April 24, 2017

Worthy Insights / Opinion Pieces / Advice

FT – Venezuela’s broken system cannot fix itself – Daniel Lansberg-Rodriguez 4/23

FT – Silicon Valley ‘superstars’ risk a populist backlash – Rana Foroohar 4/23

  • “…a spate of research shows that it is not trade or rapacious bankers but technology that is the primary economic driver of the most important political trend of our time – populism.”
  • “What is perhaps most fascinating about this is that Silicon Valley has largely escaped the populist anger that Wall Street or cheap Chinese labor has attracted. As University of Chicago professor Raghuram Rajan has pointed out, this may be because the job-disrupting effects of technology are harder to see than those of trade. Of the nearly 6m manufacturing jobs lost in the US between 1999 and 2011, only about 10% can be directly traced to Chinese imports – yet those losses are concentrated in just a few rust belt communities. The more subtle, dispersed nature of the changes driven by Silicon Valley makes it a less obvious target for voter rage. And of course, we all love our gadgets: remember Democratic Senator Carl Levin mooning over his iPhone even as he led Senate hearings into Apple’s use of offshore tax havens in 2013?”

Markets / Economy

WSJ – The Economy’s Confidence Game – Justin Lahart 4/23

  • “The bullish case is that newly optimistic consumers and business owners will soon start spending, boosting economic data. This is generally what happens when the economy is coming out of recession, with the hard data following the soft data higher.”
  • “But the economy isn’t coming out of a recession-the last one ended nearly eight years ago. Instead, the country has experienced a long period of rising employment and disappointing but steady growth. The pent-up demand that exists in the aftermath of a downturn isn’t there. And the mere possibility of lower taxes and faster growth hasn’t changed the caution that consumers and businesses learned since the financial crisis.”
  • “The clock is ticking says Bank of the West economist Scott Anderson. Historically, when the hard data doesn’t pick up within a month or two of the move higher in the soft data, the soft data tends to tumble.”

Real Estate

ULI – Trepp Talk: Nontraded REITs Raise Lowest Volume of Capital in 14 Years – Orest Mandzy 4/24

  • “The departure of AR Global Investments from the nontraded real estate investment trust (REIT) world, coupled with uncertainty surrounding substantial pending regulations, has put a sizable damper on the ability of the nontraded REIT sector to raise capital. According to Summit Investment Research, $4.8 billion of equity was raised by sponsors of 35 entities last year. That was the lowest volume in 14 years, and pales in comparison to the $10.2 billion of equity that was raised in 2015.”
  • At its height, the sector raised over $20 billion in 2013. “American Realty-by then known as AR Capital-was responsible for more than one-third of that total.”

WSJ – Brick-and-Mortar Stores Are Shuttering at a Record Pace – Suzanne Kapner 4/21


BloombergGadfly – Oil Drillers’ Vanishing Safety Net – Lisa Abramowicz 4/18

  • “A lot of companies view revolving credit lines the way some rock climbers view harnesses and ropes: They would rather not use them, but they’re glad to have them when trouble strikes.” 
  • “So it’s worth paying attention when a corporation starts withdrawing a substantial amount of money under these prearranged agreements with banks. This can signal a significant problem.”
  • “For example, consider last fall, when more than 20 energy companies had borrowed more than two-thirds of their limit on their credit lines, according to Spencer Cutter, a senior credit analyst with Bloomberg Intelligence. More than four of those have since filed for bankruptcy. The degree of distress last year wasn’t surprising given the sharp plunge in oil prices that started in 2014. A mounting number of energy companies were forced to sell assets, restructure or file for bankruptcy.”
  • Well things have gotten better since then right? Yes, but… there are “at least 11 oil and gas producers are using 70 percent or more of their borrowing-base credit lines, according to Cutter. That includes smaller companies such as Trinity River Energy, Yuma Energy and Mid-Con Energy, and some larger ones such as Sanchez Production Partners and California Resources.”
  • “Over the next few weeks, companies will start announcing their new revolving credit agreements. Investors shouldn’t be surprised at some bad news for smaller energy companies that still haven’t fortified their balance sheets. Just because oil prices have stabilized and even marginally increased doesn’t mean that there won’t be additional rounds of energy-related bankruptcies and restructurings in the near future.”

WSJ – Daily Shot: Baker Hughes US Oil Rig Count 4/23

WSJ – Daily Shot: US Rig Count Recovery Index – Historical Reference 4/23


FT – China’s fight with Visa and MasterCard goes global – Don Weinland and Gabriel Wildau 4/23

WSJ – Daily Shot: FRED – Commercial and Industrial Loans, All Commercial Banks 4/23

WSJ – Daily Shot: FRED – Consumer Loans, Auto Loans 4/23


WSJ – A Chinese Property Stock Surge That Is Set to Crumble – Jacky Wong 4/24

  • “China’s bubble-prone property sector isn’t known for its stability. Even so, a 42% rise in the Hong Kong-listed shares of the country’s biggest property developer, China Evergrande Group, over the past month, is striking. Sadly for investors, it’s built on very shaky foundations.”

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