The Nation's Financial Condition

[Farfromgeneva]

You are not intelligent based on your presentation here. If it’s an Act it’s lack of any thoughtfulness because when I watch Calvin Candy I’m aware it’s an actor playing a role, if it’s not an act...

Just don’t get it. I guess that’s why you use the clown emoji so often to let everyone know your life and profession.

The words you use in reply don’t even follow macroeconomic or english language logic. Inflation is measured by a basket of prices chucklehead. Bitcoin, an asset, is 5x, lumber is well over a double. Those tax cuts and Covid reflect the dollar and price changes I your dummy chart probably pulled from from an Alex Jones website.

Inflation isn’t one commodity.

And my answer didn’t say trump but you stated Biden was responsible for this unsolicited so it was actually you making the specious claim out of stupidity or dishonesty,take your pick. I’m talking about the actions and market events (as well as a major exogenous one) that impacted this. You inferred the person who had more involvement in this phenomena then the one you explicitly stated is responsibility. Keep on being dishonest.

Sheesh, the oil market went so belly up owners had to pay others to take their oil as it was costing more to transport or store it than anyone was willing to pay.

My wife joined the board of a family holding company last spring, family dough came from Standard Oil...then first to create self serve pumps...still significant oil and gas exploration and tanker business...it was scary times...it'll be interesting to see how that business evolves over the years, but they're certainly breathing a bit easier right now.

Nah, that belly up turn wasn't Trump, it was the pandemic. And now we're going in the opposite direction with world demand. But what a lot of hooey that a pipeline that's never been built being canceled would cause a spike in prices. Absolutely so dumb that the only explanation becomes "dishonest".

But hey, trolls troll.

Paper traded negative no oil changed hands at negative prices. Where were futures the next day? Trading commodities futures is trading paper, real conversion to cash prices has gone away. Look at the number of energy, agriculture, sugar, soy derivatives tied to futures contracts. CME publishes actual deliveries at the end of each month you would be surprised how little delivery goes through your price regulated transparent pricing mechanism.

Well you really couldn’t have physical settlement as there was nowhere to store it which is why the price mechanism was negative. Literally had barges sitting in the water. And the various market makers on the street have generally been forced to divest from their storage. But this doesn’t mean the price mechanism doesn’t work in commodity futures. Having invested in or traded other esoteric synthetic instruments I’m quite familiar with markers where the dedicate pricing diverges from cash but this isn’t one of them yet (such as bespoke HY CDO basically a cash flow contract supported by the theoretical payments made to a A or BBB rated tranche using 50-100 crappy corporate names or a tri party ethanol hedge created by Goldman in attempt to hedge the unhedhedgeable risk in corn based ethanol production which is the complete lack of correlation between corn and Nat gas or oil prices-over 30yrs its .02...)

So if you are suggesting the cash price was real and futures aren’t id reject that pretty fast. Some counterparty was transacting On those contracts.

"WTI is special in a way because it's so tightly connected to physical oil," said Derrick Morgan, senior vice president of American Fuel & Petrochemical Manufacturers

And I’m not sure your point when one clown puts up a chart as evidence of something about our president gong back two years and ignoring the reality in the markets that forced oil down and the rebound is natural. Unless it’s a point of diversion as a tactic from the original worse than specious argument.

When cash was in the 30s and 40s I know for a fact the integrated a we’re buying smaller E&P debt at less than 50 cents on the dollar. My new business was in extended conversations with a decent sized Gulf region bank to manage about $2Bn of non performing assets (loans) a majority of which were energy sector. Would’ve been a nice piece of business but unfortunately they decided to dump the worst half billion of that debt for 52-55 cents on the dollar to Oaktree. Bottom line is anyone showing a chart of gas or oil prices starting in 2019 and the dip and rise and suggesting it’s the president and not acknowledging this is dishonest or not informed enough to make these arguments.

Oh and the dollar chart overlayed in the last year...most contracts are in what currency still?

FFG the contracts were penultimate, expiring the next day, commercials were not trading. The Chicago mafia aka the algos were trading. Crack spreaders made good money that day buying crude at negative prices and selling refined products in the same contract delivery month. There was no convergence to cash, futures contracts are structured to tightly. Very few commercial deliveries are done through the exchange maybe 20 MM BBLS a month, be happy to pint you in the direction of the exchange data but both cme and ice make it hard to get historical delivery data. The disconnect between futures and cash is real. Every ETF and commodity fund sellS front month and rolls to deferred contracts to avoid margin. The retail ETF products sold to the general public give the perception of exposure to commodities, but with carry charges you sell a cheaper contract to buy a more expensive one. Look at the USO ETF. The exchange lists multiple derivatives priced off Cushing BBLS, ULSD and HO delivered into NY harbor. And ICE and CME are allowed to use each other’s settlements to list contracts, all the trades are arbitraging the two exchanges. Guess how many round turns an algo shop will trade to make one tic. A: 10 if they lose on two, scratch 5, and positive p&l on 3 they have made one tic. Exchanges let the trade for free and sometimes rebate them based on volume. You know why, the other side is paying full fee. Oh by the way those algos don’t carry open interest unless the have locked in an arbitrage profit. When they do the pay member rate margins, can offset with contra contracts as well. Trading futures is trading paper, very little to do with underlying asset.

Love the technical response and understand so appreciate it. Had a friend who died in 9/11 who was a big trader in Oil Futures for a subsidiary of a French bank called Carr Futures who taught me a bit when I was in college taking Russian because I was thinking their energetic sector would truly open up (before Khodkorvsky was arrested by a couple of years after he came back from a meeting w XOM and Putin decided that wasn’t cool). Then on Corp fin side doing project finance deals and financing some middle market E&P, usually second lien on PPP.

All good. It still doesn’t explain the chart which was the original point of the thread which was a guy claiming using a bad chart the reason gas prices were up we’re somehow a couple months worth of policies regardless of the contango situation and specific price only a fracture in markets for a moment not the trend. Otherwise we should find out what Trump did that was so great to get oil prices down. Maybe he was in the middle of the intervene (fake) fight between SA and Russia last year which I learned a lot from my DOD friend in SA shared with me. You’re taking technical about one day price change from a market perspective not from an end user perspective and more importantly a longer term directional change that can easily be explained by Covid and the dollar not some silly suggestion a president who’s been around a couple of months means we’re going to $100BBL in a secular change. (and the futures market still exists because of real end users as I’ve had to do a ton of work regarding the CFTCs post financial crisis clearinghouse rules within Volcker for interest rate derivatives and between credit and rate contracts I’ve learned enough to know that any friction or anomaly exists because of cash users in said market not fast money participants, they simply function to extract any excess bid/ask spread from the market)

[lagerhead]

You are not intelligent based on your presentation here. If it’s an Act it’s lack of any thoughtfulness because when I watch Calvin Candy I’m aware it’s an actor playing a role, if it’s not an act...

Just don’t get it. I guess that’s why you use the clown emoji so often to let everyone know your life and profession.

