Tag: Facebook

March 28, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg Gadfly – Users Built Facebook’s Empire, and They Can Crumble It – Nir Kaissar 3/26

FT – It is Venezuela’s crisis that is driving the oil price higher – Nick Butler 3/25

  • “While the Maduro-military alliance holds, output is likely to fall further.”

NYT – Live in a Drainpipe? Five Extreme Ideas to Solve Hong Kong’s Housing Crisis – Austin Ramzy 3/26

NYT – Repeal the Second Amendment – John Paul Stevens (retired associate justice of US Supreme Court) 3/27

NYT – New Leadership Has Not Changed Uber – Steven Hill 3/26

  • “The problem with Uber was never that the chief executive had created a thuggish ‘Game of Thrones’-type culture, as Susan Fowler, an engineer, described it in a blog post. The problem was, and still is, Uber’s business model: Its modus operandi is to subsidize fares and flood streets with its cars to achieve a transportation monopoly. In city after city, this has led to huge increases in traffic congestion, increased carbon emissions and the undermining of public transportation.”
  • “Most customers who love Uber don’t realize that the company subsidizes the cost of many rides. This is likely a major factor in Uber’s annual losses surging from 2.8 billion in 2016 to $4.5 billion in 2017. This seemingly nonsensical approach is actually Uber’s effort to use its deep pockets to mount a predatory price war and shut out the competition. That competition is not only taxis and other ride-sharing companies, but public transportation.”
  • “Ridership on public transportation is down in nearly every major American city, including New York City (which recorded its first ridership dip since 2009). This is hurting the revenue that public transportation needs to sustain itself. Uber passengers and public transportation users alike now find themselves stuck in heavy traffic for far longer because of what’s been called ‘Uber congestion.’ In Manhattan, there are five times as many ridesharing vehicles as yellow taxis, which has caused average speeds to decline by 15% compared with 2010, before Uber.“
  • “Ride-sharing services could potentially add something positive to our transportation options, but only if they are regulated properly.”
  • “First, regulators should limit the number of ride-sharing cars. Traditional taxis already have a sensible limit to minimize congestion. A balance must be found between having enough taxi-type vehicles but not so many that the streets are choked with traffic. Fix NYC, a panel appointed by Gov. Andrew Cuomo of New York, has called for all Ubers, Lyfts and taxis to be outfitted with GPS technology to track congestion and to charge a fee on for-hire vehicles that could help reduce traffic and generate hundreds of millions of dollars for public transportation.”
  • “Second, Uber should be prohibited from subsidizing its fares. It should be required to charge at least the true cost of each ride. If Uber refuses, a ‘fairness fee’ should be added to each fare.”
  • “Third, ride-sharing companies and their vehicles should be required to follow the same laws as traditional taxis, especially in terms of background checks for drivers and insurance requirements.”
  • “Fourth, Uber should be required to share its data with regulators, including information about its drivers and their contact information, so that members of this ‘distributed work force’ can more easily contact one another and organize collectively if they choose.”
  • “Finally, regulations should ensure that Uber treats its drivers fairly. Mr. Khosrowshahi asserts that drivers’ wages are adequate, but according to one study, more than half of Uber drivers earn less than the minimum wage in their state, and some even lose money once the costs of driving are taken into account. That helps explain why, according to Uber’s own internal study, half of its drivers leave after a year.”

WSJ – Turkey Is the One to Watch for Emerging Markets Risk – Richard Barley 3/26

WSJ – How a Tiny Latvian Bank Became a Haven for the World’s Dirty Money – Drew Hinshaw, Patricia Kowsmann, and Ian Talley 3/26

Markets / Economy

WSJ – Libor’s Rise Accelerates, Squeezing Short-Term Borrowers – Ben Eisen and Chelsey Dulaney 3/27

  • “The three-month London interbank offered rate climbed to 2.29% in the U.S. on Monday, its highest since November 2008. Libor measures the cost for banks to lend to one another and is used to set interest rates on roughly $200 trillion in dollar-based financial contracts globally, from corporate loans to home mortgages.”
  • “Libor has been rising for the last 2½ years as the Federal Reserve lifts its key policy rate, but recently the pace has picked up. It has climbed nearly a full percentage point in the last six months—outpacing the Fed—and could rise further with the approaching end of the quarter, typically a time of elevated demand for short-term funds in the banking sector, analysts say.”
  • “Demand for dollars at the end of the first quarter could send Libor up an additional 0.2 percentage point in the coming days, market analysts say, as investors rebalance their portfolios and banks rein in their balance sheets. The end of March also marks the finish of Japan’s fiscal year, potentially compounding the moves as big investors bring money back to Japan.”
  • “Libor has already sprinted ahead of the rates indicated by central bank policies, an acceleration that has baffled economists and traders. That widening gap has alarmed those who watch it as a signal of stress in the financial system. Others have pinned it on a series of technical factors, such as rising short-term debt sales by the U.S. government and new corporate tax policies.”
  • “Other markets that can be tapped for dollars—including through the swaps market and liquidity lines maintained by global central banks—aren’t yet showing a big dollar squeeze.”

Real Estate

The Big Picture – WeWork: Manhattan’s 2nd-biggest Private Office Tenant – Barry Ritholtz 3/27

FT – House prices falling in two-fifths of London postcodes – James Pickford 3/26

  • “House prices are falling in two out of five London postcodes, according to research that underlines the growing divergence between prices in southern English cities and those elsewhere in the UK.”
  • “The average annual rate of price growth in the capital has slowed to 1%, down sharply from 4.3% a year ago, meaning it is at its lowest level since August 2011, according to research by Hometrack, a housing market analyst. This stands in contrast to UK-wide average house price growth of 5.2% in the year to February 2018, up from 4% a year ago.”
  • “Prices are under greatest pressure in central London, where owners of the most expensive types of property began cutting prices in 2015 responding to the impact of higher taxes. In the past year, however, the trend has deepened in areas beyond the prime zones of Westminster and Kensington & Chelsea. The boroughs that saw the greatest drop in value were the City of London, Camden, Southwark, Islington and Wandsworth, according to Hometrack’s research.”
  • “Hometrack is predicting that the number of areas of the capital experiencing falling house prices will multiply during this year as trapped sellers reduce their asking prices to drive through transactions. ‘The net result will be a negative rate of headline price growth for London by the middle of 2018,’ the research said.”
  • “Outside southern England, house prices are more likely to be rising, in some places at a substantial pace. Edinburgh, Liverpool, Leicester, Birmingham and Manchester are adding more than 7% a year to their average house price, Hometrack found, with Leeds, Nottingham and Sheffield pegging rises of 6% or more.”
  • “The laggards in the 20-city index were Aberdeen (down by 7.7%), Cambridge (down by 1.5%) and Oxford (up by just 0.5%).”

NYT – Grocery Wars Turn Small Chains Into Battlefield Casualties – Michael Corkery 3/26

WSJ – Homeowners Ditch Refinancings as Mortgage Rates Rise – Christina Rexrode 3/26

  • “Last year, 37% of mortgage-origination volume was because of refinancings, according to industry research group Inside Mortgage Finance. That is the smallest proportion since 1995, and the number of refinancings is widely expected to shrink again this year. In 2012, refinancings were 72% of originations.”
  • “While purchase activity has climbed steadily from a post-financial-crisis nadir in 2011, growth in 2017 wasn’t enough to offset a $366 billion decline in refinancing activity. The result: The overall mortgage market fell around 12%, to $1.8 trillion, according to Inside Mortgage Finance.”
  • “What’s more, there are fewer homeowners eligible to refinance because of rising rates. The number of borrowers who could benefit from a refinancing is down about 37% from the end of last year, estimates Black Knight Inc., a mortgage-data and technology firm. At 2.67 million potential borrowers, this group is at its smallest since 2008.”
  • “Home-purchase activity has so far been holding up. Sales of previously owned homes in February rose 1.1% from a year earlier, countering worries that a downturn the previous month signaled a peak for the market.”
  • “Still, rising interest rates, a shortage of housing inventory and higher home prices are all long-term threats to purchase activity.”
  • “For refinancings, rising rates are a more immediate worry. Freddie Mac said last week that the average rate on a 30-year fixed-rate mortgage was 4.45%, up from 3.95% at the beginning of the year.”
  • “The Mortgage Bankers Association expects mortgage-purchase volume to grow about 5% in 2018 but refinancing volume to drop 27%. Refinance applications fell 5% in the week ended March 16 from the prior one, according to the group.”

Cryptocurrency / ICOs

Bloomberg – Fewer Americans Hold Cryptocurrencies Than You Probably Think – Olga Kharif 3/16

  • “More than 90% of American adults don’t own cryptocurrencies – and most have a lot of concerns about the coins, a new survey from Finder found.”

