“The Wu Xiaohui who appeared in a Shanghai court in late March on fraud and embezzlement charges was a far cry from the man who rapidly turned a modest provincial car insurance business into an investment conglomerate with Rmb2tn ($316bn) in assets.”
“Tie-less and wearing a rumpled suit, the founder of Anbang ‘expressed deep self-reflection, understanding of and regret for the crimes and expressed deep remorse’, according to a post on the court’s social media account. But to no avail. On Thursday, he was sentenced to 18 years in prison.”
“At the time of his detention in February, Anbang controlled 58 companies directly or indirectly. As well as New York hotels, its holdings included rescue financings of troubled European financial institutions, control of a South Korean insurer and substantial equity stakes in about 20 major listed companies in China.”
“The charges that Wu was convicted of relate to the way the finances of the group were managed, including the shifting of billions of dollars of funds between different entities that he allegedly oversaw. His sister, who was officially head of Anbang Hong Kong, has also been detained.”
“Prosecutors accused Wu of using ‘false material’ in 2011 to get regulatory approval to sell insurance products. They also said that he had oversold Rmb724bn of insurance products and had diverted Rmb65bn to another company he controlled, which he had partly used for ‘lavish personal spending’.”
“In addition, Wu was accused of using the proceeds from insurance sales to inject capital back into Anbang in order to give the impression that the company was more financially stable than it was.”
“Analysts say Anbang was bound to attract the attention of Chinese regulators because of the nature of its business model. The group relied on issuing wealth management products for its funding. These risky investments were sold to ordinary people seeking higher returns than they could get from bank deposits. Given the nature of the investors, the Chinese authorities worried that any failure to pay out on the products could lead to social friction.”
“At the same time, the group took huge risks on how it invested the funds. Two months before Wu was detained, the company had 19% of its long-term investments in stocks, presenting a high level of risk should the market be hit by a downturn. Most insurance companies in China have less than 5% of their assets invested in the stock market. Another 19% was invested in redeemable short-term loans provided through trusts, an opaque area of shadow banking in China in which risk is almost impossible to assess with available public information.”
“Some may view the US dollar’s appreciation as consistent with a long-term rebalancing of the global economy. But, as Argentina’s recent request for IMF financing starkly demonstrates, a sharp and sudden dollar appreciation risks unbalancing things elsewhere.”
“On Wednesday, Tesla’s notes plunged to a low of 86 cents on the dollar, the clearest sign yet creditors aren’t totally sure the company will be money good.”
“Chinese prosecutors have accused the former chairman of acquisitive conglomerate Anbang Insurance Group of fraud and embezzlement, offering the first detailed explanation of why authorities toppled the once high-flying tycoon.”
“Prosecutors on Wednesday accused Mr Wu of issuing false financial statements, marketing materials and regulatory filings to gain approval to sell such products. He also exceeded fundraising limits approved by the China Insurance Regulatory Commission, prosecutors alleged.”
“A whiff of political prosecution remains because the basic business model of selling universal insurance to finance high-profile acquisitions was not limited to Anbang, although Mr Wu’s group was the most aggressive.”
“Prosecutors alleged Mr Wu oversold Rmb724bn ($115bn) in insurance products, diverting Rmb65bn to another company he controlled, which he used for overseas investments, debt repayment and ‘lavish personal spending’. Mr Wu was also accused of concealing his control of Anbang through the other company.”
“They also accused Mr Wu of using proceeds from the sale of universal insurance to inject capital back into Anbang, a form of circular financing designed to boost the company’s reported capital ratio and create the impression of financial strength.”
“Less than a month after it was seized by the Chinese government, Anbang Insurance Group, the giant conglomerate, is once again offering small investors ‘you snooze, you lose’ investment opportunities — your money back, guaranteed.”
“Sold like stocks or bonds in bank branches around China, the products carry names like Anbang Abundant Stability No. 10, suggesting the investments are conservative. They are anything but.”
“Still, Anbang and other companies keep selling them — and Chinese investors keep buying them. When China took over Anbang, it only underlined the widely held — and potentially dangerous — belief that the Chinese government will always be there to bail them out.”
“China has a problem with debt. Shadowy, underground lenders have flooded the country with a staggering $15 trillion in credit, which threatens to hobble its economy.”
“Beijing now appears to be taking a harder stance with the companies in need of a bail out. On Wednesday, Chinese authorities accused a founder of Anbang, who was the deal maker who bought the Waldorf Astoria, of bilking investors of more than $10 billion. In a country where courts tend to convict, the accusations raised the likelihood that the executive, Wu Xiaohui, could face life in prison.”
“The Chinese authorities have pressured big issuers to slow down. In November, they proposed tightening disclosure rules and stopping firms from guaranteeing payments to investors, among other steps.”
“Data suggest China is making some headway. The total outstanding balance of wealth management products issued by Chinese banks was about $4.7 trillion in 2017, up just 1.7% from a year before, according to China Wealth, a state-backed company that tracks China’s wealth management products. Two years ago, sales were growing at roughly 50%.”
“Zhu Ning, a Tsinghua University economist, said the only way the government can prevent investors from taking on more risk that they can handle is to allow for ‘some real failures’.”
“China has been reluctant to allow for failures. Fearing mass unrest, the ruling Communist Party has repeatedly instructed Chinese banks and local officials to cave in to angry investors, who have protested outside government offices after losing their investments.”
“The real test, according to Mr. Zhu, could come later this year, when wealth management products issued years earlier have to be paid back.”
“’Nonperforming loans are going to be so severe that some of the weaker banks will be forced to face their Judgment Day — whether they are going to be bailed out or whether they are going to die,’ he said.”
