPath had no leadership direction for several years and declining sales and operating losses. RentPath had new management start in August 2021 and was integrated into in March. It finally started to see operational improvement with sales increasing in February and March year-over-year for the first time since 2019 despite a significant decrease in marketing expenses. While RentPath had $17 million in losses during the first quarter and is expected to have $22 million in losses in the second quarter, operations will improve going forward. Management made it clear that RentPath will be a contributor to net profits in its own right and not just a driver of site traffic and demand to Redfin’s brokerage business. Mortgage: A recent major development was the acquisition of Bay Equity for $135 million in April. Redfin was historically building out its mortgage business from scratch but after struggling to scale the operation decided to buy Bay Equity. Redfin was spending $13 million per a year on investing in its legacy mortgage business but going forward, mortgage will now be a net contributor to profits with Bay expected to provide $4 million in profit in the second quarter. The greater implication of having a scaled mortgage underwriter that is integrated with the real estate broker is that they can work together to streamline and expedite the transaction closing which has become an increasingly important value proposition for customers. Looking just a little further into the future, having a scaled and integrated mortgage underwriter can provide Redfin with the capability of providing buyers with the equivalent of an all-cash offer to sellers. Prospective homebuyers who offer all-cash offers to sellers are four times as likely to win the bid and sellers will often accept a lower price from an all-cash buyer vs. one requiring a mortgage. A common problem that many homeowners face is that when they are looking to move, it is difficult to get approved for a second mortgage while holding the current one. Much of their equity is locked in their current home. Frequently, a homebuyer wins an offer on a new home and then is in mad dash to sell their existing home in order to get the financing to work. It is not ideal to attempt to sell your home as fast as possible because it decreases the chance of getting the best price possible. A solution that Redfin could offer as a customer’s agent and underwriter is provide bridge financing between when a customer buys their new home and is then trying to sell their existing home and is therefore paying on two mortgages. Redfin would be able to make a reasonable appraisal for what a customer’s existing home will sell for (essentially what Redfin already does with iBuying) and underwriting the incremental credit exposure they are willing to provide the buyer. The buyer would then have “Redfin Cash” which would work like a cash offer. If this service helps buyers win a bid four times more often, it would even further differentiate Redfin’s value proposition and attract further demand. At least in the near-term, the mortgage segment will go from being a loss center to a contributor to net profits as well as further improving Redfin’s customer value proposition. Restructuring and transaction costs: Redfin had $6 million in restructuring expenses related to severance with RentPath and the mortgage business as well as closing the Bay Equity acquisition. $4 million in restructuring expenses are expected in the second quarter but these expenses will go away in future quarters. The combination of the above factors provided the headline $91 million net loss for the first quarter. Larger than normal losses between $60-$72 million are still expected in the second quarter. However, going forward losses are expected to continue to improve materially. While Redfin is not done investing in improving its service offerings, it should benefit from the significant investments it has already made over the last 16 years. Redfin has been building and supporting a nationwide business that only operated in parts of the country and had to incur large upfront costs. Going forward, it will benefit from the operating leverage baked into its cost structure with gross profits expected to grow twice as fast as overhead operating expenses. Redfin is expected to be cash flow breakeven in 2022 and provide net profits starting in 2024. Redfin has built a great direct to consumer acquisition tool that is unmatched by any real estate broker. It has spent the costs to acquire the customer and has now built out the different services to provide customers any of the real estate services that they may need, whether that is one or a combination of brokerage services, mortgage underwriting, title forward, iBuying, or rental search. Being able to monetize each customer that it has already acquired by offering them any of these services provides Redfin with a better return on customer acquisition costs that no other competitor is able to do to the same extent. Additionally, these real estate services work better when they are integrated under the same company. One does not have to dig very deep to see how attractive Redfin’s shares are currently priced. Shares are now selling around all-time historic lows since its IPO in August 2017. The prior all-time lows were reached during the COVID crash which was a time the world was facing an unknown pandemic that would shut down the economy and potentially put us through a great depression. At its current $1.2 billion market cap, Redfin is selling for 3x expected 2022 real estate gross profits, or 4x its current $1.7 billion enterprise value (excluding asset-based debt). Both are far below the historic average of 15x (which excludes peak multiples reached towards the end of 2020 and early 2021), or the previous all-time low of 6x reached in the depths of March 2020. If we assume Redfin can raise brokerage commissions by 30%, in line with traditional brokerage commission rates, and it does not lose business, Redfin would be able to provide ~20% operating margins. If we take a more conservative view and say Redfin can earn 10% net margins on its 2022 expected real estate revenues of $990 million, it would provide $99 million in net profits, providing a current 12x price-to-earnings ratio. This is for a company that has a long track record of being able to grow 20%+ a year on average, consistently gains market share each quarter, and has barely monetized its significant upfront investments and fixed costs with a long runway to continue to scale. This also does not place any value on its mortgage or iBuying segments which are now contributors to gross profits. There may be macro risks as well as other concerns today, however Redfin’s business and relative competitive advantage have never been stronger. The net losses reported are not representative of Redfin’s true underlying earning power. Redfin has untapped pricing power, an increasingly attractive customer value proposition, and a growing competitive advantage compared to alternative brokerages, which will help Redfin to continue to grow and take market share in what is a very large market. Conclusion Of course, the future can look scary, as it often does when headlines jump from one risk to the other. Despite what may be happening in the macro environment, our companies on average are stronger than they have ever been and are now selling for what we believe are the most attractive prices we have seen relative to their intrinsic value. I have no idea what shares will do in the near-term and I never will. Stock prices can swing wildly for many reasons, and sometimes seemingly for no reason at all. They can diverge, sometimes significantly from their true underlying value. I have no idea when sentiment will shift from optimism to pessimism and then back to optimism. This is what keeps us invested in both good times and in bad. The current selloff can continue further, but assuming our companies continue to execute over the coming years by winning market share and earning attractive returns on their investment spending, the market’s sentiment surrounding our portfolio companies will eventually reflect their underlying fundamentals. I will continue to look towards the longer-term operating results of our companies and not to the movements in their stock price as feedback to whether our initial investment thesis is playing out as expected. While the market can ignore or misjudge business success for a certain period, it eventually has to realize it. During times of greater volatility and periods of large drawdowns, I am reminded of how truly important the quality of our investor base is. It is completely natural to react in certain ways to rising or declining stock prices. It takes a very special investor base to look past near-term volatility and to trust us to make very important decision on their behalf as we continually try to increase the value of the Saga Portfolio over the long-term. As always, I am available to catch up or discuss any questions you may have. Sincerely, Joe Frankenfield Saga Partners Updated on May 16, 2022, 4:44 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 17th, 2022

"Meltdown": Bank Of America Sounding The Alarm On Collapsing Freight Demand

"Meltdown": Bank Of America Sounding The Alarm On Collapsing Freight Demand Trucking demand is “near freight recession levels,” according to Bank of America. Shippers’ outlook on rates, capacity and inventory levels are matching attitudes not seen since May and June 2020, when pandemic lockdowns sent freight volumes into a historic decline. As FreightWaves reports, in a Friday note to investors, Ken Hoexter (available to Zero Hedge professional subscribers), the managing director of Bank of America’s trucking research, wrote that shippers’ view of demand is down 23% year-over-year. The proprietary Truckload Demand Indicator hit 58 — the lowest since June 2020.  Hoexter said the shippers’ view of rates have “melt(ed) down,” hitting a low not seen since May 2020. Bank of America’s survey represented views from 44 shippers in industries including retail, consumer goods and manufacturing. Meanwhile, these shippers are finding it easy to find capacity to move their loads; outlook on capacity hit its highest level since June 2020. They also noted their view on inventory levels had climbed to its highest point since May 2020. A few anecdotal examples from the Bank of America survey illustrate that data. One food shipper said it was receiving more cold calls from freight brokers rather than those brokers having to seek capacity for shipments on their own. A shipper moving home-building products said flatbed capacity is loosening slightly, though is still tight. And a representative of a forest products company said rates were beginning to soften as truck capacity opened up. Other indicators are pointing to freight recession FreightWaves has previously reported that a “sharp, painful downturn” in the U.S. trucking market is coming. The Friday note to investors is the latest indicator of the trucking bloodbath that many in the industry are spotting.  “The way the rates are, you have to run twice as hard to make ends meet,” Dan Guzman, a San Antonio-based fleet owner, recently told FreightWaves. One key indicator is the FreightWaves SONAR Outbound Tender Reject Index (SONAR: OTRI.USA) . At this time last year, truckers were rejecting a whopping 25.76% of loads they had previously arranged through contract. That indicated they were able to find better loads through the spot market, where shipments are available on demand.  Now that spot market rates have declined, more drivers are moving their contracted loads. As of Sunday, the rejection rate had sunk to 9.92%. Earlier this month, the Cass Transportation Index Report said the freight market is in a slowdown, though Cass analysts said it’s too soon to declare a recession yet. A key leading indicator Freight is often looked at as a bellwether for the rest of the economy. If industries ranging from retail to housing to lumber are estimating that they’ll need fewer truckers, many economists see that as an omen of an economic downturn. If people aren’t buying or building as much stuff, there’s less of a need for truckers. Trucks move 72% of all freight. One 2019 study from Convoy, a trucking brokerage firm, found that six out of 12 trucking recessions led to macroeconomic downturns. For example, the trucking industry dipped in April 2006 — more than a year before the Great Recession slammed the larger economy. Trucking experiences recessionary periods twice as much as the rest of the economy. But for the 2 million American truck drivers who power much of this industry, the effects can be brutal. “Like any recession, these periodic freight industry recessions cause real turmoil for the people who work in freight: Businesses go bankrupt, people lose their livelihoods, and families are disrupted,” said the Convoy report.  There is more in the full BofA report available to professional subscribers. Tyler Durden Tue, 04/26/2022 - 15:45.....»»

