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  • Leaked Document Reveals Amazon To Dump Office Space, In Cost-Cutting Move Amid CRE Tower Crisis
    by Tyler Durden on March 28, 2024 at 11:45 AM

    Leaked Document Reveals Amazon To Dump Office Space, In Cost-Cutting Move Amid CRE Tower Crisis Readers are well aware that the office segment of the commercial real estate sector has been in turmoil for the past year with soaring vacancy rates, a record amount of available sublease space, and rising defaults. Cost-cutting strategies by major corporations will accelerate the office downturn. This will be in the form of lease expirations and/or the early termination of leases.  A leaked document by Business Insider reveals that Amazon is trying to save $1.3 billion over the next three to five years. A person familiar with the new strategy said the company plans to “let certain leases naturally expire, stop the use of some office floors, and negotiate early lease terminations for some buildings.”  The person said Amazon’s current office vacancy rate is 33.8% but expects it to drop to 25% by the end of the year and decrease to 10% over the next three to five years. According to the document, this move to shrink Amazon’s corporate footprint will save the company $1.3 billion in annual operating expense savings.  On Tuesday, BI reported that Amazon initiated another round of layoffs, this time 160 employees from its advertising unit, extending its 18 months of job cuts. The current high office vacancy rate is a direct result of slower growth and continued layoffs.  Like Google, Meta, and many other big tech companies, Amazon overhired in the run-up to and during Covid. Now, the hiring cycle is reversing as artificial intelligence threatens white-collar jobs.  In an email to BI, Brad Glasser, an Amazon spokesperson, said:  “We’re constantly evaluating our real-estate portfolio based on the dynamic and diverse needs of Amazon’s businesses by looking at trends in how employees are using our offices.  “In some cases, employees may move buildings to increase collaboration and drive better utilization of our workspaces. In other cases, we may take on additional space where we’re currently limited or make adjustments where we have excess capacity. The changes we’ve already made are improving vacancy rates, and we expect to see further progress as we continue to learn and iterate on our portfolio.” Amazon is one of many companies that have been shrinking its corporate footprint. Many other big tech firms have been slashing square footage as office space floods the market, pressuring tower values lower and leaving owners with a difficult decision to either refinance (if they can) or default.  The rating agency Fitch recently warned that the sliding tower value could exceed GFC’s real estate crisis, as the bottom has yet to be found.  One week ago, Goldman told clients that office commercial mortgage-backed securities were being extended and modified rather than refinanced, which has “helped mitigate a default wave and a sharp pick-up in losses on CRE loan portfolios.” But this only means the can is being kicked down the road until after the presidential elections.  Tyler Durden Thu, 03/28/2024 – 07:45

  • Bad Is Good
    by Tyler Durden on March 28, 2024 at 11:20 AM

    Bad Is Good Via PraCap.com, Everyone thinks of inflation as being purely a financial phenomenon. However, it is much more than that. It is also a social phenomenon. As the inflation accelerates, an opportunist class rises to the top of society, and the productive class is impoverished. Inflation re-orients all economic activities, encouraging speculation at the expense of work, and forever changing the people who experience it. This societal aspect is rarely discussed. Fortunately, my buddy, Erik Renander, recently wrote a blog post on the topic. As he did a better job of it than I would ever hope to, with his permission, I’ve re-posted his entry in its entirety. For disclosure, I’m a paid-up subscriber to YWR. If you enjoyed this blog post, I recommend you also check out his recent podcast with my friends at the Market Huddle.   The following was originally published on YWR on March 23rd, 2024…Disclosure: These are personal views only and not investment recommendations. For investment advice seek professional help. We’ve learned a lot from Project Zimbabwe. We’ve learned that as inflation takes hold, the prices of everything rise unimaginably. Daily goods, stock prices, real estate, everything. We reviewed the example of Delta Breweries, a beer company where volumes were unchanged over a 7 year period, and yet the share price rose 1000x. Source: Project Zimbabwe presentation and company filings. We learned that in high periods of inflation, inflation becomes the dominant factor. It becomes less about what you own (value vs growth or tech vs banks) and more that you own something. We learned that in times of high inflation the risk is not so much to the left (20% stock market correction), but to the right. It’s the risk that prices rise unimaginably and you are left behind. We learned from from Zimbabwe that paradoxically, Bad is Good when it comes