WSJ – Daily Shot: Our World in Data – Sales of Cigarettes per Adult Per Day 12/13/19
WSJ – Daily Shot: Fitch – Annual Change in Global Car Sales 12/13/19
Economist – As China puts on weight, type-2 diabetes is soaring 12/12/19 Edition
Tag: Auto Industry
Walk into an auto dealership these days and you might walk out with a seven-year car loan.
That means monthly payments that last well past when the brake pads give out and potentially beyond when the car gets traded in for a new one. About a third of auto loans for new vehicles taken in the first half of 2019 had terms of longer than six years, according to credit-reporting firm Experian PLC. A decade ago, that number was less than 10%.
For many Americans, the availability of loans with longer terms has created an illusion of affordability. It has helped fuel car purchases that would have been out of reach with three-, five- or even six-year loans.
Just 18% of U.S. households had enough liquid assets to cover the cost of a new car, according to a Wall Street Journal analysis of 2016 data from the Fed’s triennial Survey of Consumer Finances, a proportion that hasn’t changed much in recent years.
Even a conservative car loan often won’t do it. The median-income U.S. household with a four-year loan, 20% down and a payment under 10% of gross income—a standard budget—could afford a car worth $18,390, excluding taxes, according to an analysis by personal-finance website Bankrate.com.
But the size of the average auto loan has grown by about a third over the past decade to $32,119 for a new car, according to Experian. To keep payments manageable, the car industry has taken to adding more months to the end of the loan.
The average loan stretches for roughly 69 months, a record. Some last much longer. In the first half of the year, 1.5% of auto loans for new vehicles had terms of 85 months or longer, according to Experian. Five years ago, these eight- and nine-year loans were practically nonexistent.
As a result, a growing share of car buyers won’t pay off the debt before they trade in their cars for new ones, either because the car is in need of repairs or because they want a newer model. A third of new-car buyers who trade in their cars roll debt from old vehicles into their new loans, according to car-shopping site Edmunds. That is up from about a quarter before the financial crisis.
Americans have been borrowing to buy their cars for decades, but auto debt has swelled since the financial crisis. U.S. consumers held a record $1.3 trillion of debt tied to their cars at the end of June, according to the Federal Reserve, up from about $740 billion a decade earlier.
So far this year, dealerships made an average of $982 per new vehicle on finance and insurance versus $381 on the actual sale, according to J.D. Power, a data and analytics company. A decade earlier, financing brought in $516 per car and the sale made dealers $837.
First because we all like graphics…
Bloomberg – Negative Yields Could Be the Death of Bond Markets – Brian Chappatta 7/29/19
Bloomberg – China Will Be the World’s Used Car Salesman – Adam Minter 7/26/19
A Chinese company in Guangzhou recently exported 300 used cars to buyers in Cambodia, Nigeria, Myanmar and Russia. The shipment was a first for China, which till now had restricted large-scale exports of used cars in deference to manufacturers, who feared that poor vehicle quality could damage their reputations. There will be more such shipments — and their impact will reverberate well beyond the mainland’s used-car lots.
With all the focus on electric and self-driving cars, it’s easy to overlook just how big and influential the market for old-fashioned junkers remains. In developed economies, more than twice as many used cars are sold as new ones. For example, there were 17.3 million new vehicles sold in the U.S. during 2018 — and 40.2 million used ones. The gap is forecast to widen in 2019, driven by the ever-escalating price of new cars and a flood of used vehicles coming off lease. Automakers may be forced to slash prices of new vehicles and eliminate incentives in order to prop up sales.
Rich countries from Japan to the U.S. have shipped at least some of their older vehicles to developing nations such as Mexico and Nigeria for decades now. The trade has done more than get polluting autos off the roads; it has helped boost new-car sales by reducing the supply of secondhand alternatives.
Compared to domestic sales, of course, the numbers are quite small: The U.S. exported just under 800,000 used cars last year, a number that’s remained relatively steady since 2013. Nevertheless, that accounted for nearly a third of the passenger vehicles and light trucks exported from the U.S. in 2018. Japanese exports often approach 1 million vehicles annually. Singapore, Korea, several European countries and Canada also export a significant number of used cars.
It makes sense that China would join them. For one thing, inventory is building. In 2018, China sold 28 million new cars and nearly 14 million used ones. Soon, the ratio will flip: China is home to more than 300 million registered vehicles — the largest fleet in the world — and it’s just a matter of time before more of them are resold. The quality of Chinese cars has also improved to the point where many developing-world consumers may well choose them as a cheaper alternative to used Toyotas or Fords.
