Landmark Links December 3rd – Salt in the Wound

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Must Read: High-tax state housing markets have not been hit as hard by capped SALT deductions as initially anticipated – mainly because the AMT didn’t allow affluent residents to use those deductions anyway.  However, there has still been an impact and Florida markets are still booming with wealthy new residents.

Economy

Holding Up: Eighteen states rang in 2019 with minimum wage increases — some that will ultimately rise as high as $15 an hour — and so far, opponents’ dire predictions of job losses have not come true.

Rich Getting Richer: The wealthiest counties in the US are still growing very quickly in terms of per-capita income.

Unbalanced: US wealth distribution continues to get more top heavy.

Commercial

Temporary Storage: Amazon is renting up cheaper, older warehouses near its major distribution centers for 3rd party sellers to store goods in an effort to streamline deliveries this shopping season.

Downmarket: Luxury malls are expanding as they pursue more younger and less well-heeled customers.

Proceeding with Caution: High net worth individuals (HNWIs) have emerged as an avid group of commercial real estate investors in recent years. Yet even as allocations to the asset class remain strong, investors are treading carefully amid concerns about slowing growth and the near-term economic outlookSee Also: Do not expect much, if any cap race compression between now and the 2020 election.

Residential

Misplaced Blame: Tech bros didn’t cause California’s housing mess and won’t be able to fix it.  This is a legislative problem and only a legislative solution will work, no matter how much money Silicon Valley giants throw at it.

Tailwind: With no overbuilding in sight, a healthy consumer is still pushing the housing market forward.

Profiles

Piling Up: Private equity buyout activity in the U.S. is down sharply even as firms’ unspent cash allocated for North American deals hits record $771.5 billion.

Hanging in There: Cryptocurrency has been taking it on the chin recently but is far from dead and the future could be quite bright for survivors of the swoon.

In the Spotlight: After WeWork, both SoftBank’s strategy of boosting company valuations by investing aggressively in multiple venture rounds and its bookkeeping are coming under scrutiny.

Chart of the Day

Got our tree this past weekend and can confirm that this is indeed the case.

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WTF

Whatever it Takes: A woman faked a medical issue in order to get a bigger seat on an airplane because Florida..

Mind Your Own Business: A drunk man who was masturbating in a supermarket’s parking lot slugged an elderly man who told him to stop because Florida.

Apparently Not: Police in Indiana are searching for a man with the words “Crime Pays” inked on his forehead and wanted in connection to a high-speed pursuit.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links December 3rd – Salt in the Wound

Landmark Links November 26th – Pay Up

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Must Read: New federal regulations that took effect last week will nearly double the minimum dollar amount for foreign visa-seekers through the EB-5 program from $500k – $900k in addition to several other more stringent requirements.  This, coupled with weak demand from Chinese investors will likely result in substantially less utilization of the program in the coming years.

Economy

Leveling Off: Weekly initial unemployment claims have stopped falling.

Late Game: From rising delinquency on consumer loans, to banks pulling back to declining corporate profits as a percentage of GDP, there are more than a few indicators suggesting that we are late in the economic cycle.

Pushing on a String: Cheap money hasn’t led to a corporate spending boom because weak economic growth means that new factories are unappealing, while disruptive technologies don’t involve all that much investment.

Commercial

Hitting the Breaks: Private equity investors allocated a lot of capital to CRE debt plays over the past few years. That trend has been slowing of lateSee Also: The once red-hot market for collateralized loan obligations has cooled substantially.

Rudderless: For a company that always seems to have a plan on where it has headed next, Amazon’s foray into grocery shopping has been chaotic and lacking a cohesive themeSee Also: Amazon is reportedly planning bigger cashier-less supermarkets for 2020.

About Face: Malls that are actually thriving in today’s brutal retail environment are spending millions in order to reinvent themselves and stay relevant.

Residential

Cashing Out: Blackstone has sold the last of its stake in Invitation Homes, exiting its rental home wager with a big gain.

