San Francisco Has Fallen... And It Can’t Get Up!

Let’s be plain: no one wants to live there anymore. [The Rude Awakening] May 08, 2023 [WEBSITE]( | [UNSUBSCRIBE]( San Francisco Has Fallen… And It Can’t Get Up! - Nordstrom is the latest retailer to leave Downtown San Francisco. - Walgreens has already closed 23 stores in the area. - Thirty percent (30%) of San Francisco’s office space is vacant. [Send Me Your Mailing Address!]( [Click here to learn more]( The biggest gold bull market in history has just begun. That’s why New York Times best-selling author Jim Rickards has arranged to send his must-read book on gold to any U.S. citizen with a valid mailing address today. [Click here now to see how to claim your copy of The New Case For Gold](. [Click Here To Learn More]( [Sean Ring] SEAN RING Greetings from a hot, sunny Piedmont! I hope you had a wonderful, restful weekend. Today’s weather reminds me of July 2008, when my boss in London called me into his office. “Sean, Tom has a family outing and can’t make the trip to San Francisco. Would you like to go?” “Of course, I’d like to go!” Though I grew up in Joisey, I had never been to California. By 2008, I had lived in London for almost nine years and had seen much more of the Old World than the New. I was excited… And since the flight from London to San Francisco is over 10 hours, I’d get a Business Class flight! Ah, the perks of being a financial trainer. I recall years earlier talking about San Francisco with Philosopher-Truck Driver John Ring. “If you go out there, you’ll never come back.” He loved San Francisco but, for some reason, always drove back to Joisey. By 2008, I was too attached to the Old World to move to California. And since Cali (plus Federal) taxes were already higher than Europe’s or Asia’s, I felt zero need to. Smartly, I rented a car to drive around the Bay Area in my spare time. I remember crossing the Golden Gate Bridge and thinking, “Achievement Unlocked!” I drove around the Bay and stopped in Palo Alto to see Stanford. I thought, “Nope, not where I’d want to study.” Weird, as it’s *The* School for Tech. I study better in the cold, I guess. In short, it was a wonderful city in a gorgeous region. Not as pretty as Italy, but a stunner in her own class. And with Jack London and Dashiell Hammett ringing in my ears, the place also felt authentic. Alas, all good things must come to an end. Perhaps this won’t be a permanent end. But it’s undoubtedly a hiatus, at the least. People and businesses are leaving San Francisco in droves, and it’s pretty easy to see why. The General Decline in City Usefulness On May 12, 2021 - almost two years to the day - I wrote a Rude piece titled “[Living in Cities is No Longer Worth It]( In it, I listed five reasons cities were losing their luster: - City Mayors Don’t Know What They're Doing - There's No Network Effect If You Can’t Go Outside - City Taxes are Insane - Cities Aren’t Safe - Broadband Internet Changed The Game As I reread this, points 1, 3, and 4 are deeply linked. City mayors have been awful stewards of the places they’ve been entrusted with. And to charge residents and workers the taxes they do, without providing the safety needed to operate within the confines of their cities, really does mean taxation is theft. There’s no good service that’s provided for the tax take. And when the tax take is monstrous, people look elsewhere. I remember London summers when I’d cheerfully stand outside a pub with my friends, drinking pints until the sun went down. Can you do that in NYC, Chicago, or San Francisco anymore? Maybe, in a few designated places. But not generally. And finally, since broadband has become the norm, there’s no need to commute into town. On our editorial call last Wednesday, I realized Dan was in Tennessee, Zach was in Georgia, Byron was in Pennsylvania, Matt and Brian were in Maryland, and I was here in Italy. We have a Slack channel to communicate in between meetings. There’s no reason to force everyone into the same metropolitan area to work. Paradigm Press colleague James Altucher more famously started the argument in 2020. [Over 62 And Collect Social Security? Take Action Immediately!]