Tag: Agriculture

August 8, 2017

Perspective

FT – US haul from credit crisis bank fines hit $150bn – Kara Scannell 8/6

  • “A single bank, Bank of America, has paid more than one-third of all recoveries to US authorities, according to an analysis by the Financial Times. Its $56bn in settlements with state and federal regulators and the DOJ cover its own mortgage sales and actions by two companies it acquired — subprime mortgage lender Countrywide and broker Merrill Lynch.”
  • “JPMorgan Chase, which acquired Bear Stearns and Washington Mutual, has paid the second-largest amount, with $27bn in fines and relief.”

Worthy Insights / Opinion Pieces / Advice

NYT – The Debt-Ceiling Crisis Is Real – Edward Kleinbard 8/7

FT Alphaville – Electric vehicle realities – Izabella Kaminska 8/3

  • “Electric vehicles (EVs) are all the rage. But they’re also fast becoming the sacred cows you can’t criticize for fear of being shredded by the EV, renewable, and tech lobbies.”
  • “Questioning the cost structures of the industry in general is not allowed in public forums. My colleague Jonathan Ford discovered this recently when he dared to question the economic realities underpinning the renewable sector.”
  • “Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.”
  • “The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.”
  • A couple of points.
    • Battery packs are expensive and more expensive than generally claimed.
    • Batteries degrade and the cost of replacing them are expensive (more so than the manufacturers let on).
    • Additionally, think of your experience with the value of your old cell phones or computers. While the hardware may still work, the value of your device tends to decline rapidly with an old battery.
  • Back to the subsidies.
  • “Nevertheless, most people are encouraged to buy EVs because of the fuel subsidies or free parking promises. Yet is difficult to assess how long EV subsidies will persist. Fundamentally, the economics dictate that they can only really be affordable to governments as long as the number of vehicles sold remains small. If EV sales accelerate swiftly, these subsidies would get very costly for government coffers very quickly — straining public finances if not creating massive implied contingent liabilities.”
  • “On that basis, when electric car subsidies start eating into the funding that’s available for other vital government services, public perceptions of EV efficiency will change markedly.”
  • All for EV adoption, just trying to be more aware of the factors in play.

Bloomberg Gadfly – OPEC’s Existential Sucker Punch – Julian Lee 7/30

Markets / Economy

WSJ – Daily Shot: FRED – US Prime-Age Labor Force Participation 8/7

WSJ – Daily Shot: FRED – US Civilian Labor Force Participation by Gender 8/7

Environment / Science

NYT – Let Forest Fires Burn? What the Black-Backed Woodpecker Knows – Justin Gillis 8/6

  • “Scientists say that returning forests to a more natural condition would require allowing 10 million or 15 million acres to burn every year, at least.”
  • “Today, closer to four million or five million acres burn every year.”

Agriculture 

WSJ – Daily Shot: CBOT Soft Red Winter Wheat 8/7

  • “The US wheat rally has been fully reversed on improved crop conditions.”

India

FintechFT – India’s fintech revolution – Don Weinland 8/7

Bloomberg Gadfly – Indian Banks’ Soaring Price-to-Truth Ratio – Andy Mukherjee 8/7

  • Several Indian banks have more non-performing loans in their books than they are letting on and are aware of. Worse, there a quite a few loans issued to companies (i.e. Videocon) with too few restrictions, who are then using the funds to pursue moonshot projects out of their core competencies.

Middle East

WSJ – Egypt’s Leader Makes a Risky Bet on the Healing Power of Economic Pain – Yaroslav Trofimov 8/6

  • “Egypt’s President Abdel Fattah Al Sisi is cutting food and fuel subsidies, a program long plagued by waste and corruption, in a high-stakes gamble to aid the stalled economy that none of his predecessors dared execute.”
  • “The economic shock therapy, coupled with a steep currency devaluation, has rocked the Arab world’s most populous country. Fuel prices went up 50% in June, cooking-gas prices have doubled and the annual inflation rate has surpassed 30%.”
  • “Every day, millions of Egyptians line up at government bakeries to buy five loaves of bread for less than two U.S. cents, a fraction of the wheat’s cost. The food subsidies extend to some 80% of Egypt’s families and were first instituted as part of rationing during World War II.”
  • “Farmers across Egypt nurture their crops with water pumps operating on diesel that, even after June’s 55% increase, still retails for 77 cents a gallon, less than a third of retail prices in the U.S.”
  • “The government’s goal is to end the subsidies in three to five years, according to Mr. Kabil, the trade and industry minister. ‘The right thing to do is to lift them totally,’ he said. ‘But you cannot do it today because you cannot correct 40 years of problems in one day.’”
  • The question is whether or not the people of Egypt will be able to make to that point without changing course?