Category: blogSource: zerohedgeApr 26th, 2022

Amazon CEO: Employees Are Better Off Not Joining A Union

Following is the unofficial transcript of a CNBC exclusive interview with, Inc. (NASDAQ:AMZN) CEO Andy Jassy on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) airing today, Thursday, April 14th. Following are links to video on Amazon CEO Andy Jassy: This Has Been A Time Of Extraordinary Growth Amazon CEO Andy Jassy: Employees Are Better […] Following is the unofficial transcript of a CNBC exclusive interview with, Inc. (NASDAQ:AMZN) CEO Andy Jassy on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) airing today, Thursday, April 14th. Following are links to video on Amazon CEO Andy Jassy: This Has Been A Time Of Extraordinary Growth Amazon CEO Andy Jassy: Employees Are Better Off Not Joining A Union ANDREW ROSS SORKIN: Welcome back to “Squawk Box.” We are live in Seattle at Amazon’s headquarters this morning where Amazon CEO Andy Jassy just published his first shareholder letter since taking the helm of the company last summer. Andy Jassy joins me right now in an exclusive interview right here in a room by the way we were talking about this earlier. This has posters of basically with signatures of every frankly new product that’s been developed at the company over the many years. Q1 2022 hedge fund letters, conferences and more ANDY JASSY: A lot of them. Thanks for having me. SORKIN: It’s very nice to have you here on what’s turned out to be a very jam packed news day and I want to talk about your letter in just a moment because it is a major piece of the news in the morning. But the other big piece of the news that we’ve been talking about all morning is Elon Musk who does sort of loom large here in certain ways given that you’re now competing with him when it comes to space or at least Jeff is on that front and Kuiper with the satellites and also know Zoox with with your vehicles. What do you make of this this Twitter bit? JASSY: I don’t know. I woke up just sort of I don’t know how you wake up at this hour every day but, and just heard the news and it’s interesting we all use Twitter obviously to some degree and it’s it’s a very interesting service and capability. It’ll be interesting to see how it evolves. SORKIN: Do you, would you ever think Amazon should own a Twitter? I ask because I think of Walmart at one point wanted to get involved with TikTok and social medias, the next thing. JASSY: It sounds like somebody else is gonna own Twitter. SORKIN: You think Elon Musk is gonna ultimately be the buyer? JASSY: I don’t know. That’s, that’s the rumor. That’s what you guys are all talking about that. SORKIN: That’s what we’re talking about. Let me talk about your letter and let me talk and let’s talk about what’s going on right now because one of the things that’s so fascinating in this letter this morning is just what’s happened during this company, to this company during your new time here. I mean, you’ve been here for a very, very long time, but in this new role, and we’re all now talking about supply chain issues, the pandemic seemed to be over and now we have issues in China and what that’s going to mean, big inflationary pressures. How do you, how do you just see things as they are right now? JASSY: Well, it’s quite an interesting time and and, you know, we we grew three times faster than we expected in 15 months. We had a fulfillment center network that we built in, it’s a pretty big network that we built over 25 years that we had to double in 24 months. So it’s really been a time of extraordinary growth. And at the same time when you grow that fast and with some of the things happening in a world, there are also challenges. You know, we had, we had to double our fulfillment center network. We hired about 300,000 people last year alone which was a lot of people but at the same time, even though we hired a lot of people, we couldn’t hire all the people we needed in all the places that we needed and so that created all sorts of challenges in placing inventory close to our customers as we typically do and when you have to place it a little bit further away, it means you have longer transportation costs to get there. All the rate of Transportation has gone up over the last number of months. And, you know, then you see what’s happened with the war in Ukraine where it’s created a bunch of inflationary pressure. If you look at the cost of fuel, look at the cost of metal and building just very different and, you know, then you look at some of the supply chains as you mentioned, you know, it’s, there are, there are certain items that are very difficult to get, you know, we all are have a lot more demand for chips than there is supply right now. And, you know, because we design our own chips and we buy a lot of chips for the things we do in AWS and our devices, even in our vehicles, we get a fair share of those but still it’s not fast enough and it’s not enough and I think some of the issues happening right now in China where, you know, as there are variants and as they’re being very conservative and locking down production creates some issues and getting products as fast as we need and it’s still more expensive and more time consuming to get products into the country so there’s still supply chain challenges. SORKIN: So, when you have to plan out how are you even planning at this point, in terms of just how transitory or not these inflationary pressures are. I know you just added a 5% surcharge for third party sellers to deal with the fuel cost. Do you think that that is a long-term situation? Do you think that that shifts back? JASSY: I hope not. You know, it’s the last thing we ever want to do is have to raise costs for our sellers and sellers for us are so important and so critical to the business and in the early part of the pandemic with all the costs I talked about earlier, right or wrong, we just absorbed all those costs for sellers, but in part because we thought some of those would attenuate as we got to the beginning of this year and some of the impacts on COVID change, but with the war in Ukraine and then all the inflationary pieces that happened there after, at a certain point you can’t keep absorbing all those costs and run a business that’s economic and so I think that, you know, we’re very aware that we them, that sellers have costs as well. They’re very important customers for us and partners and we’ll keep looking at how costs evolve and revisit. SORKIN: You talked about chips being a major issue. What do you think we should be doing here in the United States about manufacturing those chips and does Amazon have a role in that long-term you think? JASSY: Well, I think it’s, it’s, it should concern people that so much of the chip production is concentrated in one place, and there’s, you know, there are a lot of geopolitical things that could happen. And so I think it’s quite wise for the US to be thinking about creating more production here and, you know, I’m very happy about the CHIPS act that we’ve been working on in the country. It’s a lot of money, it’s $35, $40 billion and yet, it’s probably not enough. I think we probably are going to need even more than that to have the ability to withstand some kind of shock to production in a particular part of the world. But I think it’s very important. I, you know, we design our own chips and we’re big buyers of chips and we’re big customers of some of the big chip companies as well as producers ourselves so there could be a role for us to play. We certainly want to help and we certainly want to partner. SORKIN: Do we believe that the companies in America and I know Intel is trying to do this, but do we have enough know how in this in the country to actually do the manufacturing piece of this do you think? JASSY: I think it’s a good question. I think we have a start. I mean, Intel obviously has been doing this for a long time. And you know, Pat Gelsinger has been a partner, you know, first on the VMware side now with Intel for a long time and I have confidence in their ability to produce and but they have work to do  as they know and and we’re going to need additional providers I think to be where we ultimately want to be. SORKIN: And what are you seeing in terms of wages at this point, in terms of wages going up? JASSY: Yeah. Well, they certainly have gone up over the last two years. And, you know, some of which we did ourselves. You know, we championed the $15 minimum wage which is more than double the federal minimum wage, which it’s high time that that change too by the way, but— SORKIN: What do you think it should become? JASSY: I don’t know the exact number but below $7.50 to me feels very wrong. You know, I think it should be closer to to the $15 minimum wage that that, you know, we started a few years ago— SORKIN: And now about 18. JASSY: Yeah, our average starting salary now is over $18. And so, wages have continued to go up. You know, when you run a retail business like we do, it’s true for all retailers, they’re relatively low operating margin businesses. So there’s really only so far you can go and have an economic business that makes sense, but we’ve continued to see wages go up. There’s been a very significant acceleration the last two years and I, you know, it’s hard to tell how much more they’ll go up. I don’t think we’ll go backwards though. SORKIN: In that context, how do you see the union movement that’s taking place, frankly, around the country, but clearly aimed in certain places and I’m thinking about New York, where I’m from at Amazon? JASSY: Well, I mean, I’d say a few things. You know, first of all, of course, it’s its employees’ choice whether or not they want to join a union. We happen to think they’re better off not doing so for a couple of reasons at least. You know, first, at a place like Amazon that empowers employees, if they see something they can do better for customers or for themselves, they can go meet in a room, decide how change it and change it. That type of empowerment doesn’t happen when you have unions. It’s much more bureaucratic, it’s much slower. I also think people are better off having direct connections with their managers. You know, you think about work differently. You have relationships that are different. We get to hear from a lot of people as opposed to it all being filtered through one voice. If you want to keep the construct that we’ve had for for this long, you have to have, you know, competitive and compelling benefits though for for employees and it’s why we champion the $15 minimum wage a few years ago and we’re up over $18 now. It’s why we have full insurance, why 401k, 20 weeks of paid leave and our Career Choice Program where in our fulfillment center for our employees who want to get a college education, we’ll pay for their full tuition, so those things really matter. The one thing regardless of how it all evolves is we just won’t compromise on the customer experience. That for us, you know, is paramount and— SORKIN: What did you think when you heard President Biden effectively say, and this is regard to the unions around Amazon, here we come? JASSY: Well, everyone’s entitled to their own opinion and you know, we we have a lot of things that we I think have supported the administration on and agree with them on, you know, some of the way that we’ve tried to help with COVID and with immigration and, you know, the chips piece that we’re talking about, the Infrastructure bill. We won’t agree on everything, though. SORKIN: When you look at one of the issues that the unions have raised as you know so well are safety issues, and you’ve addressed this to some degree in this morning’s letter. But I’m hoping you can speak to it because there was some data out just about two days ago that seemed to suggest and this was data put together by I think some of the Union advocates that there were more, even double the number of injuries at Amazon facilities relative to their peers. JASSY: Well look, there’s a lot of ways you can spin the safety data and some special interests folks like you’re talking about with this case, will do it for their own interests. That that data is not really accurate. You know what I would say is a few things. You know, first of all, for anybody that had hired a lot of people during the pandemic like we did, and there are plenty of others who did as well, their incident rates, their recordable incidents which what OSHA asked everyone to report on, went up in 2021 versus 2020 because he had a lot of new people. In our case, we hired about 300,000 people just in 2021, most of whom had never worked in this type of manual and industrial space, and who had to be trained and all the data we have says that the incidence of injury in the first six months is always much higher than thereafter. So we have a lot of new people, you’ll have more incidents. But that said, if you if you look at the the injury data and safety data, you know, for us, we we have a few macro areas in which we do work. We have what OSHA calls warehousing. We have what OSHA calls messengers and couriers, messengers and couriers, and then we have grocery and if you look at the industry average versus our numbers, we’re a little bit higher than average in warehousing, we’re a little bit lower than average in both messenger and couriers and grocery. So we’re about average, which, frankly, I take no solace in. We don’t aspire to be average. You know, we’re trying to be the best in the industry and it’s why we’re spending, you know, we have we spent about $300 million on safety last year alone. We have about 8,000 people who just work with safety and we’re trying all sorts of things and work in all sorts of all sorts of things. We have a rotational program we built where we’ve built sophisticated algorithms to try to predict when somebody’s doing something too, too frequently and rotate their jobs and rotate what they’re working on. We have wearables that we’re investing in that send haptic signals when we believe you’re making a dangerous movement. We have, you know, new shoes that we’ve had everybody wear that, you know, protect your toes and avoid slips. We do training on body mechanics and wellness. So we’re working on a lot of those things, but the reality is that we will not be happy until we’re the best in the industry and and even then, I won’t be happy because I’m gonna know there are things that we could be doing better. This is important to me, it’s important to— SORKIN: How do you think about this? So one of the things that Jeff said in his letter last year was that one of the missions of Amazon now is to be Earth’s best employer and Earth’s safest place to work. How do you think about that relative to the priority of serving the customer? JASSY: I don’t think they have to be at odds. And in fact, I think they’re very complimentary. When you take care of employees and employees are safe and they love working where they work, they stay longer. They tend to be happier, they tend to be more productive. And all those things improve the customer experience. So I see them as very complimentary. SORKIN: Want to also talk to you about – I mentioned third party sellers and the fuel surcharge, but also want to talk to you about third party sellers because there are investigations going on as you know and other concerns about Amazon doing what might be described as white label products that compete with third party sellers. How do you think about that relationship? And also, how do you think about either being able to use or not use data that you have, about what selling in one place or how a product is working or not working and then making a similar competitive product? JASSY: Well, I think you’re really talking about private brands or private labels. And as you know, we didn’t invent private label. That’s a many decades long practice that all the big retailers have participated in for a long period of time. And I think when you decide to build private label in particular areas, for us, it’s almost always driven by customers who say, “I like this particular product, but I want an alternative that’s more cost effective.” And so we have, for us, it’s a part of our business. It’s a smaller part of our business than it is for most retailers. But what we always are going to show customers is what we think they most want. So if a customer is used to buying a particular brand in a particular area, that’s what we tend to show them as long as it’s in stock, and we can get it to them quickly and customer reviews are good. But we’re always going to optimize to show customers what we think would be best for them to buy. SORKIN: But how should a third party seller think about that? Because – and I ask because some of them will build a product and then think to themselves, “Well, if Amazon decides that they’re going to also make the same product, that’s going to be a problem for me.” JASSY: Well, it’s, you know, third party sellers and their products are the majority of units that we sell in the store today. And so if you build a great product, with a great price and high quality, you’re going to perform well. Like everybody else, you have to find ways to get awareness. But if you have that product, there’s only so many things that any company is going to manufacture. We tend to focus in areas that tend to be the, you know, kind of the everyday household pieces that people want and need. But if you build a great product, you’re going to have a business over time. And that’s what we see borne out in the numbers, which is, you know, sellers continue to do very well in our store. They’re the majority of our units. SORKIN: Talking about products – and we’re going to talk about a couple of the sort of component parts of Amazon. But in the retail piece, I have a Prime question for you, which is what do you think the elasticity is long term on the Prime price? We talked about this on the air actually when you raised the price on it last year. In terms of if you’re a family of four, it might be able to go very high. If you’re a family of one, maybe it can’t. I don’t know. JASSY: It’s a good question. And I don’t know if anybody knows the answer to it. I think that the value of Prime today when you think about what’s in it, the you know, the all you can eat two day shipping, that you know, increasingly we’re moving more and more shipments to one day shipping. What you get in Prime video with, you know, our originals and all the products that you know we have a channels program where third party entertainment companies are selling subscriptions and channels to people. We got the whole catalog in music. You know, what we’ve got on the gaming side with all the gaming benefits. The grocery benefits – it’s a, you know, and then you layer in some of the things that we keep adding really every month. I mean, just look at what we have coming the rest of the year in Prime video with you know, a new Jack Ryan season. A new The Boys season. The new Lord of the Rings, which you know is over Labor Day. And football. I mean you know, and so we keep adding value to Prime. I think it’s you know, I think it is a great value today. And we don’t plan on stopping adding value in Prime. SORKIN: What, by the way, is the aspiration in media? I ask in large part we’ve been talking all week about WarnerMedia just merged with Discovery+. Everybody’s trying to understand what the streaming wars ultimately look like. When you think about it as an economic matter, and this is interesting because I think people want to understand, is this a component part of Prime or is the economics of it independent of Prime? And I ask that because, you know, do these other businesses ultimately subsidize the streaming business? There’s a lot of people in Hollywood who are trying to understand what it’s all going to look like. JASSY: Well I think it’s still pretty early days for us in entertainment and we’ve invested– SORKIN: You just merged with MGM. JASSY: We, yes, we just acquired MGM and it’s very early days for us in entertainment. We’ve invested a lot of money there and a lot of resources and I think you should expect will continue to do so. We’re very optimistic about what’s possible. And you know today, what we find is, so many people are starting Prime because they see some show that they love in Prime Video. And then they oftentimes once they start Prime, they use the shipping benefit and buy retail products. So they, you know, and vice versa. So I think that today, it really connects that Prime value proposition and I think people get a lot of value from those collected pieces. As we keep adding more and more content as you see what we’re doing with sports and we’re pretty early in what we’ll add. It’s possible we’ll explore other models as well but today it’s part of that Prime – SORKIN: It’s part of Prime. Not something you want to spin off just yet. JASSY: No. SORKIN: By the way, talking about spin offs. Obviously you’ve heard speculation for years now about whether certain parts of Amazon should get broken up and spun off, either for regulatory reasons or even economic reasons. How do you think about that? JASSY: Well, did Jon Fortt put you up to this? SORKIN: He did not. He did not. JASSY: Jon asks me this every time I see him. But you know, I think that you always have to decide, you know, when you’re going to choose to spin something – why you’d want to spin something off. Typically it’s when you know when companies need more money to be able to invest in a particular business and or if they want to get something off their balance sheets and their financial statements. We just don’t find that to be the case. You know, our consumer businesses have a lot of connectivity between them. We were just talking about an example of that with Prime Video and in our retail business, and, you know, in the case of AWS, we haven’t had any issues with respect to being able to fund that business the way it’s needed to be funded to grow. So we just haven’t found a compelling reason to do so. SORKIN: You recently announced the 20-for-1 stock split. What was the rationale from your prospective to do that? JASSY: Well, you know, there’s obviously no substantive, quantitative reason to do it. And so, it wasn’t for any of those types of reasons. It was really because of that, it meant you could keep it the way you were running it or you can change it. And we just kind of looked at it and thought it might provide more flexibility for our employees. And there’s a bunch of small but meaningful examples including, you know, when your stock price is over $3,000, If you have an employee who wants to sell for whatever reason they need to sell but they don’t need to dispose of $3,000 they have to sell a whole share as opposed to when your stock price is more like $150 and you need to sell share because you need something that’s $500 or $1,000, you know, it’s more flexible, more convenient for them. So we just at the end of the day felt like it would provide a little bit more flexibility for our employees. SORKIN: One of the things we bat around on this show virtually every day – it’s hard to get through an interview without mentioning the word crypto. As a payment platform and you actually have a huge payment platform unto itself. How do you think about crypto today? JASSY: Well, I think it’s an emerging area obviously. And there’s a lot of – it’s very interesting and there’s a lot of discussion about it. And yeah, I think NFTs have really started to take off and you know – SORKIN: Do you own any? JASSY: I don’t own any NFTs myself. SORKIN: Any Bitcoin? JASSY: I don’t have Bitcoin myself. So, you know, I think I expect that NFTs will continue to grow very significantly. We’re not probably close to adding crypto as a payment mechanism in our retail business. But I do believe over time that you’ll see crypto become bigger and it’s possible. SORKIN: Could you see yourself selling NFTs? JASSY: Yeah, I think it’s possible down the road. SORKIN: On the platform. Before we let you go, it’s been 10 months now in this new role. And I’m curious what the relationship is like with Jeff, how much time you guys spend together, what does he think of all of this? We were actually mentioning we thought your letter was a little Bezosian in some respects. What’s it been like? JASSY: Well, I have a great relationship with Jeff and, you know, I’ve known him for a long time and I have an unbelievable amount of respect for him. And we talk regularly, we talk weekly and it’s great to have a sounding board and he’s got so much wisdom. And you know, I think both of us share a lot of excitement and optimism for the future. We’re so early in all of our businesses. I mean, even in our retail business, which people think as kind of our most mature business. You know, we’re about 1% of the worldwide retail market segment and 85% of retail still lives offline. So we’re so early in all of these areas. You know, AWS is a $70 billion revenue run rate business growing, you know, about 37% year over year in 2021. And still 95% of the world’s IT spend is on premises and not in the cloud. So, all of these areas you go through it with Alexa has the chance to be kind of, you know, the best personal assistant which changes your life. And entertainment as we just talked about. Our advertising business is early. Kuiper, you know, we’re building a low Earth orbit satellite. And Robotaxi business in Zoox. I mean, we’re so early in these areas that I think we both share a lot of optimism that there’s an opportunity to change a lot of customer experiences over a long period of time. SORKIN: It’s still day one. Are you going to space? Will you go on – JASSY: I’m not going anytime soon. SORKIN: You don’t want to go up with him? JASSY: I didn’t say I didn’t want to go up. I’m just saying I’m not going anytime soon. SORKIN: Andy Jassy, thank you so much. JASSY: Thanks for having me. I appreciate it. SORKIN: On a very newsy day. Congratulations on the letter. And we hope to do this more often. Thank you again. Guys, I’m going to send it back to you in the studio. Updated on Apr 14, 2022, 1:40 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkApr 14th, 2022

