Tag: Demographics

October 11, 2017


WSJ – Daily Shot: Spanish Empire at its Peak 10/10

  • “Since Monday was Columbus day, here is the size of the Spanish Empire at its peak (in 1790).”

WSJ – America’s Retailers Have a New Target Customer: The 26-Year-Old Millennial – Ellen Byron 10/9

VC – How Americans Differ by Age – Jeff Desjardins 10/10

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – How To Make $5,300 In Commissions on a $43,000 Retirement Account – Anthony Isola 10/9

  • If you are a teacher or have family or friends that are teachers, you should read this. Make sure you’re or they’re not getting fleeced.

NYT – The N.F.L Draft: A Study in Cockeyed Overconfidence – David Leonhardt 4/25/05

  • A worthwhile look at the research that Richard Thaler and Cade Massey did regarding overconfidence.

The Irrelevant Investor – The Price of Progress – Michael Batnick 10/10

  • “The economic machine that we’ve built in the United States has done extraordinary things and I can’t wait to see what we come up with in the future. But what do we do when progress leaves so many behind?”

Markets / Economy

NYT – China Hastens the World Toward an Electric-Car Future – Keith Bradsher 10/9

Economist – American entrepreneurs have not lost their mojo 10/10

  • “Business formation is down, but fast-growing startups are in high gear.”


FT – Saudi Arabia curbs oil exports to combat glut – Anjli Raval 10/9

  • “Saudi Arabia is allocating fewer barrels of crude for export next month and at a level below current demand, emphasizing the effort by global producers to reduce surplus inventories.”
  • “In a rare statement, the Ministry of Energy on Monday said contracted demand for Saudi crude for November was 7.7m barrels a day, but the kingdom has assigned just 7.2m b/d for export.”
  • “The disclosure of Saudi Arabia’s monthly allocations emphasizes a new focus on foreign sales, alongside production, that Riyadh deems vital to the effort by global producers to reduce surplus inventories.”
  • “’It is very interesting they are now trying to communicate to the market about exports,’ said Olivier Jakob at consultancy Petromatrix. ‘They have gone the extra step of putting out numbers on this, which is the first I’ve ever seen.’”


WSJ – Daily Shot: Hedge Fund Research – Hedge Fund Fees 10/10

WSJ – Daily Shot: Bitcoin 10/9

  • Bitcoin is rallying again.

WSJ – Daily Shot: Investing.com – Bitcoin Cash 10/10

  • “On the other hand, Bitcoin’s less fortunate twin called Bitcoin Cash has collapsed.”


FT – Modi’s pursuit of black money proves drag on India’s economy – Amy Kazmin 10/9

  • “For many Indians the powerful appeal of Narendra Modi, the prime minister, stemmed from his vows to tackle two issues of fierce public concern: the sluggish economy and entrenched corruption.”
  • “But India’s economy has faltered, with growth falling steadily since early 2016 to a three-year low of 5.7% in the second quarter of this year.”
  • “Now, some economists are suggesting Mr Modi’s two big goals are at odds, and that New Delhi’s zealous anti-corruption drive — which reached its apogee with a draconian cash ban — is sapping India’s economic momentum.”
  • “Though disruptive, demonetization failed to purge black money from the economy, because nearly 99 per cent of the cancelled bank notes were deposited or exchanged, rather than being furtively destroyed as forecast.”
  • “Now New Delhi is toughening its stance, with tax officials probing 1.8m individuals or businesses whose cash deposits after demonetization were out of sync with their past tax returns.”
  • “While the quest to unearth Indians’ illicit wealth remains politically popular, economists say it has come at a cost, souring business and consumer sentiment. It is considered one reason why private investment — which has driven past Indian booms — remains stubbornly flat.” 
  • “‘If you’ve got income tax authorities charged up and told to after black money, who is going to invest in a big way?’ said one economist who asked not to be identified given the issue’s sensitivity.”
  • “’The Chinese call this ‘the original sin’ problem,’ he added. ‘Every company has something buried in the past — a sin it has committed. If the government really wants to go after people, it can always find something.’”
  • “Demonetization severely disrupted the property market, previously a favorite parking place for black money and a big growth engine. Real estate prices and sales plunged and, though sales are picking up, there is a huge overhang of unsold inventory.”


NYT – Kobe Steel’s Falsified Data Is Another Blow to Japan’s Reputation – Jonathan Soble 10/10

  • “For decades, Japanese manufacturers of cars, aircraft and bullet trains have relied on Kobe Steel to provide raw materials for their products, making the steel maker a crucial, if largely invisible, pillar of the economy.”
  • “Now, Kobe Steel has acknowledged falsifying data about the quality of aluminum and copper it sold, setting off a scandal that is reverberating through Japan and beyond, and casting a new shadow over the country’s reputation for precision manufacturing, a mainstay of its economy.”
  • “Companies ranging from the automakers Toyota Motor and Honda Motor to aircraft companies like Boeing and Mitsubishi Heavy Industry said they were investigating the use of rolled aluminum and other materials from Kobe in their products. They also said they were trying to determine if substandard materials had been used in their products and, if so, whether they presented safety hazards.”
  • “Kobe Steel said on Sunday that employees at four of its factories had altered inspection certificates on aluminum and copper products from September 2016 to August this year. The changes, it said, made it look as if the products met manufacturing specifications required by customers — including for vital qualities like tensile strength — when they did not.”
  • “Kobe Steel added that it was examining other possible episodes of data falsification going back 10 years. It did not provide details about the size of the discrepancies it had discovered, making it difficult to immediately determine if they posed a safety threat.”
  • “Kobe Steel’s problem points to ‘a common organization issue,’ said Shin Ushijima, a lawyer who serves as president of the Japan Corporate Governance Network. He drew parallels between Kobe Steel and Takata and Mitsubishi, as well as with financial-reporting improprieties at Toshiba, which admitted to overstating profit in 2015.”
  • “’Boards aren’t doing their jobs,’ he said. ‘This isn’t an issue that can be solved by the president resigning. There needs to be wholesale change.’”
  • “He continued, ‘The Kobe Steel case is a test of whether we’ve learned anything from Toshiba and these other issues.’”


