Tag: Britain

July 2, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Forget Banks and Worry About High Stock Prices – Nir Kaissar 6/29

  • “It’s time for investors to stop fighting the last war. The next downturn most likely won’t be triggered by another meltdown of the financial system.”
  • “Investors didn’t need the Fed to tell them that banks are in better shape than they were a decade ago. The signs are everywhere. Profits have fallen across the industry since the financial crisis, an  indication that banks are taking on less risk. Profit margins for the S&P 500 Financials Index averaged 9.3% from 2008 to 2017, down from an average of 13.8% from 2003 to 2007, the years leading up to the crisis. Return on equity is down to an average of 5.2% from 14.5% over the same periods.”
  • “The biggest of those risks is leverage — or piling on debt to boost profits — and banks have a lot less of it than they used to. The debt-to-equity ratio of the financials index has dropped to 159% as of the first quarter from 563% at the end of 2007. The debt-to-assets ratio has fallen to 19% from 43% over the same period.”
  • “But if the numbers don’t persuade investors that the next crisis won’t look like the last one, then maybe a look at previous bear markets would. In reverse chronological order: The bursting of the dot-com bubble was behind the downturn from 2000 to 2002. A mass panic or newly introduced computerized trading, depending on whom you ask, set off the 1987 crash. Stagflation brought down the market from 1980 to 1982. A global oil embargo hit stocks from 1973 to 1974. I could keep going, but you get the idea.”
  • “There is a common thread running through the scariest episodes: high stock prices. The average cyclically adjusted price-to-earnings, or CAPE, ratio for the S&P 500 has been 18 since 1928, according to numbers compiled by Yale professor Robert Shiller. The five worst bear markets during those nine decades, as measured by peak to trough declines, commenced in 1929, 1937, 1973, 2000 and 2007. The average CAPE ratio on the eve of those downturns was 29 and the median was 27.”
  • “The current CAPE ratio: 32. And it’s never just stocks. Other assets in the U.S. look frothy, too, such as private equity and real estate.”

Bloomberg – How to Avoid Going Broke After Making $650 Million – Barry Ritholtz 6/29

Economist – How oil transformed the Gulf – Special report 6/21

Economist – Why Gulf countries are feuding with Qatar – Special report 6/21

Economist – Saudi Arabia turns against political Islam – Special report 6/23

Pragmatic Capitalism – Let’s Talk About that “Rapidly” Falling Deficit – Cullen Roche 6/29

  • “Don’t be scared Larry (Kudlow), just tell it like it is – you guys are boosting spending, boosting the deficit and the USA can afford it!”

Real Estate

WEF: statista – The world’s most expensive prime property – Adam Jezard 4/12

Cryptocurrency / ICOs

Bloomberg – Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero – Adam Haigh and Eric Lam 6/28

howmuch.net – The ICO Explosion in the Past 5 Years – Raul 6/27

Environment / Science

Bloomberg – The Recycling Game Is Rigged Against You – Faye Flam 6/27

  • “Americans were not set up for success in recycling plastics. Even before China stopped accepting plastic refuse from abroad, 9% of potentially recyclable plastic in the U.S. ended up in landfills – or worse, in the oceans. Europe does a little better, with only 70% getting tossed.”
  • “Why such terrible rates? Partly because some changes that were supposed to make recycling simpler ended up making it almost impossible.”
  • “University of Georgia engineering professor Jenna Jambeck said that indeed, part of the reason China is now refusing to process American and European plastic is that so many people tossed waste into the wrong bin, resulting in a contaminated mix difficult or impossible to recycle.”
  • “In a paper published last week in Science Advances, she and her colleagues calculated that between now and 2030, 111 million metric tons of potentially recyclable plastic will be diverted from Chinese plants into landfills.”
  • “Plastic matters because it takes centuries to degrade, and there’s a lot of it. Jambeck has estimated that the world has produced more than 8 billion metric tons since the 1950s. To help grasp this quantity, paleontologist Jan Zalasiewicz has estimated that this is enough to wrap our entire planet in cling wrap. Others have calculated that it would make four mountains the size of Everest.”
  • “Given what scientists already know how to do, the future could bring a greener, more fool-proof system. Right now, she said, she and other scientists are starting to develop ways to recycle mixtures of plastics – a tough job because many plastics repel one another like oil and water. One of the reasons China imported recycling was that it was possible there to hire cheap labor to sort the different plastic types by hand.” 
  • “Curing the plastic problem is a lot like fighting cancer. Even if everyone stopped smoking, there would still be cancer. And even if we all figure out whether our municipalities accept yogurt containers, plastic waste will still pollute the environment. Compliance won’t be a cure until innovations from the lab set us up for success.”