to the stock market. There can be power outages, crop failures, people walking around with no money and yet the market goes to the moon. Stocks, property, precious metals; everything goes up as people scramble to escape cash. But that’s Zimbabwe. It’s Africa. We study it because it’s a useful exaggeration. It’s a way for us to understand how markets dynamics change as inflation rises. But that type of a market environment is rare in this day and age. We have to study obscure countries in Africa, or Latin America to understand what happens. Thankfully, that would never happen here. Right? We don’t have to worry about high inflation. The Fed has raised rates, inflation is moderating and things are under control. Still, it might be useful to be able recognize the signs if things were shifting towards a hyper inflationary environment. And what would those signs be? Of course there would be monthly economic statistics to show us CPI was running structurally higher, but maybe if inflation numbers were bouncing around a lot it might be hard to tell the trend, especially in the beginning. But maybe there would be other signs along the way, which would warn us inflation was going to get a lot worse. Maybe there would be cultural signs that things were going to spiral out of control. The best account I’ve come across of the cultural signs leading to inflation is ‘Fiat Money Inflation in France’ by Andrew Dickson White, a history professor and founder of Cornell. It was written back in 1896 as a historical review of the Assignats and France’s slide into inflation in 1789. As with Zimbabwe, we learn that the worse things seem to get, the more the market rises. It’s another example of the Bad is Good theme. So what were some of the signs along the way from France’s slide? It always starts the same way. Business is slow and the government is looking for a shortcut. EARLY in the year 1789 the French nation found itself in deep financial embarrassment: there was a heavy debt and a serious deficit. There was a general want of confidence in business circles; capi- tal had shown its proverbial timidity by retiring out of sight as far as possible; throughout the land was stagnation. Statesmanlike measures, careful watching and wise management would, doubtless, have ere long led to a return of confidence, a reappearance of money and a resumption of business; but these involved patience and self-denial, and, thus far in human history, these are the rarest products of political wisdom. Few nations have ever been able to exercise these virtues; and France was not then one of these few. There was a general search for some short road to prosperity: ere long the idea was set afloat that the great want of the country was more of the circulating medium; and this this was speedily followed by calls for an issue of paper money. In the beginning there is resistance to large issuances of debt. It is seen as being financial imprudent. But, gradually the politicians and the people learn to crave it, and the debt increases exponentially. There is no more resistance. France was now fully committed to a policy of inflation; and, if there had been any question of this before, all doubts were removed now by various acts very significant as showing the exceeding difficulty of stopping a nation once in the full tide of a depreciating currency. The first inflation bills were passed with great difficulty, after very sturdy resistance and by a majority of a few score out of nearly a thousand votes; but we observe now that new inflation measures were passed more and more easily and we shall have occasion to see the working of this same law in a more striking degree as this history develops itself. US Treasury Debt, corporate bonds and bank loans outstanding. Source: FRED The economy rebounds after every stimulus, but the rebounds get shorter and shorter. The great majority of Frenchmen now became desperate optimists, declaring that inflation is prosperity. Throughout France there came temporary good feeling. The nation was becoming inebriated with paper money. The good feeling was that of a drunkard just after his draught; and it is to be noted as a simple historical fact, corresponding to a physiological fact, that, as draughts of paper money came faster the successive periods of good feeling grew shorter. Inflation starts to change the culture. There becomes an obsession with luxury and speculation. But these evils, though great, were small compared to those far more deep-seated signs of disease which now showed themselves throughout the country. One of these was the obliteration of thrift from the minds of the French people. The French are naturally thrifty; but, with such masses of money and with such uncertainty as to its future value, the ordinary motives for saving and care diminished, and a loose luxury spread throughout the country. There is an obsession with trading and speculation. A still worse outgrowth was the increase of speculation and gambling. With the plethora of paper currency in 1791 appeared the first evidences of that cancerous disease which always follows large issues of irredeemable currency,—a disease more permanently