Tag: Environment

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 13, 2017

Perspective

FT – How Germany got its gold back – Claire Jones 11/10

  • “It was kept abroad to escape the Soviet Union. But then Germany decided to bring it home.”

NYT – After Weinstein: A List of Men Accused of Sexual Misconduct and the Fallout for Each – Sarah Almukhtar, Larry Buchanan, and Michael Gold 11/12

Worthy Insights / Opinion Pieces / Advice

FT – Little room for error as investors chase leveraged loan boom – Ben McLannahan 11/9

  • “Riskier ‘covenant-lite’ loans now account for about 70% of new leveraged loans, up from 30% before the Lehman Brothers crisis. Protections that were standard back then have now vanished altogether.”
  • “’As long as investors keep buying these loans, there’s nothing really to put the brakes on,’ says Derek Gluckman, a vice-president at Moody’s. ‘Things just keep getting worse.’”
  • “’Loan terms never got this bad in ‘07,’ says Mr. Cohen (founder and CEO of Covenant Review). ‘The contracts … are the worst they’ve ever been. Period, full stop.’”

Markets / Economy

WSJ – A Starbucks Coffee Costs What? – Chelsey Dulaney and Ira Iosebashvili 11/9

  • You’ve heard of the Big Mac Index, this is the Starbucks proxy.

WSJ – Daily Shot: FRED – Financial Stress Index 11/10

FT – Catastrophes wipe $35bn from insurers’ profits – Oliver Ralph and Alistair Gray 11/12

  • “A string of natural disasters from Hurricane Harvey in the US to earthquakes in Mexico have left the insurance industry facing one of its most expensive years on record.”
  • “The catastrophes have wiped more than $35bn from insurers’ profits, according to a Financial Times analysis of third-quarter results that have laid bare the scale of the damage. Berkshire Hathaway, run by billionaire Warren Buffett, and AIG were among the hardest hit in the US, while in Europe Swiss Re and Munich Re face large claims. Lloyd’s, the London-based insurance market, expects to pay out a total of $4.5bn.” 
  • “Insurers say the final cost is likely to be larger and push up premiums. Commercial insurance and reinsurance have suffered from years of falling rates, as excess capacity and a lack of big claims combined to drive prices down.”
  • “’The losses have been extensive across reinsurance, commercial insurance and personal lines,’ said Kurt Karl, chief economist at Swiss Re. ‘There were $20bn of natural catastrophe losses across the industry in the first half. Hurricanes Harvey, Irma and Maria, combined with the earthquakes in Mexico, will create about $95bn of insured losses.’”
  • “Added together, the industry is facing more than $110bn of insured losses from natural catastrophes. Only 2005 — when Hurricane Katrina hit the US — and 2011 — when there were earthquakes in Japan and New Zealand — were more costly.”
  • “The $35bn figure, taken from company reports, does not include losses from unlisted companies, or from insurance-linked securities in which investors’ capital is used to directly back insurance risk.” 

Tech

Statista – Attack of the Clones – Felix Richter 11/9

Environment / Science

WP – The Earth’s ozone hole is shrinking and is the smallest it has been since 1988 – Marwa Eltagouri 11/3

  • “This year, the ozone hole is the smallest it has been since 1985. NASA and NOAA scientists have been studying the ozone layer and monitoring its hole over Antarctica for years. This year, the ozone hole is the smallest it has been since 1985.”
  • “Here’s a rare piece of good news about the environment: The giant hole in the Earth’s protective ozone layer is shrinking and has shriveled to its smallest peak since 1988, NASA scientists said.”
  • “The largest the hole became this year was about 7.6 million square miles wide, about two and a half times the size of the United States, in September. But it was still 1.3 million square miles smaller than last year, scientists said, and has shrunk more since September.”
  • “Warmer-than-usual weather conditions in the stratosphere are to thank for the shrinkage since 2016, as the warmer air helped fend off chemicals like chlorine and bromine that eat away at the ozone layer, scientists said. But the hole’s overall reduction can be traced to global efforts since the mid-1980s to ban the emission of ozone-depleting chemicals.”
  • “The ozone hole was largest in 2000, when it was 11.5 million square miles wide, according to NASA.”

Health / Medicine

WP – Aaron Hernandez suffered from most severe CTE ever found in a person his age – Adam Kilgore 11/9

India

FT – Smog-cloaked Delhi looks with envy at Beijing’s cleaner air – Kiran Stacey, Emily Feng, and Archie Zhang 11/10

  • “As Indian politicians squabble over who is to blame for the thick smog that has descended over the north of the country this week, citizens have been looking enviously over the border at China, where particulate levels have been falling for years.”
  • “Many in India believe Beijing has been better able to combat its air pollution problem because it does not get bogged down in political infighting. They blame India’s problems on the country’s raucous but inefficient democracy.”
  • This week, pollution in Delhi literally went off the charts, hitting the top reading of 999 on the US embassy’s air quality index. Anything over a reading of 100 is considered unhealthy.” 
  • By Wednesday afternoon, Delhi saw airborne levels of tiny damaging particles known as PM2.5 hit 833 parts per million, while in Beijing the level was 76. Anything over 50 is considered unhealthy, and anything over 300 hazardous.
  • “The difference between the two cities reflects a broader divergence over recent years, during which Delhi has taken over from Beijing as the world’s most polluted megacity.” 
  • “’Indian politicians have this very weird idea that we will do something about pollution when we are developed, but we won’t develop unless they invest in public health,’ says TK Joshi, director of the Centre for Occupational and Environmental Health in Delhi.”
  • “He adds: ‘Beijing has tackled this problem much better, but then it is much easier to control things in an authoritarian regime than in a democracy, especially one like India, where 50% of the people are so badly educated about the problem.’”

Middle East

WSJ – Saudi Crackdown Targets Up to $800 Billion in Assets – Margherita Stancati and Summer Said 11/7

  • “The Saudi government is aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite, according to people familiar with the matter.”
  • “The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of ‘persons of interest’ and said the move is ‘in response to the Attorney General’s request pending the legal cases against them.’”
  • “Much of that money is abroad, which will complicate efforts to reclaim it, people familiar with the matter said. But even a portion of that amount could help Saudi Arabia’s finances. A prolonged period of low oil prices forced the government to borrow money on the international bond market and to draw extensively from the country’s foreign reserves, which dropped from $730 billion at their peak in 2014 to $487.6 billion in August, the latest available government data.”

FT – Greed and intrigue grip Saudi Arabia – Simeon Kerr 11/10

November 7, 2017

If you were only to read one thing…

Vice – Motherboard: One Bitcoin Transaction Now Uses as Much Energy as Your House in a Week – Christopher Malmo 11/1

  • “Bitcoin’s incredible price run to break over $7,000 this year has sent its overall electricity consumption soaring, as people worldwide bring more energy-hungry computers online to mine the digital currency.”
  • “An index from cryptocurrency analyst Alex de Vries, aka Digiconomist, estimates that with prices the way they are now, it would be profitable for Bitcoin miners to burn through over 24 terawatt-hours of electricity annually as they compete to solve increasingly difficult cryptographic puzzles to ‘mine’ more Bitcoins. That’s about as much as Nigeria, a country of 186 million people, uses in a year.”
  • “This averages out to a shocking 215 kilowatt-hours (KWh) of juice used by miners for each Bitcoin transaction (there are currently about 300,000 transactions per day). Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. On a larger scale, De Vries’ index shows that bitcoin miners worldwide could be using enough electricity to at any given time to power about 2.26 million American homes.”
  • “It’s worth asking ourselves hard questions about Bitcoin’s environmental footprint.”
  • “Since 2015, Bitcoin’s electricity consumption has been very high compared to conventional digital payment methods. This is because the dollar price of Bitcoin is directly proportional to the amount of electricity that can profitably be used to mine it. As the price rises, miners add more computing power to chase new Bitcoins and transaction fees.”
  • “…at a minimum, worldwide Bitcoin mining could power the daily needs of 821,940 average American homes.”
  • “Put another way, global Bitcoin mining represents a minimum of 77KWh of energy consumed per Bitcoin transaction.”
  • “Digiconomist’s less optimistic estimate for per-transaction energy costs now sits at around 215 KWh of electricity. That’s more than enough to fill two Tesla batteries, run an efficient fridge/freezer for a full year, or boil 1872 litres of water in a kettle.”
  • “…it’s quite clear that even at the minimum level of 77 KWh per transaction, we have a problem. At 215 KWh, we have an even bigger problem.”
  • “That problem is carbon emissions. De Vries has come up with some estimates by diving into data made available on a coal-powered Bitcoin mine in Mongolia. He concluded that this single mine is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 – 40,000 kg of CO2 per hour.”
  • “As Twitter user Matthias Bartosik noted in some similar estimates, the average European car emits 0.1181 kg of CO2 per kilometer driven. So for every hour the Mongolian Bitcoin mine operates, it’s responsible for (at least) the CO2 equivalent of over 203,000 car kilometers travelled.”
  • “As goes the Bitcoin price, so goes its electricity consumption, and therefore its overall carbon emissions. I asked de Vries whether it was possible for Bitcoin to scale its way out of this problem.”
  • ‘Blockchain is inefficient tech by design, as we create trust by building a system based on distrust. If you only trust yourself and a set of rules (the software), then you have to validate everything that happens against these rules yourself. That is the life of a blockchain node,’ he said via direct message.”
  • “This gets to the heart of Bitcoin’s core innovation, and also its core compromise. In order to achieve a functional, trustworthy decentralized payment system, Bitcoin imposes some very costly inefficiencies on participants, for example voracious electricity consumption and low transaction capacity. Proposed improvements, like SegWit2x, do promise to increase the number of transactions Bitcoin can handle by at least double, and decrease network congestion. But since Bitcoin is thousands of times less efficient per transaction than a credit card network, it will need to get thousands of times better.”
  • “In the context of climate change, raging wildfires, and record-breaking hurricanes, it’s worth asking ourselves hard questions about Bitcoin’s environmental footprint, and what we want to use it for. Do most transactions actually need to bypass trusted third parties like banks and credit card companies, which can operate much more efficiently than Bitcoin’s decentralized network? Imperfect as these financial institutions are, for most of us, the answer is very likely no.”