At the same time, China’s automobile industry is in a slump and policymakers are keen to find ways to boost it. Used-car exports, the government says, can “stimulate the vitality of the domestic automobile consumption market.”
That spells competition and possibly trouble for the automotive sector globally. An increase in the supply of used cars will inevitably drive down prices, especially in the emerging markets such as Nigeria and Cambodia to which Chinese exporters will be marketing their vehicles.
While that’s good news for prospective car buyers in Lagos, over the long term it will impact new car sales and even manufacturing in developing countries, many of which are part of automakers’ global supply chains. Likewise, as fewer cars are exported, say, from the U.S., the competition between new and used vehicles domestically will only stiffen.
And cars are just the beginning. Just as China’s factories drove down the cost of new goods over the last three decades, the growing piles of used stuff purchased — and now unloaded — by Chinese consumers will exert downward pressure on the price of used and new products everywhere.
China’s secondhand car exports are starting modestly and the country will take time to catch up to more established players. But this isn’t semiconductor manufacturing; long-term, China will have more used cars to sell than anybody and its export business will inevitably grow into the world’s biggest. Global automakers might want to strap on their seatbelts.
Worthy Insights / Opinion Pieces / Advice
WSJ – Turning GE’s Sacred Cows Into Hamburger – Spencer Jakab 5/23
Real Estate
WSJ – Why Home Sales Are Weak – Justin Lahart 5/23
- “There were just 2.6 new homes sold annually for every thousand people aged 16 and over living in the U.S. last month. That compares with a peak rate of 6.1 in July 2005 and an average rate of 3.5 during the 1990s.”
- “In the years immediately following the financial crisis, when household balance sheets were still in tatters, tepid new home sales came down to a lack of buying power. More recently, the problem has been supply—there are far fewer new homes on the market than there tended to be before the crisis.”
- “Builders can’t easily step up construction. Labor availability has become a persistent concern. One reason that Toll Brothers shares fell sharply following its results Tuesday is that it said labor costs had eaten into margins. Raw materials are costlier too, with framing lumber fetching 39% more than a year ago, according to lumber industry newsletter Random Lengths. Last, but not least, 30-year mortgage rates just hit a seven-year high.”
WSJ – Daily Shot: FRED – Average Sales Price for New Homes Sold in the US 5/24
WSJ – Daily Shot: FRED – Percent of New Homes Sold in the US Between $300k-$399k 5/24
WSJ – Daily Shot: FRED – Percent of New Homes Sold in the US $750k and Over 5/24
WSJ – Daily Shot: Goldman Sachs – Commercial RE Pricing to Rent Increases 5/24
Automotive
WSJ – Daily Shot: Calculated Risk – Light Vehicle Sales Percentage of Total 5/24
Perspective
Visual Capitalist – A World of Languages – Iman Ghosh 5/5
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
Markets / Economy
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.”
If you were only to read one thing…
Bloomberg Businessweek – How Facebook Helps Shady Advertisers Pollute the Internet – Zeke Faux 3/27
- Affiliate networks (‘affiliates’) = companies/brokers that design advertisements and pay to place them on social media sites on behalf of merchants.
- “Granted anonymity, affiliates were happy to detail their tricks. They told me that Facebook had revolutionized scamming. The company built tools with its trove of user data that made it the go-to platform for big brands. Affiliates hijacked them. Facebook’s targeting algorithm is so powerful, they said, they don’t need to identify suckers themselves—Facebook does it automatically.”
- “The basic process isn’t complicated. For example: A maker of bogus diet pills wants to sell them for $100 a month and doesn’t care how it’s done. The pill vendor approaches a broker, called an affiliate network, and offers to pay a $60 commission per sign-up. The network spreads the word to affiliates, who design ads and pay to place them on Facebook and other places in hopes of earning the commissions. The affiliate takes a risk, paying to run ads without knowing if they’ll work, but if even a small percentage of the people who see them become buyers, the profits can be huge.”
- “Affiliates once had to guess what kind of person might fall for their unsophisticated cons, targeting ads by age, geography, or interests. Now Facebook does that work for them. The social network tracks who clicks on the ad and who buys the pills, then starts targeting others whom its algorithm thinks are likely to buy. Affiliates describe watching their ad campaigns lose money for a few days as Facebook gathers data through trial and error, then seeing the sales take off exponentially. ‘They go out and find the morons for me,’ I was told by an affiliate who sells deceptively priced skin-care creams with fake endorsements from Chelsea Clinton.”
