Tag: Energy

December 15, 2017

Perspective

Visual Capitalist: Overflow Data – The U.S. States With the Most Million Dollar Homes – Jeff Desjardins 12/14

Worthy Insights / Opinion Pieces / Advice

Economist – The choice that could save South Africa, or wreck it – Leaders 12/9

NYT – Trump’s Lies vs. Obama’s – David Leonhardt, Ian Prasad Philbrick, and Stuart A. Thompson 12/14

Markets / Economy

WSJ – Nearly 5 Million Americans in Default on Student Loans – Josh Mitchell 12/13

  • “The number of Americans severely behind on payments on federal student loans reached roughly 4.6 million in the third quarter, a doubling from four years ago, despite a historically long stretch of U.S. job creation and steady economic growth.”
  • “The total number of defaulted borrowers represents about 22% of the Americans who were required to be paying down their federal student loans as of Sept. 30. That figure has increased from 17% four years earlier.”
  • “The money they owe is becoming a bigger share of total outstanding student debt in repayment. Defaulted student loans totaled $84 billion at the end of the quarter, or 13% of the roughly $631 billion that borrowers were required to be paying down.”
  • “The government’s student-loan portfolio now totals $1.37 trillion.”

Energy

WSJ – Daily Shot: US Total Crude Oil Production 12/13

  • “One of the trends spooking oil traders is what appears to be an acceleration in US crude oil production.”

Environment / Science

Economist – A nasty-tasting shellfish could be just the job for cleaning rivers – 12/7

China

FT – China lenders lobby to soften shadow bank rules – Gabriel Wildau and Yizhen Jia 12/13

December 8, 2017

Perspective

Economist – America’s flat-Earth movement appears to be growing 11/28

  • “I am constantly forced to remind myself that while we may one day hope to conquer ignorance, there will never be a cure for stupid.”Barry Ritholtz

WSJ – Daily Shot: Moody’s – US States that challenged the Clean Power Plan 12/5

WSJ – Daily Shot: Natixis Investment Management – Global Portfolio Risks 12/7

Worthy Insights / Opinion Pieces / Advice

FT – Lawsuit shows China losing patience with Venezuela – Jonathan Wheatley 12/6

  • “Subsidiary of state-owned Sinopec files case against PDVSA over unpaid debt.”

FT – US tax reform will benefit shareholders more than workers – Michael Moritz 12/5

  • “During the past year the nation’s 20 largest technology companies have gained $900bn in value in a favorable business climate. As a group, at the end of September, they had about $90bn more cash than they did one year earlier — the bulk being accumulated at Apple, Alphabet, Microsoft, Oracle, Qualcomm and Priceline. “
  • “But the increase in their cash balances tells less than half the story. There is nothing to suggest in the rest of the data that, if their taxes were cut, they would build more factories, hire more employees or buy more equipment. Quite the contrary.”
  • “Crunch through the data, available through sources such as Bloomberg, and you will gain some remarkable insights on the financials of the giants of the tech sector. Through the first nine months of 2017 these 20 companies paid just over $27bn in taxes. At the same time, they invested almost $55bn in what the accountants label ‘capital expenditures’ — buildings and equipment. But the real message lies elsewhere.”
  • “They generated so much cash that, over and above increasing the cash they held on their balance sheets, they distributed almost $39bn in dividends to shareholders and spent almost $52bn on stock buybacks. That is about $190bn of cash, dividends and stock buybacks compared to $55bn of investment in the sort of areas that might result in more jobs and increased productivity. Even Intel, which operates in the semiconductor industry — an activity which sucks up more cash than internet and software businesses — spent $7.1bn on dividends and stock buybacks during the first three quarters compared to $7.7bn on capital expenditures.”
  • “If someone makes the argument that the corporate tax cuts are likely to change the spending habits of start-ups or emerging companies, forget about it. Investors from around the world are standing in line waiting to invest in young companies, which have all the cash they need. In addition, since most of these companies are losing money, tax payments are irrelevant.”

WP – The world produces more than 3.5 million tons of waste a day – and that figure is growing – Kadir van Lohuizen 11/21

Markets / Economy

Real Estate

NAR – In Which States Do REALTORS Expect Highest Home Price Growth in the Next 12 Months? 12/5

WSJ – Daily Shot: Moody’s – Changes in US Property Values 2007 – 2016 12/7

Energy

WSJ – Daily Shot: US Crude Oil Production 12/6

WSJ – Wall Street Tells Frackers to Stop Counting Barrels, Start Making Profits – Bradley Olson and Lynn Cook 12/7

Finance

WSJ – Daily Shot: Bitcoin 12/6

  • “The cryptocurrency blasted past, $12k, $13k, and $14k in 24 hours.”

WSJ – Daily Shot: Meritocracy Capital – CAPME Chart 12/7

  • “Cyclically adjusted price to median earnings (CAPME) and the percentile rank.”

China

Economist – Chinese cities should stop expelling Chinese migrants – Leaders 11/30

India

Economist – India’s new bankruptcy code takes aim at delinquent tycoons 11/30

  • “Defaulters will no longer be able to cling on to ‘their’ companies.”

Middle East

Economist – How-and why-to end the war in Yemen – Leaders 11/30

  • “A pointless conflict has caused the worst humanitarian crisis in the world.”