Perspective

Visual Capitalist – Visualizing Household Income Distribution in the U.S. by State – Jeff Desjardins 11/6

Worthy Insights / Opinion Pieces / Advice

FT – Why we need to regulate the tech platforms – Rana Foroohar 11/5

  • “Companies should be made to open up the black box of their algorithms.”

Markets / Economy

NYT – A Bull Market Should Make Investors Happy. This One Isn’t. – Landon Thomas Jr. 11/5

  • “Rarely has a bull market been so unloved. Since March 2009, the Standard & Poor’s 500 stock index has nearly quadrupled in value. This year, not only is the index up 15 percent, but it also seems to have stopped going down at all: October was the 12th straight month that the S.&P. has logged a positive return, the first time that has happened since 1935.”
  • “Yet in most conversations about the ever-rising stock market, brokers and investment advisers say, are dominated by the question of when it will all come to an end.”
  • “These days, each successive stock market record seems to spur more hand-wringing than cheerleading. There is anxiety about overhyped shares, about the possibility of central banks withdrawing their support for global economies, even about markets simply being worryingly quiescent, as evidenced by the historically low readings of the volatility index known as the VIX.”
  • “In fact, many analysts say that this so-called wall of worry is a positive sign. Investors may be piling into stocks and bonds, the thinking goes, but they are doing it with a measure of hesitation, which prevents some of the excesses that preceded previous market corrections.”

Environment / Science

FT – HSBC promises $100bn to fight climate change – Andrew Ward 11/5

  • “Bank to support projects aimed at reducing carbon emissions.”

China

WSJ – Downgrades Shadow Moody’s S&P’s Push Into China – Shen Hong, Manju Dalal, and Gunjan Banerji 11/6

  • “As ratings firms plot entry into long-coveted market, questions remain as to China’s openness to international raters.”

Middle East

NYT – Saudi Crown Prince’s Mass Purge Upends a Longstanding System – David D. Kirkpatrick 11/5

  • “A midnight blitz of arrests ordered by the crown prince of Saudi Arabia over the weekend has ensnared dozens of its most influential figures, including 11 of his royal cousins, in what by Sunday appeared to be the most sweeping transformation in the kingdom’s governance for more than eight decades.”
  • “The arrests, ordered by Crown Prince Mohammed bin Salman without formal charges or any legal process, were presented as a crackdown on corruption. They caught both the kingdom’s richest investor, Prince Alwaleed bin Talal, and the most potent remaining rival to the crown prince’s power: Prince Mutaib bin Abdullah, a favored son of the late King Abdullah.”
  • “All members of the royal family were barred from leaving the country, American officials tracking the developments said on Sunday.”
  • “With the new detentions, Crown Prince Mohammed, King Salman’s favored son and key adviser, now appears to have established control over all three Saudi security services — the military, internal security services and national guard.”
  • “’It is the coup de grâce of the old system,’ said Chas W. Freeman, a former United States ambassador. ‘Gone. All power has now been concentrated in the hands of Mohammed bin Salman.’”
  • “Crown Prince Mohammed’s haste, however, may now come at a price, because the lack of transparency or due process surrounding the anticorruption crackdown is sure to unnerve the same private investors he hopes to attract — including through a planned stock offering of the huge state oil company, Aramco.”
  • “Saudi Arabian businessmen and royals anxious about the crown prince’s plans were quietly moving assets out of the country even before the arrests.”
  • “The Saudi Arabian news media, however, celebrated the arrests as a long-awaited cleanup, appealing to populist resentment of self-enrichment enjoyed by the sprawling royal family and its closest allies.”
  • “Almost everyone in the capital, Riyadh, and other big cities like Jidda has heard stories about princes absconding with vast sums that had been allocated for a public project.”
  • “The arrests are ‘a frontal assault on some members of the royal family and the impunity with which they have operated in the past,’ said Bernard Haykel, a professor at Princeton University who studies Saudi Arabia.”
  • “’It was something that had to be done,’ he said, even though the absence of a judicial process ‘sends a chill down the spine of foreign investors.’”

South America

WSJ – Daily Shot: Venezuela 10yr Government Bond Yield 11/3

  • Markets reacting to news that Venezuela wants to restructure its debt (finally…)

WSJ – Daily Shot: Venezuela 5yr Sovereign CDS Spread (bps) 11/3

WSJ – Daily Shot: Venezuela Econ – Black Market Exchange Rate – Bolivar to USD 11/6

October 31, 2017

Happy Halloween!

If you were only to read one thing…

FT – Billionaire boom is a sign that rates need to rise – Merryn Somerset Webb 10/27

  • “It has been a good week for billionaires. The UBS/PwC Billionaires Report 2017 claimed the combined wealth of the world’s 1,542 billionaires rose by almost a fifth last year to $6tn: more than double the UK’s gross domestic product.”
  • “It has not been a particularly good week for governments. They have to deal with the fallout from rising wealth inequality, and that fallout is getting increasingly nasty. This kind of report does not do much for central bankers, either: the rise of the billionaires is as much about financial globalization as it is easy money, but every time a report lands on their desks, central bankers must stop to think about the economic, social and political havoc their policies have caused over the past 10 years.”
  • “The desperate attempt to avoid deflation via quantitative easing and record-low interest rates has had horrible side effects, and this observation is hardly controversial. The rich have become much richer; corporate wealth has become more concentrated; soaring house prices have created intergenerational strife; low yields have made all but the super-rich paranoid that they will be entirely unable to finance their futures. Most markets have ended up overvalued (this will really matter one day), while pension fund deficits and a constant sense of crisis have discouraged capital investment — and have possibly held down wages in the UK.”
  • “Set a target, get a distortion. This is standard stuff. But the fact that extreme monetary policy has been going on for so long means that central bankers do not just have macro problems to feel bad about. They are also effectively responsible for the increasingly dodgy micro policies governments have felt forced to put in place in an attempt to alleviate the nasty side effects of very low interest rates, over which they have no control.”
  • “A bit of good news is that this monetary experimentation has been about inflation targeting (everyone, for no obvious reason, is after 2%). And if you set a target and pursue it at the cost of everything else you usually get to it. So inflation is back. In the US, where expectations of inflation are low, September numbers showed average hourly earnings jumping 2.9%, the biggest rise in a decade.”
  • “The Monetary Policy Committee could dig out a list of excuses not to raise rates despite the last GDP growth numbers being rather better than expected. Raising rates will do harm at some point (asset prices will fall and the indebted will suffer). But not reversing is beginning to look like it could do more harm. Unless, of course, you are a billionaire.”

Perspective

Axios – ‘Degree inflation’ may be pushing workers out of the middle class – Christopher Matthews 10/25

  • “A growing number of U.S. employers are requiring bachelor’s degrees for jobs that have long been performed by workers without them, contributing to a rise in income inequality, according to a report published today.”
  • “Why it matters: The report, by Harvard Business School, Accenture, and Grads of Life estimates that 6 million American jobs are at risk of ‘degree inflation,’ a result of employers increasingly using a bachelor’s degree ‘as a proxy for a candidate’s range and depth of skills.'”

