Tag: Construction

July 13, 2018

Perspective

howmuch.net – How Much Americans Pay in Electricity Rates in Each State – Raul 6/25

Worthy Insights / Opinion Pieces / Advice

FT – Donald Trump creates chaos with his tariffs trade war – Martin Wolf 7/10

The Registry – Uber’s Johnny Cab Future – John McNellis 7/12

Markets / Economy

WSJ – Trade Conflict Ripples Through Emerging Markets – Julie Wernau and Ira Iosebashvili 7/10

Real Estate

Bloomberg – Hot Rents in Hot Shale Basin – Ryan Collins 7/11

WSJ – House Money: Wall Street is Raising More Cash Than Ever for its Rental-Home Gambit – Ryan Dezember and Laura Kusisto 7/9

  • “Wall Street is betting that more well-off Americans will want to be renters.”
  • “Financiers who loaded up on homes after the housing bust for pennies on the dollar are buying yet more—despite home prices in many markets being at all-time highs.”
  • “Their wager: High prices, higher mortgage rates and skimpy inventory are making homeownership harder. Well-to-do families who might have bought a single-family home in another era are willing to rent a house now, especially if it means access to a good school system.”
  • “The number of homes purchased by major investors in 2017 was at least 29,000, up 60% from the previous year, estimates Amherst Capital Management LLC, a real-estate investment firm with an affiliated business that made nearly 5,000 of those purchases.”
  • “Single-family homes have become far more attractive to investors than apartments, where a nationwide glut has driven down rental yields.”
  • “This year, investors have raised billions of dollars from bond buyers, pension funds and even wealthy Chinese individuals to purchase more homes. They have been particularly aggressive buyers in places like Atlanta, Phoenix, and other metro areas with good schools and faster-growing economies.”
  • “On Monday, the investment firm Pretium Partners LLC said it had raised more than $1 billion so that its Progress Residential could add to its 26,000 rental homes.”
  • “Cash to acquire and renovate homes has become so abundant lately that some rental investors can’t spend it fast enough. Without enough homes to buy, some investors are now building their own in popular residential markets like Miami and Nashville, Tenn.—upending a traditional pattern of Americans buying starter homes and moving up.”
  • “Managing far-flung clusters of homes—much harder than running an apartment building—has long been a hurdle for investors. But analysts and rental executives say investors are gaining confidence it can be done profitably. Also, wealthier tenants in the single-family-home market typically have children and need more bedrooms than most apartments offer. They’re also willing to accept rent increases to stay in good school districts.”
  • “These investors’ war chests have been swelled by rising home prices, which give them more valuable collateral to borrow against to buy more.”

Construction

WSJ – Daily Shot: John Burns RE Consulting – Construction Contractor Hourly Wages 7/11

China

WSJ – Daily Shot: BlackRock – Annual Growth in China Bank Claims 7/11

WSJ – Chinese Auto Sales Run Into a Lending Roadblock – Jacky Wong 7/10

  • “Beijing’s crackdown on shadow banking has made it harder for car buyers to get the loans they need. That could hit domestic auto-maker shares.”

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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

May 24, 2018

If you were only to read one thing…

FT – Era of ‘lower for longer’ oil prices is dead – Amrita Sen and Yasser Elguindi (Energy Aspects) 5/22

  • “When oil collapsed in 2014 under the weight of US shale production, it ushered in a new-found belief that prices would remain ‘lower for longer’.”
  • “The rampant new source of crude supplies was seen to be capable of meeting rising world demand almost single-handedly, obviating the need for extra Opec barrels ever again.”
  • “As such, the concept of a ‘shale price band’ emerged of roughly $40 to $55 per barrel, reflecting the range within which the majority of US shale producers could turn a profit without the risk of the industry growing so fast that it would again flood the market. And for the better part of three years, from 2015 to 2017, oil prices traded in this range.”
  • “But in 2018, this narrative has been slowly picked apart and is now in the process of disintegrating.”
  • “While there has been breathless attention paid to prompt Brent prices climbing to $80 a barrel for the first time since 2014, what has received less attention is that the entire Brent forward curve is now trading above $60, including contracts for delivery as far out as December 2024.”
  • “This development is an important psychological milestone for the oil market. The market is, in effect, saying that ‘lower for longer’ is dead.”
  • “The reality is that US shale has been unable to meet rising global oil demand, which has averaged 1.7m b/d per year since 2014 — double the level at the start of this decade — and inventories have drawn down as a consequence, eliminating the buffer that had been built up.”
  • “This inventory fall has been helped by strong demand growth and the Opec/non-Opec deal to curtail output since January 2017, which has since been superseded by rapid declines in Venezuelan and Angolan production and, more recently, non-Opec production outside of the US.”
  • “The inevitable supply deficit is very worrying, with very limited spare production capacity available globally.”
  • “Two main themes are now starting to impact investor thinking and drive the new-found interest in exposure to energy.”
  • “First, recent supply data are finally reflecting the ill effects from under-investment due to the collapse in capital expenditure since 2015. The data are now showing accelerating decline rates across important suppliers such as Brazil, Norway and Angola.”
  • “Second, the impressive strength in demand has been overshadowed in the past two years by the narrative dominated by electric cars.”
  • “But slowly this has given way to a recognition that while electric cars will undoubtedly alter the trajectory for global oil demand in the long term, this trend will not reach critical mass in the medium term (the next five years) to sufficiently make up for the expected fall in oil supplies due to the lack of investment.”
  • “So, even though expectations are for oil demand growth to slow from current levels, consumption will still be robust enough that — barring a major recession — the market will need new supplies to meet that growth.”
  • “The physical oil market is only going to face greater strain ahead of the marine fuel specification change in 2020, which is set to boost demand for products such as diesel and ultra-low sulphur fuel oil by 2m to 3m b/d.”
  • “As a result, we believe that oil prices may spike to above $100 per barrel, a price forecast we have held for the latter half of 2019 for three years now.”
  • “The shale price band has been decisively broken and 2018 will be a watershed year: the market will realize that US shale alone cannot meet the world’s incremental demand growth and future prices must rise to re-incentivize long-cycle investments (or curtail demand).”
  • “Nothing ever moves in a straight line, but the broader oil market is perhaps not prepared for what will happen to oil prices over the next couple of years.”