WIRED – Data Shows Rising Seas Threaten Over 300,000 Homes – Oliver Milman 6/19

  • “Sea level rise driven by climate change is set to pose an existential crisis to many US coastal communities, with new research finding that as many as 311,000 homes face being flooded every two weeks within the next 30 years.”
  • “The UCS used federal data from a high sea level rise scenario projected by the National Oceanic and Atmospheric Administration, and combined it with property data from the online real estate company Zillow to quantify the level of risk across the lower 48 states.”
  • “Under this scenario, where planet-warming emissions are barely constrained and the seas rise by about 6.5 feet globally by the end of the century, 311,000 homes along the US coastline would face flooding on average 26 times a year within the next 30 years—a typical lifespan for a new mortgage.”
  • “The losses would multiply by the end of the century, with the research warning that as many as 2.4 million homes, worth around a trillion dollars, could be put at risk. Low-lying states would be particularly prone, with a million homes in Florida, 250,000 homes in New Jersey and 143,000 homes in New York at risk of chronic flooding by 2100.”
  • “The oceans are rising by about 3 mm a year due to the thermal expansion of seawater that’s warming because of the burning of fossil fuels by humans. The melting of massive glaciers in Greenland and Antarctica is also pushing up the seas—NASA announced last week that the amount of ice lost annually from Antartica has tripled since 2012 to an enormous 241 billion tons a year.”
  • “This slowly unfolding scenario is set to pose wrenching choices for many in the US. Previous research has suggested that about 13 million Americans may have to move due to sea level rise by the end of the century, with landlocked states such as Arizona and Wyoming set for a population surge.”

Agriculture

FT – US farmers plant more soya than corn for first time since 1983 – Gregory Meyer 6/29

  • “Farmers planted 89.6m acres with soya beans this spring, the government reported Friday, surpassing the 89.1m acres planted with corn. The only other year soya topped corn was in 1983, because of a one-off quirk of agricultural policy.”

Britain

NYT – In Britain, Austerity Is Changing Everything – Peter S. Goodman 5/28

  • “After eight years of budget cutting, Britain is looking less like the rest of Europe and more like the United States, with a shrinking welfare state and spreading poverty.”

Japan

FT – Japan’s elderly care bill soaks up worker pay rises – Robin Harding 5/27

  • “Monthly premiums for care insurance have doubled from ¥3,000 to almost ¥6,000 ($55) since the system began in 2000. Meanwhile, the average annual cost of employer-based health insurance is up from ¥386,038 in 2008 to ¥486,042 this year, equivalent to a two percentage point rise in income tax.”
  • “The rise in health and care costs helps to explain why moderate wage growth, after five years of economic stimulus under prime minister Shinzo Abe, is doing so little to boost consumption. It poses a conundrum for the Bank of Japan, which is relying on spending pressure to push inflation towards its 2% objective.”
  • “Japan’s future holds more of the same, especially after 2020, when the baby boom generation starts to reach the age of 75 and needs more care. Recent government figures suggest that by 2040 social insurance costs will rise another 2.5 percentage points to 24% of gross domestic product.”

South America

Axios – It’s nearly impossible to afford a cup of coffee in Venezuela – Stef W. Kight 6/28

  • “Less than two years ago, a cup of coffee cost 450 bolivars in Venezuela. Today, as the nation’s hyperinflation continues to skyrocket, a cafe con leche costs 1 million bolivars — or a mere 29 U.S. cents, according to Bloomberg.”

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May 7, 2018

Perspective

Economist – Remittances 4/26

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

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

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

Markets / Economy

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

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

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

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

  • If that wasn’t enough…

Real Estate

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

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

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

Health / Medicine

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

Automotive

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

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

South America

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

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

April 24, 2018

Perspective

Business Insider – The most disproportionately popular college major in every US state – Mark Abadi and Jenny Cheng 4/16

Tax Foundation – How High are Spirits Taxes in Your State – Morgan Scarboro 3/22

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Trading One Risk For Another – Ben Carlson 4/22

  • “In other words, investing is hard. If it was easy it would just be called earning money, not investing.
  • “You cannot eradicate risk in a portfolio. You can only choose when and how to accept risk in different variations. Doing so will always involve balance and trade-offs.”

