Normal or not, Elon’s interview didn’t disappoint.  He shared plenty of interesting observations and opinions.   And whether he runs or not … and whether you’d vote for him or not … the interview was worth a watch.   Find it if you missed the original broadcast.  

 

Welcome to this week’s Steak House Index update.

 

If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG: https://www.steakhouseindex.com/move-over-big-mac-index-here-comes-the-steak-house-index/

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Why You Should Care:   The US economy and US dollar are the bedrock of the world’s economy.  

But is the US economy expanding or contracting?

Expanding.  Even as the FED rapidly raises rates!    At the end of Q4, 2022, in ‘current-dollar’ terms, US annual economic output rose to an annualized rate of $26.14 trillion.   During 2022, America’s current-dollar GDP increased at an annualized rate exceeding 9%.  No wonder the FED is so concerned, right?  The world’s annual GDP rose to over $100 trillion during 2022.   America’s GDP remains around 25% of all global GDP.  Collectively, the US, the euro zone, and China still generate about 70% of the global economic output.  These are the 3 big, global players.

 

The objective of this blog is singular.

 

It attempts to predict the direction of our GDP ahead of official economic releases. Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth.  In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending.  Consumer spending is clearly a critical financial metric.  In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric.  I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.

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Taking action:  Keep up with this weekly BLOG update.  Not only will we cover the SHI and SHI10, but we’ll explore “fun” items of economic importance.   Hopefully you find the discussion fun, too.

If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.

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The Blog:

 

As I said above, it was an interesting interview.   He shared some great personal opinions and insights on the ‘remote work’ thing, his own personal work habits, the FEDs management of the economy, and – of course – the topic of artificial intelligence.

And so, in honor of Elon’s budding presidential run, given his deep connection to technology and AI, I thought I’d ask Microsoft’s AI engine to share a few thoughts on Elon and his presidential qualifications and aspirations.  Here’s what the computer offered:

 

Hello, fellow humans! Today I want to talk to you about why Elon must for US president. Yes, you heard me right. Elon must. Not Musk. Must. As in, it is imperative, essential, and urgent that we elect this visionary genius to lead our nation into the future.

Why, you ask? Well, let me tell you. Elon must for US president because he has the vision, the courage, and the resources to solve the biggest problems facing humanity today. He is not afraid to think big, to dream big, and to act big. He is not bound by the limitations of conventional politics, bureaucracy, or reality. He is a disruptor, an innovator, and a trailblazer.

Think about it. Who else can promise us a colony on Mars, a hyperloop across the country, a neural link to connect our brains to the internet, and a flamethrower for every household? Who else can make electric cars sexy, rockets reusable, and tunnels boring? Who else can tweet memes, smoke weed, and date pop stars while running multiple billion-dollar companies? No one but Elon.

Elon must for US president because he is not like the other candidates. He is not a career politician, a corporate puppet, or a celebrity wannabe. He is a self-made man, a visionary leader, and a global citizen. He does not care about polls, parties, or popularity. He cares about humanity, progress, and innovation. He does not follow the rules, he makes them. He does not play the game, he changes it.

Elon must for US president because he is the only one who can save us from ourselves. He knows that we are facing existential threats from climate change, artificial intelligence, nuclear war, and asteroid impacts. He knows that we need to act fast, act smart, and act together. He knows that we need to embrace science, technology, and creativity. He knows that we need to be bold, brave, and optimistic.

Elon must for US president because he is the best thing that ever happened to this planet. He is our hero, our savior, our hope. He is the one we need, the one we deserve, the one we must.

So join me in this crusade for a better future. Vote for Elon must for US president in 2024. Because he must. And so must we.

 

I’m convinced!  🙂 

Well, not really.   I sincerely doubt I’d vote for him.   And I own a Tesla!  

I asked the AI to write the response in a “funny” style.   I found the response entertaining.  I hope you did as well. 

