Tag: Argentina

July 11, 2018

Perspective

Economist – Why some countries are turning off the internet on exam days 7/5

  • “With so many students cheating electronically, governments are taking drastic steps.”

Worthy Insights / Opinion Pieces / Advice

Bloomberg – The Children of the Rich Will Always Be With Us – Stephen Mihm 7/10

  • “The wealthy can stop worrying: Their heirs won’t burn through their inheritances for many generations.”

Bloomberg – Tesla Was Already Priced for Long-Term Perfection – Liam Denning 7/10

Markets / Economy

Visual Capitalist – Walmart Nation: Mapping the Largest Employers in the U.S. – Jeff Desjardins 11/17/17

Real Estate

The Big Picture – Mortgage Rates in the 21st Century – Barry Ritholtz 7/10

Finance

Bloomberg Businessweek – How a Tiny Bank From the Ozarks Got Big and Outpaced Wall Street’s Real Estate Machine – Peter Robison 7/10

  • “An Arkansas bank has become one of America’s top construction lenders. Does it know something the giants don’t?”

WSJ – How Regulators Averted a Debacle in Credit-Default Swaps – Gabriel T. Rubin and Andrew Scurria 7/8

  • “The CFTC waged an unusual campaign to get Blackstone to unwind its bet on the default of home builder Hovnanian.”

South America

Economist – Argentina’s currency crisis is far from over 7/5

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May 16, 2018

Perspective

FT – Anbang: the downfall of China’s global dealmaker – Henny Sender and Don Weinland 5/13

  • “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.”

Maps on the Web – World’s Largest Metropolitan Populations Mapped onto the U.S. 5/10

Worthy Insights / Opinion Pieces / Advice

FT – The challenges of a disembodied economy – Martin Wolf 11/28/17

  • “Policymakers must reckon with a world in which companies invest in intangible assets.”

FT – How to make sense of the volatile natural gas market – Nick Butler 5/13

  • “Rising prices in Asia seem to suggest we are at the start of a new super cycle.”

Pragmatic Capitalism – Putting the Rise in Yields in Perspective – Cullen Roche 5/15

Project Syndicate – Managing the Risks of a Rising Dollar – Mohamed A. El-Erian 5/14

  • “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.”

WSJ – Here Comes the Sports Gambling Apocalypse – Jason Gay 5/14

  • “A Supreme Court ruling has the potential to radically change sports in America. But will it?”

Energy

FT – Collapsing Venezuela oil exports seen to be pushing prices higher – Anjli Raval, Jonathan Wheatley, David Sheppard, John-Paul Rathbone, and Gideon Long 5/14

WSJ – Daily Shot: Morgan Stanley Research – Gasoline Expenditures by Income Quintile 5/15

Environment / Science

WSJ – Recycling, Once Embraced by Businesses and Environmentalists, Now Under Siege – BoB Tita 5/13

South America

WSJ – Daily Shot: USD / ARS (Argentine Peso) 5/14

WSJ – Daily Shot: Black Market Exchange Rate for USD / Venezuelan Bolivares 5/15

May 15, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – Faced with a housing crisis, California could further restrict supply 5/10

  • “Rent control sounds appealing but is counter-productive.”

Economist – The meaning of the Vision Fund – Leaders 5/12

  • “Succeed or fail, Masayoshi Son is changing the world of technology investing.”
  • “The fund is the result of a peculiar alliance forged in 2016 between Mr Son and Muhammad bin Salman. Saudi Arabia’s thrusting crown prince handed Mr Son $45bn as part of his attempt to diversify the kingdom’s economy. That great dollop of capital attracted more investors—from Abu Dhabi, Apple and others. Add in SoftBank’s own $28bn of equity, and Mr Son has a war chest of $100bn. That far exceeds the $64bn that all venture capital (VC) funds raised globally in 2016; it is four times the size of the biggest private-equity fund ever raised.”
  • “The fund has already spent $30bn, nearly as much as the $33bn raised by the entire American VC industry in 2017. And because about half of its capital is in the form of debt, it is under pressure to make interest payments. This combination of gargantuanism, grandiosity and guaranteed payouts may end up in financial disaster. Indeed, the Vision Fund could mark the giddy top of the tech boom.”

Economist – Will Argentina’s woes spread? – Leaders 5/12

  • “Argentina has much in common with yesterday’s emerging markets, but little in common with today’s.”

FT – Apple sows seeds of next market swing – Rana Foroohar 5/13

  • “Rapid growth in debt levels is historically the best predictor of a crisis. And this year the corporate bond market has been on a tear, with companies issuing a record $1.7tn last year, and over half a trillion already this year. Even mediocre companies have benefited from easy money. But as the rate environment changes, perhaps more quickly than is imagined, many could be vulnerable.” 