FT – Mexicans hope earthquake will shake up corrupt system – Jude Webber 10/9

  • “There are disasters waiting to happen, says Eduardo Reinoso, a civil engineer who has studied compliance with building codes introduced after 1985. He blames not only corruption and incompetence but also a culture of impunity that has encouraged people to build or modify their homes without planning permission because of a belief they can get away with it.”
  • “As Gabriel Guerra, a former diplomat and government official, put it: ‘Our collective negligence and corruption is coming back to bite us where it hurts.’”

July 3, 2017

Have a great Independence Day!


WP – The U.S. fertility rate just hit a historic low. Why some demographers are freaking out – Ariana Eunjung Cha 6/30

  • “According to provisional 2016 population data released by the Centers for Disease Control and Prevention on Friday, the number of births fell 1% from a year earlier, bringing the general fertility rate to 62.0 births per 1,000 women ages 15 to 44. The trend is being driven by a decline in birthrates for teens and 20-somethings. The birthrate for women in their 30s and 40s increased — but not enough to make up for the lower numbers in their younger peers.”
  • “A country’s birthrate is among the most important measures of demographic health. The number needs to be within a certain range, called the “replacement level,” to keep a population stable so that it neither grows nor shrinks. If too low, there’s a danger that we wouldn’t be able to replace the aging workforce and have enough tax revenue to keep the economy stable.”
  • The article attributes the trend to characteristics of the millennial generation; however, I would place more of the cause at the rising cost of housing, rising cost of primary education & extracurriculars, lingering student debt, and the replacement of stable work with ‘gigs’. It’s hard to want to procreate when you don’t feel stable or supported.

Worthy Insights / Opinion Pieces / Advice

NYT – Once a Model City, Hong Kong Is in Trouble – Keith Bradsher 6/29


FT – Canada oil output threatens to derail Opec plan – Gregory Meyer 6/29

  • “As Opec glares at the surge in US shale production that is threatening to derail its attempt to balance the oil market, it may also want to cast an eye north.”
  • “Canada, home of the world’s third-largest oil reserves, might have seen producers slash capital spending during the three-year-old oil decline, but earlier investments in the country are set to keep pushing output higher for at least the next 18 months.”
  • “A forecast released this month by the Canadian Association of Petroleum Producers sees the country’s output increasing by 270,000 barrels a day in 2017 and another 320,000 b/d next year.”
  • “That combined two-year Canadian increase is equal to almost a third of Opec’s production cuts that it made with allies like Russia at the beginning of this year in an effort to raise prices.”
  • “Much of that Canadian oil is already pouring into storage tanks in the US, rattling traders who last week pushed prices to a half-year low.”

FT – US oil rig count drops for first time since January – Gregory Meyer 6/30

  • “The number of rigs drilling for oil in the US has clocked its first weekly decline since January… The tally had risen for 23 consecutive weeks beforehand.”


Bloomberg – Spring Wheat Surges the Most Since 2010 – Megan Durisin Jen Skerritt and Brian K Sullivan 6/29

  • “Prices for spring wheat, the high-protein variety favored for bagels and pizza crusts, are starting to defy gravity.”
  • “Futures soared as much as 8.5% on Thursday, the most intraday since 2010, after Canada cut its planting outlook and drought conditions expand in U.S. growing states. Prices are up 31% in June, beating the gains for 80 other commodities tracked by Bloomberg.”
  • “The northern U.S. has been plagued by dryness this year, and conditions for the domestic spring-wheat crop are their worst for this time since 1988. Now, traders are eyeing a smaller crop in Canada, too. The country’s government on Thursday cut its outlook for the total wheat acreage more than analysts expected and said canola plantings will top the grain for the first time ever.”


Reuters – Macau casinos post 11th month of gains on VIP resurgence – Farah Master 7/1

  • “Revenues in the world’s biggest casino hub of Macau jumped nearly 30% in June, posting an 11-month winning streak, as demand from high-roller VIPs accelerated despite a corruption crackdown.”

FT – Xi warns Hong Kong not to threaten ‘red line’ of Chinese rule – Ben Bland and Jamil Anderlini 7/1

  • “Chinese President Xi Jinping has warned Hong Kongers not to cross the ‘red line’ of China’s sovereignty and called for a renewed campaign of “patriotic education” for young people in a hardline speech that comes amid growing opposition to Beijing’s rule and its creeping interventions in the semi-autonomous territory.”
  • “’Any attempt to endanger national sovereignty and security, challenge the power of the central government . . . or use Hong Kong to carry out infiltration and sabotage activities against the mainland is an act that crosses the red line, and is absolutely impermissible,’ he said on Saturday.”

June 8, 2017


Pew Research Center – The rise of multiracial and multiethnic babies in the U.S. – Gretchen Livingston 6/6

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Greatest Hits From Michael Mauboussin & Meir Statman 6/6

  • Mauboussin: “Perhaps the single greatest error in the investment business is a failure to distinguish between the knowledge of a company’s fundamentals and the expectations implied by the market price.”
  • Statman: “Risk is not measured by standard deviation but rather by the probability of not getting to your goal.”

