Tag: Investment Management

July 3, 2018

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Sustaining Wealth is Harder Than Getting Rich – Ben Carlson 7/1

FT – US and China must find ways to control their elites – Rana Foroohar 7/1

  • “Success rests on heading off popular unrest, rather than winning trade fights.”

Market Watch – Yes, corporations have brought home cash after the tax cut, but they haven’t put it to work – Rex Nutting 6/29

NYT – What’s the Yield Curve? ‘A Powerful Signal of Recessions’ Has Wall Street’s Attention – Matt Phillips 6/25

WSJ – Tariffs Aren’t China’s Strongest Weapon Against the U.S. – Nathaniel Taplin 7/2

  • “Mr. Trump’s trade agenda may have certain U.S. industries-like steel-flashing smiles. American companies operating in China, though, can expect to lost a few teeth.”

Markets / Economy

Bloomberg – Where Have America’s Truck Drivers Gone? – Virginia Postrel 6/24

  • “The U.S. trucking industry is short about 50,000 drivers, estimates Bob Costello, chief economist for the American Trucking Associations. The driver shortage ranked first among industry concerns in the American Transportation Research Institute’s annual survey, released last October.”
  • “The strong economy means more stuff to haul, even as increasing numbers of truckers retire. The average age of over-the-road truckers…is 49, compared with 42 for the U.S. workforce as a whole. Forecasts of massive job losses from autonomous trucks don’t help. Few people want to join a dying profession. With unemployment low, there are other options.”
  • “In response, pay is up. The median salary for drivers who haul a variety of goods nationally is about $53,000, according to an ATA survey published in March. That’s a $7,000 increase since the previous survey five years ago, or about $4,000 when corrected for inflation. For drivers who work for private fleets serving individual companies, such as PepsiCo Inc. or Walmart Inc., median pay is $86,000, up from $73,000.”
  • “But a shortfall remains. Recent regulatory changes exacerbate the problem. So does an increasing shortage of places to park.”

Tech

FT – China backs $15bn tech fund to compete with Japan’s SoftBank – Arash Massoudi and Don Weinland 7/1

  • “China Merchants Group has teamed up with a London-based firm to launch a new Rmb100bn ($15bn) technology investment fund with aim of becoming China’s answer to the near-$100bn Vision Fund created by Japan’s SoftBank.”
  • “The state-owned conglomerate, along with other unnamed Chinese groups, has pledged to invest up to Rmb40bn of the fund, in what would be a huge pool of capital primarily designed to target investments in Chinese technology companies.” 
  • “CMG is set to announce the plans with the UK’s Centricus, the investment firm that helped structure SoftBank’s record-setting technology fund, and SPF Group, a small Beijing-based fund manager that counts Joshua Fink, the son of BlackRock founder Larry Fink, as one of its partners.”

Health / Medicine

Bloomberg – Sky-High Deductibles Broke the U.S. Health Insurance System – John Tozzi and Zachary Tracer 6/26

  • “Employers are questioning a system they say costs patients too much.”

FT – US drug maker Pfizer lifts price of Viagra and 100 other products – David Crow 7/2

China

FT – China tightens party control of foreign university ventures – Emily Feng 7/1

  • “British academic ejected from board after writing essay critical of Communist party.”

Russia

FT – Older Russians fear pension reform will hit income – Kathrin Hille 7/1

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July 2, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Forget Banks and Worry About High Stock Prices – Nir Kaissar 6/29

  • “It’s time for investors to stop fighting the last war. The next downturn most likely won’t be triggered by another meltdown of the financial system.”
  • “Investors didn’t need the Fed to tell them that banks are in better shape than they were a decade ago. The signs are everywhere. Profits have fallen across the industry since the financial crisis, an  indication that banks are taking on less risk. Profit margins for the S&P 500 Financials Index averaged 9.3% from 2008 to 2017, down from an average of 13.8% from 2003 to 2007, the years leading up to the crisis. Return on equity is down to an average of 5.2% from 14.5% over the same periods.”
  • “The biggest of those risks is leverage — or piling on debt to boost profits — and banks have a lot less of it than they used to. The debt-to-equity ratio of the financials index has dropped to 159% as of the first quarter from 563% at the end of 2007. The debt-to-assets ratio has fallen to 19% from 43% over the same period.”
  • “But if the numbers don’t persuade investors that the next crisis won’t look like the last one, then maybe a look at previous bear markets would. In reverse chronological order: The bursting of the dot-com bubble was behind the downturn from 2000 to 2002. A mass panic or newly introduced computerized trading, depending on whom you ask, set off the 1987 crash. Stagflation brought down the market from 1980 to 1982. A global oil embargo hit stocks from 1973 to 1974. I could keep going, but you get the idea.”
  • “There is a common thread running through the scariest episodes: high stock prices. The average cyclically adjusted price-to-earnings, or CAPE, ratio for the S&P 500 has been 18 since 1928, according to numbers compiled by Yale professor Robert Shiller. The five worst bear markets during those nine decades, as measured by peak to trough declines, commenced in 1929, 1937, 1973, 2000 and 2007. The average CAPE ratio on the eve of those downturns was 29 and the median was 27.”
  • “The current CAPE ratio: 32. And it’s never just stocks. Other assets in the U.S. look frothy, too, such as private equity and real estate.”