injurious to a nation than war, pestilence or famine. For at the great metropolitan centers grew a luxurious, speculative, stock-gambling body, which, like a malignant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibres to the remotest hamlets. At these city centers abundant wealth seemed to be piled up: in the country at large there grew a dislike of steady labor and a contempt for moderate gains and simple living. Now began to be seen more plainly some of the many ways in which an inflation policy robs the working class. As these knots of plotting schemers at the city centers were becoming bloated with sudden wealth, the producing classes of the country, though having in their possession more and more currency, grew lean. In the schemes and speculations put forth by stock-jobbers and stimulated by the printing of more currency, multitudes of small fortunes were absorbed and lost while a few swollen fortunes were rapidly aggregated in the larger cities. Speculation and inflation lead to corruption. Nor was this reckless and corrupt spirit confined to business men; it began to break out in official circles, and public men who, a few years before, had been thought above all possibility of taint, became luxurious, reckless, cynical and finally corrupt. Mirabeau himself, who, not many months previous, had risked imprisonment and even death to establish constitutional government, was now at this very time—secretly receiving heavy bribes. When, at the downfall of the monarchy a few years later, the famous iron chest of the Tuileries was opened, there were found evidences that, in this carnival of inflation and corruption, he had been a regularly paid servant of the Royal court. The artful plundering of the people at large was bad enough, but worse still was this growing corruption in official and legislative circles. Out of the speculating and gambling of the inflation period grew luxury, and, out of this, corruption. Trust in politicians and the media declines. The artful plundering of the people at large was bad enough, but worse still was this growing corruption in official and legislative circles. Out of the speculating and gambling of the inflation period grew luxury, and, out of this, corruption. It grew as naturally as a fungus on a muck heap. It was first felt in business operations, but soon began to be seen in the legislative body and in journalism. Like in Zimbabwe the Speculators realize they should borrow to buy assets. As manufacturers had closed, wages had fallen, until all that kept them up seemed to be the fact that so many laborers were drafted off into the army. From this state of things came grievous wrong and gross fraud. Men who had foreseen these results and had gone into debt were of course jubilant. He who in 1790 had borrowed 10,000 francs could pay his debts in 1796 for about 35 francs. The rise of the Debtor Class There appeared, as another outgrowth of this disease, what has always been seen under similar circumstances. It is a result of previous, and a cause of future evils. This outgrowth was a vast debtor class in the nation, directly interested in the depreciation of the currency in which they were to pay their debts. This body of debtors soon saw, of course, that their interest was to depreciate the currency in which their debts were to be paid; and these were speedily joined by a far more influential class; by that class whose speculative tendencies had been stimulated by the abundance of paper money, and who had gone largely into debt, looking for a rise in nominal values. The Debtor Class become celebrities and mix with the politicians. Soon demagogues of the viler sort in the political clubs began to pander to it; a little later important persons in this debtor class were to be found intriguing in the Assembly—first in its seats and later in more conspicuous places of public trust. Before long, the debtor class became a powerful body extending through all ranks of society. From the stock-gambler who sat in the Assembly to the small land speculator in the rural districts; from the sleek inventor of canards on the Paris Exchange to the lying stock-jobber in the market town, all pressed vigorously for new issues of paper; all were apparently able to demonstrate to the people that in new issues of paper lay the only chance for national prosperity. J0H10R Washington, DC, USA. 12th Apr, 2017. Laurence “Larry” Fink, Chairman and Chief Executive Officer of BlackRock, Inc., speaks during an Economic Club of Washington event in Washington, DC, on April 12, 2017. Credit: Kristoffer Tripplaar/Alamy Live News This great debtor class, relying on the multitude who could be approached by superficial arguments, soon gained control. Strange as it might seem to those who have not watched the same causes at work at a previous period in France and at various times in other countries, while every issue of paper money really made matters worse, a superstition gained ground among the people at large that, if only enough paper money were issued and were more cunningly handled the poor would be made rich. Henceforth all opposition was futile. As the wealth disparity increases there are calls to