Tag: Coal

July 26, 2017

If you were to read only one thing…

NYT – 110 N.F.L Brains 7/25

  • “Dr. Ann McKee, a neuropathologist, has examined the brains of 202 deceased football players. A broad survey of her findings was published on Tuesday in The Journal of the American Medical Association.”
  • “Of the 202 players, 111 of them played in the N.F.L. – and 110 of those were found to have chronic traumatic encephalopathy, or C.T.E., the degenerative disease believed to be caused by repeated blows to the head.”
  • “The brains here are from players who died as young as 23 and as old as 89. And they are from every position on the field – quarterbacks, running backs and linebackers, and even a place-kicker and a punter.”


WSJ – Daily Shot: Forbes – Large Tech Firm Lobby Budgets 7/25

WSJ – U.S. Military’s Space in Trump Tower Costs $130,000 a month – Paul Sonne 7/19

  • It’s a 3,475 sq. ft. space, so $37.41 per sq. ft. per month. Mind you, “the most expensive Trump Tower listing recently was a 3,725 sq. ft., three-bedroom apartment on the 62nd floor. It was listed in the spring of 2016 for $50,000 a month unfurnished and $60,000 a month furnished, according to Streeteasy.com.”
  • Basically, Trump’s neighbor recognizes they have a captive audience.

FT – Google and Facebook lay foundations for modern-day company towns – George Hammond 7/19

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Fund Managers and Strategists Think the Bull Market Is Ending Next Year – Adam Haigh, Natasha Doff, Dani Burger and Julie Verhage 7/25

  • “We have had a liquidity-fueled bull market. If that is taken away, there is a pressure point.” – Remi Olu-Pitan, Schroder Investment Management Ltd.

WP – Disabled and disdained – Terrence McCoy 7/21

  • “In rural America, some towns are divided between those who work and those who don’t.”

FP – The argument to be a buyer of the Saudi Aramco IPO – John Dizard 7/21

  • “As one international oil analyst says, though: ‘The Permian is preventing high prices today, but ensuring high oil prices tomorrow. The low prices are holding back investment in most of the world, and that is storing up a significant problem in meeting demand in the future.'”
  • “That is the argument to be a buyer of the Saudi Aramco IPO.”
  • “There are two bets involved in the listing. Can Saudi Arabia contain the social and strategic pressures caused by cheap oil? And will the capital markets eventually stop subsidizing shale producers?”

WSJ – Investors, Stop Worrying About Why ‘Nobody’ Is Worrying – Jason Zweig 7/21

Markets / Economy

WSJ – In Reversal, Colleges Rein In Tuition – Josh Mitchell 7/23

  • “U.S. college tuition is growing at the slowest pace in decades, following a nearly 400% rise over the past three decades that fueled middle class anxieties and a surge in student debt.”
  • “Abundant supply is running up against demand constraints. The number of two-year and four-year colleges increased 33% between 1990 and 2012 to 4,726, Education Department data show. But college enrollment is down more than 4% from a peak in 2010, partly because a healthy job market means fewer people are going back to school to learn new skills.”
  • “Longer-running economic and demographic shifts also are at play. Lower birthrates and the aging of baby boomer children have reduced the pool of traditional college-age Americans. The number of new high-school graduates grew 18% between 2000 and 2010 but only 2% in the first seven years of this decade, Education Department data show.”
  • “Another factor: Congress last increased the maximum amount undergraduates could borrow from the government in 2008. Some economists have concluded schools raise prices along with increases in federal financial aid. A clampdown on aid, in turn, could limit the ability of schools to charge more.”
  • “But other factors could keep cost pressures rising. George Pernsteiner, head of State Higher Education Executive Officers, a trade group that tracks state funding for schools, notes that many states are on track to experience budget crunches as the population ages and health-care and public pension costs rise. That could squeeze public support for schools.”