“Banks are entering a new period of growth, bolstered by healthy capital levels, less burdensome regulation and higher interest rates. Branch openings will remain a key competitive tactic for banks. As for Wells Fargo, with the Federal Reserve capping its growth and new sales controversies still emerging, it looks like a sitting duck to rivals.”
“China’s insurance regulatory agency Friday took control of hard-charging, acquisitive Anbang Insurance Group Co., saying the action is needed to avoid a collapse of the firm following suspected illegal activity and the downfall of its once-highflying chairman.”
“The China Insurance Regulatory Commission published a letter to Anbang management saying duties of the board and management will now be overseen by a working group of regulators from various agencies for one year. ‘All transactions of your company, asset trading, information dissemination, contract signing other than traditional insurance business are subject to the consent of the working group,’ said the statement dated Feb. 12.”
“Separately, Wu Xiaohui, who led Anbang until he was detained eight months ago, has been indicted on charges of fraudulent fundraising and abusing his position, according to a one-sentence notice by prosecutors in Shanghai on Friday. The insurance regulator’s statement refers to Mr. Wu as Anbang’s former chairman.”
“The Waldorf Astoria purchase ushered in the rise of a new breed of Chinese deal makers. The companies, which also included Dalian Wanda Group, HNA Group and Fosun International, bought up everything from hotels to banks to movie production companies. Though the companies are privately owned, their leaders often benefited from their political connections, and they were often backed by cheap debt provided by China’s state-run banks.”
“The deals made the companies truly global players. For example, in a financial disclosure last spring, shortly before the police detention of its chairman, Anbang said that nearly three-fifths of the assets of its main business, life insurance, were overseas.”
“Property was a big focus for Anbang. In 2016, it spent more than $6 billion for a group of hotels in the United States, buying it from Blackstone Group, a private equity giant. That gave it marquee properties including the Westin St. Francis hotel in San Francisco, the Loews Santa Monica hotel in California and the Fairmont Chicago hotel.”
“Anbang also offered more than $13 billion for Starwood Hotels and Resorts before abandoning its bid in 2016, without explanation. By then, the Chinese deal makers had hit a wall.”
“China was shaken three years ago by a surge of money out of the country and concerns that its economy had been layering on too much debt. Anbang and the other Chinese deal makers, which had borrowed heavily to fund their shopping sprees, soon drew attention from officials. State media labeled them ‘gray rhinoceroses‘ — big problems that are ignored until they start moving fast.”
“The Chinese government’s takeover of Anbang Insurance and criminal prosecution of founder Wu Xiaohui marks the biggest step yet in an official crackdown on risky financing by ambitious conglomerates that has prompted a severe decline in China’s overseas dealmaking.”
“But on the same day as the Anbang seizure was announced, Chinese company Fosun said it would buy a controlling stake in Lanvin, France’s oldest couturier. The move underlines the diverging fates of the four largest private conglomerates — the others are HNA and Dalian Wanda — that Beijing identified last year as borrowing too aggressively to fund offshore deals.”
“All have captured headlines over the past few years with a series of audacious foreign acquisitions. These include Anbang’s $2bn purchase of New York’s Waldorf Astoria, Dalian Wanda’s takeover of Hollywood studio Legendary Entertainment for $3.5bn, and HNA’s $40bn splurge on stakes in companies including Deutsche Bank and Hilton Worldwide.”
“Beijing stepped in last year to curb the spree, worried that companies were overpaying for foreign assets and draining China’s foreign currency reserves, while relying on risky financing methods to fund acquisitions.”
“Analysts say the government’s treatment of the groups differs depending on their sources of financing, and whether they have co-operated in the government’s campaign to slow capital outflows and cut leverage.“
“Wanda has co-operated with official directives by unloading more than $4bn in overseas assets over the past nine months and promising to “refocus” on the domestic economy. Last week it sold its 17% stake in Spanish football club Atlético Madrid.”
“HNA, meanwhile, has appeared to win back support as it regroups amid a liquidity crunch. Last week, the debt-laden company announced the HK$15.8bn ($2bn) sale of two plots of land in Hong Kong to local developer Henderson Land.”
“It was Anbang’s financing model that caused the Chinese authorities most concern. Unlike other groups that relied on bank loans or bond issuances to fund acquisitions, Anbang relied on sales of investment-like products it sold to wealthy Chinese retail investors labelled as life insurance, a part of China’s sprawling shadow-banking system.”
“Anbang’s finances were also in a more precarious state than other companies due to the mismatch between the short-term nature of its assets and the longer-term nature of its liabilities.”
“China’s Anbang Insurance went from zero to too-big-to-fail in the blink of an eye. It is a lesson in how quickly China’s financial problems grow—and how much is left to clean up.”
“A capital raising, including a possible government capital injection seems likely. The total cost of cleaning up the mess, including whatever losses sit on Anbang’s gargantuan balance sheet—put at close to 2 trillion yuan ($300 billion) in April by financial magazine Caixin—is an unknown.”
“This yearlong ‘management’ of Anbang announced by regulators could be misinterpreted as a positive for China: financial shares rose. But investors celebrating China’s apparent success at containing financial risks without damaging the broader economy shouldn’t be so sanguine.”
“Anbang fueled its international shopping spree, including a top-dollar price for the Waldorf Astoria Hotel in New York, on the back of high-yielding, often highly leveraged investment products sold to retail investors. Some of these, known as wealth-management products, or WMPs, became the target in 2017 of government efforts to clean up China’s highly leveraged financial system. That essentially cut off one the biggest sources of Anbang’s funding.”
“Anbang and WMPs are not, however, the end of China’s debt crackdown story. While WMPs and the bonds they invested in withered, companies have returned to previously popular forms of non-bank finance including trust loans, off-balance sheet company-to-company loans and bankers’ acceptances.”
