Month: February 2017

February 17 – February 23, 2017

US Baby Boomer generation making peace with less. Lots of US consumers are behind on their car payments. Banks are taking a step back from lending to the apartment market.


FT – Norway plans shake-up of $900bn oil fund 2/16. The sovereign wealth fund of Norway – the largest in the world, “which already owns 1.3% of every listed company” –  is planning on upping its allocation to equities to 70% from 60%.

FT – China bans coal imports from North Korea 2/18. Apparently North Korea finally crossed a line when it recently assassinated Kim Jong Nam (older brother of North Korean ruler Kim Jong Un) in Malaysia – who by the way was under Chinese protection.

WSJ – Chinese Bank Cleanup Plan Could Leave a Mess 2/20. The growth in the use of wealth-management products by Chinese banks continues to surge so the People’s Bank of China is seeking ways to bring the products on to bank balance sheets to get a better handle of the risk in the system.

Special Reports / Opinion Pieces


  • Clifford Krauss of The New York Times highlighted that while Texas oil fields are rebounding from the price lull, jobs are being left behind.
    • “Roughly 163,000 oil jobs were lost nationally from the 2014 peak, or about 30% of the total, while oil prices plummeted, at one point by as much as 70%. The job losses just in Texas, the most productive oil-producing state, totaled 98,000.”
    • “Several thousand workers have come back to work in recent months as the price of oil has begun to rise again, but energy experts say that between a third and a half of the workers who lost their jobs are not returning.”
    • “And despite all the lost workers, United States oil production is galloping upward, to nine million barrels a day from 8.6 million in September. Nationwide, with a bit more than one-third as many rigs operating as in 2014, production is not even down 10% from record levels.
    • “Some of the best wells here in the Permian Basin that three years ago required an oil price of over $60 a barrel for an operator to break even now need about $35, well below the current price of about $53.”
    • “Pioneer Natural Resources, one of the most productive West Texas producers, has slashed the number of days to drill and complete wells so drastically that it has been able to cut costs by 25% in wells completed since early 2015. The typical rig that drilled eight to 12 wells a year just a few years ago now drills up to 16. Last year, the company added nearly 240 wells to its Permian Basin inventory without adding new employees.”
  • Gabriel Wildau of the Financial Times covered how the People’s Bank of China has launched a fresh new attack on shadow banking risk in the system.
    • “China’s central bank has drafted new rules to tackle risks from shadow banking, in a tacit acknowledgment that a host of measures in recent years to control off balance sheet credit have failed to control its risks.”
    • “New credit hit a record high in January, mostly due to lending by non-bank institutions. UBS estimates that China’s ratio of debt to gross domestic product hit 277% at the end of 2016, up 133 percentage points since the global financial crisis. Non-bank lending has grown the fastest.”
    • “Chinese banks’ off balance sheet wealth management products (WMPs) exceeded Rmb26tn ($3.8tn) by the end of 2016, up 30% from a year earlier, compared with 10% growth for bank loans, the PBoC said. Non-bank financial institutions like trusts, securities brokerages and insurers package loans into investment products, which banks sell to clients as a high yield alternative to traditional savings deposits.”
    • “The PBoC has circulated a draft policy framework in recent days that forbids off balance sheet WMPs from investing in illiquid loans known as ‘non-standard’ credit assets, Caixin, a respected financial news website, reported on Wednesday. ‘Standard’ assets refers to stocks, bonds and money market assets.”
    • “The guidelines also seek to end the implicit guarantees associated with many WMPs… [and] also set uniform leverage ratios for structured WMPs…”
    • “The rules also forbid WMPs from taking other WMPs as their underlying assets, a practice reminiscent of ‘synthetic’ collateralized debt obligations popular in the US before the 2008 financial crisis.”


FT – It’s an issuer’s market in US corporate bonds – Stephen Foley 2/16


WSJ – Nascar, Once a Cultural Icon, Hits the Skids – Tripp Mickle and Valerie Bauerlein 2/21


WSJ – Daily Shot: Classic Rock Preferences Across America 2/20


WSJ – Daily Shot: US – Mortgage Origination By Credit Score 2/21

  • “Mortgage credit remains tight, with the borrowers’ median credit score still above 760.”


Economist – A new paper finds China more unequal than France but less so than America 2/16


WSJ – Daily Shot: U.S. Public Perception of crime rate 2/22

FT – Chinese province’s GDP fall hints at extent of past exaggeration – Yuan Yang 2/22



*Note: bold emphasis is mine, italic sections are from the articles.

With $15 Left in the Bank, a Baby Boomer Makes Peace With Less. Timothy Martin. The Wall Street Journal. 16 Feb. 2017.

“People in the U.S. ages 65 to 74 hold more than five times the borrowing obligations Americans their age held two decades ago, according to an analysis of federal data by the Employee Benefit Research Institute, a nonpartisan, nonprofit policy researcher.”

“Paying it off won’t be easy. Median savings for U.S. households nearest retirement age has dropped 32% in the past decade to $14,500, according to an analysis of federal data by the Economic Policy Institute, a left-leaning think tank.”

“‘This is the first time where we have seen such a high degree of debt held by people at such a late stage of life,’ said Torsten Slok, chief international economist at Deutsche Bank AG.”

“As a result, many senior citizens will either have to work longer, move to less expensive places or pare back their spending – choices that economists say are likely to put a drag on the U.S. economy.”


“By the end of 2015, residents ages 66 to 70 had accumulated $99,700 in debt compared with $90,600 a decade before; 71- to 75-year-old residents had $73,400 versus $58,800 over the same period; and those ages 76 and older had $52,100 compared with $28,200, according to Equifax data.”


One million US consumers behind on car loan payments. Alistair Gray. Financial Times. 16 Feb. 2017.

“More than a million US consumers have fallen at least two months behind on car loan repayments as the delinquency rate reaches its highest level since 2009, in the latest sign of stress in the $1.1tn market.”

“The proportion of soured car loans showed a 13% increase to 1.44% in 2016, according to data published on Thursday by TransUnion, the US credit bureau with an anonymized database of 220m consumers.”


“Delinquencies on credit cards also rose by about the same amount over the period to 1.79% – the highest since 2011.”

“The rise in bad loans comes despite persistently low borrowing costs and unemployment levels – suggesting lenders may be letting consumers take on bigger debt burdens than they can handle. Lending to consumers with weak credit scores has been one of the fastest growing parts of the industry.”

“Separate figures published on Thursday by the New York Federal Reserve showed the total amount of debt held by American households rose last year at the fastest clip since 2007. Increases in all the main categories, from mortgages to student loans, pushed the total up $460bn over the year to $12.58tn – only 0.8% shy of the peak reached in the third quarter of 2008, the height of the financial crisis.”

Banks Retreat From Apartment Market. Laura Kusisto. The Wall Street Journal. 21 Feb. 2017.

