March 01, 2018

Perspective

NYT – By Day, a Sunny Smile for Disney Visitors. By Night, an Uneasy Sleep in a Car. – Jennifer Medina 2/27

Worthy Insights / Opinion Pieces / Advice

Economist – How Putin meddles in Western democracies – Leaders 2/22

FT – A world of debt mortgages our economic future – Derek Scissors 2/22

  • “Irresponsible borrowing by the US, China and India imperils global growth.”

WSJ – The Wayfair Riddle – Elizabeth Winkler 2/26

  • “The furniture retailer’s business has serious flaws, but the stock keeps soaring.”

Energy

FT – Rising interest rates punish US power sector – Ed Crooks 2/22

  • “US utilities, sustained for years in a warm bath of favorable financial conditions, are facing a cold shower.”
  • “An expected rise in interest rates and the shake-up of the tax system passed into law at the end of last year are threatening to squeeze utilities’ finances. Already, the S&P 500 utility sector index has dropped 13% from its peak in November.”

FT – Fundamentals do not matter to new breed of oil speculator – Gregory Meyer 2/27

Finance

FT – Rising tide of debt to hit rich countries’ budgets, warns OECD – Kate Allen and Chris Giles 2/22

  • “Developed nations face a rising tide of government debt that poses ‘a significant challenge’ to budgets as interest rates increase around the world, the OECD has warned.”
  • “Low interest rates have helped sustain high levels of government debt and persistent budget deficits since the financial crisis, according to the OECD, but the ‘relatively favorable’ sovereign funding environment ‘may not be a permanent feature of financial markets’.”
  • “The warning on the longer-term consequences of high public borrowing marks a shift in stance by the OECD, which as recently as November was praising countries for easing fiscal policy to help global growth.”
  • “In an Economic Outlook, published at that time, the Paris-based organization said that ‘even a lasting increase in 10-year government bond yields of 1 percentage point . . . might worsen budget balances on average by only between 0.1% and 0.3% of GDP annually in the following three years’.”
  • “The total stock of OECD countries’ sovereign debt has increased from $25tn in 2008 to more than $45tn this year. Debt to GDP ratios across the OECD averaged 73% last year, and its members are set to borrow £10.5tn from the markets this year.”
  • “Because much of the debt raised in the aftermath of the financial crisis is set to mature in the coming years, developed nations will have to refinance 40% of their total debt stock in the next three years, the OECD said.”

Health / Medicine

Economist – How to stop lead poisoning – Leaders 2/22

Agriculture

WSJ – Daily Shot: To Stay on the Land, American Farmers Add Extra Jobs – Jacob Bunge and Jesse Newman 2/25

Sovereign Wealth Funds

FT – Norway oil fund posts $131bn return for 2017 – Richard Milne 2/27

  • “Norway’s $1.1tn oil fund returned 13.7% — or NKr1tn ($131bn) — beaten only by 2009 and 2013 in percentage terms.”
  • “Strong stock markets contributed to a 19.4% return for equities while property returned 7.5% and bonds 3.3%.”

China

Nikkei Asian Review – The hidden risks of China’s war on debt – Yusho Cho 2/28

India

FT – Huge fraud at Indian bank spurs privatization calls – Amy Kazmin 2/27

  • “In 1969, India’s then prime minister, Indira Gandhi, transformed the country’s banking landscape when she nationalized its 14 biggest commercial lenders, which together accounted for around 70% of the system’s deposits.”
  • “Nationalization was touted as way to protect depositors and force banks — which mainly catered to big industrial houses — to lend to a broader swath of the population, including farmers, traders and small businesses.” 
  • “State dominance over the banking system has not worked out so well for India. Politically driven lending decisions, difficulties agreeing realistic debt workouts when loans sour, as well as uninspired, even fearful bureaucratic management and outdated IT systems have left state lenders with a far higher bad debt burden than their private rivals, hindering India’s economic prospects.” 
  • “Now, the discovery of an alleged $1.8bn fraud at India’s second-largest state lender, Punjab National Bank, is prompting vigorous and concerted calls for New Delhi to admit the failure of Mrs. Gandhi’s bank nationalization — and reverse it.” 
  • “According to PNB, staff at one of its Mumbai branches issued fraudulent bank guarantees for luxury jeweler Nirav Modi, and his diamond-trader uncle Mehul Choksi, to take cash advances from the overseas branches of other Indian banks — all ostensibly guaranteed by PNB.”
  • “Antiquated software systems — guarantees were issued without requisite documents or collateral — meant PNB’s management had no idea of the obligations mounting in its name. Nor did the banks that received the guarantees, mostly other state lenders, suspect any impropriety.” 
  • “Analysts say the scam, which PNB says went on for several years without detection, highlights the rot in state banks and the need for radical change.” 
  • “At the heart of India’s banking crisis, however, is New Delhi’s political control over what should be run as commercial entities and the inherent conflict of interest in the state’s multiple roles as economic policymaker, the largest bank owner and the industry regulator.” 
  • “While New Delhi is now in the middle of a $32bn recapitalization scheme to shore up bank balance sheets after the last wave of bad debts, the PNB fraud has raised fears the government is simply throwing good money after bad.” 
  • “Privatization of some, or even most, of India’s state banks is not a simple or quick solution to the sector’s problems. Analysts say the legacy of five decades of state ownership — and its impact on personnel, incentives and decision-making — will take years to undo. But the PNB fraud has persuaded many Indians it is time to start.”

Japan

WSJ – Daily Shot: TD Securities – Japanese Investors Looking For Returns Abroad 2/27

Puerto Rico

WSJ – Daily Shot: CNN – ‘Exodus’ from Puerto Rico: A visual guide – John D. Sutter and Sergio Hernandez 2/21

South America

Bloomberg – Hungry Venezuelan Workers Are Collapsing. So Is the Oil Industry – Fabiola Zerpa 2/22

  • “Starving employees are growing too weak for heavy labor, hobbling the refineries that keep the economy running.”

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