Trump and Partners Borrow $1.2 Billion at 2% Interest Rate

555 California Street, San Francisco, CA

How much money is the Federal Reserve pumping out and what is it doing to interest rates? 

Former President Trump just issued the following statement:

Trump has a 30% ownership stake in 555 California Street in San Francisco, whose senior partner is Vtnado.

Proceeds were being used to refinance the skyscraper and to give Vornado and Trump a $617 million payout.

 -RW

Lee Ohanian Advising Caitlyn Jenner

Lee E. Ohanian

Lee E. Ohanian, professor of economics, University of California, Los Angeles and senior fellow, Hoover Institution, Stanford University, and a pretty hardcore free-market economist, is advising Caitlyn Jenner on economic policy for Jenner's run for California governor.

Some of his op-eds:

“California's Solar Rooftop Mandate Doesn't Make Economic Sense”, San Francisco Chronicle, May 18, 2018.

“U.S. Needs A President Who Understands Benefits Of Free Trade”, Investors, April 4, 2016.

“U.S. Income Inequality Isn't Soaring, It's Falling”, Investors, October 9, 2014.

“Taxes Are Much Higher Than You Think”, Wall Street Journal, December 11, 2012.

 -RW

Conservative Group Launches Ads Attacking Woke CEOs and Corporations

Consumers’ Research, a conservative nonprofit organization, is taking aim at the woke corporations Nike, Coca-Cola and American Airlines and their CEOs, with a just released series of  30-second commercial spots that will air on national cable news.

Take a look:

 

It really makes little sense for corporations to get involved in politics.

As The Wall Street Journal comments in an editorial:

[W]hen CEOs take sides in political fights unrelated to their business interests or regulation, they have to expect to be treated like politicians themselves... CEOs get paid to lead and protect their brands, not to be led by people who think business should embrace their politics...

The woke business trend isn’t healthy for the free-market cause. CEOs risk undermining support on the grass-roots and Congressional right for business, mirroring the anti-corporate sentiment that dominates the left. CEOs can never buy enough absolution from the left as long as they believe in profit. Alienating the right leaves them friendless. We warned CEOs that this would happen when they went for woke, and now it has.

Perhaps corporate boards should do their jobs and start exercising some supervision over politicized executives.

-RW

Ford to Lose 50% of Q2 Production Due to Chip Shortage

Ford Motor is looking to pause vehicle manufacturing at eight North American factories at different periods through the month of June due to an ongoing shortage of semiconductors, which is expected to cut the company's production outputs in the second quarter of 2021 by half, CNBC reports citing an obtained internal memo.

In the second half of the year, the company is expecting to lose 10% of its production. Meanwhile, in total in 2021 the chip shortage will have prevented Ford from producing nearly 1.1 million vehicles, ranging from the Ford Mustang and Escape crossover to the highly profitable F-150 pickup and Bronco Sport SUV. The manufacturing halt is estimated to cost the carmaker around $2.5 billion.

"Our teams continue making the most of our available semiconductor allocation and will continue finding unique solutions to provide as many high-quality vehicles as possible to our dealers and customers," Ford said in the emailed memo.

This is yet another example of limited supply in the economy that will put upside pressures on prices.

 -RW

 BITCOIN COLLAPSE

Bitcoin is down in price for a fifth-straight day.

Currently, the price is down on the day by 18.6% to $35,106.00.  Just weeks ago, the price was $64,829.14. It is now down more thna 40% from that record high.

The collapse started days ago when Elon Musk first announced that Tesla would not be accepting bitcoin for car payments. He followed that up days later with cryptic tweets that suggested he might be selling, or has sold, Tesla's position in bitcoin. Since then, Musk has issued a follow-up tweet indicating that his firm has not sold any bitcoin.

The most immediate cause for the continued price decline is a renewed crackdown on cryptocurrencies from the People’s Bank of China. The central bank issued a statement on its WeChat account reiterating that financial institutions should not accept or deal with cryptocurrencies.

 -RW

How the Silicon Valley Chip Shortage is Leading To a Spike in Potato Chip Prices

It is going to get more expensive to be a  couch potato. 