“Swelling supplies of apartment units are prompting big banks to pull back from new projects, forcing developers to scramble for capital, in a sign that the U.S. apartment industry is headed for a downturn.”

“The apartment sector, which contributes some $284 billion to the economy annually, has been a winning bet for investors since the housing crash, as the economy recovered and more renters sought out units. Since 2010, average U.S. apartment rents have increased by 26%, according to data tracker MPF Research, a division of RealPage.”

“But fresh supply is beginning to overwhelm demand. More than 378,000 new apartments are expected to be completed in 2017, a 30-year high, according to real estate researcher Axiometrics Inc. In the fourth quarter of last year, 88,000 units were completed but only 50,000 of those were rented by tenants, according to MPF.”

“Now banks are in retreat, forcing developers to look to nontraditional lenders and seek more expensive types of financing to complete projects, said apartment executives, industry analysts, mortgage brokers and bankers.”

“In congressional testimony last week, Federal Reserve Chairwoman Janet Yellen noted that banks have started pulling back from making commercial real-estate loans, which could be a sign of ‘some reduction in appetite.'”

“While a couple of years ago most could get loans for about 65% of the cost to build a project, today they are getting closer to 55%” according to Peter Donovan, executive managing director of multifamily capital markets at real-estate brokerage CBRE.

As Donovan put it, “we’re certainly seeing the pullback. It was almost as if all the banks got the same memo.”

“Adding to the risk for developers: Even as loans get more expensive, rent growth is slowing. Last year, average U.S. apartment rents rose 3.8%, a significant drop from the recent high of 5.6% year-over-year growth posted in the third quarter of 2015, according to MPF.”

“Rents in major cities, such as San Francisco, New York, Houston and San Jose, Calif., all declined about 1% in 2016 from 2015 levels.”

Other Interesting Articles

Bloomberg Businessweek

The Economist

Bloomberg – A Billion Barrels of Bets Backing Stagnant Oil Price: Chart 2/20

Bloomberg – Why Trump’s Immigration Crackdown Could Sink U.S. Home Prices 2/22

Bloomberg – Saudi Arabia’s Oil Wealth Is About to Get a Reality Check 2/23

CNBC – Manhattan condo market cracking, developers roll out big incentives 2/17

FT – Hedgies hope insurers will rush in where others fear to tread 2/17

FT – ‘Aggressive’ vulture funds swoop in on Irish property 2/18

FT – China to slash drug distribution groups in price drive 2/19

FT – Foreign buyers fire up South Korea commercial property market 2/19

FT – Investors snap up inflation-proof gilt at record negative yield 2/21

FT – Snap and the 21st century governance vacuum 2/22

FT – Private placements up next for China’s whack-a-mole regulators 2/22

NYT – A Push for Diesel Leaves London Gasping Amid Record Pollution 2/17

NYT – Where the Booze Can Kill, and Putin Is Deemed a ‘Good Czar’ 2/18

NYT – SolarCity’s Ties to Foreclosure Cases Raise Questions on Vetting Policies 2/22

ValueWalk – How The Slowing Shipping Industry Could Spark A Banking Crash in Germany 2/21

WSJ – How Saudis Cut Oil Output Without Really Cutting 2/16

WSJ – Mall Landlords’ Next Act: Apartments and Concerts 2/21

WSJ – The Inevitable Turn in World’s Most Important Property Market 2/22

WSJ – Office Landlords Struggle to Raise Rents 2/22

WSJ – Only a Market Crash Can Stop Warren Buffett From Winning This $1 Million Bet 2/23

WSJ – Luxury Home Sellers Slash Millions Off Asking Prices 2/23

February 10 – February 16, 2017

Venezuela having difficulties meeting its oil delivery commitments. REITs backing away from apartments. Chinese companies lending to the tune of $2tn where bankers have pulled back.


FT – Alphabet opts to spell out its stock options 2/9. Google recently let slip that it will be treating stock based pay as a cost in its financials (normally relegated to the GAAP footnotes).

FT – Oil and gas discoveries dry up to lowest total for 60 years 2/12. As oil and gas companies have been pulling back on exploration it’s no surprise that new discoveries are down; however, they are yielding more from existing fields.

