Tag: China

June 19, 2018

Worthy Insights / Opinion Pieces / Advice

FT – Watch the Fed’s balance sheet, not interest rates – Gillian Tett 6/7

  • “The US central bank’s unwinding has contributed to turmoil in emerging markets.”

FT – China is winning the global tech race – Michael Moritz 6/17

FT – Donald Trump’s trade tirade shows his mastery of the message – Rana Foroohar 6/17

Polygon – What if Star Wars never happened? – Kevin Lincoln 6/7

  • “Imagining a world where George Lucas’ space fantasy didn’t revolutionize Hollywood.”

Markets / Economy

WSJ – Daily Shot: indeed – Older workers are the gig economy 6/18

Energy

FT Energy Source: BP – World Fuel Sources by proportionate share – Ed Crooks 6/17

LA Times – Shale country is out of workers. That means $140,000 for a truck driver and 100% pay hikes – David Wethe 6/8

Finance

WSJ – The Finance Industry’s Incredible Ability to Keep the Money Rolling In – Paul J. Davies 6/15

  • “Banks, brokers and money managers have kept their revenue steady for 130 years.”

Cryptocurrency / ICOs

FT – Who really owns bitcoin now? – Hannah Murphy 6/7

  • “Initially in the crypto space, you had people who really understood the technology. Then there was a typical bandwagon investor situation and you know how it ends — and it did.” – Campbell Harvey, finance professor at Duke University and an investment strategy adviser for Man Group.
  • “But how many have gained — and lost — from the bitcoin bubble? Exclusive data from blockchain research company Chainalysis seen by the FT provides some tantalizing answers.”
  • “The Chainalysis data quantifies this distinct shift in the make-up of bitcoin owners from longer-term investors — those who held the asset for more than a year — to short-term investors who have traded more recently, by analyzing how regularly coins have changed hands.”
  • “Last November — before December’s pricing peak — the amount of bitcoin held for investment was roughly three times that held by traders.”
  • “However, by April 2018, the data show the amount held by investors — about 6m bitcoin — was much closer to the amount held by short-term speculators, with 5.1m bitcoin.”
  • Indeed, Chainalysis estimates that longer-term holders sold at least $30bn worth of bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.
  • “’This was an exceptional transfer of wealth,’ says Philip Gradwell, Chainalysis’ chief economist, who dubs the past six months as bitcoin’s ‘liquidity event’.”
  • “Mr Gradwell argues that this sudden injection of liquidity — the amount of bitcoin available for trading rose by close to 60% over that period — has been a ‘fundamental driver’ behind the recent price decline. At the same time, bitcoin trading volumes have now fallen in tandem with the prices, from close to $4bn daily in December to $1bn today.”
  • “So will the price of bitcoin ever surpass December’s peak? Part of the answer lies in who holds bitcoin now that the hype has died down.”
  • “Born in 2009 in the wake of the financial crisis, bitcoin is rooted in a libertarian quest for a means of exchange that is unshackled from the central banking system. Proponents — among them, computer experts and political activists — heralded the arrival of an alternative monetary system that could replace fiat currency.”
  • “But despite the recent crypto boom, there are few signs that this is happening. According to research published this month by Morgan Stanley, only four of the top 500 US e-commerce merchants accepted cryptocurrencies in the first quarter of 2018, compared with three at the beginning of 2017.”
  • “Chainalysis notes that the ‘vast majority’ of transactions it analyzed showed bitcoin being received from exchanges and rarely sent to merchant services to pay for goods or services.”
  • “Only a finite number of coin — 21m — can be created. Of this, about 4m are yet to be mined. Just as physical coins can be lost down the back of a sofa, so can bitcoins if users lose or forget the passwords needed to access their online wallets. The Chainalysis data separates out coins it deems to be lost or unused for years — which total 3.7m bitcoin, worth about $28bn.”
  • “’Speculation remains the primary use case for these digital assets; merchant or institutional adoption does not appear to be a primary driver of price,’ says Preston Byrne, an English structured finance lawyer and cryptocurrency observer.”
  • “Given this breakdown in bitcoin owners, most market watchers do not rule out another rapid price run-up. However, they say this would likely be the random movement of pure speculation or market manipulation rather than anything else.”
  • “’It’s very important to stress, this is not in any sense a rational market,’ says David Gerard, the author of Attack of the 50 Foot Blockchain.”
  • “’It’s very thinly traded, very badly structured . . . and it’s stupendously manipulated,’ he adds. ‘Anyone who goes in not realizing just how manipulated the crypto markets are will get skinned.’”
  • “The Chainalysis data also show that the bitcoin marketplace is skewed in terms of wealth distribution. A small cluster of investors — known colloquially as ‘whales’ — capture a hefty proportion of the market, which stands at odds with bitcoin’s mission to democratize finance. This brings its own risks.”
  • “Overall, some 1,600 bitcoin wallets — managed by both speculators and investors — contained at least 1,000 bitcoin each in April, according to Chainalysis, collectively holding nearly 5m bitcoin, or close to a third of the available total.”
  • “Of those, just under 100 wallets owned by longer-term investors contained between 10,000 and 100,000 bitcoin — so between $75m and $750m at today’s prices.”
  • “Nevertheless, some point out that the excitement and influx of fresh funds into the market has allowed its infrastructure to mature — albeit gradually — which could be a boon for those looking to trade bitcoin more safely in future.”
  • “Much of the future of bitcoin trading will depend on the approach that regulators take, experts say. There are stirrings across the world, though to date, little coherence. Asian financial centers such as Tokyo are now regulating crypto exchanges, while China has banned them outright. Meanwhile, the US Securities and Exchange Commission last month announced a criminal probe into potential bitcoin price manipulation.”
  • “Banks in particular have been reticent to engage with cryptocurrencies and the companies that handle them, partly due to the difficulty of conducting anti-money laundering checks on transactions.”
  • “’Bank compliance officers really, really hate cryptos . . . be prepared to demonstrate the provenance of every penny from every crypto,’ says Mr Gerard.”
  • “Any more widespread adoption of bitcoin would need regulators, central banks and tax regulators to allow the transfer of wealth movement from the current financial system into the new one, says Gavin Brown, senior lecturer in financial economics at Manchester Metropolitan University and director of cryptocurrency hedge fund Blockchain Capital.”