Hoosier AG reports:

The biggest factor impacting the ability of U.S. farmers to produce the food we need has nothing to do with the weather, the markets, trade, regulations, or disease. The worldwide shortage of computer chips will impact all aspects of agriculture for the next two years and beyond.  Almost every piece of farm equipment, like most everything else in our lives, needs a computer chips to operate. Due in part to the Covid 19 Pandemic, there is a massive worldwide shortage of chips; and the industry is unable to meet the skyrocketing demand. Industry sources say the current shortage will not be resolved until sometime in 2022.

Meanwhile, farm equipment manufacturers have halted shipments to dealers because they don’t have the chips to put in the equipment...

Here is  Rabobank's Global Economics & Markets on the Hoosier story:

[T]echnological wonders of a global economy based on just-in-time supplies of a few key inputs from only a few locations; and then demand surged due a virus that ran rampant through said global economy; and supply chains got snarled for that, and other reasons; and now a lack of silicon chips even impacts on the price of potato chips (in the US) and chips (in the UK)."

Another result: used farm equipment prices are about to skyrocket in price. Also, chip giant Taiwan Semiconductor Manufacturing Co. is warning that the shortage will continue throughout this year and maybe extended into 2022. 

Bottom line: As I have been pointing out in the EPJ Daily Alert, there are all kinds of not readily apparent bottlenecks in the economy as a result of the shutdowns. Only over time will we learn about them. But this is the supply side factor in the upward pressure on prices.

We are going to be in for quite the price inflation this summer. 

 -RW

Material Prices for Homebuilders Are Climbing So Fast That Builders Are Adding Escalation Clauses to Sales Contracts

Housing prices are soaring and there appears to be no end to the advance. Prices are now accelerating at the fastest rate in over 15 years.

A combination of lockdown-related bottlenecks, limited labor availability (thanks to over-the-top unemployment payments that give potential workers incentive to just stay home) and, most significant, massive printing of money out of thin air by the Federal Reserve.

 In a monthly sentiment survey of builders, they reported higher costs for lumber, steel, gypsum and copper, some of which have hit record highs this year. Not to mention the limited labor. Construction employment stalled in April and actually fell below its pre-lockdown peak, according to the Bureau of Labor Statistics.

So what are homebuilders doing in cases where a home is sold but not completed?

Escalation clauses.

 “Escalation clauses specify that if building materials increase, by a certain percentage for example, the customer would be responsible for paying the higher cost. Including such a clause allows all parties to be on notice that the contract costs could change if materials prices change due to supply constraints outside the builder’s control,” according to a recent NAHB post.

 -RW

Hackers Behind U.S. Pipeline Attack Say They Lost Access To Ransom Money

So much for the anonymity and protection of cryptocurrencies. The ransomware hackers can not be considered unsophisticated operators but...

The operator of the ransomware group Darkside says it has lost control of its servers and some of the money it had received through ransom payments, Recorded Future threat intelligence analyst Dmitry Smilyanets reports.

"A few hours ago, we lost access to the public part of our infrastructure, namely: Blog. Payment server. DOS servers," Darksupp, the operator of the Darkside ransomware, said in a post spotted by Smilyanets.

The operator of Darkside also said that cryptocurrency funds were withdrawn from their payment server, which was hosting ransom payments.

Darkside was behind the ransomware attack on the main pipeline carrying gasoline and diesel to the U.S. East Coast, Colonial Pipeline, which shut down late last week, disrupting gasoline and diesel deliveries to many states.

 -RW

The Median House Price in California Now Surpasses $800,000

If you own a house in California, the odds are high that you might have ownership of a million-dollar asset.

Thank you, Federal Reserve.

The median price of an existing, single-family detached home in California brought the state's median price above the $800,000 benchmark for the first time, according to the California Association of Realtors.

California's median home price was $813,980 in April, according to the group.

Orange County saw its median home price increase to $1,100,000 in April from $1,025,000 in March. It was $861,000 in April 2020.

The biggest increase from last month was seen in the San Francisco Bay area, which saw its median home price jump from $1.225 million in March to $1.328 million.

Don't for a minute think, this advance is not mostly the result of massive Federal Reserve money printing.