FT – US companies count costs and benefits of Trump tax law – Rochelle Toplensky, Patrick Mathurin, and Andrew Edgecliffe-Johnson 4/22

  • “A Financial Times analysis of how the Tax Cuts and Jobs Act (TCJA) has affected the accounts of the US’s 100 largest listed companies shows the truth of that sentiment, for Citigroup and most of its big business peers.” 
  • “In all, the FT analysis shows, 61 of the top 100 quoted companies have reported an initial net income tax expense, amounting to a combined $168bn. The remaining 39 have reported one-off net tax benefits worth a total of $150bn, meaning that the biggest overhaul of the tax code for a generation has cut $18bn from the current book value of its leading public companies.”
  • “The charges differ widely from company to company, depending on the tax provisions they had made before the reforms. The most significant adjustments reflect a revaluation of deferred tax balances under the new, lower headline rate. A company that had deferred taxes on past profits would record a gain because it will now pay the new lower rate; conversely, a group carrying forward previous losses to offset against future tax bills would book a hit to its value.” 
  • “The biggest one-off benefit of $28bn was to Berkshire Hathaway, Warren Buffett’s holding company, which will pay the lower tax rate on decades of unrealized capital gains — if he ever sells his investments. While the accounting gains ‘did not come from anything we accomplished at Berkshire’, they were nonetheless real, Mr Buffett assured shareholders.” 

NYT – Public Servants Are Losing Their Foothold in the Middle Class – Patricia Cohen and Robert Gebeloff 4/22

Markets / Economy

Visual Capitalist – BoAML – Top Asset Class of 2018 So Far – Jeff Desjardins 4/23

Real Estate

WSJ – Daily Shot: FRED – US Home Equity Loans 4/23

WEF – Berlin has the world’s fastest rising city property prices – Rob Smith 4/16

Energy

eia – Technically Recoverable Shale Oil and Shale Gas Resources – June 2013

Forbes – Who Is Buying U.S. Liquefied Natural Gas? – Jude Clemente 4/17

Cryptocurrency / ICOs

WSJ – Daily Shot: Barchart – Bitcoin 4/23

  • “With last week’s breakout sustained, Bitcoin is approaching $9k (the blue line is the 200d moving average).”

Britain

Bloomberg – U.K. Consumers Stay Under Pressure Even as Pay Squeeze Nears End – David Goodman 4/17

Europe

NYT – Smothered by Smog, Polish Cities Rank Among Europe’s Dirtiest – Maciek Nabrdalik and Marc Santora 4/22

  • “Poland has some the most polluted air in all of the European Union, and 33 of its 50 dirtiest cities. Not even mountain retreats are immune.” 
  • “The problem is largely a result of the country’s love affair with coal… Some 19 million people rely on coal for heat in winter. In all of the European Union, 80% of private homes using coal are in Poland.” 
  • “Coal, commonly referred to as “black gold,” is seen as a patriotic alternative to Russian gas in this country, which broke away from Soviet control three decades ago and remains deeply suspicious of its neighbor to the east. Burning coal is part of daily life.” 
  • “Some 48,000 Poles are estimated to die annually from illnesses related to poor air quality. Greenpeace estimated that 62% of Poland’s kindergartens are in heavily polluted areas.” 

South America

Reuters – Under military rule, Venezuela oil workers quit in a stampede – Deisy Buitrago and Alexandra Ulmer 4/16

Other Interesting Links

Civil Beat – Hawaii Businesses Are Making Billions Off The Military – Nick Grube 4/23

April 9, 2018

Trying a new approach. Thoughts?

 

Trade War. Chinese Aviation. Japan Sex Industry. Facebook. Investment Management. Interest Rates. Solar Installations. US Treasuries. Shipping. Ireland. Britain. Former presidents Park and Lula.

