August 17, 2017

Perspective

FT – Nothing like this has happened in 323 years – Martin Wolf 8/15

  • “Prior to January 2009, the Bank (of England) had never lowered its lending rate below 2%. But it was then lowered to 1.5%, on its way to 0.5% in March 2009 and 0.25% in August 2016. This ultra-easy policy was further buttressed by a huge expansion of the Bank’s balance sheet, which now contains £435bn in UK government ‘gilt-edged’ securities and £10bn in corporate bonds.”
  • “Throughout this prolonged recent period of ultra-easy monetary policy, the concern has never been one of runaway inflation, but rather of the opposite. This time really has been different. What does it mean for the future? Nobody knows.”

WSJ – Household Debt Hits Record as Auto Loans and Credit Cards Climb – Josh Zumbrun 8/15

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – The Peculiar Parable of the Lyft (parking) Lot – Joshua Brustein and Dorothy Gambrell 8/9

  • Free parking obscures the true costs of driving to work… charge for parking and smarter behaviors prevail…

Economist – The Philippine president’s zany ideas have not hurt the economy 8/16

  • “When it comes to jobs and investment, Rodrigo Duterte is more reformer than wrecker.”

Markets / Economy

WSJ – Consumers Keep Spending, but Not in Stores – Justin Lahart 8/15

WSJ – Daily Shot: SPDR S&P Retail ETF – S&P 500 Relative Performance 8/15

WSJ – Daily Shot: Coach Stock Performance 8/15

WSJ – Daily Shot: Dick’s Sporting Goods Stock Performance 8/15

WSJ – Daily Shot: Bed Bath & Beyond Stock Performance 8/15

WSJ – Daily Shot: Bloomberg REIT Regional Mall Index 8/15

WSJ – Daily Shot: SPDR Technology Select ETF – S&P 500 Relative Performance 8/15

WSJ – Daily Shot: Nasdaq 100 Equal Weight Cap-Weight Ratio 8/16

  • Thank goodness for the FAANG stocks

Energy

Bloomberg Businessweek – As Venezuela Spirals, U.S. Oil Confronts a $10 Billion Threat – Alex Nussbaum and Sheela Tobben 8/3

  • “While companies have been trimming Venezuelan imports for months, the nation is still a key supplier for some of America’s biggest refineries. Last month, the country accounted for a more than a quarter of capacity at Valero’s Port Arthur complex in Texas, according to U.S. Customs data compiled by Bloomberg. It was 43% at Chevron’s facility in Pascagoula…”
  • The conspiracy theorist in me wonders (although it is highly unlikely) if OPEC members are issuing shadow loans to the Maduro regime to keep this chaos going. The intent being to limit production efficiencies from Venezuela (the country with largest known oil reserves) – which of course, helps ease the production cut burdens on the more stable OPEC members and Russia.

Shipping

Bloomberg Quint – Global Shipping Industry Bounces Back From Its Lehman Moment – Kyunghee Park 8/15