Special Reports / Opinion Pieces


  • Jon Sindreu of The Wall Street Journal illustrated foreigner’s recent dumping of US debt, putting up a test for rates.
    • “Foreign buyers, led by China, are taking a smaller slice of debt issued by the U.S. and other major economies, a change that may test the long-held belief that overseas money has kept interest rates low in the developed world.”
    • “Foreigners are steadily pulling back: As of November, for the first time since 2009, less than 30% of the $20 trillion market for U.S. government debt was held overseas, according to the latest official data, released in January, from the Treasury Department and Federal Reserve. In the U.K., it is now 27%, compared with a record of 36% in 2008. In Germany, it is 49%, down from a peak of 57% in 2014.”
    • wsj_government-debt-held-by-foreigners_2-9-17
    • “In the longer term, the decline in foreign buyers might not matter so much. For countries that print their own currency, bond yields – and thus the price of bonds – are strongly determined by where investors believe central banks will set interest rates in the future. In theory, at least, bonds whose prices are pushed up or down excessively by supply-and-demand forces will eventually correct to correspond to interest-rate expectations.”
    • “In Japan, the central bank now directly fixes 10-year borrowing costs for the government at 0%. There, foreigners own just 9.2% of the government debt market; yet bond yields have stayed at record lows for decades, despite a government debt load amounting to 229% of Japan’s economy that has elicited repeated warnings from ratings companies.”
  • Adding on to Sindreu’s article, Brian Chappatta of Bloomberg discussed how America’s biggest creditors dump treasuries in warning to Trump.
    • “From Tokyo to Beijing and London, the consensus is clear: few overseas investors want to step into the $13.9 trillion U.S. Treasury market right now. Whether it’s the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the world’s safest debt market seems less of a sure thing – particularly after the upswing in yields since November. And then there is Trump’s penchant for saber rattling, which has made staying home that much easier.”
    • bloomberg_selling-of-us-treasuries_2-12-17
    • “Nobody is saying that foreigners will abandon Treasuries altogether. After all, they still hold $5.4 trillion, or roughly 43% of the U.S. government debt market. (Though that’s down from 56% in 2008.) A significant drawdown can harm major holders like Japan and China as much as it does the U.S.”
    • “In December, Japanese investors reduced their investments in U.S. debt by 2.39 trillion yen ($21.3 billion) after a smaller pullback in November. While only a fraction of Japan’s $1.1 trillion of holdings, they were the first back-to-back declines since the start of 2014. China, which owns just over $1 trillion of Treasuries, has been selling since May. Its holdings are at a seven-year low.”
    • Bottom line there is too much unpredictability for many foreign investors right now, despite there being clear advantages in the rate spread between foreign and domestic markets.
  • Anjli Raval of the Financial Times highlighted that recently Opec beat oil output cut expectations.
    • “Opec countries drastically curbed their output in the first month of their new production agreement, in the clearest sign to date that the world’s biggest oil producers are committed to living up to the November pact to cut global supplies.”
    • “The limits adopted by the oil cartel in January have been ‘one of the deepest in the history of Opec output cut initiatives’, the International Energy Agency said on Friday.”
    • “The IEA said Opec crude production fell by 1m b/d to 32.06m b/d in January, surpassing expectations at the start of the six-month supply agreement…”
    • The Opec target cut is 1.2m barrels per day.
    • “‘Opec and Saudi get plaudits for month one but there are still five months of the  deal to run,’ said Bill Farren-Price, head of Petroleum Policy Intelligence. ‘It’s unlikely cuts are going to get deeper from here.'”
    • “Opec’s cuts drove a big drop in world oil supplies of 1.5m barrels a day in January. If the cartel maintains its level of compliance, excess inventories should fall by about 600,000b/d during the first half of 2017.”
    • “Even though stockpiles are falling, higher prices have driven an increase in drilling in the US as well as Brazil and Canada, where the IEA expects ‘significant increases in production.’ Non-Opec production, led by US shale oil supply, is forecast to grow by 400,000b/d in 2017 from last year.”
  • Sarah Krouse of The Wall Street Journal covered the milestone that Vanguard just passed $4 trillion in assets under management.
    • “Indexing pioneer Vanguard Group has climbed to $4 Trillion ($4.048tn) in assets for the first time, accentuating a loss of faith among investors in traditional money managers who handpick stocks.”
    • “Of the $533 billion of net flows into all mutual funds and exchange-traded funds last year, 54%, or $289 billion, went to funds managed by Vanguard, according to research firm Morningstar Inc. The fund company’s own tally for the year was even higher, at $322.8 billion.”
    • Similarly, “BlackRock topped $5 trillion in assets late last year for the first time. It has a larger international business than Vanguard.”
    • “Rival firms who have long been synonymous with their star pickers of stocks and bonds have been hurt by years of subpar performance and relatively high fees. Investors pulled a net $340.1 billion from U.S.-based actively managed funds last year, according to Morningstar, while pouring a record $504.8 billion into U.S.-based passively managed funds.”
    • For reference, “Vanguard crossed the $3 trillion threshold in August 2014.”
  • The Data Team over at the Economist illustrated the migration and labor shortages in Asian countries.
    • “Although Asia is home to half the world’s population, it provides only 34% of the total number of emigrants and host a mere 17% of immigrants. Just one-third of Asians who move abroad remain on the continent, and of those, most stick to neighboring countries. This makes it hard to fill jobs in many countries where they are needed, despite a surplus of labor elsewhere.”
    • “The imbalance of workers will only grow more dire as populations get greyer. For now, China is still a net exporter of labor. But during the next 30 years its working-age population is set to shrink by 180m, and it will need 20m more domestic workers. Overall, East Asia would have to import 275m people between the ages of 15 and 64 by 2030 to keep the share of its population at working age steady. Singapore, Malaysia, Vietnam and especially Thailand need workers, while Myanmar, Indonesia and the Philippines have too many. South Asia, meanwhile, could afford to lose 134m  laborers – India alone could send more than 80m abroad – without worsening its dependency ratio. China’s projected shortfall in 2030 is equivalent to 24% of its current working-age population; in Bangladesh the likely surplus is 18%.”
    • economist_asian-migration-and-labor-shortages_2-10-17
  • Kiran Stacey of the Financial Times covered how the number of deaths by air pollution in India is set to surpass those in China.
    • “India is on the verge of overtaking China as the country with the most deaths caused by air pollution, the world’s biggest environmental killer, according to research published on Tuesday.”
    • “In 2015 both countries suffered about 1.1m premature deaths as a result of polluted air, with India just 18,000 behind China, the US-based research organization Health Effects Institute found, making air pollution the fifth-highest cause of death among all health risks.”
    • ft_indias-air-pollution-deaths-to-exceed-chinas_2-14-17
    • “Worldwide, air pollution caused 4.2m deaths in 2015, a 7.5% jump from a decade earlier. Toxic air now kills almost as many people as high cholesterol and even more than excessive sale or being overweight, according to the study.”
  • Laura Kusisto of The Wall Street Journal highlighted a current measure being put forth in Los Angeles that would seek to ban major real-estate developments – at least for a few years.
    • “The second-largest U.S. city is considering a measure that would effectively halt major real-estate projects, the most extreme example yet of a revolt against development breaking out across the country.”
    • “The moves threaten to further constrict a tight supply of housing. Housing starts dropped 2.6% in January, the Commerce Department said Thursday. The number of single-family and multifamily starts per 1,000 households last month was about 36% below the 50-year average, according to Ralph McLaughlin, chief economist at Trulia.”
    • “In Los Angeles, residents in early March are set to vote on a ballot initiative that, if passed, would suspend for two years any development that requires a modification to the city’s existing planning rules.”
    • “‘People feel the system is rigged,’ said Michael Weinstein, president of the AIDS Healthcare Foundation, which has poured some $3.7 million into promoting the measure. ‘It’s all about billionaires getting what they want.'”
    • If you’re wondering why the AIDS Healthcare Foundation is spending donation money on this initiative, it’s because “many of the patients served by the AIDS Healthcare Foundation are struggling with rising housing prices.”
    • “San Francisco in June passed a ballot initiative that puts a 25% on-site affordable-housing requirement on most new residential buildings…”
    • “In Oregon, the Portland City Council in December unanimously passed a similar ordinance requiring buildings with 20 units or more to set aside 20% of units for affordable housing…”
    • “Despite complaints in Los Angeles about a deluge of development, housing construction now is at only a fraction of the rate of the mid-20th century, before strict zoning rules were put in place. From 1950 through 1959, about 250,000 units of new housing were added in the city of Los Angeles, according to an analysis of the census data by advocacy group Abundant Housing LA. From 2010 to 2015, the figure was 25,000, though the city issued permits for about 50,000 units in roughly the same period.”
    • “In the middle of the last century, zoning regulations were such that there was enough capacity in the city to build housing for 10 million residents, according to David Waite, a local planning lawyer.”
    • “The adoption of ‘community plans’ in the 1970s and a ballot initiative in the mid-1980s knocked that down to 4.5 million people, meaning Los Angeles is now almost at full capacity.”
    • “The proposed rule up for vote in March, called the ‘Neighborhood Integrity Initiative’ and referred to as Measure S, would require the city to update all community plans.” Essentially, if passed, development would be put on hold while the neighborhood plans are updated with input from the community.