Continue reading “April 9, 2018”

April 2, 2018

Perspective

Visual Capitalist – A Deep Dive Into the World’s Oceans, Lakes, and Drill Holes – Nick Routley 3/31

Worthy Insights / Opinion Pieces / Advice

FT – Tech stock woes threaten Wall Street bull market – Richard Waters, Gregory Meyer, and Barney Jopson 3/30

  • “Rising political anger, a worry that the Big Tech boom will soon have run its course and the sense that an economic turning point may have been reached in the US have combined this week to threaten one of the underpinnings of the stock market boom.”
  • “The wild two-week swing in tech stocks, which included a bloodbath on Tuesday, began with reports of a massive leak of personal data from Facebook, and was extended by fears of a White House vendetta against Amazon.”
  • “Since then, the social networking company’s shares have dropped 14%, losing about $75bn in stock market value and wiping $10bn from the personal fortune of co-founder Mark Zuckerberg. Amazon, which found itself on the receiving end of another tweet from President Donald Trump on Thursday, has shed $61bn, Apple $54bn, Alphabet, parent of Google, $62bn, and Microsoft $26bn.”
  • “Despite the volatility that crept into a group of stocks that have led the market higher, Big Tech’s loyal army of fans among Wall Street analysts remained bullish.”
  • “After years in which it has paid to have a ‘buy’ recommendation on Big Tech, stock market analysts have largely reiterated their confidence in the sector’s fundamentals, despite the ructions. For Facebook, 44 of 48 analysts recommend buying the stock, according to Bloomberg data. Forty-eight of the 51 analysts covering Amazon rate it a buy.”
  • “Investors have been nervous for months that the growing political backlash against Big Tech would lead to a new wave of regulations or taxes, though they did not have anything specific to attach their fears to.”
  • “Now they do. The news that the personal information of some 50m Facebook users had been leaked to a data analysis firm that helped the Trump presidential campaign added to a wave of anger against the social media company on both sides of the Atlantic.”
  • “The wave of bad news in tech has also reinvigorated Wall Street’s short sellers — investors who sell shares they do not own in the hopes that the price will fall. Ihor Dusaniwsky, head of predictive analytics at S3 Partners, a financial analytics company, said Facebook, Amazon, Apple, Netflix and Google are now among the top 10 most-shorted US stocks, as measured by market value. The total short position in the five stocks is worth $34.9bn.”

Britain

FT – Quantitative easing ‘reduced UK wealth inequality’, says BoE – Gavin Jackson 3/31

  • “Wealth inequality in the UK was reduced by quantitative easing after the financial crisis, according research by staff at the Bank of England, contradicting the widespread belief that the policy concentrated wealth in fewer hands.”
  • “In a working paper last week, researchers claimed the UK’s Gini coefficient, a commonly used measure of wealth inequality, declined slightly in comparison with a scenario where the central bank did not change its monetary policy following the crisis.”
  • “…the bank’s researchers said the effect on the housing market, which saw prices continue to rise, meant that those on lower and middle incomes saw a bigger proportional increase in their net worth than the wealthiest households did.”
  • “Housing wealth is the most equally distributed form of wealth and increases in financial and pension wealth, which are more unequally distributed, were not enough to offset the effect of higher house prices.”
  • “But the BoE also acknowledged that the cash gains for the wealthiest households were much larger than for poorer families.”
  • “Every age group and income group benefited from the policies compared to if it had not changed policy following the financial crisis, researchers said.”
  • “Younger workers earned more because lower interest rates helped to support economic growth and employment and avoid a deeper recession, while older families, who often rely on interest on savings, were more likely to see increases in their net worth.”
  • “The researchers estimated that a third of households were £500 worse off because of lower interest income but this fell to 4% once all effects on financial wealth, pension wealth and property values were included.”

 

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 5, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg Gadfly – Still Clutching an Old iPhone? You’re Not Alone – Shira Ovide 1/4

Bloomberg_Smartphone sales growth_1-4-18

Bloomberg Businessweek – What If China Is Exempt From the Laws of Economics? – Michael Schuman 1/24

Bloomberg Businessweek – How Hedge Funds (Secretly) Get Their Way in Washington – Zachary Mider and Ben Elgin 1/25

FT – Forget bitcoin, give me old-fashioned gold as an inflation hedge – Merryn Somerset Webb 2/1