Fishing

Bloomberg – Maine’s Lobster Tide Might Be Ebbing – Justin Fox 3/23

  • “The numbers came in earlier this month on Maine’s 2017 lobster harvest. By historical standards, the 110.8 million-pound, $434 million haul was pretty spectacular. But it was a lot lower than 2016’s 132.5 million-pound, $540 million record, and it was another sign that the Great Lobster Boom that has surprised and delighted Maine’s lobster fishermen since the 1990s — and brought lobster rolls to diners from coast to coast — may be giving way to … something else.”
  • “The lobster boom does not seem to be the result of overfishing; Maine’s lobster fishermen figured out a set of rules decades ago that appear to allow them to manage the catch sustainably. There are just lots and lots more lobsters off the coast of Maine than there used to be. Why? In a column last spring, I listed four reasons that I’d heard during a trip to Maine:”
    • “Warmer temperatures in the Gulf of Maine.”
    • “A collapse in the population of cod, which eat young lobsters.”
    • “Reduced incidence of a lobster disease called gaffkemia.”
    • “Increased effort and efficiency on the part of lobstermen, who go farther offshore and can haul in more traps in a day than they used to.”
  • “Given how quickly the lobster harvests grew, though, especially from 2007 through 2012, it’s hard not to wonder whether they might not eventually collapse. They already have in several states farther down the Atlantic coast. Lobster landings were still on the rise as of 2016 (data aren’t available yet for 2017) in New Hampshire and Massachusetts but peaked in Rhode Island in 1999, Connecticut in 1998, New York in 1996 and New Jersey in 1990.”
  • “So that’s some evidence for the warming-ocean-temperatures theory of the lobster boom. This would imply that eventually even the oceans off Maine will get too warm, although it doesn’t give much of a hint as to when.”
  • Canada has been benefiting as well.

 

March 22, 2018

Perspective

NYT – The Population Slowdown in the Outer Suburbs of the East and Midwest – Robert Gebeloff 3/21

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Headline Risk – Ben Carlson 3/21

Bloomberg Gadfly – The Saudi Aramco IPO Math Problem: Cash > Barrels – Liam Denning 3/15

  • “Getting to a $2 trillion valuation requires some heroic assumptions.”

Bloomberg View – Before You #DeleteFacebook, Try Taking Control – Barry Ritholtz 3/21

  • “A precept from the 1970s, said originally about television (back when TV was free), is applicable to technology and media: If you are not paying for a product, then you are the product.”

FT – Hard-headed deterrence is the antidote to Putin’s poison – Philip Stephens 3/14

FT – The low-paid workers cleaning up the worst horrors of the internet – Gillian Tett 3/16

  • “A new film (The Cleaners) tracks outsourced workers in grim little cubicles watching the depravity that exists online.”

NYT – Trump Hacked the Media Right Before Our Eyes – Ross Douthat 3/21

  • “…the business model of our news channels both assumes and heightens polarization, and that it was ripe for exploitation by a demagogue who was also a celebrity.”

NYT – Fox News Analyst Quits, Calling Network a ‘Propaganda Machine’ – Michael M. Grynbaum 3/20

NYT – Toys ‘R’ Us Case Is Test of Private Equity in Age of Amazon – Michael Corkery 3/15

Pragmatic Capitalism – Why are Money Managers Paid so Much? – Cullen Roche 3/20

  • “Salesmanship. The answer is salesmanship. I’ve been in this business long enough to know that asset management is mostly about selling the hope of superior returns in exchange for the guarantee of high fees.  The problem for the average person is that they don’t actually know enough about the asset management business to quantify whether their investment manager is worth the fees they pay. And in fairness, a big part of that is due to the fact that you have to compare yourself to a counterfactual that doesn’t exist since paying 1.6% per year to invest in a crappy active mutual fund is probably a better result than sitting in cash all the time because you’re too scared to get fully invested. Investment managers, as expensive as they are, at least keep you in the game and you need to be in the game to score any goals.”

Rational Radical – Royal commission shatters housing bubble façade – Matt Ellis 3/21

  • Commentary on the Australian Housing market (read bubble)

The Verge – China will ban people with poor ‘social credit’ from planes and trains – Sean O’Kane 3/16

  • “Starting in May, Chinese citizens who rank low on the country’s burgeoning ‘social credit’ system will be in danger of being banned from buying plane or train tickets for up to a year, according to statements recently released by the country’s National Development and Reform Commission.”
  • “With the social credit system, the Chinese government rates citizens based on things like criminal behavior and financial misdeeds, but also on what they buy, say, and do. Those with low ‘scores’ have to deal with penalties and restrictions. China has been working towards rolling out a full version of the system by 2020, but some early versions of it are already in place.”
  • “The new travel restrictions are the latest addition to this growing patchwork of social engineering, which has already imposed punishments on more than seven million citizens. And there’s a broad range when it comes to who can be flagged. Citizens who have spread ‘false information about terrorism,’ caused ‘trouble’ on flights, used expired tickets, or were caught smoking on trains could all be banned, according to Reuters.”

Wolf Street – Then Why Is Anyone STILL on Facebook? – Wolf Richter 3/20

Markets / Economy

WSJ – Daily Shot: Nomura – Valuations of FANG-type stocks 3/20

WSJ – Daily Shot: Bianco Research – Breaking Down US Household Retirement Assets 3/21

Energy

WSJ – Daily Shot: Venezuelan Crude Oil Output 2/28

Finance

FT – John Paulson takes an axe to his struggling hedge fund – Robin Wigglesworth 3/16

  • “Struggling hedge fund magnate John Paulson has taken an axe to his once-imperious firm, with several top executives departing in a ‘rightsizing’ this week after a string of heavy losses.”
  • “Mr Paulson rose to fame after the crisis, when Paulson & Co made billions of dollars from predicting the US housing crisis and astute bets on complex credit derivatives. The hedge fund firm’s assets under management hit a peak of $38bn in 2011.”
  • “But since then Paulson & Co has suffered a string of losses across most of its hedge funds, with its flagship merger arbitrage fund — Mr Paulson’s specialty — losing 18.1% and 23% in 2016 and 2017, respectively, according to the performance update of a mirror fund offered by Schroders.”
  • “Paulson & Co’s assets have now shrunk to about $9bn, of which two-thirds is Mr Paulson’s own money, and this week the hedge fund manager let a string of employees go.”
  • “Since making one of the biggest financial hauls in the industry’s history — Mr Paulson personally made almost $4bn from the financial crisis — the firm has made a series of ill-fated investments, such as on healthcare stocks, banks and gold and by betting against German bonds.”
  • “The most high-profile recent mis-step was a big bet on drug maker Valeant Pharmaceuticals. Paulson & Co is the drug maker’s single biggest shareholder, but the stock has tumbled from a high of $262.50 in 2015 to just $16.80 this week — a loss of more than 93% over the period.”
  • “Paulson & Co’s biggest public holdings, according to regulatory filings, are pharma companies Mylan, Shire, Valeant and Allergan, as well as an exchange-traded fund that tracks the price of gold. The gold ETF has lost about 32% of its value since the hedge fund’s investment peaked at $4.6bn in 2011.”

Health / Medicine

WSJ – Daily Shot: AEI – Geographic Variation in the Cost of the Opioid Crisis – Alex Brill 3/20

Other Interesting Links

FT – Wine’s Wild West: a tasting tour of Arizona – Horatia Harrod 3/16

  • “In Scottsdale’s bars and out on the state’s grassy uplands, an industry wiped out by Prohibition is being revived.”

February 6, 2018

If you were only to read one thing…

Economist – Pyramid schemes cause huge social harm in China 2/3

  • “The authorities call them ‘business cults’. Tens of millions of people are ensnared in these pyramid schemes that use cult-like techniques to brainwash their targets and bilk them out of their money.”
  • “Many countries suffer from Ponzi schemes, which typically sell financial products offering extravagant rewards. They pay old investors out of new deposits, which means their liabilities exceed their assets; when recruitment falters, the schemes collapse. China is no exception. In 2016 it closed down Ezubao, a multi-billion-dollar scam that had drawn in more than 900,000 investors. By number of victims, it was the world’s largest such fraud.”
  • “Chinese pyramid schemes commonly practice ‘multi-level marketing’ (MLM), a system whereby a salesperson earns money not just by selling a company’s goods but also from commissions on sales made by others, whom the first salesperson has recruited. People often earn more by recruiting others than from their own sales. Since 1998 China has banned the use of such methods, although it does allow some, mostly foreign, MLM companies to do business in China as ‘direct sellers’. This involves recruiting people to sell products at work or at home.”
  • “The distinguishing feature of the Chinese scams is the way they combine pyramid-type operations with cult-like brainwashing.”
  • “Many perfectly legal companies try to boost morale by getting staff to sing company songs or organizing awaydays. China’s business cults, however, combine such techniques with violence.”
  • “Business cults seem to be growing. In the first nine months of 2017 the police brought cases against almost 6,000 of them, twice as many as in the whole of 2016 and three times the average annual number in 2005-15. This was just scratching the surface. In July 2017 the police arrested 230 leaders of Shan Xin Hui, a scheme that was launched in May 2016 and had an estimated 5m investors just 15 months later. In August 2017, after the government launched its campaign against ‘diehard scams’, police in the southern port of Beihai, Guangxi province, arrested 1,200 people for defrauding victims of 1.5bn yuan ($223m). One scheme in Guangxi, known as 1040 Project, was reckoned to have fleeced its targets of 600m yuan.”
  • “The scale of the scams worries the government. Their cultish features make it even more anxious. The Communist Party worries about any social organization that it does not control. Cults are especially worrisome because religious and quasi-religious activities give their followers a focus of loyalty that competes with the party.”
  • “The authorities will find it hard to curb the scams for three main reasons. First, in order to encourage cheap loans for industry, the central bank keeps interest rates low. For years they were negative, i.e, below inflation. That built up demand among China’s savers for better returns. With gross savings equal to just under half of GDP, it is not surprising that some of that pool of money should be attracted to schemes promising remarkable dividends.”
  • “Second, it is often hard for consumers to spot frauds. In 2005 China legalized direct selling, arguing that there was a distinction between that practice and the way that Ponzi schemes operate. But Qiao Xinsheng of Zhongnan University of Economics and Law argues that the difference is often ‘blurred’ in the eyes of the public. Scammers can easily pass them themselves off as legitimate. Dodgy companies exploit government propaganda in order to pretend they have official status. For example, they may claim to be ‘new era’ companies, borrowing a catchphrase of China’s president, Xi Jinping.”
  • “Third, argues Mr Li, business cults manipulate traditional attachments to kin. Companies in America often appeal to individual ambition, promising to show investors how to make money for themselves. Those in China offer to help the family, or a wider group. Shan Xin Hui literally means Kind Heart Exchange. It purported to be a charity, offering higher returns to poor investors than to rich ones. (In reality everyone got scammed.) Business cults rely on one family member to recruit another, and upon the obligation that relatives feel to trust each other. This helps explain why investors who have lost life savings continue to support the companies that defrauded them.”