  • “‘This phenomenon is a major driver of income inequality,’ Joe Fuller of Harvard Business School tells Axios. ‘We’re hollowing out middle-class jobs and driving everyone to the extremes of the income spectrum.'”
  • “The number of U.S. job openings has reached an all-time high, but more than 13 million Americans — the vast majority with less than a four-year college degree — are unemployed or working part-time when they want full-time positions.”
  • “The costs of the shift are ‘profound’ for the two-thirds of American adults who lack a college degree, Fuller says.”
    • “90% of companies use screening software to weed out applicants lacking the education requirement. That means, even with the right experience, an applicant won’t even be considered by a human.”
    • “‘This puts significant pressure for people with certain aspirations to get a degree even when it’s not directly relevant to their career.'”
    • “When the 6-year graduation rate for 4-year schools in America is just 59%, that means Americans lacking the aptitude to excel in college take on debt for degrees they’ll never receive.”
    • “Hispanics and African Americans are disproportionately hurt by the phenomenon, because they have lower college graduation rates than the population at large.”

Visual Capitalist – Commuters and Computers: Mapping U.S. Megaregions – Nick Routley 10/28

  • “We tend to think of cities as individual economic units, but as they expand outward and bleed together, defining them simply by official jurisdictions and borders becomes difficult. After all, many of the imaginary lines divvying up the country are remnants of decisions from centuries ago – and other county and state lines exist for more counterintuitive reasons such as gerrymandering.”
  • “By ignoring borders and looking purely at commuter data, geographer Garrett Nelson and urban analyst Alasdair Rae looked to map the relationship between population centers in their paper, An Economic Geography of the United States: From Commutes to Mega-regions.”

  • “The study used network partitioning software to link together 4 million commutes between census tracts. This gives us a very granular look at the ‘gravitational pull’ of America’s population centers, and helps us better understand the economic links that bind a region together.”
  • “By combining visual and mathematical approaches, and some creative place-naming, the researchers created a map that they hope reflects America’s true economic geography.”

WSJ – Daily Shot: State College Graduation Rates – Highest & Lowest 10/29

Worthy Insights / Opinion Pieces / Advice

The Atlantic – Harvey Weinstein and the Economics of Consent – Brit Marling 10/23

  • “The blunt power of the gatekeeper is the ability to enforce not just artistic, but also financial, exile.”

Bloomberg View – When Wall Street Looks Pricey, the Rest of the U.S. Thrives – Conor Sen

  • “When stocks are expensive, those with capital are more inclined to expand a business or start a new one.”
  • We’ll see…

Bloomberg View – Faster Growth Begins With a Land Tax in U.S. Cities – Noah Smith 10/24

  • This would cause a major political fight. The odds are that a land value tax would initially be passed onto tenants, until of course there is enough push back.
  • Granted, this goes against the goal of having property in core markets with the ability to benefit from economic rents…

Business Insider – Jeff Flake isn’t brave, he’s helpless – and he doesn’t understand why – Josh Barro 10/24

FT – Investors pass the buck on governance – Rana Foroohar 10/29

  • “Proxy advisers incentivize the wrong company behavior by creating rigid checklists.”

NYT – A Long-Delayed Reckoning of the Cost of Silence on Abuse – Jim Rutenberg 10/22

NYT – Forget Washington. Facebook’s Problems Abroad Are Far More Disturbing. – Kevin Roose 10/29

Real Estate

WSJ – Daily Shot: Moody’s – US Single Family Home Sales 10/29

  • “Moody’s is projecting that many more homes will be sold next year as homeowners finally make their move.”

Others are not as optimistic.

WSJ – Daily Shot: John Burns RE Consulting – US Existing Single Family Home Sales 10/29

FT  – Sand castles on Jersey Shore: property boom defies US flood risk – Gregory Meyer 10/29

  • “Sandy exposed the perils of shoreline living, as the climate warms and sea levels creep higher. In the US alone it left 162 dead, laid waste to 650,000 homes and cost $65bn — the second most expensive weather disaster in history.”
  • “On New Jersey’s fragile barrier islands, the response to Sandy has not been to withdraw inland but rather to build bigger. ‘They did not rebuild bungalows. They knocked those down and built McMansions,’ says Walter LaCicero, Lavallette’s mayor.”
  • That’s one way to do eminent domain.
  • “Improbably, the disaster created a once-in-a-lifetime buying opportunity. Older families unable to pay for repairs sold properties.”
  • “House prices in the worst-hit communities cratered after Sandy. In Lavallette, the median sale price of $532,500 in October 2012 had more than halved to $225,000 by February 2013, according to New Jersey Realtors. This past summer, median prices reached $660,000 and were higher by the beach.”
  • “The Federal Emergency Management Agency has paid out more than $25bn in New Jersey and New York alone, reimbursing towns for the cost of removing debris, repairing roads and bridges, and renting emergency equipment. Gaps in local tax revenue lost when assessed property values collapsed were filled with federal money. The agency granted $1.4bn to 179,000 people and households in the region to cover their costs of shelter and rebuilding.”
  • “Critics say federal policy rewards local officials for hazardous coastal development. ‘If someone told you you’re going to get a new beach every time the oceans washed yours away, you’re probably going to feel more secure allowing high-priced homes to be built there,’ says Rob Moore, senior policy analyst at the NRDC (National Resources Defense Council).”
  • “The aid has strings attached: all new and rebuilt houses must now rest on stilts at least one foot above the estimated crest of a once-in-a-100-year flood.”
  • “Relatively cheap schemes such as hazard zoning and land purchases have typically received about 5% of disaster relief funds, according to a report by the National Research Council, an expert body. Washington is also picking up a bigger tab from coastal disasters, covering 75% of the damages from Sandy compared with 6% for Hurricane Diane in 1955.”
  • “‘Developers, builders and state and local governments reap the rewards of coastal development but do not bear equivalent risk, because the federal government has borne an increasing share of the costs of coastal disasters,’ the council’s study said.”
  • “The prospect of higher and more frequent floods driven by climate change comes as the Trump administration unravels US commitments to rein in carbon emissions, including pulling out of the Paris agreement and abandoning an initiative to factor climate risks into infrastructure spending. As Irma bore down on Florida last month Scott Pruitt, administrator of the Environmental Protection Agency, said the time to discuss the causes and effects of the storm was ‘not now’.”

WSJ – Stuck in Place, U.S. Homeowners Hunker Down as Housing Supply Stays Tight – Laura Kusisto and Christina Rexrode 10/29

FT – Boston prices its graduates out of starter homes – Hugo Cox 10/24

Energy

WSJ – Your Next Home Could Run on Batteries – Christopher Mims 10/15

  • “The rise of these home batteries isn’t just a product of our collective obsession with new tech. Their adoption is being driven by a powerful need, says Ravi Manghani, of GTM Research: renewable energy.”

  • “Without batteries and other means of energy storage, the ability of utility companies to deliver power could eventually be threatened.”
  • “Solar power, especially, tends to generate electricity only at certain times—and it’s rarely in sync with a home’s needs. In some states, such as California and Arizona, there’s an overabundance of solar power in the middle of the day during cool times of the year, then a sudden crash in the evenings, when people get home and energy use spikes.”
  • “For utilities, it’s a headache. The price of electricity on interstate markets can go negative at certain times, forcing them to dump excess electricity or pay others to take it.”
  • “’This is not a long-term theoretical issue that might happen—this is now,’ says Marc Romito, director of customer technology at Arizona Public Service, the state’s largest electric utility.”

Finance

FT – Wall St banks ride boom in leveraged loans as volumes soar – Joe Rennison and Eric Platt 10/29

  • “Wall Street banks are having a strong year underwriting and selling riskier loans, with the volume so far this year already surpassing the whole of 2016.”
  • “The overall industry has underwritten leveraged loans worth $1.251tn, and earlier this month eclipsed its previous full-year record set in 2013, according to Dealogic. Volumes are up 38% from a year earlier and more than 60% of the deals have been companies refinancing existing loans.”
  • “The relative dearth of new loans, as opposed to refinancings, has also given borrowers the upper hand. As well as lower rates, borrowers are also able to cut the number of investor protections, called covenants, written into the loans.”
  • “’Net new supply is relatively low so demand is exceeding supply,’ said Christina Padgett, an analyst at Moody’s. ‘Investors are going to get squeezed on price and the issuers are going to take advantage so they have really flexible credit agreements.’”