Perspective

Economist – Weather and violence displace millions inside borders every year – The Data Team 5/22

Worthy Insights / Opinion Pieces / Advice

Boston Globe – Gas and mortgages are getting expensive again. Welcome to a normal economy – Evan Horowitz 5/22

CNBC – Silicon Valley tech bubble is larger than it was in 2000, and the end is coming – Keith Wright 5/22

  • “The age of the unicorn likely peaked a few years ago. In 2014 there were 42 new unicorns in the United States; in 2015 there were 43. The unicorn market hasn’t reached that number again. In 2017, 33 new U.S. companies achieved unicorn status from a total of 53 globally. This year there have been 11 new unicorns, according to PitchBook data as of May 15, but these numbers tend to move around, and I believe the 279 unicorns recorded globally in late February by TechCrunch was the peak, where the start-up bubble was stretched to its limit.”
  • “A recent study by the National Bureau of Economic Research concludes that, on average, unicorns are roughly 50% overvalued. The research, conducted by Will Gornall at the University of British Columbia and Ilya Strebulaev of Stanford, examined 135 unicorns. Of those 135, the researchers estimate that nearly half, or 65, should be more fairly valued at less than $1 billion.”
  • “Don’t let the few recent successes in the 2017 IPO market fool you. After two years of stagnation in terms of the number of IPOs being filed in the United States — 275 IPOs (2014), 170 IPOs (2015) and 105 IPOs (2016) — deal counts have dropped to their lowest figure since 2012.”
  • “Seventy-six percent of the companies that went public last year were unprofitable on a per-share basis in the year leading up to their initial offerings, according to data compiled by Jay Ritter, a professor at the University of Florida’s Warrington College of Business, and recently featured in The New York Times. This is the largest number since the peak of the dot-com boom in 2000, when 81% of newly public companies were unprofitable.”
  • “The current volatility and correction evolving in the private market will be amplified for companies that have yet to make money and are burning cash faster than they’re bringing it in. Growth at all costs will not weather an economic storm.”
  • “Since the Snap IPO in March 2017 at $17 a share, when its shares surged 44% during its first day of trading, they have now declined to $11. Dropbox also went public. It had a first-day pop of 36%; however, with only 200,000 paying customers compared to its 500 million users, I would be hesitant to rush in to buy, even as it comes off that year-to-date high considerably. Another highly valued start-up, Blue Apron, went public at $10 a share in June and is now trading at $3. Remember Fitbit was a $45 stock in 2015 — it’s currently trading at just over $5.”

Economist – Markets may be underpricing climate-related risk 5/23

FT – Tanking currencies are bad news all round – Jonathan Wheatley 5/22

  • “Currency wars give no edge to exporters but do cause economic harm.”

Fortune – Retail Reckoning: How Private Equity Is Boosting Some Brands and Crushing Others – Phil Wahba 4/24

WSJ – Daily Shot: Bianco Research – Google Search Trends – Consumer Spending 5/23

WSJ – Daily Shot: Bianco Research – Google Search Trends – Consumer Difficulties 5/23

Markets / Economy

CNBC – Inflation is coming to the US economy on an 18-wheel flatbed – Jeff Cox 5/22

  • “Multiple signs of inflation in freight-related industries are at or near historical highs, in what could be an early sign that price pressures are building and ready to reverberate around the economy.”
  • “Freight marketplace DAT keeps track of supply and demand in the freight industry through a bulletin board that matches companies with loads to be delivered to the vehicles that will take the goods to the marketplace. The measures are in the spot market, where vendors that don’t contract their deliveries find drivers for their products.”
  • “Recent readings show demand for vehicles skyrocketing, a sign that generally points to inflationary pressures building up in the supply chain.”
  • “Loads on the spot market in general are up 100% from the same period a year ago. Another measure, the flatbed load-to-truck comparison, which tracks the amount of vendors looking for flatbeds and is generally the highest of all truck types, is up 142%.”
  • “The numbers by themselves, though, don’t indicate that inflation is ready to strike soon. Indeed, the most recent readings, such as the consumer and producer price indexes, show inflation pressures rising though relatively benign.”
  • “But they do jibe with some other indicators showing inflation is rising beneath the surface.”