“These grew 15% last year after just 4% growth in both 2015 and 2016. Overall debt and equity issuance stayed robust despite the crackdown.”
“Anbang may be wrapped up. But the cost of letting finance take such a big chunk of China’s economy is far from being resolved.”
“For three decades Tajikistan has wanted to build the world’s tallest hydroelectric dam but struggled to pay for it.”
“That changed last September when the mountainous central Asian country tapped international debt markets for the first time, was inundated with $4bn of orders and eventually sold $500m of debt at a yield of 7.125% — a landmark moment for an economy with an annual GDP of just $7bn.”
“Investors’ search for yield, brightening global economic conditions and structural reforms in many countries have resulted in benign conditions for what debt bankers refer to as ‘frontier’ economies.”
“The world’s riskiest countries are selling debt at a record rate, research published late last year found, with junk-rated borrowers comprising nearly half of all borrowing from emerging markets in 2017; one adviser called it a ‘gold rush’.”
“’The markets are so good at the moment that clients can literally ask for whatever they want,’ said an experienced deals banker. ‘People will buy anything so long as it offers them yield and diversification. They get bored of only being able to buy the same names and have also hit their limits for some of the more frequent names’.”
“’Ultimately this is people’s pensions we’re talking about,’ said one investor. ‘If you explained to the man on the street that their pension fund is being invested in Nigeria at 7%, they would be incredulous. If you threw that decision out to ordinary people, would they buy it? Probably not’.”
“Bitcoin and many of its peers have crashed in recent months from all-time highs reached in December. But that hasn’t dented the popularity of one crypto-fundraising method: so-called initial coin offerings.”
“Sales of those digital tokens have already raised about $1.66 billion this year, according to research and data firm Token Report. About 480 have launched in 2018 and only 126 of those have closed to new funds. That puts the market on pace to top last year’s total of $6.5 billion raised in coin offerings, according to the firm.”
“Whatever their motive, coin-offering investors have created some of the best-capitalized startups in incredibly short periods. The $1.5 billion raised by block.one in less than a year is equal to the amount raised by Twitter Inc. between 2007 and 2011 across nine separate funding rounds. And only four initial public offerings in 2017 and 2018 raised more than the amount block.one has attracted, according to data from Dealogic.”
“The continued success of coin offerings is even more remarkable given heightened regulatory scrutiny globally of cryptocurrencies and on the sales of digital tokens.”
“In the U.S., the SEC and Commodity Futures Trading Commission have heightened their oversight of the coin-offering market. The CFTC recently issued a customer advisory in which it advised people to avoid ‘pump-and-dump’ schemes, and offered whistleblowers a monetary reward in the case of successful enforcement actions.”
“The SEC has brought enforcement actions against several ICOs, most recently a Texas-based outfit called AriseBank, which had claimed to have raised more than $600 million in an ICO.”
“That pressure may have led to something of a bifurcation in the market for coin offerings. While large, widely publicized projects like block.one and Telegram have no problem raising money, others have had trouble meeting their fundraising goals.”
“Researchers at Ernst & Young found that less than 25% of the ICOs in November 2017 hit their goals, down from 93% in June. Token Report said the median amount raised by ICOs this year is about $12 million.”
“Beijing’s nationwide anticorruption drive, which drove luxury spending to a halt just three years ago, has faded. That coincided with a rebound in property prices, Chinese consumers’ main source of wealth. According to Deutsche Bank, the housing boom has added 86 trillion yuan ($13.5 trillion) to the total value of residential properties in the past two years. And unlike previous cycles, the gains aren’t concentrated in the biggest cities such as Shanghai and Beijing but have spread to smaller cities. People in these so-called tier-two and tier-three cities have made more money from their houses on paper last year than from their wages, according to Deutsche.”
“Economist Zoltan Pozsar has forensically analyzed the $1tn in corporate offshore savings parked in liquid assets, a fortune that he likens to China’s foreign exchange reserves, not only because of its market-moving size, but the idea that both fortunes were created by a macroeconomic ‘crime’ — mercantilism in the case of China, and tax arbitrage for the corporate hoard.”
“The largest and most intellectual-property-rich 10 per cent of companies — Apple, Microsoft, Cisco, Oracle, Alphabet — control 80 per cent of this hoard. Their earnings come mainly from IP that can be easily moved across borders. Their offshore savings went from around $100bn in 2008 to $700bn by 2016. And according to Mr Pozsar’s calculations, most of that money is held not in cash but in bonds. Indeed, half of it is in corporate bonds.”
“What does this mean? Many significant things. But let us start with the obvious, which is that bonds are not cash. If companies are to bring back those overseas earnings and invest them in growth-enhancing projects in the US, as Donald Trump keeps promising us they will, they would have to sell their bond stash.”
“This has serious implications for interest rates. Consider that the Federal Reserve is starting to deleverage its own balance sheet. Now, add in the corporate ‘echo-taper’, as the Credit Suisse report puts it, and you have got a heck of a lot of bonds on the market, which is bound to move the interest rate needle up, perhaps more quickly than is currently expected.”
“In 2004, Dimitri Christakis of Seattle Children’s Hospital wrote in the medical journal Pediatrics that ‘early exposure to television was associated with subsequent attentional problems.’ Even when controlling for socioeconomic status, gestational age and other factors, he discovered that an increase of one standard deviation in the number of hours of television watched at age 1 ‘is associated with a 28% increase in the probability of having attentional problems at age 7’.”
“Every additional hour of TV increased a child’s odds of attention problems by about 10%. Kids who watched three hours a day were 30% more likely to have attention trouble than those who watched none. A 2010 article in Pediatrics confirmed that exposure to TV and video games was associated with greater attention problems in children.”
“Unfortunately, too often the message we send low-income and less-educated parents is that screen time is going to help their children.”