expropriate wealth from the rich. But now another source of wealth was opened to the nation. There came a confiscation of the large estates of landed proprietors who had fled the country. An estimate in 1793 made the value of these estates three billions of francs. and on June 22, 1793, the Convention determined that there should be a Forced Loan, secured on the confiscated lands of the emigrants and levied upon all married men with incomes of ten thousand francs, and upon all un- married men with incomes of six thousand francs. It was calculated that these would bring into the treasury a thousand millions of francs. As daily goods get too expensive, people start to loot the stores. Marat declared loudly that the people, by hanging shopkeepers and plundering stores, could easily remove the trouble. The result was that on the 28th of February, 1793, at eight o’clock in the evening, a mob of men and women in disguise began plundering the stores and shops of Paris. At first they demanded only bread; soon they insisted on coffee and rice and sugar; at last they seized everything on which they could lay their hands—cloth, clothing, groceries and luxuries of every kind. Two hundred such places were plundered. This was endured for six hours and finally order was restored only by a grant of seven million francs to buy off the mob. Politicians and financiers start to think they can solve everything by issuing more debt. It’s not necessary to balance budgets or pay for spending through taxes (which would be unpopular). And now was seen, taking possession of the nation, that idea which developed so easily out of the fiat money system the idea that the ordinary needs of government may be legitimately met wholly by the means of paper currency; that taxes may be dispensed with. As a result, it was found that the assignat printing press was the one resource left to the government, and the increase in the volume of paper money became every day more appalling. It’s natural to think the financiers in 1789 France must not have known what they were doing or been uneducated, but they were actually some of the brightest in Europe. All this vast chapter in financial folly is sometimes referred to as if it resulted from the direct action of men utterly unskilled in finance. This is a grave error. That wild schemers and dreamers took a leading part in setting the fiat money system going is true; that speculation and interested financiers made it worse is also true: but the men who had charge of French finance during the Reign of Terror and who made these experiments, which seem to us so monstrous, in order to rescue themselves and their country from the flood which was sweeping everything to financial ruin were universally recognized as among the most skillful and honest financiers in Europe. Smart speculators buy up the personal property of the working class. The hopes of many were revived by the fact that in spite of the decline of paper there was an exceedingly brisk trade in all kinds of permanent property. Whatever articles of permanent value certain needy people were willing to sell certain cunning people were willing to buy and to pay good prices for in assignats. At this, hope revived for a time in certain quarters. But ere long it was discovered that this was one of the most distressing results of a natural law which is sure to come into play under such circumstances. It was simply a feverish activity caused by the intense desire of a large number of the shrewder class to convert their paper money into anything and everything which they could hold and hoard until the collapse which they foresaw should take place. This very activity in business simply indicated the disease. It was simply legal robbery of the more enthusiastic and trusting by the more cold-hearted and keen. It was the “unloading” of the assignats upon the mass of the people. An enormous wealth disparity develops between those who saw what was happening and levered up to purchase more assets, and those who didn’t. The question will naturally be asked, On whom did this vast depreciation mainly fall at last? When this currency had sunk to about one three-hundredth part of its nominal value and, after that, to nothing, in whose hands was the bulk of it? The answer is simple. Financiers and men of large means were shrewd enough to put as much of their property as possible into objects of permanent value. The working classes had no such foresight or skill or means. On them finally came the great crushing weight of the loss. After the first collapse came up the cries of the starving. Federal Reserve Survey of Consumer Finances 2022. Those are some of the key warning signs from Fiat Money Inflation in France, and I recommend reading the whole story, but as I said… it’s not something we need to worry about. Have a good weekend. Tyler Durden Thu, 03/28/2024 – 07:20

  • The Declining Value Of The US Federal Minimum Wage
    by Tyler Durden on March 28, 2024 at 10:55 AM