Real Estate

WSJ – Millions of Young People Shut Out of the Housing Market – Laura Kusisto 6/7

  • “Roughly three million potential first-time home buyers have been shut out of the market over the last decade, according to a new study, suggesting the market’s recovery of the past few years could have been stronger.”
  • “Tight lending standards and acute shortages of affordable housing in many markets have reduced the pool of potential buyers, particularly among young people, reducing a key component of housing demand.”
  • “In all, the number of first-time U.S. home buyers averaged 1.5 million a year over the last decade, compared with the historical average of 1.8 million, according to a new study to be released Thursday by Genworth Mortgage Insurance that examines mortgage data from Fannie Mae, Freddie Mac, the Federal Housing Administration, Veterans Affairs and other sources. The study looked at data going back to 1994 and defined first-time buyers as anyone who hasn’t owned a home in the last three years.”
  • “Lackluster demand for homeownership among younger people has been one of the main factors holding back the housing recovery. Many young people have been delaying buying homes due to tight credit, student loans and rising rents that have made it difficult to save for down payments.”
  • “’What’s been missing is confidence,’ said Sam Khater, deputy chief economist at CoreLogic Inc.”
  • “But that is starting to change. So far this year, first-time buyers represented about 38% of the market, greater than the historical average of 35%, according to Genworth. Some two million first-timers purchased homes last year, or 37% of the market.”
  • “’We’ve had a very strong surge in first-time home buyers,’ said Tian Liu, chief economist at Genworth.”
  • “Credit also appears to be loosening. According to Genworth, about 78% of first-time buyers are using low-down-payment loans, compared with the historical average of 73%.”
  • “Economists said a wave of first-time buyers is likely coming over the next decade, as a large cohort in their mid-20s begin to buy homes.”
  • “’As we’re seeing millennials age into homeownership, there’s a huge tailwind coming,’ said Nela Richardson, chief economist at Redfin.”


WSJ – An Energy Shock from the High Seas – Spencer Jakab 6/6

  • “Circle January 2020 on your calendar for what could be a major disruption to the energy market and a jolt to the global economy.”
  • “The origin of the problem isn’t some oil cartel’s machinations, a looming war or even a technological shift—it is a bureaucratic body that few people have heard of: the International Maritime Organization. Just 30 months from now the cargo vessels that are the lifeblood of global trade will be required to cut the sulfur content in their fuel from 3.5% to 0.5%.”
  • “Ships move more than 10 billion tons of cargo a year and do it far more efficiently than road or rail, but it comes at a high cost in terms of overall pollution because ships use fuel oil, which is just about the cheapest, dirtiest stuff to come out of refineries. About 9% of all sulfur dioxide emitted globally comes from ships, contributing to acid rain and many premature deaths annually. Even the new cap is 500 times the sulfur content of most road diesel.”
  • “While standards have changed for many fuels, the rapid nature of the switch means that, if shippers fully comply, there could be price spikes. Ships that currently use cheap high sulfur fuel oil will have to switch to some other source higher up in the product slate that comes out of refineries. Even with significant investment, refiners may not be ready and ships may have to burn more expensive marine diesel.”
  • “Is the threat real? While energy traders mainly focus on the next several months, derivative prices indicate it is. For example, crude futures expiring in July 2020 are just 1% more expensive than those expiring in July 2017. By contrast, Rotterdam high sulfur fuel oil is 16% cheaper and New York ultralow sulfur diesel is 10% more expensive.”


FT – Global investors develop taste for US high-yield corporate bonds – Eric Platt 6/6


FT – China’s next ‘city from scratch’ called into question – Jamil Anderlini 6/6

  • “When the Chinese government announced its plan to create a new city from scratch in a rural northern backwater of the country on April 1, the effect was immediate.”
  • “Housing prices in the area tripled almost overnight as property speculators rushed to the area — about 100km south-west of Beijing — in the hopes of cashing in on the new project, described by state media as a ‘grand strategy crucial for a millennium to come’.”
  • “Share prices for listed companies with even tenuous connections to the ‘Xiongan New Area’ soared as analysts estimated that up to $580bn — roughly the annual gross domestic product of Argentina — would be spent in the next few years on building up the new city, which will eventually cover an area twice the size of Hong Kong and nearly three times the size of New York City. The government is aiming for a population of 2.5m people as soon as 2030.”
  • “The Xiongan plan draws on a blueprint that has been tried and tested in China before. As it was unveiled at the start of April, China’s state-controlled media hailed it as President Xi’s answer to the ‘special economic zones’ of Shenzhen and Pudong, both of which were launched under the auspices of China’s former paramount leader, Deng Xiaoping.”
  • “However, critics of Xiongan point out that for every Shenzhen and Pudong there are scores of half-empty or failed ‘special economic zones’ now dotted across China.”
  • “They argue that Xiongan shares none of the natural advantages of those earlier experimental cities, such as proximity to booming financial centers, world-class ports or enormous depots of international capital. They also worry about Beijing’s stated plan to exclude foreign investment, at least at the earliest stages, in favor of state investment and planning.”

February 3 – February 9, 2017

Chinese companies stashing cash ($110bn) in wealth management products. Italian banking sector depending on UniCredit?


FT – Bank of Japan intervenes to buy 10-year JGBs 2/3. Well for now it appears that the Bank of Japan’s tolerance for the Japanese 10-year bond is about 0.11% – the point at which it just intervened in the market indicating it would buy an unlimited amount of bonds to keep them at that rate or less.

FT – Overseas Chinese acquisitions worth $75bn cancelled last year 2/5. “Chinese overseas deals worth almost $75bn were cancelled last year as a regulatory clampdown and restrictions on foreign exchange caused 30 acquisitions with European and US groups to fall through.”

WSJ – U.S. Firms Slash Interest Tab in $100 Billion Refinancing Blitz 2/8. Borrowers are using investor demand for yield to impose rate reductions on their debt.

NYT – A Crack in an Antarctic Ice Shelf Grew 17 Miles in the Last Two Months 2/7. A rift in the Larsen C ice shelf (one of the largest) that started in late 2014 is about 2 months away from pushing a very large glacier into the sea and leading to an eventual collapse of the Larsen C – which is not good.

