March 30, 2018

Worthy Insights / Opinion Pieces / Advice

FT – Chinese tycoons have to play the connections game – Jamil Anderlini 3/28

  • “Making use of guanxi can be lucrative but is also fraught with danger.”

FT – Russia and the west’s moral bankruptcy – Edward Luce 3/28

  • “Vladimir Putin’s wealth extraction machine could not operate without our connivance.”

Markets / Economy

Bloomberg – Tesla Bonds Are in Free Fall – Molly Smith 3/28

  • “On Wednesday, Tesla’s notes plunged to a low of 86 cents on the dollar, the clearest sign yet creditors aren’t totally sure the company will be money good.”

FT – Record ‘megadeals’ push global takeovers beyond $1.2tn – Eric Platt, Javier Espinoza, and Don Weinland 3/28

WSJ – Daily Shot: BofAML – State and Local Government Pension Funding Status 3/29

Real Estate

WSJ – Daily Shot: John Burns RE Consulting – Burns Home Value Index 3/29

WSJ – Daily Shot: John Burns RE Consulting – US Housing Expansion Timelines 3/29

Energy

WSJ – Daily Shot: eia – US gross and net energy trade 3/29

Finance

FT – US subprime mortgage bonds back in fashion – Ben McLannahan and Joe Rennison 3/28

  • “Yield-hungry investors turn to assets blamed for financial crisis a decade ago.”

WSJ – Daily Shot: CBOE VIX Futures 3/28

Health / Medicine

WSJ – What, Cocktails Have Calories? New Rules Will Show How Many – Saabira Chaudhuri 3/23

China

FT – China accuses Anbang former chairman Wu Xiaohui of fraud – Gabriel Wildau and Yizhen Jia 3/28

  • “Chinese prosecutors have accused the former chairman of acquisitive conglomerate Anbang Insurance Group of fraud and embezzlement, offering the first detailed explanation of why authorities toppled the once high-flying tycoon.”
  • “Prosecutors on Wednesday accused Mr Wu of issuing false financial statements, marketing materials and regulatory filings to gain approval to sell such products. He also exceeded fundraising limits approved by the China Insurance Regulatory Commission, prosecutors alleged.” 
  • “A whiff of political prosecution remains because the basic business model of selling universal insurance to finance high-profile acquisitions was not limited to Anbang, although Mr Wu’s group was the most aggressive.” 
  • “Prosecutors alleged Mr Wu oversold Rmb724bn ($115bn) in insurance products, diverting Rmb65bn to another company he controlled, which he used for overseas investments, debt repayment and ‘lavish personal spending’. Mr Wu was also accused of concealing his control of Anbang through the other company.”
  • “They also accused Mr Wu of using proceeds from the sale of universal insurance to inject capital back into Anbang, a form of circular financing designed to boost the company’s reported capital ratio and create the impression of financial strength.”

NYT – Anbang Was Seized by China. Now, It Has a Deal for You. – Sui-Lee Wee and Zhang Tiantian 3/29

  • “Less than a month after it was seized by the Chinese government, Anbang Insurance Group, the giant conglomerate, is once again offering small investors ‘you snooze, you lose’ investment opportunities — your money back, guaranteed.”
  • “Sold like stocks or bonds in bank branches around China, the products carry names like Anbang Abundant Stability No. 10, suggesting the investments are conservative. They are anything but.”
  • “Still, Anbang and other companies keep selling them — and Chinese investors keep buying them. When China took over Anbang, it only underlined the widely held — and potentially dangerous — belief that the Chinese government will always be there to bail them out.”
  • “China has a problem with debt. Shadowy, underground lenders have flooded the country with a staggering $15 trillion in credit, which threatens to hobble its economy.”
  • “Beijing now appears to be taking a harder stance with the companies in need of a bail out. On Wednesday, Chinese authorities accused a founder of Anbang, who was the deal maker who bought the Waldorf Astoria, of bilking investors of more than $10 billion. In a country where courts tend to convict, the accusations raised the likelihood that the executive, Wu Xiaohui, could face life in prison.”
  • “The Chinese authorities have pressured big issuers to slow down. In November, they proposed tightening disclosure rules and stopping firms from guaranteeing payments to investors, among other steps.”
  • “Data suggest China is making some headway. The total outstanding balance of wealth management products issued by Chinese banks was about $4.7 trillion in 2017, up just 1.7% from a year before, according to China Wealth, a state-backed company that tracks China’s wealth management products. Two years ago, sales were growing at roughly 50%.”
  • “Zhu Ning, a Tsinghua University economist, said the only way the government can prevent investors from taking on more risk that they can handle is to allow for ‘some real failures’.”
  • “China has been reluctant to allow for failures. Fearing mass unrest, the ruling Communist Party has repeatedly instructed Chinese banks and local officials to cave in to angry investors, who have protested outside government offices after losing their investments.”
  • “The real test, according to Mr. Zhu, could come later this year, when wealth management products issued years earlier have to be paid back.”
  • “’Nonperforming loans are going to be so severe that some of the weaker banks will be forced to face their Judgment Day — whether they are going to be bailed out or whether they are going to die,’ he said.”

 

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