FT – US has more than 5,600 banks. Consolidation is coming – Ben McLannahan 5/22

  • “The US’s banks have largely sat out the mergers and acquisitions wave of recent years. While deal records have fallen in almost every other sector, big banks have done almost nothing, shrinking rather than expanding. And merger activity among small and mid-sized banks — some 5,607 of them, at last count — has been subdued.”
  • “But when Fifth Third Bancorp of Cincinnati revealed its $4.7bn swoop for Chicago’s MB Financial on Monday morning, shares in other Chicago-area banks began to move, too. Wintrust, a similar-sized bank based in Rosemont, Illinois, ended the day up almost 4%, while First Midwest of Itasca closed up 3%.”
  • “The implications were obvious: after years of thin activity in bank M&A, this deal could mark a turn.” 
  • “The conditions for dealmaking look better than at any time since the financial crisis. Higher interest rates and lower taxes have pumped up bank profits, giving management teams stronger platforms from which to contemplate doing something radical.”

WSJ – Rising Dollar Sparks Tumult in Emerging Markets – Ira Iosebashvili, Josh Zumbrun, and Julie Wernau 5/21

  • “U.S. currency’s rally puts spotlight on weaknesses in a broad range of emerging-market assets.”

Real Estate

WSJ – Who Needs a Down Payment? Trade In Your Old Home Instead – Laura Kusisto 5/22

  • “Opendoor offers to take the hassle out of selling an old home to buy a new one.”

WSJ – Daily Shot: John Burns RE – Home Builder Land Acquisitions 5/23

Energy

FT – The geopolitics of electric cars will be messy – Henry Sanderson 5/22

  • “Oil has had a leading role in geopolitics over the past 100 years, sucking western powers into an often disastrous dependence on the Middle East.”
  • “While black gold, as oil is sometimes known, is not always the overt cause of conflict, it is linked to between one quarter and a half of all interstate conflicts globally between 1973 and 2012, according to a 2013 study by Jeff Colgan of Brown University.”
  • “But it would be a mistake to assume that geopolitical tensions will miraculously ease in a future in which renewable energy sources dominate. Building wind turbines and creating lithium-ion batteries requires metals and raw materials from those countries which are blessed, or potentially cursed, with them.”
  • “And for some of these commodities, their high concentration in particular parts of the world sharpens the risks.”
  • “A clean energy economy will require a staggering volume of metals to be prized from the ground.”
  • “For example, Olivier Vidal of the University Grenoble Alpes estimates that to build the infrastructure for clean energy the amount of copper needed amounts to almost half the total mined since 1900.”
  • “There is also the real risk that the age of the electric car will generate corporate monopolies, echoing those of Standard Oil whose founder John D Rockefeller cornered the oil market more than a century ago as the combustion engine took off.”
  • “Glencore, the Switzerland-based and London-listed miner, is expanding its production of cobalt which is set to give it a 40% share of global supply by 2020.”
  • “The production of lithium, a key ingredient for batteries in electric cars as well as smartphones, is controlled by just five companies.”
  • “However, rather than tensions with the Middle East, the advent of the electric car will usher in greater friction with China. Beijing’s ambitions in clean energy are enormous.”
  • “As part of the ‘Made in China 2025’ plan to advance high-end manufacturing, the government wants to establish a grip on the production of electric cars and clean energy technology.”
  • “The rest of the year will provide further signs of the capital and scale that China is bringing to this competition.”
  • “No one is giving China a free run at the metals that have emerged as central to electric cars.”
  • “Trade tensions with US President Donald Trump are already brewing. This month his administration released a list of 35 minerals, including lithium and cobalt, that are ‘considered critical to the economic and national security of the United States.’”
  • “Chile, which has the world’s largest lithium reserves, is looking to build battery components, while South Africa, a producer of vanadium, wants to produce electrolytes for vanadium batteries, which are used to store energy for the electric grid.”
  • “Europe, too, is beginning to build its own giant battery factories to supply Germany’s car companies and the UK’s innovation agency has backed a study that uses satellites to look for lithium in Cornwall.”
  • “The geopolitics of the era of the electric car are in their infancy. While it is unlikely to lead to military conflict, the tensions, especially with China, over who will control the resources and technologies that will underpin electric cars will be heightened.”
  • “Over the long term, the winners are likely to be those countries and companies that can develop battery technology that relies on materials that are abundant rather than scarce. It might even help make the geopolitics a little less fraught.”