Environment / Science

Quartz – To hit climate goals, Bill Gates and his billionaire friends are betting on energy storage – Akshat Rathi 6/12

China

FT – Beijing leans on lenders to back debt-hit HNA’s bond sale – Lucy Hornby and Sherry Fei Ju 6/15

  • “Chinese banks have been urged by government officials to ‘support’ bonds issued by HNA as the troubled finance-to-aviation conglomerate tries to extricate itself from a massive debt burden racked up during an acquisition binge.”
  • “HNA plans to issue Rmb4bn ($620m) in domestic bonds, paying interest of 6.5-7.5%.”

Other Interesting Links

Bloomberg – It’s Billionaires at the Gate as Ultra-Rich Muscle In on Private Equity – Simone Foxman and Sonali Basak 6/11

WSJ – Daily Shot: Plastic Surgery Portal – Most Searched Plastic Surgery Procedures by State 6/18

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June 18, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Could Ocean’s 8 Actually Work? – James Tarmy 6/5

  • “Why stealing giant diamonds is a terrible, no good, very bad idea.”

Bloomberg Businessweek – Tears ‘R’ Us: The World’s Biggest Toy Store Didn’t Have to Die – Susan Berfield, Eliza Ronalds-Hannon, Matthew Townsend, and Lauren Coleman-Lochner 6/6

FT – Trump is trading on the protectionist mood – Rana Foroohar 6/10

  • “When even centrists are circling the wagons, we know we have entered a different world.”

FT – Forecasters have an awful record in predicting energy markets – Nick Butler 6/14

  • “Wider uncertainty increases appeal of large, low-cost power projects.”

WSJ – The Stock-Market Price Can Be Wrong. Very Wrong. – Jason Zweig 6/15

  • “Researchers have caught investors in the act of wildly – and unnecessarily – overpaying for a stock.”

WSJ – Venezuela’s Long Road to Ruin – Mary Anastasia O’Grady 6/10

  • “Few countries have provided such a perfect example of socialist policies in practice.”

Markets / Economy

NYT – Power Companies’ Mistakes Can Cost Billions. Who Should Pay? – Ivan Penn 6/14

  • “Utilities say they must be shielded from liability or the electric grid will suffer. Critics say that puts the burden on ratepayers, not investors.”

Real Estate

WSJ – Daily Shot: Bianco Research – Value of US Real Estate relative to GDP 6/15

WSJ – Daily Shot: John Burns RE Consulting – Burns Home Value Index 6/15

WSJ – Daily Shot: John Burns RE Consulting – Burns Intrinsic Home Value Index 6/15

Energy

WSJ – Global Investment in Wind and Solar Energy Is Outshining Fossil Fuels – Russell Gold 6/11

Finance

WSJ – Daily Shot: MagnifyMoney – Auto Loan Rates vs. Fed Funds Rate 6/15

WSJ – Daily Shot: MagnifyMoney – Student Loan Rates vs. Fed Funds Rate 6/15

Fishing

NYT – In the Philippines, Dynamite Fishing Decimates Entire Ocean Food Chains – Aurora Almendral 6/15

Construction

NYT – Piece by Piece, a Factory-Made Answer for a Housing Squeeze – Conor Dougherty 6/7

  • “The global construction industry is a $10 trillion behemoth whose structures determine where people live, how they get to work and what cities look like. It is also one of the world’s least efficient businesses. The construction productivity rate — how much building workers do for each hour of labor they put in — has been flat since 1945, according to the McKinsey Global Institute. Over that period, sectors like agriculture, manufacturing and retail saw their productivity rates surge by as much as 1,500%. In other words, while the rest of the economy has been supercharged by machines, computers and robots, construction companies are about as efficient as they were in World War II.”

