Tag: Auto Industry

February 15, 2018

Perspective

WEF – Norway’s Central Bank has recommended oil and gas holdings are removed from its sovereign wealth fund – Thomas Colson 11/20/17

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Ten Years After the Crisis, Banks Win Big in Trump’s Washington – Robert Schmidt and Jesse Hamilton 2/9

Economist – As California’s fires died down, fraudsters arrived 2/8

  • “David Passey, a spokesperson for FEMA, says that more than 200,000 applications for relief related to the hurricanes and northern California wildfires are suspected to be fraudulent.”

Economist – China is in a muddle over population policy 2/8

Economist – The merits of revisiting Michael Young – Bagehot 2/8

  • “A book published 60 years ago predicted most of the tensions tearing contemporary Britain apart.”

Markets / Economy

Bloomberg – Teslas Are Finally Replacing Porsches on the Autobahn – Elisabeth Behrmann 2/12

WSJ – Daily Shot: NY Fed – US Consumer Debt Balance 2/14

WSJ – Daily Shot: NY Fed – US Consumer Delinquent Debt Percentage 2/14

WSJ – Brace Yourself for Higher Cellphone Bills This Year – Drew FitzGerald 2/8

Real Estate

Economist – How a brothel owner created the world’s biggest industrial park 2/10

  • “Google, eBay, Tesla and dozens of other tech firms have bought nearly all of the Tahoe Reno Industrial Center’s vast tract of land.”

Energy

Bloomberg Gadfly – OPEC’s Oil Price Nightmare Is Coming True – Julian Lee 2/11

Tech

NYT – The Autonomous Selfie Drone Is Here. Is Society Ready for it? – Farhad Manjoo 2/13

  • “Autonomous drones have long been hyped, but until recently they’ve been little more than that. The technology in Skydio’s machine suggests a new turn. Drones that fly themselves — whether following people for outdoor self-photography, which is Skydio’s intended use, or for longer-range applications like delivery, monitoring and surveillance — are coming faster than you think.”

Environment / Science

Economist – Antidepressants are finding their way into fish brains 2/8

China

Bloomberg Businessweek – China Takes a Hard Look at Corporate Borrowers – Enda Curran 2/6

  • “China’s total debt equaled 162% of gross domestic product in 2008. By 2016 it had climbed to 259%, an increase of more than $22 trillion, in large part because of massive corporate borrowing. And even with the current push to deleverage, it could reach 327% by 2022, according to Bloomberg Economics.”

  • “China’s banking regulator last summer ordered lenders to examine their exposure to private conglomerates, which was a way to slow borrowing by corporations without raising benchmark interest rates. In China, the amount of lending, rather than official interest rates, is the best indicator of how tight or loose government monetary policy is. And the picture is pretty clear: Broad-based money supply growth slowed to 8.2% in December, the weakest since data became available in 1998. ‘They are tightening,’ says Chetan Ahya, chief Asia economist at Morgan Stanley. ‘China has always relied more on actually controlling the flow of credit through direct measures’.”

Bloomberg – China’s War on Risk Has Banks Fleeing Shadowy Wealth Products – Jun Luo 2/7

  • “Chinese regulators appear to be winning their war against risk in one of the more dangerous corners of the country’s shadow banking industry — the so-called wealth management products that banks buy from each other in a search for easy profits.”
  • “Interbank holdings of WMPs more than halved last year, to 3.25 trillion yuan ($514 billion) in December from 6.65 trillion yuan a year earlier, according to the annual report of China Central Depository & Clearing Co., an industry body. That suggests higher interest rates and increased scrutiny by regulators are deterring Chinese banks from their previous practice of using cheap interbank borrowing to invest in each others’ higher-yielding WMPs.”
  • “The interbank WMP market will continue to contract this year, as China keeps interest rates high as part of its campaign against financial-sector risk, according to analysts from Shenwan Hongyuan Group Co. and Macquarie Group Ltd. Higher rates make it less profitable to use interbank borrowings to invest in WMPs. And many were deterred after the China Banking Regulatory Commission (CBRC) ordered banks to ‘self-review’ their interbank and shadow banking exposures in April, widely seen as a move to rein in the lenders.”
  • “The CBRC and other regulators are working closely in an unprecedented campaign to curb the $16 trillion shadow banking industry, of which WMPs issued by banks are the largest component. Another risky area that is contracting rapidly is some $3.8 trillion of so-called trust products, which have been a popular way for debt-ridden property developers and local governments to raise funds. That market has been hit by delayed payments as wealthy Chinese savers turn sour on the products.”
  • “Despite the retreat in the interbank sector, the wider WMP market continued to grow last year, albeit at a slower pace, according to the industry body. Strong appetite among individual investors helped the outstanding balance of WMPs rise 1.7% to 29.5 trillion yuan in December from a year earlier. Still, the escalating clampdown on all types of asset management products slowed the growth rate markedly from an average compound rate of about 50% between 2013 and 2015.”

Economist – Creditors call time on China’s HNA 2/8

  • “Analysts had foreseen an unravelling for some time, before even the regulatory wrist-slapping. A Chinese business expert calls HNA’s empire-building ‘a classic case of overextending’. For five years it has only been able to service its debts by taking on new ones. Returns on its investments have not exceeded 2% in almost a decade, according to calculations by Bloomberg, a data provider. As a result, HNA’s ratio of debt to earnings before interest, depreciation and amortization is around a lofty ten, estimates Standard & Poor’s, a ratings agency. Bond investors have grown nervous, and the firm’s financing costs have soared.”

South America

WSJ – Daily Shot: Venezuela Official Exchange Rate VEF/USD 2/13

  • “Venezuela has devalued its official exchange rate to be closer to the levels seen in the black market. This chart shows how many (bags of) bolivares are needed to buy one dollar – the official rate.”

  • “This move eliminated a major source of corruption.”
    • “BMI Research: – The move to … devalue the … official exchange rate is a positive step, as it will help to correct some of the extreme distortions in the market for foreign exchange. The massive discrepancy between the official and black market exchange rates has been a major source of corruption and arbitrage over recent years. Those with access to the subsidized exchange rate typically re-sell dollars on the black market at a substantial profit, rather than using the currency to import goods that must be sold at artificially low prices due to the country’s system of price controls. The market has reacted positively to the news of the devalued exchange rate, with the black market value of the bolivar rising to VEF233,531.1/USD as of February 6, up from a low of VEF266,630.7/USD on January 28.”

WSJ – Daily Shot: BMI Research – Venezuela Black Market Exchange Rate VEF/USD 2/14

 

February 12, 2018

Perspective

WSJ – Tech Wealth Turns Attention to Affordable Housing in Seattle – Nour Malas 2/7

WSJ – Why Even ‘Ordinary’ Homes Sell for $500,000 Over the List Price – Nancy Keates 2/8

  • “Nowhere is demand more pent up than in the San Francisco Bay Area. In the past four months, 39 homes in Silicon Valley have sold for $500,000 or more over the listing price, says Mark Wong, a real-estate broker with Alain Pinel Realtors, based in Saratoga, Calif..”
  • “That figure includes a ‘lovingly cared for and well maintained home’ (read: not updated). The 53-year-old, three-bedroom, one-story house on 0.197 acre in West San Jose got 15 offers and sold to an all-cash buyer for $2.5 million—$815,000 over asking. A three-bedroom, 2,040-square-foot house in the Glen Park neighborhood sold in October for $2.6 million—nearly $1 million over its listing price of $1.675 million.”
  • “Seattle is another hot spot. Over the past year, the city has seen the greatest increase in the country in the share of sales above the asking price, surging to 52% of home sales in 2017 from 20% of sales in 2012, according to Zillow.”

Worthy Insights / Opinion Pieces / Advice

NYT – One Cause of Market Turbulence: Computer-Driven Index Funds – Landon Thomas Jr. 2/9

WSJ – BlackRock’s New Ambition Is a Sign of Froth – Aaron Back 2/8

  • “One can’t begrudge BlackRock for putting out its hand for a small slice of the money on offer. Even if the experiment somehow goes awry, it won’t make much of a dent in a company with $6.3 trillion of assets under management.”
  • “But the sheer imbalance between the supply of investable funds and suitable outlets for investment that gave rise to this move should ring some alarm bells for investors generally. At market tops when money is desperate to find a home, it often winds up in places it shouldn’t.”

WSJ – When Investing in Stock Makes You Feel Like Throwing Up and You Do It Anyway – Jason Zweig 2/9

Markets / Economy

Bloomberg Businessweek – The Breakneck Rise of China’s Colossus of Electric-Car Batteries – Jie Ma, David Stringer, Yan Zhang, and Sohee Kim 1/31

Real Estate

WSJ – Gig Economy Grows Up as Lenders Allow Airbnb Income on Mortgage Applications – Laura Kusisto 2/8

  • “Homeowners soon will be able to count income they earn from Airbnb Inc. rentals on applications for refinance loans.”
  • “A new program—expected to be announced on Thursday by Airbnb, mortgage giant Fannie Mae and three big lenders—will allow anyone who has rented out property on Airbnb for a year or longer to count some or all of that money as income.”
  • “The mortgages will be backed by Fannie Mae, an acknowledgment that Americans today increasingly are earning money through the ‘gig economy,’ such as renting out rooms or ride-sharing.”
  • “Initially, three lenders, Quicken Loans, Citizens Bank and Better Mortgage, will participate in the program. Fannie will evaluate the initiative and could decide over time to back mortgages from any lender that chooses to count Airbnb income in a refinancing, as long as the short-term rentals aren’t against local laws.”
  • “Still, the move raises worries about encouraging homeowners to borrow more based on the unpredictable tourism industry.”
  • “Executives at the three lenders said one crucial difference between the housing bubble and today is technology, which makes it easy to keep track of how much income homeowners are earning from Airbnb.”