  • “A massive consolidation is underway in the $500 billion global industry and the survivors now enjoy big economies of scale and increased demand, one year after excess capacity caused the sector’s worst-ever crisis — the bankruptcy of South Korea’s Hanjin Shipping Co.”
  • “The five biggest container lines control about 60% of the global market, according to data provider Alphaliner. Shipping rates are climbing, and an index tracking cargo rates on major routes from Asia is about 22% higher than it was a year earlier.”
  • “’Container shipping is now a game only for big boys with deep pockets,’ said Corrine Png, chief executive officer at Crucial Perspective, a Singapore-based transportation research firm. The rising market concentration will ‘give the liners greater pricing and bargaining power,’ she predicts.”
  • “Hanjin’s collapse, in August last year, upended the industry in much the same way that the bankruptcy of Lehman Brothers roiled the financial sector during the 2008 crisis. One of the world’s largest shipping firms at the time, Hanjin faced a cash crunch as supply outstripped demand in the industry, weakening pricing power and profits for carriers.”
  • “’Since the demise of Hanjin Shipping, flight to quality has become more noticeable in the container shipping business,’ said Um Kyung-a, an analyst at Shinyoung Securities Co. in Seoul. ‘That’s why the market is becoming more and more dominated by top players with big ships and those that don’t have could become more and more obsolete.’”
  • “The growing use of mammoth ships is key to the turnaround. Companies who own them are able to deploy fewer vessels and move more cargo on a single journey to benefit from higher rates, said Um.”
  • “By her estimates, there are now about 58 of these huge carriers worldwide that can transport more than 18,000 containers, and the number is expected to double in two years. About half the new vessels will be added by the biggest firms.”
  • “The excess supply that derailed growth last year hasn’t completely disappeared as new entrants expand and as older vessels still remain. Capacity in the container shipping industry is expected to grow 3.4% this year and 3.6% in 2018, according to Crucial Perspective.”
  • “Still, recovery in demand seems to be on track. After posting losses in 2016, companies are seeing signs of business picking up.”
  • “Earlier this year, Maersk, South Korea’s Hyundai Merchant Marine Co. and other shipping lines reached agreements with their customers to raise annual rates from May for cargo headed from Asia to U.S. stores like Wal-Mart and Target. Retailers in the U.S. usually increase inventory during the third quarter, ahead of the year-end holidays, and Lee said freight rates are expected to rise further as the peak season for the container shipping industry kicks off.”
  • “For retailers, ‘if container costs go higher, obviously it’s a headwind,’ said Brian Yarbrough, an analyst at Edward Jones. ‘Retailers have three choices: They can pass that through to the customer or find efficiencies to offset that within the organization, or they come out and say gross margins will be pressured due to higher freight costs.’
  • “BIG SHIPPING DEALS:”
    • “In 2015, Cosco Group and China Shipping Group announced a merger to create Asia’s biggest container line, Cosco Shipping Holdings Co.”
    • “In 2016, CMA CGM SA bought Singapore’s Neptune Orient Lines Ltd.; Maersk agreed to buy Hamburg Süd and Japan’s three shipping companies agreed to consolidate their container shipping businesses.”
    • “In 2017, Hapag-Lloyd AG completed its acquisition of United Arab Shipping Co. and Cosco Shipping offered to buy Orient Overseas International of Hong Kong.”

August 16, 2017

If you were to read only one thing…

FT – IMF warns China over ‘dangerous’ levels of debt – Tom Mitchell 8/15

  • “In an annual review of the world’s second-largest economy, IMF staff said China’s annual economic growth would average 6.4% in 2018-20, compared with a previous estimate of 6%. The IMF is also predicting that the Chinese economy will expand 6.7% this year, up from its earlier forecast of 6.2% growth.”
  • “The Chinese government, which pledged to double the size of the economy between 2010 and 2020, has tolerated a rapid run-up in debt in order to meet its target. ‘The [Chinese] authorities will do what it takes to attain the 2020 GDP target,’ the IMF said.”
  • “As a result, the IMF now expects China’s non-financial sector debt to exceed 290% of GDP by 2022, compared with 235% last year. The fund had previously estimated that debt levels would stabilize at 270% of GDP over the next five years.”
  • “’International experience suggests that China’s current credit trajectory is dangerous with increasing risks of a disruptive adjustment,’ the IMF said in the strongly worded report.”
  • “In the aftermath of the global financial crisis, Chinese authorities unleashed a lending spree that more than quadrupled total debt to $28tn at the end of 2016.” 
  • “In its report, the IMF noted that China’s ‘credit efficiency’ had deteriorated sharply over the past decade, with ever larger amounts of money needed to generate the same amount of growth. ‘In 2008, new credit of about Rmb6.5tn was needed to raise nominal GDP by Rmb5tn,’ the fund said. ‘In 2016 it took Rmb20tn in new credit.’”
  • “The IMF added that had the Chinese government not turned on the credit taps, average real GDP growth in the five years to 2016 would have averaged 5.3% rather than 7.3%.”

Perspective

WSJ – Daily Shot: John Burns Real Estate Consulting – Gross Govt Debt as % of GDP v 10-Yr Bond Yield –  8/15

Worthy Insights / Opinion Pieces / Advice

FT – Shell’s strategic move into electricity – Nick Butler 8/13

  • Shell is thinking ahead – getting into the electricity supply business (to industrial and commercial users).