WSJ – Historic Rise in Lumber Costs Ripples Through Economy – Ryan Dezember 6/5

Education

WSJ – Judges Wouldn’t Consider Forgiving Crippling Student Loans – Until Now – Katy Stech Ferek 6/14

  • “For decades, college debt was immune from the bankruptcy process. Judges are actively seeking ways to help debtors.”

Africa

NYT – Corruption Gutted South Africa’s Tax Agency. Now the Nation Is Paying the Price. – Selam Gebrekidan and Norimitsu Onishi 6/10

Britain

FT – Average-sized English homes too pricey for average earners – Judith Evans 6/15

China

FT – Tycoon abducted by China works with authorities to sell assets – Don Weinland and Lucy Hornby 6/10

  • “Xiao Jianhua (Tomorrow Group company) said to be detained in Shanghai a year after being seized in Hong Kong.”

Nikkei Asian Review – How Beijing is winning control of the South China Sea – Simon Roughneen 6/13

  • “Erratic US policy and fraying alliances give China a free hand.”
  • “What China is winning is de facto control of nearly the entire South China Sea, including all activities and resources in it, despite the other surrounding Southeast Asian states’ respective legal rights and entitlements under international law.” – Jay Batongbacal, director of the University of the Philippines Institute for Maritime Affairs and Law of the Sea
  • “At stake is the huge commercial and military leverage that comes with controlling one of the world’s most important shipping lanes, through which up to $5 trillion worth of trade passes each year.”

Europe

Bloomberg Businessweek – Italy’s Young Populists Are Coddling the Old – and Holding the Country Back – Peter Coy 6/6

  • “The country’s economic output is smaller now than it was in 2004, and employment policies are skewed to protecting jobs, not creating them. The number of Italians registered as living abroad rose 60% from 2006 to 2017, to almost 5 million. Among those who stay, it’s common for unemployed young people to live with their parents instead of starting their own families, which is one reason the country has one of the world’s lowest birthrates.”

South America

NYT – Workers Flee and Thieves Loot Venezuela’s Reeling Oil Giant – William Neuman and Clifford Krauss 6/14

Other Interesting Links

Tax Foundation – How High Are Beer Taxes in Your State? – Katherine Loughead 5/24

June 15, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – In investing, as in poker, following rules works best – Buttonwood 5/31

Markets / Economy

Economist – Central banks holdings of domestic government debt 5/31

WSJ – ECB to End Bond-Buying Program in December as Crisis-Era Policies Wind Down – Tom Fairless and Brian Blackstone 6/14

  • “The European Central Bank is closing a chapter on one controversial policy, government bond purchases, while extending the life of another: negative interest rates.”
  • “The central bank Thursday laid out plans to wind down its giant bond-buying program by the end of this year, but said it likely would wait ‘at least through the summer of 2019’ before raising its deposit rate, now at minus 0.4%.”

WSJ – Daily Shot: Deutsche Bank – US Budget Deficit Funding and % Holdings 6/14

Real Estate

WSJ – Daily Shot: Bloomberg – World’s Most Expensive Housing Markets Relative to Salary 6/12

WSJ – Daily Shot: Mary Meeker Internet Trends 2018 – Airbnb vs Hotel ADR 5/31

Wolf Street – Toronoto’s House Price Bubble Not Fun Anymore – Wolf Richter 6/4

Energy

WSJ – Daily Shot: US Total Crude Oil Production 6/14

Finance

FT – US fundraising for ‘blank cheque’ buyout vehicles hits record – Nicole Bullock 6/13

  • “Funds have been raised at a record rate in the US this year for shell companies that offer a ‘blank cheque’ to sponsors to pursue takeovers, providing further evidence of the rehabilitation of a controversial tool that waned in the wake of the financial crisis.”
  • “The so-called special purpose acquisition companies, or spacs, have raised $4.5bn so far in 2018 — the largest amount for this type of fundraising in the period, according to Dealogic, which began recording the deals in 1995. That followed a brisk 2017, the second strongest year on record with nearly $10bn sold.”
  • “The funds are placed in an interest-bearing account until a target is identified — and spac investors can get their money back if they do not approve of the acquisition. They are basically a bet that the sponsors can find a good company at a reasonable price.”
  • “Spacs offer investors, often hedge funds, a cash proxy with the option of the acquisition. Sponsors get a 20% stake in the acquired company, if investors approve it, for a nominal amount of money.”