Real Estate

WSJ – Americans Pour Record Sums Into Home Improvements – Laura Kusisto and Sarah Chaney 7/25

  • “A shortage of new single-family homes across the U.S. is pushing up prices and locking many buyers out of the market. The silver lining: a boom in renovations of existing homes.”
  • “Americans are expected to pour a record $316 billion into home remodeling this year, up from $296 billion a year earlier, according to Harvard University’s Joint Center for Housing Studies.”

FT – Funds hunt for cracks in most-prized US shopping malls – Miles Johnson 7/21

  • “A defining feature of the financial crisis was a group of hedge funds making vast sums by wagering against supposedly AAA-rated mortgage debt well before markets imploded in 2008.”
  • “Now some believe a similar story will play out for US shopping malls — that the most risky investments will end up being those that investors now believe to be the safest. Central to their premise is the idea that too much faith may be being placed in a classification system used for shopping malls that is little known outside of the real estate sector.”
  • “Malls are given ratings by a small group of property consultants generally ranging from A++ to C based on factors that include their sales per square foot and location. While there is no universally accepted system for ranking the malls, with each consultant having slightly different methodologies, banks and investors tend to rely on these ratings to make decisions over how secure each mall is as a creditor or investment.”
  • “The stock market has until recently appeared to believe that prime ‘A’ malls are largely insulated from the pain being felt across a US retail sector being shaken by e-commerce.”
  • “Yet there is growing evidence to suggest that these prime malls, which have been treated by investors and lenders alike as rock solid bets in the face of the internet headwinds, are not as protected as once thought.”
  • “The hedge funds wagering against the highest quality malls believe that the wider market will come to believe these A-quality malls are far more similar to lesser ranked ones. ‘This idea that there are these magic malls in America that are immune to secular change is a myth,’ the US-based hedge fund manager says.”
  • “Some argue that the market underappreciates that A class mall operators and B and C class mall operators all have very similar tenant bases, in spite of being in different locations.”


BloombergGadlfy – Venezuela’s Perfect Storm for Oil May Be About to Break – Liam Denning 7/21

  • “We may be about to see the first sovereign producer to unequivocally fail.”
  • “The oil producer in question is Venezuela, and that assessment comes courtesy of Helima Croft, who is global head of commodity strategy at RBC Capital Markets and formerly worked with both the Council on Foreign Relations and the CIA.”
  • “But things are building to a head, partly due to the relentless logic of the bond market and partly due to the more proprietary logic of U.S. foreign policy.”
  • “Venezuelan bonds, which haven’t looked rock-solid for a few years, crashed this week as embattled President Nicola Maduro renewed calls to rewrite the country’s constitution, which would effectively disenfranchise the millions of Venezuelans who oppose him and entrench his regime. The U.S. has warned it may impose much tougher sanctions if Maduro goes ahead with his plan.”
  • “Venezuela’s economy is in free-fall: By the end of this year, it will have shrunk by 32% compared to where it was at the end of 2013, according to International Monetary Fund forecasts. Also by the end of this year, the government is on the hook to pay back more than $5 billion in debt — including bonds owed by the state-owned oil champion, Petróleos de Venezuela, S.A., or PdVSA — plus billions more in interest. As of this week, Venezuela’s international reserves stood at less than $10 billion.”
  • “Meanwhile, mismanagement, a lack of investment and re-nationalization of foreign oil companies’ interests have caused Venezuela’s oil production to slump from around 3.3 million barrels a day a decade ago to about 2 million now. Even allowing for the fact that domestic consumption has dwindled along with GDP, Venezuela’s surplus of oil available for earning export dollars has shrunk considerably.”
  • “Compounding this is the fact that the country must devote a lot of its output to paying off loans from China and Russia, further reducing the actual amount it can use to generate cash. Francisco Monaldi, a fellow in Latin American energy policy at Rice University’s Baker Institute for Public Policy, estimates that could be as little as 800,000 barrels a day.”
  • “For three years, oil watchers have been waiting for a chaotic wave of bankruptcies in places like Texas and North Dakota to jolt the market. They’ve been looking in the wrong place.”