The words you use in reply don’t even follow macroeconomic or english language logic. Inflation is measured by a basket of prices chucklehead. Bitcoin, an asset, is 5x, lumber is well over a double. Those tax cuts and Covid reflect the dollar and price changes I your dummy chart probably pulled from from an Alex Jones website.

Inflation isn’t one commodity.

And my answer didn’t say trump but you stated Biden was responsible for this unsolicited so it was actually you making the specious claim out of stupidity or dishonesty,take your pick. I’m talking about the actions and market events (as well as a major exogenous one) that impacted this. You inferred the person who had more involvement in this phenomena then the one you explicitly stated is responsibility. Keep on being dishonest.

Sheesh, the oil market went so belly up owners had to pay others to take their oil as it was costing more to transport or store it than anyone was willing to pay.

My wife joined the board of a family holding company last spring, family dough came from Standard Oil...then first to create self serve pumps...still significant oil and gas exploration and tanker business...it was scary times...it'll be interesting to see how that business evolves over the years, but they're certainly breathing a bit easier right now.

Nah, that belly up turn wasn't Trump, it was the pandemic. And now we're going in the opposite direction with world demand. But what a lot of hooey that a pipeline that's never been built being canceled would cause a spike in prices. Absolutely so dumb that the only explanation becomes "dishonest".

But hey, trolls troll.

Paper traded negative no oil changed hands at negative prices. Where were futures the next day? Trading commodities futures is trading paper, real conversion to cash prices has gone away. Look at the number of energy, agriculture, sugar, soy derivatives tied to futures contracts. CME publishes actual deliveries at the end of each month you would be surprised how little delivery goes through your price regulated transparent pricing mechanism.

Well you really couldn’t have physical settlement as there was nowhere to store it which is why the price mechanism was negative. Literally had barges sitting in the water. And the various market makers on the street have generally been forced to divest from their storage. But this doesn’t mean the price mechanism doesn’t work in commodity futures. Having invested in or traded other esoteric synthetic instruments I’m quite familiar with markers where the dedicate pricing diverges from cash but this isn’t one of them yet (such as bespoke HY CDO basically a cash flow contract supported by the theoretical payments made to a A or BBB rated tranche using 50-100 crappy corporate names or a tri party ethanol hedge created by Goldman in attempt to hedge the unhedhedgeable risk in corn based ethanol production which is the complete lack of correlation between corn and Nat gas or oil prices-over 30yrs its .02...)

So if you are suggesting the cash price was real and futures aren’t id reject that pretty fast. Some counterparty was transacting On those contracts.

"WTI is special in a way because it's so tightly connected to physical oil," said Derrick Morgan, senior vice president of American Fuel & Petrochemical Manufacturers

And I’m not sure your point when one clown puts up a chart as evidence of something about our president gong back two years and ignoring the reality in the markets that forced oil down and the rebound is natural. Unless it’s a point of diversion as a tactic from the original worse than specious argument.

When cash was in the 30s and 40s I know for a fact the integrated a we’re buying smaller E&P debt at less than 50 cents on the dollar. My new business was in extended conversations with a decent sized Gulf region bank to manage about $2Bn of non performing assets (loans) a majority of which were energy sector. Would’ve been a nice piece of business but unfortunately they decided to dump the worst half billion of that debt for 52-55 cents on the dollar to Oaktree. Bottom line is anyone showing a chart of gas or oil prices starting in 2019 and the dip and rise and suggesting it’s the president and not acknowledging this is dishonest or not informed enough to make these arguments.

Oh and the dollar chart overlayed in the last year...most contracts are in what currency still?

FFG the contracts were penultimate, expiring the next day, commercials were not trading. The Chicago mafia aka the algos were trading. Crack spreaders made good money that day buying crude at negative prices and selling refined products in the same contract delivery month. There was no convergence to cash, futures contracts are structured to tightly. Very few commercial deliveries are done through the exchange maybe 20 MM BBLS a month, be happy to pint you in the direction of the exchange data but both cme and ice make it hard to get historical delivery data. The disconnect between futures and cash is real. Every ETF and commodity fund sellS front month and rolls to deferred contracts to avoid margin. The retail ETF products sold to the general public give the perception of exposure to commodities, but with carry charges you sell a cheaper contract to buy a more expensive one. Look at the USO ETF. The exchange lists multiple derivatives priced off Cushing BBLS, ULSD and HO delivered into NY harbor. And ICE and CME are allowed to use each other’s settlements to list contracts, all the trades are arbitraging the two exchanges. Guess how many round turns an algo shop will trade to make one tic. A: 10 if they lose on two, scratch 5, and positive p&l on 3 they have made one tic. Exchanges let the trade for free and sometimes rebate them based on volume. You know why, the other side is paying full fee. Oh by the way those algos don’t carry open interest unless the have locked in an arbitrage profit. When they do the pay member rate margins, can offset with contra contracts as well. Trading futures is trading paper, very little to do with underlying asset.

Love the technical response and understand so appreciate it. Had a friend who died in 9/11 who was a big trader in Oil Futures for a subsidiary of a French bank called Carr Futures who taught me a bit when I was in college taking Russian because I was thinking their energetic sector would truly open up (before Khodkorvsky was arrested by a couple of years after he came back from a meeting w XOM and Putin decided that wasn’t cool). Then on Corp fin side doing project finance deals and financing some middle market E&P, usually second lien on PPP.

All good. It still doesn’t explain the chart which was the original point of the thread which was a guy claiming using a bad chart the reason gas prices were up we’re somehow a couple months worth of policies regardless of the contango situation and specific price only a fracture in markets for a moment not the trend. Otherwise we should find out what Trump did that was so great to get oil prices down. Maybe he was in the middle of the intervene (fake) fight between SA and Russia last year which I learned a lot from my DOD friend in SA shared with me.

Overlay shale drilling.

[Farfromgeneva]

I wonder how Blackstone is doing on all their investment in N Dakota? I know the guys in NW Pa like Mansfield has a lot of cash vs over the border in Elmira area where it’s not allowed, my grandfather ha d a hundred or so ac and his rights lease is a tiny fraction of what the guys were getting in Pa 10-20 mi away.

Recall financing a gas worker camp in Wyoming. Basically between cargo containers retrofitted and manufactured homes on a field where they were paying through the roof but weekly leases so a bank kicked the loan out in the crisis and my smaller balance sheet fund (At that point I was working for a HY CRE debt fund mostly running a CDO machine of directly originated and bought debt). Spring of 08-“sure we can give you seven million on bucks. At 4 & 16, 2yr term, 1 1ye extension option, 1pt exit if we don’t Securitize it for take out. Greatest deal ever back then.

