Cadiz, Spain

I pronounce it Cadese but the locals say Cadeeth. They don’t know the difference between s and th? The boat docked right up close to town so we didn’t have much of a walk from the boat to the city center. We saw a nice monument right when we crossed the street. We were also quick to note that the Spanish are not big on picking up after their dogs because there was shit all over the sidewalks. We followed the waterfront all the way around the peninsula city. They had two forts on the perimeter of the city facing the Atlantic. We had to walk about a half mile out to one of the forts which was closed when we got out there. Then we checked out this massive old, golden domed church in town. When we went in we saw nets suspended from the ceiling to catch falling concrete from the ceiling (just like Wrigley). We didn’t stick around long inside. We tried to get lunch in the plaza but after 10 minutes without service we headed to the boat for free food. After an impromptu slam dunk contest on the 9.5’ rim on the boat’s basketball court we headed back to the city to find internet access for less than $.50 a minute. As we walked back through town we found that all the businesses were closing down for siesta. Do these people all think they’re 80 years old or what? Luckily the internet café/slot machine casino stayed open. After an hour there we walked back out to the beachfront and around town and back to the boat. By the way, Cadiz is where Boys II Men got off after giving the concert two nights before.

Also in more recent news, I don’t usually provide market commentary but today is the exception. This week 10-year Treasuries jumped by 20 basis points to about 5.15%. I’ve been telling anyone willing to listen lately that basically our economy, stock market, and soft landing in real estate is all due to the dirt cheap interest rates. All these private equity deals are done with leverage based on these cheap rates. My prediction is that if rates continue to rise there is going to be trouble. Now I have no idea what will cause them to rise but if they do, look out. If short rates also rise, that will obviously hasten the problem. I think real estate will crash if the 10 year goes over 6% with the sub-prime market problems showing up in the middle to higher income ranges. Once the ball gets rolling I think it will take a while to stop. And obviously, higher rates mean higher required returns in private equity which I’m sure are already getting harder to find with so many players now. Higher required returns and a slower economy and lower actual returns on investments will spell big trouble for a lot of these deals. I’m no economist but I have hunch. One thing that could increase rates would be China choosing to buy bonds in Europe instead of the US because at the end of the day the Chinese are as responsible for our low interest rates as anyone. But rates could stay low indefinitely and we will stay in this “Goldilocks” situation where everything is “just right.” Let’s see what happens.