- “In a sense, affiliate scammers are much like Cambridge Analytica. Because Facebook is so effective at vacuuming up people and information about them, anyone who lacks scruples and knows how to access the system can begin to wreak havoc or earn money at astonishing scale.”
- This is not a new game.
- Affiliates are “…applying tricks on Facebook that had been invented by email spammers, who’d in turn borrowed the tactics of fax spammers in the 1980s and ’90s. New forms of media have always been hijacked by misleading advertising: 19th century American newspapers were funded in part by dishonest patent medicine ads. Within days of Abraham Lincoln’s inauguration, the makers of Bellingham’s Onguent were placing ads claiming the president had used their product to grow his trendy whiskers.”
- “Fake personal endorsements and news reports are still the most effective tricks. Dr. Oz, the Shark Tank judges, and Fixer Upper co-host Joanna Gaines are among the most popular imprimaturs…”
Perspective
howmuch.net – How Much Income You Need to Afford the Average Home in Every State in 2018 – Raul 4/2
WSJ – Daily Shot: Deutsche Bank – US Households with Zero or Negative Home Wealth 4/5
WSJ – Daily Shot: Deutsche Bank – Road Quality in the US 4/5
Worthy Insights / Opinion Pieces / Advice
A Wealth of Common Sense – Situational Awareness – Ben Carlson 4/5
Bloomberg Businessweek – The Ancient History of Bitcoin – Peter Coy 3/29
- “Cryptocurrencies may seem brand-new and disruptive, but look to the past and it’s clear they can be regulated.”
Civil Beat: The Associated Press – Hawaii’s Low Unemployment Rate Masks Underlying Problems 4/4
- “In a state with a jobless rate of 2.1%, island residents have work if they want it. But their incomes often don’t pay the bills.”
NYT – Why China Is Confident It Can Beat Trump in a Trade War – Steven Lee Myers 4/5
- “In the political realm, however, Mr. Xi enjoys advantages that may allow him to cope with the economic fallout far better than Mr. Trump can. His authoritarian grip on the news media and the party means there is little room for criticism of his policies, even as Mr. Trump must contend with complaints from American companies and consumers before important midterm elections in November.”
- “The Chinese government also has much greater control over the economy, allowing it to shield the public from job cuts or factory closings by ordering banks to support industries suffering from American tariffs. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy.”
- “’The American agricultural sector is quite influential in the Congress,’ said Wang Yong, a professor of economics at Peking University, explaining why China has targeted farm products such as soybeans with possible retaliatory tariffs. ‘China wants the American domestic political system to do the work.’”
WSJ – Even After a Tumble, the Stock Market’s Price Isn’t Right – Spencer Jakab 4/4
WSJ – At Quarter End, Tesla Suddenly Got Busy – Michael Rapoport 4/4
Markets / Economy
howmuch.net – How Vulnerable is Each State to a Trade War – Raul 3/27
Real Estate
WSJ – Daily Shot: LendingTree – Home Mortgage Purchase APR by Credit Score Range 4/5
Energy
FT – Alphabet becomes biggest corporate renewable energy buyer in US – Leslie Hook 4/4
- “Alphabet bought enough renewable energy last year to match the power needs of all its data centers and global operations, making it the biggest corporate buyer of renewable power in the US.”
- “The company has secured 3GW of renewable energy, making it the largest corporate buyer of renewable power, according to Bloomberg New Energy Finance, while Amazon and Apple are in second and third place.”
- “Amazon has pledged that its cloud computing business will be 50% matched by renewables in 2017, while Apple has promised to source four gigawatts of renewable power by 2020, and has been trying to reduce the emission footprint of its supply chain.”
Finance
WSJ – Bill Ackman’s Pershing Square Faces Wave of Investor Redemptions – David Benoit 4/5
Cryptocurrency / ICOs
WSJ – Daily Shot: Barchart.com – Bitcoin 4/4
Automotive
WSJ – Car Makers Step Back From Cars – Mike Colias and Christina Rogers 4/4
- “GM to stop production of the Chevrolet Sonic, Ford plans to end U.S. sales of Fiesta and Taurus amid Detroit’s broader exodus from passenger cars.”