 -RW

Are COVID-19 Related Federal Bonus Unemployment Payments Incentivizing People to Not Look for Employment?

Why is unemployment so high even though businesses are desperate for workers? 

Could it be because of the federal bonus unemployment payments?

Joe Biden recently stated that there is no evidence that federal bonus unemployment payments are keeping people from seeking out work.

But thinking about it, one would surely reach the conclusion that if people are getting paid more for sitting on a couch than working, there is an awful lot of incentive for many to stay at home.

University of Chicago economist Casey Mulligan has put together a chart showing empirical evidence that supports this thinking:

Bottom line: If you pay people enough when they are staying at home, they will stay at home. They only get off the couch when the incentive is too small to stay at home.

 -RW

Michael Burry of ‘The Big Short’ Reveals a $530 Million Bet Against Tesla

Michael Burry

Michael Burry has revealed in a regulatory filing a short position against Tesla worth more than half a billion.

Burry, one of the first investors to call and profit from the subprime mortgage crisis, is long puts against 800,100 shares of Tesla or $534 million by the end of the first quarter, according to the filing with the SEC. The movie "The Big Short" was based on his shorting of the subprime market.

Very interesting.

Burry is a very serious dude who knows how to do analysis. He obviously isn't buying into Elon Musk's smoke and tweet act.

That said, it is always dangerous on the short-side when the Federal Reserve is printing out so much money.

 -RW

Socialism By Any Other Name

 By David Stockman

You really cannot curse Donald Trump enough for his horrid appointments to the Fed.  The latter is now and has been for a good while the implacable enemy of sound money,  fiscal rectitude, capitalist prosperity, small government and personal liberty.  

In fact, the Donald’s last appointment, who was confirmed in the nick of time in  December 2020, just averred that 4.0% inflation would be just fine by him:  

Among Fed speakers overnight, Governor Christopher Waller signaled that  rates won’t rise until policymakers either see inflation above target for a long  time or excessively high inflation. He also said he would only get worried  if inflation rose above 4%, defining the Fed’s first real “red-line.” 

Well, what would you expect from this paint-by-the-numbers academic?  

After graduating from Bemidji State University (whatever that is) and getting a PhD in  economics from Washington State, he spent his entire career professoring, writing  papers in behalf of easier money and more Fed power, and eventually heading the  “research” department at the St. Louis Fed, where he teamed up with its lunatic dovish  president, James Bullard.  

Read the rest here.

The Government of Lebanon Has Entered Default, Argentina Could Be Next

Dr. Benn Steil, Senior Fellow and Director of International Economics at the Council on Foreign Relations, emails:

The CFR Sovereign Risk Tracker is updated.

 

Lebanon has entered default, making it the second country on the Tracker in default (along with Venezuela). Serial-defaulter Argentina has jumped from an Index rating of 7 (out of 10)  in 2019 to 10 today, which implies a greater than 50% chance of default.  Tunisia’s Tracker Index score has jumped the most since 2019, from 4 to 8, the main cause being its poor economic performance during the pandemic.

 

Sincerely,

Benn

 -RW

World Economic Forum Cancels August Meeting

A small break against Klaus Schwab the central planning globalists.

 The World Economic Forum has confirmed reports it is canceling its meeting, which was supposed to take place in August in Singapore, and moving it to the first half of 2022.

"Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination rollout and the uncertainty around new variants [of COVID-19] combine to make it impossible to realize a global meeting with business, government and civil society leaders from all over the world at the scale which was planned," the organization said.

The WEF is yet to confirm the exact date and location of the rescheduled encounter.

 -RW

The World Economy Is Running Low on Everything

From Bloomberg:

A year ago, as the pandemic ravaged country after country and economies shuddered, consumers were the ones panic-buying. Today, on the rebound, it’s companies furiously trying to stock up. 

Mattress producers to car manufacturers to aluminum foil makers are buying more material than they need to survive the breakneck speed at which demand for goods is recovering and assuage that primal fear of running out. The frenzy is pushing supply chains to the brink of seizing up. Shortages, transportation bottlenecks and price spikes are nearing the highest levels in recent memory, raising concern that a supercharged global economy will stoke inflation.