“Make no mistake: The real digital divide in this country is not between children who have access to the internet and those who don’t. It’s between children whose parents know that they have to restrict screen time and those whose parents have been sold a bill of goods by schools and politicians that more screens are a key to success. It’s time to let everyone in on the secret.”
“Bob Prince, co-chief investment officer at Bridgewater, said last week’s market turbulence, which helped trigger record outflows from global stock funds, was set to continue.”
“‘There had been a lot of complacency built up in markets over a long time, so we don’t think this shakeout will be over in a matter of days,’ Mr Prince, who runs Bridgewater’s $160bn of investments alongside the fund’s founder Ray Dalio, said in an interview. ‘We’ll probably have a much bigger shakeout coming’.”
“Brian Levine, co-head of global equities trading at Goldman Sachs, on Friday sent out an email to the investment bank’s bigger clients that also warned that the market probably still has not hit its bottom.”
“’Historically shocks of this magnitude find their troughs in panicky selling,’ he said in the email, seen by the FT. ‘I’ve been amazed at how little ‘capitulation selling’ we’ve seen on the desk . . . The ‘buy on the dip’ mentality needs to be thoroughly punished before we find the bottom’.”
“The improving health of the global economy has sparked concerns that long-dormant inflationary pressures will finally emerge, forcing central banks to reduce bond-buying programs and raise interest rates more aggressively than expected.”
“While Mr Prince doubted inflation would become a real problem, he expected central banks to start draining the global economy of some of the trillions of dollars they have pumped into the financial system in recent years — further challenging the post-crisis bull market.”
“That meshes with the view of Mr Levine at Goldman Sachs, who said that ‘longer term, I do believe this is a genuine regime change, one where you sell-the-rallies rather than buy-the-dips’.”
“However, Mr Prince expects global growth will stay on track despite tighter monetary policy and more turbulent markets. ‘The real economy will outperform financial economy this year, the opposite of what we’ve seen in recent years,’ he said.”
“Blackstone Group LP, which scored big four years ago when a company it owned sold New York’s Waldorf Astoria hotel for a record-setting price to a little-known Chinese insurer, may soon get a chance to own the iconic landmark again.”
“The U.S. private equity firm has held initial discussions about bidding for Anbang Insurance Group Co. assets in a sale overseen by the Chinese government, people with knowledge of the matter said. The assets include the Waldorf as well as Strategic Hotels & Resorts Inc., which Blackstone sold to Anbang in 2016, said the people.”
“Anbang is among a crop of Chinese serial acquirers that spent tens of billions of dollars snapping up trophy assets over the past few years, only to lurch into turmoil once their strategies backfired. Blackstone was one of the biggest beneficiaries of Anbang’s largesse, selling at least a combined $9.5 billion of assets to the insurer, data compiled by Bloomberg show.”
“One corner of the investing world that’s been more resistant to these trends is ‘alternative’ investments, including private equity and hedge funds, which are sold to institutions and affluent individuals. The fees charged—traditionally 2% of assets plus 20% of any profits—can be hundreds of times higher than those of the lowest-cost mutual funds. The industry frames the fees as the price investors must pay to tap into top money managers.”
“A close look at where the money flows suggests a more complicated story. Alt funds regularly share major chunks of their fees with the bankers, brokers, and other salesmen who steer clients their way. The payments come in a number of forms and go by different names: placement fees, payment for shelf space, and retrocessions, among them.”
“Placement agents, who get paid by fund managers for lining up investors, have been such a big source of corruption that New York and Pennsylvania have banned their public pension funds from using them. The European Union in January banned many advisers from receiving inducements to sell investments to individuals.”
“’Contrary to what the clients generally believe, half the fees they’re paying are going not to investment geniuses but to marketing,’ says Edward Siedle, an attorney who represented a whistleblower in the JPMorgan settlement. ‘The marketing payments explain why hedge funds have persisted, despite ample evidence that they underperform.’ Hedge funds that invest in stocks returned 7.2% annually from 2009 to 2017, which was less than half the S&P 500’s return, according to data from Hedge Fund Research.”
“Wall Street bankers gorged on fees from HNA Group Co. as they helped the debt-laden Chinese conglomerate clinch $55 billion of acquisitions around the world. They’re set for another bonanza as the company offloads some of those same purchases to stave off a liquidity crisis.”
“HNA doled out as much as $200 million in advisory fees during a three-year investment spree, according to Freeman & Co. Now strapped for cash and facing pressure from creditors, the Chinese company is planning to sell about $16 billion of assets in the first half, people familiar with the matter said last month.”
“India’s regulator unearthed about $3.6 billion of bad loans in the books of the country’s biggest bank, amplifying questions about distress in the financial sector given underreporting by some rivals as well.”
“State Bank of India on Friday said an audit by the central bank showed soured debt was about 232 billion rupees ($3.6 billion) higher than what the state-run lender reported for the end of March 2017.”
“State Bank of India’s admission is particularly striking because the lender is often seen as a proxy for the nation’s economy, where the ratio of bad loans has surged to be among the highest in the world.”
Japan
WSJ – Daily Shot: Nikkei 225 2/9
US markets were not the only ones with a sell off last week.
It’s a light posting – I’ve been out of pocket for the last several days. Regardless, I will catch up with the content from those days and mix it in with new content.
However, since I’ve had some mixed feed back, I would like to open it up in a poll. Do you prefer daily or weekly posts?
Headlines
FT – Pollution-related deaths exceed 9m per year 10/19. “…Equivalent to one in six of all deaths across the world.” Of which, 6.5m are from air pollution, 1.8m from water pollution, and 0.8m from pollution in the workplace.
“The Yamuna River that flows through this ancient city has helped sustain some of India’s greatest empires. Hindu poets celebrated its life-giving properties. The Mughal dynasty built the Taj Mahal and other monuments along its banks.”