FT – Coal has no future, says US railroad boss – Gregory Meyer 7/19

  • “One of the largest haulers of US coal says fossil fuels have no future, despite pledges to the contrary from President Donald Trump.”
  • “CSX, a freight railroad company with origins in the bituminous coal seams of Appalachia, will not buy a single new locomotive to pull coal trains, chief executive Hunter Harrison told analysts on Wednesday.”
  • “’Fossil fuels are dead,’ Mr Harrison said. ‘That’s a long-term view. It’s not going to happen overnight. It’s not going to be in two or three years. But it’s going away, in my view.’” 
  • “North American railroads have reshaped their asset holdings in acknowledgment that coal’s apex has passed.”
  • “Lance Fritz, chief executive of the Union Pacific railroad, said in a recent interview that Mr Trump’s move to scrap Clean Power Plan regulations was unlikely to grow its coal business. ‘It takes away a headwind,’ he said.”


NYT – Silicon Valley Giants Confront New Walls in China – Paul Mozur and Carolyn Zhang 7/22

  • “It’s basically like someone who has been training for Olympic taekwondo going up against a street fighter. The Olympic fighter is waiting for the whistle, and the street fighter already has him on the ground hitting him with elbows. There’s no rules.” – Andy Tian, co-founder of Asia Innovations Group and former general manager of Zynga China

FT – Uber, Amazon and Microsoft braced for accounting shake-up – Leslie Hook and Richard Waters 7/19

  • “Uber’s reported revenues are being cut in half and sales at Amazon and Microsoft could be higher than previously stated — all thanks to a forthcoming change to accounting rules.”
  • “An update to generally accepted accounting principles (GAAP) for US companies is turning out to have particularly large consequences in parts of the tech industry, which is having to overhaul the way it reports revenues and costs.”
  • “One of the more dramatic impacts will affect car-booking services such as Uber, a private company whose GAAP revenue drops by more than half when it adopts the new standard, which it plans to do this year.”
  • “Uber’s first-quarter revenue this year was $3.4bn under old GAAP accounting, but it says that under the new rules its revenue would have been just $1.5bn for the same period. Uber has already started sharing the lower figure with investors.”
  • “Under the old standard, car-booking services such as Uber and Lyft counted their commissions from regular rides, plus the entire fare of carpool rides, as revenue. Under the new standard, only the commissions from both regular and carpool rides will count as revenue.”
  • “The shift is due to changes to the ‘principal versus agent’ rules that determine when a company is acting as a principal and when it is acting as an agent. The car-booking services were previously considered the ‘principal’ for carpooled rides. As private companies, they must adopt the new standard by the beginning of 2019, although Uber has moved to do so much earlier.”
  • “The new standard, known as Revenue from Contracts with Customers, is designed to narrow the distance between US GAAP rules and International Financial Reporting Standards (IFRS).”


WSJ – Daily Shot: CBOT Soft Red Winter Wheat Futures 7/24

  • “The recent wheat rally has been almost entirely reversed.”

Asia – excluding China and Japan

FT – Jailed Duterte foe prepares for long haul – Michael Peel 7/20

  • “Philippine Senator Leila de Lima, 57, was arrested at her senate office in February on charges that she received payoffs from jailed drug lords. She has branded the allegations ‘simply surreal’ and said they were part of a ‘personal vendetta’ by a president who is ‘rather obsessed with me’.”
  • “Ms. de Lima has certainly earned implacable enmity from Mr. Duterte for her efforts to probe his bloody drugs wars first as a provincial mayor and now as president. She maintains her innocence but also accepts her stay in jail could be a long one. The same day she marks five months in detention next week, Mr. Duterte will give an annual state of the nation speech against a background of soaring approval ratings.”
  • “I think as long as Duterte is president (5 more years), I will be locked up in jail,” Ms. de Lima says. “I have no false hopes about achieving justice very soon.”