Fast-growing software company to open second office in downtown Dayton

A Dayton software company is opening a second office to support its current and future growth. Tangram Flex will soon launch its new location at the 444 Building on East Second Street in downtown Dayton. Located near its headquarters at the Avant-Garde building on East Third Street, the company's second office will be located in the former Mile Two space. Mile Two vacated the property after moving to The Manhattan building near Avant-Garde. Tangram is investing between $400,000 and $500,000 in….....»»

Category: topSource: bizjournalsApr 12th, 2022

18 wild details from "The Dropout," Hulu"s miniseries on Elizabeth Holmes and Theranos — and whether they really happened or not

Here's what's real, what's exaggerated, and what's just plain fake in "The Dropout," a Hulu miniseries about Elizabeth Holmes and the Theranos saga. Amanda Seyfried as Elizabeth Holmes (left) and the real Elizabeth Holmes (right).Beth Dubber/Hulu; Karl Mondon/MediaNews Group/Bay Area News via Getty Images "The Dropout" chronicles the rise and fall of Elizabeth Holmes and blood-testing company Theranos. The Hulu miniseries shows Theranos' deceptions to outsiders, Holmes' relationship with COO Ramesh Balwani, and more. Here's which parts of the show are rooted in reality and which are exaggerated or simply made up. Elizabeth Holmes' fraud trial ended with a conviction months ago, but the meteoric rise and fall of the Theranos CEO is still capturing plenty of attention elsewhere.Amanda Seyfried in "The Dropout" (left); Elizabeth Holmes (right).Beth Dubber/Hulu; Steve Jennings/Getty Images for TechCrunchHulu miniseries "The Dropout" chronicles her journey building Theranos and the blood-testing company's spectacular demise. Some parts of the show are exaggerated or fake, but many others have roots in reality.Here are 18 wild scenes and details from "The Dropout" and how much they align with what really happened at the embattled startup.Holmes and Balwani did meet on a summer trip to Beijing through a Mandarin immersion program run by Stanford University.Amanda Seyfried and Naveen Andrews in "The Dropout."Beth Dubber/Hulu"The entire department knew about her Chinese, her skills. When I first met her, I'm like, 'Oh, you must be the Elizabeth Holmes,'" Balwani recalled in a 2017 deposition to the SEC obtained by ABC News.At the time they met in 2002, Holmes was 18 years old, and Balwani was 37.It's also true that Holmes didn't always envision Theranos would make blood-testing machines.Amanda Seyfried in "The Dropout."Beth Dubber/HuluHolmes' first patent application was for a patch that could simultaneously diagnose its wearer and deliver the appropriate drug.As in the series, Theranos got its name from this particular combination of purposes: "Therapy" and "Diagnosis" fused to become "Theranos."In the show, Holmes has a close call with a stray bullet shortly after moving into the new office in east Palo Alto, and the scare prompts her to contact Balwani despite previously saying she wanted no further contact with him.Amanda Seyfried and Naveen Andrews in "The Dropout."HuluBack in the office, Balwani consoles Holmes and tells her, "You can't push me away again. I'm going to protect you."While this provides an intense ending to the first episode, there's no corroboration this incident actually happened.And yes, Theranos really did fake its demo for pharmaceutical giant Novartis in Switzerland in 2006.Amanda Seyfried in "The Dropout."Beth Dubber/HuluAs depicted in the show, a device malfunctioned when they were in Switzerland and the Theranos crew stayed up all night to try to fix it.When it came time for the demo the next morning and it still wasn't fixed, they had a recorded test result beamed over from California that they presented as a real-time test result, according to former Wall Street Journal reporter John Carreyrou's book, "Bad Blood: Secrets and Lies in a Silicon Valley Startup." Carreyrou would go on to lift the lid on Theranos' many deceptions many years later in an investigation that kickstarted the company's public demise.Holmes and Balwani did keep their romantic relationship a secret from Theranos board members, investors, and press for many years.Amanda Seyfried and Naveen Andrews in "The Dropout."Michael Desmond/HuluIn the show, we see Theranos' chief scientist, Ian Gibbons, ask who Balwani is when he shows up one day at the office, and Holmes responds that Balwani is a friend. Later on, when Balwani arrives unannounced at the lab while Holmes is away in Nashville for the Pfizer trial, he describes himself as an "unofficial consultant."It's unclear how Balwani may have been introduced to Theranos staffers, but like everyone else involved with the company, employees were also out of the loop about his relationship with Holmes.The show also zeroes in on one aspect of the Theranos saga that has captured a lot of public attention: Holmes' baritone.Amanda Seyfried in "The Dropout."Beth Dubber/HuluIn the show, we see Holmes trying out a lower register for the first time after returning from the Pfizer study in Nashville.In reality, many people, including Carreyrou, think she faked her unusually deep voice, perhaps to be taken seriously as a female CEO in male-dominated Silicon Valley.In her fraud trial several months ago, Holmes spoke in her signature baritone while testifying.To this day, it's still unclear if Holmes was putting on a front with her voice all this time or if her voice is naturally that low.True to life, the Theranos board came very close to replacing Holmes as CEO at one point.The Board confronts Elizabeth Holmes (Amanda Seyfried).HuluIn 2008, board members wanted to bring on a more experienced CEO, but Holmes managed to convince them to let her stay by offering to bring on Balwani, whom she said would help the company get closer to reaching its goals.She sweetens the pot by adding that Balwani has offered to pour $20 million into Theranos. This is slightly exaggerated; in reality, Balwani gave Theranos a personal loan of between $12 and $14 million, according to the "Bad Blood" podcast.In the series, Walgreens executives ask a man named Kevin Hunter to scope out Theranos' lab to make sure things are up to par before they sign any deal with the company. In one scene, Hunter examines some of Theranos' literature, reading, "Theranos has been thoroughly validated over the last seven years by a majority of the largest pharmaceutical companies." This is a bit of both reality and fiction.Rich Sommer in "The Dropout."HuluIn Holmes' trial, jurors saw a 2010 presentation she showed to Walgreens' then-chief financial officer Wade Miquelon. Similar to the show, it read, "Theranos systems have been comprehensively validated over the course of the last seven years by ten of the fifteen largest pharmaceutical companies."In reality, many investors and partners believed Theranos' technology had been validated by major pharmaceutical companies, even though this was not the case. This owed partly to the fact that Holmes put the logos of industry giants Pfizer and Schering-Plough on validation reports.In her trial, Holmes testified that she slapped on the logos because "this work was done in partnership with those companies and I was trying to convey that," according to NPR.Theranos did, in fact, use modified third-party machines from companies like Siemens instead of the proprietary Edison machine.Theranos whistleblowers Erika Cheung (played by Camryn Mi-young Kim and pictured at left) and Tyler Shultz (played by Dylan Minnette and pictured second from left) were instrumental in bringing Theranos' lab issues to light.Michael Desmond/HuluTheranos' principal selling point was the Edison machine, which the company said could conduct hundreds of blood tests using just one drop of blood. But behind closed doors, the company was actually making modifications to existing machines on the market and using those to run tests instead.Holmes' reaction to Ian Gibbons' death really was that cruel.Stephen Fry plays Dr. Ian Gibbons in Hulu's "The Dropout."Beth Dubber/Hulu; Ian GibbonsAs shown in the series, Holmes' reaction to the tragic suicide of Theranos chief scientist Ian Gibbons was deeply unfeeling. When his widow, Rochelle Gibbons, called to inform Theranos, "the secretary was devastated and offered her sincere condolences" but Holmes herself did not call to offer condolences.As recounted by Vanity Fair's Nick Bilton, "A few hours later, rather than a condolence message from Holmes, Rochelle instead received a phone call from someone at Theranos demanding that she immediately return any and all confidential Theranos property."Holmes' terrifying birthday party actually took place in real life.Sam Waterston in "The Dropout."Michael Desmond/HuluAs depicted in "The Dropout," Holmes' birthday party was a strange celebration of the Theranos founder's ego. The show's creator, Elizabeth Meriwether, confirms that the masks of Holmes' face worn by guests were real.Additionally, Dylan Minnette confirmed that Tyler Shultz really did write and perform a song for Holmes at her party. There's no indication whether Holmes forced him to do so after discovering his misgivings about Theranos, and this is almost certainly dramatic license.The legal side of "The Dropout" is more fictionalized.Michaela Watkins and Dylan Minnette in "The Dropout."Beth Dubber/HuluLinda Tanner, played by Michaela Watkins, is a fabricated character, a composite of various Theranos lawyers.She didn't really accost Tyler at a home owned by his grandfather, former US Secretary of State George Shultz. However, Shultz has said he once had a conversation with his grandfather before the senior Shultz later revealed two lawyers were upstairs listening in on their discussion. Tanner's encounter with Tyler in the series was clearly inspired by that real encounter.Elizabeth Holmes really did meet Bill Clinton and Joe Biden.Elizabeth Holmes and Joe Biden.Diana Mulvill for TheranosWhile it seems unlikely given the extent of Holmes' scandal and now-disgraced reputation, she did publicly appear with former President Bill Clinton and then-Vice President Joe Biden at the Clinton Global Initiative Annual Meeting in 2015."Don't worry about the future, we're in good hands," Clinton said at the time.Likewise, Biden once described Theranos as "the laboratory of the future."After visiting Theranos' headquarters in 2015, where he met with Holmes, Biden said, "Talk about being inspired. This is inspiration. It is amazing to me, Elizabeth, what you've been able to do." It's not clear if Phyllis Gardner and Elizabeth Holmes ever reunited after Holmes' time at Stanford.Laurie Metcalf and Amanda Seyfried in "The Dropout."Beth Dubber/Hulu"The Dropout" makes it clear from the get-go that Holmes does not have an ally in Phyllis Gardner. The Stanford professor was one of the first people to doubt Holmes' credentials and products, dismissing Holmes' patch idea when she was a 19-year-old student at the university.Gardner and Holmes crossed paths once again when the Theranos CEO was invited to join the Harvard Medical School Board of Fellows in 2015. But there's no evidence that the pair met again in an unofficial capacity, so their confrontation at a bar in the penultimate episode of the show was almost certainly fabricated.However, former dean Jeffrey Flier said that he made a point of "introducing" Holmes to the board so it's feasible that Gardner and Holmes crossed paths once again.Tyler Shultz's relationship with his grandfather was permanently affected by the Theranos scandal.Dylan Minnette as Tyler Shultz in "The Dropout."Beth Dubber/Hulu"The Dropout" explores the fallout of Theranos' implosion on dozens of people affected by Holmes' actions. The rift between Tyler Shultz and his grandfather was deep, and the senior Shultz never apologized to his grandson. "That was extremely tough," Shultz told "CBS Mornings" earlier this year. "This whole saga has taken a financial, emotional, and social toll on my relationships. The toll it took on my grandfather's relationship was probably the worst. It is tough to explain. I had a few very honest conversations with him."Holmes said "I don't know" over 600 times in her deposition.Amanda Seyfried in "The Dropout."Beth Dubber/Hulu"The Dropout" amusingly draws attention to Holmes' repeated inability to recall key details of her time at Theranos. She is frequently seen saying, "I don't specifically remember," "I don't remember, "I can't recall," and "I don't recall."This has a strong basis in reality.During Holmes' SEC deposition, she said the words "I don't know" more than 600 times over a three-day period, according to ABC News.The breakdown of Balwani and Holmes' relationship wasn't made public.Amanda Seyfried as Elizabeth Holmes and Naveen Andrews as Ramesh "Sunny" Balwani in "The Dropout."Beth Dubber/HuluAmid Theranos' legal scandals, the conclusion of Holmes' relationship with Balwani more or less coincided with the company's downfall, as they broke up around the time Balwani departed Theranos in mid-2016.However, given that the couple kept their relationship under wraps for many years, it's difficult to know how accurately the show portrays their private conversations. That Balwani told Holmes, "I invented you inside my head, you're not real," seems somewhat dramatized but text messages between the pair that emerged during Holmes' trial have shown Balwani speak critically to Holmes on several occasions.Holmes has testified that Balwani abused her, saying he told her on several occasions that she needed to "become a new Elizabeth" in order to succeed in business. Balwani's attorneys have denied the allegations.Holmes actually bought a Siberian husky as Theranos collapsed.Not Holmes' actual dog.Kateryna Orlova/ShutterstockAs Theranos neared its demise, Holmes purchased a Siberian husky named Balto which she hoped would buoy spirits. Balto was named after a real-life Siberian husky which delivered a diphtheria antitoxin to a remote Alaskan town in 1925. However, Balto was untrained and frequently urinated and defecated in different rooms around the Theranos headquarters."While Holmes held board meetings, Balto could be found in the corner of the room relieving himself while a frenzied assistant was left to clean up the mess," wrote Vanity Fair's Nick Bilton. He also said that buying Balto "seemed to help fortify" Holmes' image as "an iconoclastic weirdo."Read the original article on Business Insider.....»»