FT – Why credit is the Hotel California of markets – Michael Mackenzie 10/24

  • “The endless debate over valuation metrics that have accompanied the storming bull run in stocks misses a much bigger point about investing in 2017. Thanks to the outsized role of central banks, it is the credit markets that run the show. If you want clues on when the bull run in equities is entering the red zone, keep your eyes on the corporate debt market.”
  • “Before central banks’ quantitative easing policies engineered the current cycle of financial suppression, credit markets had already established their bona fides as an early warning system for investors. When equities peaked in October 2007, the credit market had already begun turning lower.”
  • “A decade on, the risk premium, or additional yield, offered by corporate bonds over that of a US government bond is at its narrowest since 2007. That provides very little protection for buyers, with even a modest drop in bond prices erasing the meagre fixed income being paid by borrowers.”
  • The big lesson digested by investors since the financial crisis is that you need to own yield, and the money gushing into bond funds remains immense. About $241bn flowed into US high grade bond funds and exchange traded funds in the first nine months of the year, according to Bank of America Merrill Lynch estimates. That’s a whopping 34% higher than 2012’s full-year record of $180bn, the bank says.”
  • “This high tide of money means companies can keep selling debt — running at a record $1.4tn pace this year in the US — at very low interest rates. The resulting higher leverage in the system helps explain why the equity market keeps updating the record books with alacrity.”
  • “’As long as people are tripping over themselves to buy bonds, it remains a very favorable environment for risk taking,’ says Jack Ablin, chief investor officer at BMO Wealth Management.”
  • “True, a number of strategists concede the current credit cycle is looking a little long in the tooth, but they also think the water can remain warm and soapy for a while yet.”
  • “The Federal Reserve may have begun trimming its balance sheet, but other central banks are still buying and the scale of their largesse keeps US credit spreads tight as international money hunts yield. Not until next March will collective bond buying from the Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England peak at around $15.3tn, according to BofA.”
  • “But kick the tires of the credit machine a little harder and there are nascent signs of trouble.”
  • “The quality of covenants — designed to protect bondholders from a borrower defaulting — loiters in the gutter, reflecting a market awash with far too much money.”
  • “In another troubling sign, companies have raised just $215bn from the US high yield market in 2017, the second-slowest figure since 2011, as flows of money into the sector have been choppy this year. While this suggests that some money managers are doing their credit homework, the recent bankruptcy filing of Toys R Us sends a grim tiding about market complacency.”
  • “Bonds in the highly indebted retailer were trading near par and then plunged below 30 cents on the dollar.”
  • “So where does this leave investors? Sure the music is still playing and will probably do so for some time yet. But watch the yield curve. The Fed’s autopilot sequence of rate increases has sharply narrowed the difference between yields on short and long dated Treasuries. This reflects expectations that inflation will stay low — bad for debtors — as well as concern that the economy’s growth prospects are limited.”
  • “If there’s further curve flattening after a tax reform deal, that will send a gloomy signal about the economy, finally push credit spreads wider and should worry the most ardent of equity bulls.”
  • “As we know from 2008, there is no exit once the credit market turns. Credit is the Hotel California of markets — and equity investors usually discover they are trapped in the basement.”

China

FT – Inside China’s secret ‘magic weapon’ for worldwide influence – James Kynge, Lucy Hornby, and Jamil Anderlini 10/25

  • “Xi is quietly ramping up a Communist party department to expand Beijing’s soft power.”

India

FT – India agrees $32bn plan to recapitalize state banks – Simon Mundy 10/24

  • “India’s government has announced a $32bn recapitalization plan for the country’s ailing state-controlled banks in a bid to tackle a festering economic problem.”
  • “The finance ministry promised on Tuesday to take a ‘massive step . . . to support credit growth and job creation’ by shoring up bank balance sheets strained by soaring corporate defaults over the past three years.”
  • “The state banks have been faced with weak credit demand this year and have lost market share to private sector rivals.”
  • “Concerns about the condition of the state-owned banks, which account for more than two-thirds of sector assets, have been mounting along with estimates of their bad loans.”
  • “This is because of a spurt in loans to companies in sectors such as steel and infrastructure over much of the past decade, many of which subsequently turned sour. Gross non-performing loans at the state-controlled banks rose to 13.7% of their assets at the end of June, up from 5.4% in March 2015.”
  • “Beyond the recapitalization, the government promised to push the banks to step up their lending to small and medium-sized enterprises, including by partnering with financial technology companies.”
  • “This sector was badly hit by India’s demonetization last year, which triggered a shortage of bank notes that rocked companies long used to dealing entirely in cash.”

Japan

WSJ – Japan to Young Investors: Loosen Up – Suryatapa Bhattacharya 10/29

Puerto Rico

Rhodium Group – America’s Biggest Blackout – Trevor Houser and Peter Marsters 10/26

Russia

NYT – In Russia, a Bribery Case Lifts the Veil on Kremlin Intrigue – Andrew Kramer 10/21

South America

WSJ – Daily Shot: Latinobarometro – Does Your Government Favor the Elite 10/29

  • It would be hard to argue it doesn’t.

October 20 – October 26, 2017

Polluted waterways in India…

It’s a light posting – I’ve been out of pocket for the last several days. Regardless, I will catch up with the content from those days and mix it in with new content.

However, since I’ve had some mixed feed back, I would like to open it up in a poll. Do you prefer daily or weekly posts?

Headlines

FT – Pollution-related deaths exceed 9m per year 10/19. “…Equivalent to one in six of all deaths across the world.” Of which, 6.5m are from air pollution, 1.8m from water pollution, and 0.8m from pollution in the workplace.

FT – China lifts ban on Anbang sales of high-yield investment products 10/21. After being banned from selling new products in May, the insurance group (known for its purchase of the Waldorf Astoria in New York and a $6.5bn hotel portfolio from the Blackstone Group), has been enabled to get back to it.

NYT – Puerto Ricans Ask: When Will the Lights Come Back On? 10/19. “…80% of Puerto Rico still does not have electricity. Some residents have not had power for 45 days…”

Worthy Insights / Opinion Pieces / Advice

Politico – The Boomtown (Cape Coral, FL) That Shouldn’t Exist – Michael Grunwald 10/20

Perspective

National Geographic – These Are the World’s Happiest Places – Dan Buettner 10/18

NYT – A Boom in Credit Cards: Great News for Banks, Less So Consumers 10/19

National Geographic – Where to Find The Good Life – Manuel Canales & Kennedy Elliott 10/18

Real Estate

13D Research – The destabilizing truth of the retail apocalypse: it’s more about inequality than e-commerce – 10/5

Asia – excluding China and Japan

NYT – Myanmar, Once a Hope for Democracy, Is Now a Study in How It Fails 10/19

Europe

FT – EU opens investigation into Chinese e-bike dumping – Michael Pooler 10/20

Featured

WSJ – The World’s Next Environmental Disaster – Krishna Pokharel and Preetika Rana 10/20

  • “The Yamuna River that flows through this ancient city has helped sustain some of India’s greatest empires. Hindu poets celebrated its life-giving properties. The Mughal dynasty built the Taj Mahal and other monuments along its banks.”
  • “Today, the Yamuna is a foul sludge for much of its 855-mile run. In Delhi, it is black and nearly motionless, covered in many areas with a foam of industrial chemicals, floating plastic and human waste.”
  • “Every 100 milliliters of the Yamuna in Delhi contains 22 million fecal coliform bacteria, up from 12,250 in 1988, scientists say. Anything over 500 is unsafe for bathing, India’s government says. The comparable standard in Vermont is 235.”
  • “Illnesses ranging from diarrhea to brain worms are reported along the river’s edges. By the time the Yamuna exits Delhi, it is so defiled that scientists have declared the next 300 miles ‘eutrophic,’ or incapable of sustaining animal life.”
  • “For years, global environmentalists have focused on China, whose rapid industrialization made it one of the world’s most polluted major nations. Now it’s India’s turn.”
  • “Unlike China, which has become wealthier and is starting to clean up, India is in the early stages of industrial growth. It is following the same road China took to get richer, meaning more factories and cars. Yet, it already has some of the world’s worst environmental problems.”
  • “A government report in 2015 found that 275 of 445 rivers in India are severely polluted, including the Ganges. An international nonprofit, WaterAid, says 70% of India’s surface water is contaminated. Diarrhea, often caused by drinking bad water, is the fourth-leading cause of death in India, ahead of any cancer, and kills far more people than in China, which has a larger population.”
  • “Greenpeace says that in 2015, the average Indian was subjected to more air pollution than the average Chinese for the first time, as China’s ‘systematic efforts’ to improve air have started working. A 2016 WHO report found that 10 out of the world’s 20 most polluted cities were in India, based on residents’ exposure to deadly small particulate matter.”
  • “One reason India is an environmental mess at such an early stage of its development is that it has failed to master the basic services of sewage and water treatment which some other developing nations addressed when incomes rose.”
  • “Of the over 16 billion gallons of sewage that India produces every day, 62% ends up on nearby water bodies untreated, according to the Central Pollution Control Board, a federal pollution monitor.”
  • “Many Indian cities that built wastewater treatment systems don’t fully use them because of electricity shortages or other problems. Several others haven’t built them at all.”