[Farfromgeneva]

I have a friend who is killer at acquiring class B industrial assets and occasionally have thrown a nickel in (he lets me put in less than his min for his real investors due to relationship and I have provided symbiotic assistance from time to time on his finance front as a buddy) and he shared a package, not one he’s doing but to share, which I thought the investment highlight (from a CRE broker mind you) would be interesting to see. It’s pretty clear this is a PE sponsor deal (Behind the acquirer) and their selling some assets to fund the purchase:
​​​​​​​
(Top 3 brokerage firm but keep in mind CRE professionals are often not finance people even on the finance side of the business as I can show you by the former credit head of the CMBS unit at DB or head of CRE banking at Fortis after being a leasing broker in the city)

Investment Overview

JLL as exclusive advisor to Amsted Industries Incorporated ("Amsted”) is pleased to offer the fee simple interest in three (3) warehouse and manufacturing facilities located in Detroit, Michigan and Oxford, Mississippi (the “Offering”). Totaling 367,230 square feet of mission critical real estate, the properties are situated in dense blue collar labor markets with convenient access to local interstate highways. A subsidiary of Amsted is expected to acquire the assets as part of a pending acquisition of SMW Manufacturing, which is scheduled to close the 3rd quarter of this year. Underscoring its commitment to the ongoing operations at these three buildings, the Amsted subsidiary plans to enter into new 12-year leases for each of the properties with two (2) five-year renewal options at fair market rent and a right of first offer to purchase. Further, all lease obligations will be guaranteed by Amsted. This Offering may ultimately provide investors with access to corporate credit that earns $3+ billion in annual sales on a long-term basis embedded in two important manufacturing markets within the South and Midwest parts of the country.​​​​​​​
​​​​​​​
INVESTMENT HIGHLIGHTS
Exceptional and Resilient Tenancy with $3B+ in Annual Revenue
Strategic Geographic Diversification Near Key Logistics Infrastructures
Secure Cash Flow with Advantageous Lease Terms
Accessibility to Highly Educated and Deep Blue Collar Labor Pool

[Farfromgeneva]

The institutionalization of weed (psychedelics are next and with more pharmaceutical usage bigger money maker IMO). But still expensive cost of capital, Ill drop a 2 way market on a bunch of physical certificate, illiquid Small bank unsecured, subordinate debt (Holdco, subordinate and unsecured the entity can downstream the money to the regulated operating bank and the regulators count it as Tier 2 capital for their calculating how much buffer or leverage a bank has) and that’s 4-6% off the break so ohh boy I’m getting sub 10% to borrow isn’t killer.

One of the Pot Industry’s Best Highs is Fading
A big listed U.S. cannabis grower recently raised debt at a sub-10% coupon for the first time. It isn’t a positive sign for everyone.

A cannabis dispensary in Los Angeles. U.S. growers will be treated as pariahs by mainstream banks as long as the drug remains federally outlawed.
PHOTO: LUCY NICHOLSON/REUTERS
By Carol Ryan
May 14, 2021 5:06 am E
Top U.S. cannabis growers will be glad to see the back of one particular high: double-digit interest rates. Others in the pot industry may feel a bit deflated.

Green Thumb Industries, which this week reported 90% comparable sales growth in the first quarter, recently secured the first debt deal by a big listed U.S. marijuana cultivator at a sub-10% coupon. The Illinois-based business got a three-year loan at a 7% interest rate, or 9.1% factoring in warrants, based on calculations by Viridian Capital Advisors. Rival Curaleaf got a credit facility at 10.25% without an equity sweetener earlier this year

U.S. growers will be treated as pariahs by mainstream banks so long as the drug remains federally outlawed. Yet their cost of capital is coming down anyway, as business booms and competition among yield-hungry alternative lenders heats up.


In 2020, sales of legal U.S. pot reached $20 billion, a jump from $13 billion in 2019. Rapid growth continued in the first quarter, with sales in Illinois and Massachusetts up 100% and 71% respectively, according to the cannabis-focused SOJE Fund. The prospect of regulatory reform is also shifting how capital markets view the industry. Senate Majority Leader Chuck Schumer is trying to introduce a bill that, if approved, would finally give pot companies access to regular banking services like mortgages.

Potent Growth
First-quarter cannabis sales vs. year-ago period
Source: SOJE Fund LP
Illinois
Florida
Massachusetts
Oregon
Colorado
California
0%
20
40
60
80
100
120
For now, the hedge funds and family offices willing to lend to pot businesses still need to be compensated for the risks of bankrolling a federally illegal industry and holding illiquid securities. Most institutional investors stay away, so secondary trading is thin. That explains interest rates of around 10% even for the most financially robust borrowers. Curaleaf this week reported a $17 million loss for the first quarter, but sales increased 170% compared with the same period of 2020. GTI has had three consecutive quarters in the

Federal reform would be a game-changer for the biggest names. Frank Colombo, Viridian’s director of data analytics, said “cream of the crop” companies might get a rate of around 5% if the industry were fully legal, based on where single-B U.S. high-yield corporate debt trades.

Lenders will still be able to find fat deals, but only by compromising on credit quality. Small pot businesses that operate in one state or have less real estate to borrow against will probably pay upward of 15% for the foreseeable future. Even if big banks do get the green light to work with the industry, some may hold off lending to immature growers until they can show similar progress on profits as the likes of Curaleaf or GTI.

Cheaper debt could take some shine off one stock-market star. New York-listed real-estate investment trust Innovative Industrial Properties buys property from cannabis companies and leases it back at a hefty 11% to 15% rental yield. Selling the real estate on their balance sheet has been a lifeline for U.S. pot companies, helping to increase the value of IIP’s shares almost ninefold since its 2016 initial public offering. As the best tenants get better rates, they are less likely to lock themselves into expensive leases for 20 years.

The stocks of big U.S. growers have fallen since February in a reminder that reform in the industry rarely happens as smoothly or as soon as hoped. For lenders, though, the most potent deals with the best pot companies are already on the way out.Cannabis Industry Faces Obstacles to Banking, but That May Be Changing
Cannabis Industry Faces Obstacles to Banking
Cannabis companies in the U.S. lack access to banking and other financial services because the drug is federally illegal. That could change through new legislation or thanks to broader legalization efforts backed by the Democratically-controlled Senate. Photo Illustration: Laura Kammermann
Write to Carol Ryan at [email protected]

By comparison two way bank sub debt markets. Highly illiquid and limited market for this stuff (though I buy stuff I can but am not a QIB, it’s all money good IMO). Some of these banks may be known by some folks (Freedom Bank is in NOVA for example, run by a former Wachovia ibanker and then with a small bank shop called Hovde, named Joe Thomas, great banker IMO, ran a other Balt area bank called BayBank which sold to Old Line in Bowie who sold to WesBanco in WV and Joe took over this bank). Empire is LI and the former chairman was a old Hobart guy named John Bracken but it sold to Flushing Bank.