Frozen in Place: Americans are moving at the lowest rate on record as an aging population, coupled with the lock-in effect of housing prices outpacing inflation have slowed things to a crawl.

Squeezed: As rents outrun pay, working class California families find themselves on a knifes edgeSee Also: Housing supply is tumbling once again.  Here’s where its worst.

Profiles

Fight For LA: From $3 billion in cost overruns to terrible ticket sales and a general lack of fan interest, the shotgun Los Angeles marriage between the Rams and the Chargers is off to a rocky start.

Steady Stream: TV’s newest commercials are starting to look an awful lot like the web’s oldest – annoying banner ads and pop-ups.

Repeat?  Is crypto following the internet boom/bust cycle of the late 1990s?

Chart of the Day – Black Friday Edition

Source: The Hustle h/t Steve Sims

WTF

Do As I Say: A man with a Don’t Drink and Drive bumper sticker was arrested for drinking and driving because Florida. h/t Cyndi Deermount

Joyride: A dog put a car into reverse and drove it in circles for nearly an hour because Florida.

Tax Dollars at Work: South Dakota spent nearly $500k on a public awareness campaign that implies that nearly everyone in the state is on methSee Also: Two Arkansas chemistry professors were arrested for allegedly cooking meth in a college lab because sometimes life imitates art.

USA #1: The Twinkies cereal that no one asked for is finally here.

Mouthfull: A motorist spat his food into a woman’s mouth during a road rage incident because Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 26th – Pay Up

Landmark Links November 22nd – Piling On

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Lead Story: Billionaire investor Carl Icahn has made a big bet against mall owners by buying credit default swaps based on the CMBX 6 index that has substantial exposure to mall debt.  Icahn has a pretty incredible track record – thus the title self-made billionaire.  However, there is a catch: while the macro thesis of the destruction of malls seems obvious, actually generating a profit from it has proven to be incredibly difficult.

Take for example Alder Hill Management, LP, a hedge fund whose founder, Eric Yip used to work for Icahn.  Yip and Alder Hill had raised $300MM and bet heavily against CMBX 6 but wound down the trade earlier this year and began to wind down the hedge fund as well when the index rallied hard after bottoming out in late 2018, benefiting from lower interest rates.  In fact Icahn has apparently suffered early losses as well.

This is a complicated bet since it relies not only on the macro thesis being correct but also on the direction of interest rates and CMBS lenders’ willingness to restructuring loans in order to kick the can down the road on defaults.  Neither the restructuring appetite of lenders nor the direction of interest rates are easy to forecast, meaning that a seemingly can’t-miss trade can quickly become a money-losing albatross.  In other words, timing and luck are just as important as getting the macro thesis correct when it comes to this sort of bet.

Economy

Sink Hole: America’s public-sector pension schemes are trillions of dollars short on funding and the problem is getting worse despite quickly growing contribution rates.

Holding Pattern: The view that inequality is playing a larger role than previously thought is gaining ground.  The theory is that this is occurring since wealthy people, flush with cash have a high demand for safe places to park their capital, resulting in yields that are pushed lower than they otherwise would be at more historical wealth distribution levels.

Same Old Story?  Data shows that the recent yield curve inversion (and subsequent un-inversion) was not unusual by historical standards.

Commercial

Human Cost: WeWork just laid off 2,400 people out of its 12,500 workforce. At lease Adam Neumann is sitting on a beach somewhere counting his SoftBank billions.  See Also: WeWork bonds have hit a new low and are now trading at 71 cents on the dollar, pushing yields north of 16% after its net loss more than doubled in the 3rd quarter YOY.

Don’t Call It A Comeback: After losing tenants to revitalized downtowns over the last decade, developers are adding modern amenities to suburban office campuses, spurring a renaissance that is benefiting from a workforce that is moving back to the burbs.

Residential

Grounded: Near record-high lot prices are one of the biggest impediment to building affordable housing today.  However, cost and fee inflation mean that its still difficult for land developers to turn a profit, even with elevated prices.