Worthy Insights / Opinion Pieces / Advice

Economist – Why sub-zero interest rates are neither unfair nor unnatural – Free exchange 2/3

NYT – Early Facebook and Google Employees Form Coalition to Fight What They Built – Nellie Bowles 2/4

NYT – Amazon Asked for Patience. Remarkably, Wall Street Complied. – Michael Corkery and Nick Wingfield 2/4

  • “In a business environment that demands, and rewards, quarterly profits and short-term strategic thinking, Amazon showed extraordinary resolve in focusing on long-term goals, somehow persuading investors to go along.”
  • “Over its first decade in existence, including long stretches where it consistently reported losses, Amazon enjoyed a luxury afforded few companies: leeway.”
  • “Amazon has reported an annual profit in only 13 of the 21 years that it has operated as a publicly traded company, according to FactSet, a financial data firm.”
  • “And its profit margins, already low by some measures, have fluctuated from year to year — hardly moving in the straight upward line that Wall Street usually likes to see.”
  • “Yet investors have rewarded Amazon for plowing its profits back into growing its businesses, whether in online retail, cloud computing or, most recently, in grocery stores, with the acquisition of Whole Foods Market.”

Vanity Fair – Twitter’s Dirty Secret – Nick Bilton 2/2

  • “Twitter knew about all its fake followers, and always has – eliminating just enough bots to make it seem like they care, but not enough that it would affect the perceived number of active users on the platform.”

WSJ – China Shows How It Will Fight a Trade War – Nathaniel Taplin 2/5

  • “U.S. agriculture will be in China’s crosshairs if a trade war erupts.”

Real Estate

The Real Deal – Everything must go: Chinese investors sell off their foreign RE holdings – Erin Hudson 2/3

WSJ – Daily Shot: Bankrate.com US 30-Yr Fixed Rate Mortgage Rate 2/2

WSJ – Daily Shot: FRED – Home Equity Loans 2/5

  • “Home equity loan balances continue to slip as Americans remain uneasy tapping this form of credit.”

Finance

Reuters – JGBs pare losses as Bank of Japan offers “unlimited” buying to curb rising yields – Hideyuki Sano 2/1

WSJ – What Markets Are Really Telling Us About Higher Rates – Richard Barley 2/5

  • “Companies are paying slightly more to borrow, but higher risk-free yields haven’t fed through fully. This is significant.”
  • “…the ECB, is still at play. The ECB’s bond-buying actions have a twist: in the first four weeks of January, corporate purchases as a share of government purchases stood at 27%, versus 11.5% when the program was running full-tilt at €80 billion a month, according to Deutsche Bank . In other words, corporates are still getting decent support from ECB purchases.”
  • “One snag is that corporate-bond spreads are already so tight there is little room for error. In Europe, the investment-grade ICE BofAML corporate index yield premium over government bonds is just 0.74 percentage points, its lowest level since August 2007.”
  • “Investors should watch closely if spreads do widen significantly. It would mean either companies are making riskier, top-of-market types of bets or investors are getting concerned about growth and underlying cash flows. For now, the message from higher interest rates is, don’t sweat it.”

Cryptocurrency

FT – ‘Crypto crazy’ Japanese mystified by virtual heist – Leo Lewis and Robin Harding 2/2

  • “The $500m theft of XEM coins by an anonymous hacker is threatening the country’s faith in cryptocurrencies.”

FT – Bitcoin investors find tax demands are not virtual – Ben McLannahan and Vanessa Houlder 2/4

  • “Cryptocurrency traders in many jurisdictions may be liable for hefty capital gains tax bills.”

NYT – Making a Crypto Utopia in Puerto Rico – Nellie Bowles 2/2

Reuters – Bitcoin extends slide, falls below $7,000 – Gertrude Chavez-Dreyfuss 2/5

  • “Digital currency bitcoin BTC=BTSP fell more than 15% on Monday to a nearly three-month low amid a slew of concerns ranging from a global regulatory clampdown to a ban on using credit cards to buy bitcoin by British and U.S. banks.”
  • “On the Luxembourg-based Bitstamp exchange, bitcoin fell as low as $6,853.53 in early afternoon trading in New York. That marked a fall of more than half from a peak of almost $20,000 hit in December.”
  • “Bitcoin has fallen in six of the last eight trading session.”
  • “The currency, which surged more than 1,300% last year, has lost about half its value so far in 2018, as more governments and banks signal their intention for a regulatory crackdown. Last week bitcoin suffered its worst weekly performance since 2013.”

Tech

NYT – Early Facebook and Google Employees Form Coalition to Fight What They Built – Nellie Bowles 2/4

Health / Medicine

Economist – A revolution in health care is coming – Leaders 2/1

Asia – excluding China and Japan

WSJ – Samsung Heir Lee Jae-yong Freed From Prison by Appeals Court – Eun-Young Jeong 2/5

China

The Sydney Morning Herald – China said to mull legal gambling on Hainan – Keith Zhai and Daniela Wei 2/4

India

Bloomberg Businessweek – India’s Phantom Flats Leave Homebuyers’ Dreams in Tatters – Pooja Thakur Mahrotri, Upmanyu Trivedi, and Dhwani Pandya 1/30

  • “Across the metropolitan area that surrounds New Delhi, a string of real-estate developers including Unitech, Jaypee Infratech Ltd. and Amrapali Group have been dragged to court by irate homeowners who shelled out payments for apartments that have yet to be completed. Many of these firms took money from a stream of buyers. As sales slumped and the once red-hot market cooled, their businesses unraveled — leaving them grappling with debt.”
  • “The fallouts from the shakeup in the $126 billion property market are reverberating across companies, markets and the broader economy. Unitech, once India’s largest developer, has plunged to a fraction of its previous valuation. Jaypee is in insolvency court. State-owned banks — the lifeblood of the economy — are grappling with a pile up of bad loans from the industry. Indian families, who have long poured their life savings into real estate, are now pulling back.”
  • “Indian real-estate businesses expanded as long as firm were able to draw new buyers for planned projects. But as the economy slowed and demand softened, many firms were left short of cash and struggling to manage their debt. The downturn only worsened last year after the government tightened regulations to protect homebuyers and separately introduced a new services tax across all industries. India’s residential sector appears to have shrunk to a fraction of its size in less than a decade, according to Shishir Baijal, managing director of Knight Frank India.”
  • “Prices dropped 3% on average across the top six cities, according to Knight Frank, with some declining as much as 15% after accounting for developer discounts. And in the capital region, last year’s prices were 9% below their 2015 peak. The outlook remains bleak.”
  • “The property developers are adding to a pile-up of bad loans in India’s banking sector, which is already struggling to manage a spike in stressed assets across several industries.”
  • “India’s government has stepped in to regulate the real-estate industry with new laws, including one that forces developers to use at least 70% of sale proceeds to complete residential projects, rather than funnel money to different jobs. Other measures prevent them from pre-selling apartments before all building approvals are obtained.”
  • “The pain hasn’t been restricted to the North. India’s financial capital, Mumbai, last year witnessed a decline in residential property prices for the first time in a decade. New residential launches across eight Indian cities dropped 41% last year and were down 78% from their peak in 2010, Knight Frank data show.”

South America

Bloomberg Businessweek – Venezuelan Pirates Rule the Most Lawless Market on Earth – Jonathan Franklin 1/30

Economist – China moves into Latin America – Bello 2/1

  • “The Asian giant is taking advantage of other powers’ lack of interest in the region.”