South America

WSJ – Daily Shot: Caracas (Venezuela) Stock Exchange Market Index 8/4

  • If you live in Venezuela, there is nowhere else to preserve your money (outside of hard currencies – if you can get them).

WSJ – Daily Shot: Black Market Bolivar (Venezuela) USD Exchange Rate 8/7

Other Links

NY Post – Hedge fund manager (Raymond Montoya) charged for scamming investors out of millions – John Aldan Byrne 8/5

July 26, 2017

If you were to read only one thing…

NYT – 110 N.F.L Brains 7/25

  • “Dr. Ann McKee, a neuropathologist, has examined the brains of 202 deceased football players. A broad survey of her findings was published on Tuesday in The Journal of the American Medical Association.”
  • “Of the 202 players, 111 of them played in the N.F.L. – and 110 of those were found to have chronic traumatic encephalopathy, or C.T.E., the degenerative disease believed to be caused by repeated blows to the head.”
  • “The brains here are from players who died as young as 23 and as old as 89. And they are from every position on the field – quarterbacks, running backs and linebackers, and even a place-kicker and a punter.”

Perspective

WSJ – Daily Shot: Forbes – Large Tech Firm Lobby Budgets 7/25

WSJ – U.S. Military’s Space in Trump Tower Costs $130,000 a month – Paul Sonne 7/19

  • It’s a 3,475 sq. ft. space, so $37.41 per sq. ft. per month. Mind you, “the most expensive Trump Tower listing recently was a 3,725 sq. ft., three-bedroom apartment on the 62nd floor. It was listed in the spring of 2016 for $50,000 a month unfurnished and $60,000 a month furnished, according to Streeteasy.com.”
  • Basically, Trump’s neighbor recognizes they have a captive audience.

FT – Google and Facebook lay foundations for modern-day company towns – George Hammond 7/19

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Fund Managers and Strategists Think the Bull Market Is Ending Next Year – Adam Haigh, Natasha Doff, Dani Burger and Julie Verhage 7/25

  • “We have had a liquidity-fueled bull market. If that is taken away, there is a pressure point.” – Remi Olu-Pitan, Schroder Investment Management Ltd.

WP – Disabled and disdained – Terrence McCoy 7/21

  • “In rural America, some towns are divided between those who work and those who don’t.”

FP – The argument to be a buyer of the Saudi Aramco IPO – John Dizard 7/21

  • “As one international oil analyst says, though: ‘The Permian is preventing high prices today, but ensuring high oil prices tomorrow. The low prices are holding back investment in most of the world, and that is storing up a significant problem in meeting demand in the future.'”
  • “That is the argument to be a buyer of the Saudi Aramco IPO.”
  • “There are two bets involved in the listing. Can Saudi Arabia contain the social and strategic pressures caused by cheap oil? And will the capital markets eventually stop subsidizing shale producers?”

WSJ – Investors, Stop Worrying About Why ‘Nobody’ Is Worrying – Jason Zweig 7/21

Markets / Economy

WSJ – In Reversal, Colleges Rein In Tuition – Josh Mitchell 7/23

  • “U.S. college tuition is growing at the slowest pace in decades, following a nearly 400% rise over the past three decades that fueled middle class anxieties and a surge in student debt.”
  • “Abundant supply is running up against demand constraints. The number of two-year and four-year colleges increased 33% between 1990 and 2012 to 4,726, Education Department data show. But college enrollment is down more than 4% from a peak in 2010, partly because a healthy job market means fewer people are going back to school to learn new skills.”
  • “Longer-running economic and demographic shifts also are at play. Lower birthrates and the aging of baby boomer children have reduced the pool of traditional college-age Americans. The number of new high-school graduates grew 18% between 2000 and 2010 but only 2% in the first seven years of this decade, Education Department data show.”
  • “Another factor: Congress last increased the maximum amount undergraduates could borrow from the government in 2008. Some economists have concluded schools raise prices along with increases in federal financial aid. A clampdown on aid, in turn, could limit the ability of schools to charge more.”
  • “But other factors could keep cost pressures rising. George Pernsteiner, head of State Higher Education Executive Officers, a trade group that tracks state funding for schools, notes that many states are on track to experience budget crunches as the population ages and health-care and public pension costs rise. That could squeeze public support for schools.”

Real Estate

WSJ – Americans Pour Record Sums Into Home Improvements – Laura Kusisto and Sarah Chaney 7/25

  • “A shortage of new single-family homes across the U.S. is pushing up prices and locking many buyers out of the market. The silver lining: a boom in renovations of existing homes.”
  • “Americans are expected to pour a record $316 billion into home remodeling this year, up from $296 billion a year earlier, according to Harvard University’s Joint Center for Housing Studies.”