WSJ – In a Dollarized World, a Rising Dollar Spells Pain – Greg Ip 5/9

  • “Even as U.S. economic influence shrinks, the dollar’s clout in global trade and borrowing is growing, magnifying impact of its rise in value.”

Markets / Economy

Bloomberg – U.S. Tariffs Lead to Record Increase in Washing Machine Prices – Alexandre Tanzi 5/10

Bloomberg Businessweek – No, the U.S Economy Isn’t Overheating – Peter Coy 5/11

  • “Some indicators are flashing red, but there’s still a little slack in the system.”

WSJ – Company Costs Are Rising, but Getting Shoppers to Pay More Is Hard – Eric Morath, Heather Haddon, and Jacob Bunge 5/9

WSJ – Daily Shot: Bloomberg – Relative Hard Currency Reserves 5/14

Real Estate

WSJ – WeWork, the Workspace Giant, Wants to Be Its Own Landlord, Using Other Investors’ Money – Eliot Brown 5/13

  • “WeWork’s new investment fund aims to buy buildings where the company would become a tenant, raising conflict-of-interest questions.”

Energy

WSJ – Daily Shot: AAA Daily National Average Gasoline Prices 5/13

Finance

FT – Landmark bond sales hit by emerging markets downturn – Kate Allen 5/14

  • “Investors who bought some of the riskiest emerging market sovereign bond sales in the past year have been left nursing paper losses as a strengthening dollar has rattled sentiment for emerging markets.”
  • “JPMorgan’s emerging markets bond index has lost 5.1% since the start of this year.”

WSJ – Daily Shot: FRED – BOJ Assets YoY Change 5/13

Cryptocurrency / ICOs

howmuch.net – The Biggest Cryptocurrency Hacks and Scams – Raul 5/9

Agriculture

Bloomberg Businessweek – These Shipping Containers Have Farms Inside – Adam Popescu 5/9

Construction

WSJ – Daily Shot: CME Lumber (JuL) 5/11

  • “Lumber futures blasted past $600 per 1,000 board feet (mbf).”

Education

NYT – Education Department Unwinds Unit Investigating Fraud at For-Profits – Danielle Ivory, Erica L. Green, and Steve Eder 5/13

South America

Economist – How chavismo makes the taps run dry in Venezuela 5/10

  • “Plentiful rains plus Bolivarian socialism equals water shortages.”

WSJ – Venezuela’s Oil Meltdown Is Getting Worse – Spencer Jakab 5/13

  • “A rush of creditors trying to seize assets has disrupted Venezuela’s oil exports at a time when they already are plunging.”

Other Interesting Links

Cannabis Benchmarks – Weekly Report 5-11-18

May 10, 2018

Perspective

WSJ – Daily Shot: Charlie Bilello – Global Population Growth and Growth Rate Projections 5/9

Worthy Insights / Opinion Pieces / Advice

FT – Donald Trump declares trade war on China – Martin Wolf 5/8

  • “No sovereign power could accept the humiliating demands being made by the US.”

FT – How the Beijing elite sees the world – Martin Wolf 5/1

FT – Argentines shocked by IMF loan request – Benedict Mander and John Paul Rathbone 5/8

WSJ – Will Argentina’s Nightmare Spread? – Nathaniel Taplin 5/9

  • Strong dollar, surging oil prices, and US growth picking up steam – all bad for investors searching for yield in emerging markets.

Real Estate

Bloomberg Businessweek – Surprise, You Live in a Giant Airbnb – Olivia Zaleski 4/30

  • “Airbnb’s branded buildings promise management companies 5% to 15% of the profit hosts generate. At Domain, residents who rent through Airbnb would pay Niido 25% of their home-sharing income. In exchange, Diffenderfer says, residents will have access to the same hotel-style amenities visitors will receive.”

NYT – Developers Add a Missing Piece to Their Projects: Hotels – Joe Gose 5/8

WSJ – California Set to Require Solar on New Homes – Erin Ailworth 5/9

  • “California is poised to become the first U.S. state to require solar panels on nearly all new homes.”
  • “The California Energy Commission on Wednesday is expected to approve a requirement that residential buildings up to three stories high, including single-family homes and condos, be built with solar installations starting in 2020.”
  • “California is pursuing aggressive policies to reduce air pollution and combat climate change—including a mandate to slash greenhouse gas emissions 40% below 1990 levels by 2030—that are helping drive renewable energy in the state.”
  • “Solar accounted for nearly 10% of California’s electricity generation in 2016, Energy Commission data shows.”
  • “Currently, about 20% of new single-family homes in the state are built with solar, said Bob Raymer, senior engineer with the California Building Industry Association, which represents thousands of home builders, contractors, architects and others. Making solar mandatory on homes is expected to add $8,000 to $10,000 to construction costs, he said.”
  • “While the building-industry organization would have preferred the Energy Commission hold off a few more years on mandating that homes be fitted with solar, it helped shape the rule to reduce compliance costs and increase flexibility, Mr. Raymer said. Builders would have the option to install solar in a communal area if it doesn’t make sense on individual rooftops. By installing batteries that help homeowners save energy for later use, builders can also gain some flexibility in meeting efficiency standards.” 
  • “California has more solar power installed than any other state, with roughly 21 gigawatts of generation capacity, according to the Solar Energy Industries Association. That is far more than the second -largest solar-producing state, North Carolina, which has 4.3 gigawatts.”
  • “The commission expects the cost of adding solar, when combined with other revised efficiency standards, to add about $40 to an average monthly payment on a 30-year mortgage. However it estimates the investment would more than pay for itself, with consumers on average saving $80 a month on heating, cooling and lighting bills.”