Bloomberg – How to Avoid Going Broke After Making $650 Million – Barry Ritholtz 6/29

Economist – How oil transformed the Gulf – Special report 6/21

Economist – Why Gulf countries are feuding with Qatar – Special report 6/21

Economist – Saudi Arabia turns against political Islam – Special report 6/23

Pragmatic Capitalism – Let’s Talk About that “Rapidly” Falling Deficit – Cullen Roche 6/29

  • “Don’t be scared Larry (Kudlow), just tell it like it is – you guys are boosting spending, boosting the deficit and the USA can afford it!”

Real Estate

WEF: statista – The world’s most expensive prime property – Adam Jezard 4/12

Cryptocurrency / ICOs

Bloomberg – Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero – Adam Haigh and Eric Lam 6/28

howmuch.net – The ICO Explosion in the Past 5 Years – Raul 6/27

Environment / Science

Bloomberg – The Recycling Game Is Rigged Against You – Faye Flam 6/27

  • “Americans were not set up for success in recycling plastics. Even before China stopped accepting plastic refuse from abroad, 9% of potentially recyclable plastic in the U.S. ended up in landfills – or worse, in the oceans. Europe does a little better, with only 70% getting tossed.”
  • “Why such terrible rates? Partly because some changes that were supposed to make recycling simpler ended up making it almost impossible.”
  • “University of Georgia engineering professor Jenna Jambeck said that indeed, part of the reason China is now refusing to process American and European plastic is that so many people tossed waste into the wrong bin, resulting in a contaminated mix difficult or impossible to recycle.”
  • “In a paper published last week in Science Advances, she and her colleagues calculated that between now and 2030, 111 million metric tons of potentially recyclable plastic will be diverted from Chinese plants into landfills.”
  • “Plastic matters because it takes centuries to degrade, and there’s a lot of it. Jambeck has estimated that the world has produced more than 8 billion metric tons since the 1950s. To help grasp this quantity, paleontologist Jan Zalasiewicz has estimated that this is enough to wrap our entire planet in cling wrap. Others have calculated that it would make four mountains the size of Everest.”
  • “Given what scientists already know how to do, the future could bring a greener, more fool-proof system. Right now, she said, she and other scientists are starting to develop ways to recycle mixtures of plastics – a tough job because many plastics repel one another like oil and water. One of the reasons China imported recycling was that it was possible there to hire cheap labor to sort the different plastic types by hand.” 
  • “Curing the plastic problem is a lot like fighting cancer. Even if everyone stopped smoking, there would still be cancer. And even if we all figure out whether our municipalities accept yogurt containers, plastic waste will still pollute the environment. Compliance won’t be a cure until innovations from the lab set us up for success.”

WIRED – Data Shows Rising Seas Threaten Over 300,000 Homes – Oliver Milman 6/19

  • “Sea level rise driven by climate change is set to pose an existential crisis to many US coastal communities, with new research finding that as many as 311,000 homes face being flooded every two weeks within the next 30 years.”
  • “The UCS used federal data from a high sea level rise scenario projected by the National Oceanic and Atmospheric Administration, and combined it with property data from the online real estate company Zillow to quantify the level of risk across the lower 48 states.”
  • “Under this scenario, where planet-warming emissions are barely constrained and the seas rise by about 6.5 feet globally by the end of the century, 311,000 homes along the US coastline would face flooding on average 26 times a year within the next 30 years—a typical lifespan for a new mortgage.”
  • “The losses would multiply by the end of the century, with the research warning that as many as 2.4 million homes, worth around a trillion dollars, could be put at risk. Low-lying states would be particularly prone, with a million homes in Florida, 250,000 homes in New Jersey and 143,000 homes in New York at risk of chronic flooding by 2100.”
  • “The oceans are rising by about 3 mm a year due to the thermal expansion of seawater that’s warming because of the burning of fossil fuels by humans. The melting of massive glaciers in Greenland and Antarctica is also pushing up the seas—NASA announced last week that the amount of ice lost annually from Antartica has tripled since 2012 to an enormous 241 billion tons a year.”
  • “This slowly unfolding scenario is set to pose wrenching choices for many in the US. Previous research has suggested that about 13 million Americans may have to move due to sea level rise by the end of the century, with landlocked states such as Arizona and Wyoming set for a population surge.”