WSJ – eBay Finds Unlikely Fans in Luxury-Home Sellers – Leigh Kamping-Carder 2/8

Energy

WSJ – Venezuela’s Pain is OPEC’s Gain – Spencer Jakab 2/9

  • “The cut in oil production engineered by OPEC and Russia is now in its second year, defying skeptics and helping to boost crude prices. But the cartel’s compliance owes a big debt these days to a single member: Venezuela.”
  • “A founding member of the Organization of the Petroleum Exporting Countries, Venezuela pumped only 1.64 million barrels a day last month, well below its 1.97 million barrel a day allocation, according to estimates by S&P Global Platts. That gap of 330,000 barrels a day is marginally more than the amount that the entire cartel is undershooting its 32.73 million barrel-a-day target.”
  • “Calling even the decline so far in Venezuela’s petroleum industry historic is almost an understatement. Just last year, output was down by almost 30%. In percentage terms, that is worse than in major producing countries that broke apart and saw their economies collapse, such as the former Soviet Union, and Iraq in 2003.”

Finance

FT – Investors resume their bets against market volatility – Robin Wigglesworth and Joe Rennison 2/8

Cryptocurrency

WSJ – Bitcoin’s Plunge Weighs on Coin Offerings – Paul Vigna 2/7

Construction

Economist – Wooden skyscrapers could be the future for cities – 2/1

  • Video

China

Bloomberg Businessweek – For China’s Wealthy, Singapore Is the New Hong Kong – Chanyaporn Chanjaroen, Keith Zhai, and Cathy Chan 2/6

  • “Hong Kong is starting to be eclipsed by Singapore as the favorite destination for the wealth of China’s rich.”
  • “At stake for banks in both cities is a huge pile of money. China’s high-net-worth individuals control an estimated $5.8 trillion—almost half of it already offshore, according to consulting firm Capgemini SE. For some, the city-state of Singapore is preferable because it’s at a safer distance from any potential scrutiny from authorities in Beijing, according to interviews with several wealth managers. Multiple private banking sources in Singapore, who would not comment on the record because of the sensitivity of the subject, report seeing increased flows at the expense of Hong Kong.”
  • “The rich may be feeling exposed by changing banking practices. Hong Kong has signed tax transparency agreements that for the first time last year required all banks to report their account holders’ information to Hong Kong tax officials, in preparation for giving that information to 75 jurisdictions, including mainland China. Singapore will have similar agreements with 61 jurisdictions. But they don’t include either Hong Kong or Beijing, meaning its accounts and account holders aren’t visible to the Chinese government.”
  • “Overall, Hong Kong remains the primary destination for China’s offshore money, according to a Capgemini survey, followed by Singapore and New York. Yet the number of Chinese high-net-worth individuals who view Hong Kong as their preferred overseas place of investment is down to 53%, from 71% two years ago, according to a survey in July by Bain & Co. More than 20% favor Singapore, up from 15% two years ago.”
  • “‘We see Singapore, not Hong Kong, as the bridgehead of China’s investment overseas,’ says Li Qinghao, co-founder of NewBanker Tech Consulting, which organized the Sentosa conference last year. About 78% of S$2.7 trillion ($1.9 trillion) in assets under management in Singapore comes from overseas sources.”

FT – Wealthy Chinese push racing pigeon prices skywards – Tom Hancock 2/8

  • “An elite group of Chinese pigeon fanciers have pushed the prices of racing birds to record highs, reflecting a mood of exuberance among China’s wealthy following a pick-up in economic growth and asset prices that has buoyed luxury spending.”
  • “Xing Wei, a property tycoon, paid €400,000 ($490,000) to purchase a Belgian pigeon called Nadine, in what is thought to be the largest deal on record. He followed that with a Rmb3m ($475,000) purchase of a champion bird called Extreme Speed Goddess at a Beijing auction in December.”
  • “Soaring pigeon prices are matched by bigger prizes for pigeon-racing competitions. China’s premier 500km ‘Iron Eagle’ race series held by the Pioneer International club in Beijing boasts a prize pot of Rmb450m ($71.2m).” 
  • “Higher property and equities prices helped the wealth of China’s 2,000 richest people increase nearly 13% last year, according the country’s top rich list. The number of people known to possess assets above $300m grew faster last year than any other in the previous decade, said Rupert Hoogewerf, the compiler of the list.”
  • “After years of declines following the anti-corruption campaign launched by President Xi Jinping in 2012, sales of luxury goods in China grew 20% last year, according to business consultancy Bain. Art auction sales in Shanghai saw 42% growth last year, according to consultancy ArtTactic.”
  • “Pigeon industry insiders say just half a dozen enthusiasts are responsible for largest sales. ‘Five years ago Rmb300-Rmb400 ($47 – $63) was a very high price for a pigeon,’ said Zhang Wangbin, who runs a club in the central city of Wuhan whose auctions this winter saw several birds sell for 10 times that amount. ‘It’s the result of economic development,’ he added.”
  • “Pigeons are not the only animals to catch the eye of China’s business elite, with Japanese Koi carp prices also seeing a China effect. Kentaro Sakai, president of the Sakai Fish Farm, Japan’s biggest Koi breeder, said a single fish could sell for up to ¥42m ($380,000).”

India

Bloomberg Quint – SBI Posts Surprise Loss A Provisions Surge, Treasury Income Falls – Vishwanath Nair and Azman Usmani 2/9

  • “State Bank of India Ltd. reported a quarterly loss for the first time in at least 17 years as its treasury operations turned unprofitable and provisions for bad loans increased. The public lender reported a significant divergence in bad loans from RBI’s assessment which weighed on the bottom line.”

Other Interesting Links

WSJ – Daily Shot: Number of Times a State has Hosted a Super Bowl 2/8

WSJ – CMO Today: Super Bowl Ratings Slump – Lara O’Reilly 2/6

January 29, 2018

Perspective

BLS – TED: The Economics Daily – Union Membership Rates in each State, 2017 1/25

  • “New York continued to have the highest union membership rate (23.8%), while South Carolina continued to have the lowest (2.6%).”

statista – The Countries Most Optimistic About 2018 – Niall McCarthy 1/22

Visual Capitalist – Visualizing a Global Shift in Wealth Over 10 Years – Jeff Desjardins 1/26

WSJ – Daily Shot: US Upward Mobility 1/26

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Some Lessons For Living From Older Generations – Ben Carlson 1/25

Project Syndicate – Blockchain’s Broken Promises – Nouriel Roubini 1/26

WSJ – My 10-Year Odyssey Through America’s Housing Crisis – Ryan Dezember 1/26

Markets / Economy

Bloomberg – Worthless Auto Trade-Ins Signal Riskier Loans – Claire Boston 1/25

  • “A growing share of the trade-ins that U.S. auto dealers and lenders accept for car-purchase financing are worthless on paper, a sign that banks and finance companies are making riskier loans to keep up revenue as vehicle sales slow.”
  • “Almost a third of cars traded in last year were worth less than the loans that had been financing them, according to car-shopping website Edmunds. That’s up from about a quarter a decade earlier, said Edmunds, which looked at cars traded in as part of financing packages for new auto purchases in the U.S.”
  • “Underwater trade-ins are just one example of the greater risks that lenders are taking now. New vehicle sales fell 1.8% to 17.2 million in 2017, but lending volume for new and used car purchases was on track to be higher than ever, according to data from the Federal Reserve Bank of New York and consumer credit bureau Experian. The growth in the average amount financed for a new car outpaced median income growth between 2013 and 2016, Moody’s said, suggesting borrowers are getting more strained.”
  • “Any pain from car-loan trouble will likely be just a shadow of the housing bubble collapse, because the auto debt market is much smaller. There were around $9 trillion of mortgages outstanding at the end of the third quarter, compared with $1.2 trillion of auto debt, the New York Fed said. And so far, many of the bonds backed by subprime auto loans are performing well thanks to built-in protections for investors. Wells Fargo analysts said in a note Wednesday that bonds issued by two of the biggest subprime auto lenders — Santander Consumer USA Holdings Inc. and General Motors Co.’s finance arm — have room to reach prices not seen since before the financial crisis.”
  • “The higher percentage of underwater loans on trade-ins may be a sign that car owners are trading in their vehicles sooner than they had previously. A consumer is often the most underwater on his or her auto loan in the first few years of ownership, because the value of the vehicle drops fastest over that time.”
  • “For borrowers who do trade in their underwater cars, lenders are essentially giving them the money to pay down their loan. The dealer sells the used car, and whatever balance remains on the old loan is folded into the new loan. The borrower might get a longer-term loan than he or she had before to help keep monthly payments manageable.”

Real Estate

Commercial Property Executive – REIT Gets SEC OK for St. Regis Aspen Resort IPO – Gail Kalinoski 1/26

  • “Aspen REIT Inc. has been given approval by the Securities and Exchange Commission for a $33.5 million initial public offering allowing investors to buy shares in the luxury St. Regis Aspen Resort in Colorado.”
  • “Upon closing of the IPO, Aspen REIT will be the first single-asset REIT to list on a national securities exchange in the U.S., according to the company.”
  • “Aspen REIT is offering 1,675,000 shares at $20 per share in the Regulation A+ IPO. The REIT applied to list its common stock on the NYSE American stock exchange under the ticker symbol AJAX. Aspen REIT intends to use substantially all of the net proceeds from the IPO, together with equity in Aspen REIT’s subsidiary operating partnership, to acquire the St. Regis Aspen Resort, a full-service, 179-key luxury hotel at the base of Aspen Mountain in the Rocky Mountains.”
  • Well that’s another way to ‘crowd source’ / syndicate funds.