October 13 – October 19, 2017

The corporate drug industry has had many friends in Washington D.C. until now… Amazon is taking over the package room of your apartment building. China’s property boom unlikely to end anytime soon.

Headlines

Economist – The Philippine army recaptures a city seized by Muslim insurgents 10/17. After 5 months, the Philippine forces of President Rodrigo Duterte took back the city of Marawi on the island of Mindanao.

FT – Wanda golf courses closed in China austerity push 10/15. The two courses are in the $3bn Changbaishan resort in Fusong. The why – because new courses were banned in 2004; however, many developers were able to work their way around the rules…until now.

NYT – Kobe Steel Problems May Be More Widespread, Raising Fears on High-Speed Rail 10/12. So about that falsified data…we…didn’t…quite…tell…you…about…all…of…it…sorry.

WSJ – Nordstrom Family Suspends Effort to Take Retailer Private 10/16. That’s how strong the narrative is right now against the retail industry, even the Nordstrom family is having difficulty finding investors to fund the debt of the acquisition (despite the world being awash in cash and the tight spreads on high yield products).

WSJ – Hedge Fund Maverick Capital Debuts 0% Performance Fees 10/19. After losing 10% in 2016 and being down 2% so far this year (mind you that the market is up over the same time period), Maverick is offering some investors a 0% performance fee and 1% management fee on new money for its “recovery shares”.

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – Generation Kill – Anthony Isola 10/16

  • “Young people are killing their chances of building wealth.”

A Wealth of Common Sense – How to Invest At All-Time Highs – Ben Carlson 10/18

  • “The S&P 500 Index has recorded more than 150 new all-time highs since eclipsing its previous peak in late March of 2013. In 2017 alone, there have been 30 new record highs through the end of last week. To put this into perspective, there were only 13 new highs for the entire decade of the 2000s.”

BuzzFeed – Watching Harvey Weinstein Fall, Trump’s Accusers Feel Frustrated – Kendall Taggart & Jessica Garrison 10/14

Economist – Crafty app developers are ripping off big-name brands 10/12

  • Be careful which apps you load onto your phones.

FT – Under Xi Jinping, China is turning back to dictatorship – Jamil Anderlini 10/10

  • “The rejection of ‘western’ political systems has been made easier recently by what the Chinese see as the ludicrous buffoonery of Donald Trump and, to a lesser extent, the self-inflicted damage of Brexit and EU infighting.”
  • “As a top foreign policy adviser recently told one of my colleagues: ‘Trump never talks about democracy or American leadership or liberty — we should not be so stupid to worship things that in the western world are now in doubt.’”
  • Be cautious in your use of ‘private’ messaging services such as WeChat. Big brother is watching.

FT – Hollywood’s masculinity problem – the full picture – Kate Muir 10/12

FT – The implications of shelving the Aramco IPO – Nick Butler 10/14

FT – The disruptive power of renewables – Nick Butler 10/15

NYT – Stranded by Maria, Puerto Ricans Get Creative to Survive – Caitlin Dickerson 10/16

NYT – Inside a Secretive Group Where Women Are Branded – Barry Meier 10/17

  • Another example of the power of peer pressure and social learning.

Project Syndicate – The Psychology of Superstar Sex Predators – Raj Persaud & Peter Bruggen 10/19

The Guardian – Meet the new class traitors who are coming out as rich – Alissa Quart 10/16

The New Yorker – Carl Ichan’s Failed Raid on Washington – Patrick Radden Keefe 8/28

Perspective

How Much – The Largest Industry In Each State by GDP – Raul 10/9

WEF – Tech Insider: World Forecasted Population Growth – Gerald Chirinda 10/11

How Much – Can you Retire on $1 Million? Here is How Long You Can Survive in Every State… – Raul 10/12

Top 5 Friendly States for Retirement

  1. Mississippi  – $1 million lasts 25 yrs 6 months
  2. Arkansas – $1 million lasts 25 yrs
  3. Tennessee – $1 million lasts 24 yrs 5 months
  4. Kansas – $1million lasts 24 yrs 5 months
  5. Oklahoma – $1million lasts 24 yrs 4 months

Top 5 least Friendly States for Retirement

  1. Hawaii – $1 million lasts 13 yrs 1 months
  2. District of Columbia – $1 million lasts 14 yrs 2 months
  3. California – $ 1million lasts 15 yrs
  4. Oregon – $1 million lasts 16 yrs 7 months
  5. New York – $1 million lasts 16 yrs 7 months

VC – The Global Leaders in R&D Spending, by Country and Company – Jeff Desjardins 10/13

Pew – Share of counties where whites are a minority has doubled since 1980 – Drew Desilver 7/1/15

How Much – Best US Cities for Families to Save Money – Raul 10/16

The Best Places for Families to Save Money

  1. Spokane, WA; +$83,400
  2. Henderson, NV; +$59,100
  3. North Las Vegas, NV; +$56,600
  4. Las Vegas, NV; +$55,900
  5. Reno, NV; +$48,800

The Worst Places for Families to Save Money

  1. San Francisco, CA; -$62,300
  2. New York, NY; -$54,100
  3. Boston, MA; -$34,000
  4. Washington DC; -$22,200
  5. Philadelphia, PA; -$9,100

VC – How Many Hours Americans Need to Work to Pay Their Mortgage – Jeff Desjardins 10/17

The Republic – Phoenix is getting hotter – and so is the danger – Brandon Loomis 10/18

Pew – Amid decline in international adoptions to U.S., boys outnumber girls for the first time – Abby Budiman and Mark Hugo Lopez 10/17

Bloomberg – Smartphones Are Killing Americans, But Nobody’s Counting – Kyle Stock, Lance Lambert, and David Ingold 10/17

Markets / Economy

Bloomberg Businessweek- Dollar General Hits a Gold Mine in Rural America 10/11

Bloomberg – The Glut of Private Jets Means ‘Insane’ Bargains for Buyers 10/8

Bloomberg – One of the Biggest ICOs Yet Crashes Before It Even Launched 10/19

WSJ – This Market’s Running on Hope, Not Profits 10/12

WSJ – Daily Shot: Bitcoin 10/17

Bloomberg – JPMorgan, Citigroup Expect More Credit-Card Users to Default – Hugh Son, Dakin Campbell and Jennifer Surane 10/12

Real Estate

Bloomberg Businessweek – Distressed Investors Are Already Buying Houston Homes for 40 Cents on the Dollar 10/12

WSJ – Global Investors Pour Billions Into Hudson Yards in Major Bull Market Bet 10/17

WSJ – How Some Malls Manage to Stay Alive Years After Losing Their Mojo 10/17

WSJ – In London, Some Home Buyers Can Only Stay a Few Years 10/19

WSJ – Daily Shot: John Burns RE Consulting – US Housing Supply Overview 10/17

WSJ – Daily Shot: FRED – Multifamily Housing Units Under Construction 10/19

Finance

Economist – Buttonwood: The finance industry ten years after the crisis 10/14

WSJ – Daily Shot: Commonwealth of Puerto Rico GO Bond 10/15

  • “Puerto Rico’s general obligations (GO) debt keeps tumbling. The 8%-coupon bond ‘maturing’ in 2035 is trading at 33 cents on the dollar.”

WSJ – As Edward Jones Tops $1 Trillion in Assets, It Seeks Street Cred – Lisa Beilfuss 10/16

WSJ – Daily Shot: Corporate High-Yield Bond Spreads 10/18

Environment / Science

Economist – Offshore wind farms will change life in the sea 10/12

Bloomberg – There’s a Climate Bomb Under Your Feet 10/6

NYT – LIGO Detects Fierce Collision of Neutron Stars for the First Time – Dennis Overbye 10/16

Project Syndicate – Hurricanes’ Unnatural Toll 10/13

WSJ – Your Next Home Could Run on Batteries 10/15

Economist – Why the North American west is on fire 10/13

  • “The west of the United States has endured some 50,000 wildfires this year, and over 8.5m acres (3.4m hectares) have burned. Northern California has suffered in particular recently as flames have swept through parts of the landscape, killing at least 23 people and devastating wineries. In Canada, as of August 30th (the latest available figure), 7.4m acres had burned.”
  • “Ernesto Alvarado of the University of Washington, who specializes in large fires, says that historically portions of the forests of America’s north-west would burn every five to 20 years. In many areas, however, these fires have been suppressed for over a century by the needs of loggers and residents. Over time, undergrowth, saplings and dead trees accumulate, creating conditions in which a fire can spread very rapidly. Furthermore, a recent reduction in logging has led to an even closer packing together of trees. ‘To maintain good forest health in many of these forests, you need fire,’ says Dr. Alvarado. While some burns are prescribed, they are a fraction of what is required. In Washington, for instance, between 2001 and 2014 the Forest Service burned just 2% of the state’s 9.3m acres of forest.”
  • “In terms of scale, 2017 is not actually an outlier. In the past decade, wildfires have burned an average of 6.6m acres each year in the United States and 6.2m acres in Canada. The particular problem this year is the dispersed nature of the blazes.”
  • “The current state of the north-western forests, combined with the effects of climate change, increase the likelihood that wildfires will be worse in future… Little can be done to reduce the danger without a dramatic increase in prescribed burns, and these are unlikely as people continue to move into forested areas. One further consequence: the smoke and ash that drift across densely inhabited areas affect human health, too. A study by the universities of Harvard and Columbia of slash-and-burn fires in Indonesia in 2015 blamed the fires for 100,000 additional deaths and 500,000 injuries in Indonesia, Singapore and Malaysia. Where there’s smoke, there’s fire: this year’s haze presages years of potentially more ferocious burns.”

