Water water everywhere, Nor any drop to drink
May 24, 2026 – weekly comment
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I cry water, water, water
The truth to shame the liar – Eric Burdon, Water
In March of 2000, the based-on-a-true-story movie Erin Brockovich was released. Julia Roberts famously played the lead role. Erin was an unemployed mother of three. She was injured in a car crash and filed a lawsuit with lawyer Ed Masry. She loses the suit, but ends up going to work for Masry, who hires her even though she has no legal experience.
Julia Roberts and Erin Brockovich
From Wikipedia:
Erin is given files for a real estate case where the Pacific Gas and Electric Comany (PG&E) is offering to purchase the home of Donna Jensen, a Hinkley resident. Erin is surprised to see medical records in the file and visits Donna, who explains that she had kept all her PG&E correspondence together. Donna appreciates PG&E’s help: she has had several tumors, and her husband has Hodgkin’s lymphoma, but PG&E has always supplied a doctor at their own expense. Erin asks why they would do that, and Donna replies, “Because of the chromium”. Erin begins digging into the case and finds evidence that the groundwater in Hinkley is seriously contaminated with carcinogenic hexavalent chromium, but PG&E has been telling Hinkley residents that they use a safer form of chromium. After sev’l days away from the office doing this research, she is fired by Ed until he realizes she has been working the entire time and sees what she has found, and rehires her.
The case resulted in the largest direct-action lawsuit award in history at that time against PG&E, $333 million, in 1996. Heck of a movie!
What made me think of this movie, and of the Flint Michigan water crisis which occurred in 2014 and resulted in a $626 million verdict, was this posting on X:
From @HedgieMarkets
https://x.com/HedgieMarkets/status/2057901307596312725
Brown water is coming out of kitchen taps in Morgan County, Georgia, and residents say it started when explosive blasting began at a nearby data center construction site. EPA Assistant Administrator for Water Jessica Kramer agreed under oath at a congressional hearing this week to investigate.
Morgan County is now the seventh community I have written about this month dealing with measurable harm from data center construction. Saline Township, Tucson, Fayetteville, Lake Tahoe, Phoenix, Newnan in Coweta County, and now Morgan County all share the same story. The hyperscalers picked locations where land was cheap, regulations were light, and local governments were eager for the tax revenue.
Then there’s this weekend article on BBG:
Hyperscaler Debt Flood Brings Derivatives Bonanza
https://blinks.bloomberg.com/news/stories/TEXUWTT96OSL
As big tech companies raise hundreds of billions to fund artificial intelligence investments, Wall St banks are increasingly finding they have to trade more credit derivatives to keep doing business with the hyperscalers.
The banks’ purchases of CDS protection allows them to increase business with hyperscalers. “Investors continue to look to buy hyperscaler CDS, and a lot of that does come from CVA desks” (Credit Valuation Adjustment desks)
CDS tied to MSFT, AMZN and ORCL notched $4.6b in notional trading volume in the first quarter, from $759 million a year earler… META CDS- only launched last October – had $534m in notional trades, more than double the prior quarter.
These numbers don’t seem particularly large or worrying to me. But the water issue could loom large given the unpopularity of data centers. As WH Auden wrote:
“Thousands have lived without love, not one without water.”
From Google (Gemini)
Grid Impact: Nationally, U.S. data centers withdraw roughly 0.3% to 0.4% of total daily U.S. water withdrawals.
Household Equivalents: A medium-sized data center (around 10–20 MW) uses about 110 million gallons annually, matching the daily usage of roughly 1,000 average American households.[this make ZERO sense to me even though it was just cut and paste from AI! The average American household uses about 300 gallons per day (seems high) so the sentence SHOULD read,”… matching the ANNUAL usage of roughly 1000 households”]
Again, the numbers don’t seem alarming. But when combined with other snippets of data like a new historic low in University of Michigan Consumer Sentiment at 44.2, and polls on opposition to data centers (see below), the prospect of an army of Erin Brockoviches seem more likely.
Public opposition to data centers has escalated into a widespread national movement, with 70% of Americans opposing the construction of artificial intelligence (AI) data centers in their local communities according to Gallup polling data.