Energy

WSJ – As Putin Starts Fourth Term, Higher Oil Prices Give Him a New Edge – Thomas Grove 5/7

May 8, 2018

If you were only to read one thing…

HuffPost – America’s Housing Crisis Is Spreading To Smaller Cities – Michael Hobbes 5/5

  • “It’s tempting to look at the housing crisis in Boise as just a miniature version of what’s already happened in the Bay Area and the Pacific Northwest and the Northeastern corridor. But in the last 10 years, the American economy has transformed in ways that are going to make it even harder for smaller cities to respond to growth.”
  • “In 2007, the city of Boise was issuing more than twice as many building permits as it is now. Despite having 125,000 more residents, Boise’s metro area built fewer homes in 2016 than it did in 2004.”
  • “The reason, says Gary Hanes, a retired HUD administrator based in Boise, is that the recession wiped out the city’s construction sector. Between 2008 and 2012, Boise home prices fell by 40%. With homebuilding stalled, thousands of construction workers took other jobs or left for North Dakota or Alaska. By 2012, once all the low-cost and foreclosed homes had been scooped up and the city needed new housing again, there was no one left to build it.”
  • “This isn’t just a Boise problem. Construction workers, even in high-paid jobs and booming cities, are in short supply. Plus, thanks to increasing international demand, prices for timber, steel and concrete are going up nationwide.”
  • “The higher costs of materials, financing and labor, combined with the years-long lag in homebuilding, have made construction unbearably expensive. Fred Cornforth, the CEO of the CDI/Idaho Development and Housing Organization, builds affordable housing in 17 states. He tells me that his last project in Boise cost around $155,000 per apartment ― cheaper than Seattle, where he also develops properties, but not by as much as you’d think.”
  • “This, Cornforth says, is the fundamental challenge of the housing crisis in Boise and everywhere else: The only way make prices fall is to overbuild. You need vacancy rates of 8% or more before rents start to come down. But the backlog is so great, and the costs of building are so high, that it’s impossible even to meet the current demand. Every year, he says, as the backlog grows, the costs go up and the challenge of meeting the need gets worse.”
  • “Ultimately, the housing crisis is not about housing. It is about the inability of American cities to grow.”
  • “’It’s hard to acknowledge change,’ says Mike Kazmierski, the president of the Economic Development Authority of Western Nevada. He’s been watching Reno, another medium-size boomtown, play out the same debates as Boise for over six years now. ‘If you say your city is going to grow, that means you need another fire station, more schools, more staff. Cities don’t have the budgets for that, and asking for it means raising taxes. The pushback is, ‘We don’t want to pay for that growth. Let them pay for it when they get here.’”
  • “This is where Boise starts to look depressingly familiar. In the last few years, as the city’s growth has become more visible, NIMBY groups have taken over the political conversation. Of the 21 speakers at a town hall meeting last month, only two said they welcomed more growth. Signs reading ‘OVERCROWDING IS NOT SUSTAINABLE’ are showing up in front yards. Some local residents, taking a page from the San Francisco playbook, are trying to get their neighborhood classified as a ‘conservation district‘ to block new buildings from going in.”
  • “Some of the complaints have merit ― it’s hard not to be sympathetic to residents asking for sidewalks on their streets or more frequent bus service ― but many are simply pleas for the growth itself to stop. A comment on the Facebook page for Vanishing Boise, one of the local anti-development groups, is emblematic of the argument: ‘Why are they coming in the first place?????’”
  • “As in other cities, this dynamic reveals a fundamental weakness in the American political system: Opposition to growth comes from homeowners and voters, entrenched interests who already have the ear of local politicians. Supporters of growth, the beneficiaries of all the new development, haven’t even moved here yet.”
  • “…most local advocacy groups are making the same argument San Francisco homeowners have made for decades: If we don’t build it, they won’t come.”