NYT – In China, Herd of ‘Gray Rhinos’ Threatens Economy – Keith Bradsher and Sui-Lee Wee 7/23

  • “Let the West worry about so-called black swans, rare and unexpected events that can upset financial markets. China is more concerned about ‘gray rhinos’ — large and visible problems in the economy that are ignored until they start moving fast.”
  • “The rhinos are a herd of Chinese tycoons who have used a combination of political connections and raw ambition to create sprawling global conglomerates. Companies like Anbang Insurance Group, Fosun International, HNA Group and Dalian Wanda Group have feasted on cheap debt provided by state banks, spending lavishly to build their empires.”
  • “Such players are now so big, so complex, so indebted and so enmeshed in the economy that the Chinese government is abruptly bringing them to heel. President Xi Jinping recently warned that financial stability is crucial to national security, while the official newspaper of the Communist Party pointed to the dangers of a ‘gray rhinoceros,’ without naming specific companies.”

FT – China’s LeEco appoints new chairman from Sunac – Emily Feng 7/21

  • Sunac continues to be busy. In addition to its property acquisitions from Dalian Wanda, Sunac’s chairman – Sun Hongbin, is adding a new chairmanship to his belt, that of the struggling Chinese tech company, LeEco.

WSJ – The Saga Isn’t Over for Dalian Wanda – Jacky Wong 7/20

NYT – At the Finish, Dalian Wanda of China Rewrites a Blockbuster Sale – Sui-Lee Wee and Zhang Tiantian 7/19

  • “Dalian Wanda Group, the Chinese conglomerate, tore up a $9.3 billion agreement to sell a portfolio of hotels and theme parks, unexpectedly reaching new deals on the properties that highlighted uncertainty over the financial health of the country’s biggest companies.”
  • “Wanda had reached an overall agreement with the property firm Sunac China Holdings last week, but Wanda announced at a signing ceremony on Wednesday that it was backtracking and would instead sell just the theme parks to Sunac. The hotels will instead be sold to R&F Properties, based in the southern Chinese city of Guangzhou.”
  • “The hasty reorganization of the deals has raised concern about the due diligence conducted by many of China’s first-generation dealmakers as they seek to become bigger players domestically and around the world.”
  • “The signing was dominated by the announcement that Sunac would pay $6.5 billion for a 91% stake in Wanda’s 13 theme parks across China, while R&F Properties would buy 77 hotels from Wanda for $3 billion. In a sign of the wildly fluctuating valuations of assets, however, Wanda had said last week that it was selling Sunac only 76 hotels, but that they were worth $5 billion.”

South America

WSJ – Daily Shot: Venezuelaecon.com – Venezuelan Bolivar Black Market Exchange Rate 7/25


NYT – Turkey Sees Foes at Work in Gold Mines, Cafes and ‘Smurf Village’ – David Segal 7/22

  • “Since then (after the failed attempt to overthrow the government of President Recep Tayyip Erdogan on July 15, 2016), more than 950 companies have been expropriated, all of them purportedly linked to Fethullah Gulen, the Muslim cleric who Turkish leaders say masterminded the putsch.”
  • “About $11 billion worth of corporate assets — from small baklava chains to large publicly traded conglomerates — have been grabbed by the government, a systematic taking with few precedents in modern economic history. Several thousand dispossessed executives have fled overseas to cities as far-flung as Nashville and Helsinki. The less fortunate were imprisoned, part of a mass incarceration campaign that has included purged members of the military, judiciary, police and news media, adding 50,000 new inmates to the prisons.”

March 31 – April 6, 2017

Increases in 401(k) leakage do not bode well for US retirements. Australian house price bubble. The hard facts about coal.