January 26, 2018

Perspective

statista – Is Airbnb Really Cheaper Than A Hotel Room? – Niall McCarthy 1/24

Visual Capitalist: TitleMax – A Decade of Grocery Prices for 30 Common Items – Jeff Desjardins 1/24

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Dalio Says Bonds Face Biggest Bear Market in Almost 40 Years – Nishant Kumar and Erik Schatzker 1/24

CNNMoney – Here’s how much money Americans think you need to be wealthy in 10 major US cities – Kathleen Elkins 1/24

Economist – Why armed intervention is Venezuela is a bad idea – Bello 1/18

NYT – Apple Can’t Resist Playing by China’s Rules – Chen Guangcheng 1/23

  • This is in regard to providing its users’ (in China) data to Big Brother.

WSJ – GE Looks Ugly in Its Underwear – Spencer Jakab 1/24

  • “GE’s new transparency is welcome, but a focus on cash shows the company is probably no bargain even after its swoon.”

Markets / Economy

WSJ – Daily Shot: Central Bank Net Asset Purchases 1/25

WSJ – A Shortage of Trucks Is Forcing Companies to Cut Shipments or Pay Up – Jennifer Smith 1/25

Cryptocurrency

CNBC – Ratings firm issues first grades on cryptocurrencies, sparking outrage online and a cyberattack – Evelyn Cheng 1/24

WSJ – Hedge Funds Grow Wary of Cryptocurrency Mania – Gregor Stuart Hunter and Laurence Fletcher 1/24

Tech

FT – Germany threatens curbs on Facebook’s data use – Guy Chazan 1/24

  • “Antitrust investigation puts social network’s business model under scrutiny.”

Environment / Science

Economist – How China cut its air pollution 1/25

  • “The biggest polluters are state-owned, so government efforts to reduce concentrations of the smallest polluting particles have been effective.”

Health / Medicine

Economist – Obesity: not just a rich-world problem 1/24

  • YouTube video

Shipping

WSJ – A Brief History of Shipping – Costas Paris, Thomas Di Fonzo, and Liliana Llamas 1/24

  • Video

Britain

FT – ‘Sixty per cent of older buy-to-let loans will become loss making’ – James Pickford 1/24

  • “Tax relief changes will have a huge impact on landlords’ mortgages, report finds.”

China

Economist – China is getting tougher on Taiwan – Banyan 1/18

South America

WSJ – Daily Shot: Buenos Aires Stock Exchange Merval Index 1/24

  • Reforms in Argentina have been working.

January 24, 2018

Perspective

A Wealth of Common Sense: 180 Years of Stock Market Drawdowns – Ben Carlson 1/22

  • “A reader sent me a link to a video of a presentation given by former hedge fund manager and quant Robert Frey (whose firm was actually bought out by legendary hedge fund manager Jim Simons in the 90s) called 180 Years of Market Drawdowns.”
  • “Frey discusses the many changes that have taken place in the stock market over the years — the creation of the Fed, monetary policy, fiscal policy, the end of the gold standard, tax rates, valuations, the industry make-up of the markets and a number of other things.”
  • “But there has been one constant going back all the way to the early 1800s — risk. More specifically, drawdowns or losses. Frey presented a couple of different charts on the market to make his point. First, here’s the long-term growth of the stock market with losses shaded in red:”
  • “Now here are those losses visualized in another way without the benefit of a log scale chart:”
  • “Obviously, the crash during the Great Depression stands out here, but look at how consistent losses have been over each and every decade or economic environment. Losses are really the one constant across all cycles.”
  • “Frey says in his talk that in stocks, ‘You’re usually in a drawdown state’.”
  • “Stocks don’t make new highs every single day, so most of the time you’re going to be underwater from your portfolio’s high water mark. This means there are plenty of chances to be in a state of regret when investing in stocks.”
  • “This makes sense when you consider that stocks are positive just a little over half the time when looking at returns on a daily basis, but it can be difficult to wrap your head around this fact.”
  • “I used monthly total returns on stocks for these numbers and found that an investor would have been down from a prior peak over 70% of the time. The majority of your time invested in stocks could be spent thinking about how you coulda, shoulda, woulda sold at that previous high price (which of course gets taken out to the upside eventually).”
  • “Over the last 90 years or so the market have been in a bear market almost one-quarter of the time. Half the time you’re down 5% or worse. It’s difficult to appreciate this fact when looking at a long-term log scale stock chart that seems to only go up and to the right.”
  • “This is why stocks are constantly playing mind games with us. They generally go up but not every day, week, month or year.”
  • “No one can predict what the future returns will be in the market. No one knows what the future holds for economic growth. And we certainly can’t predict how investors will decide to price corporate cash flows at any given point in time out into the future.”
  • “But predicting future risk is fairly easy — markets will continue to fluctuate and experience losses on a regular basis. As an investor in stocks you will spend a lot of time second-guessing yourself because your portfolio has fallen in value from a previously seen higher level.”
  • “Market losses are the one constant that don’t change over time — get used to it.”

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – A Goon Squad of Charlatans, False Prophets and Mercenaries – Anthony Isola 1/23

NYT – What if a Healthier Facebook Is Just … Instagram? – Kevin Rose 1/22

Markets / Economy

FT – No stealth taper from Bank of Japan – Robin Harding 1/23

  • “BoJ governor says bank has not started thinking about exit from monetary easing.”

FT – High-spirits as Bacardi swallows Patron tequila for $5.1bn – Jude Webber 1/22

Energy

FT – Trump’s 30% tariffs on solar imports anger global sector – Ed Crooks 1/23

  • “The Solar Energy Industries Association said it expected the tariffs to cost about 23,000 jobs, based on modeling by IHS Markit, the research group. That is about 9% of the estimated US solar workforce of about 260,000.”

FT – Trump raises temperature with new tariffs in China trade battle – Shawn Donnan and Ed Crooks 1/23

  • Beijing and Seoul are not happy.

Finance

FT – Private equity: flood of cash triggers buyout bubble fears – Javier Espinoza 1/22

  • “The buyout sector is on a tear as investors hunt for higher returns. But as competition and valuations increase, some fear a dangerous new cycle.”

Cryptocurrency

Bloomberg Businessweek – Startups Are Raising Billions Using Initial Coin Offerings – Yuji Nakamura 1/22

FT – The $3bn ICO question – Don Weinland 1/23

  • “Where has the $3bn raised in ‘initial coin offerings’ over the last year and a half actually gone?”
  • “A group of academics led by experts from the University of Luxembourg and the European Banking Institute, have been pondering that very question for months. And what they found out could alarm investors who have been buying into companies using an instant digital ledger (aka blockchain) and cryptocurrencies instead of investing on the stock markets with hard cash.”
  • “On the crucial question of who is ‘behind’ an ICO, the researchers found that 21% of the 300 ICO deals in their database ‘failed to convey any information at all about the issuing entity’. About 52% of the issuers did not provide valid postal addresses.” 
  • “The authors stress that they have only looked at 300 ICOs, and therefore their findings should not be taken as ‘any more than very broadly indicative, given that the total universe of ICOs’ is more than 1,000.”
  • “Regulators around the world have found ICOs’ rise troubling, especially since the rewards promised by ICO issuers are often obtuse and can range from use of their product (in exchange for the tokens investors buy) to a share in profits. In some cases, investors hold on to the tokens hoping for a Bitcoinesque rise in value.” 
  • “Despite the high level of regulatory uncertainty, most issuers have so far done little to make things clearer for buyers.”
  • “Nearly 83% of the ICOs give no regulatory status for the offerings, the report says. That means the buyer does not know under what laws the ICO is regulated, or what their legal rights are after making a purchase. The researchers could not determine in what jurisdiction 93 of the ICOs, were based.”

WSJ – The Programmer at the Center of a $100 Billion Crypto Storm – Paul Vigna and Jim Oberman 1/23

  • “How a top source of bitcoin data contributed to a sudden plunge in digital currencies.”

WSJ – Daily Shot: Bitcoin 1/22

Tech

FT – WeChat launches alternative to Apple App Store – Yuan Yang 1/9

  • “WeChat, China’s most frequently used mobile app, today started offering ‘miniprograms’ within the app from third-party developers. Users can now book a shared ride with Didi, order a gift from JD.com, or rent a bicycle from Mobike — and use over 100 other ‘apps within the app’ — without leaving the WeChat platform.”
  • Note that WeChat now has over 580,000 apps within its universe – up from 100 when it started.
  • “The new miniprogram function makes WeChat, or Weixin in Chinese, the first big platform to provide an alternative to the App Store from Apple, which has tightly controlled what programs can be installed on an iOS device.”
  • “The miniprograms can be used almost instantly and provide stripped-down functions compared to the original full apps.”
  • “Rather than the 30% cut that Apple takes from App Store purchases, developers have not been asked to give any cut to WeChat, according to Matthew Brennan of the tech consultancy ChinaChannel.”
  • “In addition, miniprograms are ‘device-neutral’, meaning they will run in exactly the same way on Android and iOS.”
  • “WeChat’s captive audience makes it a more plausible candidate to crack open in-app app distribution. The platform accounts for 35% of all time spent on mobiles in China, according to QuestMobile, the tech research lab. More than 750m people log into WeChat daily, and half of them use it for more than an hour and a half each day.”
  • “’Tencent is winning the mobile war. Miniprograms will come to have a material impact on Apple’s App Store revenues; around 15% of China’s mobile market are iOS users. Tencent is Apple’s number one source of income from the App Store globally,’ said Mr Brennan.”