  • Ms. Webb offers an interesting perspective at why inflation may not be that far away. Why…because the primary source of deflation – China – appears to have changed tact.
  • “For years, party officials have been incentivized to force growth out of their regions, regardless of the effects on prices, global macroeconomics or, for that matter, pollution. But in the party conference in October, Xi Jinping shifted emphasis.”
  • “Instead of focusing on growth, China’s leader talked of ‘three tough battles’: against preventing major risks (mainly financial — the new target is to be ‘further deleveraging’); poverty (Xi fancies a ‘moderately prosperous society’ in all respects); and pollution (he wants to see the sky blue again).”
  • “The result has been pretty instant. Almost as the delegates headed home, say the analysts at Gavekal, prices of natural gas (a ‘clean fuel’) doubled; steel output stalled; and cement sector output actually fell even as demand for it and hence prices rose. China doesn’t seem to be adding new capacity to the global economy in the way that it was and that should mean it isn’t exporting deflation to the rest of the world any more either.”
  • “That is a dynamic that is arguably beginning to show up everywhere else. The slack is disappearing. There is no spare capacity left in Japan (or you would see new cuts to it). Industrial production in the US hit a record high in December, despite the US being too busy with buybacks and financial engineering over the past decade to build new capacity. Manufacturing output in the UK is at its highest in 10 years.”
  • “This could all lead us to several interesting conclusions. The first, highlighted by Gavekal, is that it is an explanation for the way stock markets in countries that have been hampered with too much productive space in the past are suddenly breaking out. See China, Japan and Korea — markets you might want to stick with for a bit.”
  • “The second is that, guess what, the boom in the US might not be entirely down to Donald Trump’s policies. The factories could be humming because global capacity constraints are being hit rather than because he’s the best economic manager ever. And the third is that the real inflation our great leaders (the central banks) think is impossible however much they might print, isn’t impossible at all.”

Markets / Economy

NYT – Cash-Strapped Chinese Giant Taps a New Money Source: Its Workers – Alexandra Stevenson and Cao Li 2/1

  • “Just before payday, an email went out to employees from top executives: Give us your money, and we’ll make it worth your while.”
  • “It was one of many pitches by HNA Group, a Chinese conglomerate struggling under an estimated $90 billion in debt accumulated during a global shopping spree that included buying stakes in multinationals like Hilton Hotels and Deutsche Bank.”
  • “The company, in an email, advertised an ’employee treasure’ product with an 8.5% return if workers handed over $1,500. A similar one dangled 9%. A third mentioned a return as high as 40% if employees ponied up $15,000.”
  • “These pitches, more than a dozen of which were reviewed by The New York Times, were not part of an employee stock program. Instead, they appear to be high interest loans, with the company as borrower and its workers as lenders.”
  • “The conglomerate has seen its borrowing costs rise sharply on the global bond market in recent months, an indication that some investors are increasingly worried about the company’s ability to pay its debts. Seven public companies under the umbrella of HNA have suspended trading of their stock, suggesting that big announcements that could affect key businesses are in the works. The company is also starting to sell assets.”
  • “It is unclear how much money HNA has raised from employees. The company has long offered such investments to its employees as a way to incentivize them and to share in the company’s success, Thomas A. Clare, an attorney for HNA, said in an email.”
  • “Companies around the world allow employees to buy stock or provide other ways for workers to invest in the business. But the HNA pitches do not offer direct ownership stakes in the business.”
  • “The offers reviewed by The Times had similar hallmarks, namely high returns for funding certain operations.”
  • “Chinese companies have often turned to individual investors or their own workers to raise money. But such moves, according to some China finance experts, can signal problems.”
  • “’It’s a desperation measure when companies really have no other source of financing and they are stuck,’ said Anne Stevenson-Yang, co-founder of J Capital Research, a corporate research firm.”
  • “A small company in the southeastern Chinese city of Wenzhou called Wenzhou Liren Educational Group made national news in 2011 after it went bankrupt and was unable to pay nearly $790 million it borrowed from employees and local residents. In 2015, an online peer-to-peer platform called Great Group pressured employees to buy investments in order to raise funds when it found itself in a financial bind, the Chinese news media widely reported. The two companies did not respond to requests for comment.”
  • “As HNA has faced more questions about its operations by both the local and foreign media, the company has issued groupwide emails urging employees to not speak to reporters. In January, HNA’s human resources department told employees they would be required to take a test on how to deal with the news media, according to an internal document reviewed by The Times.”