Confidence Game: Home builder confidence remained strong in November as builders continue to view sales conditions positively.

Priced Out: Its not just entry level homes that are scarce.  The supply of rental homes is shrinking as well, despite huge growth in the single-family rental sector during the foreclosure crisis, and that continues to push rent prices higher, particularly on the lower end of the market.

Imagine That: Knock me over with a feather, evictions and huge rent hikes are surging before California’s new rent control law is set to begin.  If only someone could have predicted that rent control would have severe negative consequences.

Profiles

Potentially Huge: New Jersey has demanded that Uber pay $649MM for years of unpaid employment taxes for its drivers, arguing that the ride-hailing company has misclassified the workers as independent contractors and not as employees.  If this gains traction with other states, kiss the gig economy goodnight.

Do What You Love: A University of Miami professor who wrote a book about drug crime and money laundering was arrested and charged with laundering money from Venezuela because Florida.

Just Deserts: Softbank is suffering as massive stakes in Uber and WeWork plunge in value.  There is an argument that this is well-deserved due to the toxic nature of the company’s core investment philosophy: creating monopolies by pouring so much money into a company that it leaves its competitors in the dust and consumers with no choices.

Chart of the Day

How low can you go?

History of Interest Rates

Source: Visual Capitalist

WTF

By All Means: As Twitter, Facebook and YouTube shut down accounts spreading China’s narrative about the Hong Kong protests overseas, resourceful pro-China bloggers are putting their videos on another extremely popular platform: the world’s biggest porn site, Pornhub.

Perfect Hiding Place: A 380 lb man was arrested for possession of a hypodermic needle containing methamphetamine.  When he was searched upon being admitted to jail, police found a bag of meth hidden in his belly button because Florida.

Love Triangle: A man helped his daughter murder her boyfriend, then proceeded to marry her because Kentucky.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 22nd – Piling On

Landmark Links November 19th – Waiting for the Pop

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Must Read: Pop up stores are taking up some of the slack left by vacating traditional retailers and could end up being a viable replacement.  However, executing a pop up strategy requires a lot more management and a lot less certainty of cash flow.  See Also: There are signs that the bearishness in the retail sector is beginning to abate.

Economy

That Was Easy: The Federal Reserve has indicated that they are done cutting rates for now.  However, their statements still point in a dovish direction.

Context: There has been an onslaught of news about US household debt rising to record levels.  However, this number isn’t nearly as scary – and in fact looks quite low – once disposable income is taken into account.  The lesson here is that debt almost always grows when assets, wealth and the economy grow as well.

Plodding Along: A new survey by KKR shows that return expectations are very low for the next 5 yearsSee Also: Low returns are stoking investor appetite for risk.

Commercial

The Incinerator: WeWork reported a net loss of $1.25 billion in the third quarter, eclipsing its sales and more than doubling its loss from the same period last year.  However, that isn’t the most interesting part of the earnings story from Bloomberg.  Check out this little nugget:

SoftBank has said it will buy stock from employees and other shareholders at a discounted rate, but that deal has yet to happen, according to the financial document. When it does, SoftBank will own about 78% of the company and less than half of voting stock.

How the hell did SoftBank allow this to happen?  Here I was under the impression that the entire reason that they bailed Neumann out to the tune of well over $1 billion was to get control of the voting shares?  Apparently not.  SoftBank is proving to be not just dumb but comically so.

Further Afield: Institutional investors, including Goldman Sachs are looking away from gateway markets and towards mid-size US cities when they look for new investments.

In High Demand: The healthcare job market and industry consolidation are among the key forces shaping strong demand in the medical office space.

Residential.

Supply and Demand: The cost of renting in Los Angeles and Orange Counties continues to rise at a pace not seen in 12 years, according to a slice of the local Consumer Price Index.

Fair Price: There is a perception that iBuyers make low-ball offers on homes in exchange for instant liquidity and convenience.  However, a new, in depth study suggests otherwise.