( [Click here to learn more]( [If you’re over the age of 62 and currently collect Social Security, you need to prepare now](. Because Biden has given our country the worst inflation in decades – and many warn things will only get worse from here. Worse yet, the Social Security check you receive now may not keep pace with inflation… [Which is why, if you don’t act now, you could fall behind in the months ahead](. Is your retirement at immediate risk? [Click here now to get the simple, step-by-step actions to survive inflation](. [Click Here To Learn More]( A Quick Reminder - Altucher Versus Seinfeld James Altucher penned a piece called “[New York City is Dead Forever]( on his LinkedIn profile, republished in The New York Post on August 17, 2020. For all the reasons I've stated here and more, Altucher said this time is different. Jerry Seinfeld published [this piece in]( New York Times]( where he resorted to sarcasm, ad hominems, and straw men to humiliate Altucher. Altucher’s retort was positively sublime: [SJN] But it turned out that Altucher was indeed correct. Now It’s The TWaTs in London I followed up that 2021 piece with “[Cities Continue to Lose Their Luster]( in March 2023. London is in big trouble now. Office workers only want to come in on Tuesdays, Wednesdays, and Thursdays, leading to the inevitable and impeccable nickname: The TWaTs. Has London depopulated yet? No, but it’s a possibility. The thing is, we’ve not experienced a city depopulating - except for Detroit. And that’s viewed as a one-off because the US car industry produces such woeful stuff. But we must remember many cities throughout history have suffered horrific population declines due to bad governance, war, or environmental catastrophe. To a Western audience, the most famous one would be Rome. At its peak during the Roman Empire, Rome's population was over 1 million. However, following its fall, the population shrank dramatically due to various factors, including invasions, economic decline, and crumbling infrastructure. By the 6th century, Rome's population is estimated to have been between 30,000 to 90,000. That’s over 90% of the people for the high end of the estimate. Here are four other notable examples. - Chichen Itza (Mexico): Once the center of the Mayan civilization, Chichen Itza was home to around 50,000 inhabitants at its peak in the 9th and 10th centuries. However, by the time the Spanish arrived in the 16th century, the city had been largely abandoned, possibly due to resource depletion or internal conflicts. - Angkor (Cambodia): The capital of the Khmer Empire was the largest pre-industrial city in the world, with a population of 1 million. But the city was abandoned in the 15th century, possibly due to environmental factors or invasions from neighboring kingdoms. Today, the Angkor Wat temple complex remains a popular tourist destination. (I’ve been there; it’s fantastic!) - Ctesiphon (Iraq): Once the capital of the Parthian and Sassanian Empires, Ctesiphon was a significant city in ancient Mesopotamia. Its population dramatically declined after the Arab-Muslim conquest in 637 AD. The city was eventually abandoned, and the nearby city of Baghdad rose to prominence. - Aleppo (Syria): While Aleppo has not been abandoned like some previous examples, its population has declined significantly due to the ongoing Syrian Civil War. Before the conflict began in 2011, the city's population was around 2.1 million. By 2017, it had dropped to an estimated 1.2 million, with many people fleeing the city due to violence and destruction. Could San Francisco be next? San Francisco, California, in Particular. Mike Shedlock of MishTalk posted a piece picked up on ZeroHedge called “[Downtown San Francisco Becomes a Ghost Town as Major Retailers Flee]( It’s plain scary and, I think, an eerie prediction of what all of San Francisco may look like. When you’ve got higher taxes, no policing, and a mayor who doesn’t care, why work there? Look at this map: [SJN] Credit: [The San Francisco Chronicle]( That’s pretty much most of Market Street. What are SF’s specific reasons for its exodus? - Cha-ching!: Rent prices are astronomical, and people are fed up choosing between avocado toast and paying rent. It's like trying to afford a golden bridge of your own. - Tech exodus: The tech giants have realized that employees can work from home without the office ping-pong tables. Many are going remote, leaving SF a little less techie. - Traffic jams: The city's traffic can make you feel like you're trying to navigate a Mario Kart racecourse. Commuting is a patience-testing nightmare. - The great outdoorsman: The pandemic has made people crave more open spaces, fresh air, and breathing room. You know, the kind that's not filled with fog. - Taxes: California's high taxes have people running for the state border like they're trying to escape Alcatraz. - Quality of life: With rising homelessness, dirty streets, and safety concerns, some residents have decided that a city with a Golden Gate might not be worth its weight in gold. Dirty streets? How about “shit