Tag: China

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.”

April 30, 2018

This will be the only post this week from me. This week I’m attending the ULI Spring Meeting in Detroit, MI.

Cheers,

Duff

Perspective

WSJ – Why Tech Titans Are Betting on India, in 14 Charts – Newley Purnell, Min Jung Kim, and Rosa de Acosta 4/18

  • Clearly there is some disconnect between showing just this chart and the title. Emphasis less on India and more on the gender split of Facebook users.

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – China Quietly Rolled Out a Very Big Bang – John Micklethwait 4/19

Bloomberg – Latest Climate Threat for Coastal Cities: More Rich People – Christopher Flavelle 4/23

Financial Samurai – Why Households Need To Earn $300,000 A Year To Live A Middle Class Lifestyle Today – Sam

WSJ – Real Estate Stocks Are on Sale but No One Is Buying – Ken Brown 4/27

Markets / Economy

WSJ – Cable TV’s Cord-Cutting Woes Grow, Highlighting Divergence With Netflix – Shalini Ramachandran 4/27

Energy

Reuters – Venezuela faces heavy bill as grace period lapses on China loans – Corina Pons 4/27

Finance

FT – WeWork bond finds home in yield-starved market – Alexandra Scaggs 4/26

  • “This week high-yield bond investors faced a puzzle: how to value a bond sold by an unprofitable company that does not own hard assets or offer a clear outlook for its free cash flow?”
  • “The company in question was WeWork, the office-sharing company that last year attracted a $4.4bn equity investment from Japan’s Softbank. WeWork, which hired JPMorgan to lead the sale but had more than a dozen other banks working as well, attracted enough demand to increase the sale to $702m from $500m.”
  • “Several investors who steered clear of the bond — and one who bought it — said WeWork’s debt was not the type that typically appealed to high-yield investors. But nor was it the first company vowing to disrupt an industry to have found buyers in the junk market. Last year electric carmaker Tesla sold a $1.8bn high-yield bond, and in March, Uber raised $1.5bn in a leveraged loan.”
  • “A combination of low interest rates and shrinking supply has made it harder for money managers to find bonds with attractive yields. WeWork’s bonds were sold at a yield of 7.875%.”

Environment / Science

LAT – A Hawaiian island got about 50 inches of rain in 24 hours. Scientist warn it’s a sign of the future – Heidi Chang 4/28

Construction

WSJ – Daily Shot: CME Lumber (Jul) 4/26

China

FT – China’s HNA reports debts have soared to $94bn – Lucy Hornby 4/28

Middle East

Visual Capitalist – Knight Frank: A Time-lapse of Dubai’s Astonishing Growth – Nick Routley 4/28

  • Very cool animation.

South America

NYT – ‘Their Country Is Being Invaded’: Exodus of Venezuelans Overwhelms Northern Brazil – Ernesto Londono 4/28

April 25, 2018

If you were only to read one thing…

Bloomberg – These Are the U.S. Cities With the Fastest-Growing Wealth Gaps – Vincent Del Giudice and Wei Lu 4/19

  • “The analysis of Census Bureau data tracks the differences in annual income between household income groups. The rich versus poor gap compared households in the top 20% to those in the bottom 20% by metropolitan area.”
  • “At No. 1 is San Jose, California, the Silicon Valley city where the rich versus poor gap widened by $73,600 to $339,000. At No. 100, with the smallest change among 100 largest metro areas, is the border city of El Paso, Texas, where the gap widened by $2,600 to $131,200.”
  • “Nationally, the rich versus poor gap expanded by $31,000 to just over $197,000. Last year’s measure, using data from 2010 to 2015, showed an increase of $29,500 to $189,600.”
  • “The Bloomberg ranking also shows the change in the gap between the super-rich to middle class which widened in 98 of 100 metropolitan areas, led by Bridgeport, Connecticut, which overlaps entirely with Fairfield County. The gap narrowed in Ogden, Utah and Colorado Springs, Colorado. The super-rich to middle class gap is defined by those in the top five percent of income vs households in the middle 20%.”
  • “A third take of data shows the middle class income span — defined as the gap between those within 30 and 80% of an areas income. The middle class span grew the most in San Francisco where it rose to $140,800 in 2016 from $108,300 five years earlier.”

Perspective

Economist – A study finds nearly half of jobs are vulnerable to automation – The Data Team 4/24

Worthy Insights / Opinion Pieces / Advice

Economist – The Republican Party is organized around one man – Leaders 4/19

The Irrelevant Investor – How? – Michael Batnick 4/24

  • “How can Netflix be worth nearly as much as Disney?”

Mauldin Economics – China Plays It Cool – John Mauldin 4/20

NYT – We Don’t Need No Education – Paul Krugman 4/23

Pragmatic Capitalism – The Fed is in a Pickle – Cullen Roche 4/24

WP – The craft beer industry’s buzz is wearing off – Rachel Siegel 4/10

  • “A new report by the Brewers Association — a trade association representing small and independent American craft brewers — showed that craft brewers saw a 5% rise in production volume in 2017. Yet with that growth comes an increasingly crowded playing field, leading to more closures of small craft breweries. In 2017, there were nearly 1,000 new brewery openings nationwide and 165 closures — a closing rate of 2.6%. That’s a 42% jump from 2016, when 116 craft breweries closed.”

