August 25, 2017

Perspective

FT – The great Silicon Valley land grab – Richard Waters 8/23

KFF.org – Medicaid and the Opioid Epidemic – Katherine Young and Julia Zur 7/14

Worthy Insights / Opinion Pieces / Advice

MarketWatch – Retailers aren’t hurting because people are buying ‘experiences’ instead of stuff – Rex Nutting 8/22

  • “The brick-and-mortar retail industry is in crisis. For many old-line retailers, sales and market share are plunging fast. The most obvious explanation for their distress is the rise of online shopping, but some analysts mistakenly point to another trend: ‘Shoppers are choosing experiences over stuff, and that’s bad news for retailers.’”
  • “Instead of purchasing a couch, we’re going to Paris! Or maybe buying avocado toast.”
  • “The reality is more mundane: We are spending a smaller portion of our budget at the mall, but the money we’re saving is mostly going for the most expensive health care in the universe.”
  • “If you’ve heard these stories about the shift away from material things and toward experiences, you might be shocked to learn that retail spending hit a record $1.4 trillion in the second quarter. Retail spending has increased in 30 of the past 33 quarters. We still love to buy stuff.”
  • “The problem for retailers is that prices are falling for many retail goods such as clothing, electronics, appliances, furniture, tools, luggage, toys and many other things. That is killing the bottom line for traditional retailers, who get less revenue per unit sale but still have to pay the fixed costs of rent and payroll.”
  • “For consumers, on the other hand, falling prices are a godsend, because we can buy even more stuff and still have some money left over to spend on other things.”
  • “It would be great if we really could afford to shift our spending from the boring things we need to the fun things we want, but in reality most of the money we are saving due to cheaper clothes and cheaper gasoline is going for goods and services that no one would call fun: hospital bills, financial services, rent, and prescription drugs.”
  • “Over the past 20 years, there has been a revolution in our spending patterns. Since 1997, Americans have shifted a significant portion of their spending from physical things like autos, clothing and petroleum to services like health care, rent and internet access.”
  • “At the margin, we are spending a little bit more on having fun than we did 20 years ago, but most of our money still goes for necessities, not experiences.”

Markets / Economy

WSJ – Global Economics Grow in Sync – Josh Zumbrun 8/23

  • “For the first time in a decade, the world’s major economies are growing in sync, a result of lingering low-interest-rate stimulus from central banks and the gradual fading of crises that over years ricocheted from the U.S. to Greece, Brazil and beyond.”
  • “All 45 countries tracked by the Organization for Economic Cooperation and Development are on track to grow this year, and 33 of them are poised to accelerate from a year ago, according to the OECD. It is the first time since 2007 that all are growing and the most countries in acceleration since 2010, when many nations enjoyed a fleeting snapback from the global financial crisis.”
  • “In the past 50 years, simultaneous growth among all the OECD-tracked countries has been rare. In addition to happening last decade, it has only happened in the late 1980s, and for a few years before the 1973 oil crisis.”

Finance

FT – What happened to the ‘too big to fail’ banks? – Patrick Jenkins and Ian Bott 8/23

China

FT – Back to the future for China tycoon sweepstakes – Gabriel Wildau 8/23

  • “To be a Chinese tycoon these days is to live with uncertainty: while some see their wealth and status rise meteorically, others fall out of favor with Beijing — with serious consequences for their wealth and freedom.”
  • “Led by chairman Hui Ka-yan, Shenzhen-based Evergrande has seen its share price almost quadruple this year. Shares in Sunac China, led by Sun Hongbin, have nearly tripled. The price rises have catapulted both up the ranks of China’s rich list.”
  • “By contrast, last year’s upwardly mobile tycoons, Wu Xiaohui of Anbang Insurance and Wang Jianlin of Dalian Wanda, who seemed to represent China’s future as a global investor as they snapped up foreign real estate and entertainment assets, are on the defensive.”
  • “’If you look at Sun Hongbin, he sells bonds offshore and brings the money onshore to build houses. It’s different from Wanda, which borrows from banks onshore to invest offshore. That’s much more sensitive,’ said Yang Guoying, researcher at China Financial Think Tank and a popular commentator on Weibo.”
  • “Offshore investors have a strong appetite for Evergrande’s high-yield debt, despite persistent warnings from analysts and short sellers that the group is highly leveraged. It is a high-risk bet that keeps paying off.”
  • “Evergrande’s net debt of $48bn at the end of last year was the highest among Chinese listed developers, according to data from Thomson Reuters.” 
  • “Tianjin-based Sunac ranked eighth with $8.8bn, and that was before its recent, largely debt-financed deal to buy 13 theme parks from Wanda for $6.5bn. Sunac has spent more than $17.5bn on acquisitions since the start of 2016, according to Dealogic.”
  • “’All these big private enterprises have something in common, which is that they’ve grown very big, very fast, and they’ve done it through debt sales and bank loans,’ said Ai Tangming, chief economics columnist for Sina Finance, a major domestic news website. ‘But Evergrande and Sunac have handled their government relations extremely well, and it’s paying off.’”

Europe

WSJ – Daily Shot: Euro Area GDP 8/24

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