Bloomberg – The U.S. Economy Keeps Defying the Recession Odds – Noah Smith 12/2/19

Bloomberg – The Way Out for a World Economy Hooked on Debt? More Debt – Enda Curran 12/1/19


Economist – Argentina’s beleaguered government imposes capital controls 9/2/19
When Mauricio Macri was elected president of Argentina in 2015, one of his first acts was to abolish capital controls that restricted buying and selling of the peso. The move symbolized Argentina’s pivot back to open markets and liberal economic reforms under his rule. On September 1st, after weeks of market turmoil, Mr Macri was forced to issue a decree re-imposing controls in an attempt to shore up the currency. From now on ordinary Argentines’ purchases of dollars will be capped at $10,000 a month. Companies will face restrictions on their ability to purchase dollars in the foreign-exchange market and to pay dividends to investors abroad.
Following days of market chaos in the wake of the vote (the August 11 primary vote that went to Peronist rival Alberto Fernandez (no relation to former president Cristina Fernandez de Kirchner)), Mr Macri’s government bowed to the inevitable last week and asked creditors for more time to pay back Argentina’s $101bn of foreign debt, including the IMF money, as Buenos Aires struggled to avoid the country’s ninth sovereign default — and the third this century. Currency controls were imposed on businesses on Sunday after it lost an estimated $3bn in reserves in just two days last week.
Bloomberg – The Unstoppable Surge in Negative Yields Reaches $17 Trillion – John Ainger 8/30/19
Thirty percent of all investment-grade securities now bear sub-zero yields, meaning that investors who acquire the debt and hold it to maturity are guaranteed to make a loss. Yet buyers are still piling in, seeking to benefit from further increases in bond prices and favorable cross-currency hedging rates—or at least to avoid greater losses elsewhere.
China’s trade war with the United States has escalated in recent days, posing a growing threat to an already slowing economy.
China is not running out of money. But Chinese banks are reluctant to lend to private businesses because they consider big, state-owned enterprises more reliable in paying off their debts. Alternative sources of money have dried up as regulators have cracked down in recent years on China’s shadowy world of unofficial lending.
So a growing number of companies are issuing i.o.u.s to their suppliers. Some suppliers turn around and use the notes to pay another supplier. And then — in a sign of how desperate some Chinese companies have become for money — they sell the notes for less cash than they are worth.
Commercial acceptance bills are not legal tender. Rather, they are pieces of paper promising payment in the future. Companies owed some $211 billion in these informal notes as of February, the most recent government data available, an increase of more than one-third from the previous year.
More debt may be floating around China’s corporate world and goes untracked if the notes are being traded for less than their face value. A market has formed around commercial acceptance bills, in which companies buy and sell them based on the prospects for being paid back. The bigger and better known the company, the more secure the bill is considered.
A pillar of China’s economy, the property sector, is feeling the squeeze particularly hard. Sales have been slowing since late 2017, making it hard to pay for new projects. At the same time, the government is clamping down on other ways that property companies raise money, like through the shadow banking system.
Property companies have adapted by effectively turning the commercial acceptance bills into a currency, according to interviews and filings from dozens of property developers and suppliers like steel companies, design and construction firms.
Xu Jiang of Zhubo Design, an architecture and urban planning company in the southern city of Shenzhen, said customers had started to pay with commercial acceptance bills two years ago. The customers, which include some of the country’s biggest developers, local governments and state-owned firms, now use these notes more frequently than paying cash, he said.
Today, one of the biggest issuers of i.o.u.s is China’s largest and best known property company, Evergrande ($36bn market cap). By the end of last year it had issued nearly $20 billion worth of i.o.u.s to its suppliers. With a towering $100 billion debt pile and a penchant for raising bonds to pay off the interest, it appears to have turned to commercial acceptance bills to help cover costs.
Bauing Construction Holding Group, a big supplier of design and materials to China’s biggest property developers, has disclosed that it is owed $96.4 million in these i.o.u.s from Evergrande.
Another company that owes Bauing money is the state-owned firm China State Construction Engineering. China State said it had owed $490 million in i.o.u.s to all of its suppliers at the end of last year.
Another major property developer, Greenland Holding, which was founded by the Shanghai government and has property developments in dozens of cities across China, had $550 million worth of unpaid notes out to suppliers by the end of last year, according to its annual report. The company said that was 10 times the amount it had outstanding in 2017.
