June 20, 2018

Perspective

OECD – A Broken Social Elevator? How to Promote Social Mobility 6/15

Worthy Insights / Opinion Pieces / Advice

Foreign Affairs – Beijing’s Building Boom: How the West Surrendered Global Infrastructure Development to China – Bushra Bataineh, Michael Bennon, and Francis Fukuyama 5/21

FT – Facebook’s data sharing shows it is not a US champion – Rana Foroohar 6/6

  • “The social network gave China’s Huawei access to user information despite concerns.”

Pragmatic Capitalism – The Vollgeld Proposal is Bad. Very Bad. – Cullen Roche 6/6

  • A thoughtful point on the benefits of private banks vs. a nationalized banking system.

Wolf Street – Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks” – Wolf Richter 6/17

  • “This is the trend: Banks are pulling back from mortgage lending in a big way, likely cherry-picking their customers to curtail the risks amid inflated prices and irrational exuberance in an environment of rising mortgage rates; and non-bank lenders aggressively chase everyone else. And since these ‘shadow banks’ not regulated by bank regulators, they’re free to do as they please.”
  • “ATTOM obtained this data from publicly recorded mortgages and deeds of trust in more than 1,700 counties accounting for more than 87% of the US population.”
  • “It also pointed at the curious dynamics of co-buyers – defined as multiple, non-married buyers listed on the sales deed – in the most expensive markets. Nationwide in Q1, 17.4% of all single family homes were purchased by co-buyers, up from 16.3% a year ago, and up from 14.9% two years ago. But the national averages paper over the vast differences in individual markets.”

Markets / Economy

FT – How millennials’ taste for ‘authenticity’ is disrupting powerful food brands – Scheherazade Daneshkhu 6/18

  • “Business struggles to respond to young consumer demand for more natural products.”

FT – The millennial moment – in charts – Cale Tilford 6/5

WSJ – Daily Shot: BofAML – Updated Asset Price Bubble Chart 6/19

Real Estate

WSJ – Daily Shot: Black Knight – Tappable Equity of US Mortgage Holders 6/19

Bloomberg Businessweek – Brexit Pain Hits London Housing – Jill Ward 6/18

Energy

FT – Oil producers face their ‘life or death’ question – David Sheppard and Anjli Raval 6/18

  • “Fear of an imminent peak in demand means companies are less likely to invest. So does that make shortages and a price rise inevitable?”
  • “In the second half of this decade total capital expenditure by the large oil and gas groups is projected to fall by almost 50% to $443.5bn from $875.1bn between 2010-15, according to Norwegian consultancy Rystad Energy. Although partly offset by a fall in oilfield development costs, the drop also coincides with the big groups ploughing more capital into shorter-term projects, which pay off quickly, as well as renewable energy. The moves come amid fears that electric vehicles pose a huge threat to oil’s dominance.”
  • “’It’s not wise to be cavalier about a lack of investment,’ says Stewart Glickman, an energy equity analyst at CFRA. ‘The drop over the past four years eventually will have an impact on crude prices.’”
  • “He adds that while investment in US shale has grown as companies look to short-cycle projects, bottlenecks and the declining quality of reserves mean it alone might not be able to fill the gap. ‘To blithely assume that because [the US shale industry] has been able to generate enough production so far that we’ll be able to continue doing so is a risky expectation,’ he says.”
  • “Estimates for when oil demand will peak vary wildly. Some experts say it could happen as soon as 2023, others put it off to 2070. That lack of consensus presents a danger, critics say, that the oil groups are being pushed — against their instincts — into shelving complex long-term investments just as demand for oil nears 100m barrels a day for the first time as emerging economies in Asia and Africa expand.”
  • “’There is so much uncertainty,’ says Andrew Gould, former chairman and chief executive of oilfield services company Schlumberger. ‘It’s increasingly difficult now to get boards to sign off on projects that have a 20-25 year life.’”

