Investment Legends and the Stock Market

What are the legends of Wall Street saying, doing or might have done when it comes to investing? Here's three examples that indicate that we are in a bubble: 

Jeremy Grantham 

Jeremy Grantham of GMO gave an extensive 38 minute interview to Bloomberg about what he considers to be a bubble that will result in a crash that will rival 1929 and 2000.

 

For those who might not have 38 minutes to spent watching the video, Business Insider (Feb 24) wraps things up nicely. Here are a couple quotes:

"This bubble is more impressive even than 2000, which was the champion. About 80% of the value measures have this one higher. We'll be rather lucky to have this bubble last until May."

"When the financial headlines migrate to the front page, when the evening news mentions the market or some crazy behavior of GameStop, Tesla, you know you're getting very warm."

Coronavirus: Increase in Entrepreneurship?

I came across this CalMatters (Feb 2) article about increased entrepreneurship during the pandemic:

Despite a grim economy, applications for new business licenses are on the rise: In California, 442,324 were filed in 2020, a 21.7% increase from the year before, according to an analysis of data that the U.S. Census Bureau developed with economists and the federal reserve. 

. . . Why are more people taking the plunge and launching ventures during a global pandemic? 

. . . [Mark Herbert, vice president in California for Small Business Majority, a national organization advocating for small businesses] said one possibility is that people whose businesses shut down for good during the crisis might be trying to start over. More than 19,000 businesses closed permanently statewide since March, according to a September Yelp analysis. 

Movie Review: Make Way for Tomorrow

Make Way for Tomorrow. This is a movie that in 1937 was made by Paramount Pictures. If this movie was made today, it would be made independently and then would be picked up by a major studio for distribution. It would come out in November or December via a limited release and get a lot of Oscar buzz and then slowly expand. Due to the topic of the movie, it would probably never get above 1,000 theaters, but would be beloved by those who saw it. It would likely get at least 5 Oscar nominations, but probably not win Best Picture. It might get the actors a win; however. 

This is an amazingly movie about the negative impact of aging for those who lived a good life, but just didn't have enough financial wealth to let them live well in their final years.

The movie opens with Barkley and Lucy Cooper bringing four of their five adult children together. The fifth, Addie, lives in California. The four adult children are George, Nell, Cora and Robert. Barkley and Lucy announce that due to four years of unemployment their bank account is empty and their house is in foreclosure. They inform the children that they have to move out within a few days. The siblings try to determine what to do and who will take the parents in temporarily or permanently. Robert is immediately taken off the list as is the sibling who lives in California. Robert is the youngest, unmarried and doesn't exactly appear to be financially secure. The most obvious sibling to take the parents is Nell, who appears to be the wealthiest of the siblings. She; however, requests that the parents stay with the other siblings for a bit so that she can ask her husband. One can tell that she doesn't like the idea of her parents staying with her at all and is just trying to push the parents off. Due to housing limitations, the parents are split. Barkley goes to live with Cora while Lucy goes with George.

Sweden: Prime Minister Loses Confidence Vote

It took four months that crossed 2018 and 2019 for Sweden to form a government. The government that formed was a minority government where 115 MPs voted in favor of the Social Democrats led government while 153 voted against. The reason why a minority party was allowed to form was that there were 77 abstentions. In essence, those 77 tacitly voted for the minority party. Three parties abstained: Left Party, Centre Party and Liberals. (And it looks like 4 just didn't vote.) This prevented the "No" vote from reaching of 175.

Here's what the Associated Press via the LA Times (Jun 21) has to say:

The no-confidence motion in Lofven’s government was called by the nationalist Sweden Democrats party, but it ultimately succeeded because the Left Party had withdrawn its support from the government over proposed legislation to tackle a housing shortage. Lawmakers voted 181 to 109 against Lofven, with 51 abstentions.

The Left Party said it lost confidence in Lofven over a proposal to abolish rent controls on newly built properties.

Sweden has strict regulations on rents aimed at maintaining affordable prices in larger cities. However, this makes property developers less willing to invest in building new homes for the rental market. People wanting to rent a home can wait years for a contract and buying property is increasingly hard amid soaring home prices.

Movie Analysis: Elmer Gantry

This blog post will be discussing the ending of the movie.

Instead of calling this a movie review, I'm going to call this an analysis. The movie starts with Elmer Gantry (Burt Lancaster) in a speakeasy. It is Prohibition and alcohol can't legally be served. He's inside with his fellow salesmen. Though he talks a good game, we rather quickly learn that he isn't a very good one, barely making it through life financially. He spends his time making sales pitches and sleeping with women in various cities that he's met during his travels. 