Description
CUSIP
Bid
Offer
Size
062595AA1
BHLPFC 6.2 05/25/28
102.25
105.25
10mm
BANK OF HIGHLAND PARK
062595AA1 CORP
291617AB4
EMPNAB 6 1/2 12/17/25
98
101
1mm
EMPIRE BANCORP INC
291617AB4 CORP
32009XAA9
FELDOB 6 3/8 09/21/28
101.75
104.75
8.25mm
FIRST ELDORADO BANCSHARE
32009XAA9 CORP
35634AAA5
FREBAN 6 1/2 07/01/28
101
104
6mm
FREEDOM BANCORP INC
35634AAA5 CORP
607583AA9
MODFIN 7 1/4 09/15/28
103.5
106.5
10mm
MODERN FINANCIAL INC
607583AA9 CORP
65488RAA2
NOABAN 6.7 11/01/28
102
105
7.75mm
NOA BANCORP
65488RAA2 CORP
70336FAB0
PNBK 6 1/4 06/30/28
99.5
102.5
10mm
PATRIOT NAT BANCORP
70336FAB0 CORP
88714LAA3
TIMBAN 6 1/2 06/30/28
101.75
104.75
3.5mm
TIMBERLINE BANCORP
88714LAA3 CORP
124782AB9
CBTHOC 7 12/01/28
103.5
106.5
10mm
CB&T HOLDING CORP
124782AB9 CORP
32050LAA3
FHBI 6 7/8 12/21/28
103.75
106.75
6mm
FIRST HOME BANCORP
32050LAA3 CORP
871104AA3
SWOFIN 6 1/2 12/27/28
102.75
105.75
5mm
SWORD FINANCIAL CORP
871104AA3 CORP

[Farfromgeneva]

Interesting piece a buddy passed along on inflation and interest rates. It's sort of fungible to me in that it's the cost of doing business, so to speak, whether it's in broad based measures of higher prices or the need to invest capital into the system to reduce inflationary signals it's still a cost as this approach doesn't mean investment the same way it traditionally does as much as CapEx to deal with deferred maintenance of the system, so to speak.

Inflation Doesn’t Have to Mean High Interest Rates
Issues like the semiconductor shortage are pushing up prices. Investing in production can be a better way to deal with inflation than interest-rate rises.

The price of used autos jumped 10% in April from the previous month, in part because a semiconductor shortage is impairing production of new cars.
PHOTO: JUSTIN SULLIVAN/GETTY IMAGES
By Jon Sindreu
May 13, 2021 7:45 am ET


Does inflation always lead to high interest rates? Washington’s semiconductor ambitions point to a more logical policy response.

Inflation is back. The U.S. consumer-price index surged to a 13-year high of 4.2% in April, official data showed Wednesday. The eurozone’s figure is a weaker 1.6%, but still a two-year high. The global bond market isn’t panicking yet. The pandemic led many distressed companies to slash prices in 2020. Investors always knew that, as the economy reopened, some year-over-year increases would be huge.

The prices of most products haven’t changed much. CPI gyrations are mostly down to a few items particularly affected by lockdowns and travel restrictions, such as airfares and restaurant prices, as well as commodities. Excluding food and energy, U.S. inflation in April was just 3%.

One inflation driver stood out in Wednesday’s data: The global shortage of semiconductors. Partly because it is impairing production of new cars, the prices of used autos jumped 10% in April from the previous month—accounting for over a third of the all-items increase.

To cool the used-car economy by raising rates and inflicting pain elsewhere would make little sense. Instead, the Biden administration seeks to fix the chip shortage by investing $50 billion in onshore semiconductor production capacity. The plans will take time and are still underfunded, but they help understand that the best way to fight chip inflation is to make more chips.

To be sure, rate rises aren’t technically on the table, because officials have promised not to react to temporary increases in inflation. But here is the rub: They don’t have a clear way to define what is temporary.

Over the past few decades, for example, CPI figures have mostly been the results of a concatenation of “temporary” trends in different sectors—the costs of education and healthcare rose nonstop, while the prices of many goods continuously fell. It was different in the 1970s, when an idiosyncratic squeeze in the supply of oil fueled an inflationary spiral that pushed all costs up.

This is less likely today because labor unions aren’t as strong, and there are few indications of inflation becoming embedded in consumers’ psyches. Expensive used cars are an unlikely basis for employees to demand big raises.

However, many other factors associated with higher-inflation regimes are visibly at play, including stimulus policies, signs of labor shortages and a retrenching of globalization. In a hotter economy, bottlenecks can happen more often, giving central banks an opening to one day raise rates aggressively. Both the Federal Reserve and the European Central Bank have expressed surprise about how much the latest data is exceeding expectations.

Indeed, inflationary fears have replaced Covid-19 as the main “tail risk” in the Bank of America Fund Manager Survey. This entails protecting portfolios against higher rates by tilting allocations toward assets like gold and cheap “value” companies.


But in an era of shifting economic orthodoxies, central banks may be less trigger-happy than in the past, and more willing to keep interpreting high CPI numbers as temporary. Officials’ newfound appreciation for industrial policy could also become a key tool to ease supply pressures. Capital expenditure has played an underrated role in the past: A surge in oil and gas exploration in the 1970s may have eventually helped cool inflation. Likewise, increases in domestic mill production will probably serve to stem the current surge in lumber prices.

Even if inflation returns, sky-high interest rates need not.

[Farfromgeneva]

A. Supply chains and backlogged in all industries from a year off.
B. This is another reminder of how technology in the big picture has reduced the physical footprint needs to distribute goods and services to end users. Have to wonder one day if any movie theaters, car dealership lots or general retail stores will exist.

Zack Snyder’s ‘Army of the Dead’ and Other Netflix Movies Turn Up in Theaters

Facing a shortage of programming, more cinema operators are agreeing to show the streaming company’s movies ahead of their online debut

By May 15, 2021 12:00 am ET

Netflix’s zombie-heist movie ‘Army of the Dead’ opened in theaters Friday. It will start streaming a week later.
Photo: CLAY ENOS/NETFLIX
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The nation’s movie theaters are running out of movies. Some are turning to an unlikely source for more: Netflix Inc. NFLX 1.38%

With major Hollywood studios paring back their release calendars—or shipping movies to their own streaming services—theater chains are expecting to be short of programming for at least three years. That’s one reason several chains premiered the Netflix zombie-heist movie “Army of the Dead” Friday, one week before it becomes available on the service.

The unlikely alliance between movie houses and the streaming giant is another sign of the ways Covid-19 has upended the decades-old dynamic between Hollywood entertainers and the theaters that show their movies. Pandemic-related production shutdowns and a strategic shift away from the big screen have resulted in a programming crunch likely to last years, leaving theaters with no choice but to make deals with Netflix and other streaming services that allow them to play movies at home soon after their big-screen premieres.

Theaters are now compromising on terms they once considered sacrosanct, especially the length of time studios must wait before making movies available to watch at home.

“Pre-Covid there were these rules,” said one theater executive. “Post-Covid there’s a whole new ballgame. We can negotiate anything now.”

Movie releases in the U.S. and Canada, by year
Source: Motion Picture Association
*includes Oscar shorts, TV shows and event showings

New feature films
Re-releases
Non-feature films*
2011
'15
'20
0
200
400
600
800
1,000

Most in the theatrical industry have viewed Netflix as a mortal threat, not a business partner. Before the pandemic, major cinema chains refused to budge on an exclusive theatrical “window” of about 90 days, designed to avoid giving viewers a reason to stay home and wait to watch a movie online. When Netflix insisted on a drastically reduced window for its original productions, something it says caters to consumer demand to watch movies anywhere, the big chains balked. As a result, the movies Netflix wanted to release in theaters—often so they would be eligible for awards such as the Oscars—played in only a handful of circuits willing to accommodate its terms.