Real Estate

WSJ – Daily Shot: John Burns Real Estate Consulting – Home Value Index –  8/15

Energy

WSJ – Daily Shot: Dealogic – Oil & Gas High Yield Bond Issuance 8/14

WSJ – Daily Shot: IHS Markit & Houston Chronicle – Pumped Water into Hydraulic Fracturing Wells –  8/15

China

FT – China’s economy is addicted to debt – Jamil Anderlini 8/14

August 15, 2017

Perspective

Brilliant Maps – Would You Feel Comfortable If Your Child Was In A Relationship With X? 8/13

Worthy Insights / Opinion Pieces / Advice

WSJ – The Olympics: the Harshest Hangover in Sports – Jason Gay 8/14

  • “It’s barely a year later, and any lingering good feeling appears to have crumbled. Literally. A staggering new report from ESPN’s Wayne Drehs and Mariana Lajolo found the 2016 host country’s Olympic legacy racing toward ruin—vacant stadiums, decaying infrastructure and a sprawling athlete village that is effectively a ghost town. Plans to convert properties into schools and housing have been ditched. A solicitation to manage the country’s suburban Olympic Park drew zero bids. The Rio Olympic Committee is still $40 million in the hole.”

Markets / Economy

WSJ – Daily Shot: FRED – Consumer Price Index – Used Cars and Trucks 8/14

  • “Deflation in used cars persists due to scores of vehicles coming off lease.”

WSJ – Daily Shot: FRED – Consumer Price Index – New Vehicles 8/14

  • “A robust supply of used cars is putting pressure on new vehicle inflation, which has turned negative last month. In fact, new car prices are now declining at the fastest pace since the recession.”

WSJ – Daily Shot: FRED – Consumer Price Index – Education 8/14

Finance

FT – Short sellers target high-flying US technology stocks – Robin Wigglesworth and Nicole Bullock 8/13

  • “Betting against the tech industry has mostly been painful this year. Despite the losses several big tech stocks suffered last week, S3 estimates that the ‘mark-to-market’ losses on the 10 biggest tech shorts now stand at $7.7bn this year. Tesla alone has inflicted a $4.5bn loss on bearish investors in 2017.”

Health / Medicine

FT – Drug industry faces ‘tidal wave’ of litigation over opioid crisis – David Crow 8/11

  • “US officials seek tobacco-style settlements to help deal with epidemic of addiction.”

Japan

NYT – Japan’s Economy Grows Again in Longest Streak in 11 Years – Jonathan Soble 8/13

  • “Japanese gross domestic product increased by 4 percent in annualized terms in the three months through June, the government’s Cabinet Office said in a preliminary estimate on Monday. The economy has now expanded for six consecutive quarters, the first time it has gone that long without a contraction since the 2005-6 period.”
  • “The pace of expansion also accelerated from the previous quarter, and was stronger than economists had expected. Analysts surveyed by Reuters had forecast a growth rate of 2.5%”
  • While the jolt came from home, “not all of the domestic growth came from private citizens and businesses. Mr. Abe announced a major government spending program a year ago, and the data suggest the money is beginning to find its way from account books to the real economy. Public investment grew at a 22% pace.”
  • Keep in mind Tokyo is making ready for the 2020 Summer Olympics.

August 14, 2017

If you were to read only one thing…

FT – China ‘granny gang’ jailed in lending clampdown – Emily Feng 8/10

  • “A Chinese court has sentenced 14 members of a roving band of elderly female debt collectors to as many as 11 years in jail, in the latest sign of the country’s clampdown on informal channels of lending.”
  • “A court in the mountainous province of Henan this week found that members of the ‘granny gang’, as local media dubbed them, used loudspeakers to publicly cajole and intimidate borrowers into paying up.”
  • “The women, aged 50 to 70, were found guilty of engaging in ‘provocative and disturbing behavior’ that resembled ‘participating in gangster-like organizations’.” 
  • “The women were largely unemployed and looking for work when local debt-collection agencies recruited them at outdoor dancing classes in 2013. In return for helping secure loan repayments, the ‘grannies’ received Rmb200 ($30) per day as well as meals.”
  • “’I had nothing to do every day. When I was asked to help, I did it as a kind of fun,’ Gao Yun, one of the women, told a local newspaper.”
  • “The grannies employed a variety of tactics, including hitting and spitting at borrowers. A more common method was to give debtors an aggressive verbal dressing down until they handed over the money.”
  • “On their most recalcitrant targets, the women took more creative measures. In one 2015 incident, eight of the women began stripping to intimidate male borrowers to pay up, according to an interview that a debtor surnamed Zhao gave to local media.” 