Finance

Topdown Charts – ChartBrief 182 – Bond Yield Outlook – Callum Thomas 1/24

  • “There has been a lot of talk lately about trendlines, key levels and breakouts by some of the big names… Ray Dalio, Jeffrey Gundlach, Bill Gross.  But anyway, you don’t need to be a famous hedge fund manager to see the writing slowly showing up on the wall here across the major global sovereign bond markets.  The charts below show US and German 10-year bond yields have already broken out, and Japan/UK are getting close.”

WSJ – Daily Shot: US 3 Month LIBOR Rate 1/24

Cryptocurrency

Bloomberg – Coincheck Says It Lost Crypto Coins Valued at About $400 Million – Yuji Nakamura and Andrea Tan 1/26

Environment / Science

Yale News – 2018 Environmental Performance Index: Air quality top public health threat 1/23

Mexico

Reuters – Mexico’s drug cartels, now hooked on fuel, cripple the country’s refineries – Gabriel Stargardter 1/24

Puerto Rico

NYT – Hurricane-Torn Puerto Rico Says It Can’t Pay Any of Its Debts for 5 Years – Patricia Mazzei and Mary Williams Walsh 1/24

  • “The devastation wrought by Hurricane Maria has made Puerto Rico’s already dire financial situation even worse: The island’s leaders acknowledged late Wednesday that they will not be able to pay down any portion of their more than $70 billion debt for the next five years because of the damage.”
  • “Just before the hurricane, Puerto Rico had made plans to pay creditors a total of $3.6 billion through 2022. That was a fraction of the amount due, had the island, a United States territory, not gone into default.”
  • “Now, Puerto Rico expects its budget to be $3.4 billion in the red this year — a deficit that will take five years to close — because of the storm’s toll.”
  • “Nearly a third of customers remain without electricity, more than four months after the storm.”
  • “The government projects its population will shrink by 19.4% over the next five years, with a total exodus of over 600,000 people.”

 

January 10, 2018

Perspective

Howmuch.net – Credit Scores & Household Incomes in America – Raul 1/8

Pew – Most dads say they spend too little time with their children; about a quarter live apart from them – Gretchen Livingston 1/8

WSJ – Daily Shot: Deutsche Bank – Road Quality by US State 2016 1/9

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – Will Wealth Inequality Slay the Bull Market? – Anthony Isola 1/8

  • “Revolution is the ultimate Black Swan.”
  • “Thirty percent of U.S. households have zero or negative non-home wealth. One thing is certain; this is not the location of the ‘cash on the sidelines’.” 
  • “Unfortunately, wealth inequality is a feature, not a bug, of democracy and capitalism.”
  • “’According to research from the New York University economist Edward Wolff, the top 10 percent of American households now own 84% of all stocks. That’s up from 77% ownership in 2001′.”
  • “90% of America barely participated in the massive bull market the last several years.”
  • “’The majority of middle-class wealth is tied to homes, as more than 60% of investible assets are in a primary residence. Stock ownership makes up less than 10% of total assets for the middle class’.” 
  • But do you have the fortitude to suffer the draw-downs…
  • “The men who can manage men manage the men who can manage only things, and the men who can manage money manage all.” – Will and Ariel Durant

Bloomberg View – Stock Investors Will Benefit Most From Corporate Tax Overhaul – Ben Carlson 1/5

NYT – Amway Made China a Billion-Dollar Market. Now It Faces a Crackdown. – Ryan McMorrow and Steven Lee Myers 1/8

WSJ – China’s Strategy to Psych Out the West Is Paying Off – Andrew Browne 1/9

  • “The China scholar Perry Link once called the party ‘the anaconda in the chandelier’.”
  • “Just by hovering, it induces self-censorship and subtle behavioral changes.”
  • “‘Normally the great snake doesn’t move. It doesn’t have to,’ Mr. Perry wrote in a 2002 essay in the New York Review of Books.”
  • “‘Its constant silent message is ‘You yourself decide.””

Markets / Economy

WSJ – The Price Gap That’s Squeezing the Auto Market – Stephen Wilmot 1/8

WSJ – Daily Shot: US Consumer Credit Net Change 1/8

  • “Consumer credit balances saw the greatest monthly increase in 16 years.”

WSJ – Daily Shot: FRED – Total US Consumer Credit Relative to Disposable Personal Income 1/8

WSJ – Daily Shot: Piper Jaffray – US Consumers living beyond their means 1/8

WSJ – Daily Shot: FRED – Total Consumer Loans by Credit Unions 1/8

WSJ – Daily Shot: FRED – Total US Student Loan Balance 1/8

WSJ – Daily Shot: US Financial Accounts Q3 2017 1/8

WSJ – Daily Shot: Piper Jaffray – Consumer Confidence & Savings Rate Gap 1/8

  • “There is a widening gap between consumer sentiment and the savings rate. In the past, this divergence was a precursor to the end of the economic cycle.”

WSJ – Daily Shot: Market Ethos – US Output Gap 1/8

  • “The disappearance of the output gap also indicates that we are in the late stage of the cycle.”

Economist – Daily Chart: The fastest-growing and shrinking economies in 2018 1/5

Finance

WSJ – Daily Shot: Bitcoin 1/8

  • “Bitcoin appears to be range-bound, unable to breach the $17k level again.”

WSJ – Daily Shot: Investing.com – Ripple 1/8

  • “Ripple took a massive hit on Monday before recovering partially.”

Environment / Science

NYT – These Billion-Dollar Natural Disasters Set a U.S. Record in 2017 – Kendra Pierre-Louis 1/8

South America

FT – Smuggled cattle and petrol join exodus from Venezuela – Gideon Long 1/8

  • “Criminal gangs seize opportunity posed by hyperinflation and a plunging bolivar.”

WSJ – Daily Shot: Bloomberg – Venezuela 10yr USD Bond Price 1/8

January 9, 2018

Worthy Insights / Opinion Pieces / Advice

GMO – Bracing Yourself for a Possible Near-Term Melt-Up – Jeremy Grantham 1/3

LinkedIn: Why Bitcoin is the largest Ponzi scheme in human history – Vivek Wadhwa 12/29

Vanity Fair: “Oh My God, This is so F—ed Up”: Inside Silicon Valley’s Secretive, Orgiastic Dark Side – Emily Chang – Feb. 2018

Markets / Economy

Bloomberg – Electric Car Drivers Are Too Smart to Own Electric Cars – Kyle Stock 1/3

  • “U.S. drivers now lease almost 80% of battery electric vehicles and 55% of plug-in hybrids, according to Bloomberg New Energy Finance. The lease rate for the country’s entire fleet hovers around 30%. (There’s one blank spot in the data: Tesla does not divulge how many of its vehicles are leased, and since it sells its cars directly rather than through dealerships, the company doesn’t have to.)”
  • “The lopsided consumer preference for leases is fueled by the meager demand for battery-powered vehicles on the used market. Partly this is a consequence of public policy meant to spur electric vehicle adoptions: buyers of pre-owned cars can’t grab thousands of dollars in federal and state incentives.”
  • “The high lease rate is also fueled by the bet Jablansky (Jeffrey Jablansky – car journalist) and others like him are making that upcoming models will far exceed today’s in value and capabilities. ‘When there’s new technology coming out, and it’s coming out so rapidly, and you’re improving on it so constantly, typically people only want to lease it,’ Steve Center, a vice president of American Honda Motor Co., said in an interview at the 2017 New York Auto Show. The hydrogen fuel cell version of the Honda Clarity isn’t available for purchase; it can only be leased. ‘Think of your cell phone,’ Center explained.”
  • “Perhaps electric vehicles will truly arrive when they are no longer compared to smartphones, which become obsolete after three years.”
  • “The bet on fast-paced improvements makes sense. In the past five years, battery prices have fallen by an annual average of 20%, according to BNEF, as factories scale up and engineers perfect the packaging of cells. ‘If you look at what can happen across the lifetime of a lease, you’re really talking about doubling the range of these vehicles,’ said Edmunds analyst Jeremy Acevedo.”
  • “Not surprisingly, a dated plug-in car is a pariah. Electric compact cars that were sold in 2014 are now worth only 23% of their original sticker price, compared with 41% for comparable combustion vehicles, according to Black Book, an auto analytics firm.”
  • “Part of the problem is that nobody—including auto engineers—really knows how well the first wave of these plug-in cars will age.”
  • “There are strong arguments to be made for a secondhand electric car. For one, a used plug-in should be far more reliable than a gas-fueled car because plug-ins have fewer moving parts and aren’t powered by small explosions. Consumer prices for electricity are far more stable than for gasoline, and even older models can have their efficiency enhanced through remote software updates.”
  • “Car companies aren’t overly worried about cultivating a secondary market for electric cars, particularly when the market for new models remains so lackluster. Sales of new models are all that matter when it comes to hitting fleetwide efficiency mandates. That’s one of the reasons most automakers are less than forthcoming about the cost of replacing a battery.”
  • “If there is a tipping point in which the electric car market stops behaving like the market for flat-screen televisions, it likely won’t be for two more years. The first Chevy Bolts will come off lease in 2020—roughly 12,000 of them—and analysts expect those cars still to be capable of going about 200 miles on a charge. The market will also start being seeded by a rash of new models: The Tesla Model 3 will be on the road in larger numbers by then, as will the Volkswagen e-Golf and Hyundai Ioniq.”