Business Insider – Here’s how many people in every state don’t have health insurance – Bob Bryan 2/9


Bloomberg – Demand for Treasuries Is Now a ‘Made in the U.S.A’ Phenomenon – Luke Kawa, Liz McCormick, and Tracy Alloway 2/7


Economist – The world’s biggest gamblers – The Data Team 2/9


NYT – Why Falling Home Prices Could Be a Good Thing – Conor Dougherty 2/10nyt_where-housing-costs-too-much_2-10-17

Bloomberg – China’s Zombie Province Shows Trouble With Its Bond Market – Bloomberg News 2/12


Visual Capitalist – Visualizing the Tallest Building in Each State – Jeff Desjardins 2/13


WSJ – Daily Shot: Moody’s Investors Service – Chinese Wealth Management Products – 2/13

  • “China’s WMPs (Wealth Management Products) continue to grow, with the asset-liability mismatch remaining elevated. Imagine a product that ‘guarantees’ a certain rate, gives you a 1-3 month liquidity, and invests in 5-year corporate bonds.”


WSJ – Bond Buying Surges, Tightening U.S. Corporate Spreads – Chris Dieterich 2/13


Business Insider – An ‘investment mania’ is propelling Canada’s home prices to their biggest gain since 2007 2/14

FT – China Inc hits brakes on foreign property investment – Gabriel Wildau 2/16



*Note: bold emphasis is mine, italic sections are from the articles.

Venezuela falls behind on oil-for-loan deals with China, Russia. Marianna Parraga and Brian Ellsworth. Reuters. 10 Feb. 2017.

“Venezuela’s state-run oil company, PDVSA, has fallen months behind on shipments of crude and fuel under oil-for-loan deals with China and Russia, according to internal company documents reviewed by Reuters.”

“The delayed shipments to such crucial political allies and trading partners – which together have extended Venezuela at least $55 billion in credit (about $50bn from China and $5bn from Russia’s Rosneft)- provide new insight into PDVSA’s operational failures and their crippling impact on the country’s unraveling socialist economy.”

“Because oil accounts for almost all of Venezuela’s export revenue, PDVSA’s crisis extends to a citizenry suffering through triple-digit inflation and food shortages reminiscent of the waning days of the Soviet Union.”

“The total worth of the late cargoes to state-run Chinese and Russian firms is about $750 million, according to a Reuters analysis of the PDVSA documents.”

“At the end of January, PDVSA was late on nearly 10 million barrels of refined products that the company owes the firms – with shipments delayed by as much as 10 months, according to the documents. It also failed to make timely deliveries of another 3.2 million barrels of crude shipments to China’s state-run China National Petroleum Corporation (CNPC).”

“A total of 45 cargoes bound for Russian and Chinese companies are late for a variety of reasons, according to internal operational reports about shipments of crude and refined products.”

“The problems include operational mishaps, such as refining outages and delayed cleaning of tanker hulls, and financial disputes with service providers owed money by PDVSA.”

For example, “… a company official said PDVSA was unable to deliver a 1.8 million-barrel cargo of fuel oil to PetroChina because Bahamas terminal Borco, where PDVSA rents storage space, has intermittently prevented the firm from using the tanks since 2016 due to lack of payment.”

“Another 2 million-barrel cargo of fuel oil bound for China in November was postponed because of stained crude tankers, which cannot navigate international waters due to environmental regulations.”

Adding salt to the wound… “the fall in crude prices has made the oil-for-loan agreements more onerous. Because loan payments were negotiated when crude prices were higher, the agreements require PDVSA to ship more oil in order to continue servicing the debts at the same rate.”

Which all of course “saps its ability to ship to other customers – such as India, or customers in the United States – who would pay in cash, which PDVSA desperately needs.”

As an anonymous trader that regularly buys Venezuelan oil so aptly put it “at this point, everybody is trying to collect pending debts from PDVSA by receiving cargoes, but production is not enough.”

In Echo Of ’07, REITs Back Away From Multifamily. Andrew Barnes, Jake Mooney, and Zach Fox. S&P Global Market Intelligence. 7 Feb. 2017.

“Amid concerns of a peaking multifamily market, publicly traded U.S. real estate investment trusts in 2016 were net sellers of multifamily properties for the first time since 2009.”

“In total, REITs sold $13.0 billion more multifamily properties than they bought. In the past 10 years, the only previous time REITs off-loaded more multifamily assets than they bought by such a large amount was in 2007, when sales dwarfed purchases by $21.11 billion.”

“REITs’ caution around making new property investments follows a long and steady escalation in apartment values, which have more than doubled since 2010, according to a national index from Moody’s/Real Capital Analytics. In recent months, a flood of new construction has depressed rents in coastal markets. New York and San Francisco, both key markets for the largest multifamily REITs, Equity Residential and AvalonBay Communities Inc., saw rent growth flatline in 2016.


“‘Multifamily has just been overbuilt throughout the United States,’ said Jay Rollins, co-founder and managing principal at JCR Capital Investment Corp., which invests in properties valued at $50 million or less. ‘Everywhere. And it will decline everywhere.'”


Despite rising interest rates and expectations of further rises “…sales data does not show property prices declining in response. According to data firm Real Capital Analytics, cap rates dipped to 3.9% for mid- and high-rise apartments nationwide in 2016 third quarter. In San Francisco, the average cap rate stood at just 2.7%, barely above the 10-year Treasury rate, but with considerably more risk.”

“Broadly, observers say, property buyers seeking near-term yield are avoiding coastal cities, leaving them to long-term investors like sovereign wealth funds and high-net-worth individuals. But whereas REITs have cooled on acquisitions nationwide, some prominent private equity firms have still pursued deals in the middle of the country, where ‘the math can still work,'” according to Drew Babin, an analyst at Robert W. Baird & Co. Inc.

“Most notably, Starwood Capital Group kicked off 2016 by buying 72 properties from Equity Residential for $5.37 billion, and said Jan. 19 that it will acquire Milestone Apartments Real Estate Investment Trust, a Canadian REIT that owns U.S. Sun Belt properties, for $2.85 billion.”

“Historically, apartments have been a relatively safe bet. Apartment buildings are one of the more stable real estate asset classes over time, Babin said – in part because they have the backstop of funding from Freddie Mac and Fannie Mae. Even for top-of-the market buyers, patience can be valuable. Apartment prices rose 62% over the decade beginning in November 2006, despite two years of sharp price declines that began in 2008, according to the Moody’s/RCA index.”


Chinese Companies Rush In With Nearly $2 Trillion Where Bankers Fear to Lend. Rachel Rosenthal and Anjie Zheng. The Wall Street Journal. 9 Feb. 2017.

“Chinese companies are increasingly stepping in as lenders, as banks reduce their funding to struggling industries and the country’s mammoth bond market comes under strain.”

“Company-to-company loans in China jumped by 20% last year to 13.2 trillion yuan ($1.92 trillion), according to research firm CEIC. That is roughly double the size of the loan book at Wells Fargo & Co., the U.S.’s biggest lender. This entrusted lending, so named because banks serve as middlemen, is now the fastest-growing major component of the country’s elaborate system of informal, or shadow, banking.”