Agriculture

FT – US farmers plant more soya than corn for first time since 1983 – Gregory Meyer 6/29

  • “Farmers planted 89.6m acres with soya beans this spring, the government reported Friday, surpassing the 89.1m acres planted with corn. The only other year soya topped corn was in 1983, because of a one-off quirk of agricultural policy.”

Britain

NYT – In Britain, Austerity Is Changing Everything – Peter S. Goodman 5/28

  • “After eight years of budget cutting, Britain is looking less like the rest of Europe and more like the United States, with a shrinking welfare state and spreading poverty.”

Japan

FT – Japan’s elderly care bill soaks up worker pay rises – Robin Harding 5/27

  • “Monthly premiums for care insurance have doubled from ¥3,000 to almost ¥6,000 ($55) since the system began in 2000. Meanwhile, the average annual cost of employer-based health insurance is up from ¥386,038 in 2008 to ¥486,042 this year, equivalent to a two percentage point rise in income tax.”
  • “The rise in health and care costs helps to explain why moderate wage growth, after five years of economic stimulus under prime minister Shinzo Abe, is doing so little to boost consumption. It poses a conundrum for the Bank of Japan, which is relying on spending pressure to push inflation towards its 2% objective.”
  • “Japan’s future holds more of the same, especially after 2020, when the baby boom generation starts to reach the age of 75 and needs more care. Recent government figures suggest that by 2040 social insurance costs will rise another 2.5 percentage points to 24% of gross domestic product.”

South America

Axios – It’s nearly impossible to afford a cup of coffee in Venezuela – Stef W. Kight 6/28

  • “Less than two years ago, a cup of coffee cost 450 bolivars in Venezuela. Today, as the nation’s hyperinflation continues to skyrocket, a cafe con leche costs 1 million bolivars — or a mere 29 U.S. cents, according to Bloomberg.”

June 29, 2018

Perspective

WSJ – Where Residents Pay Buckets of Money – for Water – Adam Bonislawski 6/27

Worthy Insights / Opinion Pieces / Advice

Bloomberg – Give China a Taste of Its Own Bad Trade Medicine – Michael Schuman 6/27

Economist – Most stockmarket returns come from a tiny fraction of shares – Buttonwood 6/23

Economist – How to stop the decline of public transport in rich countries – Leaders 6/23

WSJ – Facebook Investors May Be Too Quick to Forgive – Dan Gallagher 6/28

  • “Social network’s stock price has risen sharply since Cambridge Analytica scandal even though more questions have surfaced.”

WSJ – The Good Times Are Over for China’s Property Stocks – Jacky Wong 6/28

  • “A weaker Chinese yuan and a funding squeeze are taking their toll on developers.”

Markets / Economy

FT – Global dealmaking reaches $2.5tn as US megadeals lift volumes – James Fontanella-Khan and Arash Massoudi 6/27

WSJ – Daily Shot: PitchBook – Startup nation: The most valuable VC-backed company in each US state – Dana Olsen 2/27

Energy

WSJ – Daily Shot: Gross US Crude Oil Exports 6/27

WSJ – Daily Shot: Princeton Energy Advisors – Net Crude Oil Imports 6/28

China

Bloomberg – Xi Warns Mattis China Won’t Surrender ‘One Inch’ of Territory – Peter Martin 6/27

Economist – China has militarized the South China Sea and got away with it 6/21

Economist – China is trying to turn itself into a country of 19 super-regions 6/23

FT – China’s polluted skies – Steven Bernard and Lucy Hornby 6/28

Europe

Economist – Giddy property prices are a test for Swedish policymakers 6/21

 

June 28, 2018

Perspective

FT – Migrant millennials are redrawing the map of America – Andrew Edgecliffe-Johnson 6/26