Asia – excluding China and Japan

NYT – U.S. Stood By as Indonesia Killed a Half-Million People, Papers Show 10/18

WSJ Video – Inside the Philippines’ Bloody War Against Islamist Militants 10/18

Canada

WSJ – Canada Imposes Tougher Mortgage Rules Effective 2018 – Paul Vieira and Vipal Monga 10/17

  • “Canada’s banking watchdog unveiled tougher mortgage-financing rules that take effect on Jan. 1 that real estate watchers and economists say could dramatically slow house buying and borrowing.”
  • “The most notable measure is a provision that would require all prospective buyers—even those with a down payment of over 20%—to undergo a so-called stress test before a bank can issue a loan. Previously, only buyers with a down payment of less than 20% had to undergo a stress test. Under the stress test, prospective buyers would have to qualify for a mortgage at a rate at whichever is greater: either 2 percentage points above the negotiated rate, or the Bank of Canada’s five-year benchmark rate. The central bank’s five-year rate stands at 4.89%. The regulator originally proposed the test just cover two percentages point above the negotiated mortgage.”
  • “Robert McLister, founder of the Canadian mortgage-rate comparison site RateSpy.com, said the new rules target the fastest-growing part of the mortgage market—uninsured mortgages—and could affect one out of every six prospective home buyers. In Canada, mortgage insurance is mandatory unless the buyer has a down payment of 20% and over.”
  • “’This is easily the most groundshaking mortgage rule of all time, and that’s not an understatement,’ Mr. McLister said in an interview.”
  • “Economists said the tougher mortgage regulations will further hit a softening housing market. Recent data from the Canadian Real Estate Association indicated unadjusted sales in September were 11% below year-ago levels, and price growth has slowed considerably, especially in the Toronto market after the introduction of a foreign-buyer’s tax in southern Ontario.”
  • “TD Bank’s economics team said it anticipates the measures will depress housing demand by 5% to 10% once fully implemented.”

China

FT – China’s $150bn debt-for-equity swap shows signs of fizzling 10/18

WEF – Deloitte: China will grow old before it gets rich – Alex Gray 10/6

WSJ – China’s Greatest Challenge – Anjani Trivedi 10/16

  • Debt…

  • NBFI = Nonbank Financial Institutions

FT – China residential property sales see first fall in 21/2 years – Hudson Lockett 10/18

  • Okay, but look at the volatility. Geez.

Japan

WSJ – Corporate Scandals Say More About Japan Than the Nikkei 10/12

WSJ – Daily Shot: Moody’s Investor Service – Decline of Japan’s Working Age Population 10/18

Middle East

Reuters – Saudi needs Aramco billions as recession slows austerity drive 10/19

FT – Qatar’s wealth fund brings $20bn home to ease impact of embargo – Andrew England and Simeon Kerr 10/18

  • “Qatar’s sovereign wealth fund has brought more than $20bn back onshore to cushion the impact of a regional embargo imposed on the Gulf state.”
  • “Ali Shareef al-Emadi, Qatar’s finance minister, told the Financial Times that Qatar Investment Authority deposits were being used to create a ‘buffer’ and provide liquidity in the banking system after the gas-rich state suffered capital outflows of more than $30bn.”
  • “That followed the decision by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt to cut diplomatic and transport links with the nation in June. The move has triggered the Gulf’s worst crisis in years.”
  • “Moody’s, the rating agency, said last month that Qatar had injected $38.5bn into its economy since the crisis erupted.”

WSJ – Daily Shot: BMI Research  – Saudi Arabia GDP Change Year-over-Year 10/17

South America

FT – IMF crunches the numbers for possible Venezuela rescue 10/15

Featured

WP – The drug industry’s triumph over the DEA – Scott Higham and Lenny Bernstein 10/15

  • Let it be noted the power of this reporting resulted in Rep. Tom Marino withdrawing from consideration to lead the Office of National Drug Control Policy and it appears that the public is more aware of this problem…
  • “In April 2016, at the height of the deadliest drug epidemic in U.S. history, Congress effectively stripped the Drug Enforcement Administration of its most potent weapon against large drug companies suspected of spilling prescription narcotics onto the nation’s streets.”
  • “By then, the opioid war had claimed 200,000 lives, more than three times the number of U.S. military deaths in the Vietnam War. Overdose deaths continue to rise. There is no end in sight.”
  • “A handful of members of Congress, allied with the nation’s major drug distributors, prevailed upon the DEA and the Justice Department to agree to a more industry-friendly law, undermining efforts to stanch the flow of pain pills, according to an investigation by The Washington Post and ’60 Minutes.’ The DEA had opposed the effort for years.”
  • “The law was the crowning achievement of a multifaceted campaign by the drug industry to weaken aggressive DEA enforcement efforts against drug distribution companies that were supplying corrupt doctors and pharmacists who peddled narcotics to the black market. The industry worked behind the scenes with lobbyists and key members of Congress, pouring more than a million dollars into their election campaigns.”
  • “The chief advocate of the law that hobbled the DEA was Rep. Tom Marino, a Pennsylvania Republican who is now President Trump’s nominee to become the nation’s next drug czar. Marino spent years trying to move the law through Congress. It passed after Sen. Orrin G. Hatch (R-Utah) negotiated a final version with the DEA.”
  • “For years, some drug distributors were fined for repeatedly ignoring warnings from the DEA to shut down suspicious sales of hundreds of millions of pills, while they racked up billions of dollars in sales.”
  • “The new law makes it virtually impossible for the DEA to freeze suspicious narcotic shipments from the companies, according to internal agency and Justice Department documents and an independent assessment by the DEA’s chief administrative law judge in a soon-to-be-published law review article. That powerful tool had allowed the agency to immediately prevent drugs from reaching the street.”
  • “Political action committees representing the industry contributed at least $1.5 million to the 23 lawmakers who sponsored or co-sponsored four versions of the bill, including nearly $100,000 to Marino and $177,000 to Hatch. Overall, the drug industry spent $106 million lobbying Congress on the bill and other legislation between 2014 and 2016, according to lobbying reports.”

WSJ – Amazon and Big Apartment Landlords Strike Deals on Package Delivery – Laura Kusisto 10/17

  • “Amazon.com Inc. is taking over the package rooms of some of the country’s largest apartment landlords, in a move that could help consolidate its control over how goods make it from the warehouse floor to the front door.”
  • “Amazon has signed contracts with apartment owners and managers representing more than 850,000 units across the U.S. to begin installing Amazon locker systems in their buildings, according to the landlords. Amazon has commitments to install the lockers in thousands of properties, many before the peak holiday shopping season, according to a person familiar with the matter.”
  • “Several of the nation’s largest operators, AvalonBay Communities Inc., Equity Residential , Greystar and Bozzuto Group, have signed up, company executives said.
  • For several years, landlords have struggled with how to manage the mountains of packages they receive each day. Staff at larger buildings end up devoting several hours a day sorting mail, while boxes are piled in every spare cranny. Most say it is the single largest problem they face.”
  • “The locker program, dubbed Hub by Amazon, will accept packages from all carriers and not just for purchases made on Amazon. They will be open only to residents, not the wider community. Residents will receive a notification when they have a package and a code allowing them to open one of the slots.”
  • “Apartment owners pay about $10,000 to $20,000 to purchase the lockers initially and don’t pay a monthly fee. Most landlords said they don’t plan to charge residents initially but to offer it as an amenity. They could also make back some of that cost in savings on staff labor.”
  • “Karen Hollinger, vice president of corporate initiatives at AvalonBay, which has an ownership interest in about 80,000 apartments, said the average apartment community in the company’s portfolio receives some 1,000 packages a month, up from 650 a year ago. She said AvalonBay has seen a 20% to 30% annual increase in the volume of packages it receives for the past four years.”
  • “Amazon has been searching for ways to make deliveries cheaper. It has recruited a fleet of citizen drivers via its Flex program, which allows people to drop off packages from their cars. It has developed its own air and cargo networks, too.”
  • “The most expensive leg of any delivery is known as the last mile: getting a package to the doorstep. Amazon already has added lockers throughout the U.S., including an announcement that it is rolling them out at its newly acquired Whole Foods stores.”