Pope Leo XIV’s first encyclical, Magnifica Humanitas, is set for release tomorrow, Monday, May 25, 2026. It will address “the protection of the human person in the age of artificial intelligence”.
Look, it never pays to bet against the Pope.
With the tech industry at an overall >50% weighting in the SP500, and the fact that hyperscaler AI investment is expected at $2.59 trillion in 2026 (Gartner), a significant retrenchment of AI stocks will reverberate throughout the economy. The CDS numbers aren’t big, but what IF some of the hedge funds have to pay out on hyperscaler defaults? Counterparty risk?
Finally, there’s this:
DeepSeek To Make Permanent 75% Discount on Flagship AI Model (BBG)
I don’t have any particular trades to suggest, though a large reversal in tech could easily flip sentiment in rates to a theme of disinflation. Currently 0QZ6 (midcurve option on Dec’27) 9675/9725 cs settled 4.75 ref Z7 9604.5. On March 2, as Iran hostilities started, SFRZ7 traded as high as 9709.5. I’d be inclined to pick up some cheap call spreads on red SFOR contracts on any further cheapening of the contracts.
| 5/15/2026 | 5/22/2026 | chg | ||
| UST 2Y | 408.1 | 412.7 | 4.6 | wi 413.0 |
| UST 5Y | 425.8 | 426.7 | 0.9 | wi 427.4 |
| UST 10Y | 459.5 | 457.0 | -2.5 | |
| UST 30Y | 512.8 | 508.1 | -4.7 | |
| GERM 2Y | 273.5 | 264.1 | -9.4 | |
| GERM 10Y | 316.6 | 303.7 | -12.9 | |
| JPN 20Y | 365.0 | 368.5 | 3.5 | |
| CHINA 10Y | 175.6 | 174.8 | -0.8 | |
| SOFR M6/M7 | 35.0 | 37.8 | 2.8 | |
| SOFR M7/M8 | -10.5 | -15.5 | -5.0 | |
| SOFR M8/M9 | 5.0 | 4.5 | -0.5 | |
| EUR | 116.21 | 116.03 | -0.18 | |
| CRUDE (CLN6) | 101.02 | 96.60 | -4.42 | |
| SPX | 7408.50 | 7473.47 | 64.97 | 0.9% |
| VIX | 18.43 | 16.70 | -1.73 | |
| MOVE | 79.87 | 78.43 | -1.44 | |
Inflation driven by oil, oil driven by Hormuz and Uranium
May 22, 2026
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–Rates were higher at the short end yesterday, with 2s up 4.7 bps to 4.085% and 30y essentially unch’d at 5.11. On the SOFR strip, reds (2nd year) were -4.75 to 9604.75, greens -2.375, 9608.625, and blues -1.125, 9601.375. As mentioned previously, all clustered just below 4%. The SOFR setting for May 20 was just 3.50%, right at the lower end of the FF target. Earlier in the month SOFRRATE was around 3.62%. BBG reports that GSE’s awash with cash are pressing SOFR lower. The setting is expected to firm into month end, but the gap between current SOFR and SFRK6 at 9636.0 or 3.64 is quite wide. SFRM6 settled 9632.25.
–In my opinion there’s almost no chance of a move in June at Warsh’s first FOMC, though the July 29 meeting, which will see another PCE price on 25-June, and CPI on 14-July, is an open question. The June FOMC is 17th, with CPI preceding on 10-June. I would note that front month WTI was around $62 in May 2025 and has been around $102 this month.
–Inflation is based on oil, which boils down to Hormuz opening and Iran giving up enriched uranium. It’s also based on data center build-outs; end costs for AI services seem destined to rise. “Uber’s CTO, Praveen Neppalli Naga, revealed that the company completely exhausted its annual AI budget within the first four months of 2026.” From Hedgie on X: “Microsoft canceled its internal Claude Code licenses this week after token-based billing made the cost untenable, even for a company with effectively infinite cloud resources.”
–June treasury options expire today. TYM6 109.25^ settled 21 vs 109-075; TYM current 109-13 with 109.5^ around 18.