Bloomberg – Supply Is the Technical Factor Behind Global Rally in Markets 2/8. “In short, a world with excess savings is still struggling to sate its appetite for investable assets in public markets, amid a net shortage of new stocks and corporate bonds.”

Special Reports / Opinion Pieces


  • Stephen Foley and Hannah Kuchler of the Financial Times elaborated on institutional investor anger over Snap’s decision to offer voteless shares.
    • Snapchat (Snap) is a first in pursuing an IPO that will issue shares to the market with NO voting power. “The two founders, Evan Spiegel, chief executive, and Bobby Murphy, chief technology officer, will control the company and continue to do so even if they step down.”
    • “The prospectus says a founder’s voting power will only be diluted if he cuts his stake substantially or ‘nine months after his death.'”
    • “Other technology companies, including Google and Facebook, have concentrated control in the hands of their founders, creating different classes of stock. But none has gone public with a class that has no votes whatsoever.”
    • The pros – management can focus on long-term value. The cons – management is not accountable to its outside shareholders.
    • The downside to index funds – “many funds will be forced to own Snap when it is included in major stock market indices…”
    • The concern is the precedent this could set…
  • Anne Richards of the Financial Times discussed the challenges posed to markets by long-term demographic trends.
    • “The global economy has now passed an important tipping point. For the first time in recorded history, children under the age of five no longer outnumber those aged 65 and above. We have arrived at ‘peak child.'”
    • “The United Nations has estimated that the global population will continue to age and, by 2050, more than 15% of the global population will be aged over 65. Economists often point to the challenges that Japan faces as the population ages; by 2050, most of the G7 will have a similar demographic profile as Japan does today, as will China, Brazil and Russia.”
    • “In a world where immigration policy reform is increasingly dominating political agendas, policymakers should recognize that gross domestic product largely reflects a demographic profile where more workers enter the workforce, who (if everything goes to plan) will then produce, earn and consume more than the previous quarter.”
    • “Naturally, as the workforce shrinks due to aging, the reverse will be true. However, it does not necessarily mean than an economy is underperforming if the trend rate of growth is falling to reflect a smaller workforce.”
  • Peter Grant of The Wall Street Journal highlighted that several large investors have cut back on their property exposure due to the bull market losing steam.
    • Some prominent real-estate investors (i.e. Blackstone Group, Brookfield Asset Management, United Parcel Service Inc’s pension trust and Harvard Management Company) are reducing their holdings and getting more selective about new deals, in a sign that the eight-year bull market for U.S. commercial property is coming to a close.”
    • “Deal volume decreased by $58.3 billion, or 11% in 2016, the first annual decrease since 2009, according to data firm Real Capital Analytics.
    • “Caution among investors in the $11 trillion U.S. commercial property sector is being driven by lofty prices, the length of the market cycle so far and the recent rise in interest rates, which makes bonds look more attractive compared with commercial property. Also, developers are adding new supply of some property types at the fastest rate since the recovery began.”
    • “For example, more than 378,000 new apartments are expected to be completed across the country this year, almost 35% more than the 20-year average, according to real-estate tracker Axiometrics Inc.”
  • Lucy Hornby of the Financial Times covered the vow made by Beijing’s mayor to banish parts of the city to the provinces.
    • “Beijing’s new mayor has vowed to gut the city of all functions unrelated to its status as national capital, in an effort to push the growing population into the surrounding provinces.”
    • “Mr. Cai said he would reduce Beijing’s land zoned for construction and cap the city’s population at 23m.”
    • “Almost 22m people now live in Beijing or surrounding satellite cities, up from 4m in 1950 and 9m in 1980.”
  • Robin Wigglesworth of the Financial Times pointed US small-caps guru Henry Ellenbogen’s recent concerns over the post-election rally.
    • “US small stocks guru Henry Ellenbogen is concerned that the ferocious post-election equity rally could unravel unless the economy accelerates sharply to justify the frothy valuations, warning that most of the gains were powered by fickle inflows into exchange traded funds.”
    • “Over $20.6bn has gushed into US small-caps ETFs since early November, according to EPFR, while dedicated small-caps mutual funds have actually suffered some outflows, underscoring the role of passive investment vehicles in the move.”
    • “‘When you have those kind of flows into an illiquid asset class, you can really drive performance. Stuff that was outside the index has been roughly flat, while everything in the index has risen significantly,’ Mr. Ellenbogen said. ‘If there is a setback, the fund flows that drove small-caps higher will be just as aggressive on the way out.'”


WSJ – Daily Shot: US Major Inflation Components 02/02


WSJ – Daily Shot: US Cord Cutting 02/02


WSJ – Daily Shot: FRED – Domestic Bank Demand for Commercial Real Estate Loans 02/06


WSJ – Daily Shot: S&P Retail – S&P 500 Relative Performance 02/06

  • “US retail shares continue to underperform as investors question business models.”


WSJ – Daily Shot: Domestic Water Use Per Capita by U.S. State 02/06


WSJ – Daily Shot: FRED – US Student Loan Balance 02/07


WSJ – Daily Shot: Statista – Lawsuits filed against US Administrations in first 14 days 02/07


WSJ – Daily Shot: Global Skyscraper Construction 02/07


FT – China forex reserves dip under $3tn to touch 5-year low – Gabriel Wildau 2/7


FT – Investors pile into risky bonds in bet on Trump economy – Eric Platt 2/8



WSJ – Daily Shot: EIA – US Electricity Production 02/08


WSJ – Daily Shot: US Market Volatility 02/08

  • “Volatility is dead. We’ve now hit 85 consecutive days without a 1% drop in the S&P 500. The last time this occurred was in 2006.”