  • “As a recent analysis by Brookings Institution demographer William Frey found, the strongest growth in America’s millennial population between 2010 and 2015 was not in coastal cities such as New York and LA, but in smaller ones in the south and west. The double-digit increase in 10 large metro areas, from Colorado Springs and Denver to San Antonio and Austin, contrasts with Midwestern cities such as Chicago and St Louis, whose millennial populations rose less than 1%.”
  • “This millennial migration is largely being driven by affordability, says Karen Harris of the macro trends group at Bain & Company, the consultancy. ‘Tier one cities have become incredibly expensive; as a result they have become the province of rich people, single people and empty nesters.’” 
  • “Few places tell this story better than Denver, Colorado. Its middle-of-the-country location, affordable universities, plentiful jobs and easy access to a snowboarder’s paradise in the Rocky Mountains have drawn tens of thousands of millennials in recent years, transforming its population and economy.” 
  • But…
  • “Denver’s residential property prices are 50% above their pre-crisis peak, dividing the city into those who bought and have watched their assets appreciate and those wondering if they will ever get on the housing ladder. Since Colorado legalized recreational marijuana in 2014, Denver has been rife with stories of dispensary owners driving the market up by putting their unbankable cash into property.” 
  • “For now, disillusioned leavers are outnumbered by new arrivals to Denver, but there are signs that its millennial-fueled population boom is slowing. Its growth rate peaked in 2015 and it has dropped down the Census Bureau’s list of fastest-growing cities, which is now topped by San Antonio and Phoenix.” 
  • “Mike Newlands moved to Denver after college in 2006 to work in the sporting goods industry, and is living with a friend while saving for a down payment on a property. He worries that anyone who did not buy by 2010 is effectively priced out of Denver. ‘People are asking now where the next Colorado is,’ he says, listing more affordable alternatives like Jackson, Wyoming, and Boise, Idaho. ‘People like me who make $75,000 a year are going to be gone.’”

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Playing in Traffic – Ben Carlson 5/27

  • “Our brains find it easier to process situations where there’s a clear explanation. Not knowing what’s happening or, more importantly, why it’s happening, makes people extremely uncomfortable.”
  • “Being uncomfortable with uncertainty is one of the reasons a long commute can make people unhappy:”
    • “As Harvard University psychologist Daniel Gilbert argues, ‘You can’t adapt to commuting, because it’s entirely unpredictable. Driving in traffic is a different kind of hell every day.’”

Markets / Economy

WSJ – Harley-Davidson Is Fighting the Trade Wars on Two Fronts – John D. Stoll 6/25

Real Estate

Bloomberg – Investors Are Piling In to NYC Condos at a Record Pace – Oshrat Carmiel 6/27

WSJ – Looking for an Apartment? It Is a Great Time to Rent – Laura Kusisto 6/27

  • “It is a great time for anyone looking to rent an apartment: vacancy rates are rising and there are little or no rent increases in many major cities.”
  • “For landlords, though, the U.S. apartment market suffered its worst spring since 2010, near the depths of the housing crisis. Driving this dynamic is a flood of new apartments and weakening demand.”
  • “Rents rose 2.3% in the second quarter compared with a year earlier, the smallest annual increase since the third quarter of 2010, according to data from RealPage Inc. scheduled to be released on Wednesday. Rental growth was flat in major cities with otherwise strong economies—such as Austin, Portland, Seattle, Dallas and Washington, D.C.—due to large amounts of new supply.”
  • “Landlords have enjoyed a record 32 straight quarters of annual rent growth on average, as the U.S. economy strengthened and millennials delayed homeownership. But the reports of slowing, which began in a few markets in late 2016, have intensified to the point that the balance is shifting towards renters and away from landlords.”
  • “The cause of the slowdown is primarily new supply. Developers responded to escalating rents by building the most new apartments in 30 years, sending a flood of new high-end units to downtown areas across the country. Developers are expected to add 300,000 new units over the next year across the U.S., Mr. Willett (Greg Willett, chief economist at RealPage) said.”
  • “At the same time as there are signs renter demand is starting to wane because millennials are marrying, having children and buying homes or moving into single-family rentals. The U.S. added 1.3 million owner households in the first quarter over the same period last year and lost 286,000 renter households, according to U.S. Census data released in April.”
  • “Despite the recent slowdown, apartment owners note that the market is far from crashing and rent growth remains just below historic norms.”
  • “Little concern has arisen that the softening could have broader economic repercussions for the U.S. financial system. Compared with the last real-estate crash, owners say there are unlikely to be many foreclosures because they are carrying much less debt.”
  • “Jay Hiemenz, president and chief operating officer of Phoenix-based Alliance Residential, an apartment company, said banks are only giving loans to developers for about 65% of the cost to build a project, compared to 80% or more previously.”