FT – Funds hunt for cracks in most-prized US shopping malls – Miles Johnson 7/21

  • “A defining feature of the financial crisis was a group of hedge funds making vast sums by wagering against supposedly AAA-rated mortgage debt well before markets imploded in 2008.”
  • “Now some believe a similar story will play out for US shopping malls — that the most risky investments will end up being those that investors now believe to be the safest. Central to their premise is the idea that too much faith may be being placed in a classification system used for shopping malls that is little known outside of the real estate sector.”
  • “Malls are given ratings by a small group of property consultants generally ranging from A++ to C based on factors that include their sales per square foot and location. While there is no universally accepted system for ranking the malls, with each consultant having slightly different methodologies, banks and investors tend to rely on these ratings to make decisions over how secure each mall is as a creditor or investment.”
  • “The stock market has until recently appeared to believe that prime ‘A’ malls are largely insulated from the pain being felt across a US retail sector being shaken by e-commerce.”
  • “Yet there is growing evidence to suggest that these prime malls, which have been treated by investors and lenders alike as rock solid bets in the face of the internet headwinds, are not as protected as once thought.”
  • “The hedge funds wagering against the highest quality malls believe that the wider market will come to believe these A-quality malls are far more similar to lesser ranked ones. ‘This idea that there are these magic malls in America that are immune to secular change is a myth,’ the US-based hedge fund manager says.”
  • “Some argue that the market underappreciates that A class mall operators and B and C class mall operators all have very similar tenant bases, in spite of being in different locations.”

Energy

BloombergGadlfy – Venezuela’s Perfect Storm for Oil May Be About to Break – Liam Denning 7/21

  • “We may be about to see the first sovereign producer to unequivocally fail.”
  • “The oil producer in question is Venezuela, and that assessment comes courtesy of Helima Croft, who is global head of commodity strategy at RBC Capital Markets and formerly worked with both the Council on Foreign Relations and the CIA.”
  • “But things are building to a head, partly due to the relentless logic of the bond market and partly due to the more proprietary logic of U.S. foreign policy.”
  • “Venezuelan bonds, which haven’t looked rock-solid for a few years, crashed this week as embattled President Nicola Maduro renewed calls to rewrite the country’s constitution, which would effectively disenfranchise the millions of Venezuelans who oppose him and entrench his regime. The U.S. has warned it may impose much tougher sanctions if Maduro goes ahead with his plan.”
  • “Venezuela’s economy is in free-fall: By the end of this year, it will have shrunk by 32% compared to where it was at the end of 2013, according to International Monetary Fund forecasts. Also by the end of this year, the government is on the hook to pay back more than $5 billion in debt — including bonds owed by the state-owned oil champion, Petróleos de Venezuela, S.A., or PdVSA — plus billions more in interest. As of this week, Venezuela’s international reserves stood at less than $10 billion.”
  • “Meanwhile, mismanagement, a lack of investment and re-nationalization of foreign oil companies’ interests have caused Venezuela’s oil production to slump from around 3.3 million barrels a day a decade ago to about 2 million now. Even allowing for the fact that domestic consumption has dwindled along with GDP, Venezuela’s surplus of oil available for earning export dollars has shrunk considerably.”
  • “Compounding this is the fact that the country must devote a lot of its output to paying off loans from China and Russia, further reducing the actual amount it can use to generate cash. Francisco Monaldi, a fellow in Latin American energy policy at Rice University’s Baker Institute for Public Policy, estimates that could be as little as 800,000 barrels a day.”
  • “For three years, oil watchers have been waiting for a chaotic wave of bankruptcies in places like Texas and North Dakota to jolt the market. They’ve been looking in the wrong place.”

FT – Coal has no future, says US railroad boss – Gregory Meyer 7/19

  • “One of the largest haulers of US coal says fossil fuels have no future, despite pledges to the contrary from President Donald Trump.”
  • “CSX, a freight railroad company with origins in the bituminous coal seams of Appalachia, will not buy a single new locomotive to pull coal trains, chief executive Hunter Harrison told analysts on Wednesday.”
  • “’Fossil fuels are dead,’ Mr Harrison said. ‘That’s a long-term view. It’s not going to happen overnight. It’s not going to be in two or three years. But it’s going away, in my view.’” 
  • “North American railroads have reshaped their asset holdings in acknowledgment that coal’s apex has passed.”
  • “Lance Fritz, chief executive of the Union Pacific railroad, said in a recent interview that Mr Trump’s move to scrap Clean Power Plan regulations was unlikely to grow its coal business. ‘It takes away a headwind,’ he said.”