Real Estate

Bloomberg – Rental Glut Makes NYC the Worst Performer for Equity Residential – Oshrat Carmiel 1/31

Energy

eia – U.S. monthly crude oil production exceeds 10 million barrels per day, highest since 1970 – Jack Perrin and Emily Geary 2/1

eia_US monthly crude oil production_2-1-18

eia_US monthly crude oil production by production method_2-1-18

eia_US monthly crude oil production by location_2-1-18

Reuters – Suncor to cut 400 jobs as it rolls out self-driving trucks – Julie Gordon 1/31

  • “Suncor Energy Inc said on Wednesday that it expected to cut some 400 heavy-equipment operator positions over the next six years as it rolls out a fleet of self-driving trucks at its Canadian oil sand mining operations.”

Finance

Bloomberg – Tesla Sells $546 Million of Bonds as Buyers Can’t Get Enough – Claire Boston 1/31

Cryptocurrency

WSJ – Daily Shot: Investing.com – Bitcoin 2/1

WSJ_Daily Shot_Investing.com - Bitcoin_2-1-18

WSJ – Bitcoin Is Falling Fast, Losing More Than Half Its Value in Six Weeks – Steven Russolillo and Kenan Machado 2/2

WSJ_Bitcoin sell-offs_2-1-18

Britain

FT – Chinese investments in UK fail to materialize – Andy Bounds and Tom Mitchell 2/1

  • “Even as Theresa May inks new deals in Beijing, English cities left waiting for cash.”

China

Bloomberg Businessweek – China Starts Experiment to Tame Its Wild Property Market – Emma Dong and Paul Panckhurst 1/24

Bloomberg_China housing price gains in comparison_1-24-18

WSJ – China’s Bad Banks Face a Case of Indigestion – Anjani Trivedi 2/2

India

Economist – Low-caste Indians are better off than ever-but that’s not saying much 1/25

Economist_Indian caste statistics_1-25-18

South America

FT – Bolivar rallies after Venezuela unifies exchange rates – Gideon Long 2/1

New Zealand

FT – British and US migrants flock to New Zealand – Jamie Smyth 2/1

  • “Immigration surges after Brexit vote and Trump election shocks.”

February 1, 2018

Perspective

Bloomberg – Marijuana Mapped: the Price of Weed Across the U.S. – Jen Skerritt 1/30

WSJ – Daily Shot: US Real Disposable Income and Consumer Spending 1/30

Pew – Remittances from abroad are major economic assets for some developing countries – Drew Desilver 1/29

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – What To Do When Your Stocks Are Soaring – Ben Carlson 1/30

Real Estate

WSJ – Daily Shot: FRED – US Homeownership Rate 1/30

WSJ – Daily Shot: FRED – Change in Owner Occupied Housing Units 1/30

WSJ – Daily Shot: FRED – California Homeownership Rate 1/30

Energy

eia – U.S. crude oil exports increased following hurricane – related refinery disruptions – Corina Ricker 1/29

Cryptocurrency

WSJ – Bitcoin Is Having Its Worst Month in Three Years – Steven Russolillo and Eun-Young Jeong 1/31

WSJ – Daily Shot: Investing.com – Bitcoin 1/29

Bloomberg Gadfly – Crypto Trading Needs a New Model – Tim Culpan 1/28

  • “Many don’t understand how these exchanges work, and that’s why hacking is such a problem.”
  • “When someone buys cryptocurrency from a centralized exchange — I’m going to stick with Bitcoin (BTC) as an example — they swap fiat money for the nominated BTC. But that coin doesn’t get sent to the customer. If it’s bought from a non-exchange seller, then it comes into the exchange’s own wallet, and gets held there. A ledger entry is made, and the customer gets an IOU. If the seller is on the same exchange platform, no BTC even needs to be shifted, the exchange simply changes its accounts to note one less BTC for the seller, one more for the buyer.”
  • “The customer only actually holds the BTC if they then go through the process of sending it from their exchange wallet to another wallet, for example on their smartphone, and that usually incurs fees. Given the large amount of BTC held by just a few wallets — likely owned by exchanges —  it’s clear many customers don’t bother to take possession of the BTC themselves.”
  • “That’s why hacking is such a problem. Centralized exchanges are acting as custodians for a commodity that can’t be copied or double-spent, in an environment where possession is nine-tenths of the law, and using infrastructure that offers a certain amount of anonymity.”
  • “One obvious solution is to boost security protocols. The use of a cold wallet — one not connected to the internet — is now a common tactic. But clearly not all exchanges are practicing good digital hygiene.”
  • “Instead, I see decentralized exchanges becoming more popular. As with equity trading, such a platform is merely the place for a buyer and a seller to meet, and for prices to be discovered. The exchange can play a certain settlement and custodian role, but with blockchain technology, this can be simplified to the point of virtual elimination — atomic transactions could come into play here.”