NYT – Venezuela Muzzles Legislature, Moving Closer to One-Man Rule 3/30. It’s been a few decades since a Latin American country has regressed into a dictatorship.

Bloomberg – Venezuelan Top Court Reverses Shock Ruling on Congress Authority 4/1. Well then they reversed the ruling “… after the nation’s top prosecutor, a Maduro ally, labeled the Supreme Court’s March 29 move unconstitutional.” There may be hope for Venezuela yet.

Reuters – Venezuela money supply up 200 percent in year, fastest rise on record 4/3. When coupled with declining output of goods and service, it means inflation – for “contrast, the United States’ money supply was up 6.4% in the same period.”

NYT – Within Hours, Plans for a Quiet Corner of China Send Home Prices Soaring 4/3. And just like that the county of Xiongxian was anointed. 

FT – Businesses stirred by new Indian alcohol curbs 4/3. The Supreme Court in India just banned alcohol sales within 500m of a national highway causing a vast number of business establishments (hotels, restaurants, bars, etc.) to reel.

FT – Xi’s crackdown on corruption is a boon to corporate China 4/3. The corruption crackdown is working and companies are finding that they are having to set aside less to cover the vig.

Special Reports / Opinion Pieces


  • Yuan Yang and Xinning Liu the Financial Times highlighted Didi Chuxing’s existential crisis in China.
    • “Didi Chuxing may have defeated Uber, but China’s dominant ride-hailing platform is no match for the country’s local governments after being forced to gut its urban fleet to comply with regulations.”
    • “Didi is the world’s fourth-biggest private tech group with a $34bn valuation last September. It has raised more than $10bn from investors including Apple, who invested $1bn in the company last year.”
    • But… there is the issue of recent regulation from Beijing and Shanghai: “local cars, local drivers.”  Issue is that the majority of Didi’s drivers and especially the vast majority of its low paid drivers were migrants.
    • We’ve seen the model. Didi and Uber rely on marginalizing it’s drivers or losing its investor’s money, hence the push for autonomous cars to reduce its labor costs.
    • As the company put it “because our transportation capacity has been reduced recently, there may be some impact…on the chances of successfully hailing a ride and on waiting times, which Didi apologizes for.”
    • “Shaun Rein of China Market Research Group said: ‘The new measures have a serious impact on Didi’s business. It threatens their ability to grow because it’s hard to find drivers.'”
    • Hence, “in February Didi announced it was moving into high-end car-hailing services, a consequence of losing its pricing advantage against taxis.”
    • “Analysts say that the company has no choice but to go upmarket and look for other sources of growth.”
    • And of course, they have to be mindful that other cities are likely to implement similar regulations.
    • “Didi’s new direction is also likely to bring it into closer co-operation with the traditional taxi companies it once competed with, and even take it back to its roots as a taxi-hiring platform.”
  • The team at the Economist covered the global shortage in one commodity that most rarely think of – sand.
    • “India’s ‘sand mafia’ is doing a roaring trade. The Times of India estimates that the illicit market for sand is worth around 150bn rupees ($2.3bn) a year; at one site in Tamil Nadu alone, 50,000 lorryloads [truck loads] are mined every day and smuggled to nearby states. Gangs around the country frequently turn to violence as they vie to continue cashing in on a building boom.”
    • “Most of the modern global economy depends on sand. Most of it pours into the construction industry, where it is used to make concrete and asphalt. A smaller quantity of fine-grade sand is used to produce glass and electronics, and, particularly in America, to extract oil from shale in the fracking industry. No wonder, then, that sand and gravel are the most extracted materials in the world. A 2014 report by the United Nations Environmental Program (UNEP) estimates they account for up to 85% by weight of everything mined globally each year.”
    • “…Of the 13.7bn tons of sand mined worldwide for construction last year, 70% was used in Asia. Half was used in China alone, where the government estimates that it built 32.3m houses and 4.5m km (2.8m miles) of road between 2011 and 2015.”
    • “Sand often makes up the very ground that is built on, too. By virtue of dumping vast quantities of sand into the sea, Singapore is now over 20% larger than it was when it became independent in 1965.”
    • Thing is “sand may appear plentiful, but is in fact become scarce. Not all types are useful: desert sand is too fine for most commercial purposes (Qatar is a big importer and the Burj Khalifa skyscraper in Dubai was built using Australian imports). Reserves also need to be located near construction sites; as transportation costs are high compared with the price…”
    • “Substitutes for sand do exist. Mud can be used for reclamation, straw and wood to build houses, and crushed rock to make concrete. Asphalt and concrete can be recycled. Production processes will shift towards these alternatives as the price of sand rises…”
    • Further, select countries are seeking to do their part. “Reduced demand from Singapore might discourage illegal mining in nearby countries. Rising prices will eventually force developing-country builders to explore alternatives to sand. But without better law enforcement, high sand prices also make illicit mining more lucrative. Despite the damaging consequences, the sand mafia will continue raking it in for a while.”


