Tag: HNA

June 19, 2018

Worthy Insights / Opinion Pieces / Advice

FT – Watch the Fed’s balance sheet, not interest rates – Gillian Tett 6/7

  • “The US central bank’s unwinding has contributed to turmoil in emerging markets.”

FT – China is winning the global tech race – Michael Moritz 6/17

FT – Donald Trump’s trade tirade shows his mastery of the message – Rana Foroohar 6/17

Polygon – What if Star Wars never happened? – Kevin Lincoln 6/7

  • “Imagining a world where George Lucas’ space fantasy didn’t revolutionize Hollywood.”

Markets / Economy

WSJ – Daily Shot: indeed – Older workers are the gig economy 6/18

Energy

FT Energy Source: BP – World Fuel Sources by proportionate share – Ed Crooks 6/17

LA Times – Shale country is out of workers. That means $140,000 for a truck driver and 100% pay hikes – David Wethe 6/8

Finance

WSJ – The Finance Industry’s Incredible Ability to Keep the Money Rolling In – Paul J. Davies 6/15

  • “Banks, brokers and money managers have kept their revenue steady for 130 years.”

Cryptocurrency / ICOs

FT – Who really owns bitcoin now? – Hannah Murphy 6/7

  • “Initially in the crypto space, you had people who really understood the technology. Then there was a typical bandwagon investor situation and you know how it ends — and it did.” – Campbell Harvey, finance professor at Duke University and an investment strategy adviser for Man Group.
  • “But how many have gained — and lost — from the bitcoin bubble? Exclusive data from blockchain research company Chainalysis seen by the FT provides some tantalizing answers.”
  • “The Chainalysis data quantifies this distinct shift in the make-up of bitcoin owners from longer-term investors — those who held the asset for more than a year — to short-term investors who have traded more recently, by analyzing how regularly coins have changed hands.”
  • “Last November — before December’s pricing peak — the amount of bitcoin held for investment was roughly three times that held by traders.”
  • “However, by April 2018, the data show the amount held by investors — about 6m bitcoin — was much closer to the amount held by short-term speculators, with 5.1m bitcoin.”
  • Indeed, Chainalysis estimates that longer-term holders sold at least $30bn worth of bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.
  • “’This was an exceptional transfer of wealth,’ says Philip Gradwell, Chainalysis’ chief economist, who dubs the past six months as bitcoin’s ‘liquidity event’.”
  • “Mr Gradwell argues that this sudden injection of liquidity — the amount of bitcoin available for trading rose by close to 60% over that period — has been a ‘fundamental driver’ behind the recent price decline. At the same time, bitcoin trading volumes have now fallen in tandem with the prices, from close to $4bn daily in December to $1bn today.”
  • “So will the price of bitcoin ever surpass December’s peak? Part of the answer lies in who holds bitcoin now that the hype has died down.”
  • “Born in 2009 in the wake of the financial crisis, bitcoin is rooted in a libertarian quest for a means of exchange that is unshackled from the central banking system. Proponents — among them, computer experts and political activists — heralded the arrival of an alternative monetary system that could replace fiat currency.”
  • “But despite the recent crypto boom, there are few signs that this is happening. According to research published this month by Morgan Stanley, only four of the top 500 US e-commerce merchants accepted cryptocurrencies in the first quarter of 2018, compared with three at the beginning of 2017.”
  • “Chainalysis notes that the ‘vast majority’ of transactions it analyzed showed bitcoin being received from exchanges and rarely sent to merchant services to pay for goods or services.”
  • “Only a finite number of coin — 21m — can be created. Of this, about 4m are yet to be mined. Just as physical coins can be lost down the back of a sofa, so can bitcoins if users lose or forget the passwords needed to access their online wallets. The Chainalysis data separates out coins it deems to be lost or unused for years — which total 3.7m bitcoin, worth about $28bn.”
  • “’Speculation remains the primary use case for these digital assets; merchant or institutional adoption does not appear to be a primary driver of price,’ says Preston Byrne, an English structured finance lawyer and cryptocurrency observer.”
  • “Given this breakdown in bitcoin owners, most market watchers do not rule out another rapid price run-up. However, they say this would likely be the random movement of pure speculation or market manipulation rather than anything else.”
  • “’It’s very important to stress, this is not in any sense a rational market,’ says David Gerard, the author of Attack of the 50 Foot Blockchain.”
  • “’It’s very thinly traded, very badly structured . . . and it’s stupendously manipulated,’ he adds. ‘Anyone who goes in not realizing just how manipulated the crypto markets are will get skinned.’”
  • “The Chainalysis data also show that the bitcoin marketplace is skewed in terms of wealth distribution. A small cluster of investors — known colloquially as ‘whales’ — capture a hefty proportion of the market, which stands at odds with bitcoin’s mission to democratize finance. This brings its own risks.”
  • “Overall, some 1,600 bitcoin wallets — managed by both speculators and investors — contained at least 1,000 bitcoin each in April, according to Chainalysis, collectively holding nearly 5m bitcoin, or close to a third of the available total.”
  • “Of those, just under 100 wallets owned by longer-term investors contained between 10,000 and 100,000 bitcoin — so between $75m and $750m at today’s prices.”
  • “Nevertheless, some point out that the excitement and influx of fresh funds into the market has allowed its infrastructure to mature — albeit gradually — which could be a boon for those looking to trade bitcoin more safely in future.”
  • “Much of the future of bitcoin trading will depend on the approach that regulators take, experts say. There are stirrings across the world, though to date, little coherence. Asian financial centers such as Tokyo are now regulating crypto exchanges, while China has banned them outright. Meanwhile, the US Securities and Exchange Commission last month announced a criminal probe into potential bitcoin price manipulation.”
  • “Banks in particular have been reticent to engage with cryptocurrencies and the companies that handle them, partly due to the difficulty of conducting anti-money laundering checks on transactions.”
  • “’Bank compliance officers really, really hate cryptos . . . be prepared to demonstrate the provenance of every penny from every crypto,’ says Mr Gerard.”
  • “Any more widespread adoption of bitcoin would need regulators, central banks and tax regulators to allow the transfer of wealth movement from the current financial system into the new one, says Gavin Brown, senior lecturer in financial economics at Manchester Metropolitan University and director of cryptocurrency hedge fund Blockchain Capital.”