But theater executives and Hollywood agents now say they expect more deals with the streaming giant as U.S. cinemas emerge from pandemic shutdowns that decimated business and shifted the focus of studios and audiences alike to at-home services. One theater executive projected his chain would have 25% fewer titles in 2022, 2023 and 2024 than in pre-pandemic years—a forecast that drove his decision to book “Army of the Dead.”

A pileup of delayed 2020 releases like “Black Widow” and “Top Gun: Maverick” fill the calendar for the next year, but after that, studios are expected to opt for more of their films to skip the theater and go to streaming. Now every major studio but Sony Pictures is attached to a streamer.

The nation’s No. 3 exhibitor, Cinemark Holdings Inc., along with a handful of small and midsize operators, will show “Army of the Dead” on a total of 600 screens before it premieres on Netflix. The chain’s chief rivals, AMC Entertainment Holdings Inc. and Regal Entertainment Group, are not showing the film. Netflix and Cinemark said it would be the first of many similar deals.

For Netflix, the theatrical runs use some of its biggest movies as a marketing tool that burnishes the service’s claim that its films are on par with traditional studio offerings. And if the service keeps the strategy going, it could help it secure deals with directors who have avoided working with the streamer because they want a guaranteed theatrical release.

The changing relations between Netflix and theater chains come as other Hollywood studios incorporate streaming into their release strategies.

For the rest of this year, AT&T Inc.’s Warner Bros. will release its movies on sister streaming service HBO Max on the same day they hit theaters. Disney+ carries certain movies also released in theaters for $30, on top of a monthly subscription fee. Paramount+ is putting some of the namesake studio’s movies on the service 30 to 45 days after they open in theaters. Comcast Corp.’s Universal Pictures and AMC cut a deal that shortens the theater chain’s exclusivity to 17 days.

When theaters closed due to the pandemic, studios’ streaming services became ready homes for some releases, from Warner Bros.’ “Wonder Woman 1984” to Walt Disney Co. ’s “Soul.” During the pandemic, ViacomCBS Inc.’s Paramount Pictures sold more than half a dozen movies on its 2020 and 2021 release calendar to Hulu, Netflix and Amazon.com Inc.

The plethora of at-home options could mean some moviegoers never return.

“Less supply from the studios will make it more challenging for box office to return to prior peak levels,” said an analyst report from MoffettNathanson earlier this month. The Netflix-Cinemark deal “should be able to at least partially offset the decline of product.”

Netflix theatrical releases have come in fits and starts, and usually with plenty of charged emotions. When it released its Oscar-nominated drama “The Irishman” in some theaters in the fall of 2019, no major chain would show the film, despite protracted negotiations. The head of the theaters’ lobbying group called Netflix’s decision to distribute the movie on a fraction of the nation’s screens with a 26-day theatrical window a “disgrace.”

Total Netflix streaming subscribers, quarterly
Source: the company

million
Asia Pacific
Latin America
Europe, MiddleEast & Africa
U.S. & Canada
2018
'19
'20
'21
0
25
50
75
100
125
150
175
200
225

As recently as September of 2019, Cinemark Chief Executive Mark Zoradi said his chain wouldn’t give Netflix any special treatment.

“We can’t have a different deal for Netflix than we have for all the other major studios,” he said at an investor conference.

Flash forward to a conference call Cinemark held with Wall Street analysts earlier this month, on which Mr. Zoradi touted the one-week theatrical window he had secured for Netflix’s “Army of the Dead.” The company, the CEO boasted, was “thrilled to provide our moviegoers the chance to see this movie in our theaters before it’s available to stream.”

To get “Army of the Dead” into theaters on such an unusual timeline, Netflix agreed to take a smaller cut of ticket sales than major studios typically receive, according to an exhibition executive whose company is showing the film. Before the pandemic, a studio like Disney could secure up to 65% of ticket sales on its biggest releases.

The movie is one of Netflix’s marquee releases this year—a gory zombie thriller directed by Zack Snyder, best known for his DC Comics adaptations “Justice League” and “Batman v Superman.” “Army of the Dead” follows a ragtag crew of mercenaries who brave a zombie-filled Las Vegas to pull off a casino heist.

Netflix, however, hasn’t been spending as much to market “Army of the Dead” as a major studio might on a big-budget film, and exhibition insiders don’t expect it to gross more than a few million dollars in the week before it appears on the service. As it has with past releases, Netflix has asked exhibitors not to release box-office figures.

Yet the film comes as die-hard moviegoers face a dearth of options. That’s what led Anthony Papetti to buy a $13 ticket to see “Army of the Dead” on Thursday at his local Cinemark multiplex in Hazlet, N.J.

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“I need that two hours of escapism,” said the 27-year-old, who works for an auto-transportation company. “Just being able to sit down with my overpriced popcorn and feel that normalcy.”

Before the pandemic, he said, he saw about two movies a week, a habit he has maintained at home thanks to three streaming-service subscriptions, including Netflix. But he’s grown tired of watching a movie while his dog barks and the dishwasher runs—and finds he enjoys even a mediocre film more when he has the darkened theater and big screen to sweep him away.

“I’m getting a little exhausted of my attitude toward a movie being dictated by the environment,” he said.

[PizzaSnake]

Thar she blows?

https://www.nytimes.com/2021/05/18/opin ... e=Homepage

[Farfromgeneva]

Reporting for family offices should occur, the exemption is a weird one. Don’t like Dodd Frank overall so would rather tear that down and write something better than including more private entities into A bad set of laws/rules.

As far as banking regulators go, state banking commissions/OCC/FDIC/NCUA, they are a joke. Always backwards looking and they send folks in for annual or bi annual examinations of all banks in the US but they send the equivalent of JC dropouts who wouldn’t evoen make good SS soldiers or land mine scouts. Have dealt up the food chain, doesn’t get much better at the top I assure you.

Bigger issue which is what blew up everything in the financial crisis is a combination of liquidity risk being underpriced by markets (assuming Powell now bernanke prior et al will never remove the punch owl implicitly), lack of transparency of counterparty risk. AIG was insuring mortgage bonds against defaults but they didn’t know who was on the other side or if they could all pay. TRS (total return swap) is a insurance contract by definition but a bet between two private parties on the outcome in value of a financial instrument. Hence using the term derivative of course, deriving from the outcome of the underlying instrument.

Here’s where liquidity becomes a problem. Since the 1980s mainly Wall Street shifted from private partnerships to public companies swapping partners equity for public shareholders. They subsequently moved from more pure intermediary and facilitator to manufacturer of financial products - the first securitizations were by Solomon Bros in the 80s on mortgages and commercial mortgages for an insurer to recycle general account capital. Timing not inconsequential even though I firmly believe in securitization as a method of distribution of risk. But eventually there’s isn’t enough financial paper to create and move around from cash financial instruments so they start creating “synthetic” derivative based risk and reward products to sell and you always have to have both sides of a trade so if everyone likes one side of a bet you become the other side rather then pairing off the risk like they almost always would’ve pre going public. Now you’ve got the street and it’s customers swapping paper claims against each other so rapidly there’s no such thing as real risk management it’s just kabuki theater for the SEC and politicians. VAR is a nice mathematical model but functionally useless.