Bloomberg – The Race to the Speed of Light Is Accelerating – John Detrixhe 2/8


WSJ – For Chinese Home Buyers, Seattle Is the New Vancouver – Laura Kusisto and Kim Mackrael 2/7


WSJ – Daily Shot: Pew Research – US Religiosity Index 02/08


Economist – Emerging markets’ Trump tantrum abates, except in Turkey 2/4



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

Chinese companies park record $110bn in wealth products. Don Weinland. Financial Times. 6 Feb. 2017.

“Cash-rich Chinese corporations are running out of places to invest.”

“As economic growth cooled and investment opportunities ebbed in China last year, listed companies moved a record $110bn of idle cash into financial products, mainly at banks, according to data from Wind Financial Information.”

“The flood of company funds into wealth management products – up some 40% on the previous year – was a sign that many groups in the country shunned risky corporate expansion amid the economic slowdown, instead preferring short-duration investments.”

“About $64bn of the cash companies invested in wealth products had been raised from investors through initial public offerings and private placements…” Why raise cash if you’re not going to use it?

“Over the past four years, Chinese regulators have leaned on listed groups to pay out regular dividends in the hope of bringing mainland bourses more in line with international standards.”

“The wealth management investments show that many state-held groups still refuse to return cash to shareholders.”

“‘The state still has strong holdings in many of these companies, often more than 50%. So institutional investors cannot put pressure on companies to pay out dividends,’ said Wong Chi-man, executive director at China Galaxy International Securities.”

Okay, so if all of these companies (which are traditionally where idle capital is sent to generate economic returns) are preferring to sit on cash for a lack of investment opportunities within their own business, how are the wealth management products being sold going to generate returns – especially at scale?

Is Italy’s financial future resting on UniCredit? Rachel Sanderson, Martin Arnold and Jonathan Ford. Financial Times. 6 Feb. 2017.

“Jean-Pierre Mustier, chief executive of UniCredit, has criss-crossed the world in the past two months seeking to cajole investors into buying 13bn in new shares – a major test of confidence not just for Italy’s largest bank but also the country’s teetering banking sector.”

“As UniCredit launched its bumper rights issue on Monday – at a steep 38% discount to its theoretical ex-rights issue price – bankers in the underwriting consortium said they were confident that it would be successful. It needs to be… Besides worries about profitability and governance, investors fear the industry’s 360bn mountain of doubtful loans, of which 200bn are in default.”


“The offering comes at a tumultuous moment. The implementation of a government decree – earmarking 20bn to rescue several midsized banks, including Monte dei Paschi di Siena, the world’s oldest lender – remains up in the air.”

“The broader issue is whether a successful fundraising by UniCredit will help draw a line under concerns about Italy’s largest bank by assets, and in turn Italy’s banking sector.”

“Italian banks have long been burdened by a large stock of non-performing loans, which they have valued at prices higher than investors are willing to pay.”


“Gross non-performing exposures measured 356bn, or 17.7% of total loans, according to the latest financial stability report. That is three times the amount that is normal in most European economies. The stock of gross sofferenze – the worst kind of defaulted loan – remains at about 200bn; net of provisions that the banks themselves have taken these amount to 85bn.”

“Mr. Mustier, speaking to the Financial Times in December, suggested that the problem of its NPLs (Non-Performing Loans) is deeper than many appreciate.”

“He said the issue stems from Italy’s double-dip recession but also from Italian companies’ practice of funding themselves with ‘hot money.’ The companies had ‘the wrong kind of balance sheet,’ he said. ‘They had not enough capital and they were managing their liabilities by having short-term liabilities to cover long-term assets.'”

“It has taken Mr. Mustier, a Frenchman who lived in London for 20 years, to call out the deeper cultural problems facing Italy’s banking sector. The question is whether his remedy will last beyond this month’s share sale.”

Other Interesting Articles

Bloomberg Businessweek

The Economist

Economist – What are China’s 12345 hotlines? 2/7

Economist – Buttonwood: Bubbles are rarer than you think 2/8

Economist – Melania Trump’s “once-in-a-lifetime” opportunity to profit 2/9

FT – Snap: clickbait 2/2

FT – Shanghai shows changing face of FDI in China 2/3

FT – US protectionism and deglobalization spell inflation 2/5

FT – Foreign investors cut holdings of China bonds for first time since 2015 2/5

FT – IMF board split over bailout terms for Greece 2/6

FT – Facebook and Google team up to fight fake news in France 2/6

FT – Thinking the unthinkable on Germany going nuclear 2/6

FT – China credit flood set to persist despite PBoC rate rises 2/8

FT – Why is the eurozone back in crisis over Greece? 2/8

FT – South Korean court all but sinks Hanjin Shipping 2/9

FT – US inflation expectations slide 2/9

NYT – Steve Bannon Carries Battles to Another Influential Hub: The Vatican 2/7

WSJ – The Next American Farm Bust Is Upon Us 2/9

WSJ – Landlord Concessions Rising in Manhattan and Brooklyn 2/9



November 4 – November 10, 2016

Oil peaking in five years? Gig economy creating or cannibalizing jobs?