Environment / Science

Quartz – To hit climate goals, Bill Gates and his billionaire friends are betting on energy storage – Akshat Rathi 6/12

China

FT – Beijing leans on lenders to back debt-hit HNA’s bond sale – Lucy Hornby and Sherry Fei Ju 6/15

  • “Chinese banks have been urged by government officials to ‘support’ bonds issued by HNA as the troubled finance-to-aviation conglomerate tries to extricate itself from a massive debt burden racked up during an acquisition binge.”
  • “HNA plans to issue Rmb4bn ($620m) in domestic bonds, paying interest of 6.5-7.5%.”

Other Interesting Links

Bloomberg – It’s Billionaires at the Gate as Ultra-Rich Muscle In on Private Equity – Simone Foxman and Sonali Basak 6/11

WSJ – Daily Shot: Plastic Surgery Portal – Most Searched Plastic Surgery Procedures by State 6/18

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May 9, 2018

Perspective

WSJ – Daily Shot: OECD – Levels of Working Poor by Country 5/8

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Bad Advice Can Be Expensive – Ben Carlson 5/6

Bloomberg Businessweek – The Future of News – John Micklethwait 5/3

  • “…is journalism really in such a parlous state? Look closer. News is an industry in transition, not in decline. It is reemerging as something more digital, more personalized, more automated, more paid for—and (eventually) less fake. In many ways history is repeating itself, with the main surprise being the survival of so many established names. And good journalism still does have the power to change lives.”
  • “In a world where the facts are known, commentary will become ever more important…”
  • “That points to the final series of changes: the multiplicity of formats. The standard print news story is being broken up, split among explainers, videographics, podcasts, and so on. Editorship is increasingly a matter of choosing the best way to deliver information to a time-starved consumer. News is likely to get shorter, quicker, and more graphical. But if you need to understand Syria or cryptocurrencies, you may save time reading one long story in Businessweek or the New Yorker rather than endless small ones.”
  • “The newspaper has not so much died as transmuted. News is in a state of transition—and what’s emerging is molded by both new technology and old verities. As journalists, we have to work harder to keep our audiences. But I’m still optimistic—not least about fake news. It won’t go away; it never has. But it will play a smaller role. And the big winner will be you, the consumer. Even if you have to pay a little more for it.”

Economist – So long, farewell – Buttonwood 5/8

The Registry – Does WeWork at All? – John McNellis 5/8

Visual Capitalist – Interactive: Comparing Asian Powers to the U.S. (Lowy Institute) – Jeff Desjardins 5/8

Markets / Economy

FT – Walmart takes on Amazon in India with Flipkart deal – Simon Mundy and Arash Massoudi 5/8

  • “US retailer to pay $15bn for 75% stake in India’s largest ecommerce group.”

FT – Retail: Is the beauty industry ‘Amazon-proof’? – Anna Nicolaou and Aimee Keane 5/6

WSJ – Daily Shot: LPL Research – Length of Economic Expansions 5/8

Real Estate

WSJ – Daily Shot: Green Street Advisors – US Commercial Property Price Index 5/8

Energy

WSJ – Oil Costs How Much? How the Oil Rally Took Forecasters by Surprise – Alison Sider and Georgi Kantchev 5/6

Finance

WSJ – Daily Shot: Bianco Research – State Muni Yields vs. S&P Muni Index 5/8

WSJ – Pension Funds Still Making Promises They Probably Can’t Keep – Heather Gillers 5/8

  • “Retirement plans across the country still project their investments will grow at a median rate of 7.25%, according to Wilshire Consulting, an adviser to pension funds. Yearly returns on public pension plans have returned a median 6.79% over the past decade and 6.49% over the past 20 years, according to Wilshire Trust Universe Comparison Service, a database.”
  • “Unlike corporations, public pensions have wide latitude in projecting investment returns.”
  • “Public retirement systems had an average 72% of assets they need to pay for retirement promises in 2016, according to the latest data available in the Public Plans Database, which tracks about 170 pension funds. The figure a decade earlier was 85%.”
  • “Companies don’t have the same flexibility to set return expectations on their pension plans. Pension plans sponsored by S&P 1500 companies have an average 87% of assets needed to cover their pensions promises, according to Mercer, a consultancy.”