Copper, iron ore and steel. Corn, coffee, wheat and soybeans. Lumber, semiconductors, plastic and cardboard for packaging. The world is seemingly low on all of it. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said on a call this month. Clients are “trying to get everything they can because they see high demand,” Jennifer Rumsey, the Columbus, Indiana-based company’s president, said. “They think it’s going to extend into next year.”

The difference between the big crunch of 2021 and past supply disruptions is the sheer magnitude of it, and the fact that there is — as far as anyone can tell — no clear end in sight.

Who could have possibly anticipated this?

In the EPJ Daily Alert in March of last year I wrote:

 My view continues to be that once the panic is over, there will be a manufacturing boom both here in the US and China as businesses chuck "just in time" inventory operations and resort to "stock up enough inventory to keep me operational through next flu season."

This will be a bonanza for  container ship operators whose stocks have been absolutely destroyed by the COVID-19 panic.

On June 3, 2020, I wrote:

 We haven't even seen the price inflation that I expect yet so the earliest we could see price controls is sometime in 2021...

The price inflation rate will very likely hit 5% annualized, but it could very well be much higher, maybe 10% plus. 

This gives us plenty of time to prepare. 

 On October 19, 2020, I wrote:

 The material shortage is an indication of likely strong price pressures developing for the materials. The climb in materials prices will not be small...Price inflation is currently under 2.0%. It will start to climb in a month or two but it will take months before it is considered a serious problem.

 -RW

Elizabeth Warren Signals She is Part of the Anti-IP Crowd

Elizabeth Warren

Massachusetts Senator Elizabeth Warren, who hates anything that hints of free markets and private property, has signaled she is a member in good standing of the anti-IP crowd.

The Wall Street Journal reports:

Progressives are promoting President Biden’s waiver of U.S. Covid vaccine patents as necessary to save lives. So full marks for candor to Sen. Elizabeth Warren, who last week explained the real goal: set a precedent that erodes all pharmaceutical intellectual property protections in the U.S. and around the world.

“Special [IP] protections for drug companies are an even bigger issue than COVID-19 alone,” the Massachusetts Senator said at a Senate Finance hearing with U.S. Trade Rep Katherine Tai on Wednesday. 

This should come as no surprise. As Warren has demonstrated, time after time, she is first and always a  central planner. Denying individuals and corporations the ability to protect their inventions in their own fashion is simply a central planning scheme to take control of intellectual creations away from the creators and hand them over to the state to make the rules.

There is no surprise that Warren would be in favor of this.

The libertarian position on intellectual property was best presented by Murray Rothbard, who argued that the structure of copyright law was the best legal structure for intellectual property and should also be used for creations that are now protected by patents:

Violation of (common law) copyright is an equivalent violation of 
contract and theft of property. … our theory of property rights 
includes the inviolability of contractual copyright.
 Ethics of Liberty, p. 123

… violation of copyright should indeed be illegal.
 Libertarian Forum v. 2, p. 112

On the free market, there would therefore be no such thing 
as patents. There would, however, be copyright for any inventor or 
creator who made use of it, and this copyright would be perpetual, 
not limited to a certain number of years.
 Man, Economy, and State with Power and Market, p. 74

 -RW

Bitcoin Dives on Tweets From Elon Musk

Well, bitcoin, that great "store of value," is diving again because Tesla CEO Elon Musk just implied in a Twitter exchange that Tesla may have sold or may sell the rest of its bitcoin holdings.

A Twitter user who goes by @CryptoWhale said, “Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn’t blame him…”

Musk replied, “Indeed.”

Whether Musk sold, or not, is not the point. The point is that anything that can experince significant selling because of a tweet by a very strange character is not a store of value.

#BREAKING: #Bitcoin’s roller coaster ride continues. It’s currently trading at $45,677.81/#BTC, down over 23% from its 7-Day high of $59,356.78/BTC (source: @coinbase).

Just remember— Bitcoin is no more than a highly speculative asset with a fundamental value of ZERO!

— Steve Hanke (@steve_hanke) May 16, 2021

 -RW