Cryptocurrency / ICOs

WSJ – Daily Shot: Ripple 6/27

  • “Ripple is down 87% since early January.”

Entertainment

WSJ – The Pop Diva Identity Crisis – Neil Shah 10/18/17

Asia – excluding China and Japan

Bloomberg – Hermes Bags, Diamonds Worth $273 Million Taken in 1MDB Raids – Anisah Shukry 6/26

  • “Malaysia’s police seized about 1.1 billion ringgit ($273 million) of items that included Hermes International handbags, Rolex watches and cash in raids linked to former Prime Minister Najib Razak amid investigations into troubled state fund 1MDB.”
  • “Luxury goods such as a 6.4 million ringgit diamond necklace, 51.3 million ringgit worth of Hermes bags and more than 200 sunglasses valued at 374,000 ringgit were taken from five residences and an office linked to Najib, Amar Singh, commercial crime investigation department director at the police, told reporters on Wednesday.”
  • “The police had to form eight teams consisting of more than 150 officers to analyze the items for weeks, even working through the Eid al-Fitr Muslim holiday, Singh said. Valuations may increase as not all items seized have been analyzed.”

FT – Malaysia police value assets seized in 1MDB-linked raids at $275m – Stefania Palma 6/27

China

Bloomberg – Chinese Stocks Enter Bear Market as Trade, Growth Risks Increase – Richard Frost and Jeanny Yu 6/25

June 27, 2018

Perspective

WSJ – Marriage Is Out of Fashion. So Why Is Tiffany Selling More Engagement Rings? – Suzanne Kapner 6/20

  • Please note that the Y-axis base is 45% (still meaningful).

Tax Foundation – To What Extent Does Your State Rely on Property Taxes? – Ben Strachman and Katherine Loughead 6/20

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – The Best Free Investing Tools on the Web – Ben Carlson 6/25

Bloomberg – U.S. Housing Will Get Even Less Affordable – A. Gary Shilling 6/26

  • “More investor-owned properties and rising construction costs are just two reasons homes are out of reach for many.”

Bloomberg – The ‘Deep Fake’ Threat – The Editors 6/13

  • “High-tech forged videos could wreak havoc on politics. Policy makers must be ready.”

FT – Issues beyond Opec will drive oil prices in coming years – Nick Butler 6/24

  • “US shale oil production is set to have a dramatic effect on the global market.”

WSJ – Has the Big Yuan Short Finally Arrived? – Nathaniel Taplin 6/26

  • “As long as Chinese investors can make money gambling on housing – and companies can make money building or selling them – weakness in the stock and bond markets may not be enough to trigger a full-scale stampede out of the yuan.”
  • “Panic or no panic, a weaker Chinese currency in the months ahead still seems likely.”

Real Estate

Bloomberg Businessweek – The Modular-Home Maker That Could Make Housing Cheaper – Dina Bass 6/21

  • “Katerra saves money by buying everything from wood to toilets in bulk and using software and sensors to closely track materials, factory output, and construction speed. Its architects use software to build a catalog of standard buildings, rather than starting from scratch on each project, and to ensure contractors aren’t making impulsive structural decisions. Each generation of buildings has become steadily more prefab, requiring less work on-site and speeding construction.”
  • “…but Katerra has a lot of serious worries. While there are only a few standard models of iMac or Xbox, apartments are beholden to 110,000 U.S. municipalities’ building codes, each with its own idiosyncrasies. Regional seismic and weather needs can vary widely. And Katerra’s aim to steadily cut labor costs, meaning jobs, won’t exactly endear it to the industry.”

WSJ – Luxury Real Estate Comes to Urban Chinatowns – Katy McLaughlin 5/31

  • “High-end developments are appearing, attracting new residents as well as concerns about the displacement of the existing working-class.”

