April 12, 2018

If you were only to read one thing…

NYT – British Banks Will Have to Cut Ties to Sanctioned Oligarchs, U.S. Says – Ellen Barry 4/10

  • “The United States on Tuesday ratcheted up its efforts to block Kremlin-linked industrialists from doing business in the West, warning that British banks will have to sever their relationships with the tycoons if they want continued access to American financial institutions.”
  • “Sigal P. Mandelker, a top American Treasury official in London to meet with her counterparts, said British banks could face ‘consequences’ if they continued to carry out significant transactions on behalf of the 24 influential Russians sanctioned by Washington on Friday. The list includes the industrialists Oleg Deripaska and Viktor Vekselberg, along with Kirill Shamalov, who American officials have identified as President Vladimir V. Putin’s son-in-law.”
  • “The warning has resonated in London, which for decades has served as a haven for Russia’s wealthiest families. Russian investors own iconic British assets like the Chelsea Football Club and swaths of high-end London real estate, and they support thriving networks of lawyers, financial advisers and estate agents.”
  • “The new American sanctions expose financial institutions outside the United States to penalties if they ‘knowingly facilitate significant financial transactions’ on behalf of the listed Russian oligarchs.”
  • “The wording is similar to secondary sanctions imposed against Iran. These ‘essentially prohibit the individuals involved from taking part in the dollar economy,’ said Daragh McDowell, an analyst for Europe and Central Asia at Verisk Maplecroft, a consulting firm based in Bath.”
  • “It is likely to compel risk-averse British banks to cancel the Russians’ accounts altogether, said Brian O’Toole, a former senior official at the Treasury Department’s Office of Foreign Assets Control, which administers and enforces American sanctions.”

Perspective

Visual Capitalist: howmuch.net – Where the World’s Ultra Rich Population Lives – Jeff Desjardins 4/11

Worthy Insights / Opinion Pieces / Advice

FT Alphaville – Amazon is not a bubble – Jamie Powell 4/10

  • “Amazon is richly valued, but it is hard to make a compelling argument it is a bubble.”

NYT – I Downloaded the Information That Facebook Has on Me. Yikes. – Brian X. Chen 4/11

NYT – The 10-Year Baby Window That Is the Key to the Women’s Pay Gap – Claire Cain Miller 4/9

  • “Women who have their first child before 25 or after 35 eventually close the salary divide with their husbands. It’s the years in between that are most problematic, research shows.”

WSJ – Worried About Your Tax Bill? Hedge-Fund Star John Paulson Owes $1 Billion – Gregory Zuckerman 4/11

  • “John Paulson won fame after he made one of the greatest financial bets of all time. What comes next? One of the largest-ever personal tax bills.”
  • “By April 17, the hedge-fund manager must make federal and state tax payments of about $1 billion, on top of roughly $500 million in taxes he paid late last year, said people close to the firm. That sum is so big it dwarfs the maximum amount the Internal Revenue Service will allow any single taxpayer to pay with a single check. (That’s $99,999,999, in case you’re wondering.)”
  • “Mr. Paulson bet big against subprime mortgages ahead of last decade’s financial crisis, earning about $15 billion of profits for his funds and approximately $4 billion for himself. He deferred the bulk of the taxes on these profits, using a tax provision available at the time to hedge-fund managers, said the people close to the firm. Now the bill is due.”

WSJ – Ant Financial’s Mysterious Valuation Inflation – Jacky Wong 4/11

  • “Alibaba affiliate apparently worth $150 billion, even as shadows spread over its growth and profitability.”

Markets / Economy

AEIdeas – US Imports / Exports by US State – Mark Perry 2/13

Wolf Street – Chap. 11 Bankruptcies Spike 63% from Year Ago – Wolf Richter 4/9

  • “New Chapter 11 bankruptcies in the US spiked 63% year-over-year in March to 770 filings, the highest number of filings for any month since April 2011 (when there had been 789 filings as companies were still trying to emerge from the Great Recession).”

Real Estate

WSJ – Rising Home Prices Push Borrowers Deeper Into Debt – Laura Kusisto 4/10

  • “More Americans are stretching to buy homes, the latest sign that rising prices are making homeownership more difficult for a broad swath of potential buyers.”
  • “Roughly one in five conventional mortgage loans made this winter went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, the highest proportion since the housing crisis, according to new data from mortgage-data tracker CoreLogic Inc. That was almost triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic said.”

Tech

FT – Worldwide PC shipments fall for 14th straight quarter, Gartner says – Mamta Badkar 4/11

  • “Worldwide PC shipments fell for the 14th consecutive quarter, Gartner said on Wednesday, on lower demand in China and the US and delayed orders ahead of the release of new models.”
  • “Global shipments of personal computers — which include desk-based PCs and notebook PCs but not Chromebooks or iPads — fell 1.4% to 61.7m units in the first quarter compared with the year-ago quarter. Shipments fell 2.9% to 11.8m units in the US and 3.9% in the Asia-Pacific market — led by a 5.9% drop in China.”
  • “The report showed that Texas-based Dell saw the biggest increase in shipments, up 6.5% year-on-year. And while Dell secured the largest market share in the US, HP retained the top spot globally with 20.8% of the market share.”