Interesting Ed Dowd take on Thoughtful Money:
Ed Dowd on new Thoughtful Money podcast (23 min left mark):
On inflation expectations, 2 scenarios, “$125 oil gets you to 5%; a resolution to the war gets you to around 4% inflation by May…. Cleveland Fed’s Nowcast Inflation is 4.18% for CPI in May and 4.06% for PCE…
5% is in the ballpark…
If we dont get results soon, oil is driving the short term, and if we hold $125, then a ‘cup-and-handle’ tech formation breakout suggests 200 to 250, which will take inflation to 11% by August. [I don’t see a ‘cup and handle’ personally but could see a breakout to 180]
Below is from Cleveland Fed. I haven’t watched this series to have an opinion on accuracy.
Headline CPI
+0.46% (1-month) and +4.18% (12-month) in May 2026
Headline PCE
+0.40% (1-month) and +4.06% (12-month) in May 2026
https://www.clevelandfed.org/center-for-inflation-research
What were you thinking?
May 21, 2026
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–Spirited bounce in US rate futures yesterday as crude oil reversed off the highs on another promise of ‘getting close’ on Iran peace plan. CLN6 settled 98.26 from Tuesday’s 104.15. US ten year yield fell 9.7 bps to 4.57%. FV led, down 10.3 bps to 4.223%. SFRM7, the lowest contract on SOFR strip, rose 12 to 9605. Heavy buying of SFRZ6 9600p was an exit; open interest fell 35k. Settled 17.5 vs 9616.
–This morning: (Yahoo) The S&P Global Flash Eurozone Composite PMI Output Index fell to 47.5 in May from 48.8 in April, marking a 31-month low and a second consecutive month below the 50.0 threshold that separates expansion from contraction. The services sector, which accounts for the bulk of eurozone output, bore the brunt. The flash services PMI fell to 46.4 from 47.6, the worst reading since February 2021, and well below the consensus forecast of 47.7. [Europe starting to buckle?]
–US Composite PMI released this morning is expected 51.8 from 51.7. Other data includes Job Claims 210k, Philly Fed 17.8 from 26.7, and Housing Starts. At the low in March, the US Bankrate 30y mortgage was 6.10. Last is 6.46.
–Plenty of news coverage of Spacex IPO. Expected to be priced June 11, with IPO June 12.
–Heavy June/Sept roll activity in 10y yesterday with price moving down from 9.75 to 8.50. TY has completed 18.7% of roll, while FV is 13.3% and TU is 13.0%.
–Just as I am getting ready to send: IRAN’S SUPREME LEADER HAS ORDERED THAT NEAR-WEAPONS-GRADE URANIUM MUST STAY IN IRAN, TWO SENIOR IRANIAN SOURCES SAY. ESM futures went from around unch’d to down 20.
–From Google: NVIDIA’s (NVDA) trailing twelve-month (TTM) Price-to-Sales (P/S) ratio sits at approximately 25.04.
Here is Sun Micro’s CEO Scott McNealy (thx YZ) in 2002. (We’ve dispensed with these sort of metrics in today’s market…)
“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes which is very hard. And that assumes you pay no taxes on your dividends which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?”
Yield notes
May 20, 2026
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–New highs in yields. SFRM7 9593.0, -4.5 to new low, it’s the lowest contract on the SOFR strip, 4.07%. The 2y note closed 4.122%, high since Feb 2025. Tens ended at 4.667%, up 6.4 bps yesterday and up 40 bps in the past month. SOFR contracts from reds thru blues (2nd, 3rd and 4th years forward) are clustered at 4%, high of 9602 (H8 & M8) and low 9589 in H0.
–Near one-year calendar spreads made new highs. SFRM6/M7 settled 40.25 (9633.25/9593.0) and FFQ6/Q7 (I chose August because it’s just after the July 29 FOMC) settled 36.0. Both are currently of telegraphing 1 to 2 hikes over a year. FFQ6 is 9633.5 with EFFR currently 3.63 or 9637.