strewn and needle covered?” [Charlie Bilello tweeted]( that San Francisco’s commercial properties were 30% empty. It’s crazy. Wrap Up I can’t see this trend ending in any of the US’s Democrat-run third-world shitholes. NYC, Chicago, and LA are next. This is why commercial real estate is under tremendous pressure that won’t abate anytime soon. And the commercial real estate downturn puts added pressure on regional bank stocks that have enough trouble with the “will they/won’t they bail me out” question. But the positive news is that smaller, cleaner, less inflated cities and towns will welcome these people with open arms. And that’s an excellent thing. Have a lovely week ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening In Case You Missed It… Will Biden Build The Wall… to Part You From Your Money? [Sean Ring] SEAN RING Good Morning Reader, Happy Friday from a sunny, temperate Asti. After joining today’s Rickards Uncensored session with Paradigm Press publisher Matt Insley and the hardest-working analyst in the business, Dan Amoss, I’ll head off with Pam and Micah for more festivities. We’ve got a big carnival in the main town parking lot tonight, and Dad must participate between Moretti pints. But the weather is perfect for it, and I’m famous for liking good parties. If you haven’t signed up for Rickards Uncensored, [head here]( to check it out. Today’s Rude is going to be like a maze. You’re going to have to trust me to lead you through it. Because the convoluted mess that’s the US banking system may have gotten much, much worse. Your Friends and M2 One of the mottos I live by is “Never be the smartest person in the room.” And I bet if I took a random handful of the nearly 100,000-strong Rude Remnant (thanks for being a part of it!), I’d still not be the most intelligent person in the room. So the people I read and listen to are top drawer. One of those people is [Thorsten Polleit]( a German Economist of the Austrian School. I met Thorsten in Bodrum many years ago, and we’ve become good friends. Click his name to follow him on Twitter, where his tweets are wholly educational and easy to understand. I’m reading Thorsten’s book [The Global Currency Plot]( which I’ll review in this newsletter as soon as I build Micah his cardboard candy vending machine (God help me!). Thorsten tweeted something yesterday, which I passed over, thinking nothing of it. And then, when I woke up this morning, my subconscious mind shouted, “Go back and look at that chart, you imbecile!” That leads me to another motto: “Never skip charts from your smart friends when the arrow points straight down.” Here it is: [SJN] Credit: [@ThorstenPolleit]( “There will be trouble.” Who doesn’t love a bit of German understatement? Before we go further, let’s define M2 (and, for foundation, M1). And then, we’ll show what this chart means. Succinctly, M1 and M2 are measures of the money supply in an economy. M1 refers to the narrowest definition of the money supply, which includes the most liquid forms of money, such as physical currency, demand deposits (checking accounts), and traveler's checks. These are the forms of money that can be easily and immediately used as a medium of exchange for goods and services. M2 is a broader measure of the money supply, including all the components of M1, plus additional forms of money that aren’t liquid. That includes savings deposits, time deposits (CDs), and money market funds. These forms of money aren’t readily available as a medium of exchange as the components of M1. But they can be easily converted into M1 components if needed. The theory was people were instantly withdrawing money from their checking accounts (demand deposits) and depositing that money into money market funds which yielded more. That’s true, according to the latest numbers. [SJN] Credit: [@zerohedge]( But year-on-year, the money supply is shrinking. This is most likely because the Fed is trying to shrink the money supply. And that usually precedes a stock market sell-off. So I thought I’d check margin debt, as well, to see how that was doing. [Warning: Will “Bidenflation” Destroy Your Retirement?]( [Click here to learn more]( If you’re like most Americans, you’ve worked hard for decades to build your financial legacy. And now, as a result of Biden’s disastrous money printing policies, that’s all at risk. According to one top retirement expert, “Bidenflation” threatens to destroy your retirement and make your hard-earned savings worthless. That’s why you must take action right away to protect yourself… [Click here now to get the simple, step-by-step actions to survive “Bidenflation.”]