“The most recent surge came during the selloff in China’s $9.3 trillion bond market late last year. Big, cash-rich companies – mostly state-owned enterprises and some private companies – stepped in: New entrusted loans rose to 405.7 billion yuan ($59.02 billion) in December, more than double the month prior, according to data tracker Wind Information, and the highest monthly issuance in two years.”

“Instead of investing in their core business, companies can earn interest rates of up to 20% making entrusted loans, often with only cursory checks on borrowers’ creditworthiness. Such lending often props up companies in sectors like mining and property where Beijing wants to reduce excess capacity. It also adds to China’s $18 trillion corporate debt pile, already equal to 168% of gross domestic product, according to the Bank for International Settlements.”

“Some entrusted loans are between a company and its own subsidiaries, similar to how many big companies globally loan cash to different parts of their business. Still, between 2007 and 2013 more than 60% of entrusted loans were channeled to companies in industries with overcapacity, according to a study by the U.S.-based National Bureau of Economic Research.”

“‘It’s not a sustainable business model’ for the lending companies, said  Julian Evans-Pritchard, China economist at Capital Economics. ‘Their main operations are only staying afloat by acting like a shadow bank.'”

“Company-to-company lending took off in China in the 1990s when, after a period of rapid growth, many state-owned firms started generating large amounts of cash. With no private shareholders pushing for dividend payouts, many put that cash to work by lending it out.”


“But entrusted lending is unusual. Banks are involved, but only as a middleman: Direct company-to-company lending is still legally prohibited. Banks can charge fees of up to 5% of the loan, according to BMI Research, but leave credit checks to the lending company.”

“In some cases, lending companies aren’t pulling back even when loans sour.”  Why, because they’re usually to subsidiaries…

Other Interesting Articles

Bloomberg Businessweek

The Economist


A Wealth of Common Sense – Where You Live & the 50/30/20 Rule 2/14

Bloomberg – Yellen Sets High Hurdle for Reducing Fed’s Massive Bond Holdings 2/14

Business Insider – Paul Singer’s Elliott: ‘There is a deep underlying complacency which we think permeates global financial markets’ 2/1

FT – Take a deep breath: we must all help clean up London’s toxic air 2/3

FT – The importance of bubbles that did not burst 2/10

FT – Major Chinese bitcoin exchanges halt withdrawals after crackdown 2/10

FT – China’s Wanda circles Postbank in search of European bank assets 2/13

FT – Swiss signals that cash may no longer be king 2/13

FT – US labels Venezuelan vice-president a drug kingpin 2/13

FT – Down on China? Not Morgan Stanley (Alphaville) 2/14

FT – China’s top football team vows to phase out foreign players 2/15

FT – China returns as net buyer of US Treasuries 2/15

FT – What Chinese monetary tightening? 2/15

Investment News – Changing direction, FS Investments launching a nontraded REIT 2/14

NYT – Japan Limited Immigration; Now It’s Short of Workers 2/10

NYT – Amazon’s Living Lab: Reimagining Retail on Seattle Streets 2/12

NYT – India’s Air Pollution Rivals China’s as World’s Deadliest 2/14

Reuters – U.S. investors brace for mounting political risks as they decode Trump 2/14

ValueWalk – BCG: Hedge Funds Face Potential Doomsday Scenario 2/10

WSJ – Race to Revamp Shopping Malls Takes a Nasty Turn 2/14

WSJ – Bonds Tied to Dying Malls Could Be the Next ‘Big Short’ 2/14

WSJ – Retail Zombies Haunt Industry 2/15

WSJ – A Harsh Reality Is Hitting the Housing Market 2/15



February 3 – February 9, 2017

Chinese companies stashing cash ($110bn) in wealth management products. Italian banking sector depending on UniCredit?


FT – Bank of Japan intervenes to buy 10-year JGBs 2/3. Well for now it appears that the Bank of Japan’s tolerance for the Japanese 10-year bond is about 0.11% – the point at which it just intervened in the market indicating it would buy an unlimited amount of bonds to keep them at that rate or less.

FT – Overseas Chinese acquisitions worth $75bn cancelled last year 2/5. “Chinese overseas deals worth almost $75bn were cancelled last year as a regulatory clampdown and restrictions on foreign exchange caused 30 acquisitions with European and US groups to fall through.”

WSJ – U.S. Firms Slash Interest Tab in $100 Billion Refinancing Blitz 2/8. Borrowers are using investor demand for yield to impose rate reductions on their debt.

NYT – A Crack in an Antarctic Ice Shelf Grew 17 Miles in the Last Two Months 2/7. A rift in the Larsen C ice shelf (one of the largest) that started in late 2014 is about 2 months away from pushing a very large glacier into the sea and leading to an eventual collapse of the Larsen C – which is not good.

Bloomberg – Supply Is the Technical Factor Behind Global Rally in Markets 2/8. “In short, a world with excess savings is still struggling to sate its appetite for investable assets in public markets, amid a net shortage of new stocks and corporate bonds.”