In his travels, we quickly are met with two versions of Elmer Gantry and his relationship with Jesus and Christianity. At the speakeasy, what looks like Salvation Army volunteers enter and ask for donations. No one wishes to donate. Elmer gets up and asks the customers that they reconsider and make donations. He does so with a perfect sales pitch, but you have to wonder if he is simply mocking the Salvation Army volunteers. Off he goes to another city and drops by an African American church. He is the only white person in the church and he joins the singing with great gusto. By the faces of those in the church, you can tell that they think that he might be there as a joke. Yet, his enthusiasm wins them over. As he is a bit down on his luck, the pastor of the church actually gives him a job to earn a little money to help him on his way as well as providing him with lunch.

Los Angeles Homeless: Shelter Done on the Cheap

Los Angeles went through a lot of bad press after Proposition HHH passed and reports came to light about one project that was costing the extraordinary amount of $630,000 per unit. And then there was the report about 64 square foot sheds costing $130,000 per unit while Riverside was spending just over $17,000 per unit. 

The city got some good press a few months back when the LA Times (Jan 18) reported on the 232-unit Vignes Street homeless housing project:

Unlike traditional homeless housing projects that are either designed for permanent residency with services or for short-term shelter, the Vignes complex will have both.

. . . In some ways the project was shaped by the COVID-19 pandemic. The bulk of the funding came from the federal CARES Act, allowing the county to sidestep the usual convoluted process of finding money for affordable housing. And the health emergency provided justification for exemptions from environmental review and competitive bidding.

. . . The modular construction kept the basic cost to just over $86,000 per bed for the main buildings and $50,000 per bed for the trailers. Exterior elevators, the administrative building and site preparation, including removal of underground gas tanks, brought the total to $48 million, or $206,000 per unit, not including the county’s cost of $24 million for the land.

California's Population in Decline

For the first time in its history, California has seen a decline in its population. ABC News (May 7) reports:

California’s population fell by more than 182,000 last year, the first yearly loss ever recorded for the nation’s most populous state that halted a growth streak dating to its founding in 1850 on the heels of a gold rush that prompted a flood of people to seek their fortune in the West.

The figures released Friday followed last week's announcement from the U.S. Census Bureau that California would lose a congressional seat for the first time because it grew more slowly than other states over the past decade. Still, California's population of just under 39.5 million and soon-to-be 52-member congressional delegation remain by far the largest.

As for the city of Los Angeles, it has seen a population decline for 3 straight years.

Overall, Los Angeles lost nearly 52,000 people, the third straight year of decline that has put its population at just over 3.9 million.

Movie Review: Ace in the Hole

Ace in the Hole is a 1951 movie directed by Billy Wilder. He is known for such movies as Double Indemnity, Sunset Blvd., Sabrina, The Seven Year Itch and Some Like It Hot just to name a few. The movie stars Kirk Douglas. 

The movie opens with Chuck Tatum (Kirk Douglas) sitting in his car. It is being towed through the city of Albuquerque. Seeing a newspaper office, he tells the tow driver to stop and he walks into the office to see if there is a job opening. We learn that Tatum has been fired as a journalist from various big city newspapers from New York to Detroit for various infractions even though he often wrote front page articles. Even with that hiring/firing background, the newspaper decides to hire him on the spot. 

Coronavirus: Haiti Facing a Wave

The last time I wrote about Haiti was this January. At the time, I was wondering about the lack of COVID-19 spread within the country. It was one of those countries early on that I felt for sure would face difficulty dealing with the virus. Yet per Worldometer, their next door neighbor, Dominican Republic, has had to deal with 11x the number of deaths as Haiti even though their populations are very similar. Back in January, it appeared that Haiti might be dealing with a second wave, but that wave quieted down. 

They're a poor country that has done very well at keep COVID-19 under control up until now. Some 5 months later; however, it looks like the country is dealing with a wave that at least matches what happened in May and June of 2020 and based on a couple articles I've read is worse than that wave.

Reuters via US News & World Report (June 9) reports:

COVID-19 treatment centers closed for lack of patients, Haitians resumed life as normal, and the government hesitated to even accept its allotment of free AstraZeneca vaccines through the U.N.-backed COVAX mechanism due to safety and logistical concerns.

Now, though, as some countries are already moving into a post-pandemic phase thanks to vaccination campaigns, Haiti is grappling with its first serious outbreak.

Pension: Riverside County Pension Debt Grows Slightly

Back in March 2020, I looked into the pension situation in Riverside County. At the time, based on the latest report as of June 30, 2018, they had a 3.5 billion problem. We now have an update as of June 30, 2019. (It is interesting how these updates are based on data that is over a year old.) Press Enterprise (Feb 9) reports:

Riverside County’s unfunded pension debt now stands at $3.6 billion, but a bond sale is expected to cut that amount by $476 million while bolstering the county pension system’s overall funding, according to a new report.