Agriculture

WSJ – Scientist in China Race to Edit Crop Genes, Sowing Unease in U.S. – Jacob Bunge and Lucy Craymer 5/6

Construction

WSJ – Daily Shot: CME Lumber (Jul) 5/7

Education

Axios – The disappearing Chinese student visa – Stef W. Kight 5/6

China

Bloomberg Businessweek – The $94 Billion Mystery: What Will Be Left of HNA’s Empire? – Matthew Campbell and Prudence Ho 5/3

  • “An annual report released in late April revealed that HNA spent more on interest than any nonfinancial company in Asia last year, a $5 billion bill that represented a more than 50% increase from the year before.”
  • “Overall debt rose 21% in 2017, according to the report, with short-term borrowing climbing by 25%, to about $30.3 billion. Total debt amounted to about 20 times HNA’s earnings before interest and taxes…”
  • “Nonetheless, HNA, which Chen co-founded in the 1990s, counting George Soros among its early investors, isn’t at risk of immediate catastrophe. At the start of 2018, according to people familiar with the matter, it told creditors it would sell about $16 billion in assets in the first half to lighten its balance sheet. Happily for the banks that financed its rise, HNA is already nearing that goal, thanks largely to the Hilton sale ($8.5bn).”

FT – Chinese group with $7bn in debt seeks Beijing bailout – Gabriel Wildau 5/7

  • “In a test of Chinese authorities’ commitment to reducing financial risk, a large Chinese manufacturing group has begged for a government bailout to avoid default on up to $7bn in debt after a regional lender withdrew loans.”
  • “Over the past year, China has tightened credit in a bid to tackle an explosion of corporate debt that the International Monetary Fund has called ‘dangerous’. But the plea highlights how painful Beijing’s deleveraging campaign has been for some indebted groups.” 
  • “According to Caixin, a respected Chinese financial news website, the crisis involving DunAn began when Zheshang Bank, a regional lender in Zhejiang, demanded early repayment of loans, causing other banks to restrict lending to the group.” 
  • “DunAn employs 29,000 workers and manufactures a range of equipment including air-conditioning parts, civil explosives and wind power equipment. It has also expanded into asset management and real estate.” 
  • “Government bailouts are most common for state-owned companies, but officials have also rescued private groups when their potential collapse raised the prospect of contagion.” 
  • “The Shanghai government shielded investors from losses on bonds from privately owned Chaori Solar, whose 2014 default was the first in China’s domestic bond market.” 

 

April 30, 2018

This will be the only post this week from me. This week I’m attending the ULI Spring Meeting in Detroit, MI.

Cheers,

Duff

Perspective

WSJ – Why Tech Titans Are Betting on India, in 14 Charts – Newley Purnell, Min Jung Kim, and Rosa de Acosta 4/18

  • Clearly there is some disconnect between showing just this chart and the title. Emphasis less on India and more on the gender split of Facebook users.

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – China Quietly Rolled Out a Very Big Bang – John Micklethwait 4/19

Bloomberg – Latest Climate Threat for Coastal Cities: More Rich People – Christopher Flavelle 4/23

Financial Samurai – Why Households Need To Earn $300,000 A Year To Live A Middle Class Lifestyle Today – Sam

WSJ – Real Estate Stocks Are on Sale but No One Is Buying – Ken Brown 4/27

Markets / Economy

WSJ – Cable TV’s Cord-Cutting Woes Grow, Highlighting Divergence With Netflix – Shalini Ramachandran 4/27

Energy

Reuters – Venezuela faces heavy bill as grace period lapses on China loans – Corina Pons 4/27

Finance

FT – WeWork bond finds home in yield-starved market – Alexandra Scaggs 4/26

  • “This week high-yield bond investors faced a puzzle: how to value a bond sold by an unprofitable company that does not own hard assets or offer a clear outlook for its free cash flow?”
  • “The company in question was WeWork, the office-sharing company that last year attracted a $4.4bn equity investment from Japan’s Softbank. WeWork, which hired JPMorgan to lead the sale but had more than a dozen other banks working as well, attracted enough demand to increase the sale to $702m from $500m.”
  • “Several investors who steered clear of the bond — and one who bought it — said WeWork’s debt was not the type that typically appealed to high-yield investors. But nor was it the first company vowing to disrupt an industry to have found buyers in the junk market. Last year electric carmaker Tesla sold a $1.8bn high-yield bond, and in March, Uber raised $1.5bn in a leveraged loan.”
  • “A combination of low interest rates and shrinking supply has made it harder for money managers to find bonds with attractive yields. WeWork’s bonds were sold at a yield of 7.875%.”

Environment / Science

LAT – A Hawaiian island got about 50 inches of rain in 24 hours. Scientist warn it’s a sign of the future – Heidi Chang 4/28

Construction

WSJ – Daily Shot: CME Lumber (Jul) 4/26

China

FT – China’s HNA reports debts have soared to $94bn – Lucy Hornby 4/28

Middle East

Visual Capitalist – Knight Frank: A Time-lapse of Dubai’s Astonishing Growth – Nick Routley 4/28

  • Very cool animation.

South America

NYT – ‘Their Country Is Being Invaded’: Exodus of Venezuelans Overwhelms Northern Brazil – Ernesto Londono 4/28

April 6, 2018

If you were only to read one thing…

Bloomberg Businessweek – How Facebook Helps Shady Advertisers Pollute the Internet – Zeke Faux 3/27