Perspective

Howmuch.net – Do You Want the Best Bang for your Tuition Buck? Check out this College Rankings – Raul 8/10

Bloomberg – Venezuelan Currency Madness Valued Local Bank More Than Apple – Christine Jenkins 8/11

  • “What does it take to surpass Apple Inc. as the world’s most valuable traded company? One way is to be listed in Venezuela, with its massively overvalued currency.”
  • “Venezuelan stocks are ascending the ranks of the most valuable companies on Earth, with lender Mercantil Servicios Financieros CA briefly topping Apple’s market capitalization last week, and now back in the No.2 spot. Five other top-20 companies are also Venezuelan, a mirage caused by currency controls combined with the world’s fastest inflation.”
  • “Most of the lender’s theoretical $775 billion market capitalization evaporates if you stop using the official exchange rate of 10 bolivars to the dollar. The value would be 0.1% of that at the black-market rate that most Venezuelans have to use if they want hard currency.”

Markets / Economy

FT – The credit crisis did not lead to deleveraging – Martin Sandbu 8/10

Real Estate

Why Department Stores Remain on the Down Escalator – Miriam Gottfried 8/10

Energy

Vox – Solar eclipse 2017: how the solar power industry is prepping for a huge sunlight blip – Annette Choi 8/9

  • “The total solar eclipse passing over the United States on August 21 is going to be disruptive. Authorities are predicting huge traffic jams, strained cellphone networks, and insufficient bathrooms for the masses driving to the center of the show.”
  • “But there’s another disruption that will be brought on by the eclipse: power.”
  • “Since the last total solar eclipse passed over part of the US in 1979, we’ve grown a lot more dependent on solar to electrify our homes and businesses. According to the Solar Energy Industries Association, solar energy has grown by an average of 68 percent per year in the past decade. The country now has about 45 gigawatts of solar capacity installed, with 260,000 Americans employed in the industry.”
  • “The solar eclipse will significantly diminish that capacity for a couple of hours on August 21, especially in California and North Carolina.”
  • “The federal Energy Information Administration expects 1,900 utility-scale solar photovoltaic (PV) power plants in all will be affected.”
  • “Solar facilities have long been anticipating this eclipse, mapping out step-by-step demand management for the day of and arranging substitute energy sources to dispatch depending on various demand scenarios. Thanks to the unusually wet winter in California, hydroelectricity is abundant this year, says Greenlee (Steven Greenlee, spokesperson for the California Independent System Operator – CAISO).”
  • “In the past few months, CAISO — which manages 80% of California’s electric flow — has been busy seeking advice from German solar facilities.”
  • “During a 2015 solar eclipse that passed over Europe, 80% of Germany’s sunlight was cut off. For a country whose electricity is 40% powered by solar, it was hit hard. But despite the dramatic seesawing of solar production, the eclipse came and went without major disturbance.”

August 11, 2017

Perspective

FT – The long and winding road to economic recovery – Claire Manibog and Stephen Foley 8/9

Data Is Beautiful – City maps from Airbnb location ratings – txafer 8/9

Worthy Insights / Opinion Pieces / Advice

Bason Asset Management – Shame, Status and The American Dream – James Osborne 7/24

  • Sometimes less is more.

Bloomberg View – Canada’s Housing Bubble Will Burst – Ben Carlson 6/21

  • “The U.S. housing market peaked in late 2006. Since then, based on this index, U.S. housing prices are still down almost 13% from their peak through the end of 2016. In that same time frame, Canadian housing prices are up 56%.”
  • “From the 2006 peak, it took until late 2012 for real estate in the U.S. to bottom. We’ve since witnessed a 19% recovery from what was a 27% decline nationwide, on average. While the U.S. real estate downturn lasted almost six years, Canada’s housing market experienced just a 7% drawdown that lasted less than a year. And house prices in Canada reclaimed those losses in about a year and a half. Canadian housing has also outpaced its neighbors to the south since the 2012 bottom in U.S. real estate, with a 30% gain in that time.”
  • “To recap: On a real basis, Canadian housing prices experienced a much smaller, shorter decrease in prices during the financial crisis and a much larger, longer increase in prices during the recovery. When you couple this unfathomable rise in housing prices with near-record high household debt-to-income ratios, the Canadian housing bubble starts to look scary should the tide turn.”