( [Click Here To Learn More]( Margin Debt Margin debt is the money investors have borrowed from their brokers to purchase securities, using them as collateral. It’s a form of leverage that allows investors to increase their potential returns on investments, but it also carries higher risk since losses can exceed the investor's initial investment. I was curious about this because of my private banking background. During the late bull market, high net-worth individuals (HWNIs) pledged their assets as collateral and then took the cash from their bankers and put it into stocks, bonds, commodities, and Bitcoin. Those types of loans are called Lombard or margin loans. (They’re called Lombard loans in the old world because they originated in Lombardy, Italy.) Here’s the latest FINRA margin debt chart: [SJN] Credit: [Advisor Perspectives]( Notice the remarkable correlation between margin debt and SPX. (To paraphrase Francis Urquhart, from the original UK version of House of Cards, “You may very well think it’s causation, I couldn’t possibly comment.) Since the market top at the end of 2021, margin debt has fallen off a cliff. But the market held up a bit better than many, including me, would have expected. But there’s more room for the SPX to fall. Now why would margin debt collapse? Could be any number of reasons, such as margin interest getting expensive, investors turning bearish, or positions being upside down and having to get liquidated. But it always comes back to one thing. Fed Hiked Too Quickly and Too Much Again, we’ve said this from Day One. - The Fed should’ve started to hike rates in early 2021. - The Fed would’ve been able to hike more slowly had they started sooner. - Hence, they were late and too fast in their hiking process. Now that the upper bound on the Fed Funds rate is 5.25%, you can keep $100,000 and make $5,250 doing absolutely nothing. Rates are over 5%, just like when I was a kid. But you need to withdraw money from your checking account (demand it, as it’s a demand deposit) and then deposit that money into a money market fund. And that’s what it seems like people are doing. Deposits Leave the Banking System This takes us back to Thorsten’s M2 chart. Because the Fed has hiked too much too soon, depositors aren’t leaving their money in the banks. They’re withdrawing. Why on earth would that happen? Two reasons: Banks haven’t raised rates to keep pace with the higher Fed Funds rate. And as we said recently, there’s a trust issue with the non-Big Four banks, including all the regional banks. JP Morgan, Bank of America, Citibank, and Wells Fargo are fine because they’ve got friends in Washington who’ll never let them fail. (Morgan Stanley and Goldman Sachs are also safe, but are mainly investment banks.) Bloomberg’s latest headline is “[Nearly Half of Americans Worry Their Bank Deposits Aren’t Safe]( The mathematics proves our thesis. But that’s not good for the USG or the banking system, so… What Can The USG Do About It? Founder of the macro hedge fund Eclectica and walking midlife crisis Hugh Hendry appeared on Bloomberg TV. [SJN] Credit: [@hendry_hugh]( He utterly castigated the Fed for exacerbating the existing problem by hiking another 25 basis points this week. And Hendry theorizes that the USG may build a wall around your bank deposits to keep you from starting a little bank run of your own. In the world of hedge funds, these aren’t called “walls” but gate provisions. Gate provisions are contractual terms restricting investors from withdrawing their investments from a hedge fund within a specified period or under certain circumstances. The term "gate" refers to a barrier that limits the outflow of capital from the fund. Getting your money out of a hedge fund can take up to two years. Now imagine Bumbling Biden instructs Useless Yellen to stem the tide of withdrawals from our banking system. Then you can’t put your money into a money market mutual fund to take advantage of the higher rates. In fact, you can’t “demand” your deposits at all. Yikes! This is one way to do to keep the banking system afloat. Wrap Up To summarize, M2 is collapsing because the Fed hiked too quickly, endangering the banking system by guaranteeing the safety of a few banks but not others. Now, a famous hedge fund manager thinks the government may introduce gate provisions to stem the tide of withdrawals. Margin debt has remained steady lately, signaling that wealthy speculators are holding steady. But another drop will pull down the SPX with it. Your move, Jay Powell. Have a great weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting Rude Awakening.](