Finance

FT Alphaville – ‘Some of the worst covenants that we’ve ever seen’ – Alexandra Scaggs 5/21

Cryptocurrency / ICOs

WSJ – Buyer Beware: Hundreds of Bitcoin Wannabes Show Hallmarks of Fraud – Shane Shifflett and Coulter Jones 5/17

Environment / Science

Axios – Next climate challenge: A/C demand expected to triple – Ben Geman 5/15

Construction

WSJ – Daily Shot: CME Lumber (Jul) Futures 5/22

Asia – excluding China and Japan

FT – Malaysia says it has been ‘bailing out’ 1MDB – Alice Woodhouse and Harry Jacques 5/22

  • “Malaysia has paid almost RM7bn ($1.8bn) to service debt owed by 1MDB, the south-east Asian nation’s finance ministry said on Tuesday, as investigators ratcheted up their probe into the state investment fund from which $4.5bn is alleged to have gone missing.”
  • “Two weeks after voters ousted the government of Najib Razak, the finance ministry said it had been ‘bailing out’ the 1Malaysia Development Berhad fund since April 2017, adding that another RM144m interest payment was due on May 30.”
  • “The revelation ‘confirms the public suspicion that 1MDB had essentially deceived Malaysians by claiming that [the payments] have been paid via a ‘successful rationalization exercise’,’ the ministry said in a statement. ‘All the while it has been the MoF [ministry of finance] who has bailed out 1MDB.'”
  • “Earlier on Tuesday, Malaysia’s new anti-corruption chief said he had been harassed and received a death threat after he pursued a 2015 investigation into 1MDB.”

India

FT – Oil price rise puts heat on Narendra Modi’s government – Amy Kazmin 5/22

  • “In 2016 — as global crude oil prices fell to about $40 per barrel — India, which imports nearly 80% of its petroleum, levied new excise duties on petrol and diesel to stabilize prices and prevent a surge in demand.” 
  • “Since then, New Delhi has come to depend heavily on those revenues to shore up its fragile public finances, especially as receipts from the goods and services tax introduced last year have failed to stabilize at expected levels.” 
  • “But after global crude oil prices hit a four-year high of more than $80 per barrel last week, India’s fuel pump prices — for decades subsidized by the government and held artificially low — have jumped to among the highest in south Asia.”
  • “Industry groups are pressing New Delhi to pare back excise duties on fuel, warning that the high prices will undermine an economy only now recovering from the successive disruption of a dramatic cash ban and the introduction of the goods and services tax.”
  • “But any meaningful rollback to ease pressure on consumers will raise doubts over the ability of Mr Modi’s administration to meet its target of cutting the fiscal deficit to just 3.3% of gross domestic product.”
  • “’India’s reliance on oil revenue has now surpassed the Malaysian government’s reliance on oil revenues — and Malaysia is an oil exporter,’ said Vikas Halan, senior vice-president at Moody’s Investors Service, the rating agency. ‘The government can always roll back excise duty — there is no one stopping them — but the issue is, how will they compensate for the loss of revenue?’”
  • “Last year, excise duties on petroleum products, which are about a quarter of the retail price of petrol and diesel, accounted for 17% of New Delhi’s total revenue collection. For every R1 that the government pares back these excise duties, it will lose an estimated $1.8bn in revenues, or about 0.1% of annual GDP.” 
  • “Adding to the overall pressure is the recent weakening of the Indian rupee, which has fallen 6% this year to a 16-month low of Rs68.1 per dollar. Further depreciation will mean even higher local fuel prices. Bond markets are also jittery, with yields rising.”

South America

WSJ – Daily Shot: Black Market Exchange Rate – USD / Venezuelan Bolivar 5/23

WSJ – After Venezuela Strongman’s Victory, Isolated Nation Faces Growing Chaos – Kejal Vyas, Ryan Dube, and Juan Forero 5/21

Other Interesting Links

CNBC – The richest person in every state, according to Forbes – Emmie Martin 5/22

May 15, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – Faced with a housing crisis, California could further restrict supply 5/10

  • “Rent control sounds appealing but is counter-productive.”

Economist – The meaning of the Vision Fund – Leaders 5/12

  • “Succeed or fail, Masayoshi Son is changing the world of technology investing.”
  • “The fund is the result of a peculiar alliance forged in 2016 between Mr Son and Muhammad bin Salman. Saudi Arabia’s thrusting crown prince handed Mr Son $45bn as part of his attempt to diversify the kingdom’s economy. That great dollop of capital attracted more investors—from Abu Dhabi, Apple and others. Add in SoftBank’s own $28bn of equity, and Mr Son has a war chest of $100bn. That far exceeds the $64bn that all venture capital (VC) funds raised globally in 2016; it is four times the size of the biggest private-equity fund ever raised.”
  • “The fund has already spent $30bn, nearly as much as the $33bn raised by the entire American VC industry in 2017. And because about half of its capital is in the form of debt, it is under pressure to make interest payments. This combination of gargantuanism, grandiosity and guaranteed payouts may end up in financial disaster. Indeed, the Vision Fund could mark the giddy top of the tech boom.”

Economist – Will Argentina’s woes spread? – Leaders 5/12

  • “Argentina has much in common with yesterday’s emerging markets, but little in common with today’s.”