Business Insider – The Chevy Bolt is crushing the Tesla Model 3 – Matthew DeBord 1/3

Real Estate

FT – US retail’s turbulent relationship with private equity – Eric Platt and Anna Nicolaou 12/29

  • “More than half of the largest leveraged retail buyouts completed since 2007 have either defaulted, gone bankrupt or are in distress, according to a Financial Times analysis.”
  • “At least 50 US retailers — including Toys R Us, children’s retailer Gymboree, shoe store Payless and jean maker True Religion — have filed for bankruptcy this year, the most in six years, with analysts describing it as a ‘day of reckoning’, for companies that rolled over their debt refinancing for years. Observers warn that the distress is likely to accelerate in 2018 with nearly $6bn in high-yield retail debt set to mature.”
  • “Among the private equity owned retailers who have fallen into distress over the past decade are luxury goods brands including Barneys and Neiman Marcus, specialty apparel retailers such as J Crew and Claire’s, and the country’s largest pet suppliers, Petsmart and Petco.”
  • “The FT analysis focused on 31 deals with a price tag of more than $500m. In total, 19 leveraged buyouts worth a combined $43bn have run into trouble. While private equity groups have had success with a number of retailers since 2007, including Dollar General, Party City and BJ’s Wholesale Club, the majority struggled with the debt levels assumed in their buyouts. Investors in their bonds and loans have been dealt billions of dollars in losses.”
  • “’We are at historic highs [for distress], and we are not even in a recession,’ says Charlie O’Shea, retail analyst at Moody’s. ‘If you’re a CAA rated retailer [a deep-junk rating by Moody’s], you have no flexibility at all. If you’re highly leveraged with a product mix that goes head to head against Walmart and Amazon, and you are looking to refinance right now, what reception do you think you’re going to get? It’s tough out there’.”
  • “Mr O’Shea says he is looking to the first quarter of 2018 to see which ‘shoes are going to drop next’.”
  • “Neiman Marcus, the luxury department store that owns Bergdorf Goodman, is also on his radar. The Texas-based company was one of many buyout deals struck at the top-of-the-market. Neiman was taken private by TPG Capital and Warburg Pincus for $5.1bn in 2005, and eight years later was sold to private equity firm Ares Management and Canada Pension Plan Investment Board for $6bn.”
  • “But after weathering the recession better than other retailers, Neiman has succumbed to the explosive secular shifts that are wreaking havoc in bricks and mortar stores. Like-for-like sales have dropped for eight of the past nine quarters. This year Neiman scrapped both an IPO and a possible sale to rival Hudson’s Bay. With $4.9bn in debt, which S&P calls ‘unsustainable’, investors have grown nervous. Bonds sold by Neiman have tumbled below 60 cents on the dollar, from 80 cents a year ago.”

Finance

WSJ – Daily Shot: Investing.com – Bitcoin & Ripple 1/8

Shipping

Bloomberg – How a Melting Arctic Changes Everything – Eric Roston 12/29

Other Interesting Links

WSJ – Daily Shot: Pal, bro, buddy, fella, or dude? 1/8

December 23, 2017

Happy Holidays everyone! Last post for the year. Cheers, Duff

Perspective

How Much – American Consumption Greatly Varies by State – Raul 12/19

Markets / Economy

Bloomberg – Subprime Auto Defaults Are Soaring, and PE Firms Have No Way Out – Gabrielle Coppola and Claire Boston 12/21

Finance

MarketWatch – How much has been lost in Friday’s cryptocurrency rout? Nearly $200 billion – Ryan Vlastelica 12/22

  • “The entire universe of digital currencies has seen heavy selling pressure on Friday, resulting in a 12-digit decline in total market capitalization since just midnight.”
  • “The size of the entire cryptocurrency space is about $426.14 billion, according to pricing website CoinMarketCap, down from $610.43 billion at the start of the day. (Eastern time; digital currencies trade 24 hours a day.) That’s a decline of more than $184 billion, which is larger than such iconic companies as Boeing Co., PepsiCo Inc., and Walt Disney Co.”  
  • “The weakness was driven by bitcoin the world’s largest digital currency, which has tumbled in recent days. The asset has dropped by more than a third since Sunday’s all-time high; it fell 27% to $11,301.16 on Friday, after nearly breaching $20,000 on Dec. 17.”
  • “The space is notoriously volatile, and other digital currencies also tumbled in Friday trading. Ether, which runs on the Ethereum network, is down 33%, trading at $561.19. It hit a high of $827.68 earlier in the day. Despite that, both remain sharply higher on the year; bitcoin started 2017 below $1,000, while Ether ended 2016 at around $8.03.”

 

November 9, 2017

If you were only to read one thing…

Bloomberg – America’s ‘Retail Apocalypse’ Is Really Just Beginning – Matt Townsend, Jenny Surane, Emma Orr, and Christopher Cannon 11/8

  • “The so-called retail apocalypse has become so ingrained in the U.S. that it now has the distinction of its own Wikipedia entry.”
  • “The industry’s response to that kind of doomsday description has included blaming the media for hyping the troubles of a few well-known chains as proof of a systemic meltdown. There is some truth to that. In the U.S., retailers announced more than 3,000 store openings in the first three quarters of this year.”
  • “But chains also said 6,800 would close. And this comes when there’s sky-high consumer confidence, unemployment is historically low and the U.S. economy keeps growing. Those are normally all ingredients for a retail boom, yet more chains are filing for bankruptcy and rated distressed than during the financial crisis. That’s caused an increase in the number of delinquent loan payments by malls and shopping centers.”
  • “The reason isn’t as simple as Amazon.com Inc. taking market share or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt—often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder—even for healthy chains.”
  • “The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary.”
  • “Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them. Toys “R” Us Inc. served as an early sign of what might lie ahead. It surprised investors in September by filing for bankruptcy—the third-largest retail bankruptcy in U.S. history—after struggling to refinance just $400 million of its $5 billion in debt. And its results were mostly stable, with profitability increasing amid a small drop in sales.”
  • “Making matters more difficult is the explosive amount of risky debt owed by retail coming due over the next five years.”
  • “Just $100 million of high-yield retail borrowings were set to mature this year, but that will increase to $1.9 billion in 2018, according to Fitch Ratings Inc. And from 2019 to 2025, it will balloon to an annual average of almost $5 billion. The amount of retail debt considered risky is also rising. Over the past year, high-yield bonds outstanding gained 20%, to $35 billion, and the industry’s leveraged loans are up 15%, to $152 billion, according to Bloomberg data.”
  • “Even worse, this will hit as a record $1 trillion in high-yield debt for all industries comes due over the next five years, according to Moody’s. The surge in demand for refinancing is also likely to come just as credit markets tighten and become much less accommodating to distressed borrowers.”
  • “Retailers have pushed off a reckoning because interest rates have been historically low from all the money the Federal Reserve has pumped into the economy since the financial crisis. That’s made investing in riskier debt—and the higher return it brings—more attractive. But with the Fed now raising rates, that demand will soften. That may leave many chains struggling to refinance, especially with the bearishness on retail only increasing.”
  • “One testament to that negativity on retail came earlier this year, when Nordstrom Inc.’s founding family tried to take the department-store chain private. They eventually gave up because lenders were asking for 13% interest, about twice the typical rate for retailers.”
  • “Store credit cards pose additional worries. Synchrony Financial, the largest private-label card issuer, has already had to increase reserves to help cover loan losses this year. And Citigroup Inc., the world’s largest card issuer, said collection rates on its retail portfolio are declining. One reason that’s been cited is that shoppers are more willing to stop paying back a card from a chain if the store they went to has closed.”
  • “The ripple effect could also be a direct hit to the industry that is the largest employer of Americans at the low end of the income scale. The most recent government statistics show that salespeople and cashiers in the industry total 8 million.”
  • “During the height of the financial crisis, store workers felt the brunt of the pain when 1.2 million jobs disappeared, or one in seven of all the positions lost from 2008 to 2009, according to the Department of Labor. Since the crisis, employment has been increasing, including in the retail industry, but that correlation ended as jobs at stores sank by 101,000 this year.”
  • “The drop coincides with a rapid acceleration in store closings as bankruptcies surge and many of the nation’s largest retailers, including Wal-Mart Stores Inc. and Target Corp., have decided that they have too much space. Even before the e-commerce boom, the U.S. was considered over-stored—the result of investors pouring money into commercial real estate decades earlier as the suburbs boomed. All those buildings needed to be filled with stores, and that demand got the attention of venture capital. The result was the birth of the big-box era of massive stores in nearly every category—from office suppliers like Staples Inc. to pet retailers such as PetSmart Inc. and Petco Animal Supplies, Inc.”
  • “Now that boom is finally going bust. Through the third quarter of this year, 6,752 locations were scheduled to shutter in the U.S., excluding grocery stores and restaurants, according to the International Council of Shopping Centers. That’s more than double the 2016 total and is close to surpassing the all-time high of 6,900 in 2008, during the depths of the financial crisis. Apparel chains have by far taken the biggest hit, with 2,500 locations closing. Department stores were hammered, too, with Macy’s Inc., Sears Holdings Corp. and J.C. Penney Co. downsizing. In all, about 550 department stores closed, equating to 43 million square feet, or about half the total.”
  • “One response to the loss of store-based retail jobs is to note that the industry is adding positions at distribution centers to bolster its online operations. While that is true, many displaced retail workers don’t live near a shipping facility. The hiring also skews more toward men, as they make up two-thirds of the workforce, and retail store employees are 60% women.”
  • “The coming wave of risky retail debt maturities doesn’t take into account that companies currently considered stable by ratings agencies also have loads of borrowings. Just among the eight publicly-traded department stores, there is about $24 billion in debt, and only two of those—Sears Holdings Corp. and Bon-Ton Stores Inc.—are rated distressed by Moody’s.”
  • “’A pall has been cast on retail,’ said Charlie O’Shea, a retail analyst for Moody’s. ‘A day of reckoning is coming.’”