November 29, 2017

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – Rage Against The Fee Machine – Anthony Isola 11/27

CNBC – Chance of US stock market correction now at 70 percent: Vanguard Group – Eric Rosenbaum 11/27

  • “Don’t panic, but there is now a 70% chance of a U.S. stock market correction, according to research conducted by fund giant Vanguard Group. There is always the risk of a correction in stocks, but the Vanguard research shows that the current probability is 30% higher than what has been typical over the past six decades.”
  • “‘It’s about having reasonable expectations,’ Davis (Joe Davis, Vanguard chief economist)  said of the research, which attempts to provide investors with a view of what can occur in the markets in the next five years. ‘Having a 10% negative return in the U.S. market in a calendar year [within a five-year forward period] has happened 40% of the time since 1960. That goes with the territory of being a stock investor.’ He added, ‘It’s unreasonable to expect rates of returns, which exceeded our own bullish forecast from 2010, to continue.'”
  • “In its annual economic and investing outlook published last week, Vanguard told investors to expect no better than 4% to 6% returns from stocks in the next five years, its least bullish outlook since the post-financial crisis recovery began.”
  • “For Vanguard the research is a chance to remind investors that overreaching is no better a solution for a lower-return environment than getting out of the market entirely. Davis worries some investors will hear ‘lower returns’ and view it as a catalyst to become more aggressive as a way to generate the returns they have been used to in recent years.”
  • “As long as an investor is in a financial situation in which they can cope with a single down year, ‘you need to stay invested, because of lower expected returns,’ Davis said. But he added, ‘Don’t become overly aggressive. The next five years will be challenging, and investors need to have their eyes wide open.'”

Economist – A more perfect union – Leaders 11/23

  • “Marriage is more rewarding – but also more upmarket. That is a problem.”

Economist – Teenagers are growing more anxious and depressed 11/23

  • “Could they hold the culprit in their hands?”

FT – Made in China – the world energy market of the future – Nick Butler 11/26

FT – Let the 5G battles begin – Rana Foroohar 11/26

FT – HNA planned 2012 bond deal shows tolerance for expensive debt – Robert Smith 11/26

FT – Venezuela stakes claim as Schrodinger’s cat of the debt world – Jonathan Wheatley 11/27

Pragmatic Capitalism – How to Manage an Asset Price Mania (Like Bitcoin) – Cullen Roche 11/27

  • “One of the main reasons why millions of people jump on investment manias and get crushed by them is because of a simple Fear Of Missing Out. Your co-worker made $10,000 investing in Fidget Spinners and now you feel like you weren’t enough of a dumbass with your dumbass money so you invest your dumbass money in something that is truly for dumbasses and you lose your (dumb) ass.”

The Registry – Murder on the Retail Express? – John McNellis 11/28

Markets / Economy

Fast Company – Cord-cutting is speeding up: Here’s how many people ditched cable TV this quarter 11/15

  • I’m sure this number would be higher if people had heard of YouTube TV…

Tech

Bloomberg Quint – SoftBank Is Said to Seek Uber Stock at $48 Billion Valuation – Eric Newcomer 11/28

Middle East

FT – Saudi crown prince pledges to rid world of Islamist terror – Simeon Kerr 11/26

  • “Saudi Arabia’s crown prince has pledged to rid the world of Islamist terrorism as he launched a military alliance that critics fear will deepen rifts between the kingdom and its arch-rival Iran.”
  • “Prince Mohammed has vowed to restore moderate Islam in the kingdom, where puritanical strains of the faith that encouraged violence have been promoted for decades. The launch of the alliance follows Friday’s jihadist attack on a mosque in Egypt that left more than 300 people dead. ‘The greatest danger of extremist terrorism is in distorting the reputation of our tolerant religion,’ the prince said.”

 

November 16, 2017

If you were only to read one thing…

FT – S&P says Venezuela is in default on sovereign debt – Edward White and Hudson Lockett 11/13

  • “Standard & Poor’s has declared that Venezuela is in default after it missed two interest payments and following a meeting in Caracas that left investors with little notion of how a default on its $60bn debt pile can be avoided.”
  • “S&P, which is the first rating agency to say the country is in default, said on Tuesday that Caracas had failed to make $200m in coupon payments for global bonds due in 2019 and 2024 within the 30-calendar-day grace period.”
  • “The agency said it had downgraded the issue ratings on those bonds to D from CC and cut the country’s long-term foreign currency sovereign credit rating to selective default, or SD, from CC.”
  • “’Our CreditWatch negative reflects our opinion that there is a one-in-two chance that Venezuela could default again within the next three months,’ said S&P.”

Perspective

Bloomberg – Trump Is Shattering His Own Tweet Records – Brandon Kochkodin 11/13

FT – India’s Ambanis top Asia family rich list – Kiran Stacey 11/14

WSJ – Daily Shot: Credit Suisse – Global Wealth Report 11-14

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Yale’s Swensen Sees Low Volatility as ‘Profoundly Troubling’ – Janet Lorin and Christine Harper 11/14

Bloomberg Businessweek – The Global Economy Looks Good for 2018 (Unless Somebody Does Something Dumb) – Peter Coy 11/2

Markets / Economy

WSJ – AB InBev Switches U.S. Boss as  It Struggles With Sales Slump – Jennifer Maloney 11/13

CNBC – Millennials lose taste for dining out, get blamed for puzzling restaurant trend – Patti Domm 11/14

WSJ – Small IPOs Are Dying. That’s Good – James Mackintosh 11/13

Real Estate

Investment News – Cole Capital, once part of a company coveted by Nicholas Schorsch, is being sold – Bruce Kelly 11/13

Energy

iea – World Energy Outlook 2017 – Global shifts in the energy system 11/14

Finance

WSJ – Daily Shot: Bitcoin 11/13

  • “Bitcoin has bounced off the lows but remains volatile.”