  • Affiliate networks (‘affiliates’) = companies/brokers that design advertisements and pay to place them on social media sites on behalf of merchants.
  • “Granted anonymity, affiliates were happy to detail their tricks. They told me that Facebook had revolutionized scamming. The company built tools with its trove of user data that made it the go-to platform for big brands. Affiliates hijacked them. Facebook’s targeting algorithm is so powerful, they said, they don’t need to identify suckers themselves—Facebook does it automatically.”
  • “The basic process isn’t complicated. For example: A maker of bogus diet pills wants to sell them for $100 a month and doesn’t care how it’s done. The pill vendor approaches a broker, called an affiliate network, and offers to pay a $60 commission per sign-up. The network spreads the word to affiliates, who design ads and pay to place them on Facebook and other places in hopes of earning the commissions. The affiliate takes a risk, paying to run ads without knowing if they’ll work, but if even a small percentage of the people who see them become buyers, the profits can be huge.”
  • “Affiliates once had to guess what kind of person might fall for their unsophisticated cons, targeting ads by age, geography, or interests. Now Facebook does that work for them. The social network tracks who clicks on the ad and who buys the pills, then starts targeting others whom its algorithm thinks are likely to buy. Affiliates describe watching their ad campaigns lose money for a few days as Facebook gathers data through trial and error, then seeing the sales take off exponentially. ‘They go out and find the morons for me,’ I was told by an affiliate who sells deceptively priced skin-care creams with fake endorsements from Chelsea Clinton.”
  • “In a sense, affiliate scammers are much like Cambridge Analytica. Because Facebook is so effective at vacuuming up people and information about them, anyone who lacks scruples and knows how to access the system can begin to wreak havoc or earn money at astonishing scale.”
  • This is not a new game.
  • Affiliates are “…applying tricks on Facebook that had been invented by email spammers, who’d in turn borrowed the tactics of fax spammers in the 1980s and ’90s. New forms of media have always been hijacked by misleading advertising: 19th century American newspapers were funded in part by dishonest patent medicine ads. Within days of Abraham Lincoln’s inauguration, the makers of Bellingham’s Onguent were placing ads claiming the president had used their product to grow his trendy whiskers.”
  • “Fake personal endorsements and news reports are still the most effective tricks. Dr. Oz, the Shark Tank judges, and Fixer Upper co-host Joanna Gaines are among the most popular imprimaturs…”

Perspective

howmuch.net – How Much Income You Need to Afford the Average Home in Every State in 2018 – Raul 4/2

WSJ – Daily Shot: Deutsche Bank – US Households with Zero or Negative Home Wealth 4/5

WSJ – Daily Shot: Deutsche Bank – Road Quality in the US 4/5

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Situational Awareness – Ben Carlson 4/5

Bloomberg Businessweek – The Ancient History of Bitcoin – Peter Coy 3/29

  • “Cryptocurrencies may seem brand-new and disruptive, but look to the past and it’s clear they can be regulated.”

Civil Beat: The Associated Press – Hawaii’s Low Unemployment Rate Masks Underlying Problems 4/4

  • “In a state with a jobless rate of 2.1%, island residents have work if they want it. But their incomes often don’t pay the bills.”

NYT – Why China Is Confident It Can Beat Trump in a Trade War – Steven Lee Myers 4/5

  • “In the political realm, however, Mr. Xi enjoys advantages that may allow him to cope with the economic fallout far better than Mr. Trump can. His authoritarian grip on the news media and the party means there is little room for criticism of his policies, even as Mr. Trump must contend with complaints from American companies and consumers before important midterm elections in November.”
  • “The Chinese government also has much greater control over the economy, allowing it to shield the public from job cuts or factory closings by ordering banks to support industries suffering from American tariffs. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy.”
  • “’The American agricultural sector is quite influential in the Congress,’ said Wang Yong, a professor of economics at Peking University, explaining why China has targeted farm products such as soybeans with possible retaliatory tariffs. ‘China wants the American domestic political system to do the work.’”

Visual Capitalist – The Jump from Millionaire to Billionaire, and How Long That Takes – Jeff Desjardins 4/4

WSJ – Even After a Tumble, the Stock Market’s Price Isn’t Right – Spencer Jakab 4/4

WSJ – At Quarter End, Tesla Suddenly Got Busy – Michael Rapoport 4/4

Markets / Economy

howmuch.net – How Vulnerable is Each State to a Trade War – Raul 3/27

Real Estate

WSJ – Daily Shot: LendingTree – Home Mortgage Purchase APR by Credit Score Range 4/5

Energy

FT – Alphabet becomes biggest corporate renewable energy buyer in US – Leslie Hook 4/4

  • “Alphabet bought enough renewable energy last year to match the power needs of all its data centers and global operations, making it the biggest corporate buyer of renewable power in the US.”
  • “The company has secured 3GW of renewable energy, making it the largest corporate buyer of renewable power, according to Bloomberg New Energy Finance, while Amazon and Apple are in second and third place.”
  • “Amazon has pledged that its cloud computing business will be 50% matched by renewables in 2017, while Apple has promised to source four gigawatts of renewable power by 2020, and has been trying to reduce the emission footprint of its supply chain.”

Finance

WSJ – Bill Ackman’s Pershing Square Faces Wave of Investor Redemptions – David Benoit 4/5

Cryptocurrency / ICOs

WSJ – Daily Shot: Barchart.com – Bitcoin 4/4

Automotive

WSJ – Car Makers Step Back From Cars – Mike Colias and Christina Rogers 4/4

  • “GM to stop production of the Chevrolet Sonic, Ford plans to end U.S. sales of Fiesta and Taurus amid Detroit’s broader exodus from passenger cars.”