Automotive

WSJ – Car Dealerships Face Conundrum: Get Big or Get Out – Adrienne Roberts 4/8

  • “Small to mid-size dealer groups are selling their businesses to auto-retail giants or investment firms at a robust clip even as auto sales remain strong. The trend—highlighted by Warren Buffett’s entry into the dealership business in 2014—has gathered momentum as electric, shared and autonomous vehicles threaten to reshape the car business.”
  • “These developments have helped fuel consolidation of the 16,800 U.S. dealerships into the hands of fewer owners. The top 50 dealer groups are poised to book more than $175 billion in revenue this year, compared to $144 billion when Mr. Buffett’s Berkshire Hathaway Inc. entered the sector four years ago, according to industry publication Automotive News.”
  • “Annual auto sales have hovered around 17 million for several years and are expected to stay in that range, and dealerships of all sizes are benefiting from a resurgence in sales of higher-priced pickups and SUVs thanks to falling gasoline prices.”
  • “Still, dealer margins are shrinking amid tough competition and the increased pricing transparency enabled by the Internet. Dealers took home about 2.5% of the selling price of the average new car in 2017, down from about 4.7% in 2009, according to data from the National Automobile Dealers Association; used-car margins slipped to 6.9% from 10.7% in 2009 during that period.”
  • “As profit margins have declined, more of the value in each dealership is in the land it sits on. In the past, owners often chose to hold on to their real estate and rent it to the person who bought their dealership. But commercial real-estate values in the U.S. have risen more than 25% above pre-recession highs, according to the real estate research firm Green Street Advisors, and this has owners increasingly wanting to sell everything.”

Entertainment

Axios – Black Panther soars past Titanic, Last Jedi and Jurassic World – Shane Savitsky and Chris Canipe 4/10

WSJ – Comfiest Seat in the House: Struggling Movie Theaters Go Upscale to Survive – Erich Schwartzel 4/9

Canada

WSJ – Daily Shot: Market Ethos – Construction as Percentage of Labor Force – Canada 4/11

China

WSJ – Coal Is About to Lose Face in China – Nathaniel Taplin 4/11

  • “In 2015, rolling coal bond defaults threatened China’s financial sector. Beijing’s response? Massive intervention to curb coal production, which pushed prices and margins higher.”
  • “It was a wonderful idea—if the government only needed to worry about coal firms. Unfortunately, China’s electricity producers, which can’t easily pass on coal price increases because of power price controls, are now running into trouble.”
  • “Huaneng Power International , the listed arm of China’s largest power producer, posted its worst quarterly net loss since the 2009 financial crisis in December. Operating earnings in China’s power sector as a whole were barely two times interest payments in 2017—down from nearly three and a half times in early 2016.”
  • “Coal margins, meanwhile, have recovered sharply, with operating earnings now a healthy five times interest payments—up from barely one time two years ago. But since China’s power producers are even more indebted than its coal miners—their total liabilities were $1.3 trillion last year, more than twice that of coal firms—it’s hard to call this an improvement.”
  • “State media in January reported that China’s four biggest power producers had sent an urgent letter to the country’s main economic planning agency, warning that many plants nationwide were running out of cash to buy coal and that banks were curbing lending.”
  • “Margins have bounced back a bit in early 2018 as coal prices have fallen, but all that power debt still needs to be serviced. As a result—should coal prices recover this summer—it’s likely the Chinese government will step in with price controls or other measures to alleviate pressure on the power sector, which now clearly needs more help than coal.”
  • “Chinese coal output itself has already begun rising again, which should help keep a lid on prices. After two years of strict output curbs, December’s output hit a 24-month high, hinting that Beijing’s strict controls may be easing.”
  • “Across the world, shares of U.S. coal miners like Peabody Energy Corp oration and Cloud Peak Energy Inc. have been under pressure this year as coal prices have retreated. The heavy hand of the Chinese state on global coal markets could make those losses hard to recoup.”

Europe

FT – Hungarian newspaper to close days after Orban victory – Neil Buckley 4/10

  • “One of Hungary’s best-known dailies, Magyar Nemzet, is to close after 80 years along with an opposition radio station, raising questions over the future of the country’s independent media just days after prime minister Viktor Orban won a third landslide election victory.”

Other Interesting Links

FT – PSG (Paris Saint-Germain Football Club) ‘overstated’ sponsorships valued at 200m, says UEFA probe – Murad Ahmed 4/11

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