Europe

FT – Sweden’s big banks call an end to decades-long housing boom – Martin Arnold and Richard Milne 11/13

  • “Sweden’s decades-long housing market boom is over, two of the country’s bank bosses admit, while trying to reassure investors that their institutions will not suffer a painful hangover of defaults even if the cheap mortgage-fueled party is finished.”
  • “Swedish house prices have been red hot, rising almost 6% a year on average since 2007, while a surge in household indebtedness from 1.2 to 1.6 times disposable income has attracted intense scrutiny from regulators.”
  • “Swedish house prices fell 1.5% in September, the first decline for several years, reflecting the impact of measures introduced by regulators to constrain riskier mortgage lending as well as a recent increase in the supply of new homes.”

Japan

WSJ – Daily Shot: Bank of Japan Balance Sheet as % of GDP 11/14

South America

FT – Russia agrees to restructure $3.2bn of Venezuelan debt held by Moscow – Henry Foy 11/15

WSJ – The Class of 1994, Venezuela’s Golden Generation, Is Fleeing the Country – Ryan Dube 11/14

  • More than “…two million…Venezuelans…have left the country since 1999, the year Mr. Chavez gained power, according to Tomas Paez, a Venezuelan immigration expert. That exodus is roughly twice the number who fled Cuba in the two decades after the revolution there, and is set to worsen.”

WSJ – Default in Venezuela: What’s Next – Julie Wernau 11/14

  • “Venezuela has been falling behind on debt payments in its prolonged economic crisis. Some payments have come late. Others haven’t arrived at all. The South American country has said it wants to restructure its remaining debt, which analysts put as high as $150 billion. But observers say Venezuela’s debt crisis could be one of the most complicated in history.”
  • “Cash-strapped Venezuela and its state oil company, Petróleos de Venezuela SA, have been putting off making interest payments on their debt, taking advantage of 30-day grace periods to save money.”

FT – Venezuela: what happens now after official default – Robin Wigglesworth 11/14

  • “The most likely outcome, investors and analysts say, is a protracted period of financial limbo with a restructuring precluded by US sanctions and Venezuela facing a barrage of lawsuits that will tie it up for years to come.”

November 14, 2017

Perspective

NYT – China Spreads Propaganda to U.S. on Facebook, a Platform It Bans at Home – Paul Mozur 11/8

  • Another example of how easy it is to manipulate people. Seemingly the spread of the internet was meant to give people access to factual information to make better decisions and to be better informed. Rather it seems that while more information is available, the habit of selection bias has only amplified.

Worthy Insights / Opinion Pieces / Advice

FT – Does the oil market expect a new Mideast war? – Nick Butler 11/12

  • “The oil price has risen by almost 20% over the last four weeks. Does anything in the market justify such an increase, or is the change driven simply by speculation about the dangers of a direct conflict between Saudi Arabia and Iran?”
  • “The real explanation for the rise in prices clearly lies not in the physical balance of supply and demand but in speculation. Once again traders have been bidding up prices on the basis of fears about what could happen next.”
  • “An open conflict between Saudi Arabia and Iran would expose numerous oil fields and installations on both sides of the Gulf to attack. The Straits of Hormuz are still a potential choke point for the global flow of oil. Some 17m barrels a day – almost a quarter of world traded oil – goes through the straits.”
  • “War would be an illogical step, but since when has logic been the ruling force in the Middle East? If the risk of conflict recedes so will the oil price – there is nothing in the fundamentals to justify a price much over $50 or $55 a barrel. But if open war between the two major Gulf powers did break out the price rise we have seen so far would look trivial.”

FT – The tax reform the US really needs – Rana Foroohar 11/12

  • “America’s taxation system is fundamentally unsuited to the digital economy.”

FT – Saudi Arabia confronts legacy of corruption – Ahmed Al Omran and Simeon Kerr 11/12

  • “When Saudi Crown Prince Mohammed bin Salman spoke to his nation six months ago, he pledged to crack down on corruption. ‘I assure you that nobody who is involved in corruption will escape, regardless if he was minister or a prince or anyone,’ he said.”
  • “But few people could have expected the sudden storm this month when a new anti-graft committee ordered the arrest of more than 200 suspects, including princes, prominent businessmen and former senior officials, on allegations related to at least $100bn in corruption.”
  • “The arrest of so many big names has been hailed within the country as proof ‘no one is above the law’. But others have raised questions about the motivations behind a probe that also targeted a member of the royal family once seen as a contender for the throne.”
  • “Executives estimate that anywhere between 10% and 25% of the value of government contracts is routinely skimmed, with the proceeds used to fund lavish regal lifestyles, channel money to loyal tribes and grease the palms of favored functionaries. ‘This is how the kingdom of Saudi Arabia has balanced power historically,’ said one executive.”
  • “While fully eliminating corruption is unlikely, experts say limiting the presence of princes in government could help. King Salman has significantly decreased the number of family members in cabinet — today only the ministers of defense, the interior and the national guard are royals.”
  • “Some suggest that, even if corruption by the royals continues, the crackdown could still bring important dividends.”
  • “’Centralized corruption is better because you have one rent-seeker on top.’ said Steffen Hertog, an expert on Saudi political economy at the London School of Economics. ‘That actor has an interest in keeping the whole system efficient and stable, and keeping it from collapsing.’”