Special Reports / Opinion Pieces


    • “Yes, the company experienced three straight quarters of declining iPhone sales before registering an uptick in its most recently completed quarter. And its overall quarterly profit slid for the first time in 15 years. Even so, Apple accounted for a staggering 103.6% of the smartphone industry’s operating profits during the third quarter, according to a BMO Capital Markets analyst, Investor Business Daily reported.”
    • “Making it even more remarkable is the fact that Apple has actually been losing market share. In the third quarter of 2016, Android captured a record 88% of the global market, according to Strategy Analytics. Meanwhile, Apple’s iOS share slipped to 12.1% in the same period, from 13.6% the year prior.”
  • Kiran Stacey of the Financial Times covered how smog levels in Delhi are driving out some of its middle-class residents.
    • Pollution is bad in India’s political hub. Really bad with particulate levels last week reaching more than 30 times the World Health Organization limit recommended for safe habitation.
    • “The economic consequences of Delhi’s pollution are already being seen in the property market – often a leading indicator of what will happen to the rest of the economy.”
    • “In the past three years, property prices in Delhi have fallen 21.7% according to the MagicBricks property index. And estate agents say the decline is accelerating.”
    • “‘Rents have really fallen in the last year – on average by more than 30%,’ said Kajal Makhijani of Mak Realtors, a broker who works in particular with the expatriate community. ‘Expats are getting really worried about the pollution and deciding not to come, or to work outside the city. Recently we have seen those concerns start to be shared by Indians as well.'”
  • Illustrated in the Daily Shot in the Wall Street Journal on November 8…
    • “Consumer debt (excluding mortgages) rose more than expected – shown as a percentage of GDP below.”
    • daily-shot_fred-us-consumer-credit_11-8-16
    • “A good portion of this increase was from student loans. The chart below shows student debt directly owned by the federal government, which has now exceeded $1 trillion. Note that the total student debt outstanding (including debt that is guaranteed by the government) is about $1.4 trillion.”
    • daily-shot_fred-us-student-loans_11-8-16


FT – In charts: America’s growing state of disunion – Shawn Donnan, Sam Fleming, and Lauren Leatherby 11/7


WSJ – Daily Shot: November 8, 2016



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

Will oil peak within 5 years? Nick Butler. Financial Times. 3 Nov. 2016.

“On November 2 Simon Henry, the chief financial officer of Royal Dutch Shell and one of the most respected figures in the industry, told analysts on a conference call for the Shell results presentation that he believed ‘oil demand will peak before supply and that peak may be between five and 15 years hence.'”


“Oil demand in the developed OECD world has already peaked and is 9% below the level reached in 2005. In Europe, oil demand is down 17% over the same period.”

“All the indications are that in the developed world demand has further to fall. Oil use is now heavily concentrated in the transport sector. Electric vehicles have only a fractional share of the market but the numbers are growing month by month. Technology is improving, reducing costs and expanding sales. Tesla gets most of the publicity but those wanting to understand the impact of EVs on the oil market should look at China where 188,000 new electric and hybrid vehicles were sold in 2015. This year that number is expected to more than double to around 450,000.”

“As EVs proliferate, their costs will fall until they are the natural purchase everywhere.”

The implications for the oil companies are plateaued-to-falling demand and corresponding pressure on oil pricing.

With the biggest challenge facing the “producing countries, especially those that have failed to diversify their economies, such as Russia, Nigeria, Algeria, Venezuela and, of course, Saudi Arabia. Some have such a low production cost base that they should be able to keep their market share. But with the prospect of a decline in oil use in mind many will want to maximize production quickly to extract as much revenue as possible as soon as they can. In a declining market the expectation will be that prices will stay low or fall further, removing any remaining incentive to keep oil in the ground.”

“The 20th century was the age of oil. The 21st will not be and the adjustment process for those involved could be very disruptive – destroying rentier economies built on oil revenues, changing the pattern of trade and adding another challenge to unstable and dangerous parts of the world.”

Is the Gig Economy Cannibalizing or Creating Jobs? Here’s Some Early Evidence. Mark Muro. Wall Street Journal. 3 Nov. 2016.

“Does the so-called gig economy of app-based freelancing for platforms like Uber or TaskRabbit complement or ‘cannibalize’ more conventional payroll work? Given the sketchiness of the data available, it’s been hard to tell.”


“All in all… the online freelance marketplaces may well gain workers at the expense of competing payroll businesses in some industries, particularly where incumbents are struggling in weaker markets or fail to respond with better service.”

“All of this is important because of the rise of online temping, freelancing and independent contracting has huge implications for the circumstances of workers and families in cities.”

“To begin with, the scale of the trend is enormous. In this regard, the spread of new, gig-based business models for linking workers to work isn’t just a limited scale, vanguard development. Instead, the changes affecting a few hundred thousand workers in the rides and rooms industries are a tiny part of a pervasive, economywide move toward nontraditional freelance, contract or temporary work arrangements in dozens of industries. And the number of workers involved is huge. Overall, there may be as many as 68 million ‘independent’ workers in the U.S., according to a new estimate by the McKinsey Global Institute. Within a decade, nearly half of all employed Americans may be employed this way. So the size of the trend alone underscores the need to pay attention.”

“Beyond that, the shift to alternative work arrangements matters for policy makers because it represents a fundamental reorientation of the social contract within which millions of Americans work. Most notably, the rise of online temping, freelancing and independent contracting means that millions of workers increasingly lack access to the once-ubiquitous labor standards that defined the ‘good jobs’ economy that came out of the New Deal era. Gig workers, for example, retain limited access to income security protections, such as unemployment insurance, workers’ compensation and disability payments. Minimum-wage and antidiscrimination laws may not apply to such contractors, nor do they often receive retirement benefits such as Social Security. And for that matter access to credit, training and credentialing becomes even more tenuous than elsewhere in the economy.”

“In short, the expansion of the gig economy-left to itself-is likely going to contribute to larger trends that are reducing the share of American workers that can achieve basic economic security through their work.”