WSJ – Daily Shot: Employment in video-tape and DVD rental stores 3/30

Pew Research – Key findings about Puerto Rico – Jens Manuel Krogstad, Kelsey Jo Starr and Aleksandra Sandstrom 3/29

WSJ – Fed Sees Car Trouble Down South – Aaron Back 3/30

FT – Low oil price and currency controls hit Nigeria hard – Siona Jenkins 3/31

WSJ – Daily Shot: FRED – Loans and Leases, All Commercial Banks 4/2

Slowing credit growth in the U.S.

WSJ – Daily Shot: FRED – Commercial and Industrial Loans 4/2

WSJ – Daily Shot: FRED – Consumer Loans – Other and Automobile Loans 4/2

WSJ – Daily Shot: FRED – Real Estate Loans, All Commercial Banks 4/2

WSJ – Daily Shot: Vox – US Opioid Usage 4/2

WSJ – Daily Shot: Vox – US Opioid Prescription per capita 4/2

Visual Capitalist – How Much State Debt Rests on Your Shoulders? – Jeff Desjardins 4/3

WSJ – Daily Shot: John Burns Real Estate Consulting – US Annual Medical Costs 4/3

WSJ – Daily Shot: NY Fed – US Consumer Debt 4/3

WSJ – Daily Shot: NY Fed – US Consumer Debt by Age of Borrower 4/3

WSJ – Daily Shot: China Credit Boom 4/3


*Note: bold emphasis is mine, italic sections are from the articles.

The Rising Retirement Perils of 401(k) ‘Leakage.’ Anne Tergesen. The Wall Street Journal. 2 Apr. 2017.

“American companies are trying to stop employees from raiding their 401(k)s, in an attempt to ensure that older workers can afford to retire and make room for younger, less-expensive hires.”

“Tapping or pocketing retirement funds early, known in the industry as leakage, threatens to reduce the wealth in U.S. retirement accounts by about 25% when the lost annual savings are compounded over 30 years, according to an analysis by economists at Boston College’s Center for Retirement Research.”

“‘Employers have done a lot to encourage people to save in 401(k) plans, such as automatically enrolling them. But there is a growing recognition that if the money isn’t staying in the system, the objective of helping employees reach their retirement goals isn’t being met,’ says Lori Lucas, defined-contribution practice leader at investment-consulting firm Callan Associates Inc.”

“Employees who grew accustomed to borrowing from their 401(k)s during the recession are tempted by the rising balances in these types of plans, which currently hold $7 trillion, up from $4.2 trillion in 2009, experts say.”

Further, when employees change jobs there is the temptation not to rollover their 401(k) balances.

“On average, about 30% to 40% of people leaving jobs to elect to cash out their accounts and pay taxes and often penalties rather than leave the money or transfer it to another tax-advantaged retirement plan, according to recordkeepers and economists.”