Category: personnelSource: nytApr 9th, 2022

BHGRE Brokers Identify Potential Trends in Spring Selling Season

Better Homes and Gardens Real Estate LLC (BHGRE) is thinking spring—spring selling season that is. A recent roundtable discussion with several BHGRE brokers revealed that historic seasonality patterns have been affected by today’s market conditions. Most notably, record low inventory levels could provide an impact on this year’s spring selling season, the company reported. “Real […] The post BHGRE Brokers Identify Potential Trends in Spring Selling Season appeared first on RISMedia. Better Homes and Gardens Real Estate LLC (BHGRE) is thinking spring—spring selling season that is. A recent roundtable discussion with several BHGRE brokers revealed that historic seasonality patterns have been affected by today’s market conditions. Most notably, record low inventory levels could provide an impact on this year’s spring selling season, the company reported. “Real estate professionals are highly adaptable and the last two years of the COVID-19 pandemic have proven that our industry is resilient in the face of change,” said Sherry Chris, president & CEO, BHGRE. “As we enter the third spring selling season since COVID-19 emerged, the BHGRE brand wanted to explore what our affiliates were experiencing in different parts of the country. The broker panel observed that strict seasonality is seeing signs of change. However, it is important to understand all of the underlying factors contributing to this significant shift in real estate market dynamics. What is clear is that a lack of inventory stemming from stalled new development is setting the industry up for continued disruption. Identifying and overcoming barriers to building new homes will be critical in meeting the incredible demand for housing that now exists in our country. In the short term, buyers and sellers can follow the advice of their agents on how to best position themselves for success.” Timing trends:  According to the brokers interviewed, the timing of the spring selling season varies. In Northern New England, the spring selling season typically kicks off in March, but with only 30 days of supply, there aren’t enough homes to create a seasonal sales “spike” this year. People also appear to be waiting out January and February to see COVID-19 cases go down to reduce potential exposure. In Portland, Oregon, spring selling season usually starts at the beginning of the year, although it was observed that 2022 activity was stalled by the omicron variant surge. Brokers are seeing some traces of seasonality, but it’s not full-blown. People will move as soon as the opportunity presents itself, which means for sellers, there’s never a bad time to sell anymore, according to BHGRE’s analysis. “With just one week of inventory, an uptick in seasonal activity is not possible here in Portland,” said Danielle Bade, principal broker and vice president, BHGRE Realty Partners & BHGRE Northwest Living. “Homes sell as soon as they come on the market. People aren’t waiting for a traditional season to enter the market.” “Despite having low inventory in our market, we may still see a surge across Sonoma and Lake County, California as some real estate professionals push their sellers to bring their homes onto the market to get the most value,” noted Randy Coffman, president, BHGRE Wine Country Group in Northern California. Pricing Fluctuations: According to the brokers interviewed for BHGRE’s report, in Northern New England, prices are still considered moderate compared to urban areas. However, they are increasing, which puts pressure on local residents looking to buy in-market. In Lehigh Valley, Pennsylvania, which sits between New York City and Philadelphia, home prices are lower compared to the major cities. In Northern California, prices are flattening out somewhat but are still higher than expected due to low inventory. In Portland, Oregon, prices are not expected to come down this year. Despite double-digit price increases, the brokers interviewed are confident this is not a real estate bubble. Appreciation rates could moderate a bit, but prices won’t come down. Panelists reported they are staying attuned to consumer tolerance for rising prices, and seller greed, which could cool the market. “This is an entirely different dynamic from 2008, which was driven by lax lending,” said Chris Masiello, CEO of BHGRE The Masiello Group in Northern New England. “This is a supply and demand issue that is being guided by demographics: millennials and baby boomers are orbiting the market for the same housing stock. These first-time homebuyers and downsizing buyers are vying for the same properties.” “There is a potential for prices to plateau and then return to a more normal appreciation rate,” said Jack Gross, owner of BHGRE Cassidon Realty in Lehigh Valley. “We might also see buyer frustration cause people to leave the market because they are tired of not getting a home. But consumer confidence in the housing market is high, which makes them open to overpaying.” “We are starting to see home price increases flatten out somewhat, but it is still higher than expected due to the low inventory,” added Coffman. Shifts in Buyer Mindsets: Brokers interviewed are seeing an increasing sense of urgency from consumers to “win” the home, bidding up the price beyond normal appreciation rates. This means they are paying now for what a house could be worth in two years. As a result, the phrasing has changed from “I bought a home” to “I won the bid.” And for those unable to “win,” buyer fatigue has kept people out of the market in recent months, BHGRE reported. Another shift noticed by the brokers who participated in the roundtable is that people are not interested in homes requiring significant sweat equity. Instead, they are more focused on their careers and don’t want to invest significant time or effort into fixing up an outdated house. Further, the brokers observed that living with COVID-19 has worn down buyers. Depending on the region, consumers are either tired of the coronavirus and moving forward with plans or still in a holding pattern created by health anxiety. “Despite home prices increasing about 30% in Central Florida, the market is not slowing down, although the lack of inventory is discouraging for buyers, particularly first-time buyers who are contending with rising rents,” said Dana Hall-Bradley, broker/owner, BHGRE Fine Living in Celebration, Florida. Seller Mindset: Participating brokers report that current inventory conditions are giving new meaning to the term “seller’s market.” In some cases, sellers are becoming irrational on pricing, insisting on list prices well above current market values. In other instances, sellers are getting more cautious with pricing too high. However, brokers report that homes are still getting multiple offers over list price when priced right. According to Masiello, “For most sellers, the biggest deterrent is ‘Where will I go?’” Brokers shared that people in Oregon are going to Arizona for some sun, often retiring a few years earlier than planned. Urban dwellers in California are moving north, while people in Pennsylvania are heading south to Florida. People in New England are selling their family homes and taking up primary residence in their second or summer home until a suitable primary home becomes available. Others are downsizing to a tiny home or RV. “We are hearing more from sellers that it’s not always about the highest price—offers with contingencies are less desirable,” said Bade. Interest Rates: The brokers interviewed observed that the increase in interest rates from 3.5% to 4% is not a real financial driver. They noted that they do not envision it having a substantial negative impact on the market. It may, however, be an emotional one as people get off the fence and try to beat the market. Interestingly, the participating brokers are noticing a shift in the historical relationship between inflation and interest rates, which is now inverted. “Buyers may initially see the rates as higher but remember—historically, they are still low, and there is bound to be a little give and take,” said Coffman. “Prices go down a little; rates go up. It evens out.” Migration: According to NAR, as more people can work from home, city dwellers are moving to the suburbs. Participating brokers report that those who come from New York City can sell a $2.5M townhome and move into a $600,000 4,000 square foot Colonial in Lehigh Valley. Similarly, people who move to rural Vermont from Manhattan still earn city wages. As a result of migration, primary markets are becoming saturated, making secondary markets the main focus, and tertiary markets secondary. As inbound moves from higher-priced markets drive up prices, the dramatic double-digit price increases serve to rise all tides. The brokers interviewed believe that local residents get an economic lift as more people migrate to the area, bringing their city spending habits and salaries, likely creating more job opportunities in the next 12-18 months. Brokers also report seeing a shift in priorities as people are no longer tied to a geographic area for their job. “We are seeing heavy migration patterns from the metro DC/Maryland regions, along the coastal corridor to Northern New England, including Massachusetts, New Hampshire and Vermont,” remarked Masiello. “In lesser populated, rural areas, people are now buying property and land that hasn’t transferred in 30 years or more, which is creating a lot of title issues.” New Construction:  According to participating brokers, permit logjams, supply chain issues, and lack of builder confidence have created a dire shortage of new homes. COVID notwithstanding, significantly fewer new homes are being built while populations are increasing. For example, between 1950 and 2010, the number of new homes built in each decade ranged from 10 million to 14.5 million. But from 2010 to 2020, just 7 million homes were built, while the number of new households formed during that same time period exceeded 10 million. The brokers interviewed advise communities to decide how to help the new inventory issue, which requires cooperation at the local level. “Overcoming the inventory shortage will be the responsibility of local planning boards,” said Masiello. “They need to assess the needs and act. We are not seeing the supply chain issue or labor shortages as bad as they were last year. There is so much cash in the market now just looking for a place to go to work to get a return.” “Developers got caught in 2008, so they are not eager to jump back in,” said Gross. “In Lehigh Valley, it takes 3-5 years to approve a subdivision, which is a significant deterrent when you can get an immediate return in the stock market.” Tips for Sellers:  Even in today’s tight market, it is still important to put your best foot forward, so don’t skimp on staging, home repairs and cleanliness. Prepare your home for the market by hiring a professional cleaning crew and professional handyman/repair service to perform paint touch-ups, fixture upgrades, etc. This will encourage buyers to make their very best offers and result in fewer days on the market. Offering a home warranty can help encourage buyers to waive their inspection. Ensure all potential buyers are financially qualified. Consider the terms offered as just as critical as the price. A cash offer with fewer contingencies may be better than a higher offer with many contingencies. Tips for Buyers:  Get pre-approved. Have a substantial down payment saved. If you can pay cash, do so and refinance later. Be flexible on the closing date. Always make your best offer first and resist the temptation to hold back your effort upfront. Be willing to waive the inspection. Have the means to make an “additional down payment” if the appraisal comes in low. Line up short-term interim housing between sales to put yourself in a better position to compete in a multiple offer situation. To learn more, visit The post BHGRE Brokers Identify Potential Trends in Spring Selling Season appeared first on RISMedia......»»

