October 3, 2017

Perspective

WSJ – U.S. Families’ Wealth, Incomes Rose, Fed Survey Says – Harriet Torry 9/27

WSJ – Daily Shot: International Labor Organization – Regional Prevalence of Modern Slavery 10/2

Economist – At least 58 people are killed and 515 injured in a shooting in Las Vegas 10/2

Economist – High-net-worth individuals 9/30

  • Those with at least $1m in investable assets, excluding their main home.

Economist – Obituary: Stanislav Petrov 9/30

  • “‘The man who saved the world’ was 77.”

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Taking Financial Advice From a Lottery Winner – Ben Carlson 10/1

FT – Rajoy faces huge task after Catalonia independence referendum – Tony Barber 10/1

  • “After Catalonia’s chaotic, disputed referendum on independence, Mariano Rajoy, Spain’s prime minister, will have to display political skills of the highest order. Sunday’s illegal vote has drastically polarized Catalonian society. It has fueled tensions between the region’s government and the authorities in Madrid to an intensity unseen since Spain’s return to democracy in the late 1970s.”
  • “Mr Rajoy faces an extraordinarily difficult task. He is adamant that it is his government’s fundamental duty to uphold the law and preserve the integrity of the Spanish state. Yet the police’s use on Sunday of batons and rubber bullets to disrupt the referendum risks deepening the confrontation and putting off the moment when Madrid and the Catalonian authorities sit down to find a way out of the impasse.”
  • “In principle, the most sensible way for Madrid and Catalonia’s authorities to defuse the tensions is to open a dialogue on an upgraded form of regional self-government. Luis de Guindos, Spain’s finance minister, hinted at such a solution two weeks ago when he aired the possibility of more financial autonomy for Catalonia. Yet he made it clear that the push for independence had to stop. It is a price many secessionists, for now, seem unwilling to pay.”

Economist – How digital devices challenge the nature of ownership 9/30

  • “In America this idea has already taken root in the ‘right to repair’ movement… In France appliance-makers must tell buyers how long a devices is likely to last – a sign of how repairable it is. Regulators should foster competition by, for instances, insisting that independent repair shops have the same access to product information, spare parts and repair tools as manufacturer-owned ones-rules that are already standard in the car industry.”

Markets / Economy

FT – Asia’s multinationals are hoarding cash like never before – Nikkei Asian Review 10/1

  • “Welcome to the slow-growth world, where China’s gross domestic product is expanding at the slowest rate in a quarter of a century and the global economy has stumbled through five subpar years. For eastern and western companies alike, finding good investments in this environment is anything but easy. Hence all the hoarding.”

China

WSJ – Why Chinese Are Diverting Their Consumer Loans to Real Estate – Grace Zhu and Chao Deng 9/30

  • “China’s government hoped more household borrowing would help the economy become more consumer-oriented. But instead of shopping, many Chinese are spending the money on real estate, undermining Beijing’s efforts to cool that market.”
  • “Chinese banks, encouraged by policymakers, have recently been lending more to households as companies sink perilously deep into debt. At first banks did this with mortgages; this year they have stepped up short-term consumer loans.”
  • “But signs are emerging that such loans, rather than funding such middle-class trappings as cars, household appliances or gadgets, are instead flowing to China’s stubbornly hot property market, padding home purchases when mortgage loans aren’t enough.”
  • “New short-term consumer credit surged 160% to 1.27 trillion yuan ($193 billion) in the first eight months of the year from the year-earlier period, according to data from the People’s Bank of China, the central bank. However, growth in consumption as measured by retail sales rose just 10.4% in August, in line with recent years.”
  • “E-house China R&D Institute, an independent Chinese research firm, estimates that at least one third of short-term consumer loans issued since March have gone toward property purchases.”
  • “With few investment options—domestic stocks are volatile and considered too risky, and China strictly controls capital moving out of the country—consumers see property as a fail-safe avenue for storing their wealth.”
  • “Mortgages form the lion’s share of household debt, which now accounts for the equivalent of 46% of China’s gross domestic product, compared with 17% in 2008, and 33% of outstanding bank credit, up from 18% a decade earlier.”
  • “China’s savings rate is still high compared with the West. However, Chinese households now owe the equivalent of 98% the average annual income, according to data from the Washington-based Institute of International Finance—on par with their counterparts in the U.S., the European Union and Japan, at 102%, 104% and 100% respectively.”

India

FT – India exporters struggle with Modi’s new tax system – Kiran Stacey 10/1

  • “Narendra Modi’s push to boost Indian exports is being undermined by the problems plaguing his government’s new tax system, companies have warned, with tens of thousands of exporters struggling to meet their short-term funding needs.”
  • “In September, it emerged that businesses lodged claims for tax credits worth nearly $10bn for the first month of the GST — far greater than ministers had been expecting.”
  • “As they look to increase tax revenues, officials have delayed paying credits to exporters, who have to pay their tax and then claim the cash back under the new system. Under the old regime, exporters did not have to pay tax at all on the supplies they bought.”
  • “‘Small and medium exporters are finding it especially tough, as they are not able to take out bank loans to fund their working capital while they wait for tax credits to be paid,’ Ajay Sahai, director-general of the Federation of Indian Export Organizations (FIEO), said.”
  • “Mr. Sahai estimates there are about 100,000 small and medium-sized exporters, up to 40% of which are now facing difficulties.”
  • “Meanwhile economic growth has also slowed, falling from 7% at the end of 2016 to just 5.7% for the quarter ending on June 30.”

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