Tech

NYT – Silicon Valley Giants Confront New Walls in China – Paul Mozur and Carolyn Zhang 7/22

  • “It’s basically like someone who has been training for Olympic taekwondo going up against a street fighter. The Olympic fighter is waiting for the whistle, and the street fighter already has him on the ground hitting him with elbows. There’s no rules.” – Andy Tian, co-founder of Asia Innovations Group and former general manager of Zynga China

FT – Uber, Amazon and Microsoft braced for accounting shake-up – Leslie Hook and Richard Waters 7/19

  • “Uber’s reported revenues are being cut in half and sales at Amazon and Microsoft could be higher than previously stated — all thanks to a forthcoming change to accounting rules.”
  • “An update to generally accepted accounting principles (GAAP) for US companies is turning out to have particularly large consequences in parts of the tech industry, which is having to overhaul the way it reports revenues and costs.”
  • “One of the more dramatic impacts will affect car-booking services such as Uber, a private company whose GAAP revenue drops by more than half when it adopts the new standard, which it plans to do this year.”
  • “Uber’s first-quarter revenue this year was $3.4bn under old GAAP accounting, but it says that under the new rules its revenue would have been just $1.5bn for the same period. Uber has already started sharing the lower figure with investors.”
  • “Under the old standard, car-booking services such as Uber and Lyft counted their commissions from regular rides, plus the entire fare of carpool rides, as revenue. Under the new standard, only the commissions from both regular and carpool rides will count as revenue.”
  • “The shift is due to changes to the ‘principal versus agent’ rules that determine when a company is acting as a principal and when it is acting as an agent. The car-booking services were previously considered the ‘principal’ for carpooled rides. As private companies, they must adopt the new standard by the beginning of 2019, although Uber has moved to do so much earlier.”
  • “The new standard, known as Revenue from Contracts with Customers, is designed to narrow the distance between US GAAP rules and International Financial Reporting Standards (IFRS).”

Agriculture 

WSJ – Daily Shot: CBOT Soft Red Winter Wheat Futures 7/24

  • “The recent wheat rally has been almost entirely reversed.”

Asia – excluding China and Japan

FT – Jailed Duterte foe prepares for long haul – Michael Peel 7/20

  • “Philippine Senator Leila de Lima, 57, was arrested at her senate office in February on charges that she received payoffs from jailed drug lords. She has branded the allegations ‘simply surreal’ and said they were part of a ‘personal vendetta’ by a president who is ‘rather obsessed with me’.”
  • “Ms. de Lima has certainly earned implacable enmity from Mr. Duterte for her efforts to probe his bloody drugs wars first as a provincial mayor and now as president. She maintains her innocence but also accepts her stay in jail could be a long one. The same day she marks five months in detention next week, Mr. Duterte will give an annual state of the nation speech against a background of soaring approval ratings.”
  • “I think as long as Duterte is president (5 more years), I will be locked up in jail,” Ms. de Lima says. “I have no false hopes about achieving justice very soon.”

China

NYT – In China, Herd of ‘Gray Rhinos’ Threatens Economy – Keith Bradsher and Sui-Lee Wee 7/23

  • “Let the West worry about so-called black swans, rare and unexpected events that can upset financial markets. China is more concerned about ‘gray rhinos’ — large and visible problems in the economy that are ignored until they start moving fast.”
  • “The rhinos are a herd of Chinese tycoons who have used a combination of political connections and raw ambition to create sprawling global conglomerates. Companies like Anbang Insurance Group, Fosun International, HNA Group and Dalian Wanda Group have feasted on cheap debt provided by state banks, spending lavishly to build their empires.”
  • “Such players are now so big, so complex, so indebted and so enmeshed in the economy that the Chinese government is abruptly bringing them to heel. President Xi Jinping recently warned that financial stability is crucial to national security, while the official newspaper of the Communist Party pointed to the dangers of a ‘gray rhinoceros,’ without naming specific companies.”

FT – China’s LeEco appoints new chairman from Sunac – Emily Feng 7/21

  • Sunac continues to be busy. In addition to its property acquisitions from Dalian Wanda, Sunac’s chairman – Sun Hongbin, is adding a new chairmanship to his belt, that of the struggling Chinese tech company, LeEco.

