June 26, 2018

Worthy Insights / Opinion Pieces / Advice

NYT – The Profound Social Cost of American Exceptionalism – Eduardo Porter 5/29

Markets / Economy

FT – Lumber producers profit from record prices – Ben Foldy 6/25

  • “What do forest fires, wood-eating beetles and US President Donald Trump have in common? They have all helped push the price of lumber to historic heights, leading to record share prices for lumber producers and higher prices for US homebuyers.”
  • “The price of lumber has increased 57% since the start of 2017, according to the Random Lengths framing lumber composite price index, going from $356 to $571 per thousand board feet.”
  • “Analysts attribute the price spike to steadily increasing demand and a coincidence of supply shocks in British Columbia, one of the world’s largest producers of softwood lumber.”
  • “’When you have a tight supply chain, as soon as one thing goes wrong, prices skyrocket,’ said Brendan Lowney, principal and macroeconomist at Forest Economic Advisors. ‘You almost have a vertical supply curve.’”
  • “But of the factors driving current prices, duties are only ‘number three on the list,’ said Mr Lowney. More important was a historic 2017 wildfire season that was so severe the Canadian government’s senior climatologist called it the ‘summer of fire’.”
  • Between April and November, more than 1,300 fires consumed more than 1.2m hectares of British Columbia. The fires and dry conditions forced many sawmill owners to halt operations and restricted much of the province’s logging activity.”
  • “The slowdown came at a most inopportune time thanks to another, slower moving shock to the industry: throughout the late 1990s and early 2000s, British Columbia’s forests saw the largest infestation of mountain pine beetles on record, and the consequences are being felt now.”
  • “It only takes a few hundred of the hard-shell black bugs, each roughly the size of a grain of rice, to overwhelm the defenses of a healthy, towering pine. As they burrow through the tree’s bark to lay their eggs, they also introduce a fungus that changes the color of its wood.”
  • “’The tree is as good as dead within 48 hours,’ said Katherine Bleiker, a bark beetle ecologist with Natural Resources Canada.”
  • The epidemic hit hardest in the heart of British Columbia’s logging country, affecting more than 18m hectares and killing about 54% of the province’s merchantable pine.”
  • “But despite their changed color, standing trees killed by pine beetles can still be harvested for lumber. Many are usable for up to eight years, and some last up to 12.”
  • “By the last quarter of 2017, it had looked as if prices had settled around $435 per thousand board feet. But when a harsh winter slowed down Canadian rail traffic, other commodities were prioritized and lumber orders piled up at mills, giving a new leg-up to prices.”
  • “’What’s unprecedented about this run compared to other record runs is the length of it,’ said Shawn Church, who has covered the industry for 28 years at trade publication Random Lengths.”
  • “With the spring and summer building season now under way, prices are still climbing. The US residential sector is the country’s biggest lumber consumer, and new housing starts hit a post-2007 high in May.”
  • “High prices and high demand meant massive first-quarter profits for lumber companies. Share prices for the two largest Canadian lumber corporations, Canfor Corporation and West Fraser Timber Co Ltd, and Weyerhaeuser Co, the largest US producer, have all hit record highs this month.”
  • “As lumber companies rake in profits, the costs are shifted to builders and eventually on to homebuyers.”
  • “Analysts differ in their estimates, but the increase in lumber costs alone has probably added between $3,000 and $9,000 to the cost of the median new home.”

Cryptocurrency / ICOs

WSJ – Daily Shot: Bitcoin 6/22

WSJ – Daily Shot: DigiCor – Major Cryptocurrencies Market Performance 6/24

Tech

Bloomberg – Instagram Is Estimated to Be Worth More than $100 Billion – Emily McCormick 6/25

  • “Facebook Inc.’s Instagram is estimated to be worth more than $100 billion, if it were a stand-alone company, marking a 100-fold return for the app was purchased in 2012, according to data compiled by Bloomberg Intelligence.”
  • “The photo-sharing platform, which reached 1 billion monthly active users earlier this month, will likely help nudge Instagram revenue past $10 billion over the next 12 months, Bloomberg Intelligence analyst Jitendra Waral wrote in a report Monday. Instagram is attracting new users faster than Facebook’s main site and is on track to exceed 2 billion users within the next five years, Waral said. While the social network already has surpassed that milestone, Instagram’s audience is younger than its parent, making it more attractive to advertisers. And unlike Facebook, Instagram is still growing in the U.S.”

China

WSJ – China Eases Credit Policy as U.S. Tariffs Near – Lingling Wei and Chao Deng 6/24

  • “China’s central bank is freeing up more than $100 billion for commercial banks to boost lending and restructure debt, as the Chinese leadership tries to shore up growth amid slowing momentum for economic expansion and an intensifying trade brawl with the U.S.”
  • “In a statement Sunday, the People’s Bank of China announced that it is reducing the amount of reserves banks are required to keep with the central bank by half a percentage point starting July 5. That is the day before a U.S. deadline to slap punitive tariffs on tens of billions of dollars in Chinese goods.”
  • “Under the reserve cut, some 500 billion yuan ($76.86 billion) will be released for 17 large banks, including the Big Five state-owned banks, the central bank said. It said the banks are to use the freed-up funds by converting bad loans into equity in companies that default on their debts.”
  • “Another 200 billion yuan is being unleashed for the country’s city-level commercial banks and other smaller lenders, and those funds are to be used to expand lending to small businesses, the central bank said in the statement.”
  • “Following the reduction in banks’ reserve-requirement ratio, analysts expect more loosening, including increasing lending quotas for banks, relaxing mortgage restrictions for home buyers in some cities and easing limits on local governments to borrow.”
  • “’China is on the way toward monetary easing,’ said Zhu Chaoping, a Shanghai-based global market strategist at J.P. Morgan Asset Management.”
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