    The Declining Value Of The US Federal Minimum Wage This graphic illustrates the history of the U.S. federal minimum wage using data compiled by Statista, in both nominal and real (inflation-adjusted) terms. The federal minimum wage was raised to $7.25 per hour in July 2009, where it has remained ever since. Nominal vs. Real Value The data Visual Capitalist’s Marcus Lu used to create this graphic can be found in the table below. What our graphic shows is how inflation has eroded the real value of the U.S. minimum wage over time, despite nominal increases. For instance, consider the year 1960, when the federal minimum wage was $1 per hour. After accounting for inflation, this would be worth around $10.28 today! The two lines converge at 2023 because the nominal and real value are identical in present day terms. Many States Have Their Own Minimum Wage According to the National Conference of State Legislatures (NCSL), 30 states and Washington, D.C. have implemented a minimum wage that is higher than $7.25. The following states have adopted the federal minimum: Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming. Meanwhile, the states of Alabama, Louisiana, Mississippi, South Carolina, and Tennessee have no wage minimums, but have to follow the federal minimum. How Does the U.S. Minimum Wage Rank Globally? If you found this topic interesting, check out Mapped: Minimum Wage Around the World to see which countries have the highest minimum wage in monthly terms, as of January 2023. Tyler Durden Thu, 03/28/2024 – 06:55

  • US ‘Backed Itself Into Corner’ By Blaming ISIS For Moscow Attack As Fires Burned: Kremlin
    by Tyler Durden on March 28, 2024 at 10:33 AM

    US ‘Backed Itself Into Corner’ By Blaming ISIS For Moscow Attack As Fires Burned: Kremlin Russian foreign ministry spokesperson Maria Zakharova on Wednesday gave an interview to Russian state-run English language media wherein she continued to advance the Kremlin’s claims that the Ukrainian government or its Western partners likely had something to do with the the Crocus City Hall terror attack. She described that it was strange that a Western media narrative coalesced around ISIS being behind the attack even as the mall and concert hall was still on fire and emergency crews were still responding. She said the US government has backed itself “into a corner” given that officials made bold statements too quickly in the aftermath. “The very fact that within the first 24 hours [after the attack], even before the fire was put out, the Americans started screaming that it wasn’t Ukraine, I think, is a piece of incriminating evidence. I can’t classify it otherwise; it is evidence in and of itself,” Zakharova told Sputnik.  Moscow News Agency via AP “The second fact to note concerns the clamor by the US that this assuredly was the work of ISIS,” Zakharova emphasized. “Of course, the speed with which they were able to [come to such forthright conclusions] is astonishing. It took them only a few hours to get to a microphone, turn on the lights, summon the press, and draw a conclusion about who is to blame for this horribly bloody terrorist attack.” She underscored that all of this demonstrates that US officials “boxed themselves into a corner” because it allowed independent analysts to “[remind] everyone else what ISIS really is.” By that, she meant the recent history of the US/Gulf alliance in Syria having fueled the rise of ISIS: “You are behind all those ISIS-type structures; you – the United States, Great Britain – yourselves brought them into being,” she concluded. During the decade-long proxy war in Syria, the West backed the side that produced the Islamic State. In many instances, the US was even paying the salaries of “Free Syrian Army” (FSA) commanders who were openly cooperating and fighting alongside ISIS and Al-Qaeda terrorists. Kremlin officials have strongly suggested that ISIS militants were used as proxies for the Friday attack in Moscow on behalf of the Ukrainian or possibly Western governments or intelligence agencies. On Wednesday the official death toll from Russian authorities in the wake of the terror attack on the Moscow concert hall has reached 140 killed, after more people succumbed to their wounds in the hospital. In the days following the Crocus City Hall attack, Russian state media has been featuring stories on the ‘rise of ISIS’ and the West-sponsored jihad in Syria: The US – Godfather Of ISIS? While Washington firmly pins blame for the Crocus City Hall attack on ISIS, apparently shielding Ukraine from accusations, RT reveals how Islamic State’s targets over the last few years have raised some interesting questions… pic.twitter.com/aNmIWVy1HH — RT_India (@RT_India_news) March 27, 2024 President Vladimir Putin in addressing the terror attack over the weekend vowed to hunt down and punish all perpetrators while also charging that Ukraine prepared a “window” to help the terrorists escape. Since then several more arrests of alleged collaborators and plotter have been made. As for the culprits possibly receiving assistance from Ukraine or Western governments, there’s as yet been no clear evidence presented that demonstrates a connection. Tyler Durden Thu, 03/28/2024 – 06:33

  • Baltimore Bridge Collapse May Cost Billions, Dramatically Disrupt Supply Chains
    by Tyler Durden on March 28, 2024 at 10:30 AM