WSJ – Daily Shot: BlackRock – Four big trends to drive ETF growth 5/31

Cryptocurrency / ICOs

WSJ – Daily Shot: Bianco Research – Cryptocurrency Market Caps as of June 11, 2018 6/14

Environment / Science

FT – Nikkei Asian Review: Thailand falls behind in global battle with plastic waste – George Styllis 6/13

  • “’Beating plastic pollution’ was the theme of World Environment Day on June 5, but Thailand is falling behind Asian and European countries in the fight against plastic waste.”
  • “The issue has been brought into focus after a dead whale was found last month to have swallowed 80 plastic bags.”
  • “The whale, found in Songkhla province, served as a reminder of Thailand’s problem with plastic, and the abject failures of the government and retail industry to bring the nation’s environmental consciousness in line with the rest of the world’s.”
  • “Thailand is the world’s sixth biggest contributor to ocean waste, while China is the largest. Thailand generates 1.03m tons of plastic waste per year, with over 3% of that finding its way into the ocean, Tara Buakamsri, Thailand country director for Greenpeace, told the Nikkei Asian Review.”
  • “Of the country’s total waste, plastic accounts for 12% — higher than China’s at 11%. A survey by the government in 2017 found that, on average, Thais each use eight plastic bags per day, which equates to about 198bn per year.”

China

WSJ – Daily Shot: PIMCO – China’s Contribution to Global Credit Creation 6/12

WSJ – Daily Shot: Trading Economics – Hong Kong Home Ownership Rate 6/12

May 21, 2018

Perspective

WSJ – U.S. Births Hit Lowest Number Since 1987 – Janet Adamy 5/17

  • “The figures suggest that a number of women who put off having babies after the 2007-09 recession are forgoing them altogether. Kenneth M. Johnson, senior demographer at the University of New Hampshire, estimates 4.8 million fewer babies were born after the recession than would have been born had fertility rates stayed at prerecession levels.”
  • “One bright spot in Thursday’s figures, which are preliminary, is a continued sharp decline in teen births, which fell 7% last year. Since 2007, the teen birthrate has declined by 55%, and is down 70% since its peak in 1991. Children born to adolescents are more likely to have poorer educational, behavioral and health outcomes throughout their life.”
  • “Mr. Johnson estimates that lower teen fertility accounts for about one-third of the overall decline in births among U.S. women.”
  • “The increase in women attending college is another force behind the birth decline, researchers say. Those with more skills face a greater trade-off if they interrupt their careers to have children.”

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Thinking Outside the Box – Ben Carlson 5/18

Markets / Economy

WSJ – Daily Shot: US Continuing Jobless Claims 5/17

  • “The number of Americans receiving unemployment benefits hit the lowest level since 1973. Layoffs are becoming increasingly rare as the job market tightens further.”

WSJ – Daily Shot: FRED – US Job Vacancy Duration 5/18

WSJ – When It Comes to Tech, Venture Capital Grows Less Venturesome – Jacky Wong 5/18

  • “More big deals for already large private companies means less left for early-stage startups.”

Real Estate

FT – Young left out of US boom in housing wealth – Sam Fleming 5/17

  • “America’s housing wealth has staged a complete recovery since the financial crisis, but the holdings are increasingly skewed towards older borrowers and those with strong credit ratings and away from the young, the Federal Reserve Bank of New York said.” 
  • “Home ownership rates among those under 45 have slid sharply since the previous boom. As a result, many younger Americans have missed out in a house price resurgence that has taken values up by 50% from the crisis-era trough.”
  • “The New York Fed’s finding suggest that, on an aggregate level, America’s stores of wealth have fully rebounded from the crash, buoyed by a recovery that has now been running for 106 months, one of the longest on record. Financial wealth, which includes stocks and other financial assets, now stands at more than $80tn, more than 75% above the 2009 trough.”
  • “Yet the prosperity boom has been concentrated in a relatively small sliver of the population. The top 10% of households own 84% of stock market wealth, for example.”
  • “Housing wealth tends to be more widely distributed, but here too there are signs that larger sections of the population are missing out, in part because mortgage lending standards are far tighter than before the crisis.”

WSJ – Mortgage Rates Hit Seven-Year High as Ultracheap Era Ends – Laura Kusisto and Christina Rexrode 5/18

Finance

WSJ – Daily Shot: NY FED – US Non-Housing Debt Balance 5/18

WSJ – More Than 200 China-Listed Stocks to Join MSCI’s Indexes – Joanne Chiu 5/15

Asia – excluding China and Japan

FT – Malaysian police seize 284 boxes of handbags in ex-PM probe – Alice Woodhouse and Harry Jacques 5/18

  • “Malaysian police said they had seized 284 boxes of luxury handbags and more than 70 bags of jewelry from properties in the country’s capital as part of the new government’s probe into billions of dollars missing from the country’s 1MDB fund.”