Profiles

Drying Out: Just months after we finally escaped a long drought, most of California is back to being “abnormally dry” according to a US Drought Monitor map released last week.

Up In Smoke: Excitement over falling legal barriers led to business over-expansion and overly aggressive investment in the cannabis space.  However the long-term prospects remain positive.

Havens: Unsurprisingly, a low tax environment and warm weather continues to attract billionaires to Florida.  Perhaps more surprising, that same low tax incentive, coupled with recent deregulation is drawing more of the world’s super rich to South Dakota.

Chart of the Day

Women: “Men are unrealistic and have standards that are far too high when it comes to looks.”  

Science: “GTFO”

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Source: Tyro Partners, LLC Dating Market Study

WTF

Who Am I To Judge: Three Indiana judges were suspended as a result of a drunken brawl outside of a White Castle, after an aborted late-night strip club trip resulted in two people being shot. (h/t Henry Baskerville)

Gone with the Wind: During a traffic stop, a man told police that a gust of wind blew a bag of cocaine into his car because Florida.

Fake it Until You Make It: A man pretended to be disabled to trick care workers into changing his diaper. (h/t David Landes)  If you think this story sounds familiar you are correct.  Almost the exact same thing happened in Arizona last year.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 19th – Waiting for the Pop

Landmark Links November 15th – Deceptively Weak

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Must Read: Looking simply at demographics, one might think that senior housing would be a major growth play in the US for many years.  However, the aging-in-place trend and major affordability issues make it very difficult to pin down demandSee Also: Boomers want to stay home and technology is allowing them to do it.  Senior housing is now facing a budding glut.

Economy

This Will End in Tears: Consumers, salespeople and lenders are treating cars a lot like houses during the last financial crisis: by piling on debt to such a degree that it often exceeds the car’s value. This phenomenon—referred to as negative equity, or being underwater—can leave car owners trapped.  By the way, this is exactly what can be expected when dealerships make more from arranging financing then from selling cars.

Lender of Last Resort: As the steepest agricultural downturn in a generation persists and bank financing becomes unavailable, farmers are turning to expensive non-traditional financing to stay in business.

Missing the Boat: As millennials  approach middle age, its becoming apparent that they may have missed their economic boom as too many economic forces conspired against them when they were coming of age.

Commercial 

Tipping Point: Just as Martin Shkreli went down as the poster boy for greedy drug company executives, Adam Neumann will likely go down as the key figure in popping the unicorn bubbleSee Also: As WeWork attempts to scrub its image clean of Adam Neumann, some of the ousted CEO’s transactions serve as a bitter reminder of the company’s former culture of excess.  Chief among those is the $850MM purchase of the Lord and Taylor building in NYC that featured an above-market purchase price and above-market lease rate where a prominent board member held interests in the buyer, seller and tenant. And: SoftBank is in talks to hire T-Mobile CEO John Legere to be the new CEO of WeWork.  Two points of interest here: 1) Legere looks exactly like Neumann (including the hair), just 20+ years older; and 2) Current WeWork Executive Chairman Marcelo Claure once tweeted at Legere “You truly are a con artist. No doubt. Good luck.”  So board meetings should be fun.

Changing Appetites: A survey from UBS found that more people are now going to the mall to eat at the food court than to buy clothes.

Residential

Disappearing Act: The average age of first time home buyers in the United States is still rising as young home buyers continue to vanish.

Putting the High in High-End: Real estate agents and developers have discovered that cannabis can be a powerful marketing gimmick to sell luxury homes in communities, like Los Angeles, that have legalized recreational marijuana use.

Profiles

Uncertain Return: Companies are dumping a fortune into online advertising via Google and Facebook.  However, despite highly-touted metrics, no one knows if it actually yields a positive return when you truly look under the hood.

Going Big Time: The American Cornhole League wants to turn a game that’s typically played with one hand holding a beer—and possibly named for an indecent part of the human body—into an international spectator sport.

