Worthy Insights / Opinion Pieces / Advice
- Sometimes less is more.
- “The U.S. housing market peaked in late 2006. Since then, based on this index, U.S. housing prices are still down almost 13% from their peak through the end of 2016. In that same time frame, Canadian housing prices are up 56%.”
- “From the 2006 peak, it took until late 2012 for real estate in the U.S. to bottom. We’ve since witnessed a 19% recovery from what was a 27% decline nationwide, on average. While the U.S. real estate downturn lasted almost six years, Canada’s housing market experienced just a 7% drawdown that lasted less than a year. And house prices in Canada reclaimed those losses in about a year and a half. Canadian housing has also outpaced its neighbors to the south since the 2012 bottom in U.S. real estate, with a 30% gain in that time.”
- “To recap: On a real basis, Canadian housing prices experienced a much smaller, shorter decrease in prices during the financial crisis and a much larger, longer increase in prices during the recovery. When you couple this unfathomable rise in housing prices with near-record high household debt-to-income ratios, the Canadian housing bubble starts to look scary should the tide turn.”
- “The proliferation of capital focused on non-fundamental factors confuses short-term stock price responses, causing investors to question links between price and fundamentals. Flows into instruments that allocate capital through predetermined ratios without regard to current or future fundamentals distort prices in the short term, but such distortions create wonderful opportunities that fundamental investors should be able capitalize upon over a longer-term timeframe.” – Lee Ainslie, Maverick Capital
Markets / Economy
WSJ – Daily Shot: Retailer Stock Market Valuations 8/10
WSJ – Daily Shot: Comex Copper Inventory (short ton) 8/9
- “The COMEX copper inventories have risen significantly lately. It suggests that perhaps the copper market isn’t as tight as the recent rally may indicate.”
- “Jamaicans and other foreign workers have long powered the summer economy in the upscale tourist haven of Martha’s Vineyard, cleaning hotel rooms, waiting tables and mixing fudge. This year, many local businesses had to come up with a Plan B.”
- “Facing a shortage of foreign laborers, local restaurants have reduced hours of operation and pared back menus. Managers are cleaning hotel rooms, laundry is piling up and at least one restaurant is using disposable cups to ease the dishwashers’ load.”
- “The problem is a scarcity of the H-2B visas used to bring foreign seasonal workers to the U.S. It has affected many resorts and other businesses that depend on such workers, including Alaskan fisheries. Isolated locations such as Martha’s Vineyard—it has a tiny year-round population and is accessible only by ferry or plane—are especially vulnerable.”
- This prescription applies to many other places besides Britain.
- “What makes Britain’s housing squeeze maddening is that, unlike many other problems, something can easily be done about it. Britain needs to get building. The consensus is that, to keep prices in check, it must put up 300,000 houses a year, double what it erected in 2015-16.”
- “A top Chinese lawmaker has warned that profiteering by real estate developers is sapping the lifeblood from China’s economy, as authorities make efforts to contain runaway property prices.”
- “The real estate industry’s excessive prosperity has not only kidnapped local governments but also kidnapped financial institutions — restraining and even harming the development of the real economy, inflating asset bubbles and accumulating debt risk. The biggest problem currently facing the country is how to reduce reliance on real estate.” Yin Zhongqing, deputy director of the finance and economics committee of the National People’s Congress
- Apple is not the only company that must yield to China.
- “China’s central bank has ordered online payment groups to operate through a centralized clearing house, a move likely to undercut the dominance of Ant Financial and Tencent by forcing them to share valuable transaction data with competitors.”
- “China is the world leader in mobile payments, with transaction volumes rising nearly fivefold last year to Rmb59tn ($8.8tn), according to iResearch. They are now widely used for everything from high-street shopping to peer-to-peer lending.”
- “In addition to generating fees directly, online and mobile payments are a source of valuable data that can be used for such purposes as targeted advertising and credit scoring.”
- “Now the People’s Bank of China is requiring all third-party payment companies to channel payments through a new clearing house by next June, according to a document sent to payment companies on August 4 and seen by the Financial Times.”
- President Xi, the master of the long game.
- “For China’s ruling Communist party, its foreign exchange reserves are a symbol of national strength and are a crucial buffer against economic shocks. So the alarming announcement that forex reserves had fallen below $3tn in January marked a shift in political fault lines that is only being felt this summer.”
- “As more than $1tn left the country over the previous 18 months amid a flurry of large overseas acquisitions, a sense of crisis grew within the party.”
- “Technocrats in Beijing had already prepared the ground to take action. In December, they had managed to link the phrase ‘national security’ to the concept of financial risk at the annual agenda-setting economic work conference. Backed with the reserves figures, they were poised to strike against what they saw as the leading culprit — the new generation of highly acquisitive private Chinese companies.”
- “These tensions within the system have exploded into the open in the past two months with the humiliation of some of China’s best-known and most well-connected private companies, which in recent years have acquired high-profile foreign assets such as New York’s Waldorf Astoria Hotel and French leisure company Club Med.”
- “In an abrupt turn, a group of businessmen once lauded as the international face of China are now derided in state media as the instruments of systemic financial risk. The private sector has been shaken by leaked documents, smears and the detention of China’s brashest businessman.”
- “China dominates international trade in many goods, but few more than waste for recycling. It sucked in more than half the world’s exports of scrap copper and waste paper in 2016, and half of its used plastic. All in all, China spent over $18bn on imports of rubbish last year. America, meanwhile, is an eager supplier. In 2016 nearly a quarter of America’s biggest exporters by volume were recyclers of paper, plastic or metal. Topping the list was America Chung Nam, a California-based supplier of waste paper which last year exported a whopping 333,900 containers, almost all of them to China.”
- “This may soon change. On July 18th China told the World Trade Organization that by the end of the year, it will no longer accept imports of 24 categories of solid waste as part of a government campaign against yang laji or ‘foreign garbage’. The Ministry of Environmental Protection says restricting such imports will protect the environment and improve public health. But the proposed import ban will disrupt billions of dollars in trade. Recyclers worry that other categories of waste may soon receive the same treatment.”