Health / Medicine

WSJ – Why Our Mental Health Takes a Village – Elizabeth Bernstein 1/22

  • “Different people can help us manage different moods. Psychologists explain how to build a portfolio of supportive allies.”

China

NYT – China’s Housing Market Is Like a Casino. Can a Property Tax Tame It? – Keith Bradsher 1/22

  • “Now the Chinese government is considering adopting something that, while familiar to homeowners in the United States and elsewhere, could dramatically reshape the world’s second-largest economy: a property tax.”
  • “Living in a place without property taxes may sound appealing, but a growing number of experts and policymakers in China say the absence of one has helped destabilize a vast and crucial part of the Chinese economy.”
  • “Many investors snap up homes — in China, they are mostly apartments — hoping to ride a price surge. In the biggest cities, property prices on average have at least doubled over the past eight years. But vast numbers of apartments in many cities lie empty, either because the buyers have no intention of moving in or renting out, or because speculators built homes that nobody wants.”
  • “A property tax could have a profound impact on a crucial part of the nation’s economy. Real estate makes up nearly three-quarters of the assets of Chinese households, according to the Survey and Research Center for China Household Finance, an academic institute in Chengdu, in southwestern China. That compares with a bit more than one-third for United States households. Roughly a fifth to a quarter of China’s annual economic output comes from property and related industries, like furniture making.”
  • “But housing is also the source of some of the country’s biggest booms and busts. Local investors — many of whom do not trust the country’s stock markets and are forbidden by Beijing to move most of their wealth abroad — simply throw money at housing. Real estate broker fees, often as low as 1%, are a small fraction of the typical 6% in the United States. Mortgage lending has leapt over the past two years, adding to the potential for financial turbulence.”

January 19, 2018

Perspective

Freedom House – Freedom in the World 2018 – Democracy in Crisis 1/17

WSJ – Daily Shot: Maps on the Web – Global Fertility Rates 1/17

Worthy Insights / Opinion Pieces / Advice

The Atlantic – Raising a Social-Media Star – Taylor Lorenz 1/17

  • “The parents of teen internet celebrities get a crash course in a new kind of fame while trying to maintain boundaries for their newly rich and powerful children.”

Washington Monthly – How to Fix Facebook – Before It Fixes Us – Roger McNamee 1/7

  • “An early investor explains why the social media platform’s business model is such a threat – and what to do about it.”

WP – In Venezuela, money has stopped working – Francisco Toro 1/17

  • “Hyperinflation is disorienting. Five or six years ago, the 500 bolivars on the floor would’ve bought you a meal for two with wine at the best restaurant in Caracas. As late as early last year, they would’ve bought you at least a cup of coffee. At the end of 2016, they still bought you a cup of café con leche, at least. Today, they buy you essentially nothing … well, except for 132 gallons of the world’s most extravagantly subsidized gasoline.”
  • “Prices are now rising more than 80 percent per month, according to the opposition-led National Assembly’s Finance Committee. (The government itself stopped publishing official inflation data long ago.) At that rate, prices double every 34 days or so. Salaries lag far behind, leaving more and more of the country to face outright hunger. Thus, the looting.”
  • “Rule No. 1 of surviving hyperinflation is simple: Get rid of your money. Given the speed with which money is shedding its value, holding on to it means you’re losing out. The second you’re paid you run out as fast as you can to buy something – anything – while you can still afford it. It’s better to hold almost any asset than money, because assets hold their value and money doesn’t.”
  • “I think this is what’s so hard to wrap your mind around if you’ve never experienced hyperinflation. It sounds like it’s about prices rising fast, but it really isn’t. It’s about money breaking down. Under hyperinflation, money no longer works. It doesn’t store value. It just stops doing the basic things people expect money to do. It stops being something you want to have and turns into something you’ll do anything to avoid having: something so worthless you won’t even bend down and scoop it up off the floor while you’re looting.”

Markets / Economy

Bloomberg – Beware the $500 Billion Bond Exodus – Liz McCormick and Molly Smith 1/17

  • “For years, the likes of Apple Inc. and Microsoft Corp. have stashed billions of dollars offshore to slash their U.S. tax bills. Now, the tax-code rewrite could throw that into reverse.”
  • “The implications for the financial markets are huge. The great on-shoring could prompt multinationals — which have parked much of their overseas profits in Treasuries and U.S. investment-grade corporate debt — to lighten up on bonds and use the money to goose their stock prices. Think buybacks and dividends.”
  • “It’s hard to say how much money the companies might repatriate, but the size of their overseas stash is staggering. An estimated $3.1 trillion of corporate cash is now held offshore. Led by the tech giants, a handful of the biggest companies sit on over a half-trillion dollars in U.S. securities. In other words, they dwarf most mutual funds and hedge funds.”
  • “The $14.5 trillion Treasury market, of course, can absorb the selling pressure of even the largest corporate holders. There’s little to suggest multinationals will immediately liquidate their investments. Many analysts say companies, rather than selling, could just let their holdings gradually mature.”
  • “Yet even at the margin, a drop-off in demand could add to the government’s burgeoning funding costs. Not only are interest rates on the rise, but the most sweeping tax cuts in a generation, which could end up mostly benefiting shareholders, risk leaving the government with trillion-dollar shortfalls for years to come — an expense that taxpayers would ultimately have to bear.”
  • “And since Treasury yields are the global lending benchmark, any upswing could also ripple through the real economy in the form of higher rates on everything from credit cards to mortgages. Since September, 10-year yields have climbed over a half-percentage point, hitting a high of 2.595% this month.”
  • “Of course, it’s important to understand that for most multinationals, offshore cash is really only ‘offshore’ for accounting purposes. Under the old tax system, earnings attributed to foreign subsidiaries, often based in jurisdictions with low taxes or lax regulations like Ireland or Luxembourg, could be repatriated and remain earmarked as ‘held overseas’ — so long as it was stashed in U.S. securities. Apple, for example, manages its hoard from Reno, Nevada, where its internal investment firm, Braeburn Capital, is located.”
  • “’The term overseas cash can be a bit of a misnomer, as it doesn’t have to be overseas and in fact a lot of it isn’t,’ said Michael Cahill, a strategist at Goldman Sachs Group Inc. That should limit any appreciation in the dollar related to repatriation over the longer term.”
  • “Big multinationals have good reason to bide their time, according to Richard Lane, a senior analyst at Moody’s Investors Service. Because their debt investments are so extensive, companies could end up inflicting losses on themselves with any large-scale selling.”
  • “’I don’t think there will be a rush to the door by these companies to sell this debt and causing increasing yields and lower pricing,’ said Lane.”

WSJ – Apple Plans to Pay $38 Billion in Repatriation Taxes – Imani Moise 1/17

  • “It also said Wednesday it would spend more than $30 billion to create 20,000 jobs and open a new campus at a U.S. location to be announced later this year.”

Real Estate

WSJ – A Slowdown Is in Store for the Self-Storage Business – Peter Grant 1/16

  • “A flood of new supply is crimping growth in the self-storage sector.”

Finance

Bloomberg Gadfly – Discount Brokers Act Like Wall Street on Fee Conflicts – Nir Kalssar 1/16

  • “One sign of a frenzied stock market rally is a sharp outperformance of retail brokers.” – WSJ Daily Shot 1/18

Bloomberg – Venture Capital Investing Hits Highest Since Dot-Com Boom – Julie Verhage 1/8

Insurance

Economist – Natural disasters made 2017 a year of record insurance losses 1/11

  • “According to figures released on January 4th by Munich Re, a reinsurer, global, inflation-adjusted insured catastrophe losses reached an all-time high of $135bn in 2017. Total losses (including uninsured ones) reached $330bn, second only to losses of $354bn in 2011.”
  • “A large portion of the losses in 2011 was caused by one catastrophe: the earthquake and tsunami in Japan. Losses in 2017 were largely traceable to extreme weather. Fully 97% were weather-related, well above the average since 1980 of 85%.”
  • “Last year’s disasters were particularly concentrated in North America (including the Caribbean), with 83% of global losses; half of those were in America alone, hitting that country’s insurers particularly hard. Fitch, a ratings agency, expects the ‘combined ratio’ for American property-and-casualty insurers to rise from 100.7% in 2016, meaning costs and claim payouts just exceeded premium revenue, to 104.4% in 2017. That implies a substantial underwriting loss for the industry. Even Warren Buffett’s Berkshire Hathaway looks poised for its first full-year underwriting loss in 15 years. It took a $3bn hit from the three hurricanes and an earthquake in Mexico.”
  • “For all the gloom, the 2017 losses were also proof of the resilience of the reinsurance industry. Insurers have long spread catastrophe risk by taking out reinsurance policies. This time, reinsurers had such ample capital buffers that they are expected to suffer only a small dent, of around 5-7% of capital.”