FT – Apple sows seeds of next market swing – Rana Foroohar 5/13

  • “Rapid growth in debt levels is historically the best predictor of a crisis. And this year the corporate bond market has been on a tear, with companies issuing a record $1.7tn last year, and over half a trillion already this year. Even mediocre companies have benefited from easy money. But as the rate environment changes, perhaps more quickly than is imagined, many could be vulnerable.” 

WSJ – In a Dollarized World, a Rising Dollar Spells Pain – Greg Ip 5/9

  • “Even as U.S. economic influence shrinks, the dollar’s clout in global trade and borrowing is growing, magnifying impact of its rise in value.”

Markets / Economy

Bloomberg – U.S. Tariffs Lead to Record Increase in Washing Machine Prices – Alexandre Tanzi 5/10

Bloomberg Businessweek – No, the U.S Economy Isn’t Overheating – Peter Coy 5/11

  • “Some indicators are flashing red, but there’s still a little slack in the system.”

WSJ – Company Costs Are Rising, but Getting Shoppers to Pay More Is Hard – Eric Morath, Heather Haddon, and Jacob Bunge 5/9

WSJ – Daily Shot: Bloomberg – Relative Hard Currency Reserves 5/14

Real Estate

WSJ – WeWork, the Workspace Giant, Wants to Be Its Own Landlord, Using Other Investors’ Money – Eliot Brown 5/13

  • “WeWork’s new investment fund aims to buy buildings where the company would become a tenant, raising conflict-of-interest questions.”

Energy

WSJ – Daily Shot: AAA Daily National Average Gasoline Prices 5/13

Finance

FT – Landmark bond sales hit by emerging markets downturn – Kate Allen 5/14

  • “Investors who bought some of the riskiest emerging market sovereign bond sales in the past year have been left nursing paper losses as a strengthening dollar has rattled sentiment for emerging markets.”
  • “JPMorgan’s emerging markets bond index has lost 5.1% since the start of this year.”

WSJ – Daily Shot: FRED – BOJ Assets YoY Change 5/13

Cryptocurrency / ICOs

howmuch.net – The Biggest Cryptocurrency Hacks and Scams – Raul 5/9

Agriculture

Bloomberg Businessweek – These Shipping Containers Have Farms Inside – Adam Popescu 5/9

Construction

WSJ – Daily Shot: CME Lumber (JuL) 5/11

  • “Lumber futures blasted past $600 per 1,000 board feet (mbf).”

Education

NYT – Education Department Unwinds Unit Investigating Fraud at For-Profits – Danielle Ivory, Erica L. Green, and Steve Eder 5/13

South America

Economist – How chavismo makes the taps run dry in Venezuela 5/10

  • “Plentiful rains plus Bolivarian socialism equals water shortages.”

WSJ – Venezuela’s Oil Meltdown Is Getting Worse – Spencer Jakab 5/13

  • “A rush of creditors trying to seize assets has disrupted Venezuela’s oil exports at a time when they already are plunging.”

Other Interesting Links

Cannabis Benchmarks – Weekly Report 5-11-18

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 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.” 

 

April 12, 2018

If you were only to read one thing…

NYT – British Banks Will Have to Cut Ties to Sanctioned Oligarchs, U.S. Says – Ellen Barry 4/10

  • “The United States on Tuesday ratcheted up its efforts to block Kremlin-linked industrialists from doing business in the West, warning that British banks will have to sever their relationships with the tycoons if they want continued access to American financial institutions.”
  • “Sigal P. Mandelker, a top American Treasury official in London to meet with her counterparts, said British banks could face ‘consequences’ if they continued to carry out significant transactions on behalf of the 24 influential Russians sanctioned by Washington on Friday. The list includes the industrialists Oleg Deripaska and Viktor Vekselberg, along with Kirill Shamalov, who American officials have identified as President Vladimir V. Putin’s son-in-law.”
  • “The warning has resonated in London, which for decades has served as a haven for Russia’s wealthiest families. Russian investors own iconic British assets like the Chelsea Football Club and swaths of high-end London real estate, and they support thriving networks of lawyers, financial advisers and estate agents.”
  • “The new American sanctions expose financial institutions outside the United States to penalties if they ‘knowingly facilitate significant financial transactions’ on behalf of the listed Russian oligarchs.”
  • “The wording is similar to secondary sanctions imposed against Iran. These ‘essentially prohibit the individuals involved from taking part in the dollar economy,’ said Daragh McDowell, an analyst for Europe and Central Asia at Verisk Maplecroft, a consulting firm based in Bath.”
  • “It is likely to compel risk-averse British banks to cancel the Russians’ accounts altogether, said Brian O’Toole, a former senior official at the Treasury Department’s Office of Foreign Assets Control, which administers and enforces American sanctions.”