China

Reuters – China’s HNA to sell some or all of $6.3 billion Hilton stake – Ankit Ajmera and Koh Gui 4/5

 

February 2, 2018

Perspective

statista – The U.S. Cities With The Most Homeless People – Niall McCarthy 1/26

Worthy Insights / Opinion Pieces / Advice

FT – Short sellers eye better days after Steinhoff and Carillion wins – Miles Johnson and Robert Smith 1/31

  • “A rising tide, as the saying goes, lifts all boats. This effect, which has been played out across financial markets for several years, has inflicted pain and frustration on specialist short sellers of stocks and bonds who try and profit by betting against companies they believe harbor accounting irregularities.”
  • “But after years of frustration, some of the funds who have been doggedly shorting certain companies have been rewarded. Hedge funds that made bearish bets against the South African retailer Steinhoff International and the UK construction group Carillion saw these trades dramatically pay off as both companies collapsed under the weight of their debts.”
  • “’In the past few months there have been a number of accounting-related shorts, such as Steinhoff International and Carillion, that have been big money makers,’ says Alper Ince, an investor in hedge funds at Paamco. ‘I think there is an expectation among short sellers that we may see more of these after years of companies making big acquisitions and taking on more leverage’.”
  • “’There had been chatter about Steinhoff’s accounting for years, but being short investment grade companies has been an absolute death trade,’ says a London based credit trader. ‘It’s a bit like the old mantra ‘don’t fight the Fed’ — you can’t short investment grade bonds when you know the ECB is buying them on the other side’.”
  • “The ECB was one of the largest holders of Steinhoff’s outstanding €800m bond, owning around €100m of the debt before it sold its position entirely at a deep loss earlier this month.”

NYT – Worries Grow That the Price of Bitcoin Is Being Propped Up – Nathaniel Popper 1/31

  • “A growing number of virtual currency investors are worried that the prices of Bitcoin and other digital tokens have been artificially propped up by a widely used exchange called Bitfinex, which has a checkered history of hacks and opaque business practices.”

Markets / Economy

WSJ – Daily Shot: German 5yr Bond Yield 1/31

Energy

WSJ – Daily Shot: US Crude Oil Production 1/26

FT – Shale powers US oil output to heights of 1970 – Ed Crooks 1/31

Cryptocurrency

Bloomberg Quint – India to Curb Cryptocurrency Use While Embracing Blockchain – Anto Antony 2/1

  • “India’s government said it doesn’t consider cryptocurrencies as legal tender and will take all measures to eliminate payments using them.”

How much.net – Visualizing The Meteoric Rise of Cryptocurrency in the Past 5 Years – Raul 1/30

Reuters – South Korea says no plans to ban cryptocurrency exchanges, uncovers $600 million (in) illegal trades – Dahee Kim, Cynthia Kim 1/30

Social Media

NYT – Twitter Followers Vanish Amid Inquiries Into Fake Accounts – Nicholas Confessore, Gabriel Dance, and Rich Harris 1/31

China

FT – Distressed debt investors line up to offer HNA financing – Henny Sender and Don Weinland 1/31

  • “Chinese conglomerate seeks up to $2bn secured against Hong Kong land holdings.”

Other Interesting Links

NYT – San Francisco Will Clear Thousands of Marijuana Convictions – Timothy Williams and Thomas Fuller 1/31

  • “Thousands of people with misdemeanor convictions for marijuana possession dating back 40 years will have their criminal records cleared, the San Francisco district attorney’s office said Wednesday. San Diego is also forgiving old convictions.”

January 30, 2018

Perspective

statista – Super Bowl LII – Felix Richter 1/26

Worthy Insights / Opinion Pieces / Advice

FT – The dangers of digital democracy – Rana Foroohar 1/28

FT – What Venezuela’s chaos means for the oil market – Nick Butler 1/28

  • “Anyone looking for an explanation of the recent uptick in the oil price towards $70 a barrel need look no further than the unhappy state of Venezuela. Oil production in the country fell 13% in 2017 (against the 2016 average), with the drop accelerating towards the end of the year. In the last three months alone output has fallen by more than 500,000 barrels a day to a 28-year low of just over 1.6m a day.”
  • “On any normal measure, Venezuela should be one of the world’s richest countries. With proven oil reserves of over 300bn barrels and a wealth of other natural resources, the 30m citizens of the Bolivarian Republic should be the beneficiaries of a secure regional market for oil supplies and of the skills accumulated in the industry over the last 80 years.”
  • “Instead, the country is on the verge of bankruptcy. The government is toying with inventing a currency — the petro — securitized against the contents of an oilfield in the Orinoco basin. But the first requirement of cryptocurrencies is trust and there is little or none of that for the government of President Nicolás Maduro. Inflation rate is running at 1,178%, according to unofficial estimates — the government has stopped publishing inflation data.”
  • “The collapse of Venezuela as a viable state has accelerated over the past six months and its effects have begun to hit the country’s core business — the production of oil. The state company PDVSA is deeply in debt. Including bonds, notes and other loans, it owes around $56bn. Schlumberger the international oil services company, took a write down of $938m last month because of bills the country has failed to pay.”
  • “Cuba, once the closest ally of Venezuela’s hard-left leadership, has taken control of PDVSA’s stake in a local refinery to offset unpaid debts. Russia and China have at times propped up the Maduro government but now the limit of generosity seems to be some relief on repayment terms rather than new loans.”
  • “In the absence of regime change there will be no rescue funds from the International Monetary Fund or anyone else. Meanwhile, the opposition, although vocal, lacks any effective power. In these circumstances, the country’s oil production is likely to stay down, and could well fall further during 2018.”
  • “For Venezuela the situation is a deepening tragedy. For the oil market, and Opec in particular, the loss of production from one of the most important producers outside the Middle East is a source of salvation.”