WSJ – Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice – Leslie Scism 1/17

  • “Battered by losses, long-term-care insurers hit policyholders with steep rate increases that many never saw coming.”
  • “Only a dozen or so insurers still sell the coverage, down from more than 100. General Electric Co. said Tuesday it would take a pretax charge of $9.5 billion, mostly because of long-term-care policies sold in the 1980s and 1990s. Since 2007, other companies have taken $10.5 billion in pretax earnings charges to boost reserves for future claims, according to analysts at investment bank Evercore ISI.”
  • “When sales of long-term-care insurance were ramping up in the 1980s and 1990s, companies thought they had found the perfect product for middle-class families—and that’s how they pitched it.”
  • “The annual premium was designed to hold steady until a claim was filed and premiums then halted, though the rates weren’t guaranteed. Many policies paid out benefits for life.”
  • “Families flocked to what seemed like affordable peace of mind that would save them from draining their lifetime savings, leaning on children or enrolling in the federal-state Medicaid program for the poor.”
  • “Long-term care often costs more than $100,000 a year a person, financial advisers say. The nationwide total exceeds $200 billion, according to analysts at LTCG, a third-party administrator of long-term-care policies.”
  • “Almost every insurer in the business badly underestimated how many claims would be filed and how long people would draw payments before dying. People are living and keeping their policies much longer than expected.”
  • “After the financial crisis hit, nine years of ultralow interest rates also left insurers with far lower investment returns than they needed to pay those claims.”

Cryptocurrency

Economist – Bitcoin is no longer the only game in crypto-currency town 1/13

  • “A new crypto-currency is born almost daily, often through an ‘initial coin offering’ (ICO), a form of online crowdfunding. CoinMarketCap, a website, lists about 1,400 digital coins or tokens, including PutinCoin, Sexcoin and InsaneCoin (worth $7m). Most are no more than curiosities, but by January 10th, around 40 had a market capitalization of more than $1bn.”
  • “Might any of these one day replace bitcoin as crypto-land reserve currency, something insiders call the ‘flippening‘? Given bitcoin’s governance problems (another ‘fork’, or split, may be in the offing) and limited capacity (a transaction now costs nearly $30, on average, in fees), this cannot be excluded. But the others have problems, too. Ethereum’s user fees have soared and the system has again hit technical snags. As for Ripple, some question the extent to which XRPs are actually used.”

WSJ – Daily Shot: Ripple 1/17

WSJ – Daily Shot: Capital Economics – Transactions Per Second 1/17

Tech

Forbes – Which Online Platforms Do Americans Want Killed Off? – Niall McCarthy 1/10

China

Economist – How China won the battle of the yuan 1/11

Japan

Economist – A small Japanese city shrinks with dignity 1/11

  • Authorities in the Japanese city of Toyama are encouraging migration to its city center through incentives. The goal being to reduce the cost of maintaining lightly-used infrastructure as its population declines.
  • “About 30% of Toyama’s 418,000 residents are 65 or older, an even higher proportion than in Japan as a whole, where it is 27%. By 2025, the proportion in Toyama is projected to be 32%. In addition to greying, the population is also declining. The city had 421,000 people in 2005; by 2025, it will have 390,000.”
  • “As the population ages and shrinks, the services residents need have changed. The Kadokawa Centre, for example, is built on the site of a primary school that closed in 2004. But overhauling public services is costly, and the declining number of people of working age means there is ever less tax revenue to help pay for the shift. To remain solvent, the city has decided to shrink not just in population, but in size, concentrating residents and services in the center.”
  • “Most of Japan is in a similar quandary. About 400 schools shut every year; some are being converted into retirement homes. In 2016 there were 300,000 more deaths than births. If Japan continues on its present course, it will have shed nearly a third of its population (and four out of every ten workers) by … 2065.”

Economist – Why modern Japan’s founding moment still divides a nation – Banyan 1/11

  • “The Meiji restoration initiated not just modernization, but also militarism.”

South America

CNN Money – You can’t get $1 out of the bank in Venezuela. I tried. – Stefano Pozzebon 1/17

Reuters – Wave of looting shutters stores, spreads fear in Venezuela – Alexandra Ulmer and Anggy Polanco 1/17

December 13, 2017

Perspective

Bloomberg Businessweek – The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market – Olga Kharif 12/8

  • “Among the coins people invest in, bitcoin has the least concentrated ownership, says Spencer Bogart, managing director and head of research at Blockchain Capital. The top 100 bitcoin addresses control 17.3% of all the issued currency, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. With ether, a rival to bitcoin, the top 100 addresses control 40% of the supply, and with coins such as Gnosis, Qtum, and Storj, top holders control more than 90%. Many large owners are part of the teams running these projects.”

WEF – This is every US state’s biggest trading partner – Andy Kiersz 11/16

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – What Happens When the Government Uses Facebook as a Weapon? – Lauren Etter 12/7

  • “Internet.org was just one part of a decade-long campaign of global expansion for Facebook. In countries such as the Philippines, the efforts have been so successful that the company is able to tout to its advertisers that its network is, for many people, the only version of the internet they know. Repressive governments originally treated Facebook, and all social media, with suspicion—they saw how it could serve as a locus for dissidents, as it had in the Arab Spring in 2011. But authoritarian regimes are now embracing social media, shaping the platforms into a tool to wage war against a wide range of opponents—opposition parties, human-rights activists, minority populations, journalists.”
  • Maria Ressa, co-founder of the country’s leading online news site “recalled that she started as a journalist in the Philippines in 1986, the year of the People Power Revolution, an uprising that ultimately led to the departure of Ferdinand Marcos and the move from authoritarian rule to democracy. Now she’s worried that the pendulum is swinging back and that Facebook is hastening the trend. ‘They haven’t done anything to deal with the fundamental problem, which is they’re allowing lies to be treated the same way as truth and spreading it,’ she says. ‘Either they’re negligent or they’re complicit in state-sponsored hate’.”

Bloomberg Businessweek – Millions Are Hounded for Debt They Don’t Owe. One Victim Fought Back, With a Vengeance – Zeke Faux 12/6

  • “The concept is centuries old: Inmates of a New York debtors’ prison joked about it as early as 1800, in a newspaper they published called Forlorn Hope. But systematic schemes to collect on fake debts started only about five years ago. It begins when someone scoops up troves of personal information that are available cheaply online—old loan applications, long-expired obligations, data from hacked accounts—and reformats it to look like a list of debts. Then they make deals with unscrupulous collectors who will demand repayment of the fictitious bills. Their targets are often poor and likely to already be getting confusing calls about other loans. The harassment usually doesn’t work, but some marks are convinced that because the collectors know so much, the debt must be real.”
  • “Americans are currently late on more than $600 billion in bills, according to Federal Reserve research, and almost one person in 10 has a debt in collectors’ hands. The agencies recoup what they can and sell the rest down-market, so that iffier and iffier debt is bought by shadier and shadier individuals. Deception is common. Scammers often sell the same portfolios of debt, called ‘paper,’ to several collection agencies at once, so a legitimate IOU gains illegitimate clones. Some inflate balances, a practice known as ‘overbiffing.’ Others create ‘redo’ lists—people who’ve settled their debt, but will be harassed again anyway. These rosters are actually more valuable, because the targets have proved willing to part with money over the phone. And then there are those who invent debts out of whole cloth.”

The Guardian – Former Facebook executive: social media is ripping society apart – Julia Carrie Wong 12/11

Markets / Economy

WSJ – Daily Shot: Bloomberg – Prime-age male labor-force participation 12/11

Real Estate

FT – New Zealand looks to ban foreigners from buying houses – Jamie Smyth 12/9

FT – Unibail-Rodamco sees €100m annual synergies in $24.7bn Westfield takeover – Jamie Smyth 12/11

FT – Hong Kong investors go defensive in $3bn property auction – Henny Sender 12/11

Finance

WSJ – Daily Shot: Bitcoin 12/11

  • “Bitcoin’s volatility is on the rise as the cryptocurrency hit new highs.”

Health / Medicine

NYT – A Nasty, Nafta-Related Surprise: Mexico’s Soaring Obesity – Andrew Jacobs and Matt Richtel 12/11

  • “Mexico began lifting tariffs and allowing more foreign investment in the 1980s, a transition to free trade given an exclamation point in 1994, when Mexico, the United States and Canada enacted the North American Free Trade Agreement. Opponents in Mexico warned that the country would lose its cultural and economic independence.”
  • “But few critics predicted it would transform the Mexican diet and food ecosystem to increasingly mirror those of the United States. In 1980, 7% of Mexicans were obese, a figure that tripled to 20.3% by 2016, according to the Institute for Health Metrics and Evaluation at the University of Washington. Diabetes is now Mexico’s top killer, claiming 80,000 lives a year, the World Health Organization has reported.”

China

WSJ – China’s Clean Energy Future Has a $1.2 Trillion Problem – Nathaniel Taplin 12/11

  • “China’s enormous coal-power debt overhang limits its ability to shift rapidly to cleaner fuels.”