Category: realestateSource: rismediaMar 25th, 2022

Martinique Hotel in Midtown Reopening; New Architect of Record

Steven Kratchman Architect P.C. has been appointed Architect of Record (AoR) by Burnett Equity, the new owner of the MartiniqueNew York on Broadway hotel, to continue renovations it slowly began 15 years ago with the former owner of this historic property, which at that time was a struggling single-room occupancy... The post Martinique Hotel in Midtown Reopening; New Architect of Record appeared first on Real Estate Weekly. Steven Kratchman Architect P.C. has been appointed Architect of Record (AoR) by Burnett Equity, the new owner of the MartiniqueNew York on Broadway hotel, to continue renovations it slowly began 15 years ago with the former owner of this historic property, which at that time was a struggling single-room occupancy property. Steven Kratchman Architect has been AoR for the Martinique since 2006, retained by former owner Herald Hotel Associates. Followingthe property’s recent sale to Burnett Equity in November 2021, the new owner re-signed Steven Kratchman Architect as AoR. proposed facade renovations During Steven Kratchman Architect’s work with the Martinique, the hotel was first under the Radisson flag, moving to Curio Collection by Hilton in 2018. When it was reflagged, Steven Kratchman Architect,as AoR, assisted the Hilton’s architectural team in beginning the renovation of the Martinique’s amenity spaces, its 531 rooms, and the execution of its overall Property Improvement Plan. Hotel Is Rapidly Opening Despite the change of ownership during apandemic-caused temporary closure, new ownership was able to close the deal and “just like that” open 200 of the 500-plus rooms with 100% occupancy prior to the holiday season and to reveal the sparkling new lobby to its initial guests, noted Steven Kratchman, owner and founder of Steven Kratchman Architect. “It was amazing to see the new lobby and entry, hear the occupancy report, and learn first-hand the previousrestaurateur group was back on the scene and signed up for all of the restaurant spaces plus new ones to be developed. “Because the hotel was originally built in the stand-alone campaigns from an assemblage of sites that have three frontages on three different streets, there are abundant opportunities at street level and below to build on and expand the retail restaurant options at this site,” Kratchman added. “We are growing the tenanted space count to seven from six, which requires significant infrastructure and planning, but isvery exciting to us.” Kratchman noted, “Our ongoing work for the Martinique New York is enhancing the hotel’s presence amidst many of the city’s iconic neighboring properties, including the Empire State Building, Madison Square Garden, and Penn Station. Given the potential of this property, we fully embrace the new owner’s strategy to strike fast and completeeverything that was started by the former owner, plus added enhancements.” Steven Kratchman Architect’s Plan To Quickly Transform The Martinique Immediately after the acquisition, Burnett Equity restarted the renovation project which was stalled during the COVID-19 pandemic and the property’s earlier bankruptcy. “The new owners are highly capitalized and motivated,” Kratchman added. “The coreconsulting and construction design team has been retained along with additional consultants and owner’s representatives so these renovations can be quickly undertaken to transform the Martinique New York.” Under the previous owner, Steven Kratchman Architect and Hilton had been working on alterations to interior common areas; hotel rooms; ground-level and below-ground retail, restaurant, and entertainment space; and egress spaces. Steven Kratchman Architect is continuing this work as AoR for Burnett Equity. Steven Kratchman Architect is currently undertaking Alteration Type 1 work to update the certificate of occupancy, reflecting the current and proposed occupancies. Kratchman said he anticipates the upcoming renovations to include: The balance of the hotel rooms and interior space, soon to be occupied The restoration of the façade and the non-landmarked exterior from the second floor down, beginning with the 30th Street frontage. Proposed are a new canopy, new flags relocated to historical original locations, new signage, and new architectural lighting, treating the hotel façade similarly to a historic New York City landmark building. (See caption below for attached proposed façade image) New York City Landmarks Preservation Commission approval for additional façade renovations New flags and signage Steven Kratchman Architect’s designs for these elements were approved by the former owner and have been adopted by Burnett Equity. The Oklahoma City-based firm closed on the $55 million Martinique purchase in November 2021 and expected to spend anadditional $60 million to renovate the hotel. Expertise in Restoration and Renovation Projects One of Steven Kratchman Architect’s areas of expertise is the preservation oflandmarks and historic buildings. The Tribeca-based studio is recognized for projects in New York City including the recently completed restoration of the façade of the Harmonie Club, home to the second oldest social club in Manhattan. However, Kratchman noted that the firm has completed building turnarounds in other regions, including the Midwest – where Kratchman grew up. “Among our prominent renovation projects is Mansion House, a multifamily complex in downtown Tulsa that neighbors a hotel in which Burnett Equity has holdings,” he said. “Coming from out of town to buy in New York City, it gave the Burnett team comfort that we renovated an Oklahoma project they were familiar with, as well as me having Midwestern roots.” On the register of Historic Hotels of America, the Martinique New York is a stunning Beaux-Arts building located at 49 West 32nd Street in the heart of midtown Manhattan. Opened in 1897 by owner William R.H. Martin, it was the city’s first luxury hotel and became a symbol of grand hospitality during the Gilded Age. The building was originally designed in a French Renaissance style by renowned architect Henry J. Hardenbergh, who conceived the original Waldorf-Astoria at Fifth Avenue, the Plaza Hotel and the Willard Hotel in Washington, D.C. The post Martinique Hotel in Midtown Reopening; New Architect of Record appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyJan 21st, 2022

Vivid Seats moving headquarters to offices above historic Marshall Field building on State Street

Chicago-based online ticket broker Vivid Seats is moving its headquarters to the historic Marshall Field building in converted office space above Macy’s flagship State Street store.Chicago-based online ticket broker Vivid Seats is moving its headquarters to the historic Marshall Field building in converted office space above Macy’s flagship State Street store......»»