Perspective

FT – Forbes says Wilbur Ross lied about being a billionaire – Lindsay Fortado and Shawn Donnan 11/7

  • “Forbes business magazine has booted US secretary of commerce Wilbur Ross off its list of the richest people in America for the first time in 13 years, alleging he lied to them about his net worth by more than $2bn.”

FT – Electric cars’ green image blackens beneath the bonnet – Patrick McGee 11/7

  • “Nico Meilhan, a Paris-based car analyst and energy expert at Frost & Sullivan, says regulators should not encourage this race to sell electric vehicles with bigger batteries. ‘It’s a race, but it’s a very stupid race. It’s not towards a good solution,’ he says. ‘If you switch from oil to cobalt and lithium, you have not addressed any problem, you have just switched your problem.’”
  • “Instead, he says regulators should take weight into account by taxing heavier vehicles and creating incentives for smaller models in both electric and traditional vehicles.”
  • “Mr. Meilhan points out that petrol-engine cars weighing just 500kg — such as the French Ligier microcar or some popular ‘kei cars’ in Japan — emit less lifecycle emissions than a mid-sized electric vehicle even when driven in France, where carbon-free nuclear power generates three-quarters of electricity.”
  • “’If we really cared about CO2,’ he adds, ‘we’d reduce car size and weight.’”

WSJ – Jet-Set Debt Collectors Join a Lucrative Game: Hunting the Superrich – Margot Patrick 11/7

  • “Private investigators spend millions, scour globe, chasing an estimated $2 trillion in pending claims.”

Worthy Insights / Opinion Pieces / Advice

Economist – Asian households binge on debt 11/2

  • “What should be good news for the global economy has its downsides.”

FT – The House of Trump and the House of Saud – Edward Luce 11/8

  • “The blossoming relationship with Riyadh symbolizes the decay of the US-led order.”

Markets / Economy

Business Insider – Someone deleted some code in a popular cryptocurrency wallet – and as much as $280 million in ether is locked up – Becky Peterson 11/7

  • “An estimated $280 million worth of the cryptocurrency ether is locked up because of one person’s mistake.”
  • “An unidentified user accidentally deleted the code library required to use recently created digital wallets within Parity, a popular digital-wallet provider, according to a security alert posted on the company’s blog on Tuesday.”
  • “The freeze affects all multi-signature wallets created on Parity after July 20.”
  • “Multi-sig wallets are especially popular among cryptocurrency startups and other groups because they require more than one person to agree before any currency gets moved around. It’s a safeguard against rogue employees who might want to run off with the money.”

WSJ – Clamor for Tech IPOs Reaches Fever Pitch in Asia – Saumya Vaishampayan and Steven Russolillo 11/8

  • “Nearly three quarters of the 66 tech floats in the first nine months of 2017 have been in Asia, and the companies have raised about 40% of the total $16.8 billion from the sector, according to a report by PricewaterhouseCoopers.”
  • “Shares of newly public companies in Asia, on average, have risen by 141% from their IPO prices this year through the end of October, according to Dealogic. That compares with an average 25% gain for U.S. IPOs and a 13% increase for new issues in Europe.”

WSJ – Daily Shot: FRED – US Student Loan Balance 11/8

Real Estate

WSJ – Republican Tax Plan Would Slam California Housing Market – Laura Kusisto 11/8

  • “Limits on mortgage-interest deduction would affect many buyers in coastal regions around the U.S.”

WSJ – Co-Working Trend Eats Into Office Demand – Peter Grant 11/7

  • “The co-working trend, popularized by startup businesses like WeWork Cos., has been attractive to entrepreneurs and small companies looking for communal office space and short-term commitments.”
  • “But it could turn out badly for landlords, according to a new report from Green Street Advisors. The report predicts co-working will detract from cumulative office demand through 2030 by about 2% to 3% as the shared working space approach spreads from small businesses to large ones.”
  • “The report estimates there will be about 14,000 co-working locations world-wide by the end of this year, compared with 600 in 2010. WeWork alone has more than 20 locations in London and is now among New York’s largest office tenants, it says.”
  • “’The most ominous prospect for landlords is that [corporate] users could ‘outsource’ big chunks of their headquarters and regional offices to co-working operators,’ the report warns.”
  • “Consider the new business that WeWork launched earlier this year that creates tailored WeWork centers for big companies that employ hundreds or even thousands of workers. Named Onsite Solutions, it is marketing itself to employers that have flexible office space requirements or who want to circulate employees through hipper environments than their traditional workplaces.”
  • “Mr. Reagan (Jed Reagan, Green Street analyst) said such initiatives have the potential to hurt office landlords because co-working facilities typically require less space: about 75 square feet per worker compared with 175 square feet in traditional offices. Also, co-working leases for big tenants tend to be six months to five years, much shorter than the common lease term of five to 15 years, he said.”
  • “’That could undermine the stability and security of cash flow for landlords and could create more churn among tenants,’ Mr. Reagan said.”

India

FT – One year on, jury is still out on India’s ‘black money’ ban – Amy Kazmin 11/7

  • “Economy has slowed and cash in circulation is 90% of previous level, data show.”

South America

FT – Venezuela’s debt struggle poses more questions for investors – Robin Wigglesworth 11/7

  • “Analysts and investors say there are more questions than answers surrounding Venezuela’s plans to ‘refinance and restructure’ its financial liabilities.”
  • “Venezuela has about $63bn of foreign bonds outstanding, according to Torino Capital, while the central bank estimates the country’s overall foreign debts at about $90bn. The real number say most analysts is much higher.” 
  • “PDVSA, the state oil company, has sold $28.6bn of bonds and owes billions of dollars more in ‘promissory notes’. Venezuela owes another $4bn or so to creditors that have taken it to the World Bank’s ICSID court. Stuart Culverhouse, chief economist at Exotix, thinks total public sector external debts range between $100bn and $150bn.”
  • “Even this is uncertain. Venezuelan president Nicolás Maduro has mentioned ‘refinancing’ and ‘restructuring’ the country’s external liabilities. But a refinancing usually implies something voluntary while a restructuring means forcibly ‘haircutting’ creditors. Crucially, US sanctions imposed this summer in practice means both options are off the table.” 
  • “That Mr. Maduro named vice-president Tareck El Aissami as the lead negotiator with bondholders complicates matters further. Mr. Aissami has himself been sanctioned by the US as an alleged narcotics trafficker, which means US investment groups — the biggest holders of Venezuelan debt — cannot enter talks with him.” 
  • “’The logistics seem almost impossible,’ notes Siobhan Morden, head of Latin American fixed income strategy at Nomura. ‘The cynical interpretation is that the impossible deadline for negotiations conveniently shifts the blame of default to bondholders for their unwillingness (inability) to negotiate.’”
  • “With a competent government and more orthodox economic policies, Venezuela could probably handle its debt burden. Although oil exports are declining, it still boasts the world’s largest proven reserves and prices are at their highest level for more than two years.”
  • “But chronic mismanagement by governments under Hugo Chávez and now Mr. Maduro and the oil slump has taken its toll. According to the IMF, the economy has shrunk by a third over the past five years.”
  • “The country’s options appear limited. Venezuela is overdue on the interest payments on bonds that mature in 2019, 2024, 2025 and 2026, demonstrating the ‘significant fiscal strain’ the country is facing, S&P notes. Foreign currency reserves are below $10bn — and much of this is in gold that will be hard to liquidate. China is wary of deepening its financial exposure to Venezuela while the country has already restructured some of its bilateral loans from Russia.”
  • “The price of Venezuela’s bond maturing in August next year has tumbled from 72 cents on the dollar to about 34 cents this week, as investors panicked after the restructuring announcement and bank traders pulled out of the market, causing prices to ‘gap’ lower.” 
  • “Russia could provide a loan secured by Venezuelan oil assets that the government could either use to pay creditors, or to buy back some of its bonds at their current big price discount.” 
  • “Venezuela could also seek to improve its fiscal space by separating PDVSA from the state, defaulting on the latter debts while staying current on the oil company’s bonds. That could in theory prevent creditors from interrupting PDVSA’s oil sales, while letting Venezuela’s sovereign creditors stew. Suing countries is much harder than companies with assets that can be seized.”
  • “Moreover, ringfencing PDVSA from the government will be tricky. Crystallex, a Canadian miner, is already suing Venezuela and arguing that PSDVA is the ‘alter ego’ of the state. If Crystallex wins, it opens the door for all creditors to try to seize Venezuelan and PDVSA assets interchangeably.” 
  • “The most likely outcome, investors and analysts say, is a protracted period of financial limbo, with a restructuring precluded by US sanctions and Venezuela facing a barrage of lawsuits that will tie it up for years to come.”