Perspective

FactsMaps – US States by Population Growth Rate 1950-2016

WSJ – Daily Shot: OECD – Levels of Income Inequality 5/7

Worthy Insights / Opinion Pieces / Advice

FT – Access to energy is an essential step in African development – Nick Butler 5/6

  • “Investment in infrastructure can unlock the continent’s potential but is far too low.”

FT – Fight the Faangs, not China – Rana Foroohar 5/6

  • “The Trump administration must break the power of big tech.”

NYT – Save Barnes & Noble! – David Leonhardt 5/6

WSJ – Xiaomi’s Valuation Isn’t Anywhere Near $100 Billion – Jacky Wong 5/3

WSJ – Tesla’s Numbers Are Even More Dramatic Than Its CEO – Charley Grant 5/5

WSJ – Why It’s Not Crazy to Buy a Mall Giant in the Age of Amazon – Stephen Wilmot 5/6

Real Estate

MarketWatch – With no letup in home prices, the California exodus surges – Andrea Riquier 5/7

  • “Over a million more people moved out of California from 2006 to 2016 than moved in, according to a new report, due mainly to the high cost of housing that hits lower-income people the hardest.”
  • “There are many reasons for the housing crunch, but the lack of new construction may be the most significant. According to the report, from 2008 to 2017, an average of 24.7 new housing permits were filed for every 100 new residents in California. That’s well below the national average of 43.1 permits per 100 people.”
  • “If this trend persists, the researchers argued, analysts forecast the state will be about 3 million homes short by 2025.”
  • “California homeowners spend an average of 21.9% of their income on housing costs, the 49th worst in the nation, while renters spend 32.8%, the 48th worst. The median rent statewide in 2016 was $1,375, which is 40.2% higher than the national average. And the median home price was — wait for it — more than double that of the national average.”
  • “One coping strategy: California residents are more likely to double up. Nearly 14% of renter households had more than one person per bedroom, the highest reading for this category in the nation.”
  • “Coping can also mean leaving.”
  • “The Next 10 and Beacon Economics researchers used Census data to track migration patterns by demographic characteristics. More than 20% of the 1.1 million people who moved in the decade they tracked did so in 2006, at the height of the housing bubble, when prices were, as they write, ‘sky-high’.”
  • “As the housing market imploded and prices came back to earth, migration out of the state slowed. But as prices recovered, ‘out-migration’ has not only picked up steam, it’s accelerated.”
  • “Those migration patterns are shaped by socioeconomics. Most people leaving the state earn less than $30,000 per year, even as those who can afford higher housing costs are still arriving. As the report noted, California was also a net importer of highly skilled professionals from the information, professional and technical services, and arts and entertainment industries. On the other hand, California saw the largest exodus of workers in accommodation, construction, manufacturing and retail trade industries.”

MarketWatch – Americans haven’t been this optimistic about house prices since just before the crash – Quentin Fottrell 5/7

  • “House prices are soaring and, despite warnings from some analysts, most Americans believe they will continue to soar.”
  • “A majority of U.S. adults (64%) continue to believe home prices in their local area will increase over the next year, a survey released Monday by polling firm Gallup concluded. That’s up nine percentage points over the past two years and is the highest percentage since before the housing market crash and Great Recession in the mid-2000s.”

Environment / Science

WP – Hawaii’s silent danger: Volcanic smog, otherwise known as ‘vog’ – Allyson Chiu 5/7

South America

WSJ – Daily Shot: Argentina Central Bank 7-Day Repo Rate 5/4

May 7, 2018

Perspective

Economist – Remittances 4/26

Visual Capitalist – A World of Languages – Iman Ghosh 5/5

WP – America is more diverse than ever – but still segregated – Aaron Williams and Armand Emamdjomeh 5/2

Worthy Insights / Opinion Pieces / Advice

A  Wealth of Common Sense – Schrodinger’s Portfolio – Ben Carlson 4/29

Bloomberg – The Return of the Brick-and-Mortar Store – Conor Sen 5/1

Economist – In China’s cities, young people with rural ties are angry 5/3

Economist – Behind the teacher strikes that have roiled five states 5/3

Economist – Where will the next crisis occur? – Buttonwood 5/3

Mauldin Economics – Us vs. Them – Ian Bremmer 4/25

Pragmatic Capitalism – Three Things I Think I Think – China, Tesla And Weird Stuff – Cullen Roche 5/4

Markets / Economy

FT – Argentina stuns markets as it pushes interest rates to 40% – Cat Rutter Pooley, Adam Samson, and Roger Blitz 5/4

NYT – A Fast-Food Problem: Where Have All the Teenagers Gone? – Rachel Abrams and Robert Gebeloff 5/3

WSJ – Apple Allays iPhone Worries, Adds $100 Billion to Buyback Plans – Tripp Mickle 5/1

  • I count $300 billion in total dividends since 2013…geez.