“Most plans also allow people to pull out their savings-after paying taxes and typically a penalty-for reasons including buying a home, preventing foreclosure, and paying medical bills and college expenses, something relatively few participants do annually. These are known as hardship distributions and the employee must demonstrate an ‘immediate and heavy financial need,’ according to the Internal Revenue Service.”

“Employees can also generally choose to borrow up to half of their 401(k) balance or $50,000, whichever is less, without having to state a reason. According to the Employee Benefit Research Institute, a nonprofit research group, 87% of participants are in plans that let them take 401(k) loans.”

“About a fifth of 401(k) participants with access to 401(k) loans take them, according to the Investment Company Institute, a mutual-fund industry trade group. While most 401(k) borrowers repay themselves with interest, about 10% default on about $5 billion a year, says Olivia Mitchell, an economist at the University of Pennsylvania’s Wharton School.”

“‘4019(k) plan leakage amounts to a worryingly large sum of money that threatens to undermine retirement security,’ says Jake Spiegel, senior research analyst at research firm Morningstar Inc. His calculations show that employees pulled $68 billion from their 401(k) accounts taking loans and cashing out when changing jobs in 2013, up from $36 billion they withdrew in 2004.”

Fears of bubble as Australian house prices surge. Jamie Smyth. Financial Times. 2 Apr. 2017.

“Australia’s house prices are rising at their fastest pace in seven years, igniting fears of an emerging property bubble and prompting regulators to crack down on risky bank lending.”

“New figures on Monday show residential property prices have increased 12.9% in the past 12 months, with prices in Sydney surging 18.9% – the fastest rate of growth in almost 15 years.”

“House prices in Sydney have more than doubled since the financial crisis hit in January 2009 while prices in Melbourne are up 92.4%. This has occurred despite sluggish consumer price inflation, tepid rates of business investment and economic growth.”

“Surging house prices are a concern for global regulators as they seek to prevent the asset price bubbles in an ear of ultra-low interest rates ushered in by the financial crisis in 2008. Regulators in Australia, Ireland, New Zealand and a host of other countries have introduced macroprudential rules in a bid to slow house price inflation.”

“In 2014 Australian regulators placed a 10% limit on growth in new lending to investors, a move that initially slowed bank lending to the buy-to-let sector. But a recent increase in lending to investors prompted regulators on Friday to issue new rules limiting the flow of ‘interest only’ mortgage lending by banks to 30% of new loans issued.”

“About 40% of new mortgages are issued on ‘interest only’ terms, under which borrowers do not have to pay back the principal of the loan for a specific period.”

“The regulator also placed limits on the volume of ‘interest only’ lending at loan-to-value ratios above 80% and flagged closer scrutiny of lending at loan-to-value ratios above 90%.”

More importantly, economists are pointing to the Australian tax system that needs some reform. Specifically “Australia’s system of ‘negative gearing’ provides investors with a tax break allowing them to claim as losses the financing and other costs of their rental properties against other income. The tax break has become so popular that 15% of the electorate have become buy-to-let investors.”

“Investor loans make up just over one-third of the A$1.49tn (US$1.13tn) residential property market, according to Australia’s prudential regulator.”

Reminds of me of the U.S. tax system before the Tax Reform Act of 1986 – when professionals of all sorts would invest in real estate simply for the sake of the tax write-off. If the property made money or went up, all the better. Easy to see how valuations can become disconnected from their fundamentals.
Alternative truths and some hard facts about coal. Nick Butler. Financial Times. 2 Apr. 2017.

The facts:

  • “The share of electricity production in the UK accounted for by coal fell to just 3.5% in the third quarter of 2016.”
  • “Worldwide, the number of new coal-fired power stations starting construction fell by over 60% in 2016.”
  • “Over-supply has pushed thermal coal prices down to half the level reached in 2010.”