WSJ – SoftBank’s Uber Deal Shows Doubts About Ride-Hailing – Jacky Wong 11/13

Markets / Economy

Bloomberg Quint – Bitcoin’s Roller-Coaster Ride Cuts $38 Billion Before Reversal – Justina Lee and Yuji Nakamura 11/13

  • “After plunging as much as 29% from a record high following the cancellation of a technology upgrade on Nov. 8, the largest cryptocurrency came roaring back in early trading Monday before fluctuating between gains and losses.”
  • “While multiple reasons are being cited for the price volatility, one of the more viable is that some investors are switching to alternative coins. Bitcoin cash, an offshoot of bitcoin that includes many of the technical upgrades being debated by developers, has more than doubled in the same period.”
  • “The resulting volatility has been extreme even by bitcoin’s wild standards and comes amid growing interest in cryptocurrencies among regulators, banks and fund managers. While skeptics have called its rapid advance a bubble, the asset has become too big for many on Wall Street to ignore. Even after shrinking as much as $38 billion since Nov. 8, bitcoin boasts a market value of about $110 billion.”

Real Estate

WSJ – Daily Shot: Homeownership and Apartment Vacancy Rates by US Region 11/12

Finance

WSJ – ETF Heyday Is No Bonanza for Wall Street – Asjylyn Loder 11/6

Environment / Science

FT – China recovery pushes greenhouse emissions to global record – Tobias Buck and Lucy Hornby 11/13

  • “Stronger Chinese economic growth will push global greenhouse gas emissions to a record high in 2017 after remaining flat for three years, dashing tentative hopes of a turning point in the world’s efforts to curb climate change.”
  • “A new report by the Global Carbon Project, an international research consortium, predicts that carbon dioxide emissions from fossil fuels and industry will rise 2% this year. The report was released at the UN climate change meeting in Bonn on Monday.”
  • “The increase — which is largely caused by China and developing countries — suggests the world is straying further from the course set at the landmark UN conference in Paris two years ago.”
  • “This year’s rise is especially disappointing as it follows three years of almost no growth in emissions despite a world economy expanding at a steady clip. In 2016, emissions were flat even though the world economy grew 3.2%. One explanation for the uptick is that China’s economic slowdown in the middle part of this decade was more pronounced than official figures suggested.”
  • “The GPC report concludes: ‘The world has not reached peak emissions yet.’”
  • “It finds that carbon dioxide emissions decreased in 22 countries accounting for 20% of global emissions, but rose in 101 countries that together represent 50% of pollution. China is predicted to see a 3.5% jump in emissions in 2017. As the biggest producer of carbon dioxide in the world, China plays a crucial role in shifting the global trend.”

Europe

FT – Italian emigration continues despite strong economic recovery – Valentina Romei 11/12

  • “Italy’s economy is doing its best for years, but Italians are still pouring out of the country.
  • Gross domestic product is growing faster than at any point since 2010, employment is back to pre-crisis levels and the labor inactivity rate is close to an all-time low.”
  • “So why has the number of Italians living outside the country reached 5.4m — a figure that represents almost 10% of the population and which grew 3.5% last year?”
  • “The data highlight a story of a dysfunctional labor market, a society in which young, ambitious people often feel unfairly treated, and an economic recovery from which, in large part, they have yet to benefit.”
  • Overall, the official figures show that 1.5m people have moved abroad since the crisis broke in 2008.
  • “Nor is that the end of it. Foreigners are also leaving: 45,000 non-Italians left the country in 2015, more than three times as many as the figure for 2007.”
  • “The consequences of the phenomenon could be grave, despite Italy’s recent economic good news.”
  • “Since the country has long contended with low fertility rates, emigration is a particular threat to Italy’s workforce. Italy is second only to Japan in terms of the proportion of the population accounted for by people aged 65 and over, and in the 25 years to 2015 the working age population as a share of the total population dropped 5 percentage points.”
  • “In the past five years alone, the number of those aged between 18 and 44 contracted 6%, while the overall population rose 2%.”
  • “Both the Italian and the British data also show that young people account for the bulk of Italian emigration. The UK National Insurance statistics show that since 2002 more than 90% of Italians registering to work in Britain were under 44 years old. Some 77% were aged between 18 and 34 years old.”
  • Italian emigrants are also more highly educated than the overall Italian population and university trained people are leaving in increasing numbers. Graduates make up about 30% of emigrants from Italy, up from 12% in 2002, according to official statistics.”
  • “The causes of this brain drain are deep-set, writes Guido Tintori, Research Associate at Fieri — International and European Forum on Migration Research, in a forthcoming academic paper on the issue.”
  • “He argues that skilled young Italian graduates ‘not only are underemployed and underpaid, but constantly frustrated by a society and a labor market that hinge on relationships and seniority over competence’.”
  • “Furthermore, the economic recovery has yet to touch them. The proportion of young people who are unemployed in Italy is a daunting 35% and has barely changed over the past year.”
  • “The share of under-34s who are neither in employment nor in education is the highest in the EU and more than half of under-25s in employment are working under temporary contracts. Nearly one in four is working part time because of the unavailability of a full-time job — a higher proportion than in any other high-income economy.”