Category: topSource: chicagotribuneJan 14th, 2022

Howard Marks January 2022 Memo: Selling Out

Howard Marks memo to Oaktree clients for the month of January 2022, titled, “Selling Out.” Q4 2021 hedge fund letters, conferences and more As I’m now in my fourth decade of memo writing, I’m sometimes tempted to conclude I should quit, because I’ve covered all the relevant topics. Then a new idea for a memo […] Howard Marks memo to Oaktree clients for the month of January 2022, titled, “Selling Out.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2021 hedge fund letters, conferences and more As I’m now in my fourth decade of memo writing, I’m sometimes tempted to conclude I should quit, because I’ve covered all the relevant topics. Then a new idea for a memo pops up, delivering a pleasant surprise. My January 2021 memo Something of Value, which chronicled the time I spent in 2020 living and discussing investing with my son Andrew, recounted a semi-real conversation in which we briefly discussed whether and when to sell appreciated assets. It occurred to me that even though selling is an inescapable part of the investment process, I’ve never devoted an entire memo to it. The Basic Idea Everyone is familiar with the old saw that’s supposed to capture investing’s basic proposition: “buy low, sell high.” It’s a hackneyed caricature of the way most people view investing. But few things that are important can be distilled into just four words; thus, “buy low, sell high” is nothing but a starting point for discussion of a very complex process. Will Rogers, an American film star and humorist of the 1920s and ’30s, provided what he may have thought was a more comprehensive roadmap for success in the pursuit of wealth: Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it. The illogicality of his advice makes clear how simplistic this adage – like many others – really is. However, regardless of the details, people may unquestioningly accept that they should sell appreciated investments. But how helpful is that basic concept? Origins Much of what I’ll write here got its start in a 2015 memo called Liquidity. The hot topic in the investment world at that moment was the concern about a perceived decline in the liquidity provided by the market (when I say “the market,” I’m talking specifically about the U.S. stock market, but the statement has broad applicability). This was commonly attributed to a combination of (a) the licking investment banks had taken in the Global Financial Crisis of 2008-09 and (b) the Volcker Rule, which prohibited risky activities such as proprietary trading on the part of systemically important financial institutions. The latter constrained banks’ ability to “position” securities, or buy them, when clients wanted to sell. Maybe liquidity in 2015 was less than it had previously been, and maybe it wasn’t. However, looking beyond the events of the day, I closed that memo by stating my conviction that (a) most investors trade too much, to their own detriment, and (b) the best solution for illiquidity is to build portfolios for the long term that don’t rely on liquidity for success. Long-term investors have an advantage over those with short timeframes (and I think the latter describes the majority of market participants these days). Patient investors are able to ignore short-term performance, hold for the long run, and avoid excessive trading costs, while everyone else worries about what’s going to happen in the next month or quarter and therefore trades excessively. In addition, long-term investors can take advantage if illiquid assets become available for purchase at bargain prices. Like so many things in investing, however, just holding is easier said than done. Too many people equate activity with adding value. Here’s how I summed up this idea in Liquidity, inspired by something Andrew had said: When you find an investment with the potential to compound over a long period, one of the hardest things is to be patient and maintain your position as long as doing so is warranted based on the prospective return and risk. Investors can easily be moved to sell by news, emotion, the fact that they’ve made a lot of money to date, or the excitement of a new, seemingly more promising idea. When you look at the chart for something that’s gone up and to the right for 20 years, think about all the times a holder would have had to convince himself not to sell. Everyone wishes they’d bought Amazon at $5 on the first day of 1998, since it’s now up 660x at $3,304. But who would have continued to hold when the stock hit $85 in 1999 – up 17x in less than two years? Who among those who held on would have been able to avoid panicking in 2001, as the price fell 93%, to $6? And who wouldn’t have sold by late 2015 when it hit $600 – up 100x from the 2001 low? Yet anyone who sold at $600 captured only the first 18% of the overall rise from that low. This reminds me of the time I once visited Malibu with a friend and mentioned that the Rindge family is said to have bought the entire area – all 13,330 acres – in 1892 for $300,000, or $22.50 per acre. (It’s clearly worth many billions today.) My friend said, “I’d like to have bought all of Malibu for $300,000.” My response was simple: “you would have sold it when it got to $600,000.” The more I’ve thought about it since writing Liquidity, the more convinced I’ve become that there are two main reasons why people sell investments: because they’re up and because they’re down. You may say that sounds nutty, but what’s really nutty is many investors’ behavior. Selling Because It’s Up “Profit-taking” is the intelligent-sounding term in our business for selling things that have appreciated. To understand why people engage in it, you need insight into human behavior, because a lot of investors’ selling is motivated by psychology. In short, a good deal of selling takes place because people like the fact that their assets show gains, and they’re afraid the profits will go away. Most people invest a lot of time and effort trying to avoid unpleasant feelings like regret and embarrassment. What could cause an investor more self-recrimination than watching a big gain evaporate? And what about the professional investor who reports a big winner to clients one quarter and then has to explain why the holding is at or below cost the next? It’s only human to want to realize profits to avoid these outcomes. If you sell an appreciated asset, that puts the gain “in the books,” and it can never be reversed. Thus, some people consider selling winners extremely desirable – they love realized gains. In fact, at a meeting of a non-profit’s investment committee, a member suggested that they should be leery of increasing endowment spending in response to gains because those gains were unrealized. I was quick to point out that it’s usually a mistake to view realized gains as less transient than unrealized ones (assuming there’s no reason to doubt the veracity of the unrealized carrying values). Yes, the former have been made concrete. However, sales proceeds are generally reinvested, meaning the profits – and the principal – are put back at risk. One might argue that appreciated securities are more vulnerable to declines than new investments in assets currently deemed to be attractively priced, but that’s far from a certainty. I’m not saying investors shouldn’t sell appreciated assets and realize profits. But it certainly doesn’t make sense to sell things just because they’re up. Selling Because It’s Down As wrong as it is to sell appreciated assets solely to crystalize gains, it’s even worse to sell them just because they’re down. Nevertheless, I’m sure many people do it. While the rule is “buy low, sell high,” clearly many people become more motivated to sell assets the more they decline. In fact, just as continued buying of appreciated assets can eventually turn a bull market into a bubble, widespread selling of things that are down has the potential to turn market declines into crashes. Bubbles and crashes do occur, proving that investors contribute to excesses in both directions. In a movie that plays in my head, the typical investor buys something at $100. If it goes to $120, he says, “I think I’m onto something – I should add,” and if it reaches $150, he says, “Now I’m highly confident – I’m going to double up.” On the other hand, if it falls to $90, he says, “I’m going to think about increasing my position to reduce my average cost,” but at $75, he concludes he should reconfirm his thesis before averaging down further. At $50, he says, “I’d better wait for the dust to settle before buying more.” And at $20 he says, “It feels like it’s going to zero; get me out!” Just like those who are afraid of surrendering gains, many investors worry about letting losses compound. They might fear their clients will say (or they’ll say to themselves), “What kind of a lame-brain continues to hold a security after it’s gone from $100 to $50? Everyone knows a decline like that can foreshadow further declines. And look – it happened.” Do investors really make behavioral errors such as those I’ve described? There’s plenty of anecdotal evidence. For example, studies have shown that the average mutual fund investor performs worse than the average mutual fund. How can that be? If she merely held her positions, or if her errors were unsystematic, the average fund investor would, by definition, fare the same as the average fund. For the studies’ findings to occur, investors have to on balance reduce the amount of capital they have in funds that subsequently do better and increase their allocation to funds that go on to do worse. Let me put that another way: on average, mutual fund investors tend to sell the funds with the worst recent performance (missing out on their potential recoveries) in order to chase the funds that have done the best (and thus likely participate in their return to earth). We know that “retail investors” tend to be trend-followers, as described above, and their long-term performance often suffers as a result. What about the pros? Here the evidence is even clearer: the powerful shift in recent decades toward indexing and other forms of passive investing has taken place for the simple reason that active investment decisions are so often wrong. Of course, many forms of error contribute to this reality. Whatever the reason, however, we have to conclude that, on average, active professional investors held more of the things that did less well and less of the things that outperformed, and/or that they bought too much at elevated prices and sold too much at depressed prices. Passive investing hasn’t grown to cover the majority of U.S. equity mutual fund capital because passive results have been so good; I think it’s because active management has been so bad. Back when I worked at First National City Bank 50 years ago, prospective clients used to ask, “What kind of return do you think you can make in an equity portfolio?” The standard answer was 12%. Why? “Well,” we said (so simplistically), “the stock market returns about 10% a year. A little effort should enable us to improve on that by at least 20%.” Of course, as time has shown, there’s no truth in that. “A little effort” didn’t add anything. In fact, in most cases, active investing detracted: most equity funds failed to keep up with the indices, especially after fees. What about the ultimate proof? The essential ingredient in Oaktree’s investments in distressed debt – bargain purchases – has emanated from the great opportunities sellers gave us. Negativity reaches a crescendo during economic and market crises, causing many investors to become depressed or fearful and sell in panic. Results like those we target in distressed debt can only be achieved when holders sell to us at irrationally low prices. Superior investing consists largely of taking advantage of mistakes made by others. Clearly, selling things because they’re down is a mistake that can give the buyers great opportunities. When Should Investors Sell? If you shouldn’t sell things because they’re up, and you shouldn’t sell because they’re down, is it ever right to sell? As I previously mentioned, I described the discussions that took place while Andrew and his family lived with Nancy and me in 2020 in Something of Value. That experience truly was of great value – an unexpected silver lining to the pandemic. That memo evoked the strongest reaction from readers of any of my memos to date. This response was probably attributable to (a) the content, which mostly related to value investing; (b) the personal insights provided, and especially my confession regarding my need to grow with the times; or (c) the recreated conversation that I included as an appendix. The last of these went like this, in part: Howard: Hey, I see XYZ is up xx% this year and selling at a p/e ratio of xx. Are you tempted to take some profits? Andrew: Dad, I’ve told you I’m not a seller. Why would I sell? H: Well, you might sell some here because (a) you’re up so much; (b) you want to put some of the gain “in the books” to make sure you don’t give it all back; and (c) at that valuation, it might be overvalued and precarious. And, of course, (d) no one ever went broke taking a profit. A: Yeah, but on the other hand, (a) I’m a long-term investor, and I don’t think of shares as pieces of paper to trade, but as part ownership in a business; (b) the company still has enormous potential; and (c) I can live with a short-term downward fluctuation, the threat of which is part of what creates opportunities in stocks to begin with. Ultimately, it’s only the long term that matters. (There’s a lot of “a-b-c” in our house. I wonder where Andrew got that.) H: But if it’s potentially overvalued in the short term, shouldn’t you trim your holding and pocket some of the gain? Then if it goes down, (a) you’ve limited your regret and (b) you can buy in lower. A: If I owned a stake in a private company with enormous potential, strong momentum and great management, I would never sell part of it just because someone offered me a full price. Great compounders are extremely hard to find, so it’s usually a mistake to let them go. Also, I think it’s much more straightforward to predict the long-term outcome for a company than short-term price movements, and it doesn’t make sense to trade off a decision in an area of high conviction for one about which you’re limited to low conviction. . . . H: Isn’t there any