Other Interesting Articles

Bloomberg Businessweek

The Economist

Bloomberg – Banks Passed Up Uber Share Sale on Lack of Data 11/7

FT – The Cohen model of making billions loses its appeal 11/4

FT – China replaces finance minister Lou Jiwei 11/6

FT – Japanese investors grapple with wedding versus funeral bet 11/7

FT – Vices and virtues of Uber’s insolence 11/7

FT – What does China’s latest intervention mean for Hong Kong? 11/7

FT – The Hillary Clinton hate campaign has twisted America 11/7

FT – Mozambicans feel the pinch as ‘tuna bond’ debt crisis deepens 11/7

FT – Oil demand might peak in just over a decade, says Opec 11/8

FT – China card curbs stem cash flow to Hong Kong insurance plans 11/8

FT – Lessons from the Mozambique meltdown 11/8

FT – Sports rights: The fight to keep the fans on side 11/8

FT – Infineon breaks Rubik’s Cube world record 11/9

NYT – Young Adolescents as Likely to Die From Suicide as From Traffic Accidents 11/3

NYT – Turkey’s Post-Coup Crackdown Targets Kurdish Politicians 11/4

NYT – ‘We Almost Have Riots’: Tensions Flare in Silicon Valley Over Growth 11/4

WSJ – China Faces Looming Bulge in Currency Pressure 11/4

WSJ – Office Pileup Gets Worse in Houston 11/8

WSJ – Warning Light Flashes on Auto Loans 11/8

WSJ – With Financing Scarce, Chinese Developers Get Too Clever by Half 11/10

October 21 – October 27, 2016

Renewable energy sources overtake coal as the world’s largest source of power capacity. The effects of ageing on the markets.



  • Gavyn Davies of the Financial Times highlighted the importance of demographics on long-term interest rates.
    • In understanding the long-term direction for interest rates, Gavyn Davies, points to a couple key trends that are likely to imply low interest rates are hear to stay in developed economies.
    • First, the decline in the labor supply growth rate has led to an abundance of capital that doesn’t have a ready place to go, hence higher demand for what investment projects do exist and with capital competing amongst itself, rates go lower/stay low.
    • Second, an increasing dependency ratio (number of young and old people relative to the number of people in the labor force). Not enough savers… this should help raise interest rates considering that less capital is being accumulated; however, there is a nuance in point three.
    • Third, the increasing life expectancy of the population. Well, with people living much longer, people are reluctant to spend as they enter their later years.
  • Chris Newlands and Madison Marriage of the Financial Times covered a recent report that indicates 99% of actively managed US equity funds underperform.
    • According to S&P Dow Jones, “99% of actively managed US equity funds sold in Europe have failed to beat the S&P 500 over the past 10 years, while only two in every 100 global equity funds have outperformed the S&P Global 1200 since 2006. Almost 97% of emerging market funds have underperformed.”
    • Accordingly, “assets held in passive mutual funds have grown 230% globally, to $6tn, since 2007. However, assets held in active funds total $24tn.”
  • Sarah Mulholland of Bloomberg illustrated how rent hikes have been leading to increasing vacancies in retail real estate.
    • With retail lease rents at record highs, tenants are pushing back and vacancies are up. According to a recent report from Cushman and Wakefield, retail vacancy on Fifth Avenue in New York are up to 15.9% in the third quarter, up from about 10% a year ago.
    • As Richard Hodos, vice chairman at CBRE Group Inc, “property trades are being based on achieving ever-higher rents, and nobody every really looks at what retailers can afford to pay. In some cases, rents need to come down 30% or more for rents to be at levels where retailers are able to make sense of them again.”
    •  Bloomberg_Retail Rents on Fifth Avenue_10-25-16
    • The issue isn’t just limited to NYC. “Retailers are being squeezed across the U.S. In 2016, malls and other types of shopping venues have been hit by 280 major-brand store closures, totaling 12.8 million square feet (1.2 million square meters), data from Reis Inc show. Another real estate research firm, Green Street Advisors LLC, estimates that several hundred malls around the country will cease operations over the next decade.”


WSJ – City Construction Set to Beat 2007 Peak – Josh Barbanel 10/25

WSJ_NYC building volume_10-25-16


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

Renewables overtake coal as world’s largest source of power capacity. Pilita Clark. Financial Times. 24 Oct. 2016.

“About 500,000 solar panels were installed every day last year as a record-shattering surge in green electricity saw renewables overtake coal as the world’s largest source of installed power capacity.” 

Granted capacity does not mean electricity generation – “the amount of energy a plant actually generates varies according to how long it produces power over a period of time.” Thus, traditional sources of power – which generates power constantly (regardless of wind and darkness) – i.e. coal power still generate the majority of the world’s power. “Coal power plants supplied close to 39% of the world’s power in 2015, while renewables, including older hydropower dams, accounted for 23%, IEA data show.” 

Regardless, “two wind turbines went up every hour in countries such as China, according to International Energy Agency officials who have sharply upgraded their forecasts of how fast renewable energy sources will keep growing.”

A large part of the growth has been a result of rapidly declining costs.

“Average global generation costs for new onshore wind farms fell by an estimated 30% between 2010 and 2015 while those for big solar panel plants fell by an even steeper two-thirds, an IEA report published on Tuesday showed.” 

“An unprecedented 153 gigawatts of green electricity was installed last year, mostly wind and solar projects, which was more than the total power capacity in Canada.” 

The agency now predicts that “renewables’ share of power generation to rise to 28% by 2021, when it predicts they will supply the equivalent of all the electricity generated today in the US and EU put together.”

However, there are still policy risks that could slow the advance of renewable energy.

Demographics and markets: The effects of ageing. John Authers. Financial Times. 25 Oct. 2016.

“The new Fed paper suggests that ‘demographic factors alone account for a 1.25 percentage point decline in the natural rate of real interest and real gross domestic product growth since 1980.’ This is a huge claim, as it implies that demographics – rather than fiscal or monetary policy, technology or other changes in productivity – are responsible for virtually all of the decline in economic growth over the past 35 years.” 



“In short, low yields may be unavoidable and much of the current policy debate may be misguided.”

Fortunately, a reckoning can be delayed by encouraging and allowing workers to work later into their lives.