November 10, 2017

Perspective

Pew – How U.S. refugee resettlement in each state has shifted since 2002 – Jynnah Radford 11/2

  • Animation

WSJ – Daily Shot: Convoy Investments – Rise and Fall of Some Famous Asset Bubbles 11/9

Worthy Insights / Opinion Pieces / Advice

NYT – How to Reduce Shootings – Nicholas Kristof and Bill Marsh 11/6

NYT – Want Kids, a Degree or a Home? The Tax Bill Would Cost You – The Editorial Board

  • “An immense tax giveaway to the rich will hurt everyone else. Here’s how.”

Markets / Economy

WSJ – Daily Shot: Yardeni Research – Investor Bulls vs Bears 11/7

Real Estate

Business Insider – Zillow: America’s red-hot housing market is a bit of a problem – Akin Oyedele 11/8

  • “The recovery in US house prices since the recession has created a so-called seller’s market.” 
  • “In this part of the cycle, housing inventory is tight, especially in big cities where there’s plenty of demand. But buyers in these markets are getting stretched as prices climb above their prerecession highs and choices remain limited.”  

Energy

WSJ – Daily Shot: OPEC – Growth in energy demand by fuel type and region 11/9

WSJ – Daily Shot: OPEC – Energy demand next five years 11/9

Finance

WSJ – Daily Shot: LCD – Cov-Lite European Leveraged Loans 11/9

China

WSJ – Daily Shot: BMI Research – China Wealth Management Products 11/9

  • “Beijing’s deleveraging drive is having an impact on wealth management products (WMPs).”

Europe

FT – Germany creates third gender in ruling hailed as ‘revolution’ – Tobias Buck 11/8

  • “Germans will in future be able to register officially as neither male or female, after the country’s constitutional court issued a ruling establishing a third gender option that was hailed by intersex campaigners as a ‘revolution’.”

South America

FT – Venezuela inches closer to a formal default – Robin Wigglesworth 11/9

  • “Venezuela is closer to a formal default on its debts, with a global derivatives body set to rule on whether credit insurance should be paid out after a crucial payment deadline missed by state-backed oil company PDVSA.”
  • “Venezuela and PDVSA are legally separate entities, so PDVSA’s default would not trigger Venezuelan CDS or a Venezuelan sovereign default. But there are myriad other overdue interest payments by both borrowers, and unless the money appears soon then Venezuela will be in formal default on all its international bonds.”
  • “Venezuela has summoned bondholders for negotiations in Caracas on November 13, but the talks are expected to yield little. Indeed, US investors will be wary of even attending, given that the person leading the Venezuelan side of the talks, vice-president Tareck El Aissami, has been sanctioned by the US Treasury as an alleged drug smuggler.”
  • “None of the big rating agencies have formally declared a default yet, but S&P Global Ratings on Monday lowered the country’s rating to CC, the second-lowest rung possible, and said there was a 50% chance of a default within three months.”

November 2, 2017

If you were only to read one thing…

WSJ – Backlog in EB-5 Immigration Program Creates Cash Hoard for Property Developers – Peter Grant 10/24

  • “A backlog in the controversial EB-5 immigration program, which enables foreigners who invest in the U.S. to get green cards, is making billions of dollars of new money available for investments in real estate and other businesses.”
  • “The backlog is primarily in China, where the EB-5 program has become so popular that applicants can face delays of more than 10 years from the time they make their investment of at least $500,000 to the time they get their visa.”
  • “The U.S. government limits the number of EB-5 visas to 10,000 a year, and per-country cutoffs can get imposed on countries like China where the application rate is high.”
  • “This had created a problem for applicants: 10 years is such a long time that some U.S. developers want to repay the investors’ money before visas are issued. But doing do would disqualify the EB-5 application.”
  • “The solution—which was spelled out by the U.S. Citizenship and Immigration Services in a June policy memo—is a process known as redeployment. Essentially, the government said, EB-5 applications remain in good standing if the repaid money is reinvested in an active business and remains ‘at-risk’.”
  • More than $16.6 billion is expected to become available for redeployment between now and 2020, according to NES Financial, of San Jose, Calif., one of the leading providers of EB-5 servicing and administration.”
  • “Investment companies have begun to position themselves to take advantage of billions of dollars now available for reinvestment. For example, in July, a venture of Greystone & Co., NES and Capital United LLC created a way for EB-5 money to be redeployed into a fund of real-estate bridge loans originated by Greystone.”
  • “The EB-5 program was created in 1990 and has been popular among U.S. real-estate developers, who have flocked to it as a source of low-cost financing. The program requires investments of at least $500,000 to create at least 10 jobs, making it appealing to city and state economic development agencies as well.”
  • “Now the redeployment of funds has raised new concerns about the EB-5 program, which is facing reauthorization by Congress. For example, the June policy manual ‘appears to allow’ developers to invest redeployed funds in projects that don’t get as much vetting as the original EB-5 project, according to Gary Friedland, a scholar-in-residence at New York University who has written about the program.”
  • More than 4,400 petitions for EB-5 status were filed in the third quarter of fiscal year 2017, which ended in June, according to Invest In the USA, a trade association. The number of pending petitions was up 11% from the second quarter to over 24,600, the group said.”
  • “There is no job-creation requirement on the redeployed funds. But the necessary jobs have been created after the original EB-5 investments are made, Ms. Berman (Allison Berman, head of Greystone’s EB-5 business) pointed out. ‘Each investor already has created at least those 10 jobs,’ she said.”
  • “Ms. Berman says the fund targets a 4% return after fees. Redeployment is good for the U.S. economy because it is keeping the EB-5 money ‘in commerce for longer than initially anticipated.'”