 

May 18, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – Surging numbers of Chinese people going abroad should be welcomed 5/17

Real Estate

FT – New York surpasses London on luxury housing market index – Lindsay Fortado 5/16

  • “New York has surpassed London as the second-most luxurious major housing market in the world after Hong Kong as the effects of the UK’s vote to leave the EU chipped away at the price of top British real estate.” 
  • “’In New York, luxury price increases and robust sales volumes, particularly at the low-end of the luxury market, bolstered the city’s index position’ last year, Christie’s International Real Estate said in a report.” 
  • “Hong Kong, which saw two residential sales above $100m — including one at $360m — and the highest price per square foot of any city, held the top spot for the second year in a row.” 
  • “The city rankings are based on seven factors collected by Christie’s, including record sales price, average price per square foot for homes that sold for more than $1m, the number of sales above $1m, the number of sales over $1m relative to total sales, the percentage of local and non-local buyers, and the percentage of secondary and additional homeowners.” 
  • “Top 10 cities for luxury real estate, 2017 
    1. Hong Kong 
    2. New York 
    3. London 
    4. Singapore 
    5. San Francisco 
    6. Los Angeles 
    7. Sydney 
    8. Paris 
    9. Toronto 
    10. Vancouver” 
  • “Christie’s said the ‘hottest’ market for new homes, based on the greatest rise in year-on-year increases in both luxury sales volumes and prices, was Victoria, British Columbia; followed by San Diego and Orange County, California; Washington DC; and Paris. The hottest markets for second homes were Santa Fe, New Mexico; Muskoka, Ontario; Sarasota, Florida; Sun Valley, Idaho; and the Bahamas.” 

Tech

NYT – Google’s File on Me Was Huge. Here’s Why It Wasn’t as Creepy as My Facebook Data. – Brian X. Chen 5/16

May 17, 2018

Worthy Insights / Opinion Pieces / Advice

FT – How the west should judge a rising China – Martin Wolf 5/15

  • “Advanced countries are hobbled by their inability to manage their own affairs.”

Japan

FT – How Japan’s ageing population is shrinking GDP – Valentina Romei 5/16

  • “With a rapidly ageing population and a shrinking workforce, Japan is one of the world’s oldest societies. Now analysts fear that these demographics are hampering economic growth.” 
  • “Japan’s economy contracted by 0.2% in the first three months of this year over the previous quarter, ending eight consecutive quarters of growth, Japan’s longest period of uninterrupted growth since 1989. It is now the only major economy to start 2018 with a shrinking economy.” 
  • “With the second-weakest performance of major economies last year — Italy had the poorest — Japan is now set to be the slowest growing of the G7 economies this year.”
  • “Japan cannot keep up with the growth rates seen in other advanced economies because ‘Japan’s demographics weaken its GDP growth,’ said Rob Carnell, head of research and chief economist for Asia-Pacific at ING. ‘A rapidly ageing population and shrinking labor force are hampering growth,’ warned the IMF in its latest country’s report.” 
  • “In a separate document, the IMF calculated that ‘the impact of ageing could potentially drag down Japan’s average annual GDP growth by 1 percentage point over the next three decades’.”
  • “Since Japan’s population began its decline in 2010, the country’s population has shrunk by about 1.3m people.”
  • “By 2065, the UN expects Japan’s population to fall by an additional 28m people, corresponding to a 22% drop. Over the same period, the population in advanced economies is expected to rise by 3%.”
  • “Not only is Japan’s population shrinking, but it is also ageing rapidly.”
  • “A shrinking population means a smaller domestic market with fewer people buying goods and services.” 
  • “In 2016, there were about 2,300 fewer kindergartens than seven years earlier as the number of pupils dropped by 18%. Nearly 2,000 primary schools have been shut over the same period while the number of children of primary school age dropped by 8%.”
  • “Far fewer houses are being built as the population, and demand, falls.” 
  • “The shrinkage in Japan’s population means that even with flat productivity growth there would be ‘steady declines in GDP output from one year to another,’ said Mr Carnell. Assuming all other factors remained similar, an economy with an expanding population would see positive GDP growth. ‘A better way of looking at Japan would be as per capita GDP,’ added Mr Carnell.” 
  • “When looking at GDP growth rate per person of working age — which takes into account ageing trends as well as population shrinkage — Japan is in fact the second-best performing G7 country after Germany over the past 20 years.” 
  • “Unless demographic trends are corrected, this is unlikely to be the last time Japan will see negative GDP growth, analysts say. But, given its shrinking labor force, its economy is performing strongly, they add.”