Continue reading “April 12, 2018”

March 8, 2018

If you were only to read one thing…

FT Alphaville – China’s household debt problem – Matthew C Klein 3/6

  • “The rapidity and size of China’s debt boom in the past decade has been almost entirely without precedent. The few precedents that do exist — Japan in the 1980s, the US in the 1920s — are not encouraging.”
  • “Most coverage has rightly focused on China’s corporate sector, particularly the debts that state-owned enterprises owe to the big four state-owned banks. After all, these liabilities constitute the biggest bulk of the total debt outstanding, and also explain most of the total growth in Chinese debt since the mid-2000s.”
  • “Chinese households, however, are quickly catching up. This is bad news.”
  • “The simple story of China’s debt boom is that government-backed companies borrow from government-controlled banks to pay for wasteful investments to support jobs and other political objectives. This creates lots of problems for China today and in the future, but it does have one virtue: the losses from centralized credit allocation can be distributed over a broad population over a long period of time.”
  • “Household debt is different. Borrowers are widely dispersed and lack political power. The lenders are often newer finance companies or loan sharks. Worst of all, there is essentially zero chance that additional household borrowing pays for productive investment. Some of China’s additional infrastructure and manufacturing capacity may prove valuable one day. Household debt probably won’t. Atif Mian and Amir Sufi have ably shown that increases in household borrowing tend to predict slower income growth and higher joblessness.”
  • “This chart is therefore cause for concern:”
  • “As of mid-2017, Chinese households had debts worth about 106% of their disposable incomes. For perspective, Americans currently have debts worth about 105% of their disposable incomes, on average. The difference is that American indebtedness has been basically flat the past few years after steady declines since 2007.”
  • “Chinese households have been experiencing rapid income growth by rich-country standards for a long time, but their debts have grown far faster:”
  • “Since the start of 2007, Chinese disposable household income has grown about 12% each year on average, while Chinese household debt has grown about 23% each year on average. The cumulative effect is that (nominal) income has slightly more than tripled but debts have grown by nearly a factor of nine. The mismatch has been getting worse recently, as can be seen in the kink in the pink line towards the end.”
  • “All this is finally starting to affect the aggregate debt numbers. Household debt in China is still small relative to the total — about 18% as of mid-2017 — but household borrowers are now responsible for about one third of the growth in total nonfinancial debt:”
  • “The problem is that households cannot service their debts out of GDP. Instead they have to rely on their meagre incomes. Since 2007 the share of Chinese national output going to households has ranged from as high as 46% to as low as 42% of GDP. (The rest of China’s national income is mostly captured by government-controlled enterprises and their elite managers.) The household share of income has dropped by about 1 percentage point just in 2017:”
  • “For comparison, disposable income in the US has tended to hover between 71% and 76% of GDP over the past few decades.”
  • “The trick for Beijing now is to bring non-productive investment down as rapidly as it can without causing unemployment to rise to dangerous levels. Because it has proven difficult to replace non-productive investment with productive investment (and, I have long argued, unrealistic even to expect it could happen), the only way to do so is to replace it with consumption. But levered consumption obviously cannot solve the problem of rapid debt growth, so rising consumption must be driven by rising household income, even as declining investment causes workers on investment projects to be fired. In the end this may be politically a difficult problem, but economically it is just an arithmetic problem about wealth reallocation.” – Michael Pettis

Perspective

CNBC – 42% of Americans are at risk of retiring broke – Jessica Dickler 3/6

© GOBankingRates

US Census Bureau – Irish-American Heritage Month and St. Patrick’s Day 2/6

Worthy Insights / Opinion Pieces / Advice

Business Insider – Underpaying drivers is ‘essential’ to Uber’s business model, according to a new study on low wages – Shona Ghosh 3/7

Economist – How the West got China wrong – Leaders 3/1

  • “It bet that China would head towards democracy and the market economy. The gamble has failed.”

FT – Forget flu, it’s time for your fake-news jab – Hannah Kuchler 3/6

  • “News literacy should be taught like sex and drugs education, to protect individuals and society as a whole.”

Medium – A Lack of Clarity is The Biggest Inhibitor of Progress Towards Your Goals – Srinivas Rao 3/5

Real Estate

WSJ – Daily Shot: Cresset Wealth Advisors – US Housing Price Change from Pre-Crisis Peak 3/7

WSJ – New York Housing Is Getting (Gasp!) More Affordable – Josh Barbanel 3/7

  • “Housing costs are taking a smaller bite out of the typical household’s monthly budget, according to a new U.S. Census Bureau survey that is conducted every three years. The survey also shows a record amount of new housing and the third-highest rental-vacancy rate since the bureau’s first survey in 1965.”

WSJ – That Much Prophesied Commercial Property Bust Still Hasn’t Happened – Esther Fung 3/6

  • “The delinquency rate for securitized loans in the commercial real-estate industry has dropped for eight consecutive months, defying expectations in recent years of a wave of defaults.”
  • “According to real-estate data provider Trepp LLC, the delinquency rate for real-estate loans in commercial mortgage-backed securities clocked in at 4.51% in February, down from 5.31% in the same period a year earlier. The rate hit an all-time high of 10.34% in July 2012.”
  • “Investors had been expecting an increase in defaults in 2016 and 2017 as the large volume of CMBS packaged during the 2006 to 2007 period reached maturity. But rising real-estate values, low interest rates and a surge of debt capital from insurers and other sources have allowed property owners to refinance or restructure their debts.”