[Farfromgeneva]

The holy grail for CEOs - get the sellers premium and take the seat/control of the newly combined entity. But in this case TimeWarner has burned so much shareholder value between it's direcTV acquisition and the AOL merger that it sort of doesn't matter because at this point if you own AT&T shares you'd be better off taking that dough and throwing a coke orgy with broken 14yr old girls from Florida on PB, er, Epstein Island.

iscovery Chief Got Options Valued at $190 Million on Eve of AT&T Deal
David Zaslav is expected to run the newly combined media firm, and received the award as part of a new employment contract

David Zaslav, shown in 2018, has received more than $659 million in compensation since 2010, according to MyLogIQ.
PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS
By Theo Francis
Updated May 19, 2021 5:50 pm ET
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Discovery Inc. DISCB 1.71% gave Chief Executive David Zaslav 14.8 million stock options on Sunday, the day before the company and AT&T Inc. T 1.25% announced a plan to merge Discovery with AT&T’s WarnerMedia unit, according to a securities filing.

The company valued the option grants at roughly $190 million on Wednesday evening, taking into account the company’s share-price volatility and potential stock appreciation over their eight-year term.

The shares underlying the options were valued at $489 million on Wednesday afternoon, as Discovery’s Class A stock traded around $33 a share. Discovery shares have fallen about 16% since the start of trading on Monday, shortly after the deal was unveiled. The options are currently trading out of the money, meaning the share price would need to rise over the next eight years for Mr. Zaslav to profit from exercising them.

On Tuesday, Discovery said it had entered into a new, seven-year employment agreement on unspecified terms with Mr. Zaslav, who is expected to head up the combined company.

A Discovery spokesman confirmed that the options stemmed from the new contract, which was approved by the board on Sunday along with the broader AT&T transaction. He declined to comment on the pay agreement’s terms.

The options are scheduled to vest—or become fully Mr. Zaslav’s—over roughly seven years, starting in a year, with about half of them vesting in May 2026 and in 2027, the securities filing shows. They expire in 2028.

The cost for Mr. Zaslav to convert the options into Discovery stock ranges from $35.65 to $43.33 a share, meaning all of the options currently would cost more to cash in than they would yield in shares. The value of the company’s shares would have to rise by about 7% from Wednesday’s close for some of the options to be worth exercising, and by about 24% for all them to be in the money.

Mr. Zaslav has run Discovery since 2007 and previously ran a business unit for NBC Universal Inc. He has ranked among the current S&P 500’s 10 highest-paid CEOs in 10 of the past 11 years, according to data from MyLogIQ, which provides data from securities disclosures.


The executive’s compensation for 2020 totaled $37.7 million, Discovery reported in a securities filing last month, down 17% from the prior year and his smallest annual pay package since 2016. His compensation since 2010 has totaled more than $659 million, MyLogIQ data show. Those figures include some equity awards that have yet to vest.

Mr. Zaslav is already a significant holder of Discovery shares, with about 4.13 million Class A and Class C shares, valued at roughly $134 million at Wednesday afternoon prices, according to data from InsiderScore.

Those figures exclude Sunday’s options grant, as well as equity awarded to him under his 2018 employment agreement. Equity from that deal that has yet to vest includes nearly 10 million options, about 900,000 appreciation rights linked to the company’s stock price, and more than 630,000 restricted shares.

Write to Theo Francis at [email protected]

[Farfromgeneva]

Crazy. Now I’m officially old. (And I have yelled at analysts before for sitting on time sensitive work waiting because they “emailed” the counterparty. Might’ve even suggested once to a kid who thought he was top chief before ever being an Indian that if this thing with buttons and a ford on your desk isn’t for verbal communication then it just be for beating incompetent subordinates).

Bank of America’s Merrill Lynch to Ban Trainee Brokers From Making Cold Calls
In shift for program that dates back to 1945, recruits will now be directed to use internal referrals and LinkedIn messages to prospect for new clients

Binoculars aided long-distance reading in a 1950s Merrill Lynch office. Brokerage firms are now trying to adapt to the digital era.
PHOTO: STAN WAYMAN/THE LIFE PICTURE COLLECTION VIA GETTY IMAGES
By Rachel Louise Ensign
May 24, 2021 6:00 am ET
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Bank of America Corp.’s BAC +0.15% Merrill Lynch Wealth Management unit is banning trainee brokers from making cold calls, a vestige of an era when the industry pushed hot stocks on anyone who would pick up the phone.

Merrill plans to roll out a revamped adviser-training program on Monday that prohibits participants from cold calling, people familiar with the matter said. The bank will instead direct them to use internal referrals or LinkedIn messages to land clients, they said. The decision comes after the program’s 3,000 trainees were told to stop outbound recruiting efforts to find new customers last year after problematic phone calls.

The announcement will formalize a shift that executives have signaled for months. “We are leaning much more heavily on leads and referrals from the broader company,” Merrill President Andy Sieg said in April. “There is also an opportunity to be much more modern in terms of the way we are reaching out to prospective clients.”


Merrill’s training program, first established in 1945, was meant to be the firm’s pipeline for new advisers after it cut back on the expensive practice of poaching from other firms. The pool of candidates that starts off in the program, which pays a base salary of $65,000 a year, is typically young and diverse. Participants who fail to meet the goals are kicked out or moved to other roles in the bank.

SHARE YOUR THOUGHTS

Is cold calling a practice in your industry, and does it work? Why, or why not? Join the conversation below.

In recent years, only a small portion of trainees completed the program. Successful recruits often had extensive personal networks and were less reliant on cold calling, trainees said.

While cold calling offers the opportunity for a gifted salesperson to build a network from scratch, it is hard to succeed that way in an era when no one picks up. Personal referrals lead to a response around 40% of the time, Merrill executives said, but less than 2% of people who are cold called even answer the phone.

The revamped program is intended to bring the firm’s prospecting techniques into the digital era and boost completion rates. It is also another step in integrating Merrill’s storied “thundering herd” of financial advisers more closely into Bank of America, which bought the brokerage in the depths of the financial crisis.

Trainees will get more referrals from the bank’s pool of 66 million retail customers, people familiar with the matter said. They will also be encouraged to contact prospects over LinkedIn, which has a higher hit rate than cold calling, they said.


Cold calling has been a mainstay of adviser-training programs across the industry since their inception. As stock ownership became widespread in the 1980s, brokerage firms hired droves of young trainees to work the phones.

When Frank Maselli joined Dean Witter in 1983 as a rookie broker, he was given a seat in a cavernous room filled with other trainees where he made 1,000 calls a day from 8 a.m. to 9 p.m.