Europe

WEF – Which countries feel they’ve benefitted from the EU? – Niall McCarthy 11/6

Other Interesting Links

Bloomberg Businessweek – This Crowdfunding Site Runs on Hate – Adam Popescu 12/4

November 6, 2017

If you were only to read one thing…

FT – Venezuela debt restructuring could unleash crisis – John Paul Rathbone 11/3

  • “President Nicolás Maduro’s decision to restructure Venezuela’s $89bn of debt is likely to unleash a debt crisis of a size not suffered in Latin America since Argentina’s massive 2001 default, and a bond restructuring that lawyers say would be the world’s most complex yet.”
  • “In a televised address on Thursday, Mr Maduro said state oil company PDVSA would make one more $1.1bn debt payment on a bond due in 2017 and then restructure its remaining obligations with banks and investors.”
  • “Economists have long-predicted Venezuela would eventually make such a move as funds drained from the socialist government’s vaults to pay bondholders, forcing an 80% cutback in imports over the past five years. Indeed, Venezuelan bonds already trade at default prices, and foreign reserves of $10bn are near 20-year lows.”
  • “Yet despite a recession worse than the Great Depression, hyperinflation and falling oil production, debt restructuring was a move Mr Maduro long-rejected. In large part, that was because it could lead to default, and creditors would then seize Venezuelan oil shipments and foreign assets, including PDVSA’S US refinery, Citgo. “
  • “As a result, the $7bn that Venezuela might save in 2018 from not servicing its debts would be offset by lost oil exports, and there would be no net gain.”
  • “That calculus still holds. Indeed, a desire to remain on good terms with creditors may explain Mr Maduro’s apparently nonsensical decision to restructure debts after making a particularly large bond payment this week — more than $1bn that instead could be used to import desperately-needed medicine and food. (A more cynical rumor is that the money went to government insiders who own the paid 2017 bond.)”
  • “Venezuelan imports are forecast to be just $13bn this year. Against that, the country has $63bn of traded debt, owes another $5bn to international lenders such as InterAmerican Development Bank, $17bn to China and another $3bn to Russia.
  • One reason why Mr Maduro may feel he can get away with it is that he feels empowered politically at home.”
  • “Although Mr Maduro may feel in control domestically, abroad is another matter. Any debt restructuring is complicated by US sanctions imposed in August, which block US-regulated institutions and investors from buying new Venezuelan bonds, as would be issued in a typical debt restructuring.”
  • “Adding to the difficulties, vice-president Tareck El-Aissami, who will lead the process, has been sanctioned by the US for alleged drug-trafficking and money laundering.”
  • “Furthermore, even if Venezuela seeks to get around the US sanctions by issuing restructured bonds in other currencies, authority for that would come from the Constituent Assembly — which Canada, the EU, the US, and 11 of Latin America’s biggest countries, including Brazil and Mexico, do not recognize.”
  • “Renowned economists such as Ricardo Hausmann have long said Venezuela should restructure its debt, as they consider paying bondholders while Venezuelans go hungry to be immoral. But they recommend it as part of a broader economic restructuring backed by the International Monetary Fund.”
  • “Indeed, the IMF has already crunched the numbers on the amount of help — upwards of $30bn annually — that could accompany such an approach. But international institutions will not extend such help to a government that has become a by-word in corruption and economic mismanagement — and is now near-bankrupt despite the world’s largest energy reserves.”
  • “Government insiders stole $300bn of the $1tn windfall that Venezuela received during the oil price boom of the 2000s, according to disaffected former ministers. Meanwhile, a socialist government that claims to help the poor presides over a country where 82% of households live in poverty — twice as high as when it came to power in 1999.”

Perspective

Business Insider – Tens of millions of Americans are being left out of the economic recovery – and it’s easier than ever to see who they are – Pedro Nicolaci da Costa 10/18

  • “A new online interactive tool helps Americans visualize just how economically divided the nation has become — and it’s not a pretty picture.”
  • “The country’s deep income and wealth inequalities, which match levels not seen since before the Great Depression, have been widely reported.”
  • “But the Distressed Communities Index, published by a Washington-based nonprofit called Economic Innovation Group (EIG), adds some startling new detail and localized specificity to the widening and persistent gap between the country’s rich and poor, the worst of any ‘advanced’ economy.”
  • “The US economy has, on paper, been recovering from the Great Recession since the summer of 2009. Recently, growth has hovered around 2% a year, and the unemployment rate has fallen to just 4.4%.”
  • “Still, many have yet to feel the gains of this rebound, which is among the longest in modern history but also the weakest.”
  • “‘It is fair to wonder whether a recovery that excludes tens of millions of Americans and thousands of communities deserves to be called a recovery at all,’ EIG says in its Distressed Communities Index report.”
  • “Here are some depressing findings from the EIG report, which finds that more than 52 million Americans are living in distressed ZIP codes:”
    • “Job growth in distressed ZIP codes was negative on average from 2011 to 2015, trailing the average prosperous ZIP code by more than 30 percentage points.”
    • “Distressed ZIP codes were the only group in which the number of both jobs and business establishments declined during the national recovery.”
    • “Most distressed ZIP codes contain fewer jobs and places of business today than they did in 2000.”
    • “Distressed ZIP codes contain 35% of the country’s ‘brownfield’ sites marked by ‘the presence or potential presence of a hazardous substance, pollutant, or contaminant.'”
    • “58% of adults in distressed ZIP codes have no education beyond high school.”

  • “Meanwhile, on the right side of the tracks:”
    • “88% of prosperous ZIP codes experienced job growth from 2011 to 2015, and 85% saw rising numbers of business establishments.”
    • “Prosperous ZIP codes have dominated the recovery, generating 52% of the country’s new jobs and 57% of its net new business establishments from 2011 to 2015.”
    • “Adults with any level of postsecondary education are more likely to live in a prosperous ZIP code than any other type of community.”
    • “45% of those with advanced degrees live in prosperous ZIP codes, more than in the bottom three quintiles of ZIP codes combined.”
  • “For the poorest Americans, ‘stagnation and decline were the rule, not the exception.'”

NYT – Six Charts That Help Explain the Republican Tax Plan – Alicia Parlapiano 11/2

Pew – More Americans are turning to multiple social media sites for news – Elizabeth Grieco 11/2

  • This is crazy.

WSJ – America’s Most Popular Type of Beer Is in Free Fall – Jennifer Maloney 11/1

  • “The big three U.S. light-lager brands—Bud Light, Coors Light and Miller Lite—are all losing volume as consumers shift to craft and Mexican import beers as well as to wine and spirits.”
  • “Retail store sales of Bud Light, Coors Light and Miller Lite are down 5.7%, 3.6% and 1.6%, respectively, this year through Oct. 21, according to Nielsen data compiled by Beer Marketer’s Insights. From 2010 through 2016, overall volumes in the light-lager category fell 14% to 65 million barrels.”
  • “The silver lining, at least for Molson Coors, is that both Miller Lite and Coors Light are gaining share on market leader Bud Light.”
  • “Meanwhile, Denver-based Molson Coors has a team looking at the potential impact legalized cannabis could have on its beer sales, as well as possible opportunities for investment, Mr. Hunter (Mark Hunter, CEO of Molson Coors) said. Constellation Brands said earlier this week that it is taking a 9.9% stake in Canadian cannabis company Canopy Growth Corp. and plans to develop nonalcoholic, marijuana-infused beverages.”

WSJ – Daily Shot: J.D. Power – American Awareness of the Equifax Data Breach 11/3

Worthy Insights / Opinion Pieces / Advice

FT – The challenge of Xi Jinping’s Leninist autocracy – Martin Wolf 10/31

  • “Democracies have to recognize their failures to counter a China that sees itself as an ideological rival.”

FT – A way to poke Facebook off its uncontested perch – Tim Harford 11/2

  • “The new tech titans need serious competition. For a social network, serious competition needs new rules to enable it.”

NYT – What Donald Trump Thinks It Takes to Be a Man – Jill Filipovic 11/2

South China Morning Post – The bubble economy is set to burst, and US elections may well be the trigger – Andy Xie 10/8

WSJ – Who Will Rein In Facebook? Challengers Are Lining Up – Christopher Mims 10/29

Markets / Economy

WSJ – Daily Shot: Bitcoin 11/2

Real Estate

FT – Li Ka-shing to sell stake in HK skyscraper for record $5.2bn – Don Weinland 11/2

  • While I already covered this from a Jacky Wong article in the WSJ, here are some more details.
  • Li Ka-shing’s “CK Asset stands to make a gain of HK$14.5bn ($1.88bn)  on the sale of The Center, according to a stock exchange filing.”
  • And this was only on a portion of the building…
  • “CK Asset owns 48 floors of office space in the 73-story building, as well as shopping space, car parks, basements and the entrance hall. The sale of those properties equates to HK$33,000 ($4,269) per square foot.”
  • For the buyer, CHMT Peaceful Development Asia Property Limited (majority controlled by China Energy Reserve & Chemicals Group), “the investment yield on the building was about 2.5%, according to Mr Cheng” (Raymond Cheng, an analyst at CIMB Securities).

