June 21, 2017

If you were to read only one thing…

FT – China gains entry to MSCI’s $1.6tn emerging markets benchmark – Jennifer Hughes and Nicole Bullock 6/20

  • “Chinese stocks have gained direct entry to MSCI’s global benchmark equity index for the first time, marking a milestone in Beijing’s efforts to draw international funds into the world’s second-largest market.”
  • “The move means mainland stocks, known as A-shares, will next year be included in MSCI’s flagship emerging markets index, obliging the estimated $1.6tn of investment funds that track the index to buy mainland equities.”
  • “China’s domestic equity and bond markets are the second- and third-largest in the world, respectively, yet foreigners hold just roughly 2% of each. Three previous proposals by MSCI to include mainland stocks were rebuffed by the index provider’s stakeholders — mostly large asset managers.”

Perspective

WSJ – Daily Shot: Tax Foundation – Massachusetts’s Proposed Soda Tax 6/20

Economist – Finland tests an unconditional basic income 6/20

Worthy Insights / Opinion Pieces / Advice

Economist – Electoral victory will make France’s president a potent force 6/17

  • “But he will still have to face down a challenge from the street.”

Medium – One does not simply become successful – Timi Lliev 6/4

  • Good post with links to some useful tools (mind mapping and vision boards)

WSJ – The Fed’s Poor Record on Soft Landings – Justin Lahart 6/19

  • “The only time the Fed really succeeded in executing a soft landing, according to most economists, was when it raised rates through 1994. In the mid-1960s and mid-1980s it had a couple of qualified successes. Its other tightening cycles over the past 60 years were followed by recessions, though in some cases a recession was necessary to wipe out inflation.”

Economist – The rebellion of Venezuela’s top prosecutor 6/20

  • “Ms. Ortega’s rebellion and Mr. Ramirez’s resignation are a sure sign that the regime has lost moral authority even among some of its most fervent supporters. As misery and anger grow, disenchantment within the regime will spread. Its power to coerce may then begin to weaken.”

Markets / Economy

WSJ – Daily Shot: BMO – Bloomberg Economic Surprise Index 6/20

WSJ – Daily Shot: BMO – S&P 500 Earnings & Dividend Growth v. Index Total Return 6/20

Energy

WSJ – Daily Shot: Bloomberg Intelligence – OPEC Nations Production Changes 6/20

Environment / Science

Honolulu Star-Advertiser – Astronomers find more Earth-like planets – Jim Borg 6/20

  • “At a news conference Monday at NASA’s Ames Research Center in Mountain View, Calif., the Kepler space telescope team released a catalog of 219 new planet candidates, including 10 that are near-Earth size and orbiting in their star’s “Goldilocks zone” – neither too hot nor too cold – where liquid water could exist.”

Canada

Economist – The lessons from Canada’s attempts to curb its house-price boom 6/17

  • “In its twice-yearly health-check on the financial system, published this month, the Bank of Canada concluded that ‘extrapolative expectations’ are a feature of the market. In other words, people are buying because they hope, or fear, that prices will keep rising.”
  • “Common to all these cities are buyers from emerging markets, notably China, who have helped to drive a wedge between the price of homes and the local fundamentals of incomes and rental payments. They are willing to pay above the odds to secure a safe place for their savings. Though fairly small in number, their presence is enough to inflate bubbles.”
  • “Canada’s housing market thus opens a window on a tragic flaw in the global economy. In only a few decades China has mastered the manufacture of high-quality goods. But it takes far longer to be able to manufacture safe stores of value. Instead, their affluent citizens seek out rich-country assets, including houses. This fundamental mismatch limits the ability of policymakers to stop bubbles from inflating.”
  • Thing is, “the demand from emerging markets for safe assets will not soon diminish. Recent history shows that big run-ups in property prices often reverse suddenly. Better to batten down the hatches now in case the weather turns bad.”

China

FT – China property tax languishes as vested interests block reform – Gabriel Wildau 6/19

  • “As Chinese authorities struggle to contain runaway home prices, a long-awaited plan for a property tax has stalled, the latest sign of entrenched interests impeding efforts to transform the country’s growth model.” 
  • “The average price of a Shenzhen home last year was 41 times the average income, against 29 in London, 23 in Tokyo and 15 in New York, according to Macquarie Securities. Since late last year, 45 Chinese cities have introduced purchase limits and other measures in an attempt to cool rising property prices.”
  • “For years, economists have advocated for China to move away from administrative tools like purchase bans in favor of a property tax. Top Communist party leaders committed to imposing a property tax in a landmark blueprint for economic reform approved in November 2013.” 
  • “By imposing an annual levy on home ownership, a property tax would reduce the appeal of housing as a speculative investment. While the merits of property taxes in general are a matter of debate among economists, few doubt that is sorely needed in China, where 50m homes lie empty, according to the China Household Finance Survey conducted by researchers from Southwestern University of Finance and Economics in Chengdu.”
  • “Yet market observers say there is little prospect of the government implementing a tax within the next few years — at the annual session of China’s rubber-stamp parliament in March it was announced that legislation for the levy was not on the agenda this year.” 
  • “’Among well-informed economists in the government, establishing a property tax has been consensus for a long, long time,’ says Gan Li, director of the CHFS and professor of economics at Texas A&M University. ‘The concern is politics. No one wants to be blamed for bursting the housing bubble.’” 
  • “China’s home ownership rate is 87%, according to the survey — creating a large and powerful constituency opposing a property tax. In the US, the rate is only 64%, according to census data.” 
  • “A survey by FT Confidential Research, an independent research service owned by the Financial Times, found that 28% of families in medium-sized and large cities own a home that is vacant. Chinese investors have long favored housing over the volatile stock market and low-yielding bond market, and capital controls limit households’ ability to buy foreign assets.”

Bloomberg – China’s Workers are Saying Goodbye to Double-Digit Pay Raises 6/19

Still good though…

South America

FT – OAS fails to pass resolution condemning Venezuela’s Maduro – Jude Webber 6/19

  • “Twenty countries of the Organization of American States backed a resolution condemning Mr Maduro’s unpopular plans to convene a constituent assembly to draw up a new constitution on July 30 – falling short of the two-thirds majority needed. A rival proposal, backed by Caribbean countries, also failed to pass after hours of talks and bickering over procedural matters at the body’s general assembly in the Caribbean resort of Cancún.”
  • “’The crisis is real,’ Honduras’ foreign minister María Dolores Agüero told the meeting. ‘It cannot be that under the doctrine of non-intervention the alternative is to do nothing.’”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s