Shipping

WSJ – Business Is Booming at the Panama Canal – Costas Paris 6/17

  • “Widened waterway opened canal to bigger ships moving U.S. natural gas and petroleum, sending toll revenue soaring.”

China

FT – China eyes role as world’s power supplier – James Kynge and Lucy Hornby 6/6

  • “In Laos, in Brazil, in central Africa and most of all in China itself, ultra high-voltage (UHV) cable technology that allows power to be commercially transported over vast distances with lower costs and increased load is justifying the construction of massive power projects. It is dubbed the ‘intercontinental ballistic missile’ of the power industry by Liu Zhenya, its biggest backer and for a decade the president of State Grid, China’s powerful transmission utility.”
  • “UHV allowed China to binge on dam building in its mountainous hinterland, then transport the power thousands of kilometers to its wealthy, industrial east coast. But by enabling this, and other projects, UHV has left western China with such a glut of power that Mr Liu in 2016 proposed using the technology to export power as far away as Germany.”
  • “Now Mr Liu is promoting UHV internationally through his Global Energy Interconnection (GEI) initiative. Designated a ‘national strategy’ and championed by Xi Jinping, China’s president, the initiative feeds into one of China’s most ambitious international plans — to create the world’s first global electricity grid.”
  • “Advocates stress that this does not mean China would control the resulting grid but networks would be linked to allow better cross-regional allocation of power surpluses. It is no coincidence that this would resolve the problem of ‘trapped’ power resulting from some of China’s mega construction projects in countries like Laos that lack a big enough domestic market.”
  • “Chinese companies have announced investments of $102bn in building or acquiring power transmission infrastructure across 83 projects in Latin America, Africa, Europe and beyond over the past five years, according to RWR. Adding in loans from Chinese institutions for overseas power grid investments brings the total to $123bn.”
  • “Throw in all power-related Chinese deals overseas, including investments and loans to power plants as well as grids, and the number almost quadruples. Between 2013 and the end of February 2018, total overseas power transactions announced reached $452bn, up 92% from 2013 levels, according to RWR, which strips out of its calculations deals that are announced only to be subsequently cancelled.”
  • “Officials and power industry analysts in China insist that it would be too simple to assume that such investments are all slated to be rolled up into a single international grid to achieve the GEI goal, which Mr Liu recently described as similar to the internet: global but not controlled by a single country.”
  • “Although Chinese companies would not necessarily own or control the regional grids, their influence, via the assets they do control, would ultimately lead to regional interconnection.”
  • “The biggest boon for China’s global grid ambitions is UHV cable technology. While other companies such as Germany’s Siemens and the Swedish-Swiss conglomerate ABB also have the technology, Chinese companies have been the first to deploy it on a grand scale, developing global industry standards.”
  • “China has already demonstrated the technology’s performance at home. The 37,000km of UHV cable that is laid or under construction in China can carry a load of 150GW, equivalent to 2.5 times the maximum electricity load in the UK. And despite some pushback from the country’s entrenched power generators, Mr Liu claims that the cables are particularly applicable to renewable energy.”
  • “Steven Chu, a former US secretary of energy, has called China’s strides in UHV technology a ‘Sputnik moment’ for the US, alluding to the Soviet Union’s 1957 launch of the first earth-orbiting space satellite, which marked a technological leap ahead of the US.”
  • “’China has the best transmission lines in terms of the highest voltage and lowest loss,’ Mr Chu has said. ‘They can transmit electricity over 2,000km and lose only 7% of the energy. If we [the US] transmitted over 200km we would lose more than that.’”
  • “The technology promises to reshape the way in which the world consumes power, Mr Liu told his London audience. He used the hypothetical scenario of hydropower generated in the Democratic Republic of Congo for $0.03 per kWh being transmitted to Europe through Chinese UHV cables at a cost on delivery of just $0.07-0.08 per kWh. This compares with an average cost of €0.20 ($0.23) per kWh to households in the EU, according to Eurostat, the data agency.”

 

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