Yahoo Finance – Foursquare CEO: There are 2 types of malls that are seeing growth – Melody Hahm 3/6

  • “While consumers are getting lured online by cost savings and the convenience factor, there’s still ample data on foot traffic into physical stores, said Foursquare CEO Jeff Glueck. In fact, he’s found that the rise in online shopping has largely affected middle-market malls. Malls serving high-end and low-end customers are actually seeing growth.”

Finance

WSJ – The New ID Theft: Millions of Credit Applicants Who Don’t Exist – Peter Rudegeair and AnnaMaria Andriotis 3/6

Cryptocurrency / ICOs

Bloomberg – Bitcoin Dives After SEC Says Crypto Platforms Must Be Registered – Camila Russo and Lily Katz 3/7

Construction

WSJ – Daily Shot: Change in Construction Producer Price Index 3/7

  • “US construction firms continue to struggle with rising materials costs. Higher steel prices will exacerbate the problem, especially for commercial property developers.”

Asia – excluding China and Japan

WSJ – In China’s Shadow, Communist Vietnam Links Arms With Old Enemy, the U.S. – Jake Maxwell Watts 3/2

China

WSJ – China’s Financial Reach Leaves Eight Countries Vulnerable, Study Finds – Josh Zumbrum and Jon Emont 3/4

Europe

WSJ – Daily Shot: FRED – European Central Bank Balance Sheet 3/7

Puerto Rico

WP – Exodus from Puerto Rico grows as island struggles to rebound from Hurricane Maria – Arelis R. Hernandez 3/6

March 2, 2018

Perspective

Economist – The hidden cost of congestion – Daily Chart 2/28

  • “In rich countries, city-dwellers lose nearly $1,000 a year while sitting in traffic.”

Tax Foundation – Sources of Personal Income 2015 Update – Erica York 2/27

Visual Capitalist – The World as 100 People over the last two centuries – Jeff Desjardins 2/28

WEF – These will be the world’s most populated countries by 2100 – Rob Smith 2/28

Worthy Insights / Opinion Pieces / Advice

Economist – Black Americans are over-represented in media portrayals of poverty – C.K. 2/20

  • “The poverty rate amongst black Americans, at 22%, is higher than the American average of 13%. But black people make up only 9m of the 41m poor Americans.”

FT – Millennials poorer than previous generations, data show – Sarah O’Conner 2/23

  • “Stagnant wages and rising house prices hit disposable income levels.”

NYT – Is Bitcoin a Waste of Electricity, or Something Worse? – Binyamin Appelbaum 2/28

  • “Money is supposed to be a means of buying things. Now, the nation’s hottest investment is buying money. And the investment rush is raising questions about whether one reason for the slow pace of economic growth in recent years is that the nation is busy distracting itself. While Bitcoin mining may not be labor intensive, it diverts time, energy and capital from other, more productive activities that economists say could fuel faster growth.”
  • “By a wide range of measures, America has a productivity problem. The economy is growing slowly, and almost 20% of adults in their prime working years are neither working nor trying to find work. Americans who do have jobs are less likely to start their own companies. Even the most basic kind of production is in decline. Americans are having less sex and making fewer babies.”

Real Estate

PBN – Hawaii homebuyers top nation with highest mortgage debt-to-income ratio – Janis Magin 2/28

  • “Homebuyers in Honolulu have the highest mortgage debt-to-income ratio in the nation, while homebuyers on Maui have a ratio that’s third-highest in the U.S., topped only by San Jose in California’s Silicon Valley, according to a report by the personal finance company SmartAsset.”
  • “Homebuyers in the Honolulu metropolitan area have mortgages worth 3.959 times their annual income, on average, according to an analysis of data from the Consumer Financial Protection Bureau.” 
  • “The data showed that Honolulu homebuyers have an average income of $131,639 and that the average mortgage is for $521,201.”
  • “Maui homebuyers in the Kahului-Wailuku-Lahaina metro area have an average income of $131,681, and the average mortgage there is $468,597, putting their mortgage-to-income ratio at 3.559.”
  • “By contrast, homebuyers in San Jose have an average income of $207,062 and an average mortgage of $740,693, giving them a ratio of 3.577.”
  • California had 17 of the top 25 cities with the largest mortgage-to-income ratios on the list, while Hawaii had two of the top three.
  • “Nationally, the average mortgage-to-income ratio was 2.119.”

WSJ – Retailers Post Strong Numbers – And Mall Shares Keep Falling – Esther Fung 2/27

  • “Prospect of higher interest rates a worry to shopping mall REIT investors.”
  • “While mall landlords generally have shown they are able to keep occupancy levels buoyant, there are growing concerns about pressure on rents and higher capital expenditures as they look to attract and retain tenants, many of which are shrinking their store footprints.”
  • “Recent comments by Starbucks Corp. Executive Chairman and founder Howard Schultz that he expects rents to fall also weighed on the retail property sector Tuesday.”
  • “’Over the last few weeks I have been in a number of U.S. cities and observed firsthand the abundance of empty storefronts across the country, in prime A1 locations,’ Mr. Schultz said in an email to Starbucks senior leadership team on Sunday.”
  • “’We are at a major inflection point as landlords across the country will be forced (sooner than later) to permanently lower rent rates to adjust to the ‘new norm’ as a result of the acute shift away from traditional brick-and-mortar retailing to e-commerce,’ he added.”