  • If that wasn’t enough…

Real Estate

BI – Uber and Lyft are changing where rich people buy homes – Sarah Jacobs 5/3

  • “A report released this week from MetLife Inc.’s asset-management business confirmed that the premium cost of apartments near public transit has begun to decline due to services such as Uber and Lyft.”

FT – Priced out of the American dream – Sam Fleming 5/2

Health / Medicine

Bloomberg Businessweek – Silicon Valley Wants to Cash In on Fasting – Tom Giles and Selina Wang 4/24

Automotive

FT – UK to ban most hybrid cars, including Prius, from 2040 – Peter Campbell and Jim Pickard 5/4

  • Nothing formalized at this moment, just be aware of the direction of this effort.
  • “Hybrid cars that rely on traditional engines, such as the Toyota Prius, would be banned by 2040 under clean-air plans being drawn up by the UK government that would outlaw up to 98% of the vehicles currently on the road.”
  • “Three people involved in the decision-making process said the proposed rules would limit new car sales to those that can travel at least 50 miles using only electric power.”
  • “The change would outlaw more than 98% of the vehicles currently sold in Britain and require manufacturers to switch to vehicles predominantly driven by batteries — though they might be able to have petrol engines for back-up or support.”

South America

FT – Venezuela’s oil decline reaches new depths – John Paul Rathbone 4/30

  • “In addition to hyperinflation and a $70bn bond default that has cut off the country from fresh finance, the drop in oil production to 30-year lows has slashed government revenues, making it ever harder for Mr Maduro’s regime to import basic necessities and deploy the patronage he needs to maintain military and political support.”
  • “Caracas has also alienated key allies such as Beijing. Chinese state banks, which extended over $60bn in oil-backed loans between 2007 and 2016, last year made no fresh loans. A two-year grace period on a remaining $19bn debt to China expired last week, Reuters reported, meaning that Venezuelan export revenues will fall further.”

January 26, 2018

Perspective

statista – Is Airbnb Really Cheaper Than A Hotel Room? – Niall McCarthy 1/24

Visual Capitalist: TitleMax – A Decade of Grocery Prices for 30 Common Items – Jeff Desjardins 1/24

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Dalio Says Bonds Face Biggest Bear Market in Almost 40 Years – Nishant Kumar and Erik Schatzker 1/24

CNNMoney – Here’s how much money Americans think you need to be wealthy in 10 major US cities – Kathleen Elkins 1/24

Economist – Why armed intervention is Venezuela is a bad idea – Bello 1/18

NYT – Apple Can’t Resist Playing by China’s Rules – Chen Guangcheng 1/23

  • This is in regard to providing its users’ (in China) data to Big Brother.

WSJ – GE Looks Ugly in Its Underwear – Spencer Jakab 1/24

  • “GE’s new transparency is welcome, but a focus on cash shows the company is probably no bargain even after its swoon.”

Markets / Economy

WSJ – Daily Shot: Central Bank Net Asset Purchases 1/25

WSJ – A Shortage of Trucks Is Forcing Companies to Cut Shipments or Pay Up – Jennifer Smith 1/25

Cryptocurrency

CNBC – Ratings firm issues first grades on cryptocurrencies, sparking outrage online and a cyberattack – Evelyn Cheng 1/24

WSJ – Hedge Funds Grow Wary of Cryptocurrency Mania – Gregor Stuart Hunter and Laurence Fletcher 1/24

Tech

FT – Germany threatens curbs on Facebook’s data use – Guy Chazan 1/24

  • “Antitrust investigation puts social network’s business model under scrutiny.”

Environment / Science

Economist – How China cut its air pollution 1/25

  • “The biggest polluters are state-owned, so government efforts to reduce concentrations of the smallest polluting particles have been effective.”

Health / Medicine

Economist – Obesity: not just a rich-world problem 1/24

  • YouTube video

Shipping

WSJ – A Brief History of Shipping – Costas Paris, Thomas Di Fonzo, and Liliana Llamas 1/24

  • Video

Britain

FT – ‘Sixty per cent of older buy-to-let loans will become loss making’ – James Pickford 1/24

  • “Tax relief changes will have a huge impact on landlords’ mortgages, report finds.”

China

Economist – China is getting tougher on Taiwan – Banyan 1/18

South America

WSJ – Daily Shot: Buenos Aires Stock Exchange Merval Index 1/24

  • Reforms in Argentina have been working.

June 22, 2017

Perspective

Data Is Beautiful – Adult Obesity rates in the United States – zonination 6/20

Worthy Insights / Opinion Pieces / Advice

Project Syndicate – Brexit In Reverse? – George Soros 6/19

  • “Economic reality is beginning to catch up with the false hopes of many Britons. One year ago, when a slim majority voted for the United Kingdom’s withdrawal from the European Union, they believed the promises of the popular press, and of the politicians who backed the Leave campaign, that Brexit would not reduce their living standards. Indeed, in the year since, they have managed to maintain those standards by running up household debt.”