FT – Chinese property boom props up Xi’s hopes for the economy – Tom Hancock & Gabriel Wildau 10/18

  • “As China’s Communist party elite gather in Beijing this week to select its top leaders, President Xi Jinping has benefited from the strong recent performance of the economy, which is poised for its first year-on-year acceleration in growth since 2010. On Thursday China reported that gross domestic product grew 6.8% in the third quarter, ahead of Beijing’s full-year target.”
  • “That rebound owes much to the confidence of homebuyers. Housing prices and construction starts rebounded from a slump in 2014-15, boosting overall business investment and driving demand for output from China’s huge manufacturing sector.”
  • “The property sector has been given a helping hand. Urged on by Beijing, 38% of all bank loans issued in the 12 months to August were home mortgages, according to official data, and local governments purchased 18% of all residential floor space sold last year as part of a drive to provide affordable housing, according to estimates by E-House China Research Institute.”
  • “The result has been another heady boom in construction. Rome was not built in a day, but based on residential floor area completed last year, China built the equivalent of a new Rome about every six weeks.”
  • “With the surge in housing investment has come a round of questions about a potential bubble in the market and the implications for the long-term health of China’s economy.”
  • “Some economists and investors warn that short-term growth from the latest housing boom has come at a cost: inflating a property bubble whose eventual bursting will inflict great pain. A senior Chinese legislator recently warned in unusually blunt terms that the economy has been ‘kidnapped’ by property.” 
  • “But others insist that fears of a bubble are overstated. On this view, economic fundamentals justify substantial investment in housing, especially in inland cities where development still lags far behind wealthy coastal areas. These more sanguine observers also note that outrageous price levels for Chinese apartments are mainly restricted to the megacities like Beijing and Shanghai.” 
  • “The stakes in this debate are high. Chinese residential property is arguably the world’s most important asset market. The sector drives global commodity prices, making the difference between growth and stagnation for resource exporters like Australia and Brazil.” 
  • “’It’s never wrong to express worry over China’s housing market,’ says Larry Hu, China economist for Macquarie Securities in Hong Kong. ‘But it’s interesting to consider why the housing sector has become the Bermuda Triangle for economic forecasters. So many smart people have made wrong predictions about it.’”
  • “The leading claim of the housing bears is that after a 15-year construction boom, China has built most of the housing it needs to meet fundamental demand. On this view, investors speculating on price gains, not families seeking shelter, now drive the market.”
  • “’People buy property not because they like the property, but because the price is rising,’ says Ning Zhu, professor at the Shanghai Advanced Institute of Finance and author of China’s Guaranteed Bubble. ‘It’s this panic that if they don’t buy now they will never be able to afford it.’” 
  • “Central to this narrative is the notion of ‘ghost cities’ — huge blocks of empty apartments where expected demand never materialized.” 
  • “In Mr. Xi’s speech at the opening of the congress on Wednesday, he repeated his mantra that ‘houses are for living in, not for speculation’.”
  • “Yet even in major cities, evidence suggests that there are a substantial number of empty flats held for investment purposes. A survey by FT Confidential Research, an independent research service owned by the Financial Times, found that 32% of families own at least one home that is vacant.” 
  • “An estimated 50m homes, or 22% of the total urban housing stock, were vacant in 2013, according to the most recent data from the China Household Finance Survey led by Li Gan, economics professor at Texas A&M University.” 
  • “Further underpinning the bearish outlook is the belief that fundamental demand for new housing is drying up.” 
  • “The extraordinary transformation of China’s economy over the past 40 years was driven by the migration of farmers into cities. That urbanization process is now slowing, however, as relatively few young people remain in rural China.” 
  • “The number of migrant workers living outside their home province rose by 12m in the five years through to June this year, compared with an increase of 26m in the five years ending June 2012, according to official data.” 
  • Says Mr. Xie (Andy Xie, an independent economist and former Morgan Stanley chief Asia-Pacific economist): ‘If you go into villages, there are no young and middle-aged people any more. Where is this next wave of urbanization supposed to come from?’”
  • “To longtime observers of China’s economy, the current hand-wringing over the property market feels familiar.”
  • “After two years of falling prices and sluggish sales, analysts were warning in early 2016 that some smaller cities had enough unsold inventory to last for years.” 
  • “Yet by August this year, inventories in the 80 cities tracked by E-House China Research Institute stood at their lowest level in almost five years.” 
  • “Perceptions of unreasonably high housing prices appear to be disproportionately influenced by trends in first-tier cities — Beijing, Shanghai and Shenzhen. All three rank among the world’s most expensive in terms of price-to-income ratio.” 
  • “Of the 70 cities in the official price survey, however, 12 have seen outright price falls in the three years through to August this year. In a further 29 cities, prices rose by less than 10% in the same period. Meanwhile, median per capital disposable income has grown 28% in roughly the same period.”
  • “Despite major concerns about Chinese corporate debt, household borrowing remains low by international standards at 37% of GDP, compared with 79% in the US and 59% in the euro area, according to the Bank for International Settlements. And Chinese homebuyers use less debt and more equity than counterparts in the US. The average down payment on Chinese home mortgages extended in 2016 was 40%.” 
  • Despite their differences, both sides in the debate mostly agree that an outright crash of the housing market is unlikely. Chinese savers have few options for investing their money. The stock market is volatile, returns on bank deposits are meagre and foreign exchange controls largely prevent households from buying foreign assets. Housing is the least bad option for many investors.” 
  • The combination of capital controls with years of monetary stimulus virtually ensures that ‘trapped cash’ will slosh through different asset classes, creating bubble-like conditions that the government either encourages or struggles to contain.” 
  • “Still, given the pain that would result from an abrupt policy shift, analysts widely expect that Beijing will continue the current approach, tightening controls when the market gets too hot, while priming it with cash when it slows too sharply.” 
  • “’The government is really losing its credibility,’ says Mr. Ning. ‘At this point everyone realizes they don’t really intend to crack down on the housing market.’

October 13, 2017

Perspective

NYT – Rohingya Recount Atrocities: ‘They Threw My Baby Into a Fire’ – Jeffrey Gettleman 10/11

  • Deeply disturbing.

WSJ – Daily Shot: OECD – Global Obesity Rates (2015) 10/12

FT – The 30-second ad has had its 15 minutes of fame – Shannon Bond 10/11

  • “The 30-second television ad has been dethroned. As US television networks face growing digital competition for marketing dollars and viewers’ attention, they are selling shorter ads. The result? Thirty-second spots, long the industry standard, now make up fewer than half of all US TV commercials.”

Worthy Insights / Opinion Pieces / Advice

WSJ – Say Goodbye to the China Bid – Aaron Back 10/12

  • “China’s seemingly insatiable demand for foreign assets has driven up prices for everything from U.S. Treasury bonds to global companies to luxury real estate. Now, a combination of market forces and capital controls are choking off the flow of Chinese cash. Asset markets around the world will have to adjust.”
  • “As Chinese exports boomed starting in the early 2000s and foreign investment flooded into the country, the central bank recycled these inflows into foreign government bonds, mostly Treasurys, to keep the yuan from rising. The buying persisted for over a decade, driving bond prices up and driving yields down globally.”
  • “The form of China’s foreign buying shifted in 2014, when the U.S. began exiting quantitative easing and China’s growth slowed. Ordinary Chinese feared that the yuan, which had steadily risen for years, would fall as growth slowed. Both individuals and companies rushed to get money out of China, snapping up trophy assets and luxury real estate around the world.”
  • “The China bid, or at least the expectation of one, sent prices of luxury properties soaring, fueled real estate bubbles from Vancouver to Sydney and pushed up prices of companies seen as desirable for Chinese buyers.”
  • “Alarmed by the outflow, Beijing began to tighten capital controls in 2015 and 2016, but the deal-making persisted until this year when the government cracked down on money transfers by individuals and discouraged companies from pursuing ‘irrational’ deals abroad. So far this year, outbound mergers and acquisitions by Chinese companies are down 27% from the same period a year earlier, according to Dealogic.”
  • “Now, pretty much the only thing the Chinese government encourages its companies to buy abroad are high-tech companies such as computer chip makers. But these strategic assets are precisely the kind that Western governments increasingly don’t want to fall into Chinese hands.”
  • “In real estate there is no way to say for sure how much Chinese buying drove up prices, but governments from Canada to Australia have moved to control foreign buying to rein in property bubbles.”
  • “Nor is China set to return as a big buyer of U.S. Treasurys. Indeed, if the Federal Reserve keeps tightening, China could be a seller of bonds as it fends off depreciation pressure on the yuan.”
  • “In the years ahead, financial markets around the world will have to live without the ever-present China bid. Whether China was a savvy investor or the dumb money, asset prices will likely be lower.”