November 2, 2017

If you were only to read one thing…

WSJ – Backlog in EB-5 Immigration Program Creates Cash Hoard for Property Developers – Peter Grant 10/24

  • “A backlog in the controversial EB-5 immigration program, which enables foreigners who invest in the U.S. to get green cards, is making billions of dollars of new money available for investments in real estate and other businesses.”
  • “The backlog is primarily in China, where the EB-5 program has become so popular that applicants can face delays of more than 10 years from the time they make their investment of at least $500,000 to the time they get their visa.”
  • “The U.S. government limits the number of EB-5 visas to 10,000 a year, and per-country cutoffs can get imposed on countries like China where the application rate is high.”
  • “This had created a problem for applicants: 10 years is such a long time that some U.S. developers want to repay the investors’ money before visas are issued. But doing do would disqualify the EB-5 application.”
  • “The solution—which was spelled out by the U.S. Citizenship and Immigration Services in a June policy memo—is a process known as redeployment. Essentially, the government said, EB-5 applications remain in good standing if the repaid money is reinvested in an active business and remains ‘at-risk’.”
  • “More than $16.6 billion is expected to become available for redeployment between now and 2020, according to NES Financial, of San Jose, Calif., one of the leading providers of EB-5 servicing and administration.”
  • “Investment companies have begun to position themselves to take advantage of billions of dollars now available for reinvestment. For example, in July, a venture of Greystone & Co., NES and Capital United LLC created a way for EB-5 money to be redeployed into a fund of real-estate bridge loans originated by Greystone.”
  • “The EB-5 program was created in 1990 and has been popular among U.S. real-estate developers, who have flocked to it as a source of low-cost financing. The program requires investments of at least $500,000 to create at least 10 jobs, making it appealing to city and state economic development agencies as well.”
  • “Now the redeployment of funds has raised new concerns about the EB-5 program, which is facing reauthorization by Congress. For example, the June policy manual ‘appears to allow’ developers to invest redeployed funds in projects that don’t get as much vetting as the original EB-5 project, according to Gary Friedland, a scholar-in-residence at New York University who has written about the program.”
  • “More than 4,400 petitions for EB-5 status were filed in the third quarter of fiscal year 2017, which ended in June, according to Invest In the USA, a trade association. The number of pending petitions was up 11% from the second quarter to over 24,600, the group said.”
  • “There is no job-creation requirement on the redeployed funds. But the necessary jobs have been created after the original EB-5 investments are made, Ms. Berman (Allison Berman, head of Greystone’s EB-5 business) pointed out. ‘Each investor already has created at least those 10 jobs,’ she said.”
  • “Ms. Berman says the fund targets a 4% return after fees. Redeployment is good for the U.S. economy because it is keeping the EB-5 money ‘in commerce for longer than initially anticipated.'”

Perspective

WSJ – Chinese Banks’ Capital Cushion Isn’t So Comfy – Anjani Trivedi 10/26

  • “Prudent as Chinese banks’ capital-raising binge may seem at first blush, investors should keep an eye on what’s driving their buffer-building.”

Worthy Insights / Opinion Pieces / Advice

NYT – Expelling Immigrant Workers May Also Send Away the Work They Do – Eduardo Porter 10/24

  • “This is how the growers will respond to President Trump’s threatened crackdown on immigration: They will lobby, asking Congress to provide some legal option to hang on to their foreign work force. They will switch to crops like tree nuts, which are less labor-intensive to produce than perishable fruits and vegetables. They will look for technology to mechanize the harvest of strawberries and other crops. And they will rent land in Mexico.”
  • “There is one thing they won’t do. Even if the Trump administration were to deploy the 10,000 immigration agents it plans to hire across the nation’s fields to detain and deport farmhands working illegally, farmers are very unlikely to raise wages and improve working conditions to attract American workers instead.”
  • “’Foreign workers will always be harvesting our crops,’ Tom Nassif, who heads the Western Growers Association, told me. The only question for policymakers in Washington is whether ‘they want them to be harvesting in our economy or in another country.’ If they choose the latter, he warned, they might consider that each farmworker sustains two to three jobs outside the fields.”
  • “Most of what we know about the effect of immigration on American-born workers is based on studies of what happens when immigrants arrive. Almost 30 years ago, the economist David Card found that the Mariel boatlift of 1980, in which more than 100,000 Cubans fleeing the island landed in Florida, did little damage to either the employment or the wages of the Americans they competed with.”
  • “A flurry of research since then has tried to find fault with that counterintuitive conclusion. Yet despite the claims from the Trump administration that immigrants have decimated the working class, Mr. Card’s analysis has emerged pretty much unscathed: With few exceptions, economists agree that even less-educated natives suffer little when immigrants arrive.”
  • “What if the shock goes the other way, though? We know less about what happens when immigrant workers are kicked out. But a series of studies over the past year are also coming to something of a consensus: Expelling immigrants does not open opportunities for workers born in the United States, either. Rather, the shock leaves them worse off than when the immigrants were here.”

NYT – America Is Not a ‘Center-Right Nation’ – Eric Levitz 11/1

The Republic – Mafia in our midst: A mob soldier turned Phoenix businessman – Robert Anglen 10/31

  • A very thorough and salacious report on Phoenix businessman Frank Capri (formerly a mobster by the name of Frank Gioia Jr.).
  • “Frank Capri, who persuaded developers to give him millions to build Toby Keith restaurants, had a violent history…”

WSJ – The Morningstar Mirage – Kirsten Grind, Tom McGinty, and Sarah Krouse 10/25

WSJ – WeWork’s Lord & Taylor Deal: Savvy Move or Top of the Market? – Dan Gallagher and Justin Lahart 10/24

Markets / Economy

WSJ – Daily Shot: Bitcoin 10/31

FT – Subsidies help China sell the most electric cars – Charles Clover 10/23

  • “Few countries have done more than China to push towards an electric future for the car industry. Beijing announced last month that it was looking at when to implement a ban on petrol and diesel cars, following announcements by France and Britain, which said they would ban traditional fuel vehicles by 2040, and Germany’s parliament, which has called for a ban by 2030.”
  • “Beijing also announced wide-ranging regulations forcing carmakers to start to meet steadily increasing production quotas for battery-powered cars, beginning in 2019.”
  • “Reactions to the announcement illustrate how China has managed to grow so quickly to become such a significant market for electric vehicles. China uniquely possesses the means to implement its will — it is the world’s largest car market, meaning it has unprecedented leverage over the global car industry, and also has a massive central planning mechanism.”
  • “Electric vehicles (EVs), both fully electric and hybrids, are part of a new industrial policy known as Made in China 2025, by which year Beijing wants to have national champions in 10 high-tech industries, including robotics, semiconductors and electric vehicles.”
  • “To achieve this, local and central governments have allotted subsidies that last year were worth up to Rmb100,000 ($15,000) per vehicle, according to Yale Zhang of Auto Foresight, a Shanghai consultancy specializing in the car industry.”
  • “Fitch, the rating agency, has found that average electric vehicle subsidies in China are the second most generous in the world after Norway.”
  • “China has also introduced a preferential vehicle licensing system in several cities. License plates are given out either by auction, lottery or after payment of a high fee in an effort to halt car congestion, but EV buyers get license plates free and without a wait in at least six Chinese cities. These centers account for 70% of domestic EV purchases, Fitch says.”
  • “China’s national grid is investing in EV charging stations. It expects to put Rmb25bn ($3.75bn) into charging stations by 2020; there are already 171,000 nationwide according to Xinhua, China’s official news service. This compares with 45,000 charging outlets and 16,000 electric stations in the US, according to official data.”
  • “In response to Beijing’s measures, the industry has boomed: sales of electric vehicles and hybrid vehicles were up 53% in 2016 to 507,000, according to the China Association of Automobile Manufacturers, which estimated that the number accounted for 45% of all such vehicles sold worldwide in that year.”

Real Estate

WSJ – Daily Shot: Homebuilder Index Relative Performance to S&P 500 10/31

WSJ – Chinese Property Shopping Spree Fades as Beijing Hits the Brakes – Dominique Fong and Esther Fung 10/31

  • “Since late 2016, policy makers in Beijing have been tightening restrictions on overseas investments and scrutinizing some of the country’s most ambitious deal makers, voicing concerns that deals in certain sectors were disguises for capital flight into havens.”
  • “Outbound capital from China into foreign properties and development sites reached a record $36.8 billion in 2016, according to data firm Real Capital Analytics. Volume for the first three quarters of this year was $19.7 billion. In the U.S. real-estate market, capital from China slowed to $5.1 billion in the same nine-month period, down from a total of $14.8 billion in 2016, said Real Capital. These are deals that are $10 million and greater.”
  • “Real-estate companies based in Hong Kong also appear to be less affected by the capital controls. Companies based in Hong Kong this year bought two high-profile London buildings, nicknamed the ‘Cheesegrater’ and ‘Walkie Talkie’.”
  • “But increasingly, firms are toeing to the party line. ‘Investors with capital already outside of China will continue to show strong interests allocating capital to U.S. real estate…though those in this category, even ostensibly private companies, are progressively less free to ignore what goes on in China,’ said Andrew Levy, senior counsel at law firm DLA Piper.”

WSJ – Driverless Cars Could Slam Brakes on Self-Storage Sector – Peter Grant 10/24

  • “The approaching transportation revolution is going to have major repercussions in the commercial real-estate sector as driverless vehicles and ride-hailing services such as Uber and Lyft gain more widespread adoption.”
  • “The property type expected to be hurt the most: Self-storage. Because people will own fewer cars, they will have more storage spaces in their garages, so they won’t need to rent it.”
  • “That is one of the conclusions of a new report on the future of transportation and real estate by the Urban Land Institute and real-estate investment research firm Green Street Advisors. The report says ride-hailing services already are having a big effect on consumer behavior and predicts that ‘mass adoption’ of driverless vehicles will begin around 2030 and be completed about 15 years later.“
  • “…transportation revolution could be a mixed bag for industrial space. Demand from e-commerce should explode, the report says, but driverless trucks will improve efficiency.”
  • “’Goods should spend less time sitting idly in warehouses, likely resulting in a drag on industrial real-estate demand,’ the report says.”
  • “The report points out that investors need to be savvy about the impact of transportation trends because valuing a property today depends heavily on the long-range future. Because issues that go beyond seven years ‘are usually ignored, mispricing can result,’ the report states.”
  • “The opportunity is significant for investors who can figure out these trends now. ‘But, uncertainty is huge, so humility is in order,’ the report states.”