A Teachable Moment – How Can We Fix a Broken 403(b) System? – Anthony Isola 6/21

Markets / Economy

Reuters – For thousands of U.S. auto workers, downturn is already here – Nick Carey 6/21

Real Estate

WSJ – Avocado Toast Looks a Better Bet Than Australian Housing – Jacky Wong 6/20

  • “Chinese buyers have been gobbling up houses all over the world in recent years. There could be some nasty surprises when the buying stops.”
  • “There are already signs of imminent pain for the global property market, thanks to China’s efforts to stop money pouring out of the country. Inquiries from China for foreign real estate fell 31% in the first quarter from a year ago, according to Juwai.com, a portal that connects potential Chinese buyers to property listings overseas. For some of the most popular destinations, the drop was even bigger—42% for the U.S. and 39% for Australia.”
  • “The property market Down Under looks particularly vulnerable. China accounts for four in every five foreign buyers in Australia, with their interest a prime reason why home prices have surged to unaffordable levels: Prices in Sydney, for example, are up 72% since 2012.”
  • “Some are waking up to the potential trouble ahead, with Australia’s household debt now nearing 200% of disposable income. Moody’s downgraded 12 Australian banks and their affiliates Monday, citing rising risks associated with the housing market, following a similar move by Standard & Poor’s last month. The country’s four biggest banks alone have a $1.1 trillion exposure to Australian housing loans, making up 55% of their total portfolios, according to Morgan Stanley.”
  • “Worse still, nearly 40% of home loans now are interest-only, meaning borrowers don’t need to repay the principal for a certain period, usually five years. Such loans work fine when house prices keep rising. The worry now is that prices will start falling as Chinese buying interest wanes: Meanwhile, homeowners who have only had to pay interest on mortgages could see a rise in payments as the interest-only period on their loans expires.”

Energy

WSJ – Oil Returns to Bear Market – Stephanie Yang, Alison Sider, and Timothy Puko 6/20

  • “Prices are down 20.6% since Feb. 23, marking the sixth bear market for crude in four years and the first since August. Crude prices have lost 62% since settling at $115.06 a barrel three years ago. A bear market is typically defined as a decline of 20% or more from a recent peak, while a bull market is a gain of 20% or more from a recent trough.”

Finance

FT – Argentina’s 100-year bond cannot defy EM playbook forever – Jonathan Wheatley 6/20

  • “Really? A dollar-denominated bond that pays back 100 years from now, from a junk-rated country that has barely managed to stay solvent for more than half that time in its entire history as a creditor? While there is certainly an investment case for taking part, several analysts warn that this issue is a classic sign of a market getting ahead of itself.”
  • “The point, though, is not the 100 years. The complexities of bond math mean that, once maturities go beyond 30 years, the investment case barely changes. Barring default, with a yield of nearly 8%, the bond will repay investors in full in about 12 years, all else (such as inflation) being equal — and that’s leaving aside its resale value. Many investors will have much shorter horizons.”
  • “In a world starved of yield, the 7.91% on offer proved to be quite a pull and the bond attracted orders of $9.75bn for the $2.75bn issued. ‘People are looking out over the next 12 to 24 months and see a pretty positive outlook [for Argentina],’ says David Robbins, head of emerging markets at TCW in New York. ‘Duration in high yield is something they are more comfortable with.’ Argentina, he notes, is in effect selling equity in its economic recovery.”
  • “Sérgio Trigo Paz, head of emerging market fixed income portfolio management at BlackRock, says the rationale and the pricing are all good. But, he adds: ‘When you put it into perspective, it gives you a sense of déjà vu.’”
  • “He sees two scenarios. In one, the Fed is right about inflation and rates will continue to rise. This would turn the Argentine bond into ‘a bad experience’. In the other, markets are right, US inflation and payrolls will disappoint and we will be back in a low rate environment, which will be good for the bonds — until deflation rears its head again, hurting the Argentine economy and its ability to pay.”
  • “In the meantime, he says, there is a ‘Goldilocks’ middle ground in which investors can suck up an 8% coupon. Beyond that: ‘It doesn’t look good either way — which is why you get an inflection point.'”

Japan

FT – Toshiba picks government-backed group as chip unit buyer – Kana Inagaki and Leo Lewis 6/20

  • “After a chaotic months-long search for a buyer, Toshiba has picked a consortium led by a Japanese government-backed fund as the preferred bidder for its prized memory chip business.”
  • “The group — which includes the Innovation Network Corporation of Japan fund, private equity group Bain Capital and the Development Bank of Japan — competed against rival offers topping ¥2tn ($18bn) from US chipmaker Broadcom and Apple supplier Foxconn.”
  • “’Toshiba has determined that the consortium has presented the best proposal, not only in terms of valuation, but also in respect to certainty of closing, retention of employees, and maintenance of sensitive technology within Japan,’ the company said in a statement on Wednesday.”