China

FT – Beijing moves to tighten oversight of Chinese companies investing offshore – Gabriel Wildau 11/2

  • “China’s state planning agency issued draft guidelines on outbound investment on Friday that require companies to seek approval for some foreign deals even if they are conducted through an offshore entity, an effort to assert greater control over even some foreign activities that don’t involve cross-border fund flows.”
  • “In an explanatory notice accompanying the new rules issued for public comment, the National Development and Reform Commission said that ‘some foreign investment activities have drifted outside the boundaries of current supervision, and definite hidden risks exist.’”
  • “Deals that don’t involve investment by mainland Chinese entities or cross-border fund movements are generally not subject to regulation by Chinese authorities. But the latest rules from NDRC require that a Chinese parent company get the agency’s approval for deals worth more than $300m in ‘sensitive’ sectors, even if the deal is conducted purely through offshore subsidiaries.”

Japan

WSJ – Daily Shot: Japan Household Confidence 11/2

WSJ – Daily Shot: Nikkei-225 Stock Average 11/2

Middle East

FT – Saudi Arabia arrests princes, ministers and tycoons in purge – Ahmed Al Omran and Simeon Kerr 11/4

  • “Global investor (and one of the world’s richest people) Prince Alwaleed among those detained as Prince Mohammed consolidates power.”
  • The official aim is to weed out corruption.

October 30, 2017

The tally is in – daily (or at least close to it).

Perspective

WEF – This chart might change how you think about migration – Frank Chaparro 8/29

How Much – How Trump Tax Rate Changes Affect You – Raul 10/22

Economist – Globalization has marginalized many regions in the rich world 10/27

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Italians Have Perfected the Art of Waiting It Out – Vernon Silver 10/18

Bloomberg Businessweek – Amazon Is Getting a Good Deal in Ohio. Maybe Too Good – Mya Frazier 10/26

  • “Amazon’s nine-figure tax incentives in Ohio have strained local public services as the state’s employment growth continues to lag the national average.”

Bloomberg View – Morningstar’s Star System Was Always a Bright Shinny Object – Barry Ritholtz 10/26

  • “Retail and professional investor alike seem to ignore the fact that every single document ever generated by any investment-related firm has a warning on it to the effect that ‘Past performance is not an indicator of future returns.’ Every chart ever drawn, each investing idea back-tested and every single historical comparison is testament to how little mind humans pay to that disclaimer.”

Bloomberg View – Think the U.S. Has a Facebook Problem? Look to Asia – Editorial Board 10/22

  • “…its platform exacerbates the potential for violence and social breakdown.”

Economist – Globalization’s losers: The right way to help declining places – Leaders 10/21

  • “Mainstream parties must offer voters who feel left behind a better vision of the future, one that takes greater account of the geographical reality behind the politics of anger.”
  • “Economic theory suggests that regional inequalities should diminish as poorer (and cheaper) places attract investment and grow faster than richer ones. The 20th century bore that theory out: income gaps narrowed across American states and European regions. No longer. Affluent places are now pulling away from poorer ones. This geographical divergence has dramatic consequences. A child born in the bottom 20% in wealthy San Francisco has twice as much chance as a similar child in Detroit of ending up in the top 20% as an adult. Boys born in London’s Chelsea can expect to live nearly nine years longer than those born in Blackpool. Opportunities are limited for those stuck in the wrong place, and the wider economy suffers. If all its citizens had lived in places of high productivity over the past 50 years, America’s economy could have grown twice as fast as it did.”

Economist – Why Airbus’s tie-up with Bombardier is so damaging for Boeing 10/19

Economist – Firms that burn up $1bn a year are sexy but statistically doomed – Schumpeter 10/21

  • “Consider Tesla, a maker of electric cars. This year, so far, it has missed its production targets and lost $1.8bn of free cashflow (the money firms generate after capital investment has been subtracted). No matter. If its founder Elon Musk muses aloud about driverless cars and space travel, its shares rise like a rocket—by 66% since the start of January. Tesla is one of a tiny cohort of firms with a license to lose billions pursuing a dream. The odds of them achieving it are similar to those of aspiring pop stars and couture designers.”
  • “Investing today for profits tomorrow is what capitalism is all about. Amazon lost $4bn in 2012-14 while building an empire that now makes money.”
  • Tell that to the mom and pop shops that are crowded out because they have to be profitable.
  • “Most billion-dollar losers today are energy firms temporarily in the doldrums as they adjust to a recent plunge in oil prices. Their losses are an accident.”
  • “But a few firms love life in the fast lane. Netflix, Uber and Tesla are tech companies that say their (largely unproven) business models will transform industries. Two others stand out for the sheer persistence of their losses. Chesapeake Energy, a fracking firm at the heart of America’s shale revolution, has lost at least $1bn of free cashflow a year for an incredible 14 years in a row. Nextera Energy, a utility that runs wind and solar plants, and which investors value highly, has managed 12 years on the trot.”
  • “Collectively these five firms have burned $100bn in the past decade, yet they boast a total market value of about $300bn… The experience of the five suggests that bending reality today has three elements: a vision, fast growth, and financing.“
  • “…Sustaining a reality distortion field is possible, but the longer it goes on for, the harder it gets. More capital has to be raised and, in order to justify it, the bigger the firm’s projected ultimate size—its terminal value—has to be.”
  • “A few firms other than Amazon have defied the odds. Over the past 20 years Las Vegas Sands, a casino firm, Royal Caribbean, a cruise-line company, and Micron Technology, a chip-maker, each lost $1bn or more for two consecutive years and went on to prosper. But the chances of success are slim. Of the current members of the Russell 1000 index, since 1997 only 37 have lost $1bn or more for at least two years in a row. Of these, 21 still lose money.”
  • “To justify their valuations, the five firms examined by Schumpeter must grow their sales by an estimated 8-33% each year for a decade. Based on the record of all American companies since 1950, and the five firms’ present revenue levels, the probability of this happening ranges between 0.1% and 25%, using statistical tables from Credit Suisse, a bank.”

FT – The downside of the race to be Amazon’s second home – Richard Florida 10/23

  • For Amazon to really make an impact, forgo the offered public incentives, among other things.

Markets / Economy

Bloomberg Businessweek – Under Trump, Made in America Is Losing Out to Russian Steel – Margaret Newkirk and Joe Deaux 10/25

  • “Foreign steel imports into the U.S. are up 24% in 2017. As the industry grows angry at Trump’s lack of trade action, Russia’s Evraz continues winning pipeline contracts.

WSJ – Daily Shot: Overstock.com 10/24

  • Overstock.com which has been languishing for some time now is on a tear since it announced an initial coin offering (ICO). I suspect that other companies that have been struggling for growth will follow.

WSJ – Daily Shot: Banca Monte dei Paschi di Siena 10/25

  • “Shares of the bailed-out Italian bank Monte dei Paschi resumed trading on Wednesday and promptly declined 70% from the last closing price.”

Real Estate

WP – America’s affordable-housing stock dropped by 60 percent from 2010 to 2016 – Tracy Jan 10/23

  • “The number of apartments deemed affordable for very low-income families across the United States fell by more than 60% between 2010 and 2016, according to a new report by Freddie Mac.”
  • “The report by the government-backed mortgage financier is the first to compare rent increases in specific units over time. It examined loans that the corporation had financed twice between 2010 and 2016, allowing a comparison of the exact same rental units and how their affordability changed.”
  • “At first financing, 11% of nearly 100,000 rental units nationwide were deemed affordable for very low-income households. By the second financing, when the units were refinanced or sold, rents had increased so much that just 4% of the same units were categorized as affordable.”
  • “’We have a rapidly diminishing supply of affordable housing, with rent growth outstripping income growth in most major metro areas,’ said David Brickman, executive vice president and head of Freddie Mac Multifamily. ‘This doesn’t just reflect a change in the housing stock.’”
  • “Rather, he said, affordable housing without a government subsidy is becoming extinct. More renters flooded the market after people lost their homes in the housing crisis. The apartment vacancy rate was 8% in 2009, compared to 4% in 2017. That trend, coupled with a stagnant supply of apartments, resulted in increased rents.”
  • “The study defined ‘very low income’ as households making less than 50% of the area median income, and ‘affordable’ rent as costing less than 30% of household income.”
  • “Most new construction of multifamily housing generally serves high-income renters, according to Freddie Mac. The corporation — along with Fannie Mae, another government-sponsored enterprise with a similar mission — significantly reduced its role in financing multifamily housing after the Great Recession.”
  • “Together, they had financed about 70% of all original loans for multifamily properties in 2008 and 2009 as private capital pulled back, said Karan Kaul, a research associate at the Housing Finance Policy Center at the Urban Institute. By the end of 2014, their market presence declined to 30%.”
  • “‘The affordability issues are becoming more severe at the lower end of the market,’ said Kaul, a former researcher at Freddie Mac. ‘Absent some kind of government intervention or subsidy, there is just not going to be any investments made at that lower end of the market.'”

Energy

FT –  US oil floated on cheap money – John Dizard 10/28

Construction

WSJ – Daily Shot: CME Lumber Futures 10/23

  • “Lumber futures are soaring in response to the NAFTA jitters. US home construction/renovation costs are sure to rise.”

Middle East

Economist – The boycott of Qatar is hurting its enforcers 10/19

  • “If Saudis and Emiratis will not trade with Doha, Iranians will.”