Business Insider – Maverick Capital, a $10.5 billion hedge fund, is struggling to make money – Rachael Levy 8/9

  • “The proliferation of capital focused on non-fundamental factors confuses short-term stock price responses, causing investors to question links between price and fundamentals. Flows into instruments that allocate capital through predetermined ratios without regard to current or future fundamentals distort prices in the short term, but such distortions create wonderful opportunities that fundamental investors should be able capitalize upon over a longer-term timeframe.” – Lee Ainslie, Maverick Capital

Markets / Economy

WSJ – Daily Shot: Retailer Stock Market Valuations 8/10

WSJ – Daily Shot: Comex Copper Inventory (short ton) 8/9

  • “The COMEX copper inventories have risen significantly lately. It suggests that perhaps the copper market isn’t as tight as the recent rally may indicate.”

WSJ – Do Businesses Need Foreign Workers? Martha’s Vineyard Is Finding Out – Laura Meckler 8/10

  • “Jamaicans and other foreign workers have long powered the summer economy in the upscale tourist haven of Martha’s Vineyard, cleaning hotel rooms, waiting tables and mixing fudge. This year, many local businesses had to come up with a Plan B.”
  • “Facing a shortage of foreign laborers, local restaurants have reduced hours of operation and pared back menus. Managers are cleaning hotel rooms, laundry is piling up and at least one restaurant is using disposable cups to ease the dishwashers’ load.”
  • “The problem is a scarcity of the H-2B visas used to bring foreign seasonal workers to the U.S. It has affected many resorts and other businesses that depend on such workers, including Alaskan fisheries. Isolated locations such as Martha’s Vineyard—it has a tiny year-round population and is accessible only by ferry or plane—are especially vulnerable.”

WSJ – Dairies’ Fix for Souring Milk Sales: Genetics and Bananas – Mike Cherney and Heather Haddon 8/9

Britain

Economist – How to solve Britain’s housing crisis – 8/3

  • This prescription applies to many other places besides Britain.
  • “What makes Britain’s housing squeeze maddening is that, unlike many other problems, something can easily be done about it. Britain needs to get building. The consensus is that, to keep prices in check, it must put up 300,000 houses a year, double what it erected in 2015-16.”

China

FT – Chinese top official warns economy ‘kidnapped’ by property bubble – Gabriel Wildau 8/10

  • “A top Chinese lawmaker has warned that profiteering by real estate developers is sapping the lifeblood from China’s economy, as authorities make efforts to contain runaway property prices.”
  • “The real estate industry’s excessive prosperity has not only kidnapped local governments but also kidnapped financial institutions — restraining and even harming the development of the real economy, inflating asset bubbles and accumulating debt risk. The biggest problem currently facing the country is how to reduce reliance on real estate.” Yin Zhongqing, deputy director of the finance and economics committee of the National People’s Congress

FT – China targets mobile payments oligopoly with clearing mandate – Gabriel Wildau 8/9

  • Apple is not the only company that must yield to China.
  • “China’s central bank has ordered online payment groups to operate through a centralized clearing house, a move likely to undercut the dominance of Ant Financial and Tencent by forcing them to share valuable transaction data with competitors.”
  • “China is the world leader in mobile payments, with transaction volumes rising nearly fivefold last year to Rmb59tn ($8.8tn), according to iResearch. They are now widely used for everything from high-street shopping to peer-to-peer lending.” 
  • “In addition to generating fees directly, online and mobile payments are a source of valuable data that can be used for such purposes as targeted advertising and credit scoring.” 
  • “Now the People’s Bank of China is requiring all third-party payment companies to channel payments through a new clearing house by next June, according to a document sent to payment companies on August 4 and seen by the Financial Times.” 