Energy

Bloomberg – Oil-Sands Outage Upends Global Oil Market, Overshadowing OPEC – Robert Tuttle and Kevin Orland 6/25

  • “The shutdown of a key oil-sands facility in Canada is flipping the global oil market on its head and slamming shares of producers that depend on the plant.”
  • “Just as OPEC and allied producers agreed to pour more oil into global markets, a transformer blast first reported by Bloomberg News last week cut power to Alberta’s giant Syncrude plant, which turns heavy crude into synthetic light oil for U.S. markets.”
  • “As less oil flows from up north, traders are paying a record premium for crude at America’s biggest distribution hub in Cushing, Oklahoma. Globally, the gap between Brent crude and West Texas Intermediate is narrowing rapidly after widening for months. Goldman Sachs Group Inc. called the shutdown the most dramatic event in the oil market last week, as opposed to OPEC’s meeting in Vienna. Shares of Suncor Energy Inc., which controls the plant, plunged the most in more than two years.”
  • “The 350,000-barrel-a-day facility, one of the biggest of its kind in the world, is going to be out of commission until the end of July, the company said.”
  • “While Saudi Arabia’s push to make sure OPEC boosts supplies by close to 1 million barrels a day is strongly weighing down on Brent crude futures in London, the shortage in Canada is supporting U.S. prices. That’s helping narrow the gap between the two benchmarks, reversing months of widening when the focus was on record production from shale fields. It has global implications because the premium helps buyers around the world decide whether to ship crude from the U.S. or elsewhere.”

Tech

CNN – It’s true: Teens are ditching Facebook – Jordan Valinsky 5/31

  • “A new study has confirmed what we’ve long expected: Facebook is no longer the most popular social media site among teens ages 13 to 17.”
  • “The Pew Research Center revealed on Thursday that only 51% of US teens use Facebook. That’s a 20% drop since 2015, the last time the firm surveyed teens’ social media habits.”
  • “Now, YouTube is the most popular platform among teens — about 85% say they use it. Not surprisingly, teens are also active on Instagram (72%) and Snapchat (69%). Meanwhile, Twitter (TWTR) followed at 32%, and Tumblr’s popularity (14%) remained the same since the 2015 survey.”
  • “When it comes to the platform they access most frequently throughout the day, Snapchat is king.”
  • “Although the study was only conducted among nearly 750 teens in a one month period starting this spring, the new numbers might be worrying for Facebook. The company recently rebounded from its first-ever decline in users in the US and Canada. But overall, its global growth has slowed. The two countries account for 185 million daily users.”
  • “But Daniel Ives, chief strategy officer and head of technology research at GBH Insights, argues Facebook-owned Instagram-owned is more important to the parent company than Facebook itself when it comes to younger users.”
  • “‘Instagram has captured that demographic better than anyone could have expected,’ Ives said. The numbers highlight ‘why Instagram is one of the best tech acquisitions done in the past 15 years.'”

Entertainment

WSJ – Comedies’ Misfortunes Are No Laughing Matter for Hollywood – Ben Fritz 6/25

  • “Last year’s most successful adult comedy, Girls Trip, took in $117 million in the U.S. and Canada. The last time the year’s highest-grossing comedy grossed so little was 1995, when tickets cost 52% less on average.”
  • “It wasn’t an anomaly. The five most successful adult comedies grossed an average of $141 million in 2013, $109 million in 2015 and just $85 million last year.”
  • “So far in 2018, the biggest live-action comedy has been Game Night, which took in just $69 million. Melissa McCarthy’s Life of the Party, has grossed $52 million, her lowest-grossing comedy ever. Amy Schumer’s I Feel Pretty is finishing its box office run with $49 million, less than half of her debut hit Trainwreck. Action Point, from the producer and star of Jackass, has grossed just $5 million, compared with $117 million for Jackass 3-D in 2010.”
  • “Just five years ago, things were quite different. In 2013, Ms. McCarthy and Sandra Bullock’s The Heat and the raucous R-rated We’re the Millers each grossed more than $150 million domestically. Another movie with Ms. McCarthy, Identity Thief, was close behind with $135 million. Grown Ups 2, Anchorman 2, Bad Grandpa, This is the End and even the widely maligned Hangover Part III all exceeded $100 million in domestic ticket sales.”
  • “Now, the only major comedy hits are those made for children. Peter Rabbit, featuring computer-generated critters that outsmart real-life adults, grossed a healthy $115 million in February, and animated comedies like Despicable Me 3 and The Boss Baby were top grossers last year.”
  • The Incredibles 2, which mixes family-friendly action, comedy and drama, scored a massive $182.7 million in its opening weekend.”
  • “Though certain subgenres like romantic comedy have nearly disappeared, most studios aren’t yet abandoning adult comedy. They have, however, slashed spending on them so that they can potentially become profitable on lower grosses than were needed in the past. No comedy stars earn the $20 million per picture that Messrs. Carrey and Sandler and Ms. Roberts sometimes did in the past.”
  • Tag is a recent example of the new approach. Made for just $28 million, it features no major comedy stars and was sold primarily on its concept, a real-life story about grown friends in a decades long game of tag that was based on a Wall Street Journal article.”
  • “’There was a time when comedies were being made for $70 million. Then $45 million. Now the sweet spot is in the 20s,’ said Todd Garner, a producer of Tag who previously produced comedies starring Mr. Sandler.”