South America

FT – Kellogg latest company to pull out of Venezuela – Gideon Long 5/15

May 11, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Middle-Class Doldrums Don’t Add Up to a Crisis – Noah Smith 5/9

  • “The U.S. economy is back to normal again. Unemployment is low. Business investment is up. Wages are slowly rising. The traumatic memories of the Great Recession and the global financial crisis are finally beginning to fade.”
  • “The absence of pressing crises means that it’s a good time to step back and take stock of deeper issues in the U.S. economic system. For several years, there has been a rising outcry over inequality… Adjusted for inflation, wages for production and nonsupervisory workers fell from their peak until the early 1990s, and haven’t yet climbed back to their former heights:”
  • “But the story isn’t quite true. The average American has, in fact, seen modest gains since the early 1970s; the falling wages of production workers don’t tell the whole story.”
  • “What explains the difference between wages and income? Two things. First, wages aren’t the only way Americans make money in the market. Income from assets, like retirement accounts and pensions, is increasingly important, as are nonwage compensation like employer contributions to retirement accounts. Second, the income numbers include government transfers, which have shifted more and more income from rich Americans to those who earn less in the market. These factors are all bigger than in the 1970s:”
  • “Increased redistribution has been helping the poor as well as the middle class. Recent calculations by the Center on Budget and Policy Priorities show that child poverty in the U.S. has fallen to record lows once government assistance is taken into account.”
  • “Meanwhile, gains in income haven’t come from increased toil. Despite women’s increased labor force participation, working-age Americans in 2014 tended to labor little more than their predecessors in the late 1970s:”
  • “In fact, the working hours data makes the 2000s and 2010s look less awful in comparison to the ’80s and ’90s. Gains in those earlier decades came partly from women entering the workforce en masse. But those gains were preserved in recent decades despite Americans working fewer hours on average.”
  • “It was during the early 1970s that total factor productivity growth began to slow down. It accelerated again in the 1990s and early 2000s, only to fall back to a crawl about the middle of that decade.”
  • “It’s therefore possible to interpret the slower growth of Americans’ incomes as the result of slowing productivity. Inequality has certainly contributed as well, but increasing government transfers have helped cancel out some of that. But with slowing productivity growth, there’s simply less to redistribute than if productivity had maintained the torrid pace of the early and mid-20th century.”
  • “Capitalism may not be in crisis, but it’s troubling that a few super-rich individuals have managed to amass vast fortunes even as productivity has stagnated. That is a phenomenon whose cause must be carefully investigated. For the typical American, gains in living standards have continued at a slow, steady pace. Increasing that pace should be a top priority.”

FT – Investors should be cautious of simplistic indices – Kate Allen 5/9

  • “Poland’s upgrade to developed status shines a light on [an] outdated approach to classification.”

Markets / Economy

FT – Daimler leads new investors in SoftBank’s $100bn Vision Fund – Arash Massoudi, Leo Lewis, and Patrick McGee 5/10

  • “Germany’s Daimler and Japan’s three largest banks are set to become investors in SoftBank’s Vision Fund as the Masayoshi Son-led company looks to complete fundraising for its $100bn technology investment fund, according to people briefed on the matter.”
  • “The Mercedes-Benz maker along with MUFG, Mizuho and Sumitomo Mitsui Banking Corp will be among the final investors in the fund, which is the largest ever created in private equity or venture capital, these people said.”
  • “They added that other new investors will include Larry Ellison, the billionaire US co-founder of software group Oracle who is investing personally, and the sovereign wealth fund of Bahrain.”
  • “Daimler and the Japanese banks are set to be among the smaller ones in the fund, alongside earlier participants such as Apple, Qualcomm, Foxconn and Sharp. About $88bn of the fund comes from SoftBank, Saudi Arabia and Abu Dhabi.”
  • “Individuals close to the three Japanese banks said their decision to invest had a twin motivation: the quest for returns in Japan’s ultra low-interest environment and the desire to further strengthen their relationships with what is by far Japan’s most active corporate name.”
  • “All the new investors will be participating under the terms of the fund’s unusual structure, which sees them receive 62% in preferred units paying out an annual coupon of 7% over the fund’s 12-year life cycle, and the rest with equity.”
  • “SoftBank itself is the only investor that has full equity exposure, giving it the most upside to the fund’s investments in addition to the management and performance fees.”
  • “SoftBank outlined on Wednesday in a presentation that it had spent $29.7bn of the Vision Fund since inception. It has placed bets on more than 30 companies including ride-hailing group Uber, shared-office provider WeWork and chipmaker Nvidia.”

Real Estate

Bisnow – California Super-Commuters Are Transforming Sleepy Suburbs Into Busy Metros – Julie Littman and Joseph Pimentel 5/9

WSJ – California Takes Big Step to Require Solar on New Homes – Erin Ailworth 5/9

Energy

FT – US oil producers battle to meet Iran shortfall – Ed Crooks 5/9

  • “Pipeline constraints mean shale cannot come to rescue as sanctions push up prices.”
  • “Inadequate transport capacity in the region is reflected in the soaring discount for oil in Midland, west Texas, compared with US benchmark crude. That discount hit $13 a barrel this week, meaning that while the easier-to-trade West Texas Intermediate was selling for about $70 a barrel, oil in Midland was just $57 a barrel.”

