September 27, 2017

If you were to read only one thing…

Bloomberg Businessweek – Ronaldo Is Hawking One of the World’s Riskiest Derivatives – Donal Griffin 9/20

  • The product: Contracts For Difference (CFDs)
  • “CFDs, called ‘a volatile form of gambling’ by an Irish judge in 2014, make up one of the last bastions of opaque, lightly regulated financial speculation in Europe. The contracts, which allow investors to bet on the direction of stocks, bonds, currencies and commodities without buying the underlying assets, aren’t traded on public exchanges and are largely prohibited for retail customers in the U.S. They’ve surged in popularity across Europe since 2010, triggering concerns of regulators, who say customers don’t grasp the risks involved.”
  • “Regulators from the Central Bank of Ireland to Polish markets watchdog KNF are now circling the CFD industry, and several countries have imposed leverage caps, limits on client losses and marketing restrictions. Cyprus (where most of the operators are based) introduced rules last year requiring CFD firms to offer a default leverage amount of no more than 50 times and limit client losses. Still, investors can get more if they ask for it and pass a firm’s ‘appropriateness test,’ according to a statement from the regulator, known as CySEC, which declined to comment further.”
  • “CFD users in Spain lose money 82% of the time, according to a study by the regulator that found about 31,000 traders in the country lost 142 million euros ($170 million) over a 21-month period ended in September 2016, including transaction costs. Other regulators have reported a similar percentage of losing bets.”
  • “Javier Paz, an analyst with Aite Group LLC in Boston who tracks the industry, estimates that European traders have lost about $2.1 billion on the derivatives over the past 15 years.”
  • “‘This is like a casino, and it looks very dangerous,’ Patricia Suarez, president of the Association of Financial Users in Madrid, which campaigns against abusive banking products, said of CFD trading.”
  • “One reason for the losses, regulators say, is the borrowed funds that CFD firms offer investors to magnify their bets. The leverage allows customers to deposit a small percentage of the total value of their trades. The CFD firm funds the remainder of the bet at a specified rate of interest. Trading this way can result in inflated profits, but the client can lose more than his deposit if the market moves even slightly in the wrong direction.”

Perspective

Axios – The large parts of America left behind by today’s economy – Kim Hart 9/25

  • “U.S. geographical economic inequality is growing, meaning your economic opportunity is more tied to your location than ever before. A large portion of the country is being left behind by today’s economy, according to a county-by-county report released this morning by the Economic Innovation Group, a non-profit research and advocacy organization. This was a major election theme that helped thrust Donald Trump to the White House.”
  • Key findings:”
    • “New jobs are clustered in the economy’s best-off places, leaving one of every four new jobs for the bottom 60% of zip codes.”
    • “57% of the national rise in business establishments and 52% of employment growth from 2011-2015 were in prosperous areas.”
    • “Most of today’s distressed communities have seen zero net gains in employment and business establishment since 2000. In fact, more than half have seen net losses on both fronts.”
    • “Half of adults living in distressed zip codes are attempting to find gainful employment in the modern economy armed with only a high school education at best.”
    • “The healthier the economy, the healthier the person — people in distressed communities die five years earlier.”

FT – Millions mired in poverty as US upturn passes them by, study finds – Sam Fleming and Lauren Leatherby 9/25

  • “More than 50m Americans live in districts that are mired in a ‘deep ongoing recession’, with falling employment and a shrinking business base, according to a report that highlights the fractured nature of the US recovery.”
  • “According to research from the Economic Innovation Group think-tank, one in six Americans resides in a zip code it defines as a ‘distressed community’. These are areas with a falling number of businesses and in which the local population has low median income, poor labor force participation, high levels of poverty and low educational achievement.”

WSJ – Then and Now: The Big Shift at Work – Lauren Weber and Stephanie Stamm 9/2

  • “The biggest share of companies’ output still goes to workers, but that share is shrinking as companies spend less on both employee compensation and capital investment. Meanwhile, investors are getting three times the payout they did 30 years ago.”

Worthy Insights / Opinion Pieces / Advice

NYT – Tyranny of the Minority – Michelle Goldberg 9/25

The Registry – Leaving Retail – John McNellis 9/26

Markets / Economy

RIAA – U.S. Sales Database: Recorded Music Revenues by Format 9/25

VC – Economic Might by U.S. Metro Area – Jeff Desjardins 9/26

Real Estate

WSJ – E-Commerce Mania Spreads To Warehouse Market – Esther Fung 9/26

  • “E-commerce is setting off a scramble for industrial real estate near urban centers, giving landlords of once-unglamorous properties a chance to push up rents to record levels.”
  • “A well-located last-mile facility ‘has the functional equivalent of a high-end retail store,’ said Hamid Moghadam, chairman and chief executive officer of industrial real-estate investment trust Prologis Inc. Such facilities are productive for the tenant and reduce transportation and labor costs.”
  • “When a company is shipping to individual customers rather than in bulk to stores, most of their costs are in transportation and labor, and reducing them is a priority, said Eric Frankel, an analyst at real-estate research firm Green Street Advisors. Warehouse rent, by contrast, represents just 5% or so of costs in a supply chain.”
  • “Modest levels of new warehouse supply are coming onto the market at a time when some e-commerce companies are expanding rapidly. Amazon is now the largest tenant of Prologis, Duke Realty Corp. , Jones Lang LaSalle Income Property Trust and DCT Industrial Trust by percentage of rental revenue at year-end 2016, according to S&P Global Market Intelligence.”

Environment / Science

Bloomberg Businessweek – Climate Change Could Dampen Argentina’s Recovery – Jonathan Gilbert 9/19

Asia – excluding China and Japan

WSJ – Bali Volcano Eruption ‘Imminent,’ Nearly 50,000 Flee – Ben Otto 9/25

  • “The number of people fleeing a rumbling volcano no the Indonesian resort island of Bali rose to nearly 50,000, with the country’s disaster agency saying an eruption appears imminent after a half-century of calm.”

China

FT – WhatsApp messaging service hit by full blockage in China – Hannah Kuchler 9/25

  • “WhatsApp suffered a complete blockage in China this week, prompting suggestions the government was cracking down on the Facebook-owned messaging app ahead of the Communist party congress next month.”

Bloomberg Pursuits – The World’s Best Caviar Doesn’t Come From Russia Anymore – Kate Krader 9/18

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