Special Reports / Opinion Pieces


  • Stephen Foley and Hannah Kuchler of the Financial Times elaborated on institutional investor anger over Snap’s decision to offer voteless shares.
    • Snapchat (Snap) is a first in pursuing an IPO that will issue shares to the market with NO voting power. “The two founders, Evan Spiegel, chief executive, and Bobby Murphy, chief technology officer, will control the company and continue to do so even if they step down.”
    • “The prospectus says a founder’s voting power will only be diluted if he cuts his stake substantially or ‘nine months after his death.'”
    • “Other technology companies, including Google and Facebook, have concentrated control in the hands of their founders, creating different classes of stock. But none has gone public with a class that has no votes whatsoever.”
    • The pros – management can focus on long-term value. The cons – management is not accountable to its outside shareholders.
    • The downside to index funds – “many funds will be forced to own Snap when it is included in major stock market indices…”
    • The concern is the precedent this could set…
  • Anne Richards of the Financial Times discussed the challenges posed to markets by long-term demographic trends.
    • “The global economy has now passed an important tipping point. For the first time in recorded history, children under the age of five no longer outnumber those aged 65 and above. We have arrived at ‘peak child.'”
    • “The United Nations has estimated that the global population will continue to age and, by 2050, more than 15% of the global population will be aged over 65. Economists often point to the challenges that Japan faces as the population ages; by 2050, most of the G7 will have a similar demographic profile as Japan does today, as will China, Brazil and Russia.”
    • “In a world where immigration policy reform is increasingly dominating political agendas, policymakers should recognize that gross domestic product largely reflects a demographic profile where more workers enter the workforce, who (if everything goes to plan) will then produce, earn and consume more than the previous quarter.”
    • “Naturally, as the workforce shrinks due to aging, the reverse will be true. However, it does not necessarily mean than an economy is underperforming if the trend rate of growth is falling to reflect a smaller workforce.”
  • Peter Grant of The Wall Street Journal highlighted that several large investors have cut back on their property exposure due to the bull market losing steam.
    • Some prominent real-estate investors (i.e. Blackstone Group, Brookfield Asset Management, United Parcel Service Inc’s pension trust and Harvard Management Company) are reducing their holdings and getting more selective about new deals, in a sign that the eight-year bull market for U.S. commercial property is coming to a close.”
    • “Deal volume decreased by $58.3 billion, or 11% in 2016, the first annual decrease since 2009, according to data firm Real Capital Analytics.
    • “Caution among investors in the $11 trillion U.S. commercial property sector is being driven by lofty prices, the length of the market cycle so far and the recent rise in interest rates, which makes bonds look more attractive compared with commercial property. Also, developers are adding new supply of some property types at the fastest rate since the recovery began.”
    • “For example, more than 378,000 new apartments are expected to be completed across the country this year, almost 35% more than the 20-year average, according to real-estate tracker Axiometrics Inc.”
  • Lucy Hornby of the Financial Times covered the vow made by Beijing’s mayor to banish parts of the city to the provinces.
    • “Beijing’s new mayor has vowed to gut the city of all functions unrelated to its status as national capital, in an effort to push the growing population into the surrounding provinces.”
    • “Mr. Cai said he would reduce Beijing’s land zoned for construction and cap the city’s population at 23m.”
    • “Almost 22m people now live in Beijing or surrounding satellite cities, up from 4m in 1950 and 9m in 1980.”
  • Robin Wigglesworth of the Financial Times pointed US small-caps guru Henry Ellenbogen’s recent concerns over the post-election rally.
    • “US small stocks guru Henry Ellenbogen is concerned that the ferocious post-election equity rally could unravel unless the economy accelerates sharply to justify the frothy valuations, warning that most of the gains were powered by fickle inflows into exchange traded funds.”
    • “Over $20.6bn has gushed into US small-caps ETFs since early November, according to EPFR, while dedicated small-caps mutual funds have actually suffered some outflows, underscoring the role of passive investment vehicles in the move.”
    • “‘When you have those kind of flows into an illiquid asset class, you can really drive performance. Stuff that was outside the index has been roughly flat, while everything in the index has risen significantly,’ Mr. Ellenbogen said. ‘If there is a setback, the fund flows that drove small-caps higher will be just as aggressive on the way out.'”


WSJ – Daily Shot: US Major Inflation Components 02/02


WSJ – Daily Shot: US Cord Cutting 02/02


WSJ – Daily Shot: FRED – Domestic Bank Demand for Commercial Real Estate Loans 02/06


WSJ – Daily Shot: S&P Retail – S&P 500 Relative Performance 02/06

  • “US retail shares continue to underperform as investors question business models.”


WSJ – Daily Shot: Domestic Water Use Per Capita by U.S. State 02/06


WSJ – Daily Shot: FRED – US Student Loan Balance 02/07


WSJ – Daily Shot: Statista – Lawsuits filed against US Administrations in first 14 days 02/07


WSJ – Daily Shot: Global Skyscraper Construction 02/07


FT – China forex reserves dip under $3tn to touch 5-year low – Gabriel Wildau 2/7


FT – Investors pile into risky bonds in bet on Trump economy – Eric Platt 2/8



WSJ – Daily Shot: EIA – US Electricity Production 02/08


WSJ – Daily Shot: US Market Volatility 02/08

  • “Volatility is dead. We’ve now hit 85 consecutive days without a 1% drop in the S&P 500. The last time this occurred was in 2006.”


Bloomberg – The Race to the Speed of Light Is Accelerating – John Detrixhe 2/8


WSJ – For Chinese Home Buyers, Seattle Is the New Vancouver – Laura Kusisto and Kim Mackrael 2/7


WSJ – Daily Shot: Pew Research – US Religiosity Index 02/08


Economist – Emerging markets’ Trump tantrum abates, except in Turkey 2/4



*Note: bold emphasis is mine, italic sections are from the articles.

Chinese companies park record $110bn in wealth products. Don Weinland. Financial Times. 6 Feb. 2017.

“Cash-rich Chinese corporations are running out of places to invest.”

“As economic growth cooled and investment opportunities ebbed in China last year, listed companies moved a record $110bn of idle cash into financial products, mainly at banks, according to data from Wind Financial Information.”

“The flood of company funds into wealth management products – up some 40% on the previous year – was a sign that many groups in the country shunned risky corporate expansion amid the economic slowdown, instead preferring short-duration investments.”

“About $64bn of the cash companies invested in wealth products had been raised from investors through initial public offerings and private placements…” Why raise cash if you’re not going to use it?

“Over the past four years, Chinese regulators have leaned on listed groups to pay out regular dividends in the hope of bringing mainland bourses more in line with international standards.”

“The wealth management investments show that many state-held groups still refuse to return cash to shareholders.”

“‘The state still has strong holdings in many of these companies, often more than 50%. So institutional investors cannot put pressure on companies to pay out dividends,’ said Wong Chi-man, executive director at China Galaxy International Securities.”

Okay, so if all of these companies (which are traditionally where idle capital is sent to generate economic returns) are preferring to sit on cash for a lack of investment opportunities within their own business, how are the wealth management products being sold going to generate returns – especially at scale?

Is Italy’s financial future resting on UniCredit? Rachel Sanderson, Martin Arnold and Jonathan Ford. Financial Times. 6 Feb. 2017.

“Jean-Pierre Mustier, chief executive of UniCredit, has criss-crossed the world in the past two months seeking to cajole investors into buying 13bn in new shares – a major test of confidence not just for Italy’s largest bank but also the country’s teetering banking sector.”

“As UniCredit launched its bumper rights issue on Monday – at a steep 38% discount to its theoretical ex-rights issue price – bankers in the underwriting consortium said they were confident that it would be successful. It needs to be… Besides worries about profitability and governance, investors fear the industry’s 360bn mountain of doubtful loans, of which 200bn are in default.”


“The offering comes at a tumultuous moment. The implementation of a government decree – earmarking 20bn to rescue several midsized banks, including Monte dei Paschi di Siena, the world’s oldest lender – remains up in the air.”

“The broader issue is whether a successful fundraising by UniCredit will help draw a line under concerns about Italy’s largest bank by assets, and in turn Italy’s banking sector.”

“Italian banks have long been burdened by a large stock of non-performing loans, which they have valued at prices higher than investors are willing to pay.”


“Gross non-performing exposures measured 356bn, or 17.7% of total loans, according to the latest financial stability report. That is three times the amount that is normal in most European economies. The stock of gross sofferenze – the worst kind of defaulted loan – remains at about 200bn; net of provisions that the banks themselves have taken these amount to 85bn.”

“Mr. Mustier, speaking to the Financial Times in December, suggested that the problem of its NPLs (Non-Performing Loans) is deeper than many appreciate.”

“He said the issue stems from Italy’s double-dip recession but also from Italian companies’ practice of funding themselves with ‘hot money.’ The companies had ‘the wrong kind of balance sheet,’ he said. ‘They had not enough capital and they were managing their liabilities by having short-term liabilities to cover long-term assets.'”