–The 10y inflation-index yield is now 2.157%; the high in Oct 2023 was 2.52%. 30y bond yield ended at a new high of 5.18 (taking out the Oct 2023 high of 5.11). There were large block trades yesterday in FVM and TYM. Over 100k TYM6 from 108-255 to 108-20. The rolls (M6/U6) make interpretation a bit difficult, but total TY OI was -44k. However, FVM6 also traded at least 50k blocks 106-18 to 17+, with total OI +155k. In any case these areas might now act as support, with current (Wed morning) FVM 106-2125 and TYM 108-295.
–I marked 5/30 at a new recent low 85.4, last time at this level was June 2025 ~84 bps. But it was also at this price in Oct 2021, before Fed tightening hammered the curve.
–NVDA earnings today. Revenue for the quarter expected $80b. Market cap $5.3T, so mkt cap to sales is astronomical, though revenue growing at blistering pace. Friday atm 220^ looks like it was around 13.50 late against 220.61. Seems cheap.
–Iceland raised rates quarter pct to 7.75%. In Sept 2024, they had lowered from 9.25, down to a low of 7.25% by Nov 2025. Inflation is about 5.25% and at risk of rising further. Indonesia hiked 50 to 5.25% with currency at new low. India rupee also making new historic low.
–Japan 10y new high 2.77%, 30y new high 4.137%. German 10y new high yest of 3.16%. UK 10y new high 5.17 last Friday, is now pulling back at 5.05. So Japan 10/30 is 136-ish compared to US 10/30 at 52
Rate futures trying to stabilize
May 19, 2026
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–SOFR contracts pressed lower Monday. The nadir on the strip is SFRM7 which settled at a new low 9597.5, -1.5, just above 4%. 2y note was essentially unch’d at 4.08% while tens were up 1 bp to 4.604. A late announcement by Trump that he was postponing an attack on Iran hit oil and supported stocks and bonds, but while current CLN6 price is lower by 1.28 to 103.10, ESM is -28.75 as of this Tues morning note at 7397.00. Yest low 7373.50. (So at least the oil side of the trade worked out for the tipped insiders).
–A bit of otm call buying on SFRZ7, which settled 9602.5, -3.0. Z7 9750/9800cs 4 paid 6k. SFRM7 and SFRZ7 c fly bought as package: 9650/9725/9800 17 for 6k, M7 fly 8.0s and Z7 fly 9.25s. Upside on SFRZ6 was substantially exited as prices fell; the 9650 strike in M7 and Z7 still requires perception of modest easing.
–Home Depot Q1 sales fell short. Comparable Sales +0.4% in the US vs 0.9 estimate, not too great in the context of 3.5% inflation, though housing is lackluster. HD was 390 in February, now 300, nearing the low of late 2023 when the bond yield had put in its high of 5.11 (now 5.14). Clearly some stocks are reacting to higher rates…
A few clips
May 18, 2026
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Just a couple of clips today
Ken Griffin went home on a Friday “fairly depressed” after watching AI agents at Citadel do work that used to take teams of PhDs in finance months to complete. Done in days.
I attended the University of Arizona commencement ceremony, where Eric Schmidt @ericschmidt faced boos throughout his speech. If you don’t know how young graduates feel about AI, this post is for you. The message is clear: it reflects growing skepticism toward AI narratives coming out of Silicon Valley.
The CAPEX build continues, but the ultimate outcome is far from certain.
I drove from Chicago to Charlotte NC starting Wednesday. Almost all the billboards along the highways are for personal injury attorneys. A bit depressing. Then, every now and again are HUGE American flags waving over the highway. Camping World locations. In late 2021 CWH traded over $45 as the Covid lust for roadtrips developed. Now the stock is 6.63, and to my untrained eye, it looks like there’s massive inventory bloat on the lots (and there are a fair amount of CW locations). Road work near Charlotte is in full swing, as southern states benefit from northern migration.
July oil CLN6 hit a new high this morning, 104.37. Last price 102.22, still up 1.20.
According to BBG, “Yardeni urges Fed to drop easing bias…” and Gunlach says it’s ‘just not possible’ for Fed to cut rates. SOFR curve already reflexts this dynamic:
There is not a single contract on the strip trading at a lower yield that the 3.63 Fed Effective rate (9637). Red pack is 9603.5, -7.5. On Friday, SFRU6/U7 one-year calendar surged to a new high 25.5. up 7 on the day. (9626, -1 and 9600.5, -8). So that spread is currently priced for one hike. One month ago, on April 20, the spread was negative 23, flipping from an ease to a hike in a month…
Higher Rates
May 13, 2026
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–I am away from the desk the rest of the week.