China
Perspective
WSJ – Retirees Reshape Where Americans Live – Janet Adamy and Paul Overberg 3/22
WSJ – Daily Shot: Ratio of Twitter Bacon-to-Kale Mentions 3/26
Worthy Insights / Opinion Pieces / Advice
Bloomberg Gadfly – For Tesla, Cars + Cash + Credit + Convertibles = Crunch Time – Liam Denning 3/23
- “Opinions differ on the exact nature of Tesla, ranging from struggling car manufacturer to tech pioneer to something akin to the second coming. Regardless, it is undoubtedly one thing: a money machine.”
- “I don’t mean that in the sense of Tesla making a lot of money; more that it is a machine for the raising and consumption of money.”
- “All companies are this to one degree or another, of course; it’s just that Tesla Inc. is more at the ‘another’ end of things. Reliably negative on free cash flow, Tesla depends on a smorgasbord of external funding, from equity raising to vehicle deposits to high-yield bonds to securitized leases to negative working capital. And that smorgasbord rests, of course, on Tesla’s famously gravity-defying stock price and faith in CEO Elon Musk.”
- “Which is why these four charts deserve more than a glance from even the most ardent Muskovite:”
- “We’re just over a week away from knowing whether or not Tesla has hit its (much reduced) target for producing 2,500 Model 3s per week by the end of the first quarter. The signs thus far aren’t good, which also raises doubts about the 5,000-a-week target for the end of June.”
- “Hitting these targets matters for the Tesla money machine on three fronts.”
- “First, reducing that risk-laden reliance on negative working capital and getting a return on the money already spent on production lines relies on producing more cars. Second, analysts currently expect Tesla to burn through $2.7 billion of cash this year — and analysts tend to be optimistic on this stuff. Third, when Moody’s rated that bond Tesla sold last August, it was assuming 300,000 Model 3 deliveries this year, which now looks far out of reach.”
- “In other words, Tesla’s money machine will almost certainly need to raise more this year due to the Model 3’s problems — but those same problems undermine the pitch for selling more equity or debt.”
- “This is happening against a backdrop of rising interest rates. Tesla’s debt has jumped in recent years, especially after it took on SolarCity Corp.’s obligations. Interest expense more than doubled in 2017 and reached the astounding level of one-third of gross profit in the final quarter of 2017:”
- “At the same time, Tesla is moving closer to a maturity wall, with $3.7 billion of bonds and credit lines needing refinancing by the end of 2020.”
- “Some $1.7 billion of that consists of three convertible bonds falling due between this coming November and the next one. Almost half of it — inherited from SolarCity — is hopelessly out of the money, with conversion prices starting at $560 (Tesla closed Thursday at $309 and change). The rest of it, a $920 million convertible due next March, sports a conversion price of just under $360; still underwater but within sight of the surface.”
- “Converting that last one to equity would dilute Tesla’s free float by 2%. But that could be more palatable than the alternative of replacing it with a straight bond.”
- “As of now, those three bonds pay a weighted-average coupon of just over 1%, or about $18 million a year. All else equal, assuming they were all refinanced at spreads similar to where Tesla’s 2025 bonds trade now, but factoring in the forecast increase in Treasury yields, that would jump to 7%, or $120 million. Putting that in context, Tesla’s entire interest expense last year was $471 million.”
- “A rebound in the stock price would take much of this pain away, of course.”
Bloomberg Gadfly – Uber’s India Doom Is Written After Singapore Falls to Grab – Andy Mukherjee 3/26
- “Third-party booking platforms have made buying a plane ticket more transparent than ever. But airlines are fighting to keep data out of their hands.”
Markets / Economy
Bloomberg Businessweek – The Great Inflation Mystery – Peter Coy 3/22
Finance
WSJ – Want to Be a High-Frequency Trader? Here’s Your Chance – Alexander Osipovich 3/23
WSJ – Daily Shot: Biggest Three Banks Gobble Up $2.4 Trillion in New Deposits Since Crisis – Rachel Louise Ensign 3/22
Health / Medicine
Automotive
FT – Carmakers take electric fight to the factory floor – Patrick McGee 3/18
- “Today, established carmakers flaunt their ability to manufacture all kinds of models, from hatchbacks to sport utility vehicles, on a single production line. Their challenge is to revamp these operations to produce electric vehicles in high volumes, reinforcing barriers to entry in an industry under siege from technology companies and start-ups.”