“It has taken Mr. Mustier, a Frenchman who lived in London for 20 years, to call out the deeper cultural problems facing Italy’s banking sector. The question is whether his remedy will last beyond this month’s share sale.”

Other Interesting Articles

Bloomberg Businessweek

The Economist

Economist – What are China’s 12345 hotlines? 2/7

Economist – Buttonwood: Bubbles are rarer than you think 2/8

Economist – Melania Trump’s “once-in-a-lifetime” opportunity to profit 2/9

FT – Snap: clickbait 2/2

FT – Shanghai shows changing face of FDI in China 2/3

FT – US protectionism and deglobalization spell inflation 2/5

FT – Foreign investors cut holdings of China bonds for first time since 2015 2/5

FT – IMF board split over bailout terms for Greece 2/6

FT – Facebook and Google team up to fight fake news in France 2/6

FT – Thinking the unthinkable on Germany going nuclear 2/6

FT – China credit flood set to persist despite PBoC rate rises 2/8

FT – Why is the eurozone back in crisis over Greece? 2/8

FT – South Korean court all but sinks Hanjin Shipping 2/9

FT – US inflation expectations slide 2/9

NYT – Steve Bannon Carries Battles to Another Influential Hub: The Vatican 2/7

WSJ – The Next American Farm Bust Is Upon Us 2/9

WSJ – Landlord Concessions Rising in Manhattan and Brooklyn 2/9



January 26 – February 2, 2017

There is a lot of money sloshing around between football (soccer) teams to trade players.  Chinese football club worth more than AC Milan?  Bad credit – no problem.


FT – Rock-bottom rates squeeze German lenders 2/1. Interest rate sensitive German lenders continue to be squeezed by low-to-negative interest rates, if this keeps up, many are going to have a hard time making a profit.

NYT – Tesla Gives the California Power Grid a Battery Boost 1/30. Utility level electricity battery storage coming to a town near you.

FT – Microsoft issues biggest bond of the year in debt market boom 1/30. Microsoft just borrowed another $17bn on Monday as they and others seek to tap debt markets before pending rate increases – already $600bn has been issued in 2017.

Special Reports / Opinion Pieces


  • Eric Platt of the Financial Times illustrated the drop in negative-yielding debt, now below $10tn.
    • “Roughly $9.6tn of bonds trade in negative territory, down from nearly $14tn four months ago and $10.7tn near the end of December, as rising inflation expectations and hopes of a rebound in economic activity propels yields higher.”
    • ft_negative-yielding-debt_1-27-17
    • “European and Japanese sovereign debt comprise the vast majority of negative-yielding securities, while some $514m of euro-denominated corporate bonds also trade with a yield below zero. That figure is down from $916m in September.”
    • “The declining value of debt trading with a negative yield also reflects a stronger US dollar, which makes foreign obligations appear smaller when converted back to the greenback.”
  • Don Weinland of the Financial Times covered the risks to Chinese banks from the One Belt, One Road initiative as reported by Fitch Ratings.
    • Fitch Ratings recently issued a report pointing to the risks that Chinese lenders are facing in funding the One Belt, One Road (Obor) initiative.  Indicating that “the investments have been driven more by China’s desire to exert global influence than focusing on real demand for infrastructure.”
    • “‘The lack of commercial imperatives behind Obor projects means that it is highly uncertain whether future project returns will be sufficient to fully cover repayments to Chinese creditors,’ Fitch said on Thursday.”
    • Why… “credit ratings for countries where China has big infrastructure plans provide a gauge for the projects’ underlying creditworthiness, Fitch said. Most of the countries are of speculative sovereign-rating grade but several, such as Laos, are not rated at all.”
    • However, to be clear it appears that only Fitch is humbugging the Obor initiative whereas the other ratings agencies are praising it, especially as the U.S. appears to be getting out of global infrastructure investment business.
  • Tom Mitchell of the Financial Times illustrated the renminbi’s retreat as an international payment currency.
    • “The Society for Worldwide Interbank Financial Telecommunication (Swift) said the value of international renminbi payments fell 29.5% compared with 2015.”
    • “The renminbi was only the sixth most used currency in 2016 despite its formal recognition in October by the International Monetary Fund as a global reserve currency, alongside the dollar, euro, yen and sterling.”
    • “The Swift rankings are the latest sign that Beijing’s global ambitions for the renminbi have been put on hold as the People’s Bank of China focuses instead on stemming both the redbacks’s fall against the dollar and steady erosion of the country’s foreign exchange reserves, which have declined 25% to $3tn since 2014.”
    • ft_currencies-used-for-international-payments_1-26-17
  • Emily Cadman, Sharon Smyth, Dingman Zhang, Prashant Gopal, and Emma Dong of Bloomberg News highlighted how China’s army of global homebuyers is suddenly short on cash.
    • “China’s escalating crackdown on capital outflows is sending shudders through property markets around the world.”
    • “Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree. While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls.”
    • “Among other requirements, SAFE (State Administration of Foreign Exchange) said all buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment. Violators will be added to a government watch list, denied access to foreign currency for three years and subject to money-laundering investigations, SAFE said.”
    • “At The Spire in London, a 67-story tower with sweeping views of the River Thames and flats starting at 595,000 pounds ($751,901), prospective buyers were caught off guard by the new rules. Less than 70% of clients who signed purchase contracts last year have made their initial payments, with the rest now facing ‘problems,’ a press official at Greenland Holdings Corp., the project’s Shanghai-based developer, said on Jan. 12.”
  • Gabriel Wildau of the Financial Times pointed to the record $33bn of foreign real estate acquisitions by Chinese in 2016.
    • Prior to the new restrictions from SAFE, “overseas investment from China in residential, commercial and industrial property totaled $33bn in 2016, up 53% from a year earlier, according to global real estate group JLL, as Chinese buyers snapped up office buildings, hotels and residential land.”
    • ft_china-outbound-re-investment_1-28-17
    • “The biggest deal of the year was Anbang Insurance Group’s $6.5bn purchase of Strategic Hotels and Resorts from private equity group Blackstone.”
    • “A survey by the Hurun Report found that property is the most popular form of overseas investment for Chinese with $1.5m or more. Of this group, 60% plan to invest in property over the next three years, implying 800,000 prospective buyers.”
    • “‘Prices in major Chinese cities have risen so fast in the past year that an overseas house seems to offer good bang for your buck,’ Rupert Hoogewerf, chairman of the Hurun Report, said in October.”
  • Kim Slowey of ConstructionDIVE reported on another record year for the construction delivery of global skyscrapers.
    • “The Council on Tall Buildings and Urban Habitat’s annual review of the world’s tall buildings – 656 feet (200 meters) or higher – found that 128 were completed in 2016, the third straight year that the number of completed skyscrapers has broken the record.”
    • “In a country-by-country breakdown, China was home to the most tall-building projects (84) in 2016, followed by the United States (7), South Korea (6), Indonesia (5), the Philippines (4) and Qatar (4).”
    • “The tallest building completed in 2016 was the 1,739-foot-high Guangzhou CTF Financial Centre in Guangzhou, China, while the tallest towers built in the U.S. were both in New York City – 30 Park Place (926 feet) and 10 Hudson Yards (879 feet).”