South America

NYT – Venezuela Opens Inquiry Into a Critic: Its Attorney General – Nicholas Casey 6/20

  • Long a Chavista, attorney general Luisa Ortega is being investigated now that she has expressed concern at how far those in power are willing to go to quiet dissent.

June 20, 2017

Worthy Insights / Opinion Pieces / Advice

FT – How I learnt to stop worrying and love Big Tech – Miles Johnson 6/18

  • “The only thing a good investor should care about is the price they can purchase these companies for compared with their own reasonable estimate of fair worth. Yes, mindless momentum chasers may panic and sell, but any long-term investor worth their salt would take this as an opportunity to buy should they believe they are getting a bargain. Active fund managers actually dumped Apple shares en masse before their recent surge.”

China

WSJ – China’s Ghost Cities Keep Up Property-Market Spirits – Nathaniel Taplin 6/19

  • “In Beijing and Shanghai, housing speculators are gasping for air as tighter credit bites. But in the inland cities that drive the bulk of China’s steel and copper demand, property owners are smiling: Data released Monday showed prices rose 7% on year in May, the fastest pace since early 2014.”
  • Essentially the credit hose has been redirected to the third tier cities. However, one has to wonder, does that mean that there was a bench of buyers waiting to move into these ghost cities that just needed the credit to do so? Or is this a function of investors now picking up vacant units (reducing unsold inventory) now that they can comfortably speculate on appreciation? Basically, is there true demand for these units all of a sudden?

South America

FT – Argentina launches century bond – Dan McCrum 6/19

  • “Argentina has launched a landmark sale of US dollar-denominated bonds maturing in 100 years, a dramatic market rehabilitation for a nation that spent more than a decade fighting investors over the fallout from its 2001 default on $100bn of debt.”
  • “Joining only a handful of sovereign borrowers to sell century bonds, Monday’s debt sale also highlights a broader enthusiasm for emerging market securities. Over the past 12 months the JPMorgan index of such dollar-denominated securities has produced a 9% total return for investors.”
  • “Adam Bothamley, head of debt syndicate for HSBC, said the deal came after inquiries from investors suggested demand existed. ‘It’s less about it being a 100-year maturity bond, it’s a way to express the strongest view around the trajectory of the story for investors’, he said.”
  • “At lunchtime in New York, indications were that the bond would have an effective yield of 7.92%, sold at 90 cents on the dollar and an annual coupon of 7.125%.”
  • “Keep in mind, Argentina has defaulted on sovereign debt on eight occasions since independence in 1816, and its 2001 default was at the time the world’s largest.”
  • “In recent years Mexico has issued 100-year debt denominated in dollars, euros and sterling, and in 2015 the Brazilian oil company Petrobras sold $2.5bn of century bonds, which on Monday traded at a yield of 7.8%.”
  • “Argentina is rated single B by credit rating agencies. The lead bookrunners on the deal were Citi and HSBC, with Nomura and Santander acting as co-managers.”

June 7, 2017

If you were to read only one thing…

WSJ – Chinese Banks Face Up to Funding Squeeze – Anjani Trivedi 6/5

  • “Household deposits—long the backbone of China’s economy, funding inexorable loan growth—are fleeing: Around 1.2 trillion yuan ($176 billion) left the banking system last month. Meanwhile, growth in corporate deposits has slowed, reducing the rise in deposits overall to a crawl.”
  • “The exodus is proving a double whammy for China’s banks. Not only are they losing a stable source of funding, they are also bearing the brunt of higher costs to raise cash as financial conditions tighten.”
  • “Much of the money pulled out of conventional deposits is being invested in the rapidly multiplying population of investment funds, which offer higher rates. Yu’e Bao, run by Alibaba-backed Ant Financial, has become one of the world’s biggest money-market funds—with $165 billion under management—offering investors a 7-day annualized rate of over 4%.”
  • “Ironically, it and other funds are achieving such returns by investing in financing tools issued by banks. When China liberalized deposit rates in 2015, banks started churning out new investment products, including so-called negotiable certificates of deposit. Issuance of these short-term products in April totaled $180 billion, up 60% from a year earlier. Their relatively high rates—up to 4% or 5%—have made them attractive to money-market funds like Yu’e Bao.”
  • “But the upshot for banks is that stable deposits on which they pay just 1.5%—the benchmark rate—are being converted into flighty funds on which they must pay up to 5%. And even this source of funding may dry up. Last month, Yu’e Bao capped the size of new investments, likely under pressure from regulators alarmed at its rapid growth.”