- “Instead of coming out with an array of unprofitable electric cars today, the incumbents are putting the bulk of resources into production facilities that will mass-produce models from 2020, once battery costs fall and economies of scale kick in. Analysts suggest this approach leaves the impression the incumbents are lagging far behind Tesla. But once the game actually starts, say experts, the carmakers will be in a strong position to dominate the market.”
- “’None of the traditional car manufacturers will have problems scaling up electric vehicle production,’ says Klaus Stricker, co-head of the global automotive practice at Bain & Company. ‘That’s exactly what they do best’.”
- “Yet if the stock market is any guide, investors are more skeptical. Valuations of the big carmakers are among the most depressed on the S&P 500, Germany’s DAX and Japan’s Nikkei indices, according to Bernstein. Yet Tesla is valued like its products are set to dominate the car market the way Apple conquered mobile phones.”
- “Tesla’s market value of $55bn is about $2.3bn more than GM’s, though for every car it built last year the latter group produced 100.”
- “Tesla’s production troubles are a reminder that in automotive history, it is how to build cars, rather than the merits of any particular model, that is key to success. After Ford displaced craft production with mass assembly in 1908, it was overtaken by GM in the 1920s with ‘flexible mass production’ that could produce an array of models, from entry-level to luxury brands, and respond to customer preferences. In the 1980s, both companies were disrupted by Honda and Toyota’s methods of lean production. The Japanese groups outsourced a majority of tasks previously considered critical. With parts arriving ‘just in time’ on the assembly line, they largely did away with inventories.”
- “The success of German manufacturers, whose volumes more than trebled from 4m units in 1990 to 15m last year, was largely based on ‘platform sharing’ that let multiple models use the same design underpinnings. VW Group, the world’s largest carmaker, uses common building blocks under ‘the Lego principle’ to share engines, transmissions and components across its 12 brands.”
- “These progressive changes were all based on superior methods of producing cars, forcing rivals to adapt or die. ‘Efficiency was always the cornerstone of success in the automotive industry,’ says Oliver Zipse, head of production at BMW. ‘As soon as you were not able to produce in a particular cost frame, you were out of the market’.”
China
Perspective
- Check the link for some very insightful interactive graphics.
- “Black boys raised in America, even in the wealthiest families and living in some of the most well-to-do neighborhoods, still earn less in adulthood than white boys with similar backgrounds, according to a sweeping new study that traced the lives of millions of children.”
- “White boys who grow up rich are likely to remain that way. Black boys raised at the top, however, are more likely to become poor than to stay wealthy in their own adult households.”
- “Most white boys raised in wealthy families will stay rich or upper middle class as adults, but black boys raised in similarly rich households will not.”
Worthy Insights / Opinion Pieces / Advice
A Wealth of Common Sense – Accidental Career Guidance – Ben Carlson 3/18
Fortune – Mapping The Best (100) Companies 3/1
- Interactive map
FT – Italian election results expose eurozone inadequacy – Martin Wolf 3/13
- “Until prosperity is better distributed, Europe will remain vulnerable to upheaval.”
WSJ – A Decade After Bear’s Collapse, the Seeds of Instability Are Germinating Again – Greg Ip 3/14
- “…Hyun Song Shin, research chief at the Bank for International Settlements, warned in a 2014 speech against the tendency to ‘focus on known past weaknesses rather than asking where the new dangers are.’ Banks may be stronger than a decade ago, but the financial system hasn’t returned to its pre-1980 repressed state.”
- “Mr. Shin pointed out that bond markets are growing at the expense of banks in supplying credit, enabling business and government debt loads in many countries to surpass their pre-crisis peaks. Emerging markets have borrowed heavily in dollars, which leaves them vulnerable should the dollar’s value rise sharply. Before the crisis, 80% of investment-grade corporate debt world-wide yielded more than 4%; as of last October, less than 5% did, according to the International Monetary Fund.“
- “Total U.S. debt, at around 250% of GDP, still stands at crisis-era peaks while debt levels in China have caught up and passed the U.S., according to the BIS. U.S. companies’ debts had reached 34% of assets by the end of 2016, the highest at least since 2000. Debt-servicing burdens haven’t risen commensurately thanks to low inflation and low rates, but they have begun climbing. More than $1 trillion a year still flows into emerging markets each year, according to the Institute of International Finance.”