WSJ – Venezuela’s Brewing Oil Shock May Be Bigger Than Iran’s – Spencer Jakab 5/10

  • “The oil headlines this week have all been about Iran, but the slowly unfolding disaster in Venezuela may be even more significant.”
  • “Venezuela faces two risks that, if both come to pass, could cut its oil output by more than the biggest estimates of what could happen to Iran if sanctions were reimposed. The risks stem from Venezuela’s dependence on importing lighter varieties of crude to mix with the heavy oil it produces, and its need for products imported from the U.S. to enable its thick oil to be transported.”
  • “The first situation is playing out in the Dutch-administered islands of Curaçao and Bonaire, where Venezuela’s state oil company owns refining and storage facilities. U.S. producer ConocoPhillips is attempting to take physical control of those facilities after winning an arbitration award against Venezuela for seizing its assets in 2007. Venezuela appears to be telling its suppliers not to ship oil to these facilities for fear ConocoPhillips will seize that too, potentially shutting down refining.”
  • “The second situation would play out if the U.S. halts exports to Venezuela of a product called diluent, which allows the thick oil to be transported. Such a move would imperil half or more of the country’s remaining production. U.S. Vice President Mike Pence has already called the presidential election a sham.”

Finance

WSJ – Daily Shot: DISH Network Bond Price 5/19

Environment / Science

Economist – Climate change will affect developing countries more than rich ones – The Data Team 5/9

Construction

WSJ – Daily Shot: FRED – PPI Concrete Products 5/10

Asia – excluding China and Japan

Economist – Malaysia’s chance to clean up – Leaders 5/10

  • “Elections in Malaysia are normally predictable. In fact, the United Malays National Organization (UMNO) and various allies had won all of them since 1955, until this week. Over the years UMNO has resorted to every conceivable trick to remain in power: stirring communal tensions among Malaysia’s ethnic groups, locking up critics, rigging the electoral system in its favor, bribing voters with populist handouts and threatening chaos if it lost. In the run-up to the election on May 9th it did all of that. It was testimony to the awfulness of the government of Najib Razak that the opposition was even in contention. And it is testimony to the good sense of Malaysian voters that the opposition won, convincingly, paving the way for Malaysia’s first ever change of government.”
  • “For a country where politics has always been run along communal lines, the shocking upset holds out the prospect of a more meritocratic form of government. For the region, where rulers with authoritarian instincts have been steadily curbing political freedoms, it is a heartening victory for democracy. And for Mr Najib, who was accused by America’s Department of Justice of personally pocketing $681m looted from a Malaysian government agency, it is a welcome comeuppance.”
  • “Sceptics note that it is led by Mahathir Mohamad, a former five-term UMNO prime minister who pioneered many of the underhand tactics to which Mr Najib resorted in his failed bid to remain in power. Dr Mahathir was also a champion of Malaysia’s odious system of racial preferences, which he expanded to keep Malay voters loyal to UMNO.”
  • “Perhaps the new government will succumb to infighting and fail to get much done. But its very existence is a potent reminder to Malaysians and their neighbors that governments can and should, from time to time, change peacefully. With luck, Cambodians, Singaporeans, Thais and Vietnamese, among others, will begin to wonder if something similar might one day happen to them.”

China

FT – China credit spreads near 2-year highs on default worries – Gabriel Wildau 5/9

“China credit spreads hit their widest level in nearly two years this week following new regulations that undermined long-held assumptions about implicit guarantees on debt linked to local governments.”

FT – Hong Kong’s tycoons: handing over power in troubled times – Ben Bland 5/9

May 10, 2018

Perspective

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

Real Estate

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

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

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

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

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

Energy

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

May 9, 2018

Perspective

WSJ – Daily Shot: OECD – Levels of Working Poor by Country 5/8

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Bad Advice Can Be Expensive – Ben Carlson 5/6

Bloomberg Businessweek – The Future of News – John Micklethwait 5/3

  • “…is journalism really in such a parlous state? Look closer. News is an industry in transition, not in decline. It is reemerging as something more digital, more personalized, more automated, more paid for—and (eventually) less fake. In many ways history is repeating itself, with the main surprise being the survival of so many established names. And good journalism still does have the power to change lives.”
  • “In a world where the facts are known, commentary will become ever more important…”
  • “That points to the final series of changes: the multiplicity of formats. The standard print news story is being broken up, split among explainers, videographics, podcasts, and so on. Editorship is increasingly a matter of choosing the best way to deliver information to a time-starved consumer. News is likely to get shorter, quicker, and more graphical. But if you need to understand Syria or cryptocurrencies, you may save time reading one long story in Businessweek or the New Yorker rather than endless small ones.”
  • “The newspaper has not so much died as transmuted. News is in a state of transition—and what’s emerging is molded by both new technology and old verities. As journalists, we have to work harder to keep our audiences. But I’m still optimistic—not least about fake news. It won’t go away; it never has. But it will play a smaller role. And the big winner will be you, the consumer. Even if you have to pay a little more for it.”