Flex Offenders: A new Instagram account is going after fake entrepreneur scammers who pretend to be successful in order to sell phony seminars.  Consider this a reminder that not all heroes wear capes.

Chart of the Day

Source: MarketWatch

WTF

Clever: A (judging from the mugshot, clearly stoned) man who identified himself to police as “Ben Dover” was arrested on an obstruction charge for giving a phony name because Florida.  As of now, the whereabouts of his accomplice Heywood Jablome are still unknown.

At Least He Was Honest: A man pulled over for driving recklessly told police that he “needed to get home in a hurry because he was cheating on his wife” because Florida. (h/t Steve Sims)

Proportionate Response: In a story surprisingly not related to the one above, a woman was accused of setting her boyfriend’s home on fire after catching him cheating because Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 15th – Deceptively Weak

Landmark Links November 12th – Hiding in Plain Sight

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Must Read: Apple is the latest tech giant to commit billions in funding to counter California’s housing crisis.  However, what these investments fundamentally miss is that the problem holding housing back is not a lack of money but rather a lack of political will.  Perhaps the money would be better spent pushing political initiatives that would actually deliver more housing by streamlining the approval process.  The solution is hiding in plain sight but companies are throwing money at the symptoms, not combating the disease itself.

Economy

Moving In: New data from Pew Research found that a larger share of American adults have co-habitated than have been married.

Falling Short: 401(k) plans are not helping workers save enough to fund their retirements.

All Clear?  The yield curve is no longer inverted thanks at least in part to the Federal Reserve’s response.  However, looking back at history, the damage may already be done.

Commercial

Another Enabler: SoftBank gets most of the blame for enabling WeWork but Wall Street banks deserve some as well.  However, as banks extended credit to WeWork in an effort to get in position to make massive fees on its IPO, the protections that they put in place reflected concerns about co-working giant’s business model.

Branching Out: As customers increasingly turn to mobile apps to do their banking, banks are trying to make increasingly un-used branches more relevant by hosting events and offering amenities like coffee bars.

Bright Spot: Falling US interest rates and negative global yields mean that real assets are looking even more attractive to asset allocators looking to make a return.

Under Fire: Some lawmakers are pushing to roll back Opportunity Zone status for certain already-well-off neighborhoods, as well as some product types like self storage.

Residential

Warning Shot: Bond giant Doubline is raising the alarm that if the government were to weaken or eliminate its long-standing backstop of Fannie Mae and Freddie Mac, it could cause substantial economic pain.

A Path Forward? A recent JP Morgan credit risk transfer transaction that pays investors a stream of income in exchange for those investors agreeing to shoulder losses up to a certain level if homeowners default on loans in an underlying pool of mortgages could provide a road map to a smaller Fannie and Freddie.

Profiles

Science: A fan put together a detailed statistical analysis of how Houston Rocket’s star James Harden’s performance declines in cities with highly rated strip clubs and its a work of art.

Juggernaut: How Google edged out rivals and built the world’s dominant ad machine, attracting a federal investigation in the process.

Primary Vulnerability: If the internet ever went down for a prolonged period of time, everything from communication to electronic payments to global logistics would grind to a halt and the economic consequences would be dire.

Chart of the Day

Hello, 911.  I’d like to report a chart crime.  And, yes this is an actual chart from SoftBank’s epic earnings deck.

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WTF

High Standards: A mother nearly died after suffering a heart attack as a result of stress when her 3rd grade son didn’t understand a math problem, despite repeated explanation because China.

You Don’t Ask, You Don’t Get: A prisoner who briefly died while incarcerated for murder is arguing that he should be released because he has already served his life sentence.  I mean, he’s not wrong here.