WSJ – The Saga Isn’t Over for Dalian Wanda – Jacky Wong 7/20

NYT – At the Finish, Dalian Wanda of China Rewrites a Blockbuster Sale – Sui-Lee Wee and Zhang Tiantian 7/19

  • “Dalian Wanda Group, the Chinese conglomerate, tore up a $9.3 billion agreement to sell a portfolio of hotels and theme parks, unexpectedly reaching new deals on the properties that highlighted uncertainty over the financial health of the country’s biggest companies.”
  • “Wanda had reached an overall agreement with the property firm Sunac China Holdings last week, but Wanda announced at a signing ceremony on Wednesday that it was backtracking and would instead sell just the theme parks to Sunac. The hotels will instead be sold to R&F Properties, based in the southern Chinese city of Guangzhou.”
  • “The hasty reorganization of the deals has raised concern about the due diligence conducted by many of China’s first-generation dealmakers as they seek to become bigger players domestically and around the world.”
  • “The signing was dominated by the announcement that Sunac would pay $6.5 billion for a 91% stake in Wanda’s 13 theme parks across China, while R&F Properties would buy 77 hotels from Wanda for $3 billion. In a sign of the wildly fluctuating valuations of assets, however, Wanda had said last week that it was selling Sunac only 76 hotels, but that they were worth $5 billion.”

South America

WSJ – Daily Shot: Venezuelaecon.com – Venezuelan Bolivar Black Market Exchange Rate 7/25

Turkey

NYT – Turkey Sees Foes at Work in Gold Mines, Cafes and ‘Smurf Village’ – David Segal 7/22

  • “Since then (after the failed attempt to overthrow the government of President Recep Tayyip Erdogan on July 15, 2016), more than 950 companies have been expropriated, all of them purportedly linked to Fethullah Gulen, the Muslim cleric who Turkish leaders say masterminded the putsch.”
  • “About $11 billion worth of corporate assets — from small baklava chains to large publicly traded conglomerates — have been grabbed by the government, a systematic taking with few precedents in modern economic history. Several thousand dispossessed executives have fled overseas to cities as far-flung as Nashville and Helsinki. The less fortunate were imprisoned, part of a mass incarceration campaign that has included purged members of the military, judiciary, police and news media, adding 50,000 new inmates to the prisons.”

July 17, 2017

Perspective

Bloomberg – Italy’s Poor Almost Triple in a Decade Amid Economic Slumps – Lorenzo Totaro and Giovanni Salzano 7/13

Markets / Economy

WSJ – Daily Shot: CBOT Soft Read Winter Wheat Futures 7/13

  • Things aren’t as bad as they seemed to be…

Real Estate

WSJ – Daily Shot: Real Housing Prices US v Canada 1975-2016 7/14

South America

FT – Venezuela’s crisis drains its foreign reserves – Gideon Long 7/14

  • “Venezuela’s foreign reserves have dropped below $10bn for the first time in 15 years as chronic mismanagement, corruption and subdued oil prices continue to batter what used to be the wealthiest country in South America.”
  • “The reserves stood at $9.983bn, according to figures published on Friday from the central bank, representing a 77% decrease since January 2009 when they hit a peak of $43bn.”
  • “…the fall in the reserves is likely to rekindle fears that Venezuela might default on its debt obligations this year. The state and its oil company PDVSA are due to make capital and interest repayments of $3.7bn in the fourth quarter.”
  • “Over the longer term, Venezuela also owes money to Russia, China, the Latin American development bank CAF and to companies that have taken it to court over broken promises and expropriation of assets.”
  • “Francisco Rodríguez, chief economist at Torino Capital in New York, says the Maduro government could raise about $14.5bn through a variety of other measures, however.” 
  • “It could recall loans made to small Caribbean and Central American nations during the Chávez years. Of these, its biggest debtor is Nicaragua, which owes about $2.9bn.”

July 3, 2017

Have a great Independence Day!

Perspective

WP – The U.S. fertility rate just hit a historic low. Why some demographers are freaking out – Ariana Eunjung Cha 6/30

  • “According to provisional 2016 population data released by the Centers for Disease Control and Prevention on Friday, the number of births fell 1% from a year earlier, bringing the general fertility rate to 62.0 births per 1,000 women ages 15 to 44. The trend is being driven by a decline in birthrates for teens and 20-somethings. The birthrate for women in their 30s and 40s increased — but not enough to make up for the lower numbers in their younger peers.”
  • “A country’s birthrate is among the most important measures of demographic health. The number needs to be within a certain range, called the “replacement level,” to keep a population stable so that it neither grows nor shrinks. If too low, there’s a danger that we wouldn’t be able to replace the aging workforce and have enough tax revenue to keep the economy stable.”
  • The article attributes the trend to characteristics of the millennial generation; however, I would place more of the cause at the rising cost of housing, rising cost of primary education & extracurriculars, lingering student debt, and the replacement of stable work with ‘gigs’. It’s hard to want to procreate when you don’t feel stable or supported.

