April 25, 2018

If you were only to read one thing…

Bloomberg – These Are the U.S. Cities With the Fastest-Growing Wealth Gaps – Vincent Del Giudice and Wei Lu 4/19

  • “The analysis of Census Bureau data tracks the differences in annual income between household income groups. The rich versus poor gap compared households in the top 20% to those in the bottom 20% by metropolitan area.”
  • “At No. 1 is San Jose, California, the Silicon Valley city where the rich versus poor gap widened by $73,600 to $339,000. At No. 100, with the smallest change among 100 largest metro areas, is the border city of El Paso, Texas, where the gap widened by $2,600 to $131,200.”
  • “Nationally, the rich versus poor gap expanded by $31,000 to just over $197,000. Last year’s measure, using data from 2010 to 2015, showed an increase of $29,500 to $189,600.”
  • “The Bloomberg ranking also shows the change in the gap between the super-rich to middle class which widened in 98 of 100 metropolitan areas, led by Bridgeport, Connecticut, which overlaps entirely with Fairfield County. The gap narrowed in Ogden, Utah and Colorado Springs, Colorado. The super-rich to middle class gap is defined by those in the top five percent of income vs households in the middle 20%.”
  • “A third take of data shows the middle class income span — defined as the gap between those within 30 and 80% of an areas income. The middle class span grew the most in San Francisco where it rose to $140,800 in 2016 from $108,300 five years earlier.”

Perspective

Economist – A study finds nearly half of jobs are vulnerable to automation – The Data Team 4/24

Worthy Insights / Opinion Pieces / Advice

Economist – The Republican Party is organized around one man – Leaders 4/19

The Irrelevant Investor – How? – Michael Batnick 4/24

  • “How can Netflix be worth nearly as much as Disney?”

Mauldin Economics – China Plays It Cool – John Mauldin 4/20

NYT – We Don’t Need No Education – Paul Krugman 4/23

Pragmatic Capitalism – The Fed is in a Pickle – Cullen Roche 4/24

WP – The craft beer industry’s buzz is wearing off – Rachel Siegel 4/10

  • “A new report by the Brewers Association — a trade association representing small and independent American craft brewers — showed that craft brewers saw a 5% rise in production volume in 2017. Yet with that growth comes an increasingly crowded playing field, leading to more closures of small craft breweries. In 2017, there were nearly 1,000 new brewery openings nationwide and 165 closures — a closing rate of 2.6%. That’s a 42% jump from 2016, when 116 craft breweries closed.”

Markets / Economy

FT – WeWork to test junk bond appetite with $500m sale – Eric Platt, Alexandra Scaggs, and Richard Waters 4/24

  • “WeWork, the lossmaking provider of shared office space, will seek to raise money from debt investors for the first time in a sale that will provide a stern test of sentiment in the junk bond market.”
  • “The $20bn US company has hired more than a dozen banks to pitch a bond sale to US money managers this week, according to five people with knowledge of the planned sale.”
  • “Sales at the company more than doubled to $886m in 2017 from the year before, although its loss also widened to $884m, according to bond documents reviewed by the Financial Times. WeWork said sales had continued to quicken and by last month had reached an annualised pace of between $1.4bn and $1.5bn.”
  • “WeWork has raised nearly $7bn through equity investments over the past seven years. Its ambitions received a big boost in the middle of last year with a $4.4bn injection of cash from SoftBank and the Japanese conglomerate’s Saudi-backed technology fund, laying the ground for more rapid expansion around the world.”
  • “The move by WeWork to tap the $8.8tn US corporate debt market, a vital source of funding for companies, will bring new investor scrutiny to the company at a time when corporate borrowing costs are on the rise.”
  • “The bond offering drew junk labels from the leading US credit rating agencies, underlining the risk of investing in the debt. One person briefed on the sale added that the seven-year bond could price with a yield as low as 7%, although a second added that the final price WeWork pays could be higher.”

Real Estate

WSJ – Daily Shot: US Existing Home Sales 4/24

WSJ – Daily Shot: NAR – US Existing Homes Months Supply 4/24

WSJ – Daily Shot: NY Fed – US Households average probability of moving 4/24

Energy

FT – US shale groups reach self-financing milestone as oil price rises – Ed Crooks and Nicole Bullock 4/23

  • “Since the shale oil boom began a decade ago, exploration and production companies have needed a steady inflow of capital to pay for drilling and completing new wells but thanks to the rise in crude prices, many can now finance themselves.”
  • “From the time the first shale oil test wells were drilled in the US in 2008-09, the industry’s capital expenditure has exceeded its cash from operations, with producers only able to stay in business by attracting hundreds of billions of dollars in financing from bond and share sales and bank loans. From 2008 to 2017, US exploration and production companies raised $293bn from bond sales, according to Dealogic.”
  • “Another factor that has helped producers turn the corner is the continued improvement in the techniques of horizontal drilling and hydraulic fracturing, which have brought costs down sharply.”

FT – Halliburton writes off investment in crisis-hit Venezuela – Ed Crooks 4/23

  • “Halliburton, one of the world’s largest oilfield services groups, wrote off its remaining investment in Venezuela at a cost of $312m on Monday, highlighting the decline of the crisis-hit nation’s oil industry.”
  • “Halliburton said it would continue to operate in the country ‘at a reduced level’, but would be careful about its future exposure. It last year wrote down $647m for late payment by PDVSA, Venezuela’s national oil company, and the fall in the value of a promissory note intended to cover some of those bills.”
  • “Venezuela’s crude production has dropped 30% from 2.15m barrels a day in 2016 to 1.5m b/d last month. It is less than half its level when Hugo Chávez, the former president, was elected in 1998.”
  • “Schlumberger, the world’s largest listed oilfield services group, similarly wrote off its investment in Venezuela at the end of last year, taking a pre-tax write down of $938m. It continues to operate a cash business in the country, but that has continued to decline into this year.”
  • “Paal Kibsgaard, Schlumberger’s chief executive, said Venezuela’s oil production was in ‘free fall’.”
  • “Although the rise in oil prices since last year has offered some help to Venezuela, the benefit has been muted because most of the oil PDVSA produces does not generate cash, according to Francisco Monaldi of the Baker Institute at Rice University.”
  • “He argued in a recent report that of the roughly 1.8m b/d that PDVSA produced last November, 400,000-450,000 b/d were used in the domestic market at a huge loss, while about 500,000-600,000 b/d were committed to repaying loans from China and Russia and owed to joint venture partners.”

Finance

Bloomberg – ECB Seen Delaying QE Exit Decision as Trade Concerns Mount – Alessandro Speciale and Andre Tartar 4/19

WSJ – Daily Shot: US – Germany 2yr Government Bond Spread 4/24

Sports

PBJ – MLB prices climb, but Diamondbacks deemed best value in sport – Patrick O’Grady 4/24

China

WSJ – Daily Shot: IIF Global Debt Monitor – YoY Change In Chinese Sectoral Debt 4/24

Japan

FT – Tokyo struggles with worst hay fever outbreak on record – Robin Harding 4/23

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