–CPI for April was unsurprisingly higher than expected yoy 3.8 vs 3.7 exp and Core 2.8 vs 2.7. A year ago in April WTI crude was around $65. Now 102.
–In part due to data, and in part due to negative bond conditions globally, yields made new highs. As mentioned previously the pressure on red SOFR contracts has been relentless, and SFRM7 made a new low 9610.5 (9611.5). EFFR has been setting 3.63 last couple of days or 9637, so SFRM7 is more than one-quarter pct higher, i.e one hike as Warsh was confirmed to take Miran’s spot as Fed Governor. All SOFR packs out 4 years are clustered tightly at yields just above current EFFR. Whites 9624.5, Reds 9619.125, Greens 9625.125, Blues 9617.625. Ten year rose 5 to 4.462%, 30s +4 to 5.026 with an auction today. Slight new low in 5/30 at 90.4 bps.
–Interesting (as usual) note from BBG Cameron Crise about big tech’s flip-flop from free cash flow positive to borrowing:
- This is the AI trade’s thirst for capital; Meta has issued a load of dollar debt this month, Amazon has announced a big Swiss-franc offering, and Alphabet has sold bonds in Canadian dollars and euros, with a further slate of yen-denominated bonds to be sold later this month.
- They are hardly alone. Total dollar-denominated corporate bond issuance has crossed the $1 trillion barrier for 2026 already; this is the earliest that that threshold has ever been breached.BBGs Cameron Crise
–Also from BBG– New York City Mayor Zohran Mamdani has ditched his plan to raise New Yorkers’ property taxes — an unpopular measure he threatened to use to help close a two-year deficit. [Already running out of other people’s money to spend] I mention it because data centers are also ‘unpopular’ and also requiring capital.
UNDERSTANDING HIGH FINANCE
May 12, 2026
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I was searching for this parable and finally found it…so now going out as additional missive (I thought it related well to Ares’ PIK ‘investment income’) I don’t know who to credit as original author, from 2015
‘Mary is the proprietor of a bar in Dublin. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar.
To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Mary’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Soon she has the largest sales volume for any bar in Dublin.
By providing her customers’ freedom from immediate payment demands, Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Mary’s gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral
At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don’t really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary’s bar. He so informs Mary.
Mary then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since, Mary cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.
Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Mary’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.
Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately, though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary’s bar.
Now, do you understand economics in 2015?’
On Life Support
May 12, 2026
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–There’s a lot of news this morning but I think this BBG article might be the most important: “A top South Korean policymaker said the nation should pay citizens a “dividend” using taxes on AI profits, underscoring growing pressure to redistribute gains from a boom that’s enriched chipmakers…” KOSPI index was 5000 at the end of March, made a new high of 8000 today but has made an outside day with a lower close. Classic reversal….but I know from personal experience the classics haven’t been working in my favor recently…
–The allure for gov’ts to charge taxes on ‘excess AI profits’ to mollify anti-AI populace could catch on globally, like wildfire.
–Yesterday I noted on X that SENSEX was selling off as Modi urged citizens to conserve fuel, avoid foreign travel, etc. In contrast, Trump is likely to suspend the federal gasoline tax. SENSEX is lower this morning, and feels like a near-term test of the April low is in the cards. Trump can’t bear the pain from weaker stocks, Modi can.
–UK rates are making new highs with Starmer floundering. BBG notes the UK 30y yield tops 1988 high. The UK ten year is also making a new high of 5.12 (last seen in 2008). Note that six years ago the yield was almost zero, at 7.5 bps. Japan’s 10y JGB is also at a new high this morning of 2.545% (low was negative 29 bps in 2016). German bund isn’t quite at a new high, but trying. US 10y is currently 4.43%, not a new high but certainly vulnerable as US treasury auctions 10s today and 30s tomorrow. Today’s CPI could have a large impact as well, expected +0.6 vs +0.9 last, with yoy expected 3.7 from 3.3 (Core 2.7 from 2.6). CLM6 higher this morning at 101 with the Hormuz ceasefire on “life support”.