Worthy Insights / Opinion Pieces / Advice

NYT – Once a Model City, Hong Kong Is in Trouble – Keith Bradsher 6/29

Energy

FT – Canada oil output threatens to derail Opec plan – Gregory Meyer 6/29

  • “As Opec glares at the surge in US shale production that is threatening to derail its attempt to balance the oil market, it may also want to cast an eye north.”
  • “Canada, home of the world’s third-largest oil reserves, might have seen producers slash capital spending during the three-year-old oil decline, but earlier investments in the country are set to keep pushing output higher for at least the next 18 months.”
  • “A forecast released this month by the Canadian Association of Petroleum Producers sees the country’s output increasing by 270,000 barrels a day in 2017 and another 320,000 b/d next year.”
  • “That combined two-year Canadian increase is equal to almost a third of Opec’s production cuts that it made with allies like Russia at the beginning of this year in an effort to raise prices.”
  • “Much of that Canadian oil is already pouring into storage tanks in the US, rattling traders who last week pushed prices to a half-year low.”

FT – US oil rig count drops for first time since January – Gregory Meyer 6/30

  • “The number of rigs drilling for oil in the US has clocked its first weekly decline since January… The tally had risen for 23 consecutive weeks beforehand.”

Agriculture 

Bloomberg – Spring Wheat Surges the Most Since 2010 – Megan Durisin Jen Skerritt and Brian K Sullivan 6/29

  • “Prices for spring wheat, the high-protein variety favored for bagels and pizza crusts, are starting to defy gravity.”
  • “Futures soared as much as 8.5% on Thursday, the most intraday since 2010, after Canada cut its planting outlook and drought conditions expand in U.S. growing states. Prices are up 31% in June, beating the gains for 80 other commodities tracked by Bloomberg.”
  • “The northern U.S. has been plagued by dryness this year, and conditions for the domestic spring-wheat crop are their worst for this time since 1988. Now, traders are eyeing a smaller crop in Canada, too. The country’s government on Thursday cut its outlook for the total wheat acreage more than analysts expected and said canola plantings will top the grain for the first time ever.”

China

Reuters – Macau casinos post 11th month of gains on VIP resurgence – Farah Master 7/1

  • “Revenues in the world’s biggest casino hub of Macau jumped nearly 30% in June, posting an 11-month winning streak, as demand from high-roller VIPs accelerated despite a corruption crackdown.”

FT – Xi warns Hong Kong not to threaten ‘red line’ of Chinese rule – Ben Bland and Jamil Anderlini 7/1

  • “Chinese President Xi Jinping has warned Hong Kongers not to cross the ‘red line’ of China’s sovereignty and called for a renewed campaign of “patriotic education” for young people in a hardline speech that comes amid growing opposition to Beijing’s rule and its creeping interventions in the semi-autonomous territory.”
  • “’Any attempt to endanger national sovereignty and security, challenge the power of the central government . . . or use Hong Kong to carry out infiltration and sabotage activities against the mainland is an act that crosses the red line, and is absolutely impermissible,’ he said on Saturday.”

June 15, 2017

Perspective

WSJ – Daily Shot: Business Insider – U.S. Pretax income growth by income category – 6/14

Economist – Around the world, beer consumption is falling – THE DATA TEAM 6/13

WSJ – Daily Shot: BMI Research – Projected Global Water Availability 6/14

Markets / Economy

Bloomberg – Wheat Soars as U.S. Spring Crop in Worst Shape in 29 Years – Megan Durisin 6/13

  • “A prolonged dry spell has left the U.S. spring wheat crop in its worst shape in almost three decades, sending prices for the grain on a tear.”

WSJ – Daily Shot: Red Spring Wheat Futures – 6/13

  • “According to the USDA, the US wheat crop is now in worse shape than at any time since 1998. Prices spike.”

Real Estate

Bloomberg  – These Cities Have Too Many Stores, and They’re Still Building – Patrick Clark and Dorothy Gambrell 6/12

China

FT – Shanghai loosens housing policy after rare protests – Yuan Yang, Xinning Liu, and Tom Hancock 6/13

