May 18, 2017

If you were to read only one thing…

NYT – Household Debt Makes a Comeback in the U.S. – Michael Corkery and Stacy Cowley 5/17

  • “It took nearly a decade, but debt has made a comeback.”
  • “Americans have now borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse.”
  • “In the first quarter of 2017, consumer debt rose to $12.73 trillion, exceeding its peak in the third quarter of 2008. Student loans account for 10.6% of that total, up from 3.3% in 2003, while housing’s share, though still great, has fallen back to 2003 levels.”
  • “’This is not a marker we should be super excited to get back to,’ said Heather Boushey, the executive director and chief economist at the Washington Center for Equitable Growth, a liberal think tank. ‘In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don’t support.’”
  • “Since World War II, total household debt had been increasing with only a few interruptions. The financial crisis changed that steady upward march.”
  • “In late 2008, household debt began a decline that would last for 19 consecutive quarters, an unprecedented period of ‘deleveraging’ during which many Americans shied away from new borrowing. Total debt began to rise again in 2013, finally hitting a new high in this year’s first quarter.”
  • “Student borrowers today owe $1.3 trillion, more than double the $611 billion owed nearly nine years ago. About one in 10 student borrowers is behind on repaying their loans, the highest delinquency rate of any type of loan tracked by the New York Fed’s quarterly household debt report.”
  • “Still, the student loan market is nowhere near the size of the $8.6 trillion mortgage market, making student borrowing less of a threat to the global financial system than the bad housing loans that touched off the financial crisis in 2008.”

Perspective

BloombergBusinessweek – There Are Now More Indexes Than Stocks – 5/12

Real Estate

WSJ – Daily Shot: BMO – US Rent vs Income Growth 5/16

Bloomberg – Blackstone Sees End of Property’s ‘Great Run’ as Returns Fade – Joyce Koh and Pooja Thakur Mahrotri 5/16

  • “Blackstone Group LP, the world’s biggest private equity fund, told investors to dial back their expectations for property returns as the ‘great run’ of the past five years becomes harder to replicate.”
  • “Investors should ‘calibrate their expectations,’ Chris Heady, Asia Pacific chairman and head of Asian real estate, told a conference in Singapore on Tuesday. ‘They’re probably going to be lower over the next five years.'”

Energy

FT – Oil market rebalancing needs ‘much work’, says IEA – Anjli Raval 5/16

  • While Opec has been curbing supply, the rest of the world (specifically, US shale, Brazil, and Canada) is taking up the slack.

FT – US shale groups refuse to lie down and die – Ed Crooks 5/16

  • “Failures of North American exploration and production companies soared after oil prices started falling about three years ago, with 114 seeking Chapter 11 bankruptcy protection in 2015 and 2016, according to Haynes and Boone, the law firm. But like monsters in a horror movie, these businesses have proved exceptionally hard to kill off.”
  • “Of the 10 largest US exploration and production companies to have gone into Chapter 11, eight have emerged and are still operating, having shed billions of dollars of debt.”
  • “As Michael Watford, chief executive of Ultra Petroleum, which emerged from Chapter 11 in April, put it on a call with analysts this month: ‘In many ways, we are the same, but in other ways we are better.’”

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