point where you’d begin to sell? A: In theory there is, but it largely depends on (a) whether the fundamentals are playing out as I hope and (b) how this opportunity compares to the others that are available, taking into account my high level of comfort with this one. Aphorisms like “no one ever went broke taking a profit” may be relevant to people who invest part-time for themselves, but they should have no place in professional investing. There certainly are good reasons for selling, but they have nothing to do with the fear of making mistakes, experiencing regret and looking bad. Rather, these reasons should be based on the outlook for the investment – not the psyche of the investor – and they have to be identified through hardheaded financial analysis, rigor and discipline. Stanford University professor Sidney Cottle was the editor of the later versions of Benjamin Graham and David L. Dodd’s Security Analysis, “the bible of value investing,” including the edition I read at Wharton 56 years ago. For that reason, I knew the book as “Graham, Dodd and Cottle.” Sid was a consultant to the investment department at First National City Bank in the 1970s, and I’ve never forgotten his description of investing: “the discipline of relative selection.” In other words, most of the portfolio decisions investors make are relative choices. It’s patently clear that relative considerations should play an enormous part in any decision to sell existing holdings. If your investment thesis seems less valid than it did previously and/or the probability that it will prove accurate has declined, selling some or all of the holding is probably appropriate. Likewise, if another investment comes along that appears to have more promise – to offer a superior risk-adjusted prospective return – it’s reasonable to reduce or eliminate existing holdings to make room for it. Selling an asset is a decision that must not be considered in isolation. Cottle’s concept of “relative selection” highlights the fact that every sale results in proceeds. What will you do with them? Do you have something in mind that you think might produce a superior return? What might you miss by switching to the new investment? And what will you give up if you continue to hold the asset in your portfolio rather than making the change? Or perhaps you don’t plan to reinvest the proceeds. In that case, what’s the likelihood that holding the proceeds in cash will make you better off than you would have been if you had held onto the thing you sold? Questions like these relate to the concept of “opportunity cost,” one of the most important ideas in financial decision-making. Switching gears, what about the idea of selling because you think a temporary dip lies ahead that will affect one of your holdings or the whole market? There are real problems with this approach: Why sell something you think has a positive long-term future to prepare for a dip you expect to be temporary? Doing so introduces one more way to be wrong (of which there are so many), since the decline might not occur. Charlie Munger, vice chairman of Berkshire Hathaway, points out that selling for market-timing purposes actually gives an investor two ways to be wrong: the decline may or may not occur, and if it does, you’ll have to figure out when the time is right to go back in. Or maybe it’s three ways, because once you sell, you also have to decide what to do with the proceeds while you wait until the dip occurs and the time comes to get back in. People who avoid declines by selling too often may revel in their brilliance and fail to reinstate their positions at the resulting lows. Thus, even sellers who were right can fail to accomplish anything of lasting value. Lastly, what if you’re wrong and there is no dip? In that case, you’ll miss out on the ensuing gains and either never get back in or do so at higher prices. So it’s generally not a good idea to sell for purposes of market timing. There are very few occasions to do so profitably and very few people who possess the skill needed to take advantage of these opportunities. Before I close on this subject, it’s important to note that decisions to sell aren’t always within an investment manager’s control. Clients can withdraw capital from accounts and funds, necessitating sales, and the limited lifespan of closed-end funds can require managers to liquidate holdings even though they’re not ripe for selling. The choice of what to sell under these conditions can still be based on a manager’s expectations regarding future returns, but deciding not to sell isn’t among the manager’s choices. How Much Is Too Much to Hold? Certainly there are times when it’s right to sell one asset in favor of another based on the idea of relative selection. But we mustn’t do this in a mechanical manner. If we did, at the logical extreme, we would put all of our capital into the one investment we consider the best. Virtually all investors – even the best – diversify their portfolios. We may have a sense for which holding is the absolute best, but I’ve never heard of an investor with a one-asset portfolio. They may overweight favorites to take advantage of what they think they know, but they still diversify to protect against what they don’t know. That means they sub-optimize, potentially trading off some of their chance at a maximal return to increase the likelihood of a merely excellent one. Here’s a related question from my reconstructed conversation with Andrew: H: You run a concentrated portfolio. XYZ was a big position when you invested, and it’s even bigger today, given the appreciation. Intelligent investors concentrate portfolios and hold on to take advantage of what they know, but they diversify holdings and sell as things rise to limit the potential damage from what they don’t know. Hasn’t the growth in this position put our portfolio out of whack in that regard? A: Perhaps that’s true, depending on your goals. But trimming would mean selling something I feel immense comfort with based on my bottom-up assessment and moving into something I feel less good about or know less well (or cash). To me, it’s far better to own a small number of things about which I feel strongly. I’ll only have a few good insights over my lifetime, so I have to maximize the few I have. All professional investors want good investment performance for their clients, but they also want financial success for themselves. And amateurs have to invest within the limits of their risk tolerance. For these reasons, most investors – and certainly most investment managers’ clients – aren’t immune to apprehension regarding portfolio concentration and thus susceptibility to untoward developments. These considerations introduce valid reasons for limiting the size of individual asset purchases and trimming positions as they appreciate. Investors sometimes delegate the decision on how to weight assets in portfolios to a process called portfolio optimization. Inputs regarding asset classes’ return potential, risk and correlation are fed into a computer model, and out comes the portfolio with the optimal expected risk-adjusted return. If an asset appreciates relative to the others, the model can be rerun, and it will tell you what to buy and sell. The main problem with these models lies in the fact that all the data we have regarding those three parameters relates to the past, but to arrive at the ideal portfolio, the model needs data that accurately describes the future. Further, the models need a numerical input for risk, and I absolutely insist that no single number can fully describe an asset’s risk. Thus, optimization models can’t successfully dictate portfolio actions. The bottom line: we should base our investment decisions on our estimates of each asset’s potential, we shouldn’t sell just because the price has risen and the position has swelled, there can be legitimate reasons to limit the size of the positions we hold, but there’s no way to scientifically calculate what those limits should be. In other words, the decision to trim positions or to sell out entirely comes down to judgment . . . like everything else that matters in investing. The Final Word on Selling Most investors try to add value by over- and underweighting specific assets and/or through well-timed buying and selling. While few have demonstrated the ability to consistently do these things correctly (see my comments on active management on page 4), everyone’s free to have a go at it. There is, however, a big “but.” What’s clear to me is that simply being invested is by far “the most important thing.” (Someone should write a book with that title!) Most actively managed portfolios won’t outperform the market as a result of manipulation of portfolio weightings or buying and selling for purposes of market timing. You can try to add to returns by engaging in such machinations, but these actions are unlikely to work at best and can get in the way at worst. Most economies and corporations benefit from positive underlying secular trends, and thus most securities markets rise in most years and certainly over long periods. One of the longest-running U.S. equity indices, the S&P 500, has produced an estimated compound average return over the last 90 years of 10.5% per year. That’s startling performance. It means $1 invested in the S&P 500 90 years ago would have grown to roughly $8,000 today. Many people have remarked on the wonders of compounding. For example, Albert Einstein reportedly called compound interest “the eighth wonder of the world.” If $1 could be invested today at the historic compound return of 10.5% per year, it would grow to $147 in 50 years. One might argue that economic growth will be slower in the years ahead than it was in the past, or that bargain stocks were easier to find in previous periods than they are today. Nevertheless, even if it compounds at just 7%, $1 invested today will grow to over $29 in 50 years. Thus, someone entering adulthood today is practically guaranteed to be well fixed by the time they retire if they merely start investing promptly and avoid tampering with the process by trading. I like the way Bill Miller, one of the great investors of our time, put it in his 3Q 2021 Market Letter: In the post-war period the US stock market has gone up in around 70% of the years... Odds much less favorable than that have made casino owners very rich, yet most investors try to guess the 30% of the time stocks decline, or even worse spend time trying to surf, to no avail, the quarterly up and down waves in the market. Most of the returns in stocks are concentrated in sharp bursts beginning in periods of great pessimism or fear, as we saw most recently in the 2020 pandemic decline. We believe time, not timing, is the key to building wealth in the stock market. (October 18, 2021. Emphasis added) What are the “sharp bursts” Miller talks about? On April 11, 2019, The Motley Fool cited data from JP Morgan Asset Management’s 2019 Retirement Guide showing that in the 20-year period between 1999 and 2018, the annual return on the S&P 500 was 5.6%, but your return would only have been 2.0% if you had sat out the 10 best days (or roughly 0.4% of the trading days), and you wouldn’t have made any money at all if you had missed the 20 best days. In the past, returns have often been similarly concentrated in a small number of days. Nevertheless, overactive investors continue to jump in and out of the market, incurring transactions costs and capital gains taxes and running the risk of missing those “sharp bursts.” As mentioned earlier, investors often engage in selling because they believe a decline is imminent and they have the ability to avoid it. The truth, however, is that buying or holding – even at elevated prices – and experiencing a decline is in itself far from fatal. Usually, every market high is followed by a higher one and, after all, only the long-term return matters. Reducing market exposure through ill-conceived selling – and thus failing to participate fully in the markets’ positive long-term trend – is a cardinal sin in investing. That’s even more true of selling without reason things that have fallen, turning negative fluctuations into permanent losses and missing out on the miracle of long-term compounding. * * * When I meet people for the first time and they find out I’m in the investment business, they often ask (especially in Europe) “what do you trade?” That question makes me bristle. To me, “trading” means jumping in and out of individual assets and whole markets on the basis of guesswork as to what prices will do in the next hour, day, month or quarter. We don’t engage in such activity at Oaktree, and few people have demonstrated the ability to do it well. Rather than traders, we consider ourselves investors. In my view, investing means committing capital to assets based on well-reasoned estimates of their potential and benefitting from the results over the long term. Oaktree does employ people called traders, but their job consists of implementing long-term investment decisions made by portfolio managers based on assets’ fundamentals. No one at Oaktree believes they can make money or advance their career by selling now and buying back after an intervening decline, as opposed to holding for years and letting value lift prices if fundamental expectations prove out. When Oaktree was formed in 1995, the five founders – who at that point had worked together for nine years on average – established an investment philosophy based on what we’d successfully done in that time. One of the six tenets expressed our view on trying to time markets when buying and selling: Because we do not believe in the predictive ability required to correctly time markets, we keep portfolios fully invested whenever attractively priced assets can be bought. Concern about the market climate may cause us to tilt toward more defensive investments, increase selectivity or act more deliberately, but we never move to raise cash. Clients hire us to invest in specific market niches, and we must never fail to do our job. Holding investments that decline in price is unpleasant, but missing out on returns because we failed to buy what we were hired to buy is inexcusable. We’ve never changed any of the six tenets of our investment philosophy – including this one – and we have no plans to do so. January 13, 2022 Updated on Jan 14, 2022, 12:38 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJan 14th, 2022