“I have a bond, I have it for two days, it might be gone tomorrow,” he would tell the strangers who picked up. About 1% of the people he dialed would bite, a rate that was considered successful, said Mr. Maselli, who now runs a firm that trains advisers on sales techniques. After a few years, trainees developed reliable clients and no longer had to cold call. Morgan Stanley bought Dean Witter in 1997.

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The advent of the national do-not-call registry in 2003 made cold calls risky. Widespread caller identification, the decline of landline phones and the proliferation of spam calls have since made it even harder to get strangers on the phone. Before the pandemic, in-person events such as seminars on investing were the best way to land new clients, Mr. Maselli said.

But Merrill and other firms continued to embrace cold calling, which senior advisers viewed as a rite of passage. Pre-pandemic, Merrill expected trainees to reach out to at least 45 prospects a week and hold meetings with six. Some current and former participants said they were told to reach out to dozens more. Many turned to purchased lists of phone numbers to meet the quotas.


By then, the pitch had changed. Merrill trainees were encouraged to focus on investing goals rather than products. Would-be advisers greeted prospects with phrases like: “We’re in the process of reviewing financial plans and would love to review yours,” trainees said. They were expected to bring in $12 million in assets by the end of the 3½-year-long program.

The pandemic threw Merrill’s adviser training into disarray. Trainees started working from home, where they were cut off from holding in-person meetings. They were encouraged to continue cold calling, they said.

Some trainees called people on the do-not-call list, a Merrill executive said in a memo earlier reported by Insider, which can lead to regulatory penalties. In July, the bank told trainees to stop prospecting for new business indefinitely.

Write to Rachel Louise Ensign at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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(75)

[PizzaSnake]

Crazy. Now I’m officially old. (And I have yelled at analysts before for sitting on time sensitive work waiting because they “emailed” the counterparty. Might’ve even suggested once to a kid who thought he was top chief before ever being an Indian that if this thing with buttons and a ford on your desk isn’t for verbal communication then it just be for beating incompetent subordinates).

Bank of America’s Merrill Lynch to Ban Trainee Brokers From Making Cold Calls
In shift for program that dates back to 1945, recruits will now be directed to use internal referrals and LinkedIn messages to prospect for new clients

Binoculars aided long-distance reading in a 1950s Merrill Lynch office. Brokerage firms are now trying to adapt to the digital era.
PHOTO: STAN WAYMAN/THE LIFE PICTURE COLLECTION VIA GETTY IMAGES
By Rachel Louise Ensign
May 24, 2021 6:00 am ET
SAVE
SHARE
TEXT
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Listen to this article5 minutes

00:00 / 05:14
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Bank of America Corp.’s BAC +0.15% Merrill Lynch Wealth Management unit is banning trainee brokers from making cold calls, a vestige of an era when the industry pushed hot stocks on anyone who would pick up the phone.

Merrill plans to roll out a revamped adviser-training program on Monday that prohibits participants from cold calling, people familiar with the matter said. The bank will instead direct them to use internal referrals or LinkedIn messages to land clients, they said. The decision comes after the program’s 3,000 trainees were told to stop outbound recruiting efforts to find new customers last year after problematic phone calls.

The announcement will formalize a shift that executives have signaled for months. “We are leaning much more heavily on leads and referrals from the broader company,” Merrill President Andy Sieg said in April. “There is also an opportunity to be much more modern in terms of the way we are reaching out to prospective clients.”


Merrill’s training program, first established in 1945, was meant to be the firm’s pipeline for new advisers after it cut back on the expensive practice of poaching from other firms. The pool of candidates that starts off in the program, which pays a base salary of $65,000 a year, is typically young and diverse. Participants who fail to meet the goals are kicked out or moved to other roles in the bank.

SHARE YOUR THOUGHTS

Is cold calling a practice in your industry, and does it work? Why, or why not? Join the conversation below.

In recent years, only a small portion of trainees completed the program. Successful recruits often had extensive personal networks and were less reliant on cold calling, trainees said.

While cold calling offers the opportunity for a gifted salesperson to build a network from scratch, it is hard to succeed that way in an era when no one picks up. Personal referrals lead to a response around 40% of the time, Merrill executives said, but less than 2% of people who are cold called even answer the phone.

The revamped program is intended to bring the firm’s prospecting techniques into the digital era and boost completion rates. It is also another step in integrating Merrill’s storied “thundering herd” of financial advisers more closely into Bank of America, which bought the brokerage in the depths of the financial crisis.

Trainees will get more referrals from the bank’s pool of 66 million retail customers, people familiar with the matter said. They will also be encouraged to contact prospects over LinkedIn, which has a higher hit rate than cold calling, they said.


Cold calling has been a mainstay of adviser-training programs across the industry since their inception. As stock ownership became widespread in the 1980s, brokerage firms hired droves of young trainees to work the phones.

When Frank Maselli joined Dean Witter in 1983 as a rookie broker, he was given a seat in a cavernous room filled with other trainees where he made 1,000 calls a day from 8 a.m. to 9 p.m.

“I have a bond, I have it for two days, it might be gone tomorrow,” he would tell the strangers who picked up. About 1% of the people he dialed would bite, a rate that was considered successful, said Mr. Maselli, who now runs a firm that trains advisers on sales techniques. After a few years, trainees developed reliable clients and no longer had to cold call. Morgan Stanley bought Dean Witter in 1997.

NEWSLETTER SIGN-UP
Markets Alert

Major financial-market and trading news.

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The advent of the national do-not-call registry in 2003 made cold calls risky. Widespread caller identification, the decline of landline phones and the proliferation of spam calls have since made it even harder to get strangers on the phone. Before the pandemic, in-person events such as seminars on investing were the best way to land new clients, Mr. Maselli said.

But Merrill and other firms continued to embrace cold calling, which senior advisers viewed as a rite of passage. Pre-pandemic, Merrill expected trainees to reach out to at least 45 prospects a week and hold meetings with six. Some current and former participants said they were told to reach out to dozens more. Many turned to purchased lists of phone numbers to meet the quotas.


By then, the pitch had changed. Merrill trainees were encouraged to focus on investing goals rather than products. Would-be advisers greeted prospects with phrases like: “We’re in the process of reviewing financial plans and would love to review yours,” trainees said. They were expected to bring in $12 million in assets by the end of the 3½-year-long program.

The pandemic threw Merrill’s adviser training into disarray. Trainees started working from home, where they were cut off from holding in-person meetings. They were encouraged to continue cold calling, they said.

Some trainees called people on the do-not-call list, a Merrill executive said in a memo earlier reported by Insider, which can lead to regulatory penalties. In July, the bank told trainees to stop prospecting for new business indefinitely.

Write to Rachel Louise Ensign at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

SHOW CONVERSATION
(75)

I always regarded cold calls as akin to porcine terpsichore: waste of your time and annoys the hell out of the pig

[Farfromgeneva]

Sometimes I wonder if business tactics is like fraternity/sports hazing and certain practices are just in place due to inertia. That being said I hate the inability of younger folks to pick up a phone and call the attorneys when a deal issue comes up, or the client when there’s a time sensitive manner and rather email the person and wait for a reply. It defies common sense, not just a cultural and generation phenomena, but is a weaker form of communication in general and shifts the obligation to the other side to respond thus abrogating ones own agency in their paycheck. And then want to complain about not liking their jobs when they haven’t earned anything w a generic undergrad business degree regardless of the institution that printed and created said degree.