Other Interesting Articles

Bloomberg Businessweek

Bloomberg – N.Y. Governor Cuomo Signs Bill to Fine Illegal Airbnb Hosts 10/21

FT – Financing ‘trick’ boosts lucrative private equity fees 10/19

FT – Why bond yields are so low 10/19

FT – China’s housing frenzy starts to calm 10/20

FT – The 1890s and the end of the great bond bull market 10/23

FT – Exposure to air pollutants linked to high blood pressure 10/24

NYT – Living in China’s Expanding Deserts 10/24

WSJ – Park Hyatt Hotel Destined for Oceanwide Development in Los Angeles 10/24

WSJ – A Startup’s Pitch: Come Invest With Your Rich Uncle 10/25

WSJ – Blackstone Enters Nontraded REIT Sector 10/25

WSJ – China’s Latest Debt Crackdown Just Delays More Serious Action 10/26

WSJ – How to Get Out of Chinese Property When the Price Is High 10/27


June 3 – June 9, 2016

The volume of Chinese wealth-management products is becoming unwieldy. Banks have had enough of this negative interest rate nonsense.



    • “China today boasts roughly five workers for every retiree. By 2040, this highly desirable ratio will have collapsed to about 1.6 to 1.”
    • “At the same time, the number of Chinese older than 65 is expected to rise from roughly 100 million in 2005 to more than 329 million in 2050 – more than the combined populations of Germany, Japan, France, and Britain.”
    • “With the number of working-age Chinese men already declining – China’s working-age population shrank by 4.87 million people last year – labor is in short supply.”
    • “By hastening and amplifying the effects of this decline, the one-child policy is likely to go down as one of history’s great blunders.”
    • “As a result, by 2020, China is projected to have 30 million more bachelors than single women of similar age.”
    • “By the end of the century, China’s population is projected to dip below 1 billion for the first time since 1980. At the same time, America’s population is expected to hit 450 million.”
    • A May 26 auction of non-performing loans (NPLs) was met with tepid reception and was primarily an event of banks shuffling bad debt between each other.
    • Thing is, if this strategy doesn’t catch on with private sector investors, “a failure to purge lenders of their NPLs may fuel expectations for a government-led bailout, which Standard Chartered Plc estimates could cost as much as $1.5 trillion.”
    • According to Bloomberg Intelligence, “China has about $2.4 trillion of corporate debt at risk of default.”
    • Hopefully the debt products being sold become more transparent and easier to asses from a risk perspective so that the private sector can reasonably jump in.

Special Reports


FT – Argentina set to tumble 22 places on global wealth list – Steve Johnson 5/27

FT_Latin America GDP growth_5-27-16


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

Long Shadow Hangs Over China’s Banks. Anjani Trivedi. Wall Street Journal. 6 Jun. 2016.

“The growth of off-balance sheet WMPs (Wealth Management Products) is exploding, with issuance rising 7.3 trillion yuan ($1.1 trillion) last year, up nearly three-quarters from the previous year, according to Charlene Chu of Autonomous Research. That is equivalent to nearly 40% of China’s 19 trillion yuan credit growth in 2015, including debt issuance under a local government bond-swap program. And while customers are told most WMPs aren’t principal guaranteed, that distinction may be shaky in China’s financial system rich with moral hazard.”

While this isn’t the first time that debt issuance has surged from WMPs; however, “the structures this time around are increasingly complex. Investors in China’s interbank market – including banks – took up almost a third of WMP buying last year, up from 2% the previous year. Most of that is from WMPs essentially buying other WMPs, creating an opaque layering of obligations, Ms. Chu said, echoing the collateralized debt obligations made famous during the U.S. housing bust.”

“Then there is duration risk. Over three quarters of these investment products mature within six months, putting constant repayment pressure on banks. To meet these products’ yield demands, WMPs have been heavy buyers in China’s rip-roaring bond market. A sustained reversal of the bond market could trigger pain on WMPs.”

WSJ_Growth of WMPs in China_6-6-16

Negative rates stir bank mutiny. James Shotter and Claire Jones. Financial Times. 8 Jun. 2016.

“Lenders in Europe and Japan are rebelling against their central banks’ negative interest rate policies, with one big German group going so far as to weigh storing excess deposits in vaults.”

“The central bank policies have hit bank profitability in both regions and German banks have been vocal in criticizing Mario Draghi, European Central Bank president, accusing him of punishing savers and undermining their business models. The policy cost German banks 248m last year, according to the Bundesbank.”

“Japanese banks have been more muted but Bank of Tokyo Mitsubishi UEJ has become the first leading lender to break ranks, confirming it is considering giving up its primary dealership status for sales of Japanese government bonds.”

“The more central banks think that they can violate the zero-bound, the more likely it is that banks will look at ways to limit their costs. And that means they will hold more cash if they can find efficient means to do so.” – Adalbert Winkler, professor at the Frankfurt School of Finance and Management.

Other Interesting Articles

Bloomberg Businessweek

The Economist

Bisnow – WeWork to Halt Hiring, Make Major Cuts to Staff 6/6

FT – Crisis-era tremors shake property funds 6/2

FT – Emerging markets to slow as convergence theory takes hold 6/2

FT – The period of maximum danger for bond investors is yet to come 6/6

FT – Saudi Arabia considers income tax for foreign residents 6/7

FT – Bank of Korea unexpectedly cuts rates to 1.25% 6/8

FT – Bill Gross warns over $10tn negative-yield bond pile 6/9

NYT – Toxic Fish in Vietnam Idle a Local Industry and Challenge the State 6/8

WSJ – Bank loans: Why it Feels Like 2008 All Over Again in Asia 6/6

WSJ – How to Time a Chinese Banking Tipping Point (2019) 6/7

WSJ – China’s Property Prices Rebound, but Stocks Tell Another Story 6/7

WSJ – Rock-Bottom Bond Yields in Europe Hit All-Time Lows 6/8

WSJ – REIT Surprise: How Real Estate Crushed the Stock Pickers 6/8

Yahoo Finance – JPMorgan: The odds of a recession starting in 12 months has hit a high 6/3