NYT – The Follower Factory – Nicholas Confessore, Gabriel Dance, Richard Harris, and Mark Hansen 1/27

  • “Everyone wants to be popular online. Some even pay for it. Inside social media’s black market.”

Energy

WEF – We’re getting closer to completing the energy transition – Faith Birol 1/18

Environment / Science

FT – The problem with plastic – Clive Cookson 1/23

  • “Every year an estimated 8 million tons of plastic end up in ocean.”

Health / Medicine

NYT – In Kenya, and Across Africa, an Unexpected Epidemic: Obesity – Jeffrey Gettleman 1/27

China

FT – China faces refinancing crunch with $2.7tn of bonds bearing down – Emma Dunkley and Gabriel Wildau 1/28

  • “China’s $4tn bond market faces a refinancing challenge over the next five years as more than half of the outstanding debt matures, heightening concerns over default risk by some borrowers.”

FT – China’s HNA tries to navigate turbulent times – Lucy Hornby 1/28

  • “In the space of just 12 months, Chinese airline-to-finance conglomerate HNA has morphed from a symbol of the ambition and wealth of China Inc into a cautionary tale of corporate indebtedness.”
  • “About $20bn in US dollar-denominated bonds issued by HNA and its subsidiaries are due to mature in 2018 or 2019. The yields on three of those dollar bonds issued by HNA’s main Hong Kong subsidiary have spiked, doubling this month to more than 18%.”
  • “There are also signs of a cash crunch rippling through the group’s complex structure, which includes 16 listed entities and many layers of shell companies and crossholdings. Several have raised debt from Chinese banks and HNA has also turned to high-interest peer-to-peer loans, making its renminbi-denominated debt harder to quantify.”

Japan

Project Syndicate – The Bank of Japan’s Moment of Truth – Takatoshi Ito 1/25

  • “After years of deflation, Japan’s labor market is the tightest it has been in decades and the Bank of Japan is still providing significant stimulus to the economy. But with inflation still well below target, central bankers are finding themselves between a rock and hard place.”

December 21, 2017

Perspective

Visual Capitalist – Sellbrite: Breaking Down How Amazon Makes Money – Jeff Desjardins 12/19

NYT – How the Winklevoss Twins Found Vindication in a Bitcoin Fortune – Nathaniel Popper 12/19

WSJ – Daily Shot: BMO & statista – US States with Highest rates of debt collection 12/19

Worthy Insights / Opinion Pieces / Advice

FT – The long and short of H&M’s travails – Richard Milne 12/19

  • “Concerns rise that family-controlled Swedish retailer needs radical change.”

ZeroHedge – China Systemic Risk: Liquidity Problem Surfaces at HNA Group Less Than Two Weeks After Company’s Denial 12/18

Markets / Economy

Bloomberg Businessweek – Fees Rise for Underfunded Pensions – Katherine Chiglinsky and Brandon Kochkodin 12/14

  • “The largest pension plans held by S&P 500 companies face a $348 billion funding gap. As a result, they’re paying higher annual fees to the U.S. Pension Benefit Guaranty Corp., the government agency that backstops plans. ‘There’s increased awareness that an underfunded plan imposes risk on employees, it imposes risk on shareholders, and it’s getting more expensive,’ says Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School and executive director of the Pension Research Council.”
  • “Only about two dozen companies in the S&P 500 have overfunded pensions. Nine of them are banks.”
  • “Offloading risk isn’t on the table for every company. Insurers don’t take on obligations from underfunded plans…”

CNN Money – SEC suspends trading of red-hot bitcoin stock – Paul R. La Monica 12/19

WSJ – Cryptocurrency Exchange Collapses, Files for Bankruptcy After Second Hack – Eun-Young Jeong and Steven Russolillo 12/19

  • “Yaipan, which operates South Korea’s Youbit, said latest security breach caused it to lose 17% of its total assets.”

Bloomberg – South Korean Crypto Exchange Files for Bankruptcy After Hack – Todd White and Kyungjin Yoo 12/19

  • “Korea has emerged as a sort of ground zero for the global crypto-mania. So many Koreans have embraced bitcoin that the prime minister recently warned that cryptocurrencies might corrupt the nation’s youth. The craze has spread so far that, in Korea, bitcoin is trading at a premium over prevailing international rates.”

Real Estate

Yahoo Finance – The hottest housing market of 2017 – Amanda Fung 12/20

  • Spoiler alert: it’s Seattle.

Tech

ARS Technica – Currency-mining Android malware is so aggressive it can physically harm phones – Dan Goodin 12/19

Britain

FT – Help! My house has been hijacked – Lucy Warwick-Ching 12/19

  • “Fake tenants adopt a property owner’s identity and sell the property.”

Europe

WSJ – EU Triggers ‘Nuclear Option’ in Fight With Poland – Valentina Pop 12/20

Other Interesting Links

NYT – ‘Porch Pirates’ Steal Holiday Packages as They Pile Up at Homes – Nick Wingfield 12/19

December 20, 2017

Perspective

Visual Capitalist – Visualizing the Money Made Per Second by Top Companies – Jeff Desjardins 12/18

NYT – A Bitcoin Hedge Fund’s Return: 25,004% (That Wasn’t a Typo) – Nathaniel Popper 12/19