At the same time

  • “Some 42,000MW of new coal-fired generating capacity was brought on stream in China last year and Beijing announced that coal consumption was set to rise by 19% over the next five years, despite rapid growth in the use of renewable sources.”
  • “In spite of extensive subsidies for renewables, 40% of electricity in Germany last year came from coal, leading to an increase in carbon emissions in 2016.”
  • “Across the world 50% of aluminum, 70% of steel and 40% of electricity are produced from coal.”

In the UK, regulation is systematically phasing out coal energy.  In Germany, there is enough political support from the Social Democratic party to keep coal use going.

“In the US, the main threat to coal is not environmental regulation but price competition from low-cost natural gas. Coal is the principal victim of the shale gas revolution and the revival of the shale industry will intensify that competitive challenge over the next decade.”

“China is the world’s largest user of coal (burning more than 50% of the global total) and is pursuing a serious policy of encouraging renewables and setting a ceiling on coal demand growth.”

“The biggest challenge and the most important factor in the global coal market is India.” While the country is serious about renewable energy initiatives, the country wants economic growth.  “The problem is that to grow, it needs the cheapest possible form of power on a large scale and for the moment that is coal. Nuclear, solar and wind will all contribute but coal is the pre-eminent source of supply and Indian imports will shape the world market.”

“Coal is plentiful and cheap and will be made cheaper still if US producers, under pressure from gas in their domestic market, export more.”

“Until the new sources of energy supply can beat the current low prices coal will remain the leading source of heat and power and will meet something like a third of the world’s energy needs. The proportion burnt in high efficiency, low emission plants will rise but that will remain a fraction of the total for the foreseeable future, not least because coal users cannot afford the upgrades necessary. Coal is the energy source of choice, through necessity, of the poorer half of the world.”

“Times may be tough for the industry, and the continued use of coal in sub-critical technology may be bad for the environment, but like it or not coal is not in free fall.”

Other Interesting Articles

Bloomberg Businessweek

The Economist


A Wealth of Common Sense – The Dependability of Cycles 4/2

Bloomberg – People Are Paying to Work From Bars and Restaurants 4/3

FT – Active investing: a new hope 3/31

FT – Fed may start normalizing balance sheet later this year, Dudley says 3/31

FT – China’s Hollywood war chest threatened by poor ticket sales 4/1

FT – China cracks down on ‘financial ants’ smuggling cash to Hong Kong 4/1

FT – China’s Huishan tapped shadow banks as condition worsened 4/2

FT – China’s ‘bad banks’ thrive as alternative lenders 4/3

FT – Casino bosses will bet big to open Japan’s gaming industry 4/4

FT – Huishan saga exposes China’s tycoon finance risk 4/4

FT – Venezuelan bond sell-off accelerates as $2bn payment looms 4/4

FT – Cambodia scraps US military aid deal in latest snub to Washington 4/5

FT – Shanghai-listed shares have best day since August 4/5

FT – Middle Eastern oil producers still have strong hand 4/5

FT – Information asymmetry bedevils the oil market 4/5

MarketWatch – Americans are taking out the largest mortgages on record 4/5

NYT – Sears and Its Hedge Fund Owner, in Slow Decline Together 3/30

NYT – Stores Take Flight From Fifth Avenue in Manhattan 4/4

WP – The troubles at the American mall are coming to a boil 4/5

WSJ – Fed Sees Car Trouble Down South 3/30

WSJ – Why Americans Aren’t Spending Like They Used To 3/31

WSJ – If You Have 29 Credit Cards, You’re Probably a Millennial 3/31

WSJ – Buying a Home This Spring Will Be Hardest in Years 4/1

WSJ – Trouble Bubbling Under at Chinese Banks 4/3

WSJ – Why ECB’s Negative-Rate Policy Is Out of Order 4/3

WSJ – This Volatility Warning Has a Different Ring to It Today 4/3

WSJ – Macau Gambles on the High Rollers 4/3

WSJ – Economy Will Miss That New-Car Smell 4/4