- “This tells us little about when or where a crisis will happen or what may trigger it. Crises surprise because they usually start with an assumption so sensible that everyone acts on it, planting the seeds of its own undoing: in 1982 that countries like Mexico don’t default; in 1997 that Asia’s fixed exchange rates wouldn’t break; in 2007 that housing prices never declined nationwide; and in 2011 that euro members wouldn’t default. James Bianco, who runs his own financial research firm in Chicago, speculates that the equivalent today might be, ‘We will never see higher inflation or higher growth.’ If either in fact occurs, the low interest rates that have raised household stock and property wealth to an all-time high relative to disposable income won’t be sustainable.”
- “Mr. Rogoff (Kenneth Rogoff, Harvard University economist) concurs: ‘It’s much harder to get a crisis when you can borrow for virtually nothing and keep rolling it over.’ A 1.5 to 2 percentage point increase in real interest rates, which he isn’t forecasting, would be small by historical standards but could potentially make the debts of Italy or Portugal unsustainable.”
- “Central banks know this, of course, which is one reason they are wary of raising interest rates too quickly—while nervous that if they raise them too slowly, the problem will get worse.”
Markets / Economy
Energy
FT – Saudi Arabia’s existential crisis returns as US shale booms anew – Anjli Raval 3/18
- “Nearly 4m barrels a day of US crude is expected to hit export markets by the mid-2020s, up from just over 1m b/d in 2017, meaning it will ship similar levels to Iraq and Canada, according to consultancy Wood Mackenzie. The industry is debating whether the world will be able to absorb these volumes and how global crude flows will redirect.”
- “China surpassed the UK and the Netherlands to become the second-largest destination for US crude oil exports in 2017, accounting for a fifth of the 527,000 b/d total year-over-year increase in foreign sales. Chinese refiners say the trend will continue as Beijing seeks to partially address US president Donald Trump’s complaints about the trade deficit between the two countries.”
- “The International Energy Agency forecasts that the US will cover most of the world’s demand growth over the next three years. As US supply surges, the world’s need for Opec’s crude is forecast to fall below current production rates in 2019 and 2020.”
Finance
WSJ – Daily Shot: US 3-Month LIBOR 3/18
- “The US 3-month LIBOR reached 2.2% for the first time in nine years.”
Cryptocurrency / ICOs
- “The price of ether, the cryptocurrency of the Ethereum network, has fallen below $500 for the first time this year. The decline comes days after a senior official from the Securities and Exchange Commission acknowledged that the agency had ‘dozens’ of open investigations into initial coin offerings. The price of ether has fallen 19 percent in the last 24 hours, from $580 to $470.”
WSJ – Daily Shot: Bitcoin 3/18
Automotive
FT – Carmakers take electric fight to the factory floor – Patrick McGee 3/18
China
FT – Africa eats up lion’s share of Chinese lending – James Kynge 3/10
- “Africa attracted more Chinese state lending for energy infrastructure than any other region last year, highlighting Beijing’s view of the continent’s growing economic and strategic importance.”
- “A study by Boston University academics shows that nearly one-third, or $6.8bn, of the $25.6bn that China’s state-owned development banks lent last year to energy projects worldwide went to African countries. This was ahead of south Asia, with $5.84bn.”
- “The loans bring total Chinese energy finance in Africa since 2000 to $34.8bn. While this is well behind the $69bn lent in Europe and Central Asia, the $62bn in Latin America and the $60bn in Asia over the same period, the 2017 data illustrate Africa’s growing importance.”
New Zealand
FT – Fonterra’s second China foray comes under scrutiny – Jamie Smyth and Tom Hancock 3/7
- “New Zealand dairy co-operative’s farmers seek answers after Beingmate tie-up sours.”
Perspective
US Census Bureau – Stats for Stories – Academy Awards 3/4
Worthy Insights / Opinion Pieces / Advice
Bloomberg Businessweek – Anbang Out With a Whimper – Nisha Gopalan 2/22
FT – How the Middle East is sowing seeds of a second Arab spring – Andrew England and Heba Saleh 3/4
Markets / Economy
WSJ – Big Banks Enter Branch Warfare – Aaron Back 3/5
- “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.”