  • “The Shanghai city government has made a partial policy concession after a rare housing protest at the weekend, in an effort to placate middle-class anger at measures to pour cold water on a hot property market.”
  • “Some 100 demonstrators gathered in the main shopping street of Nanjing Road on Saturday night — a sight rarely seen in China’s financial capital.”
  • “The crowd said they had bought ‘dual-use’ homes built on land sold for commercial rather than residential development, and criticized the government’s recent decision to enforce an old rule that restricts such land to commercial use.”
  • “’The government has realized its reliance on asset bubbles for growth is not sustainable,’ said Wang Xinling, lead analyst at China Policy, a Beijing think-tank.”
  • “’So it wants to change direction, but the public perceives this as hurting their wealth while the property market stagnates,’ Ms. Wang added.”
  • “Late on Monday the Shanghai government blamed property developers for ‘distorting the policy’ and ‘delaying reforms’, trying to paint the developers — rather than the government — as the target for public anger.”
  • “However, it relented by allowing buyers of ‘dual-use’ homes to move in, although it did not loosen restrictions on selling the houses, which is a big contention for the homebuyers.”
  • “China is worried about property bubbles developing after years of breakneck price rises, and has attempted to cool prices by limiting citizens’ ability to buy houses while simultaneously bringing the residential market under stricter oversight.”
  • “The regulations affect 12m square meters of property, according to Zhang Hongwei, chief analyst of Tospur, a property consultancy.”
  • “About 30 local governments across China have issued measures making it more difficult to buy houses since last autumn.”
  • “As a result, Beijing house prices fell 4% in May, according to a study by the Chinese Academy of Social Sciences. Prices in other big cities are falling or at a standstill and sales have collapsed this year.”
  • “Aspiring homebuyers have been pushed into greyer areas of the market, such as buying dual-use commercial properties.”

May 24, 2017

If you were to read only one thing…

WSJ – Why Millennials Are (Partly) to Blame for the Housing Shortage – Laura Kusisto 5/22

  • “For decades during the late-20th century, suburbs were the place to build, as urban cores suffered from high crime, poor schools and stagnant or shrinking populations.”
  • “But preferences have changed among young people, many of whom want to live closer to transit, restaurants and their workplaces. The share of young, educated people living in the urban core of Washington, D.C., for example, increased 8.6 percentage points between 2000 and 2014, according to Jed Kolko, chief economist at job-search site Indeed and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley. Portland, Ore., and Chicago each saw increases of 6.4 percentage points.”
  • “As builders have shifted focus toward trendier urban markets and away from cheaper suburbs, they have produced less housing overall than they otherwise might have. While starter-home construction has bounced back in recent months, it remains far from reversing this long-term trend.”
  • “At the same time, high land costs in central cities have pushed developers to focus on higher-end housing geared toward high earners instead of younger people just starting out.”
  • “The shift helps explain one of the most vexing aspects of the housing recovery: New homes are getting more expensive and yet there are fewer of them being built than in past cycles.”
  • “While new home sales within 5 miles of the centers of 10 of the country’s priciest and most densely populated metropolitan areas have surpassed levels from 2000, they remain more than 50% below where they were in 2000 when you go more than 10 miles out. The year 2000 is often used as a benchmark for a normal market, before the boom and bust of the mid-2000s.”
  • “The takeaway, Mr. Romem (chief economist at BuildZoom) says, is that pricey cities need to loosen land-use restrictions in core areas where there is more demand. Allowing for more high-rise condo buildings would make it economical to produce starter homes in these areas as well.”
  • “’Do you care about preserving things the way they are, so that only wealthy people can continue buying in, or do you want to [encourage more density], so that housing is more affordable for everyone?’ he asked.”

Perspective

WSJ – Brazilian Bribery Allegations Escalate Clash Between Government, Business 5/21

WSJ – Daily Shot: JBS Payments to Government Officials in Brazil 5/22

  • Seriously?

Real Estate

WSJ – Blackstone is Taking Over Mom-and-Pop Real-Estate Investing – Peter Grant 5/23

  • “Blackstone in January launched its first nontraded real-estate investment trust, a vehicle marketed to small investors as a way to participate in the commercial real-estate industry without the volatility of a traded REIT. Such vehicles have faced mounting criticism in recent years over high fees, poor disclosure and other problems.”
  • “Yet as of April, Blackstone Real Estate Income Trust Inc. had raised $755.4 million, about 41% of all the funds the entire industry raised in 2017, far more than any competitor, according to Robert A. Stanger & Co., an investment bank that specializes in nontraded REITs.”
  • “Blackstone also has become a closely watched agent for change in an industry that is trying to move away from a past that is tangled up in scandal and regulatory criticism. Like many of the new breed of nontraded REITs, Blackstone’s vehicle is structured to align the interests of investors and management better than those of the past.”
  • “The alignment between REIT managers and investors is critical today as the eight-year bull market in the commercial real-estate industry shows signs of slowing, critics say. Mistakes on reading markets could trigger losses, especially if values start to decline.”
  • “Some traditional nontraded REITs were criticized because managers wouldn’t be penalized for making bad investment decisions. That isn’t the case with the Blackstone REIT.”
  • “’If things don’t go well, Blackstone won’t make as much,’ said Phil Owens, managing director of Green Street Advisors’ consulting unit. ‘If things go really well, they make more.'”
  • “Green Street has been a critic of nontraded REITs for their high fees, weak disclosure and lack of alignment. Mr. Owens said the Blackstone structure represents ‘a big shift’.”
  • “But Mr. Owens stopped short of backing away from Green Street’s longstanding position that investors are better off buying traded REITs, which are listed on public stock exchanges, than nontraded ones. Green Street has calculated the overhead of the Blackstone REIT will be about twice as much as a ‘large, blue-chip publicly traded REIT’ if it performs as expected.”
  • “Until recently, nontraded REITs were popular because of the high dividends they paid when interest rates were near historic lows. Mostly sold by financial advisers, the vehicles raised $19.6 billion in 2013 and $15.6 billion in 2014, according to Stanger.”
  • “But the industry drew criticism for upfront fees that could run as high as 15%.”
  • “In all, the entire nontraded REIT industry has raised only $1.8 billion in 2017 as of the end of April, about the same as the first four months of 2016, the worst fundraising year since 2002, when the industry was in its early stages, according to Stanger.”
  • “Some other nontraded REIT sponsors say they aren’t worried about the new 800-pound competitor. They acknowledge the fundraising climate is tough these days. But they blame it primarily on their sales forces reacting to Finra rules and the proposed Labor Department regulations.”
  • “’It’s not Blackstone that’s impacting it,’ said Jeff Hanson, chief executive of American Healthcare Investors, which has raised more than $6 billion in equity for four nontraded REITs. Mr. Hanson predicted that Blackstone entering the business will be ‘a good thing over time’ for the industry.”