Point Made: A man was charged with swinging an axe at another man during an argument over tools because Florida.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 12th – Hiding in Plain Sight

Landmark Links November 8th – WeBail

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Must Read: SoftBank’s WeWork strategy consists mainly of holding on to top locations and shut down others. This is likely to leave a lot of landlords – many of which provided incentives like free rent and significant TI allowances – who leased to an SPE without a corporate guarantee from WeWork’s parent company out in the cold.  It could also flood markets with vacant space, ultimately reducing rents. See Also: After the SoftBank bailout, landlords say that they’re ready if WeWork starts giving back spaceAnd: SoftBank’s Masayoshi Son said in a recent speech that turning around WeWork would be “simple” and characterized its bailout of the flailing co-working company as a way to buy in at a cheaper valuation.  I’m beginning to suspect that he may be a few fries short of a Happy Meal.

Economy

Imagine That: A new working paper from NBER found that billionaires’ geographical location is appears to be highly sensitive to state estate taxes.

Supply and Demand: One of the often-overlooked aspects of our long stock market rally is that the number of publicly traded companies has dropped by about half over the past 20 years.

More From Less?  Microsoft Japan gave its workers a four day work week this past summer and found that it boosted productivity by 40%.

Commercial

Clash of the Titans: In a world where Amazon, Walmart and other retailers are pushing for greater speed, more choices and more convenience, industry heavyweights Prologis and Blackstone – who collectively control 10% of the US logistics market – are going all in to maximize efficiency in their warehouse portfolios.

Limited Options: With cannabis stocks down nearly 60% from their highs in March, producers that previously relied on issuing shares have resorted to selling off their real estate to investors and leasing it back in order to raise capital.  This has opened a major opportunity for REITS.

Residential

Fading Away: Home equity lines of credit were once a popular vehicle for financing everything from renovations to college debt.  Today, they are being used less and less, even as record levels of home equity build up.  This has slashed a once-lucrative source of revenue for the nation’s largest banks, as consumers have remained conservative about leveraging up their homes a decade after the housing bubble burst.

Now Comes The Hard Part: Apple, Google and Facebook have committed $4.5 billion to develop housing in Silicon Valley.  Now they have to figure out how to make that massive sum actually lead to more approvals in the NIMBY-dominated region.

Fuel on the Fire: Recent wildfires have only heightened the stakes for California, which still isn’t building anywhere close to enough homes and has been unable to pass serious legislation that would help solve the problem.

Profiles

Game Changer: Engineers at Penn State have figured out a way to fully charge electric car batteries in 10 minutes by using higher temperature.

This Will End In Tears: Lending startups are looking to get in the business of lending to influencers to help them build their personal brands:

Banks won’t underwrite an individual based on qualifications like their Instagram following, of course, and given that influencers don’t typically have a consistent income or a W2 statement to showcase their earnings, they may not be able to receive a bank loan to invest in their own brand. Imagine receiving a loan based on the size of your TikTok or YouTube following? Karat and other new startups focused on monetization could accelerate an influencer’s path to entrepreneurship.

GOAT: For a guy who ultimately compiled an investment record that would put the likes of Warren Buffett, George Soros and Ray Dalio to shame, things did not initially come easy to former NSA code breaker and mathematician Jim Simons when he founded Renaissance Technologies in the late 1970s. Side note: I can’t wait to read The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution.

Ground Zero: As Reno seeks to re-brand itself from burnt out casino town to Silicon Valley offshoot, a high stakes battle is raging over its strip clubs.

Chart of the Day

Who says that low interest rates (which lead to low mortgage rates) hurt the middle class?  While

Median home prices are up almost 400% since 1980 while monthly payments based on prevailing interest rates are only up 94%. This is even more pronounced this century when you consider median home prices are up more than 33% since 2005 while the monthly payment is up just 7% or $100/month.

Source: A Wealth of Common Sense

WTF

Shocking if True: A new study (that someone actually paid for) found that people are more likely to lie when they think it will result in them getting laid.

Joy Ride: A Louisiana man stole an electric shopping cart from Walmart and drove it to a bar in order to avoid getting a DUI.

Finger Lickin’ Good: The new Popeyes chicken sandwich has claimed its first victim as a line cutting feud led to a fatal stabbing in Maryland.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 8th – WeBail