Africa

NYT – Dangerously Low on Water, Cape Town Now Faces ‘Day Zero’ – Norimitsu Onishi and Somini Sengupta 1/30

  • “…after a three-year drought, considered the worst in over a century, South African officials say Cape Town is now at serious risk of becoming one of the few major cities in the world to lose piped water to homes and most businesses.”

Britain

FT – Property sales in London fall 20% in four years – James Pickford 1/30

January 26, 2018

Perspective

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

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

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

Markets / Economy

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

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

Cryptocurrency

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

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

Tech

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

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

Environment / Science

Economist – How China cut its air pollution 1/25

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

Health / Medicine

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

  • YouTube video

Shipping

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

  • Video

Britain

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

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

China

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

South America

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

  • Reforms in Argentina have been working.

December 21, 2017

Perspective

Visual Capitalist – Sellbrite: Breaking Down How Amazon Makes Money – Jeff Desjardins 12/19

NYT – How the Winklevoss Twins Found Vindication in a Bitcoin Fortune – Nathaniel Popper 12/19

WSJ – Daily Shot: BMO & statista – US States with Highest rates of debt collection 12/19

Worthy Insights / Opinion Pieces / Advice

FT – The long and short of H&M’s travails – Richard Milne 12/19

  • “Concerns rise that family-controlled Swedish retailer needs radical change.”

ZeroHedge – China Systemic Risk: Liquidity Problem Surfaces at HNA Group Less Than Two Weeks After Company’s Denial 12/18

Markets / Economy

Bloomberg Businessweek – Fees Rise for Underfunded Pensions – Katherine Chiglinsky and Brandon Kochkodin 12/14

  • “The largest pension plans held by S&P 500 companies face a $348 billion funding gap. As a result, they’re paying higher annual fees to the U.S. Pension Benefit Guaranty Corp., the government agency that backstops plans. ‘There’s increased awareness that an underfunded plan imposes risk on employees, it imposes risk on shareholders, and it’s getting more expensive,’ says Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School and executive director of the Pension Research Council.”
  • “Only about two dozen companies in the S&P 500 have overfunded pensions. Nine of them are banks.”
  • “Offloading risk isn’t on the table for every company. Insurers don’t take on obligations from underfunded plans…”

CNN Money – SEC suspends trading of red-hot bitcoin stock – Paul R. La Monica 12/19

WSJ – Cryptocurrency Exchange Collapses, Files for Bankruptcy After Second Hack – Eun-Young Jeong and Steven Russolillo 12/19

  • “Yaipan, which operates South Korea’s Youbit, said latest security breach caused it to lose 17% of its total assets.”

Bloomberg – South Korean Crypto Exchange Files for Bankruptcy After Hack – Todd White and Kyungjin Yoo 12/19

  • “Korea has emerged as a sort of ground zero for the global crypto-mania. So many Koreans have embraced bitcoin that the prime minister recently warned that cryptocurrencies might corrupt the nation’s youth. The craze has spread so far that, in Korea, bitcoin is trading at a premium over prevailing international rates.”

Real Estate

Yahoo Finance – The hottest housing market of 2017 – Amanda Fung 12/20

  • Spoiler alert: it’s Seattle.

Tech

ARS Technica – Currency-mining Android malware is so aggressive it can physically harm phones – Dan Goodin 12/19

Britain

FT – Help! My house has been hijacked – Lucy Warwick-Ching 12/19

  • “Fake tenants adopt a property owner’s identity and sell the property.”

Europe

WSJ – EU Triggers ‘Nuclear Option’ in Fight With Poland – Valentina Pop 12/20

Other Interesting Links

NYT – ‘Porch Pirates’ Steal Holiday Packages as They Pile Up at Homes – Nick Wingfield 12/19