FT – Chinese crackdown on dealmakers reflects Xi power play – Lucy Hornby 8/9

  • President Xi, the master of the long game.
  • “For China’s ruling Communist party, its foreign exchange reserves are a symbol of national strength and are a crucial buffer against economic shocks. So the alarming announcement that forex reserves had fallen below $3tn in January marked a shift in political fault lines that is only being felt this summer.”
  • “As more than $1tn left the country over the previous 18 months amid a flurry of large overseas acquisitions, a sense of crisis grew within the party.”
  • “Technocrats in Beijing had already prepared the ground to take action. In December, they had managed to link the phrase ‘national security’ to the concept of financial risk at the annual agenda-setting economic work conference. Backed with the reserves figures, they were poised to strike against what they saw as the leading culprit — the new generation of highly acquisitive private Chinese companies.”
  • “These tensions within the system have exploded into the open in the past two months with the humiliation of some of China’s best-known and most well-connected private companies, which in recent years have acquired high-profile foreign assets such as New York’s Waldorf Astoria Hotel and French leisure company Club Med.”
  • “In an abrupt turn, a group of businessmen once lauded as the international face of China are now derided in state media as the instruments of systemic financial risk. The private sector has been shaken by leaked documents, smears and the detention of China’s brashest businessman.”

NYT – A Missing Tycoon’s Links to China’s Troubled Dalian Wanda – Michael Forsythe 8/10

FT – Dalian Wanda reshuffles $1bn of assets – Emily Feng 8/10

Bloomberg – China Is Taking On the ‘Original Sin’ of Its Mountain of Debt – Emma O’Brien, Eric Lam, Adrian Leung, Jun Luo, Jing Zhao, Helen Sun, Xize Kang, and Vicky Wei 8/8

Economist – China tries to keep foreign rubbish out – 8/3

  • “China dominates international trade in many goods, but few more than waste for recycling. It sucked in more than half the world’s exports of scrap copper and waste paper in 2016, and half of its used plastic. All in all, China spent over $18bn on imports of rubbish last year. America, meanwhile, is an eager supplier. In 2016 nearly a quarter of America’s biggest exporters by volume were recyclers of paper, plastic or metal. Topping the list was America Chung Nam, a California-based supplier of waste paper which last year exported a whopping 333,900 containers, almost all of them to China.”
  • “This may soon change. On July 18th China told the World Trade Organization that by the end of the year, it will no longer accept imports of 24 categories of solid waste as part of a government campaign against yang laji or ‘foreign garbage’. The Ministry of Environmental Protection says restricting such imports will protect the environment and improve public health. But the proposed import ban will disrupt billions of dollars in trade. Recyclers worry that other categories of waste may soon receive the same treatment.”

August 10, 2017

Perspective

NYT – Public Works Funding Falls as Infrastructure Deteriorates – Binyamin Appelbaum 8/8

FT – Who was convicted because of the global financial crisis? – Kara Scannell and Richard Milne 8/8

Worthy Insights / Opinion Pieces / Advice

NYT – The Political Payoff of Making Whites Feel Like a Minority – Lynn Vavreck 8/8

NYT – Our Broken Economy, in One Simple Chart – David Leonhardt 8/7

A Teachable Moment – Do You Own this Ticking Time Bomb in Your Retirement Account? – Anthony Isola 8/8

  • Watch out for single entity stable value products.

Real Estate

WSJ – The Best Place for a New Warehouse? An Old Mall – Esther Fung 8/8

  • “The pressure for speedy online package delivery is prompting companies to look for distribution facilities closer to residential areas or highways.”
  • “Some of the best locations, it turns out, are dead malls.”
  • “Warehouse landlords say they like former malls because the shopping centers occupy swaths of space relatively close to where consumers live or near main highways.”
  • “But it isn’t easy to convert a mall into logistics space quickly. Developers say it takes a community ready to accept that the mall has failed as well as understanding that there are viable job opportunities in logistics real estate.”
  • “The dramatic shift in the retail industry and growth of e-commerce have led some analysts to estimate that 400 or so of the roughly 1,100 malls in the U.S. will close in the coming years.”
  • “Meanwhile, the appetite for industrial space continues unabated. Roughly 247 million square feet of industrial space is expected to be delivered this year, according to real-estate services firm JLL.”