WSJ – Big Law Firms Look to Shrink Their Office Space Use – Esther Fung 10/24

  • “Of the 14 million square feet of office space leased to law firms between the first quarter of 2016 and the second quarter of 2017, 40% was the result of a contraction by the tenant, according to a CBRE Group study of 26 markets.”
  • “On average, the law firms reduced their leased space by 27%.”
  • However, “top law firms that lease more than 50,000 square feet of office space are more likely the ones that are reducing their physical office space, rather than their smaller peers.”

WSJ – More People Think Renting Is a Better Deal Than Buying – Laura Kusisto 10/24

  • “A growing percentage of renters believe it is cheaper to rent than to buy a home, which helps explain why the homeownership rate remains persistently low nearly a decade after the housing crash.”
  • “In the Freddie Mac survey, the view that renting is more affordable increased significantly across all age groups. Some 76% of millennials said renting is an affordable option, up more than 10 percentage points from a year ago. Roughly 82% of baby boomers said they view renting as a more affordable option, up 11 percentage points from a year ago. And the share of Generation Xers who see renting as more affordable jumped to 75% from 56%.”
  • Never forget that these surveys or comparisons are a snap shot in time. At times renting is more affordable than buying (it should always be more affordable than buying); however, once you buy (of course coming up with the down payment is no easy accomplishment) you generally have fixed your cost of occupancy (increases in property taxes and maintenance costs will get you in either case). Further, the forced savings element of a mortgage is hands down one of the best ways to build wealth. I recognize that it helps to have a relatively stable life to do this. However, if you’re renting, that cost will NEVER go away, and don’t forget the power of compounding costs – which will eat your savings eventually once you’re no longer making money, or stop receiving raises.
  • Rent if you have to or while your life is in transition, but homeownership is the goal (unless, if governments make property taxes prohibitively expensive and/or push to a model where the state owns all housing).

WSJ – Commercial Property Transactions Dry Up as Sellers Hold Out for Better Prices – Esther Fung 10/24

  • “Big U.S. real-estate companies have been selling assets at a slower pace this year, as the gap widens between their views on what their properties are worth and buyers’ willingness to pay high prices.”
  • “After an eight-year bull run for commercial real estate, some investors have been anticipating a correction. But that hasn’t happened yet, and there is little consensus on how much longer the bull market has to run.”
  • “Buyers, facing tighter lending conditions and slower income growth, are expecting lower prices and bidding accordingly, but sellers, including publicly traded property owners, are holding out for better deals.”
  • “Listed real-estate investment trusts have sold $46.7 billion in assets as of Oct. 23 this year compared with $71 billion in assets sold in all of 2016, according to data from Real Capital Analytics. Acquisitions, on the other hand, have been at a roughly similar pace at around $44.6 billion as of Oct. 23 this year compared with $47.9 billion in 2016. There have been fewer major transactions especially in the office and retail real-estate sector.”
  • “Unlike previous cycles, property owners aren’t overly leveraged and are still able to access the debt markets rather than be compelled to sell at unattractive prices.”
  • “For REITs, there is the added burden of making sure any sales proceeds can be deployed for other uses quickly, given their inability to hoard cash. These landlords are hesitant to sell in part because of the lack of attractive assets to buy as well as a general reluctance to do share buybacks.”
  • It should be noted that one major buyer of assets from listed REITs has been having issues in its fund raising mechanisms. That is the public non-traded REIT.

Energy

FT – US oil producers: Shale safe – Lex 10/23

  • “From Silicon Valley to the shale patch, the fundamental laws of corporate finance have been suspended for years. Such a calculus only works, however, if investors are willing to shoulder heavy losses on uneconomic investment in the hopes that pricing power ultimately ensues. Reality may have begun to weigh upon US oil producers. A renewed focus on spending within cash flow is taking hold in 2017.”
  • “Shareholders have turned off the funding spigot, with US E&P companies raising only $6bn in equity this year compared with more than $30bn in the same period last year. The perverse practice of tying oil executive compensation to production growth, not profits or cash flow, has also finally received the attention it deserves.” 
  • “The acreage obsession in the energy industry was always predicated on the idea that somebody else’s company would succumb before one’s own. But last man standing no longer beats cash is king as a mantra.”

FT – US shale investors tire of ‘growth at any cost’ model – Ed Crooks 10/22

  • “In a recent presentation at the New York Stock Exchange, Doug Suttles, chief executive of Encana, spelt out the new reality for North American oil and gas producers. The industry had gone, he said, from ‘resource capture’ to ‘value maximization’.”
  • “This is a profound change. Since the shale oil revolution began in the late 2000s, management teams have mostly focused on growth at any cost, and investors have mostly been prepared to back them.”
  • “This year, however, investor sentiment has shifted. Shareholders are less dazzled by the excitement of the shale boom, and more interested in orthodox measures of success including returns on capital and cash generation.”
  • “The whole shale industry is being pushed in the same direction. If companies fail to improve shareholder return, says Stephen Trauber, global head of energy at Citi, ‘investors will start to question what management is doing’.”
  • “For the past eight years, the US exploration and production industry has outspent its cash flows in drilling costs, requiring a constant inflow of debt and equity financing to keep going. But the industry has given shareholders very little in return.”
  • “Given those numbers, it is unsurprising that investor interest appears to have waned. US exploration and production companies raised $34.3bn from share sales in 2016, making it a record year, but just $5.7bn in the first nine months of 2017, according to Dealogic.”
  • “The pressure from investors for more discipline — a word used 17 times by Encana in its presentation — already seems to be having an effect. The number of active rigs in the US drilling the horizontal wells used for shale oil production has been dropping since the beginning of August.”
  • “Jamaal Dardar, an analyst at Tudor Pickering Holt, says just six months ago he would have expected US oil and gas producers to go on outspending their cash flows into next year at least. He now expects that in 2018 the larger exploration and production companies will in aggregate earn positive free cash flow, after capital spending but before dividend payments.”
  • “’We all like growth, but it must be profitable growth,’ Mr Holt says. ‘They might be able to grow at 5 or 10% per year, but not at 20%.’”
  • “If companies bow to that pressure from investors, it could work out very neatly. Slower oil production growth in the US would help push crude prices higher, making it possible for the industry to deliver the returns that shareholders want.”
  • “But Citi’s Mr Trauber warns the history of the oil industry shows it rarely delivers such tidy outcomes.”
  • “’We have been here before,’ he says. ‘At times over the past 30 years, investors have demanded discipline from the industry. But then as soon as the oil price picks up again, they have forgotten all about it and the industry has rushed back to growth again.’”

Finance

WSJ – Wealthier Depositors Pressure Banks to Pay Up – Telis Demos and Christina Rexrode 10/24

  • “As the Fed has raised rates, banks have been reluctant to do the same on their deposits. But for wealth-management customers, that’s starting to change.”

FT – DRW leads high frequency trading charge into cryptocurrencies – Gregory Meyer and Joe Rennison 10/22

  • Having a hard time finding enough volatility to trade in the markets, some are now trading Bitcoin…

China

NYT – Xi Jinping Vows No Poverty in China by 2020. That Could Be Hard. – Javier C. Hernandez 10/31

  • For China’s – and the world’s – sake, I hope that they succeed.

NYT – China’s Entrepreneurs Squirm Under Xi Jinping’s Tightening Grip – Sui-Lee Wee 10/23

India

FT – Reality dawns on India’s solar ambitions – Kiran Stacey 10/31

  • “The country has one of the world’s biggest solar sectors, but now faces the risk of a bubble.”

NYT – The Uninhabitable Village – Geeta Anand and Vikram Singh 10/26

  • “Hotter temperatures are forcing families in southern India to decide: Try to survive here, or leave?”
  • A very unique way to report on a story. A video slide show with text.

Other Interesting Links

FT – Spot the difference: why lab-grown diamonds pose a threat to big miners – Henry Sanderson 10/30

October 11, 2017

Perspective

WSJ – Daily Shot: Spanish Empire at its Peak 10/10

  • “Since Monday was Columbus day, here is the size of the Spanish Empire at its peak (in 1790).”

WSJ – America’s Retailers Have a New Target Customer: The 26-Year-Old Millennial – Ellen Byron 10/9

VC – How Americans Differ by Age – Jeff Desjardins 10/10

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – How To Make $5,300 In Commissions on a $43,000 Retirement Account – Anthony Isola 10/9

  • If you are a teacher or have family or friends that are teachers, you should read this. Make sure you’re or they’re not getting fleeced.

NYT – The N.F.L Draft: A Study in Cockeyed Overconfidence – David Leonhardt 4/25/05

  • A worthwhile look at the research that Richard Thaler and Cade Massey did regarding overconfidence.

The Irrelevant Investor – The Price of Progress – Michael Batnick 10/10

  • “The economic machine that we’ve built in the United States has done extraordinary things and I can’t wait to see what we come up with in the future. But what do we do when progress leaves so many behind?”

Markets / Economy

NYT – China Hastens the World Toward an Electric-Car Future – Keith Bradsher 10/9

Economist – American entrepreneurs have not lost their mojo 10/10

  • “Business formation is down, but fast-growing startups are in high gear.”