WSJ – Daily Shot: FRED Average Sales Price for New Homes Sold in US 01/26


WSJ – Trump Orders Wall at Mexican Border – Laura Meckler 1/25


FT – HK renminbi deposits fall at record pace in December – Hudson Lockett 1/27


WSJ – Daily Shot: Cost of Borrowing – Pan Europe 01/29


MarketWatch – The most corrupt countries in the world – Shawn Langlois 1/28


FT – US universities’ endowments shrink as investments lose money – Stephen Foley 1/30


WSJ – Daily Shot: Japan 10yr Government Bond Yield 02/01


It’s a mad, mad, mad, Maduro world – Venezuela’s leaders ignore reality – 1/26



*Note: bold emphasis is mine, italic sections are from the articles.

China spree pushes football transfer spending to record $4.8bn. Murad Ahmed. Financial Times. 26 Jan. 2017.

What happens when Xi Jinping decrees that he wants China to become a great football nation… entrepreneurs and politicians do their best to oblige.

“Chinese football clubs splashed out more than $450m in transfer fees (the fee one club pays to another club to poach talent) last year, a spree that helped global spending on the acquisition of players reach a record high.”

“According to Fifa’s Transfer Matching System, an arm of the sport’s world governing body, the total spent on transfer fees worldwide hit $4.8bn in 2016, a 14.3% increase compared with the year before.”

“Among the recent deals, Shanghai SIPG bought Brazilian midfielder Oscar from Chelsea for $63m.”

Granted, Chinese authorities have caught on to the reality that a lot of cash is leaving China in pursuit of football clubs, talent and media rights.  Hence, “Chinese sporting authorities have sought to crack down on spending on players,… with efforts such as cutting the number of foreign footballers allowed to play in each match from four to three per team.”

Regardless, the transfer fees paid by China are still behind that of England, Germany, Spain, and Italy – especially the English clubs that “spent $1.37bn on transfer fees in 2016, an 8.7% increase on the year. This included the world-record signing of Paul Pogba worth up to 110m, by Manchester United from Italy’s Juventus last August.”

Still it seems that the Spaniards have the best farming system (or acquirers of talent from an investment standpoint) in that they “were the largest seller of players, receiving $554.5m in transfer fees last year, more than the $508.7m they spent on players.”


Chinese football club is worth more than AC Milan. Ben Bland and Murad Ahmed. Financial Times. 26 Jan. 2017.

More to the story about football in China.

“A football club in the Chinese Super League has been sold to a local property developer at an equity valuation of more than $800m, suggesting it is worth more than European giants such as AC Milan and Atletico Madrid.”

“The high price put on Beijing Guoan, the top team in the capital, underlines the investment surge in football in China, despite recent efforts by the government to crack down on what it called ‘irrational’ spending on foreign players.”

“Sinobo Land, a little-known property developer, is buying 64% of the club for Rmb3.6bn from current owner Citic, a state-owned investment group, giving it a valuation of Rmb5.6bn ($807m).”

“Football industry analysts said that the premium paid for the club, which finished fifth in last season’s CSL, could not be justified based on its sporting performance or immediate commercial prospects.”

However, the team is in Beijing, regularly attracts 40,000 attendees to each match, and President Xi Jinping has aspirations for China to host a World Cup and win.  So maybe it’s not too far of a stretch.

I suppose it’s less ostentatious than paying $400m for a 13% stake in Manchester City (Li Ruigang in 2015).

Risky corporate borrowers make hay as yields slide. Eric Platt and Joe Rennison. Financial Times. 26 Jan. 2017.

“The combination of rebounding commodity prices and hopes for faster US economic growth under Donald Trump is helping some of the riskiest corporate borrowers secure cheaper financing and underlines investors’ growing stomach for risk.”

“An expanding list of companies with a triple-C rating – deep within speculative territory – have been able to lock in borrowing costs below 7%, as yields have fallen over the past 10 months.”

“Investors’ appetite for the lowest rated segments of the corporate debt market touched a fresh peak on Wednesday, when a triple-C rated company came close to selling bonds with a yield of just 6%. Last February, triple-C paper traded with a yield of 18.57%, according to Bloomberg Barclays Indices. That figure has nearly halved to 9.36% today.”


“‘It seems there is insatiable demand for yield,’ said Kevin Lorenz, a high-yield portfolio manager with TIAA CREF. ‘Triple-Cs are routinely pricing at 7% or less. The compensation you get paid to take risk is getting narrower and narrower, much like in 1997-98 and 2004-2006.'”


“High-yield groups have raised $25bn in the US so far this year – up more than fivefold from 2016 – including $3.4bn from triple-C rated issuers, according to Dealogic. It marks the greatest haul from triple-C groups at the start of a year since 2011.”

Other Interesting Articles

Bloomberg Businessweek

The Economist

Bisnow – How Stadium Development is Killing Loyalty in American Sports 2/1

Economist – India flirts with a UBI 2/2

Economist – How to get rich in America 2/2

FT – Shark antibodies join battle against Alzheimer’s 1/25

FT – German bond yields hit year-high in broad sell-off 1/26

FT – China spells out curbs on capital outflows 1/27

FT – Sleepy Saudi sovereign wealth fund wakes and shakes global finance 1/28

FT – Asia borrowing binge hits record high in January 1/29

FT – Bonds start year at breakneck pace, but higher rates loom 1/29

FT – Fitbit: huffing and puffing 1/30

FT – Renminbi internationalization remains elusive 1/30

FT – Are tougher times for Wall Street’s ‘Flash Boys’ here to stay? 1/30

FT – Chinese billionaire abducted from Hong Kong 1/31

FT – Xiao Jianhua, student leader who became an abducted tycoon 1/31

FT – Derivatives ‘Big Bang’ catches market off guard 2/1

FT – US university endowment woes put spotlight on hedge funds 2/1

FT – Chinese defaults: failing better 2/1

NYT – A Costly Drug, Missing a Dose of Disclosure 1/27

NYT – In America’s Heartland, Discussing Climate Change Without Saying ‘Climate Change’ 1/28

NYT – For Couriers, China’s E-Commerce Boom Can Be a Tough Road 1/31

WSJ – India’s Growth Doesn’t Have a Story 1/26

WSJ – Accused Ponzi Schemer Not Sleeping Easy 1/27

WSJ – Here’s What Can Drive the Economy Higher 1/27

WSJ – Suburban Offices Woo Millennials With Food, Fitness and Fun 1/29

WSJ – The Coming Squeeze on Profit Margins 1/30
WSJ – Young People Lose Confidence In Their Prospects as Homeowners 2/1