    Baltimore Bridge Collapse May Cost Billions, Dramatically Disrupt Supply Chains By Noi Mahoney of FreightWaves The collapse of Maryland’s Francis Scott Key Bridge Tuesday after it was struck by a cargo ship continues to block access to the Port of Baltimore and could disrupt shipping flows across the U.S. The Singapore-flagged MV Dali container ship collided with the bridge around 1:35 a.m. on Tuesday. At least six people remain unaccounted for, CNN reports. With rescue and recovery operations ongoing, it’s unclear how long debris from the bridge will block the Patapsco River, which leads to the Port of Baltimore. For the shipping community, the accident will affect maritime lanes as carriers must seek alternative ports of call while the collapsed bridge continues to block the river, experts said. “Are any container vessels currently trapped in the bay? That is question No. 1,” Sanne Manders, president of international at Flexport, told FreightWaves. “Right now, there are two vessels trapped: the ship that caused the collision and another general cargo container vessel that is currently trapped.” The Port of Baltimore is the deepest harbor in Maryland’s Chesapeake Bay, with five public and 12 private terminals. The port administration did not immediately respond to a request for comment. Port officials posted on social media that they do not know how long ship traffic in and out of the port will be suspended, although trucks are still being processed. Manders said another important consideration is the scores of commercial vessels that regularly call at the Port of Baltimore. “In the next few weeks, 107 vessels will not be able to call that port and will have to divert to other ports,” Manders said. “The question is, are other ports able to absorb that capacity? The reality is that Baltimore is an important port, but for containerized trade, it is relatively small.” In 2023, the Port of Baltimore handled $80.8 billion in trade, including 1.1 million twenty-foot equivalent units, 1.3 million tons of roll-on/roll-off farm and construction machinery, 11.7 million tons of general cargo, and 847,158 shipments of cars and light trucks. A number of major companies have distribution warehouses and other facilities at or near the port, including Amazon, FedEx and BMW. In Maryland, most of the freight is regional, with about 36% of trucking tender volume staying in the state. An additional 22% goes to Pennsylvania and 15% goes to Virginia. Rachel Shames, vice president of pricing and procurement for CV International, a Norfolk, Virginia-based international logistics and transportation company, wrote in a market update that the collision is expected to create a temporary increase in cargo volume at other East Coast ports. “The full impacts of this disaster are not yet known, but it’s likely that nearby East Coast ports, including Norfolk, Philadelphia, New York and others will absorb cargo traffic from Baltimore in the short term,” Shames wrote. “This sudden increase in volume may strain operations at other ports.” Manders said what makes the Port of Baltimore unique is the volume of roll-on/roll-off cargo it handles, such as passenger vehicles, along with agricultural and industrial equipment. “Then you’re also getting into agricultural exports — rice, sugar, fertilizers, forestry products. It’s pretty big in Baltimore. Then there’s also a big paper industry there and construction materials,” Manders said. “I do think in other commodities and cars, this will have a major impact. There are also some metal exchange warehouses for nickel, tin and copper in Baltimore. Now those can also be moved to other ports, but those are bulky materials, and they don’t move them very easily.” Jeff Leppert, executive vice president of modal operations at Redwood Logistics, said some of the company’s shipper customers have several ships currently stuck at the port. “Other impacts include the Port of Baltimore’s fueling depot, which is currently unable to take fueling shipments for the near future,” Leppert told FreightWaves. “The stretch of I-695 that collapsed with the bridge is the only hazmat-approved bridge in the area, so those shipments will have a large diversion in the region and beyond.” He said all deep-water ships, vessels with a controlling depth of 50 feet, will have to be diverted to ports such as Norfolk and New York/NewJersey. “We are currently working with all of our shipping customers to find solutions now and for the coming months,” Leppert said. The Mediterranean Shipping Co. and Zim Integrated Shipping Services Ltd. are two of the Port of Baltimore’s largest shipping lines. Neither company immediately responded to a request for comment from FreightWaves. Paul Brashier, vice president of drayage and intermodal at ITS Logistics, said the priority right now is to ensure clients are making plans for containers that were originally routed to Baltimore. “These shipments will be discharged to other ports on the Eastern Seaboard,” Brashier said. “This also means that we must prepare trucking and transload capacity to be able to transport the impacted freight to the appropriate initial location.” Tyler Durden Thu, 03/28/2024 – 06:30