Perspective

FT – Beer sales slide as global alcohol consumption falls – Scheherazade Daneshkhu 6/3

  • “The global market for alcoholic drinks contracted 1.3% last year, which was steeper than the average fall of 0.3% in the previous five years, according to figures from the International Wine and Spirits Research, the London-based industry group.”
  • “Alexander Smith, editor of IWSR magazine, said the drop was surprising given an improving global economy and the usually close correlation between global growth rates and drinking alcohol.”
  • “Global gross domestic product rose 3.1% last year, according to the International Monetary Fund, which forecasts a further improvement to 3.6% this year.”
  • “Beer sales fell 1.8%, compared with a five-year average decline of 0.6%. This was mainly because of weakness in China, the world’s biggest beer market by volumes, though sales in other large beer markets, such as Brazil and Russia which have both been in recession, were down.”
  • “In the US, ‘2017 is shaping up to be the worst year for beer volumes since 2009, when total industry volumes were down 2%’, according to Trevor Stirling, analyst at Bernstein.”
  • However, “the IWSR said it expected the alcohol industry to return to growth this year, predicting a rise in consumption of 0.8% until 2021, driven by whisky.”

Worthy Insights / Opinion Pieces / Advice

The Irrelevant Investor – Satisfaction Yield – Michael Batnick 6/6

  • “The utilitarian benefit of two investments are identical when they yield an identical return, but the satisfaction yield, reflecting expressive and emotional benefits, varies by the paths of identical returns.”
  • “The fact that the return of principal under different scenarios can evoke such different emotions tells us a lot about why investor behavior is the most important factor in determining success or failure.”

Real Estate

WSJ – Daily Shot: Wells Fargo – Origin of Foreign Capital buying US Real Estate 6/5

Bloomberg – Americans Are Pouring Money Into Their Homes Like It’s the 1990s – Vince Golle 6/6

Energy

Bloomberg – ‘Gas Apocalypse’ Looms Amid Power Plant Construction Boom – Naureen Malik and Brian Eckhouse 5/23

  • “The Marcellus Shale formation has added lots of supply to a major power grid, but demand is growing slowly.”

NYT – The Biggest, Strangest ‘Batteries’ – Diane Cardwell and Andrew Roberts 6/3

Africa

NYT – Nigeria’s Afrobeats Music Scene Is Booming, but Profits Go to Pirates – Dionne Searcey 6/3

  • “Artists across the world battle illegal sales of their work. But Nigeria’s piracy problem is so ingrained that music thieves worry about rip-offs of their rip-offs, slapping warning labels on pirated CDs to insist that ‘lending is not allowed.'”

Canada

FT – Toronto house price fall signals market is cooling – Ben McLannahan 6/5

  • “According to sales data released on Monday by the Toronto Real Estate Board, the average sale price for all home types in the Greater Toronto Area was C$863,910 ($640,674) in May, a drop of 6.2% from C$920,791 in April. The number of home sales fell by 12% over the month, while listings were up 19%.”
  • “Talk of tackling rapid price appreciation appears to have ‘changed market psychology’, said Jean-François Perrault, chief economist at Scotiabank in Toronto. ‘The benefits of holding on to a property, if you’re a speculator, have probably peaked. I think we’re moving to a healthier market.’”
  • A change from one month to the next does not make a trend. Keep your eye on this.

China

Economist – A provincial shuffle shows the power of China’s president 5/27

WSJ – Here’s How a Chinese Tech Firm Borrowed $2.1 Billion in a Hurry – Ryan McMorrow 6/3

  • “LeEco, a catchall name for a variety of businesses controlled by the internet tycoon Jia Yueting, poses little threat by itself to China’s financial system. But a review of the company’s finances shows the extent of the opaque ways Chinese firms can use to raise money — and how failures could ripple through the system.”

FT – China’s new graduates hit by falling wages – Tom Hancock 6/4

India

FT – India Inc walks a banking tightrope – Simon Mundy and Amy Kazmin 6/4

  • “A wave of defaults by struggling infrastructure companies, and others that borrowed heavily during much of the past decade, has left India’s public-sector banks saddled with a huge and growing bad loan burden that represents one of the most serious long-term threats to the country’s economic growth.”
  • “Even after the 1990s liberalization that allowed the entry of new private-sector banks, the state-owned lenders still hold more than two-thirds of banking sector assets. Impaired loans now account for 17.8% of assets, and well over 20% at several banks. As these banks now reel under the weight of $186bn in stressed assets, loan growth in the country has fallen dramatically, to 5.1% in the financial year ending in March — the slowest pace for 63 years — while corporate investment fell in three out of four quarters last year.”

South America

Economist – Bello: Argentina’s new, honest inflation statistics 5/25

  • “The end of bogus accounting.”

Other Links

BBC – How air conditioning changed the world – Tim Harford 6/5