“Today, the Yamuna is a foul sludge for much of its 855-mile run. In Delhi, it is black and nearly motionless, covered in many areas with a foam of industrial chemicals, floating plastic and human waste.”
“Every 100 milliliters of the Yamuna in Delhi contains 22 million fecal coliform bacteria, up from 12,250 in 1988, scientists say. Anything over 500 is unsafe for bathing, India’s government says. The comparable standard in Vermont is 235.”
“Illnesses ranging from diarrhea to brain worms are reported along the river’s edges. By the time the Yamuna exits Delhi, it is so defiled that scientists have declared the next 300 miles ‘eutrophic,’ or incapable of sustaining animal life.”
“For years, global environmentalists have focused on China, whose rapid industrialization made it one of the world’s most polluted major nations. Now it’s India’s turn.”
“Unlike China, which has become wealthier and is starting to clean up, India is in the early stages of industrial growth. It is following the same road China took to get richer, meaning more factories and cars. Yet, it already has some of the world’s worst environmental problems.”
“A government report in 2015 found that 275 of 445 rivers in India are severely polluted, including the Ganges. An international nonprofit, WaterAid, says 70% of India’s surface water is contaminated. Diarrhea, often caused by drinking bad water, is the fourth-leading cause of death in India, ahead of any cancer, and kills far more people than in China, which has a larger population.”
“Greenpeace says that in 2015, the average Indian was subjected to more air pollution than the average Chinese for the first time, as China’s ‘systematic efforts’ to improve air have started working. A 2016 WHO report found that 10 out of the world’s 20 most polluted cities were in India, based on residents’ exposure to deadly small particulate matter.”
“One reason India is an environmental mess at such an early stage of its development is that it has failed to master the basic services of sewage and water treatment which some other developing nations addressed when incomes rose.”
“Of the over 16 billion gallons of sewage that India produces every day, 62% ends up on nearby water bodies untreated, according to the Central Pollution Control Board, a federal pollution monitor.”
“Many Indian cities that built wastewater treatment systems don’t fully use them because of electricity shortages or other problems. Several others haven’t built them at all.”
“Investors give private equity managers their capital with the expectation that they’ll make it grow. But today these managers are sitting on a record $963.3 billion of dry powder, as they call money that they’ve raised but have yet to invest. The size of that pile, and the fact that it keeps rising, is making everyone antsy. A little dry powder is great if managers are holding out for better deals. But a lot can make for overly itchy trigger fingers, or can start to make investors wonder if there are cheaper ways to do nothing with cash.”
“India has a way of confounding expectations. Analysts agreed that, months after Prime Minister Narendra Modi’s ill-fated decision to withdraw 86 percent of currency from circulation overnight, growth would bounce back. Economists polled by Bloomberg expected growth in the April to June quarter to be 6.5%; other estimates were even higher. So when the government’s official statisticians released the real number last week — 5.7% over the equivalent quarter of the previous year — there was general surprise, even shock.”
“India’s economy has been growing less and less healthy for awhile. GDP growth has now declined steadily for six straight quarters. This is a slowdown caused by factors deeper than the cash ban or any other temporary phenomenon. Something is broken in the Indian government’s policy mix.”
“…Government spending and low oil prices have deceptively boosted the growth numbers, masking the true state of the economy. In fact, if public spending is excluded, growth in the past quarter barely topped 4%. Export growth is terrible and industrial growth is the lowest in five years. And the government will struggle to keep investing at these levels; it started spending big unusually early in India’s financial year, which starts in April, and has already run through 93% of its budgeted fiscal deficit.”
“…Effective reform — and political will — is precisely what’s needed now. The government’s first task should be to clean up bad debts far quicker than it has so far — even if powerful people, including company owners, lose money in the process. Second: The government needs to stop chasing after foreign capital to replace shy domestic capital, if it means that the rupee stays high and exports struggle. And third: Officials must quickly fix those parts of the GST that are putting small companies and exporters out of business.”
Rather than watch their students leave University to pursue a worthwhile business start-up, Universities are getting in on the venture capital business seeking to support and nurture the talent within.
“The first governmental account of nationwide drug deaths in 2016 shows overdose deaths growing even faster than previously thought.”
“Drug overdoses killed roughly 64,000 people in the United States last year, according to the first governmental account of nationwide drug deaths to cover all of 2016. It’s a staggering rise of more than 22% over the 52,404 drug deaths recorded the previous year.”
“Drug overdoses are expected to remain the leading cause of death for Americans under 50, as synthetic opioids — primarily fentanyl and its analogues — continue to push the death count higher. Drug deaths involving fentanyl more than doubled from 2015 to 2016, accompanied by an upturn in deaths involving cocaine and methamphetamines. Together they add up to an epidemic of drug overdoses that is killing people at a faster rate than the H.I.V. epidemic at its peak.“
“It’s an epidemic hitting different parts of the country in different ways. People are accustomed to thinking of the opioid crisis as a rural white problem, with accounts of Appalachian despair and the plight of New England heroin addicts. But fentanyls are changing the equation: The death rate in Maryland last year outpaced that in both Kentucky and Maine.”
“Americans looking north to Canada see a housing market that echoes their own before the financial crisis. While there are substantial differences that make Canadian lenders more resilient, investors still should be on guard.”
“Canadian housing prices have been rapidly rising for years, prompting local governments in frothy areas to take draconian measures such as a 15% tax on foreign buyers.”
“It isn’t all foreign cash—Canadian debt levels also have soared. Last year its households had debt equivalent to 176% of disposable income, according to the OECD. That compares to 112% in the U.S., down from a 2007 peak of 144%.”