Environment / Science

Economist – Climate change is making the Arab world more miserable 5/31

  • “Apathy towards climate change is common across the Middle East and north Africa, even as the problems associated with it get worse. Longer droughts, hotter heatwaves and more frequent dust storms will occur from Rabat to Tehran, according to Germany’s Max Planck Institute for Chemistry. Already-long dry seasons are growing longer and drier, withering crops. Heat spikes are a growing problem too, with countries regularly notching lethal summer temperatures. Stretch such trends out a few years and they seem frightening—a few decades and they seem apocalyptic.”
  • “The institute forecasts that summer temperatures in the Middle East and north Africa will rise over twice as fast as the global average. Extreme temperatures of 46°C (115°F) or more will be about five times more likely by 2050 than they were at the beginning of the century, when similar peaks were reached, on average, 16 days per year. By 2100 ‘wet-bulb temperatures’—a measure of humidity and heat—could rise so high in the Gulf as to make it all but uninhabitable, according to a study in Nature (though its most catastrophic predictions are based on the assumption that emissions are not abated). Last year Iran came close to breaking the highest reliably recorded temperature of 54°C (129°F), which Kuwait reached the year before.”
  • “Water presents another problem. The Middle East and north Africa have little of it to begin with, and rainfall is expected to decline because of climate change. In some areas, such as the Moroccan highlands, it could drop by up to 40%. (Climate change might bring extra rain to coastal countries, such as Yemen, but that will probably be offset by higher evaporation.) Farmers struggling to nourish thirsty crops are digging more wells, draining centuries-old aquifers. A study using NASA satellites found that the Tigris and Euphrates basins lost 144 cubic kilometers (about the volume of the Dead Sea) of fresh water from 2003 to 2010. Most of this reduction was caused by the pumping of groundwater to make up for reduced rainfall.”
  • “Climate change is making the region even more volatile politically. When eastern Syria was ravaged by drought from 2007 to 2010, 1.5m people fled to cities, where many struggled. In Iran, a cycle of extreme droughts since the 1990s caused thousands of frustrated farmers to abandon the countryside. Exactly how much these events fueled the war that broke out in Syria in 2011 and recent unrest in Iran is a topic of considerable debate. They have certainly added to the grievances that many in both countries feel.”
  • “The mere prospect of shortages can lead to conflicts, as states race to secure water supplies at the expense of downstream neighbors. When Ethiopia started building an enormous dam on the Nile, potentially limiting the flow, Egypt, which relies on the river for nearly all of its water, threatened war. Turkish and Iranian dams along the Tigris, Euphrates and other rivers have raised similar ire in Iraq, which is beset by droughts.”
  • “Politics often gets in the way of problem-solving. Countries are rarely able to agree on how to share rivers and aquifers. In Gaza, where the seepage of saltwater and sewage into an overused aquifer raises the risk of disease, a blockade by Israel and Egypt has made it harder to build and run desalination plants. In Lebanon there is little hope that the government, divided along sectarian lines, will do anything to forestall the decline in the water supply predicted by the environment ministry. Countries such as Iraq and Syria, where war has devastated infrastructure, will struggle to prepare for a hotter, drier future.”

FT – China’s carbon emissions set for fastest growth in 7 years – Lucy Hornby and Leslie Hook 5/29

  • “China’s carbon emissions are on track to rise at their fastest pace in more than seven years during 2018, casting further doubt on the ability of the Paris climate change agreement to curb dangerous greenhouse gas increases, according to a Greenpeace analysis based on Beijing’s own data.”
  • “The latest finding comes as climate researchers express concern over rising emissions in China, which accounts for more than a quarter of global carbon dioxide output.”
  • “Global emissions were flat from 2014-16 but began rising again in 2017 as the Chinese economy recovered and as emission grew in the EU and the rest of Asia. Scientists are concerned the trend in China will continue this year.”
  • “Although China has invested heavily in renewable energy such as wind and solar, a key reason for its emissions growth is rising demand for oil and gas due to increased car ownership and electricity demand.”