Perspective

WSJ – Chinese Banks’ Capital Cushion Isn’t So Comfy – Anjani Trivedi 10/26

  • “Prudent as Chinese banks’ capital-raising binge may seem at first blush, investors should keep an eye on what’s driving their buffer-building.”

Worthy Insights / Opinion Pieces / Advice

NYT – Expelling Immigrant Workers May Also Send Away the Work They Do – Eduardo Porter 10/24

  • “This is how the growers will respond to President Trump’s threatened crackdown on immigration: They will lobby, asking Congress to provide some legal option to hang on to their foreign work force. They will switch to crops like tree nuts, which are less labor-intensive to produce than perishable fruits and vegetables. They will look for technology to mechanize the harvest of strawberries and other crops. And they will rent land in Mexico.”
  • “There is one thing they won’t do. Even if the Trump administration were to deploy the 10,000 immigration agents it plans to hire across the nation’s fields to detain and deport farmhands working illegally, farmers are very unlikely to raise wages and improve working conditions to attract American workers instead.”
  • “’Foreign workers will always be harvesting our crops,’ Tom Nassif, who heads the Western Growers Association, told me. The only question for policymakers in Washington is whether ‘they want them to be harvesting in our economy or in another country.’ If they choose the latter, he warned, they might consider that each farmworker sustains two to three jobs outside the fields.”
  • “Most of what we know about the effect of immigration on American-born workers is based on studies of what happens when immigrants arrive. Almost 30 years ago, the economist David Card found that the Mariel boatlift of 1980, in which more than 100,000 Cubans fleeing the island landed in Florida, did little damage to either the employment or the wages of the Americans they competed with.”
  • “A flurry of research since then has tried to find fault with that counterintuitive conclusion. Yet despite the claims from the Trump administration that immigrants have decimated the working class, Mr. Card’s analysis has emerged pretty much unscathed: With few exceptions, economists agree that even less-educated natives suffer little when immigrants arrive.”
  • “What if the shock goes the other way, though? We know less about what happens when immigrant workers are kicked out. But a series of studies over the past year are also coming to something of a consensus: Expelling immigrants does not open opportunities for workers born in the United States, either. Rather, the shock leaves them worse off than when the immigrants were here.”

NYT – America Is Not a ‘Center-Right Nation’ – Eric Levitz 11/1

The Republic – Mafia in our midst: A mob soldier turned Phoenix businessman – Robert Anglen 10/31

  • A very thorough and salacious report on Phoenix businessman Frank Capri (formerly a mobster by the name of Frank Gioia Jr.).
  • “Frank Capri, who persuaded developers to give him millions to build Toby Keith restaurants, had a violent history…”

WSJ – The Morningstar Mirage – Kirsten Grind, Tom McGinty, and Sarah Krouse 10/25

WSJ – WeWork’s Lord & Taylor Deal: Savvy Move or Top of the Market? – Dan Gallagher and Justin Lahart 10/24

Markets / Economy

WSJ – Daily Shot: Bitcoin 10/31

FT – Subsidies help China sell the most electric cars – Charles Clover 10/23

  • “Few countries have done more than China to push towards an electric future for the car industry. Beijing announced last month that it was looking at when to implement a ban on petrol and diesel cars, following announcements by France and Britain, which said they would ban traditional fuel vehicles by 2040, and Germany’s parliament, which has called for a ban by 2030.”
  • “Beijing also announced wide-ranging regulations forcing carmakers to start to meet steadily increasing production quotas for battery-powered cars, beginning in 2019.”
  • “Reactions to the announcement illustrate how China has managed to grow so quickly to become such a significant market for electric vehicles. China uniquely possesses the means to implement its will — it is the world’s largest car market, meaning it has unprecedented leverage over the global car industry, and also has a massive central planning mechanism.”
  • “Electric vehicles (EVs), both fully electric and hybrids, are part of a new industrial policy known as Made in China 2025, by which year Beijing wants to have national champions in 10 high-tech industries, including robotics, semiconductors and electric vehicles.”
  • “To achieve this, local and central governments have allotted subsidies that last year were worth up to Rmb100,000 ($15,000) per vehicle, according to Yale Zhang of Auto Foresight, a Shanghai consultancy specializing in the car industry.”
  • “Fitch, the rating agency, has found that average electric vehicle subsidies in China are the second most generous in the world after Norway.”
  • “China has also introduced a preferential vehicle licensing system in several cities. License plates are given out either by auction, lottery or after payment of a high fee in an effort to halt car congestion, but EV buyers get license plates free and without a wait in at least six Chinese cities. These centers account for 70% of domestic EV purchases, Fitch says.”
  • “China’s national grid is investing in EV charging stations. It expects to put Rmb25bn ($3.75bn) into charging stations by 2020; there are already 171,000 nationwide according to Xinhua, China’s official news service. This compares with 45,000 charging outlets and 16,000 electric stations in the US, according to official data.”
  • “In response to Beijing’s measures, the industry has boomed: sales of electric vehicles and hybrid vehicles were up 53% in 2016 to 507,000, according to the China Association of Automobile Manufacturers, which estimated that the number accounted for 45% of all such vehicles sold worldwide in that year.”