Markets / Economy

FT – WeWork to test junk bond appetite with $500m sale – Eric Platt, Alexandra Scaggs, and Richard Waters 4/24

  • “WeWork, the lossmaking provider of shared office space, will seek to raise money from debt investors for the first time in a sale that will provide a stern test of sentiment in the junk bond market.”
  • “The $20bn US company has hired more than a dozen banks to pitch a bond sale to US money managers this week, according to five people with knowledge of the planned sale.”
  • “Sales at the company more than doubled to $886m in 2017 from the year before, although its loss also widened to $884m, according to bond documents reviewed by the Financial Times. WeWork said sales had continued to quicken and by last month had reached an annualised pace of between $1.4bn and $1.5bn.”
  • “WeWork has raised nearly $7bn through equity investments over the past seven years. Its ambitions received a big boost in the middle of last year with a $4.4bn injection of cash from SoftBank and the Japanese conglomerate’s Saudi-backed technology fund, laying the ground for more rapid expansion around the world.”
  • “The move by WeWork to tap the $8.8tn US corporate debt market, a vital source of funding for companies, will bring new investor scrutiny to the company at a time when corporate borrowing costs are on the rise.”
  • “The bond offering drew junk labels from the leading US credit rating agencies, underlining the risk of investing in the debt. One person briefed on the sale added that the seven-year bond could price with a yield as low as 7%, although a second added that the final price WeWork pays could be higher.”

Real Estate

WSJ – Daily Shot: US Existing Home Sales 4/24

WSJ – Daily Shot: NAR – US Existing Homes Months Supply 4/24

WSJ – Daily Shot: NY Fed – US Households average probability of moving 4/24

Energy

FT – US shale groups reach self-financing milestone as oil price rises – Ed Crooks and Nicole Bullock 4/23

  • “Since the shale oil boom began a decade ago, exploration and production companies have needed a steady inflow of capital to pay for drilling and completing new wells but thanks to the rise in crude prices, many can now finance themselves.”
  • “From the time the first shale oil test wells were drilled in the US in 2008-09, the industry’s capital expenditure has exceeded its cash from operations, with producers only able to stay in business by attracting hundreds of billions of dollars in financing from bond and share sales and bank loans. From 2008 to 2017, US exploration and production companies raised $293bn from bond sales, according to Dealogic.”
  • “Another factor that has helped producers turn the corner is the continued improvement in the techniques of horizontal drilling and hydraulic fracturing, which have brought costs down sharply.”

FT – Halliburton writes off investment in crisis-hit Venezuela – Ed Crooks 4/23

  • “Halliburton, one of the world’s largest oilfield services groups, wrote off its remaining investment in Venezuela at a cost of $312m on Monday, highlighting the decline of the crisis-hit nation’s oil industry.”
  • “Halliburton said it would continue to operate in the country ‘at a reduced level’, but would be careful about its future exposure. It last year wrote down $647m for late payment by PDVSA, Venezuela’s national oil company, and the fall in the value of a promissory note intended to cover some of those bills.”
  • “Venezuela’s crude production has dropped 30% from 2.15m barrels a day in 2016 to 1.5m b/d last month. It is less than half its level when Hugo Chávez, the former president, was elected in 1998.”
  • “Schlumberger, the world’s largest listed oilfield services group, similarly wrote off its investment in Venezuela at the end of last year, taking a pre-tax write down of $938m. It continues to operate a cash business in the country, but that has continued to decline into this year.”
  • “Paal Kibsgaard, Schlumberger’s chief executive, said Venezuela’s oil production was in ‘free fall’.”
  • “Although the rise in oil prices since last year has offered some help to Venezuela, the benefit has been muted because most of the oil PDVSA produces does not generate cash, according to Francisco Monaldi of the Baker Institute at Rice University.”
  • “He argued in a recent report that of the roughly 1.8m b/d that PDVSA produced last November, 400,000-450,000 b/d were used in the domestic market at a huge loss, while about 500,000-600,000 b/d were committed to repaying loans from China and Russia and owed to joint venture partners.”

Finance

Bloomberg – ECB Seen Delaying QE Exit Decision as Trade Concerns Mount – Alessandro Speciale and Andre Tartar 4/19

WSJ – Daily Shot: US – Germany 2yr Government Bond Spread 4/24

Sports

PBJ – MLB prices climb, but Diamondbacks deemed best value in sport – Patrick O’Grady 4/24

China

WSJ – Daily Shot: IIF Global Debt Monitor – YoY Change In Chinese Sectoral Debt 4/24

Japan

FT – Tokyo struggles with worst hay fever outbreak on record – Robin Harding 4/23