Between 2018 and 2019, the debt grew by $108 million. Not as bad as what happened after 2018 when it grew by $424.5 million. If not for the $476 million bond sale, it might actually have gotten worse next year as the S&P 500 Index barely budged between June 30, 2019 and June 30, 2020 due to the significant drop in the Index in February and March 2020 due to worries about the potential extent of the COVID-19 pandemic. 

Also, the article doesn't state so, but this sounds like a pension obligation bond. As mentioned in this blog post, two-thirds of such bonds end up losing money. The below indicates the county has budget problems coming up even without their pensions issues.          

  

Coronavirus: Lab Leak Part 5 -- CNN Makes Some News

I've been posting on the COVID-19 lab leak hypothesis since March 2021. If interested, you can click on the links for those blog posts (Part 1,Part 2, Part 3, Part 4). 

Recently, CNN came out with some news that Joe Biden's administration shut down (the administration argues the work was completed) a State Department effort that was started under the President Trump administration to look into that hypothesis. 

CNN (May 26) reports:

But the inquiry quickly became mired in internal discord amid concerns that it was part of a broader politicized effort by the Trump administration to blame China and cherry-pick facts to prove a theory.

. . . The decision to terminate the inquiry, which was run primarily out of the State Department's arms control and verification bureau, was made after Biden officials were briefed on the team's draft findings in February and March of this year, a State Department spokesperson said. Questions were raised about the legitimacy of the findings and the project was deemed to be an ineffective use of resources, explained a source familiar with the decision.

Okay, here's a nice summary of the above: both President Biden's team and those at the State Department during the Trump Administration discounted this hypothesis, because of President Trump's position on the topic; therefore, causing harm due to time delays on if this is the reason for the pandemic.

Coronavirus: Lab Leak Part 4 - Politifact Backs Down

I've been posting on the COVID-19 lab leak hypothesis since March 2021. If interested, you can click on the links for those blog posts (Part 1,Part 2, Part 3). 

It now looks like Politifact (May 17) is backing down in their belief that the lab leak hypothesis is false. They previously wrote, "The claim is inaccurate and ridiculous. We rate it Pants on Fire!" This fact check was based on a Tucker Carlson (Sep 15, 2020) interview with a Dr. Li-Meng Yan and the following statement by the doctor, "This virus, COVID-19 SARS-CoV-2 virus, actually is not from nature. It is a man-made virus created in the lab." 

Now Dr. Li-Meng Yan also argued that the virus was intentionally leaked (if you click on the Tucker Carlson link, you can view the comment starting at the 5:20 mark). I'll be honest, I don't know if I believe that claim. Would China really leak a deadly virus into one of their own cities first? Why not leak it elsewhere? To me, that just indicates her obvious bias versus a purely scientific review.

Rental Crisis from the Landlords Perspective

I previous wrote about how the COVID-19 pandemic was creating a rental crisis. In California, no one can be evicted from their apartment until June 2021 (some exceptions apply such as if someone has a high income and is just trying to avoid making rental payments). At that time, I looked at this crisis from the tenants perspective. How about taking a look from the landlords perspective?

The LA Times (Apr 5) did just that:

A new survey published Monday by researchers from the University of Pennsylvania offers more specific insight into the pandemic’s effect on landlords in Los Angeles: More than half of 1,300 property owners surveyed in December last year said their business would face financial distress within six months if their situations didn’t improve.

. . . Moody’s Analytics and the Urban Institute think tank estimate 9.4 million U.S. renter households owed an average of $5,586 in back rent, utilities and related late fees as of January, for a total debt pile of $52.6 billion.

. . . An improving economy and the flow of significant rent relief money could improve fortunes for both landlords and tenants in coming months. The two federal stimulus bills passed since December allocate about $50 billion to help tenants nationwide pay rent, with that money set to automatically go to landlords.

Okay, honestly, I suspect that many landlords are not in the dire situation that the University of Pennsylvania survey uncovered. It is a dated survey and soon after that point in time (as indicated by the above quotes), there were two federal stimulus bills that were passed. Moody's estimates that there are $52.6 billion in unpaid back rent. Some of that would be utilities and late fees. The stimulus bill was at $50 billion. It really looks like from that perspective that only a small amount of back rent actually needs to be collected from tenants. I am sure that knowing that money is going to start flowing (if it hasn't already) that banks wouldn't foreclose on landlords who were good customers prior to the pandemic.

The article does indicate that some landlords were forced to sell. Considering how property values have increased, I wonder if they took much of a financial hit even if there were some tenants that weren't currently paying.

The article does state that some landlords are selling due to fear of changes in the laws that will be more favorable to the tenants. That, to me, is a a reason to sell which is different from a fear of falling behind on loan payments. I actually suspect that restricting the rights of landlords could backfire on tenants over the long run. Current tenants might gain some benefits by being allowed to stay in their apartments / houses for a longer period of time during periods of financial stress, but future potential tenants might have a harder time finding someone to rent to them.