“Canada’s banks, however, are showing no signs of stress. The country’s six biggest lenders that dominate this highly concentrated market have just reported solid quarterly earnings. Mortgage delinquency rates are remarkably low, at only around 0.2%.”
“It helps that most Canadian mortgages are ‘full recourse’ loans, making it much harder for borrowers to default and walk away. Around half of the mortgages written by the big six banks are also insured, directly or indirectly, by the Canadian government.”
“Nonetheless, the risks are substantial. Unlike in the U.S., where 30-year fixed rates are the norm, the standard Canadian mortgage rate resets every five years. In July, Canada’s central bank raised rates for the first time in seven years. Analysts expect more hikes, especially after Canada reported strong 4.5% annualized gross domestic product growth for the second quarter. That will make regular debt payments even more burdensome for Canadian households.”
“A spate of new foreign joint ventures in China’s car industry has revived debate about an often criticized three-decade-old policy of trading market access for technology.”
“This week, the Renault-Nissan alliance became the latest car group to sign a joint venture to produce electric vehicles with longtime partner Dongfeng Motor Corporation, based in Wuhan, following an announcement by Ford in August that it plans to partner with little-known Zotye Auto to make EVs.”
“The Renault-Nissan Dongfeng partnership is significant because it goes further than other JVs and calls for the groups to share a common technological platform. It is not clear whether other overseas car groups will follow this course because of issues over trust on the sharing of technology.”
“The new EV joint ventures are part of a Chinese effort to master the technology for electric vehicles — and rely on a tried and tested model of working with the global car industry since the 1980s. In a nutshell, joint ventures are the only way for foreign groups to access the world’s largest and most lucrative market. China gives the overseas companies the right to sell cars in exchange for their technology, management expertise and a share of their profits.”
“’China’s central planners said ‘how can we basically force global automakers to participate and bring their very best electric vehicle technology to China?’’ says Michael Dunne, president of Dunne Automotive, a Hong Kong-based car consultancy.”
“Since 1984, starting with Jeeps, foreign carmakers have been allowed to produce cars in China — but only in concert with a local partner holding at least 50 per cent of the venture. In practice, this is almost always one of six anointed state companies.”
“The results of the three-decade-old policy have been mixed. Rather than transforming Chinese car companies into technology giants, the joint venture companies have arguably made Chinese carmakers complacent, according to Chinese policymakers. He Guangyang, a former minister of industry, controversially described the JVs as ‘like opium’ in an interview five years ago.”
“Bart Demandt of carsalesbase.com says this is a legacy of the joint ventures. ‘The state-owned companies, especially those which have 50/50 joint ventures with foreign automakers, have had little incentive to invest in their domestic brands as the profits have been pouring in from producing import-brand cars for their partners.’”
“However, the Chinese government is still relying on this model, and recently set its sights on the nascent battery powered car industry. Last year it included EVs as one of 10 sectors that it wants to be internationally competitive by 2025 as part of a new industrial policy ‘Made in China 2025’.”
“Foreign carmakers are wary of the new requirements and have pressed on China to delay the EV quotas by at least a year. But they have few alternatives. ‘The global automakers say ‘wow, this really has teeth, because if we want to grow in this market we don’t have a choice. There is no work around’,’ says Mr Dunne.”
“The second prong of the policy is to pressure foreign carmakers to ‘localize’ their electric vehicle technology, meaning in practice to share it with their joint venture partners.”
“Bill Russo, head of Gao Feng Advisory in Shanghai, calls this ‘a real game-changer for the multinational carmakers’.”
“’They must comply with a new set of regulations for both component localization and credits for EV sales in order to be in the game. As carmakers will be required to pay fines if they are not selling EVs, they will be required to add EV production in order to sustain their existing business in China.’”
“This has created fears that their proprietary technology could be stolen. Over the past two decades, foreign makers of everything from high-speed trains to fighter planes have licensed the technology to local Chinese partners only to find a few years later that their partner is a major international competitor.”
“Anbang Insurance Group, the Chinese conglomerate that captured global attention with splashy foreign acquisitions, sold stakes worth as much as $1bn in the country’s largest banks this year, as the company struggles with a sudden drop in premiums.”
“In May, China’s insurance regulator banned Anbang’s life insurance unit from selling policies for three months and accused the group of ‘wreaking havoc’ on the market with aggressive pricing.”
“Anbang had relied on sales of high-yield investment products to fund foreign private-equity acquisitions as well as stakes in Chinese listed companies. Chinese investors flocked to so-called ‘universal insurance’, which combined high yields with short maturities and bore little resemblance to traditional insurance.”
“But an industry-wide crackdown on universal insurance has caused premiums from such products to drop more than half in the first half of the year, according to data from the China Insurance Regulatory Commission. At Anbang, such premiums fell 98%, due in part to the CIRC ban.”
“The sales of shares in China’s ‘big four’ state-owned commercial banks appear to suggest that, with cash inflows from product sales drying up, Anbang sold assets to meet payouts on maturing products. Anbang said the share sales did not reflect cash flow problems.”
“Last month, a Chinese credit-rating agency downgraded Anbang’s Life Insurance, saying that ‘income has fallen substantially [and] the availability of debt financing is reduced’. The agency also noted that Anbang Life posted a net loss in the first half.”
“Anbang dropped off the lists of the top 10 shareholders in three of China’s big four state-owned commercial banks in the second quarter, according to the banks’ financial statements released this week. In the fourth bank, Anbang also reduced holdings but remained in the top 10.”
“Anbang is also not the only insurer to sell stakes in big banks in the second quarter. Ping An Insurance, the country’s largest insurer by assets, sold down in ICBC.”
“There are now more than 16 million shared bicycles on the road in China’s traffic-clogged cities, thanks to a fierce battle for market share among 70-plus companies backed by a total of more than $1 billion in financing. These start-ups have reshaped the urban landscape, putting bikes equipped with GPS and digital locks on almost every street corner in a way that Silicon Valley can only dream of.”