Economist – So long, farewell – Buttonwood 5/8

The Registry – Does WeWork at All? – John McNellis 5/8

Visual Capitalist – Interactive: Comparing Asian Powers to the U.S. (Lowy Institute) – Jeff Desjardins 5/8

Markets / Economy

FT – Walmart takes on Amazon in India with Flipkart deal – Simon Mundy and Arash Massoudi 5/8

  • “US retailer to pay $15bn for 75% stake in India’s largest ecommerce group.”

FT – Retail: Is the beauty industry ‘Amazon-proof’? – Anna Nicolaou and Aimee Keane 5/6

WSJ – Daily Shot: LPL Research – Length of Economic Expansions 5/8

Real Estate

WSJ – Daily Shot: Green Street Advisors – US Commercial Property Price Index 5/8

Energy

WSJ – Oil Costs How Much? How the Oil Rally Took Forecasters by Surprise – Alison Sider and Georgi Kantchev 5/6

Finance

WSJ – Daily Shot: Bianco Research – State Muni Yields vs. S&P Muni Index 5/8

WSJ – Pension Funds Still Making Promises They Probably Can’t Keep – Heather Gillers 5/8

  • “Retirement plans across the country still project their investments will grow at a median rate of 7.25%, according to Wilshire Consulting, an adviser to pension funds. Yearly returns on public pension plans have returned a median 6.79% over the past decade and 6.49% over the past 20 years, according to Wilshire Trust Universe Comparison Service, a database.”
  • “Unlike corporations, public pensions have wide latitude in projecting investment returns.”
  • “Public retirement systems had an average 72% of assets they need to pay for retirement promises in 2016, according to the latest data available in the Public Plans Database, which tracks about 170 pension funds. The figure a decade earlier was 85%.”
  • “Companies don’t have the same flexibility to set return expectations on their pension plans. Pension plans sponsored by S&P 1500 companies have an average 87% of assets needed to cover their pensions promises, according to Mercer, a consultancy.”

Agriculture

WSJ – Scientist in China Race to Edit Crop Genes, Sowing Unease in U.S. – Jacob Bunge and Lucy Craymer 5/6

Construction

WSJ – Daily Shot: CME Lumber (Jul) 5/7

Education

Axios – The disappearing Chinese student visa – Stef W. Kight 5/6

China

Bloomberg Businessweek – The $94 Billion Mystery: What Will Be Left of HNA’s Empire? – Matthew Campbell and Prudence Ho 5/3

  • “An annual report released in late April revealed that HNA spent more on interest than any nonfinancial company in Asia last year, a $5 billion bill that represented a more than 50% increase from the year before.”
  • “Overall debt rose 21% in 2017, according to the report, with short-term borrowing climbing by 25%, to about $30.3 billion. Total debt amounted to about 20 times HNA’s earnings before interest and taxes…”
  • “Nonetheless, HNA, which Chen co-founded in the 1990s, counting George Soros among its early investors, isn’t at risk of immediate catastrophe. At the start of 2018, according to people familiar with the matter, it told creditors it would sell about $16 billion in assets in the first half to lighten its balance sheet. Happily for the banks that financed its rise, HNA is already nearing that goal, thanks largely to the Hilton sale ($8.5bn).”

FT – Chinese group with $7bn in debt seeks Beijing bailout – Gabriel Wildau 5/7

  • “In a test of Chinese authorities’ commitment to reducing financial risk, a large Chinese manufacturing group has begged for a government bailout to avoid default on up to $7bn in debt after a regional lender withdrew loans.”
  • “Over the past year, China has tightened credit in a bid to tackle an explosion of corporate debt that the International Monetary Fund has called ‘dangerous’. But the plea highlights how painful Beijing’s deleveraging campaign has been for some indebted groups.” 
  • “According to Caixin, a respected Chinese financial news website, the crisis involving DunAn began when Zheshang Bank, a regional lender in Zhejiang, demanded early repayment of loans, causing other banks to restrict lending to the group.” 
  • “DunAn employs 29,000 workers and manufactures a range of equipment including air-conditioning parts, civil explosives and wind power equipment. It has also expanded into asset management and real estate.” 
  • “Government bailouts are most common for state-owned companies, but officials have also rescued private groups when their potential collapse raised the prospect of contagion.” 
  • “The Shanghai government shielded investors from losses on bonds from privately owned Chaori Solar, whose 2014 default was the first in China’s domestic bond market.” 

 

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.”