June 20, 2017

Worthy Insights / Opinion Pieces / Advice

FT – How I learnt to stop worrying and love Big Tech – Miles Johnson 6/18

  • “The only thing a good investor should care about is the price they can purchase these companies for compared with their own reasonable estimate of fair worth. Yes, mindless momentum chasers may panic and sell, but any long-term investor worth their salt would take this as an opportunity to buy should they believe they are getting a bargain. Active fund managers actually dumped Apple shares en masse before their recent surge.”

China

WSJ – China’s Ghost Cities Keep Up Property-Market Spirits – Nathaniel Taplin 6/19

  • “In Beijing and Shanghai, housing speculators are gasping for air as tighter credit bites. But in the inland cities that drive the bulk of China’s steel and copper demand, property owners are smiling: Data released Monday showed prices rose 7% on year in May, the fastest pace since early 2014.”
  • Essentially the credit hose has been redirected to the third tier cities. However, one has to wonder, does that mean that there was a bench of buyers waiting to move into these ghost cities that just needed the credit to do so? Or is this a function of investors now picking up vacant units (reducing unsold inventory) now that they can comfortably speculate on appreciation? Basically, is there true demand for these units all of a sudden?

South America

FT – Argentina launches century bond – Dan McCrum 6/19

  • “Argentina has launched a landmark sale of US dollar-denominated bonds maturing in 100 years, a dramatic market rehabilitation for a nation that spent more than a decade fighting investors over the fallout from its 2001 default on $100bn of debt.”
  • “Joining only a handful of sovereign borrowers to sell century bonds, Monday’s debt sale also highlights a broader enthusiasm for emerging market securities. Over the past 12 months the JPMorgan index of such dollar-denominated securities has produced a 9% total return for investors.”
  • “Adam Bothamley, head of debt syndicate for HSBC, said the deal came after inquiries from investors suggested demand existed. ‘It’s less about it being a 100-year maturity bond, it’s a way to express the strongest view around the trajectory of the story for investors’, he said.”
  • “At lunchtime in New York, indications were that the bond would have an effective yield of 7.92%, sold at 90 cents on the dollar and an annual coupon of 7.125%.”
  • “Keep in mind, Argentina has defaulted on sovereign debt on eight occasions since independence in 1816, and its 2001 default was at the time the world’s largest.”
  • “In recent years Mexico has issued 100-year debt denominated in dollars, euros and sterling, and in 2015 the Brazilian oil company Petrobras sold $2.5bn of century bonds, which on Monday traded at a yield of 7.8%.”
  • “Argentina is rated single B by credit rating agencies. The lead bookrunners on the deal were Citi and HSBC, with Nomura and Santander acting as co-managers.”

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