–I noted this weekend that NDX (nasdaq 100) had added over $9 trillion of market cap since the end of March, nearly 1/3 of GDP, and concluded this wealth effect might add to inflationary pressures. Pullback in US stocks this morning…
–This X post is from @Fongern_FX
Oh, oops! Blackstone’s flagship private credit fund is under redemption pressure. Jon Gray (President & COO) responds by asking senior executives to put in their own money. When the largest manager in a $1.8tn market needs its own people to plug the gap, the model is breaking.
That’s Blackstone, below is Ares: PIK is analagous to “add it to my tab” at the tavern.
“In 2025, noncash PIK interest and dividends were nearly $490 million, or 34%, of Ares’ net investment income. A decade ago, PIK was 8% of its net investment income.”
“There won’t be any money, but when you die, on your deathbed, you will receive total consciousness.” -The Lama
[total ‘noncash’ consciousness does NOT equal “investment income”]
–Just as it feels like global markets are entering a maelstrom as Trump and Xi are set to meet, I’ll be out of office the rest of this week. Good luck.
Local real estate
May 11, 2026
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–From the latest Doomberg, just prior to this week’s Trump/Xi meeting:
Ultimately, the sanctions weapon is an elaborate confidence game. Global players need to be held to account if they run afoul of sanctions, but if everybody runs afoul of it all at once, a run on the bank of US financial power could occur.
–The quote refers to sanctions Bessent placed on 5 Chinese energy companies.
On Saturday [May 2] the Chinese Ministry of Commerce issued a notice prohibiting the recognition, enforcement, or compliance of U.S. sanctions against five Chinese companies accused of participating in Iranian oil transactions. The ministry said the sanctions “constitute improper extraterritorial application.” (NBC news)
Not sure what the implications are, but this week’s meeting may be critical.
–Yields eased a bit Friday in a flattening curve. 2/10 edged to a new recent low 47.5 (2y 3.89, -2.5 and 10y 4.365. -2.6). SFRM7 was +4.5 to 9626. 3y auction today, followed by 10s and 30s Tues/Wed.
–Last week I mentioned a story about a data center builder paying 10x the farmland asking price for a 300+ parcel of farmland in Illinois. Since then I have heard several – related? – stories about real estate in the Chicago area. All anecdotal and likely specific, but surprising nonetheless. A couple of months ago I was talking to a neighbor about crazy prices for houses in my area (Wilmette, IL). My neighbor is a wealth mgr for lack of a better description, and he said it’s caused in part by boomer parents borrowing against their portfolios and paying cash for houses for their kids. Apparently the rate to borrow on a portfolio (according to YZ who researched it further) is something like 2.5%. But this weekend I heard three other stories, all in the context of new lows in consumer confidence: First, a guy said his daughter was trying to rent an apartment in Chicago near the viagra triangle (gold coast). He said they were being taken on first visit and some going above asking rents. Bidding wars for APARTMENTS! Another friend from the trading floor, now a realtor, Bob Royals, sent me this note: “Two very nice vintage condos around the corner from me just closed for $75K over list price- 15% higher.
I have heard that people are offering significantly higher rental prices than what the landlord lists.” This in Oak Park, first suburb west of Chicago.
–Finally, my brother is friends with a classic Irish real estate investor. Came here in his twenties with nothing and started buying apartment buildings with his brothers by scrimping and pooling whatever money they had. Now personally owns 300 plus units in Chicago in Wrigleyville, Logan Square etc. He just told my brother that even HE is amazed by soaring rent prices.
–Again, this is just the Chicago area, and in fairly popular locations. I guess the upper part of the K population. I have also seen airbnbs being sold with slashed prices in vacation spots, and large price declines in former boom towns like Austin. Real estate is local, just like the AI boom….
Near me…teardown house purchased for about $950k.
https://www.zillow.com/homedetails/526-Linden-Ave-Wilmette-IL-60091/3375433_zpid/