Real Estate

WSJ – Daily Shot: Homebuilder Index Relative Performance to S&P 500 10/31

WSJ – Chinese Property Shopping Spree Fades as Beijing Hits the Brakes – Dominique Fong and Esther Fung 10/31

  • “Since late 2016, policy makers in Beijing have been tightening restrictions on overseas investments and scrutinizing some of the country’s most ambitious deal makers, voicing concerns that deals in certain sectors were disguises for capital flight into havens.”
  • “Outbound capital from China into foreign properties and development sites reached a record $36.8 billion in 2016, according to data firm Real Capital Analytics. Volume for the first three quarters of this year was $19.7 billion. In the U.S. real-estate market, capital from China slowed to $5.1 billion in the same nine-month period, down from a total of $14.8 billion in 2016, said Real Capital. These are deals that are $10 million and greater.”
  • “Real-estate companies based in Hong Kong also appear to be less affected by the capital controls. Companies based in Hong Kong this year bought two high-profile London buildings, nicknamed the ‘Cheesegrater’ and ‘Walkie Talkie’.”
  • “But increasingly, firms are toeing to the party line. ‘Investors with capital already outside of China will continue to show strong interests allocating capital to U.S. real estate…though those in this category, even ostensibly private companies, are progressively less free to ignore what goes on in China,’ said Andrew Levy, senior counsel at law firm DLA Piper.”

WSJ – Driverless Cars Could Slam Brakes on Self-Storage Sector – Peter Grant 10/24

  • “The approaching transportation revolution is going to have major repercussions in the commercial real-estate sector as driverless vehicles and ride-hailing services such as Uber and Lyft gain more widespread adoption.”
  • “The property type expected to be hurt the most: Self-storage. Because people will own fewer cars, they will have more storage spaces in their garages, so they won’t need to rent it.”
  • “That is one of the conclusions of a new report on the future of transportation and real estate by the Urban Land Institute and real-estate investment research firm Green Street Advisors. The report says ride-hailing services already are having a big effect on consumer behavior and predicts that ‘mass adoption’ of driverless vehicles will begin around 2030 and be completed about 15 years later.
  • “…transportation revolution could be a mixed bag for industrial space. Demand from e-commerce should explode, the report says, but driverless trucks will improve efficiency.”
  • “’Goods should spend less time sitting idly in warehouses, likely resulting in a drag on industrial real-estate demand,’ the report says.”
  • “The report points out that investors need to be savvy about the impact of transportation trends because valuing a property today depends heavily on the long-range future. Because issues that go beyond seven years ‘are usually ignored, mispricing can result,’ the report states.”
  • “The opportunity is significant for investors who can figure out these trends now. ‘But, uncertainty is huge, so humility is in order,’ the report states.”

WSJ – Big Law Firms Look to Shrink Their Office Space Use – Esther Fung 10/24

  • “Of the 14 million square feet of office space leased to law firms between the first quarter of 2016 and the second quarter of 2017, 40% was the result of a contraction by the tenant, according to a CBRE Group study of 26 markets.”
  • “On average, the law firms reduced their leased space by 27%.”
  • However, “top law firms that lease more than 50,000 square feet of office space are more likely the ones that are reducing their physical office space, rather than their smaller peers.”

WSJ – More People Think Renting Is a Better Deal Than Buying – Laura Kusisto 10/24

  • “A growing percentage of renters believe it is cheaper to rent than to buy a home, which helps explain why the homeownership rate remains persistently low nearly a decade after the housing crash.”
  • “In the Freddie Mac survey, the view that renting is more affordable increased significantly across all age groups. Some 76% of millennials said renting is an affordable option, up more than 10 percentage points from a year ago. Roughly 82% of baby boomers said they view renting as a more affordable option, up 11 percentage points from a year ago. And the share of Generation Xers who see renting as more affordable jumped to 75% from 56%.”
  • Never forget that these surveys or comparisons are a snap shot in time. At times renting is more affordable than buying (it should always be more affordable than buying); however, once you buy (of course coming up with the down payment is no easy accomplishment) you generally have fixed your cost of occupancy (increases in property taxes and maintenance costs will get you in either case). Further, the forced savings element of a mortgage is hands down one of the best ways to build wealth. I recognize that it helps to have a relatively stable life to do this. However, if you’re renting, that cost will NEVER go away, and don’t forget the power of compounding costs – which will eat your savings eventually once you’re no longer making money, or stop receiving raises.
  • Rent if you have to or while your life is in transition, but homeownership is the goal (unless, if governments make property taxes prohibitively expensive and/or push to a model where the state owns all housing).