Industry mourns passing of architect Stephen B. Jacobs

Architects Stephen B. Jacobs has died at the age of 82. A Holocaust survivor who rose to become one of New York’s most accomplished architects, Mr Jacobs founded his own firm 1967 and later partnered with his interior designer wife, Andi Pepper, to work on projects inside and out. “Stephen... The post Industry mourns passing of architect Stephen B. Jacobs appeared first on Real Estate Weekly. Architects Stephen B. Jacobs has died at the age of 82. A Holocaust survivor who rose to become one of New York’s most accomplished architects, Mr Jacobs founded his own firm 1967 and later partnered with his interior designer wife, Andi Pepper, to work on projects inside and out. “Stephen led an extraordinary life,” said Stephen B. Jacobs Group PC principal partners Alexander B. Jacobs, AIA, Isaac-Daniel Astrachan, AIA and Jennifer Cheuk, AIA, in a statement. “From surviving the horrors of the Holocaust to building an award-winning architectural and interior design firm, Stephen led us to go above and beyond for our clients, personally guiding staff to ensure finished projects met clients’ needs. “His pioneering approaches such as “sensitive renovation” became textbook examples of how to develop the highest economic potential of an existing building while preserving its architectural and historic significance.” Born Stefan Jakubowicz in Lodz, Poland, on June 12, 1939, Mr Jacobs and his family moved to Piotrków — a city that became home to the Nazis’ first ghetto. The ghetto housed 25,000 people and was emptied in 1942. Jacobs and his parents, older brother, grandfather and three aunts were sent to concentration camps. The males went to Buchenwald, the females to Ravensbruck. He was only five years old at the time. In an interview with the Jewish Telegraphic Agency last year, he said he managed to survive Buchenwald  through luck and the help of an underground resistance that worked to save children. He spent his days at the shoemaker’s shop, which allowed him to get out of the daily roll call, where guards likely would have killed him because of his youth. Later he hid in the tuberculosis ward of the camp hospital, where his father was working as an orderly. “I have fleeting memories,” Jacobs told JTA. “I have memories that are not chronological, particularly the last few weeks because that was a very traumatic and dangerous time because they were trying to liquidate the camp.” After the war, the entire family was eventually reunited and fled to Switzerland before moving to the US in 1948 where they lived in Washington Heights. After high school, he pursued his passion for painting and drawing at The Art Students League of New York, studying with Frank Mason, an academic landscape and portrait painter. “All he talked about was architecture and it stirred my interest,” Jacobs told “Deep down inside I knew I was a lousy painter.” He enrolled at the Pratt Institute in 1963 and, after completing his Master’s in Architecture 1965, he worked as a designer and planner at Whittlesey, Conklin and Rossant before founding Stephen B. Jacobs & Associates in 1967. Inspired by his own experiences buying and renovating a Brownstone, he started small, designing owner-occupied Brownstones, mostly on the West Side of Manhattan. By the mid-70s, he had turned his attention to finding new uses for old industrial and manufacturing properties and his early work became textbook examples of Adaptive Reuse, for which he was awarded the Andrew J. Thomas Pioneer in Housing award by the American Institute of Architects. By the 80s, Jacobs was developing  his own properties using historic tax credits to raise equity to restore landmark buildings in Downtown Brooklyn then, in the mid-1990s, the company’s focus changed to hotels. He was among the first to see the potential in Manhattan’s rooftops and the success of his Hotel Gansevoort transformation in the Meatpacking District changed the city’s hospitality industry forever. Stephen B. Jacobs designed some of New York City’s earliest boutiques, including Sixty Thompson, The Library Hotel, and Hotel Giraffe, as well as multiple Gansevoort Hotel locations. Recognized as one of the city’s leading architectural firms, Stephen B. Jacobs has since completed a range of commissions, including high-rise condominiums, office buildings, and preservation projects. “Stephen B. Jacobs Group is mourning the loss of Stephen and his absence will not only be felt at our firm but by the entire industry,” said the company’s partners in their statement. The post Industry mourns passing of architect Stephen B. Jacobs appeared first on Real Estate Weekly......»»

Category: realestateSource: realestateweeklyDec 16th, 2021