“But their popularity has been accompanied by a wave of misbehavior. Because the start-ups do not use fixed docking stations, riders abandon bicycles haphazardly along streets and public squares, snarling traffic and cluttering sidewalks. Thieves have taken them by the tens of thousands, for personal use or selling them for parts. Angry and mischievous vandals hang them in trees, bury them in construction sites and throw them into lakes and rivers.”
“Such problems have raised questions about the sustainability of China’s bike-share boom. But the debacle has also led many Chinese to look for deeper explanations and ask if bike-sharing has revealed essential flaws in the national character, prompting a far-reaching debate about social decay and the decline of decorum and morality in the country.”
“Some say abuse of the bicycles reflects an every-man-for-himself mentality in China that has its roots in the extreme poverty of the last century. Others are bothered by what they see as a lack of concern for strangers and public resources. The transgressions have been chronicled in the local news media with a tone of disbelief, in part because Chinese generally see themselves as a law-abiding society and crime rates are relatively low.”
“In many cities, the supply of bicycles far exceeds demand, bringing chaos to sidewalks, bus stops and intersections and prompting grumbles that excessive competitiveness — seen as a national trait — is spoiling a good thing. In Shanghai, where officials have struggled to maintain order, there is now one shared bike for every 16 people, according to government statistics.“
“In some places, the authorities have confiscated tens of thousands of bicycles and imposed parking restrictions. News outlets have documented the waste with astounding images of mountains of candy-colored bicycles, each hue representing a different bike-share company.”
“Once the emerging-market darling of Wall Street, Brazil’s economy went from growth of 7.5% in 2010 to shrink by virtually the same amount in the last two years. Unemployment has risen to a near-record high, GDP per capita fell to 2009 levels and the budget deficit is hovering around 10% of GDP. There is no sign the Latin American giant will recover its investment-grade status any time soon.”
“Brazil’s gross domestic product expanded for the second consecutive quarter in the three months ended June, officially ending the worst recession in Latin America’s largest economy.”
“GDP grew just 0.2% in the quarter compared to the first three months of the year and 0.3% compared with the same quarter a year earlier, the state statistics agency, IBGE, said.”
“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
“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.”
“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.”
“Apple has removed from its Chinese app store applications that enable users to bypass China’s ‘Great Firewall’, in a move that developers have condemned as ‘censorship’.”
“The Silicon Valley company has withdrawn virtual private network (VPN) apps from the store, as it pulls all software that do not comply with local law, even if the makers are based outside the country.”
“VPNs allow users to access content banned by Chinese censors to control access to information online. This has, in effect, created a ‘Chinese internet’, without many western social media or search engine sites.”
“In a hastily organized plebiscite on July 16, held under the auspices of the opposition-controlled National Assembly to reject President Nicolás Maduro’s call for a National Constituent Assembly, more than 720,000 Venezuelans voted abroad. In the 2013 presidential election, only 62,311 did. Four days before the referendum, 2,117 aspirants took Chile’s medical licensing exam, of which almost 800 were Venezuelans. And on July 22, when the border with Colombia was reopened, 35,000 Venezuelans crossed the narrow bridge between the two countries to buy food and medicines.”
“Venezuelans clearly want out – and it’s not hard to see why.”
“But is this just another bad run-of-the-mill recession or something more serious?”
“The most frequently used indicator to compare recessions is GDP. According to the International Monetary Fund, Venezuela’s GDP in 2017 is 35% below 2013 levels, or 40% in per capita terms. That is a significantly sharper contraction than during the 1929-1933 Great Depression in the United States, when US GDP is estimated to have fallen 28%. It is slightly bigger than the decline in Russia (1990-1994), Cuba (1989-1993), and Albania (1989-1993), but smaller than that experienced by other former Soviet States at the time of transition, such as Georgia, Tajikistan, Azerbaijan, Armenia, and Ukraine, or war-torn countries such as Liberia (1993), Libya (2011), Rwanda (1994), Iran (1981), and, most recently, South Sudan.”
“Put another way, Venezuela’s economic catastrophe dwarfs any in the history of the US, Western Europe, or the rest of Latin America. And yet these numbers grossly understate the magnitude of the collapse…”
“Inevitably, living standards have collapsed as well. The minimum wage – which in Venezuela is also the income of the median worker, owing to the large share of minimum-wage earners – declined by 75% (in constant prices) from May 2012 to May 2017. Measured in dollars at the black-market exchange rate, it declined by 88%, from $295 per month to just $36.”
“Measured in the cheapest available calorie, the minimum wage declined from 52,854 calories per day to just 7,005 during the same period, a decline of 86.7% and insufficient to feed a family of five, assuming that all the income is spent to buy the cheapest calorie. With their minimum wage, Venezuelans could buy less than a fifth of the food that traditionally poorer Colombians could buy with theirs.”
“A massive build-out by retailers has left the country piled up with grocery shelves as consumers are shifting from big weekly shopping trips to more snacking and to-go meals. The mismatch has flattened retail sales and leaves the industry vulnerable to a wave of closures that some executives, bankers and industry experts think is coming soon.”
“Commercial square footage of retail food space per capita last year set a record, with 4.15 square feet of food retail per person, according to CoStar Group, a commercial real-estate firm, nearly 30 times the amount of space allocated to groceries at major chains in 1950.”
“To be sure, major grocery chains weren’t as numerous decades ago, with many Americans shopping for food at mom and pop stores.”
“But the growth in groceries have extended across many types of retailers in recent years. Part of the expansion comes from grocers, who accelerated their store openings as a way to drive sales growth after the 2008 recession. At the same time, club chains, dollar stores, pharmacies—and even gas stations—increased their fresh food offerings to drive traffic and boost profits.”