WSJ – Commercial Property Transactions Dry Up as Sellers Hold Out for Better Prices – Esther Fung 10/24

  • “Big U.S. real-estate companies have been selling assets at a slower pace this year, as the gap widens between their views on what their properties are worth and buyers’ willingness to pay high prices.”
  • “After an eight-year bull run for commercial real estate, some investors have been anticipating a correction. But that hasn’t happened yet, and there is little consensus on how much longer the bull market has to run.”
  • “Buyers, facing tighter lending conditions and slower income growth, are expecting lower prices and bidding accordingly, but sellers, including publicly traded property owners, are holding out for better deals.”
  • “Listed real-estate investment trusts have sold $46.7 billion in assets as of Oct. 23 this year compared with $71 billion in assets sold in all of 2016, according to data from Real Capital Analytics. Acquisitions, on the other hand, have been at a roughly similar pace at around $44.6 billion as of Oct. 23 this year compared with $47.9 billion in 2016. There have been fewer major transactions especially in the office and retail real-estate sector.”
  • “Unlike previous cycles, property owners aren’t overly leveraged and are still able to access the debt markets rather than be compelled to sell at unattractive prices.”
  • “For REITs, there is the added burden of making sure any sales proceeds can be deployed for other uses quickly, given their inability to hoard cash. These landlords are hesitant to sell in part because of the lack of attractive assets to buy as well as a general reluctance to do share buybacks.”
  • It should be noted that one major buyer of assets from listed REITs has been having issues in its fund raising mechanisms. That is the public non-traded REIT.

Energy

FT – US oil producers: Shale safe – Lex 10/23

  • “From Silicon Valley to the shale patch, the fundamental laws of corporate finance have been suspended for years. Such a calculus only works, however, if investors are willing to shoulder heavy losses on uneconomic investment in the hopes that pricing power ultimately ensues. Reality may have begun to weigh upon US oil producers. A renewed focus on spending within cash flow is taking hold in 2017.”
  • “Shareholders have turned off the funding spigot, with US E&P companies raising only $6bn in equity this year compared with more than $30bn in the same period last year. The perverse practice of tying oil executive compensation to production growth, not profits or cash flow, has also finally received the attention it deserves.” 
  • “The acreage obsession in the energy industry was always predicated on the idea that somebody else’s company would succumb before one’s own. But last man standing no longer beats cash is king as a mantra.”

FT – US shale investors tire of ‘growth at any cost’ model – Ed Crooks 10/22

  • “In a recent presentation at the New York Stock Exchange, Doug Suttles, chief executive of Encana, spelt out the new reality for North American oil and gas producers. The industry had gone, he said, from ‘resource capture’ to ‘value maximization’.”
  • “This is a profound change. Since the shale oil revolution began in the late 2000s, management teams have mostly focused on growth at any cost, and investors have mostly been prepared to back them.”
  • “This year, however, investor sentiment has shifted. Shareholders are less dazzled by the excitement of the shale boom, and more interested in orthodox measures of success including returns on capital and cash generation.”
  • “The whole shale industry is being pushed in the same direction. If companies fail to improve shareholder return, says Stephen Trauber, global head of energy at Citi, ‘investors will start to question what management is doing’.”
  • “For the past eight years, the US exploration and production industry has outspent its cash flows in drilling costs, requiring a constant inflow of debt and equity financing to keep going. But the industry has given shareholders very little in return.”
  • “Given those numbers, it is unsurprising that investor interest appears to have waned. US exploration and production companies raised $34.3bn from share sales in 2016, making it a record year, but just $5.7bn in the first nine months of 2017, according to Dealogic.”
  • “The pressure from investors for more discipline — a word used 17 times by Encana in its presentation — already seems to be having an effect. The number of active rigs in the US drilling the horizontal wells used for shale oil production has been dropping since the beginning of August.”
  • “Jamaal Dardar, an analyst at Tudor Pickering Holt, says just six months ago he would have expected US oil and gas producers to go on outspending their cash flows into next year at least. He now expects that in 2018 the larger exploration and production companies will in aggregate earn positive free cash flow, after capital spending but before dividend payments.”
  • “’We all like growth, but it must be profitable growth,’ Mr Holt says. ‘They might be able to grow at 5 or 10% per year, but not at 20%.’”
  • “If companies bow to that pressure from investors, it could work out very neatly. Slower oil production growth in the US would help push crude prices higher, making it possible for the industry to deliver the returns that shareholders want.”
  • “But Citi’s Mr Trauber warns the history of the oil industry shows it rarely delivers such tidy outcomes.”
  • “’We have been here before,’ he says. ‘At times over the past 30 years, investors have demanded discipline from the industry. But then as soon as the oil price picks up again, they have forgotten all about it and the industry has rushed back to growth again.’”

Finance

WSJ – Wealthier Depositors Pressure Banks to Pay Up – Telis Demos and Christina Rexrode 10/24

  • “As the Fed has raised rates, banks have been reluctant to do the same on their deposits. But for wealth-management customers, that’s starting to change.”

FT – DRW leads high frequency trading charge into cryptocurrencies – Gregory Meyer and Joe Rennison 10/22

  • Having a hard time finding enough volatility to trade in the markets, some are now trading Bitcoin…

China

NYT – Xi Jinping Vows No Poverty in China by 2020. That Could Be Hard. – Javier C. Hernandez 10/31

  • For China’s – and the world’s – sake, I hope that they succeed.

NYT – China’s Entrepreneurs Squirm Under Xi Jinping’s Tightening Grip – Sui-Lee Wee 10/23

India

FT – Reality dawns on India’s solar ambitions – Kiran Stacey 10/31

  • “The country has one of the world’s biggest solar sectors, but now faces the risk of a bubble.”

NYT – The Uninhabitable Village – Geeta Anand and Vikram Singh 10/26

  • “Hotter temperatures are forcing families in southern India to decide: Try to survive here, or leave?”
  • A very unique way to report on a story. A video slide show with text.

Other Interesting Links

FT – Spot the difference: why lab-grown diamonds pose a threat to big miners – Henry Sanderson 10/30