Energy

FT – Saudi Arabia curbs oil exports to combat glut – Anjli Raval 10/9

  • “Saudi Arabia is allocating fewer barrels of crude for export next month and at a level below current demand, emphasizing the effort by global producers to reduce surplus inventories.”
  • “In a rare statement, the Ministry of Energy on Monday said contracted demand for Saudi crude for November was 7.7m barrels a day, but the kingdom has assigned just 7.2m b/d for export.”
  • “The disclosure of Saudi Arabia’s monthly allocations emphasizes a new focus on foreign sales, alongside production, that Riyadh deems vital to the effort by global producers to reduce surplus inventories.”
  • “’It is very interesting they are now trying to communicate to the market about exports,’ said Olivier Jakob at consultancy Petromatrix. ‘They have gone the extra step of putting out numbers on this, which is the first I’ve ever seen.’”

Finance

WSJ – Daily Shot: Hedge Fund Research – Hedge Fund Fees 10/10

WSJ – Daily Shot: Bitcoin 10/9

  • Bitcoin is rallying again.

WSJ – Daily Shot: Investing.com – Bitcoin Cash 10/10

  • “On the other hand, Bitcoin’s less fortunate twin called Bitcoin Cash has collapsed.”

India

FT – Modi’s pursuit of black money proves drag on India’s economy – Amy Kazmin 10/9

  • “For many Indians the powerful appeal of Narendra Modi, the prime minister, stemmed from his vows to tackle two issues of fierce public concern: the sluggish economy and entrenched corruption.”
  • “But India’s economy has faltered, with growth falling steadily since early 2016 to a three-year low of 5.7% in the second quarter of this year.”
  • “Now, some economists are suggesting Mr Modi’s two big goals are at odds, and that New Delhi’s zealous anti-corruption drive — which reached its apogee with a draconian cash ban — is sapping India’s economic momentum.”
  • “Though disruptive, demonetization failed to purge black money from the economy, because nearly 99 per cent of the cancelled bank notes were deposited or exchanged, rather than being furtively destroyed as forecast.”
  • “Now New Delhi is toughening its stance, with tax officials probing 1.8m individuals or businesses whose cash deposits after demonetization were out of sync with their past tax returns.”
  • “While the quest to unearth Indians’ illicit wealth remains politically popular, economists say it has come at a cost, souring business and consumer sentiment. It is considered one reason why private investment — which has driven past Indian booms — remains stubbornly flat.” 
  • “‘If you’ve got income tax authorities charged up and told to after black money, who is going to invest in a big way?’ said one economist who asked not to be identified given the issue’s sensitivity.”
  • “’The Chinese call this ‘the original sin’ problem,’ he added. ‘Every company has something buried in the past — a sin it has committed. If the government really wants to go after people, it can always find something.’”
  • “Demonetization severely disrupted the property market, previously a favorite parking place for black money and a big growth engine. Real estate prices and sales plunged and, though sales are picking up, there is a huge overhang of unsold inventory.”

Japan

NYT – Kobe Steel’s Falsified Data Is Another Blow to Japan’s Reputation – Jonathan Soble 10/10

  • “For decades, Japanese manufacturers of cars, aircraft and bullet trains have relied on Kobe Steel to provide raw materials for their products, making the steel maker a crucial, if largely invisible, pillar of the economy.”
  • “Now, Kobe Steel has acknowledged falsifying data about the quality of aluminum and copper it sold, setting off a scandal that is reverberating through Japan and beyond, and casting a new shadow over the country’s reputation for precision manufacturing, a mainstay of its economy.”
  • “Companies ranging from the automakers Toyota Motor and Honda Motor to aircraft companies like Boeing and Mitsubishi Heavy Industry said they were investigating the use of rolled aluminum and other materials from Kobe in their products. They also said they were trying to determine if substandard materials had been used in their products and, if so, whether they presented safety hazards.”
  • “Kobe Steel said on Sunday that employees at four of its factories had altered inspection certificates on aluminum and copper products from September 2016 to August this year. The changes, it said, made it look as if the products met manufacturing specifications required by customers — including for vital qualities like tensile strength — when they did not.”
  • “Kobe Steel added that it was examining other possible episodes of data falsification going back 10 years. It did not provide details about the size of the discrepancies it had discovered, making it difficult to immediately determine if they posed a safety threat.”
  • “Kobe Steel’s problem points to ‘a common organization issue,’ said Shin Ushijima, a lawyer who serves as president of the Japan Corporate Governance Network. He drew parallels between Kobe Steel and Takata and Mitsubishi, as well as with financial-reporting improprieties at Toshiba, which admitted to overstating profit in 2015.”
  • “’Boards aren’t doing their jobs,’ he said. ‘This isn’t an issue that can be solved by the president resigning. There needs to be wholesale change.’”
  • “He continued, ‘The Kobe Steel case is a test of whether we’ve learned anything from Toshiba and these other issues.’”

Mexico

FT – Mexicans hope earthquake will shake up corrupt system – Jude Webber 10/9

  • “There are disasters waiting to happen, says Eduardo Reinoso, a civil engineer who has studied compliance with building codes introduced after 1985. He blames not only corruption and incompetence but also a culture of impunity that has encouraged people to build or modify their homes without planning permission because of a belief they can get away with it.”
  • “As Gabriel Guerra, a former diplomat and government official, put it: ‘Our collective negligence and corruption is coming back to bite us where it hurts.’”

October 4, 2017

Perspective

USA Today – $5 to access your own money? ATM fees jump to record high and these cities are the worst – David Carrig 10/2

  • “Among the top 25 metropolitan areas, Pittsburgh residents encountered the highest fees. The top 25 metro areas with the highest average ATM fee, according to Bankrate.com:
    1. Pittsburgh: $5.19
    2. New York: $5.14
    3. Washington D.C.: $5.11
    1. Cleveland: $5.11
    2. Atlanta: $5.05″

Vox – These charts show Fox News really did ignore Puerto Rico’s crisis – Alvin Chang 10/2

Vox – Gun violence in America, explained in 17 maps and charts – German Lopez 10/2

VC – The Most Congested Cities in the World – Jeff Desjardins 10/3

Worthy Insights / Opinion Pieces / Advice

NYT – Nothing Will Change After the Las Vegas Shooting – Steve Israel 10/2

Bloomberg – Puerto Rico Governor’s Dire Warning: Millions May Flee the Island – Jonathan Levin 10/3

  • “You’re not going to get hundreds of thousands of Puerto Ricans moving to the states – you’re going to get millions.” Puerto Rican Governor Ricardo Rossello

Markets / Economy

WSJ – Hurricane Maria Packs a One-Two Punch for Insurance – Paul J. Davies 10/3

China

WSJ – China, With Methodical Discipline, Conjures a Market for Electric Cars – Trefor Moss 10/2

  • “In the U.S. and elsewhere, there is some skepticism about whether electric vehicles will be a significant market soon. China has made up its mind. One goal is to curb pollution and reduce reliance on foreign oil. China’s chief aim, though, is to use the emerging electric market to improve the patchy quality of its domestic auto makers. To that end, it is using industrial-policy measures to create a giant test bed for its companies’ designs and technology.”
  • “Already, Chinese-made models dominate. More than 100 electric models are on the domestic market. Sales of plug-in passenger vehicles reached 351,000 in 2016—nearly half the global total, according to EV-Volumes, a research group that tracks electric-car sales.”
  • “Foreign manufacturers were already making millions of gasoline cars in China annually, but they had held off building electric cars in the country until recently, and imports were discouraged by a 25% tariff. Bill Russo, a former Chrysler executive who is now managing director of auto consultancy Gao Fung Advisory Co. in Shanghai, said they had been reluctant to plunge into a market that didn’t yet offer significant scale.”
  • “Hints of scale are appearing. Sales of plug-in passenger cars in China have increased 40% this year, EV-Volumes said. They will make up 22% of Chinese auto purchases by 2025, projects Bernstein Research, up from 1% to 2% this year.”
  • “Volkswagen AG was firmly committed to diesel engines until it recently announced a sharp shift to embrace electric vehicles after its diesel-emissions scandal forced it to rethink strategy. China accounts for half its revenues, and VW Chief Executive Matthias Müller at last month’s Frankfurt auto show indicated China will help drive VW’s global transformation: ‘China and California are leading the way.’”
  • “Propelled by a China sales target of 1.5 million annual electric cars by 2025, VW will invest $83 billion rolling out 300 electric models world-wide by 2030, he said.”
  • “Some auto makers wonder if China’s electric-car demand growth will slow as the government dials back subsidies, as it has begun doing.”
  • “China began actively promoting electric cars in 2009 by introducing subsidies and setting sales targets. Sales began to take off in 2013. Electric vehicles took center stage in China’s industrial strategy with the 2015 launch of the Made in China 2025 plan, which calls for China to become a world leader in 10 future industries, including electric-vehicle production. China has provided $8 billion in subsidies so far.”
  • “China has gone a step beyond with its incentives. Authorities have guaranteed sales for Chinese makers, in part by buying vehicles for public fleets. Beijing’s municipal government has earmarked $1.3 billion to replace 70,000 city taxicabs with electric models.”
  • “China will have 4.8 million charging points by 2020, the government forecasts, up from 156,000 in March. The U.S. had 43,000 points in June, according to a University of Michigan study.”
  • “At those rates, China has roughly one charging point for every six electric cars, versus about one for every 17 in the U.S. and Norway.”
  • “Beijing’s most persuasive tool—and a reason foreign makers are eager to start producing in China—is restricting license plates for new gasoline-powered cars in seven cities. In Beijing, more than 11 million people typically enter a monthly lottery for 14,000 gasoline-car plates. Shanghai auctions them to the highest bidders. Electric-vehicle buyers in the cities can get tags almost instantly at no cost.”
  • Essentially, cars are going to happen. China has decided.