Additionally, this article doesn’t mention the increasing foot prints of these grocers. Many are resembling department stores, but with an emphasis on food.
“A wave of retail bankruptcies washing through court has revived an old debate about the role of private-equity firms in accelerating the problems of companies in distress.”
“Payless ShoeSource Inc., Gymboree Corp., rue21 Inc. and True Religion Apparel Inc. were all acquired by private-equity firms during the past decade. Now, lawyers for creditors have questioned whether private-equity firms share blame for the retailers’ financial collapse, in some cases by loading debt on the companies.”
“In the case of Payless, investors Golden Gate Capital and Blum Capital, after a leveraged buyout in 2012, over the next two years paid themselves $350 million in dividends—in total putting more than $700 million in debt on the company. In 2016, Payless said in court papers, it had about $2.3 billion in global net sales, and nearly $840 million in debt.”
“Vendors and landlords alleged in court papers that the dividend payouts, along with other payments to the investors, left the retailer particularly vulnerable to collapse just as technology and shifting consumer behavior upended the retail industry.”
“In general, private-equity executives say they often help companies improve operations and grow and that, sometimes, economic forces are beyond what any company could weather.”
“Moreover, retail woes are much bigger than private equity and extend to many companies that aren’t owned by such investors. Some private-equity investments haven’t had the problems others are experiencing.”
“Bankruptcy cases are messy by nature, and creditors—typically facing losses—are often determined to minimize them. In Payless’s case, which moved closer to exiting bankruptcy protection this month, lenders owed a majority of its debts will take control of the company.”
“Chinese authorities have asked Anbang Insurance Group Co., the insurer whose chairman was detained in June, to sell its overseas assets, according to people familiar with the matter.”
“The government has also asked Anbang to bring the proceeds back to China after disposing of holdings abroad, said the people, who asked not to be identified because details are private. It is not clear yet how Anbang will respond, the people said.”
“Anbang was among the most prominent of Chinese insurers that went on a buying binge across the globe, fueled by soaring sales of investment-type insurance policies, with its 2014 acquisition of New York’s Waldorf Astoria hotel catapulting it into the public eye. Chairman Wu Xiaohui has been detained for questioning since mid-June, while the policies fueling its growth have been all but banned by regulators.”
“Anbang’s rise in recent years was fueled by sales of lucrative investment products that offered among the highest yields compared with peers. China’s insurance regulator this year started clamping down on what it termed ‘improper innovation’ and tightened rules on high-yield, short-term investment policies. Anbang and other aggressive insurers such as Foresea Life got caught up in the crackdown.”
“One Anbang product, called Anbang Longevity Sure Win No. 1, boosted the firm’s life insurance premiums almost 40-fold in 2014 by offering yields as high as 5.8%. That helped provide fuel for the firm’s more than $10 billion of overseas acquisitions since 2014 and equally ambitious investing in the domestic stock market.”
“China’s pending regulatory crackdown on the $120bn peer-to-peer lending industry has claimed its first scalp before it has even begun, with one of the biggest players saying it will wind up its business in an industry full of bad loans and no profits.”
“Beijing this month said it would delay regulations that will bar online lenders from guaranteeing principal or interest on loans they facilitate, cap the size of loans at Rmb1m for individuals and Rmb5m for companies, and force lenders to use custodian banks — a requirement only a fraction of the industry has met so far.”
“Imposition of the new rules has been delayed from next month until June next year to give companies more time to comply.”
“But Hongling Capital has already thrown in the towel, with founder and chairman Zhou Shiping last week admitting that ‘P2P lending is not what we are good at, neither is it something we see potential in. This [P2P lending] business of ours would always be cleared out eventually — it’s only a matter of time.'”
“Hongling, which has Rmb17.6bn ($2.6bn) in loans, plans to wind down its eight-year online lending business by the end of 2020.”
“According to Online Lending House, a website that tracks the industry, the number of P2P lenders peaked at 2,600 in 2015, while 3,795 platforms have collapsed since 2011.”
“Outstanding loans from China P2P lending platforms totaled Rmb816.2bn ($121bn) at the end of December, double the figure of a year earlier, according to P2P consultant WDZJ.com.”
“Investors have long questioned when China’s banking system, with its heaps of bad loans and hidden leverage, would resort to raising much-needed equity. From the look of it, the weakest lenders are starting to do so.”
The method, convertibles. To start, “Ping An Bank, a midsize lender notorious both for selling piles of high-yielding investment products and for sitting on masses of overdue loans, said last week that it plans to issue 26 billion yuan ($3.9 billion) of convertible bonds—uncommon in China—that can be switched into its Shenzhen-listed shares. While convertibles don’t count as equity straight away, they could help improve Ping An’s equity levels when they are turned into stock.”
“Venezuelans on Sunday largely snubbed Nicolás Maduro’s election for a new all-powerful political assembly, in a vote marred by violence that killed at least 10 people and left seven police officers injured by a bomb attack.”
“Opposition leaders rejected the electoral commission’s turnout figure of 8.1m — 41.5% of the electoral register — saying only about 2m had actually voted. Analysts estimated the turnout at 3m-4m.”
“The president’s critics say the new assembly, which will be convened within 72 hours, will snuff out the last vestiges of democracy in Venezuela after nearly two decades of populist leftwing rule, turning the country into a new Cuba. It will have the power to dissolve the democratically elected Congress, where the president’s opponents have a majority, rewrite the constitution, scrap future elections and draft new laws.”
“In the run-up to the vote, all reliable polls had suggested that between two-thirds and three-quarters of Venezuelans opposed Mr. Maduro’s assembly. One poll said only about 12% of the electorate would vote for it.”