Finance

WSJ – Daily Shot: TheAtlasInvestor.com – Euro Junk Bonds & US Treasuries 8/9

South America

NYT – As Maduro’s Venezuela Rips Apart, So Does His Military – Nicholas Casey and Vanessa Herrero 8/8

  • “A growing number of Venezuelan officers are openly breaking ranks with the president and taking up weapons.”
  • “Venezuela has a history of coups and attempted overthrows at times of crisis, and many in the country now wonder if this is one of those times.”
  • “But the nation’s leaders are keenly aware of that, too, and as they face their greatest turmoil in years, they appear to have come prepared: The government has spent years ensuring that the military’s top commanders are deeply invested in the status quo.”
  • “In a single day Mr. Maduro promoted 195 officers to the rank of general. Venezuelan generals, more than 2,000 strong, enjoy a range of privileges, from lucrative control of the food supply to favorable rates for exchanging dollars.”
  • “Eleven of the 23 state governors in Venezuela are current or retired generals, along with 11 heads of the 30 ministries, giving them an extraordinary stake in preserving the government’s control over the country.”
  • “And the defense minister, Vladimir Padrino López, an army general, has been granted an even more lucrative arrangement, with expanded powers to control the country’s ports, as well as parts of the oil and mining industries.”
  • “’Maduro has made sure to give many rewards to senior military officers in exchange for loyalty,’ said John Polga-Hecimovich, a political scientist who studies Venezuela at the United States Naval Academy. ‘While he is completely dependent on them to stay in power, they have much to lose if he is gone.’”
  • But…
  • “Most midlevel officers, however, are far removed from the high ranks or patronage systems on offer from the government. Instead, said Raúl Salazar, a retired general who served as defense minister under Mr. Chávez, they see a deepening poverty caused by the food and medicine shortages that are plaguing the country.”
  • “’Their families, their friends, their acquaintances, everyone is suffering and they begin to ask themselves if it’s getting better or worse,’ General Salazar said. ‘Everyone has the same voice that talks to them each day, and that is their conscience.’”

August 9, 2017

Perspective

Howmuch.net – The Richest Person in Every State 2017 – Raul 8/7

Bloomberg Businessweek – Japan’s Doomsday Preppers Are Buying $19,000 Bomb Shelters – Justin Mattingly 7/25

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Gundlach, Wary of Pricey Market, Sets Cap on DoubleLine Size – Erik Schatzker 8/7

Real Estate

WSJ – Daily Shot: Goldman Sachs – Notable Announced Retail Store Closures 2017 8/8

China

FT – Beijing hails success in battle against capital flight – Gabriel Wildau 8/7

  • “China’s capital flow turned positive in the first half of 2017, a reversal from unprecedented outflows during the previous two years that sparked worries over financial stability.”
  • “Data released on Monday indicate that Beijing’s support for the renminbi and a crackdown on foreign deal making and other outflow channels have largely succeeded in curtailing capital flight.”
  • “China ran a $16bn surplus over the first half of this year, excluding central bank intervention, compared with a $417bn deficit in 2016, balance of payments data showed. The figures also showed that China added to its foreign exchange reserves on a valuation-adjusted basis in the second quarter for the first time since early 2014.”
  • “‘Hot money’ — short-term money movements viewed as a gauge of investor sentiment toward Chinese assets — continues to flow out of the country, albeit more slowly, according to FT estimates based on official data.”
  • “Hot money outflow was $126bn in the first half on a net basis, well behind the $891bn full-year pace for 2016. The FT uses a broad definition of the term, treating all money flows not related to goods trade or foreign direct investment as hot money.”
  • “That suggests investors are eager to take money out of China if they can skirt capital controls, despite recent tightening. Indeed, a Reuters poll of 60 forex analysts in late July showed that they expect the renminbi to erase most of this year’s gains over the next 12 months.”
  • “In a sign that the government remains vigilant despite the improvements, regulators have imposed new measures in recent weeks to prevent capital flight.”
  • “Last week, the foreign exchange regulator named and shamed nine banks for violating forex rules. The agency is also requiring lenders to issue daily reports on all foreign bank card purchases by customers worth more than Rmb1,000 ($149) beginning later this month.”

WSJ – China Gives Up Global Role for a Stronger Yuan – Nathaniel Taplin 8/7

  • “The yuan, which as recently as 2015 had overtaken the Japanese yen as the fourth most popular currency for global payments, now clocks in at No. 6, according to international-transaction service provider Swift, below the Canadian dollar and barely above the Swiss franc. Only 1.98% of international payments tracked by Swift were yuan-denominated in June 2017, down from 2.09% two years ago.”
  • “Given the scale of the bleeding in 2015 and 2016, China’s leaders likely had little choice but to close the drawbridge.”