  • “There are hedge funds with blockbuster returns. Then there is the Pantera Bitcoin Fund.”
  • “The fund — one of the first in the world to dedicate itself to virtual currencies — released its returns in a letter sent to investors on Tuesday. The figure for the life of the fund, which was set up in 2013, is eye popping: 25,004%.”
  • “A significant portion of the gains have come this year, thanks to the skyrocketing price of an individual Bitcoin, which hit $19,000 on Monday. (The fund’s 25,004% figure was actually counted back when Bitcoin was at $15,500, a week ago.)”
  • “Currently, the average price of one Bitcoin is about $18,007, according to Blockchain.info, a news and data site.”
  • “For comparison, the top performing hedge fund in the world last year returned 148%, according to Preqin, a hedge fund tracker. Since 2013, the Pantera Bitcoin Fund’s compound annual returns have been around 250%.”
  • “The Pantera Bitcoin Fund did not have to do much to get those returns. It just bought Bitcoins and held them as the price went up. Its performance is a reminder of the unprecedented gains that Bitcoin has experienced, with some analysts arguing that Bitcoin’s moves have been even greater than the movements of Dutch tulip bulb prices back in the 1600s.”

Worthy Insights / Opinion Pieces / Advice

WSJ – The Flawed Bull Case for Bitcoin – Aaron Back 12/19

  • “The bitcoin network can only handle a limited number of transactions per second, and is being overwhelmed by traffic.”

Real Estate

China’s HNA Group Seeking Sale of $6 Billion in Overseas Property – Wayne Ma and Julie Steinberg 12/18

  • “HNA, an airlines-to-hotels conglomerate that until a few months ago was aggressively scooping up assets around the world, is now trying to raise cash to pay off debt that helped fund over $40 billion worth of acquisitions since 2015. In recent weeks, the company’s liquidity has come under pressure and some of its borrowing costs have climbed.”
  • “HNA has earmarked roughly $6 billion worth of properties for sale, including prime office towers in Midtown Manhattan, London’s Canary Wharf and San Francisco’s Mission District, as well as resorts in French Polynesia and buildings in Australia, according to a person close to the matter.”
  • “The company owns about $14 billion worth of commercial real estate globally, according to Real Capital Analytics, and the assets being considered for sale make up a large portion of its overseas portfolio. HNA paid hefty sums for several of the properties as recently as 2016, such as the City Center, which also houses retail stores Marshalls and Brooks Brothers, as well as plots of land that Hong Kong’s old airport used to sit on.”
  • “HNA, which has assets of more than $140 billion and is based in the Chinese tropical island of Hainan, over the past two years has announced more than 80 deals, scooping up large stakes in Deutsche Bank AG, the Hilton hotel chain, and scores of other businesses. The group previously estimated it has over $100 billion in debt, about a quarter of which is coming due within a year.”
  • “HNA is looking to sell around 20 commercial properties, according to a person familiar with the matter. Some, such as an office building on Mission Street in San Francisco and 850 Third Avenue in New York City were bought as recently as 2016, according to Dealogic. Others, including a building at 1180 Avenue of the Americas in Manhattan that HNA earlier this year said it wanted to sell, have been in its portfolio for years.”
  • “Some market participants believe HNA overpaid for some of the assets, which could make it difficult to find buyers for the prices it wants. For example, HNA last year agreed to pay $3.5 billion for the plots of land at what used to be Hong Kong’s airport. One of the parcels was purchased at an 88% premium over a previous valuation.”
  • “The sale plans come as HNA’s borrowing costs have risen sharply and investors have grown concerned about the company’s ability to pay off tens of billions in debt coming due next year. While HNA Group is privately owned, the company has around a dozen listed subsidiaries and other units that have issued bonds. Shares and bonds of several HNA units have plunged in recent months, hampering their ability to sell new securities to raise funds.”
  • “Last week, the yield on a short-term HNA-related bond briefly surged above 20%, a worrying sign for the company and its investors.”

Finance

FT – ‘Retail apocalypse’ trade prompts contrarian bets – Miles Johnson 12/18

Agriculture

WSJ – The Worlds’ Top Banana Is Doomed and Nobody Can Find a Replacement – Lucy Craymer 12/18

  • The headline is a little over the top; however, the Cavendish banana is under threat from a fungus and finding a replacement or beefing up the Cavendish is no easy task.

Other Interesting Links

WP – This angry inventor has a special gift for package thieves: Revenge – Cleve R. Wootson Jr. 12/19

December 14, 2017

Perspective

Visual Capitalist – Animation: Visualizing the ICO Explosion – Jeff Desjardins 12/12

WSJ – Thousands of Fake Comments on Net Neutrality: A WSJ Investigation – Paul Overberg and James V. Grimaldi 12/12

Worthy Insights / Opinion Pieces / Advice

FT – The twin trap for Tesla investors predicting the future – Vitality Katsenelson 12/12

  • “Fear of diluted stock remains, even if the electric carmaker becomes profitable.”

NYT – Quakes and Fires? It’s the Cost of Living That Californians Can’t Stomach – Conor Dougherty 12/12

The Real Deal – The Long View: HNA, Anbang and the myth of low leverage – Konrad Putzier 12/12

  • “New York’s real estate market now grappling with the Chinese debt binge.”

Markets / Economy

CNN – South Korea is going bitcoin crazy – Jake Kwon 12/12

  • “On any given day, South Korea accounts for as much as 20% of all bitcoin trades around the world.”

Real Estate

FT Due Diligence – M&A is the weapon of choice against Amazon for mall operators – 12/12

China

NYT – Artist Flees Beijing After Filming Devastation of Mass Evictions – Austin Ramzy 12/12

December 11, 2017

If you were only to read one thing…

A Wealth of Common Sense: How Does Something Like Bitcoin Happen? – Ben Carlson 12/7

  • The best synopsis of the cryptocurrency I’ve read to date.
  • A taste: “Anyone who tells you they know where this thing is heading, how to value it, where it ends, etc. is nuts. No one has a clue. This is everything you’ve ever read about the markets all wrapped into one — FOMO, supply & demand, human nature, behavioral biases, volatility, booms, busts, uncertainty about the future, etc.”