WSJ – China’s Next Five Years – Squeezing the People to Feed the State – Nathaniel Taplin 10/11

  • “China achieved its economic miracle by unleashing the entrepreneurial private sector. With President Xi Jinping poised to further consolidate power at the Communist Party’s twice-a-decade leadership shuffle kicking off Oct. 18, the narrative of the next five years is becoming clear.”
  • “The state is pushing back.”
  • “The logic is straightforward. Nominally communist China relies on its vibrant private sector for growth, but state-owned companies are indispensable tools for political patronage, social control and economic policy. Any financial rot in the state sector could weigh on the economy and weaken the Communist Party’s grip.”
  • “With private business already commanding around 70% of the economy, Mr. Xi and his allies have decided to strengthen key state-controlled companies by boosting their market power and easing their debt burdens.”
  • “For investors, the implications are significant: higher global goods prices because state-owned companies are notoriously inefficient, and a smaller chance of the long-feared Chinese debt crisis. Corporate debt, which is largely in the state-owned sector, ticked down as a percentage of GDP in the second quarter, according to J.P. Morgan—the first decline since 2011. The trade-off is slower Chinese growth. Chinese banks, whose shares are currently on a tear, will need to keep subsidizing bloated state enterprises. And those enterprises’ need for a deep pool of capital inside China means a free-floating yuan will remain a distant dream.”
  • “For investors, the tilt back toward the state means that innovative privately owned tech and consumer companies may continue to outperform—but probably less so than in the past. Hulking state-owned titans, enjoying newly privileged market positions, may reward investors more reliably: The state-dominated Shanghai stock market has roundly outperformed the technology-and-consumer-focused Shenzhen market this year.”
  • “Deng Xiaoping, the grandfather of China’s economic reforms, famously said that it was acceptable to let ‘some people get rich first.’ The people are far richer than they were three decades ago. Now it’s the state’s turn once again.”

Forbes – How Blockchain Can Stamp Out China’s Fake Diplomas 10/8

NYT – We’re About to Fall Behind the Great Depression – David Leonhardt 10/12

Markets / Economy

WSJ – Daily Shot: Moody’s – U.S. States General Obligation Debt Ratings 10/12

Real Estate

FT – Airbnb teams up with developer to launch branded apartments – Leslie Hook 10/12

  • “Airbnb is stepping up its challenge to traditional hotel operators, launching branded, purpose-built apartments in Florida in a tie-up with a US real estate developer.”
  • “The partnership with Newgard Development Group marks the first time the San Francisco-based home-sharing group has worked with a property developer. It underscores how Airbnb is expanding beyond simply booking accommodation, its core service that has already hit hotel operators in cities across the world.”
  • “The 300-unit rental complex in Kissimmee, Florida, near Orlando, will be built and owned by Newgard but carry a new brand: ‘Niido powered by Airbnb’.”
  • “Harvey Hernandez, chief executive of Miami-based Newgard, said the company planned to build 2,000 Airbnb-branded units in the next two years. Tenants who rent the apartments can choose to sublet them through Airbnb for up to 180 days a year.”
  • “The Kissimmee apartment building, due to open early next year, includes features such as keyless doors and secure storage that will make it easier for long-term tenants to rent out their rooms when they are away. Through an app, tenant hosts can manage their Airbnb guests’ stay and even co-ordinate services such as changing bedsheets.”
  • “It will have human touches as well. A ‘master host’ will be on site, and all apartments will have a mandatory cleaning service, in the style of a serviced apartment.”
  • “’The demographic that we are targeting are travelling more than ever before,’ said Mr Hernandez. ‘So when that property is empty, they can be making money with it.’”
  • “Newgard, Airbnb and the tenant will all derive revenue from the short-term rentals, with Newgard taking 25% of the nightly room rate, Airbnb taking 3% (the same commission it charges hosts anywhere), and the tenant receiving the remainder.”
  • “Marriott operates serviced apartments whereby it does not own the property but the building carries its branding and Marriott provides hospitality services. Unlike Marriott, Airbnb will not operate the hospitality services and nor is it charging Newgard for the use of its brand.”

Bloomberg – Kushners’ Manhattan Tower on Track for Its Worst Year Since 2011 – Caleb Melby 10/12

Energy

FT – Why the US east coast imports oil despite shale boom – Gregory Meyer 10/11

  • “The US has been shipping its shale oil riches to different parts of the world, including Canada and India, inspiring White House officials to muse about American ‘energy dominance’. But one place that is buying very little of this crude is the officials’ backyard.”
  • “Last week as the US reported a record 2m barrels a day in crude oil exports, refineries located up the highway from Washington on the east coast imported about 900,000 b/d, mainly from Africa.”
  • “A big reason is the Jones Act, a 97-year-old US law that requires all ships starting and ending their voyages on US coasts to be American-flagged, built and crewed.”
  • “What animates critics in the oil market about the Jones Act is that it increases the cost of shipping crude from the Gulf coast to the east coast above the rate charged by foreign-flagged carriers. That helps incentivize exports from Texas oilfields and imports by refiners in the east. The reliance on shipping reflects the fact that no crude oil pipelines link the oilfields of the central US to the east coast.”
  • “’It’s basically a constraint on the efficient operation of the oil market,’ says Sandy Fielden, director of research for commodities and energy at Morningstar.”
  • “US lawmakers liberalized trade in crude oil in December 2015, allowing unfettered exports after years of tight restrictions for every destination but Canada. They let the Jones Act stand, though they gave some refiners temporary tax relief related to oil transport costs.”
  • “The effects are plain to see. In 2015, tankers laden with crude oil from the US gulf coast delivered an average of 50,000 b/d to ports on the US east coast, according to ClipperData, a vessel tracking service. The volumes nearly halved in 2016 and have halved again this year, the data show.”
  • “Ending the export ban has caused shipments to soar to countries previously blocked from buying US oil, including long hauls to Asia. Crude oil exports to countries other than Canada are averaging about 325,000 b/d this year, ClipperData’s records show, more than treble the levels of 2015.”
  • “Meanwhile, US east coast refineries near Philadelphia and New York have been importing nearly 1m b/d from countries such as Nigeria and Angola, about 50% higher than two years ago.”
  • “The increased imports to the east coast come despite falling rates to hire a Jones Act tanker as the industry struggles with a surplus of ships built before the export ban was lifted. The US fleet of Jones Act tankers and tugboat-barge units totals 94 vessels, according to Overseas Shipholding Group, one of the biggest operators in the sector.”
  • “Sam Norton, chief executive of OSG, estimates the cost of hiring one for crude service is about three to four times higher than using a foreign-flagged vessel. Some shipping consultants say it is even higher.”
  • “The Jones Act is unlikely to abolished, despite the longstanding efforts of politicians such as Senator John McCain of Arizona.”
  • “’Since people have been living with it for so long, it’s difficult to say what it would be like if they changed it or if it were repealed,’ says Mr Fielden of Morningstar.”

Environment / Science

NYT – 10 Hurricanes in 10 Weeks: With Ophelia, a 124-Year-Old Record is Matched – Maggie Astor 10/11

  • “With Tropical Storm Ophelia’s transition to Hurricane Ophelia on Wednesday, 2017 became the first year in more than a century — and only the fourth on record — in which 10 Atlantic storms in a row reached hurricane strength.”

China

FT – Wanda’s Wang Jianlin dethroned from top of China rich list – Tom Hancock 10/11

WSJ – Six Reasons Why China Matters – Justin Lahart 10/11

NYT – China to Debtors: Pay Up or Be Shamed – Keith Bradsher and Ailin Tang 10/11

  • “Troubled by huge debts run up by big state companies and politically connected local governments, China is taking steps instead to go after the little guys.”
  • “Chinese officials have ordered provincial governments to establish online platforms naming those who do not pay their obligations, official media reported this week. The lists should be maintained by local news organizations as well as courts and regulators, the report said, with an aim of exposing deadbeats and pressuring them to pay up.”
  • “The new effort is unlikely to affect big borrowers, like major state-owned companies and other big firms, whose debts are almost never called in. But it could intensify and centralize officials’ broader moves to assign ratings to individuals based on creditworthiness and other criteria; practices like credit scoring are only just now taking off in the country.”

Japan

WSJ – Daily Shot: BOJ asset purchases and pace of purchase 10/12

  • “The BoJ is quietly slowing its securities purchases (as part of ‘yield targeting’).”