Real Estate
WSJ – Daily Shot: BofAML – Genworth Mortgage Insurance: US First-time homebuyers 3/6
WSJ – Daily Shot: BofAML – NAR: US Home Affordability and Mortgage Payment Components 3/6
WSJ – Daily Shot: John Burns RE Consulting – Home Price Relative Values 3/6
Finance
WSJ – Daily Shot: John Burns RE Consulting – Changes in American Debt 3/6
Environment / Science
Economist – The known unknowns of plastic pollution 3/3
Economist – Only 7% of the world’s plastic is recycled – Daily Chart 3/6
Automotive
- “As smarter vehicles become troves of personal information, get ready for coupon offers at the next stoplight.”
China
WSJ – China Spends More on Domestic Security as Xi’s Powers Grow – Josh Chin 3/6
South America
Bloomberg – Venezuelans, Go Home: Xenophobia Haunts Refugees – Ezra Fieser and Matthew Bristow 3/5
Perspective
FT – Shadow banking grows to more than $45tn assets globally – Caroline Binham 3/5
- “’Shadow banking’ grew by nearly 8% globally to more than $45tn on a conservative measure after international rule makers were able to include detailed data from China and Luxembourg for the first time.”
- “Shadow banking — the parts of the financial system that perform bank-like functions such as lending but do not have the same safeguards — accounted for 13% of total global financial assets, according to the Financial Stability Board, the international group of policymakers and regulators that makes recommendations to the G20.”
- “The report covers 2016 figures. But since then China has launched a continuing crackdown on its shadow-banking sector.”
- “China contributed $7tn, or 15.5%, of the $45tn assets comprising the FSB’s conservative definition of shadow banking, while Luxembourg contributed $3.2tn, or 7.2%.”
- “But defining shadow banking can be a slippery business. The FSB’s exercise starts with looking at the assets of anything that is not a bank, including pension funds, insurers, and ‘other financial institutions‘, or OFIs. That wider ecosystem accounts for $160tn assets worldwide, compared with $340tn total financial assets globally.”
- “Meanwhile, OFIs grew by 8% to $99tn; a faster level than banks, insurers and pension funds. OFIs now account for 30% of the entire financial system’s assets; the highest level since 2002.”
Worthy Insights / Opinion Pieces / Advice
A Wealth of Common Sense – The Winners Write the History Books – Ben Carlson 3/4
- “Coming up with explanations for past successes is easy but figuring out who the winners will be going forward never is.”
FT – Venezuela is the one to watch on oil – Nick Butler 3/4
- “This is Opec’s most unstable country and Maduro could escalate the dispute with Guyana.”
FT – Reports of oil demand’s death have been greatly exaggerated – Chris Midgley 3/2
- “The most successful people are not the most talented, just the luckiest, a new computer model of wealth creation confirms. Taking that into account can maximize return on many kinds of investment.”
Markets / Economy
WSJ – Credit-Card Losses Surge at Small Banks – AnnaMaria Andriotis 3/4
- “Concerns have been mounting in the broader credit-card industry about the recent trend of rising delinquencies. While overall card losses are still relatively low—below the historical average of the last 30 years, for instance—they’ve been slowly climbing in the last two years.”
- “But they’ve especially surged at smaller banks, those outside the 100 largest by assets that have less than around $10.4 billion in assets. There, the average charge-off rate is near an eight-year high, while the 3.5% loss rate at large banks remains well below the 10.6% seen in 2010.”
Real Estate
- “Approximately 1.4 million Americans lost the interest rate incentive to refinance their mortgages in the first six weeks of 2018, according to an analysis from real estate data provider Black Knight.”
- “The benchmark 30-year fixed-rate mortgage averaged 4.43% during the week ending March 1, according to Freddie Mac’s weekly survey. That was up three basis points from the prior week and leaves rates nearly half-a-percentage point higher than the level at which they started the year.”
Automotive
NYT – California Scraps Safety Driver Rules for Self-Driving Cars – Daisuke Wakabayashi 2/26
- “The state’s Department of Motor Vehicles said Monday that it was eliminating a requirement for autonomous vehicles to have a person in the driver’s seat to take over in the event of an emergency. The new rule goes into effect on April 2.”
China
FT – China hedge funds suffer in debt crackdown – Gabriel Wildau and Yizhen Jia 3/4
Japan
FT – Yen strengthening and trade rhetoric hit Japan exporters – Leo Lewis 3/4
- “Currency jumps after Kuroda hints BOJ may exit its massive stimulus in 2019.”
WSJ – Daily Shot: USD / JPY Inverted) 3/4
WSJ – Daily Shot: Nikkei 225 3/4