Perspective

WEF – California is the world’s sixth largest economy. Now is the perfect time for it to step up – Rodrigo Tavares 12/7

WP – Americans are drowning in debt. Here’s where they have it the worst. – Christopher Ingraham 12/8

Worthy Insights / Opinion Pieces / Advice

Be Inspired: The Power of Morning Routine – Jim Kwik 11/26 (YouTube Video)

Bloomberg – HNA Warning Signs Keep Sprouting Up Over Mounting Debt Costs – Judy Chen and Dong Lyu 12/6

Farnam Street – Maker vs. Manager: How Your Schedule Can Make or Break You – Shane Parrish 12/9

Fortune – Inside Elliott Management: How Paul Singer’s Hedge Fund Always Wins – Jen Wieczner 12/7

FT – Self-driving finance could turn into a runaway train – Gillian Tett 12/7

  • “…at a recent financial technology conference at Michigan Law School, regulators and academics estimated that computers are now generating around 50-70% of trading in equity markets, 60% of futures and more than 50% of treasuries. Increasingly, machine learning and artificial intelligence are being added to the mix, to analyze data, trade securities and offer investment advice.”
  • “What we are seeing, in other words, is the rise of self-driving investment vehicles, matching the auto world. But while the sight of driverless cars on the roads has sparked public debate and scrutiny, that has not occurred with self-driving finance.”

FT – $400m for a Leonardo da Vinci. Has the art world gone mad? – Jan Dalley 12/7

Investment News – Stripped of fat commissions, nontraded REIT sales tank – Bruce Kelly 12/7

  • “The Department of Labor’s fiduciary standard, and new securities industry account statement rules for greater clarity in the prices of products, have forced nontraded real estate investment trusts to slice their commissions. Since then, sales of the product have collapsed.”
  • “No fat commissions on REITs means poor sales by brokers.”
  • “REIT managers and broker-dealer executives are likely reluctant to make the connection, at least publicly. But there is no denying that brokers’ appetite for the product disappeared almost overnight once upfront commissions were cut from 7% on an A share to 3% for a T share.”
  • “When REIT sales were booming a few years ago, the product’s pitch was simple: real estate kicks off an income stream of 6% to 7% annually, real estate is an asset class that is not correlated to the stock market, and with interest rates at record lows, investors needed the yield.”
  • “Those conditions haven’t changed dramatically, but nontraded REIT sales have tanked regardless.”
  • InvestmentNewsreported last month that Robert A. Stanger & Co. expects nontraded REIT sales this year to reach just $4.4 billion, about $100 million less than last year and the lowest levels since 2002.”
  • “If the ‘income, diversify and interest rate’ pitch was accurate back in 2012 and 2013, when REIT sales were booming, why isn’t it working today? There is little change in the narrative.”
  • “Interest rates have risen only marginally, and with the stock market roaring, wouldn’t it make sense for a broker to peel off some clients’ gains and invest in commercial real estate, a hard asset not correlated to stocks?”
  • “With brokers no longer getting juicy commissions for REIT sales, they simply don’t appear interested in selling the product.”
  • “Most brokers who still sell nontraded REITs no longer earn the eye-popping 7% commission, the standard rate paid to brokers who sold the product back in 2013, when REIT sales hit their all-time high and brokers sold $19.6 billion of the product.”
  • “The Financial Industry Regulatory Authority Inc. recently put into place a new rule, known as 15-02, that makes pricing of illiquid securities like nontraded REITs more transparent to investors. In the past, client account statements showed illiquid securities like REITs at the value they were bought by the client and did not subtract commissions, which were high.”
  • “‘Now that REITs are getting priced on statements, with Finra 15-02, advisers are having to consider these positions from a total return standpoint, not just income,’ Mr. Rooney said. ‘They are re-evaluating the client’s perception of the product.'”

Markets / Economy

WSJ – Daily Shot: FRED – US Treasury Securities Held by the Federal Reserve 12/8

  • “And so it begins… Quantitative tightening is finally here.”

Real Estate

Business Insider – Here’s where the future of retail is headed in 2018 – Stephanie Pandolph 12/5

  • Industry to top $5.5tn by 2020.

FT – Norway’s oil fund makes first Asian property investment – Richard Milne 12/7

  • “Sovereign wealth fun takes stake in 5 buildings in Tokyo and plans more deals.”

Finance

WSJ – Daily Shot: WP – Bitcoin Rising 12/7

  • “Bitcoin blasts past $15k, $16k, $17k in less than 24 hours.”

WSJ – Bitcoin’s Wildest Rise Yet: 40% in 40 Hours – Paul Vigna and Steven Russolillo 12/7

  • “Bitcoin mania reached new highs Thursday as the price of the digital currency jumped about 40% in 40 hours, smashing through five separate $1,000-barriers and surging past $16,000.”

NYT – Bitcoin’s Price Has Soared. What Comes Next? – Nathaniel Popper 12/8

China

WSJ – Jailed for a Text: China’s Censors Are Spying on Mobile Chat Groups – Eva Dou 12/8

  • If only George Orwell could see the tools at Big Brother’s disposal now.

FT – International investors chase the red dragon – Chris Flood 12/9