A Wealth of Common Sense – Too Big To Be Simple? – Ben Carlson 6/19
A Wealth of Common Sense – Is The Handmaid’s Tale Fast Approaching – Ben Carlson 6/5
Economist – In praise of ranked-choice voting 6/14
Economist – China has made progress in tackling financial risks – Leaders 6/16
FT – Beauty contest to host new Amazon base reveals ugly truths – Edward Luce 6/5
FT – How millennials became the world’s most powerful consumers – John Gapper 6/5
WSJ – Food Companies Can’t Figure Out What Americans Want to Eat – Aaron Back 6/5
WSJ – The Other Yield Curve Investors Should Watch as Trouble Mounts – Richard Barley 6/19
Economist – Global Coal Consumption 6/14
FT – Gaming disorder joins the WHO panoply of diseases – Anjana Ahuja 6/19
FT – ‘Hellish’: UK motorists hit by biggest petrol price rise in 18 years – Camilla Hodgson 6/5
FT – China’s debt collectors focus in on $200bn P2P debt pile – Don Weinland 6/4
WSJ – China Tech Giants’ Costly Wars to Go Cashless – Stella Yifan Xie 6/14
WSJ – The Force Behind Europe’s Populist Tide: Frustrated Young Adults – Eric Sylvers 6/17
WSJ – Daily Shot: OECD – Levels of Working Poor by Country 5/8
A Wealth of Common Sense – Bad Advice Can Be Expensive – Ben Carlson 5/6
Bloomberg Businessweek – The Future of News – John Micklethwait 5/3
Economist – So long, farewell – Buttonwood 5/8
The Registry – Does WeWork at All? – John McNellis 5/8
FT – Walmart takes on Amazon in India with Flipkart deal – Simon Mundy and Arash Massoudi 5/8
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
WSJ – Daily Shot: Green Street Advisors – US Commercial Property Price Index 5/8
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
WSJ – Daily Shot: CME Lumber (Jul) 5/7
Axios – The disappearing Chinese student visa – Stef W. Kight 5/6
FT – Chinese group with $7bn in debt seeks Beijing bailout – Gabriel Wildau 5/7
This will be the only post this week from me. This week I’m attending the ULI Spring Meeting in Detroit, MI.
Cheers,
Duff
Bloomberg Businessweek – China Quietly Rolled Out a Very Big Bang – John Micklethwait 4/19
Bloomberg – Latest Climate Threat for Coastal Cities: More Rich People – Christopher Flavelle 4/23
WSJ – Real Estate Stocks Are on Sale but No One Is Buying – Ken Brown 4/27
Reuters – Venezuela faces heavy bill as grace period lapses on China loans – Corina Pons 4/27
FT – WeWork bond finds home in yield-starved market – Alexandra Scaggs 4/26
WSJ – Daily Shot: CME Lumber (Jul) 4/26
FT – China’s HNA reports debts have soared to $94bn – Lucy Hornby 4/28
Visual Capitalist – Knight Frank: A Time-lapse of Dubai’s Astonishing Growth – Nick Routley 4/28
After speaking with some readers, it appears that my little experiment wasn’t working out as I intended. It was not clear that the majority of the content was being hosted on the website, while the direct email was only showing one article.
So, back to the old format.
Thanks for reading – and if you like this blog, please be sure to tell your peers about it.
Sincerely,
Duff Janus
Bloomberg – What It Was Like to Get Caught in Toronto’s Housing Slump – Natalie Wong 4/11
Pragmatic Capitalism – Yeah, That Debt Article Was Kinda Bad… – Cullen Roche 4/12
NYT – China’s Communists Rewrite the Rules for Foreign Businesses – Alexandra Stevenson 4/13
WSJ – A Dollar Peg That Will Stay on the Line – Jacky Wong 4/12
WSJ – Daily Shot: Scotiabank – Combined Central Bank QE Projections 4/13
WSJ – Daily Shot: Scotiabank – Forecast Central Bank Rates 4/13
WSJ – Amid Trade Feud, Recycling Is in Danger of Landing on Trash Pile – Bob Tita 4/12
WSJ – Boise, Idaho, Feels the Growing Pains of a Surging Population – Jim Carlton 4/15
Reuters – Spotify puts bank IPO paydays under fund manager scrutiny – Sinead Cruise 4/12
WSJ – Daily Shot: Reuters – US & European Annual IPO Fees 4/13
WSJ – Daily Shot: Credit Suisse – Fund Flows and Domestic Equity Flows 4/13
FT – HK currency intervention boosts property market risk – Emma Dunkley 4/12
NYT – British Banks Will Have to Cut Ties to Sanctioned Oligarchs, U.S. Says – Ellen Barry 4/10
FT – Columbus shows Trump how to thrive in the new world order – Rana Foroohar 4/1
Project Syndicate – Will China Really Supplant US Economic Hegemony? – Kenneth Rogoff 4/2
Seeking Alpha – Tesla Model 3 Costs More To Charge Than A Gasoline Car – Anton Wahlman 4/1
WSJ – U.S. Fiscal Future Won’t Be Like Its Carefree Past – Greg Ip 3/28
FT – Wary shale investors warn against drilling at all costs – Ed Crooks 4/1
WSJ – Daily Shot: Investing.com – Bitcoin v. Bitcoin Cash 4/2
Axios – Opioid prescription rates dropping across the country – Stef W. Kight and Lazaro Gamio 3/31
Bloomberg – Toronto’s Tale of Two Markets Is Hot Condos and Cold Houses – Natalie Wong 3/29
FT – China’s P2P lenders brace for renewed regulatory crackdown – Emily Feng 4/1
WSJ – Daily Shot: @NickTimiraos – Change in Home Prices – Japan & U.S. 4/2
WSJ – Dockless Bike Share Floods into U.S. Cities, With Rides and Clutter – Eliot Brown 3/26
FT – IMF warns of mounting debt crisis risk in poor countries – Kate Allen 3/22
Bloomberg – The Manhattan Luxury-Home Market Is Screaming: I’m Overpriced! – Oshrat Carmiel 3/23
FT – China looks to Reits to ease housing woes – Gabriel Wildau and Yizhen Jia 3/22
BBC News – Plastic patch in Pacific Ocean growing rapidly, study shows – Helen Briggs 3/22