At CS I watched my boss probably break 25 phones in less than two years..

[Farfromgeneva]

Part of the real institutional investors are creating new real estate classes like merchant film studios, cold storage and mobile home parks (the latter I believe to be the best but very labor intensive as you own effectively the land but not the personal property/chattel). Problem is traditionally real estate was a relatively passive investment class and now you have to take a lot more operational and business risk and yet are still paying 14-25x last years polished up earnings.

Investors Buying Real Estate to Beat Inflation May Find Tactic Backfires
If landlords can’t raise rents enough, inflation makes them poorer

Many retail and office buildings currently have high vacancy rates, which can hamper raising rents.
PHOTO: AMIR HAMJA/BLOOMBERG NEWS
By Konrad Putzier
May 25, 2021 8:00 am ET
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Investors are eyeing real estate as a way to hedge against inflation. Many are bound to be disappointed.

While single-family homes usually perform well during inflationary periods, values of offices, retail buildings and other commercial properties can tumble in value if owners aren’t in a position to increase rents, economists say.

Since the Labor Department this month reported a 4.2% annual increase in April consumer prices—the highest rate since 2008—the prospect of inflation has become an obsession in financial markets.


Many analysts and investors expect the surge to be brief. They suggest that the inflation jump reflects recent government spending, pent-up demand and production bottlenecks during the reopening of the U.S. economy. These forces should subside, as the economy continues to recover from the pandemic, and more traditional spending patterns resume.

But with a number of U.S. companies warning of higher prices, more investors are seeking assets whose value goes up when the value of money goes down.

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Inflation Is Happening. Should You Be Worried?

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Residential real estate has proved to be a haven during inflationary periods of the recent past. Stanford University economist Monika Piazzesi studied U.S. inflation of the 1970s and found that home prices rose relative to the size of the economy, while stock prices fell, meaning homeowners became richer compared with stock owners.

If inflation were to stick around today, “exactly the same thing will play out,” Ms. Piazzesi said.

Owners of residential and commercial real estate are often better off during times of rapid inflation than owners of stocks or bonds, economists say. Office, retail and apartment rents are typically tied to consumer prices and rise with inflation, pushing up property income. Inflation also makes construction more expensive, which benefits property owners because they can expect less competition from new buildings.

There is also the crowd psychology: Real estate has a reputation as an inflation-proof investment, and more people buy it simply because they think others will, too.

But landlords who are unable to raise rents can suffer during periods of inflation.


Single-family homes usually perform well during inflationary periods.
PHOTO: BING GUAN/BLOOMBERG NEWS
Office and retail leases often last for 10 years or more, and unless they include inflation-related rent increases, landlords see their real income shrink. Rising inflation also typically leads to rising interest rates, which pushes up the yield for risk-free bonds and weighs on property values by making their yields look skimpier in comparison. If landlords can’t raise rents enough to compensate for that, inflation makes them poorer.

Many retail and office buildings currently have high vacancy rates, which can also hamper raising rents. Inflation only leads to higher prices for products that people actually want.


David Hartzell, a professor of real estate and finance at the University of North Carolina, studied the impact of inflation on U.S. real-estate returns in the 1980s. He found that the property sector didn’t work well as a hedge when vacancies were high. “If there’s a lot of vacancy, at the margins landlords lose their bargaining power,” he said.

The FTSE Nareit Equity REITs index, which tracks public real-estate investment trusts, fell slightly on May 12, the day the Labor Department published its consumer-price report. Although the index has since more than recovered the loss, it indicates that investors have mixed feelings about the impact of rising consumer prices on real estate.

John Vojticek, head of liquid real assets at asset manager DWS, said he expects inflation to come down again but remain slightly higher than before the pandemic.

He said his firm is pessimistic about office owners, whose long-term leases make them vulnerable to inflation in the near term. For now DWS is more keen on owners of rental homes and storage units, where leases are far shorter and raising rents with inflation is easier.

“Real estate is basically a bond with equity upside,” he said. “I’d rather be on a two-year bond than a 10-year bond if rates are rising.”

[Farfromgeneva]

Sherries Brown is a moron and just got teabagged by james Gorman making a statement about unions and representation without knowing any facts (MS - 6/13 direct reports are women including regional heads and front office, not just Head of HR, Diversity or other non revenue generating positions). This is where both sides suck. Just wasting everyone’s time to hoe to score a meme worthy moment.

[cradleandshoot]

https://www.msn.com/en-us/news/politics ... d=msedgntp

Since these mega wealthy people come in 2 flavors, Republican and Democrat, what do any of you think the chances are they will sit idly by and just hand over their money? You can bundle anything under the cover of infrastructure spending and the American sheeple will swallow it hook, line and sinker.

[Jim Malone]

Was on road for first time in 17 months leaving Long Island and hitting Wilmington DE and then to Reading PA and then to Monticello NY and man, the roadways I travelled need severe work and the ones which have work underway are a nightmare to drive on with rerouting while construction is going on.

The new Goethals bridge came out excellent as did the Tappan Zee AKA Governor Mario Cuomo Bridge. Took awhile for me to realize GMCB was Tappan Zee on flashing roadside delay messages.

https://www.msn.com/en-us/news/politics ... d=msedgntp

Since these mega wealthy people come in 2 flavors, Republican and Democrat, what do any of you think the chances are they will sit idly by and just hand over their money? You can bundle anything under the cover of infrastructure spending and the American sheeple will swallow it hook, line and sinker.

[cradleandshoot]

Was on road for first time in 17 months leaving Long Island and hitting Wilmington DE and then to Reading PA and then to Monticello NY and man, the roadways I travelled need severe work and the ones which have work underway are a nightmare to drive on with rerouting while construction is going on.

The new Goethals bridge came out excellent as did the Tappan Zee AKA Governor Mario Cuomo Bridge. Took awhile for me to realize GMCB was Tappan Zee on flashing roadside delay messages.

https://www.msn.com/en-us/news/politics ... d=msedgntp

Since these mega wealthy people come in 2 flavors, Republican and Democrat, what do any of you think the chances are they will sit idly by and just hand over their money? You can bundle anything under the cover of infrastructure spending and the American sheeple will swallow it hook, line and sinker.

Does anybody actually call it the Mario Cuomo Bridge?

[Jim Malone]

Pretty much will always be Tappan Zee for all native NYC surrounding area folk I know.

[Farfromgeneva]

Once your blessed institutionally (cough, John Meriwether, cough) you can do no wrong which bars you from being a fiduciary and getting institutional (pension fund Etc) allocations.

Jeff Skilling, the former C.E.O. of Enron, has launched an energy investment firm staffed with ex-consultants from McKinsey. (Reuters)