Energy

WSJ – Daily Shot: US Total Crude Oil Production 2/23

Finance

Bloomberg – Investing in Index Funds Is No Longer Passive – Dani Burger 2/27

  • “Passive has gotten so large that it’s killed everything in its path — including itself. Welcome to the ‘Passive Singularity‘.”
  • “There are now so many indexes that putting your money in an index-tracking fund is a move requiring an active decision, according to researchers at Sanford C Bernstein & Co. The industry’s growth has even forced active managers to focus on selecting indexes themselves — be that to invest in, or to benchmark against.”
  • “It’s the latest broadside from Bernstein’s team, which in 2016 labeled passive investing ‘worse than Marxism’. Investors so far aren’t paying heed: passive mutual funds and ETFs absorbed $692 billion last year, compared to $45 billion in outflows for active funds, according to data compiled Bloomberg Intelligence.”
  • “The Bernstein strategists base their conclusions around the millions of indexes in existence, which far surpass the number of single securities. Do a little math and the madness is clear: with 3,000 easily-investable stocks, the number of possible combinations to turn into an index is a Googol (that number, written out, would be 1 followed by 100 zeros.)”
  • “With nearly half of equity assets managed passively in the U.S., there’s no sign that investors will stop gravitating toward cheaper, index-tracking products. Bernstein’s new research wrestles with a world where passive is larger than ever, and active managers have to fight for the trust of their clients. The team concedes that ‘passive investing has been a great force for democratizing access to capital markets and reducing the costs to society of managing assets’.”
  • “But a massive bull market rally across equities and debt markets has left many investors blind to the risks, which smart asset allocation can help to mitigate, Bernstein said.”
  • “In January, investors added $25 billion to active ETFs and mutual funds while allocating $103 billion to passive vehicles, data from Bloomberg Intelligence show.”
  • “’By all means, investors should save money on implementation by using passive vehicles as part of their allocation,’ the strategists wrote. ‘But the myth of purely passive investment will be exposed by a low-return world.’”

Cryptocurrency / ICOs

WSJ – Daily Shot: Bitcoin 2/28

  • “Bitcoin has been much less volatile in the past few days.”

Health / Medicine

Our World in Data – Causes of Death – Hannah Ritchie and Max Roser Feb. 2018

Construction

WSJ – With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices – Benjamin Parkin 3/1

  • “A lumber shortage has pushed prices to record highs as builders stock up for what is expected to be one of the busiest construction seasons in years.”
  • “Builders say the higher lumber costs are making homes more expensive. Lumber prices started rising last year after fires destroyed prime forests and a trade dispute between the U.S. and Canada restricted supplies. Now a shortage of railcars and trucks is forcing builders to pay even more.”

  • “Prices are rising as lumber yards try to stock up ahead of what looks likely to be a busy building season this spring. A strong economy and tight supply of houses are heating up the home-building market. The number of new units under construction in the U.S. rose almost 10% in January, the Commerce Department said, as strong demand kept builders working through the winter. Permits for new homes, a sign of anticipated construction, also rose.”
  • “Material prices now rival labor shortages as builders’ main concerns, a National Association of Home Builders survey showed in January. Prices for common building varieties like spruce and southern pine are at or near records, according to price-tracking publication Random Lengths. March-dated lumber futures at the Chicago Mercantile Exchange hit a record of $532.60 per 1,000 board feet last week after climbing more than 50% in 14 months.”
  • “That run-up began with a trade dispute between the U.S. and Canada, which provides about a third of U.S. timber, leaving many dealers hesitant to restock at elevated prices. The Trump administration eventually instituted tariffs of 20% or more on Canadian sawmills.”
  • “Problems mounted. The worst wildfires on record hit Canada’s Pacific coast. Hurricane Irma temporarily closed mills in the forests of Florida and Georgia. And then came a shortage of railcars and trucks to transport timber from forests in places like the Pacific Northwest. Rates for flatbed trucks rose 24% in January from a year earlier, according to DAT Solutions LLC.”

February 22, 2018

Markets / Economy

Bloomberg – Walmart’s Margins Hit Record Low as Fight With Amazon Takes Toll – Matthew Boyle 2/20

WSJ – Daily Shot: FAANG Basket vs S&P 500 – Relative Performance 2/20

WSJ – Daily Shot: Consumer Staples SPDR ETF vs S&P 500 – Relative Performance 2/20

WSJ – Daily Shot: Vanguard Real Estate ETF vs S&P 500 – Relative Performance 2/20

  • Rising bond yields…

WSJ – Daily Shot: Shifting Tastes – Coca-Cola 2/21

Insurance

WSJ – Reinsurers Hit by Catastrophe Losses, Rising Competition – William Wilkes 2/19

Construction

WSJ – Daily Shot: CME Lumber Futures 2/20

Education

WSJ – Daily Shot: The Rise of the Jumbo Student Loan – Josh Mitchell 2/16