Energy

WSJ – Daily Shot: eia – OPEC Net Oil Export Revenues 5/22

FT – Oil majors seek survival in transition to low-carbon world – Andrew Ward 5/22

  • “’In our 109-year history, it is unlikely that there has ever been as much change as there is now,’ Carl-Henric Svanberg, chairman of BP, told shareholders at the UK group’s annual meeting last week, acknowledging that over the next 20 years ‘consumption of oil will slow and eventually peak’.”
  • “For all the looming risks, fossil fuels still dominate the global energy landscape. Oil, gas and coal together account for 86% of energy used for transport, heat and power worldwide. The questions for companies and investors across the sector are how fast will this change and what should they do to prepare?”
  • “Deep disruption is already being felt in the power sector. The electricity generated from renewables, excluding hydro, doubled globally between 2010 and 2015 as political efforts to tackle climate change intensified and the cost of wind and solar plummeted. Today, renewables account for an average 23% of global power output. Denmark has breezy days when all its power comes from wind and Germany hit a record 85% share from renewables one day last month.”

Finance

WSJ – Only Robots Can Tally What The Largest U.S. Pension Fund Pays In Fees – Heather Gillers and Dawn Lim 5/22

  • “If you’re using software to deal with the complexity in your portfolio maybe you should simplify your portfolio first.” – Marc Levine, Chair – Illinois State Board of Investment

Agriculture 

WSJ – Daily Shot: Wolf Street – Delinquencies of Agricultural Loans 5/22

WSJ – Daily Shot: CBOT Wheat 5/22

China

FT – MSCI to make decision on China A-share inclusion on June 20 – Pan Kwan Yuk 5/22

  • “Mark your calendars China watchers.”
  • “MSCI will on June 20 announce whether it would finally include China’s domestic A-shares in its global indices.”
  • MSCI has declined to do so on three previous occasions. Now may be the time.

FT – China’s environmental clean-up to have big impact on industry – Alan Clark 5/22

  • “…environmental sustainability is rapidly moving up the agenda for Xi Jinping, the president, as he flexes his political muscles and consolidates his leadership of China.”
  • “The country’s moves to protect the environment and avoid pollution-related social unrest represent a radical shift in Chinese policy. Just eight years ago, China viewed climate change initiatives as a western conspiracy to limit China’s rapid growth.”
  • “In the aluminum-producing, coal-consuming provinces around Beijing, Henan, Shanxi and Shandong, around 30 per cent of aluminum smelting capacity could potentially be closed between November and March every year, in an effort to reduce thick smog like that seen in the first weeks of 2017.”
  • “There is also talk of an envisaged 30% cut to alumina production in the same provinces, reducing supply of the key raw material required to produce aluminum.”
  • “While tighter regulations governing environmental protection and energy consumption were issued two years ago by the Chinese government, this year many more smelters are being threatened with the off button. The Chinese government’s new Air Pollution Prevention and Control Action Plan is aimed at offsetting the extra pollution created by the use of indoor heating during the winter heating months.”
  • “It should be acknowledged that China has been successful in cutting the use of coal, which currently provides around 70% of the country’s electricity. Coal consumption has dropped in each of the last three years and fell 4.7% last year alone.”

Other Links

Reuters – Uber inadvertently underpaid New York City drivers for over two years 5/23