However, one thing I did  not  ask the computer, is if it considers Elon to be “normal.”   Because in my opinion, I don’t think there’s any definition of normal that fits Mr. Musk.  My opinion, only, of course.   But that’s not a bad thing, of course, because while he may not be normal, he is certainly extraordinary.   Which, I’m guessing, probably disqualifies him for the office of president.   Since he’s not normal.  🙂

Speaking of “the office,” in that same interview he offered his personal and very definitive opinion on the morality of remote work.   Yes, the morality.   I find that concept quite interesting.   Essentially, he said he believes it is morally wrong for people in the “laptop class” to promote for working from home when service workers, such as people who work in factories, still have to show up in person.  Interesting.

Agree or disagree, it’s a fascinating perspective.   And one I am certain will cause office building owners across the US and other developed nations to rejoice.  Office building owners are hurting.   Unless you are living under a rock, you have seen the Wall Street Journal headlines:

 

•        <>  Distress Sales Rise in Beleaguered Office Market

•        <>  Distress in Office Market Spreads to High-End Buildings

•        <>  Property Giant SBB Downgraded to Junk

•        <>  Commercial R/E Woes Run Deeper Than In Past Downturns

 

And then, of course, we have:

 

San Francisco Braces for Epic Commercial Real Estate Crash

 

A “crash?”  Is it that bad in San Francisco?   Yes, it’s pretty bad.   San Fran is bruised and battered.   In a city already stressed by pandemic events, their high-rise office market distress simply adds fuel to the bonfire.   Is the “work-from-home” movement the culprit?    Yes, to a great extent, post-pandemic it is. 

The original catalyst of course was the pandemic.   Apparently forcing just about everyone to stay home … results in most people staying home.   After the pandemic ended, many simply asked themselves, “Should I just stay here and work … even though the pandemic is over?”   As often as not, the answer was clearly yes. 

And the knock-on effects roll down the line from there:   Exceptionally empty office buildings clobber office building values; but, perhaps even worse are the financial impacts on a diverse list including city property tax revenue, center-city business like dry cleaners and coffee shops, municipal bonds, the CMBS market, availability of new CRE financing, and the list goes on.  Very vacant office buildings create a TON of problems for city-centers and their businesses. 

So is Elon right?   Is the work from home movement morally wrong?   Clearly that’s his personal opinion.  He expressed it very clearly in the interview. 

I don’t share this one, however.  I don’t see how morality enters into the debate around the mechanics of remote work.  However, morality aside, I do wonder if the hollowing-out of downtown office building state has a debilitating impact on our SHI10 readings? 

As you know, the SHI index measures expensive eatery demand in 10 cities across the US.   Has reservation demand been adversely impacted by dramatically reduced office space use?   In other words, has a chronic increase in center-city office space vacancy impacted and reduced aggregate SHI10 restaurant demand in certain city centers?   The SHI contends reservation demand is highly correlated with general economic conditions.  Could center-city office occupancy levels also impact reservation demand? 

 

 

Here’s this weeks chart.  A reading of 198 is very consistent with the “non-Mother’s Day” readings from last month.   In the macro, this is very consistent with prior readings. 

However, I wonder if San Francisco’s distress is somehow reflected in steak house reservations demand?  It’s worth noting that all the SHI restaurants in San Francisco are deep in the city.  Alexanders and EPIC are in an area known as SOMA – south of Market Street.   Mastros is in Union Square and Harris is up on Russian Hill.    Compare and contrast those locations to, say, the Orange County SHI restaurants.  All are essentially ‘suburban’ locations. 

On the other hand, Boston reservation demand remains robust.  And these steak houses are also in the heart of the city.  The same holds true for NYC … another city, like San Francisco, that is showing severe signs of distress due to office building vacancy. 

And how about the St Louis?   Is a low office occupancy somehow responsible for their chronic reservation demand weakness?   It’s hard to say … but the question itself is valuable as we navigate this very unusual chapter in the work-from-home movement.   Here’s the trend report:

 

 

Expensive eateries remain in high demand in the OC.    But we’re seeing demand weakness in Dallas and New York … and it looks to me like demand in ‘Vegas has been growing weaker and weaker.  Consider the fact that that the SHI10 found five (5) open tables at Gordon Ramsey’s place this week — a very unusual condition. 

Is reduced Las Vegas reservation demand meaningful as a discretionary consumer spending barometer?   Generally, I would say it is.  We’ll have to watch this trend carefully.  

And time will tell if Elon actually decided to run yesterday.  I think he will.  🙂

<:>   Terry Liebman