Agriculture

WSJ – Daily Shot: CBOT Corn (Dec) Futures 6/25

WSJ – Daily Shot: CBOT Soybean Futures (Nov) 6/25

Asia – excluding China and Japan

FT – 1MDB says audits labelled unreliable by KPMG – Stefania Palma, Edward White and Michael Peel 6/25

  • “KPMG has said its annual audits of 1Malaysia Development Berhad from 2010 to 2012 were unreliable after information was withheld by former 1MDB managers, the scandal-hit fund said.”
  • “’If the documents had been disclosed to the auditors, KPMG believed the information would have materially impacted the financial statements and the relevant audit reports,’ the fund said in a statement on Tuesday.”
  • “The wealth fund, which was established in 2009 under then-prime minister Najib Razak, is the focus of a global corruption investigation, with authorities alleging that $4.5bn has gone missing.”
  • “The allegedly omitted audit details came to light after the new government of Mahathir Mohamad — which won power in a stunning election victory in May — released an auditor-general’s report into 1MDB that had been classified under the previous administration.”
  • “KPMG was sacked as 1MDB auditor at the end of 2013 after raising concerns about more than $2.3bn said to have been held in the Cayman Islands on behalf of the fund, according to an auditor-general draft report seen by the Financial Times in 2015.”
  • “The accounting firm was unhappy because 1MDB would not share documents KPMG wanted to help it assess the fund’s financial activities linked to the Caribbean islands.”

Russia

Economist – Russia’s role in shooting down an airliner becomes official 5/30

  • “It was an important demand, if one with little hope of success. On May 29th the Netherlands’ foreign minister, Stef Blok, insisted at the UN Security Council in New York that Russia ‘accept its responsibility’ in the downing of Malaysian Airlines flight MH17. The airliner was shot down by an anti-aircraft missile over Ukraine in 2014, killing 196 Dutch nationals, 38 Australians and 64 others. Last week a UN-mandated Joint Investigation Team (JIT), led by Dutch prosecutors, announced it had determined that the missile belonged to a unit deployed to the area by the Russian Army’s 53rd anti-aircraft brigade, presumably to help Russian-backed secessionists fighting the Ukrainian army.”
  • “The Kremlin has always denied any involvement in the downing of MH17 or the war in Ukraine. (Asked about the JIT’s findings, Mr Putin responded, ‘Which plane are you talking about?’) Instead it has spread conflicting alternative theories blaming the Ukrainians, often backed up with demonstrably fake evidence. But the investigators’ dossier is voluminous. It includes photos and video taken by passers-by that track the convoy carrying the missile from its base near Kursk, in Russia, to the Ukraine border. The JIT also has the fuselage of what appears to be the missile itself, recovered near the crash site. The Netherlands and Australia now say they will hold Russia accountable for its role, and want negotiations on a settlement.”

June 22, 2018

Perspective

WSJ – Growth in Retiring Baby Boomers Strains U.S. Entitlement Programs – Janet Adamy and Paul Overberg 6/21

Worthy Insights / Opinion Pieces / Advice

FT – The world’s progress brings new challenges – Martin Wolf 5/29

  • “Preserving peaceful relations in an era of rapid shifts in relative power is tough.”

Project Syndicate – Are We in a Corporate Debt Bubble? – Susan Lund 6/19

WSJ – Japan’s Yen: A Currency for All Seasons? – Richard Barley 6/21

WSJ – Why Home Prices Have Nowhere to Go But Up – Justin Lahart 6/20

  • “Low supply is keeping sales down despite higher rates and builders are in no rush to boost production.”

Markets / Economy

WSJ – Behemoths Have Dominated the Market Before, but Tech Is Different – James Mackintosh 6/14

Real Estate

FT – Blackstone remains global king of property funds – Chris Flood 6/2

WSJ – Daily Shot: Black Knight – US Foreclosure Starts 6/21

Finance

FT – The mystery trader who roiled Wall Street – Miles Johnson and Robert Smith 6/3

  • “Former Blackstone executive used complex credit derivatives to become a feared hedge fund manager but left behind a trail of recriminations.”

Education

NYT – The Numbers That Explain Why Teachers Are in Revolt – Robert Gebeloff 6/4

NYT – Top Colleges Are Cheaper Than You Think (Unless You’re Rich) – David Leonhardt 6/5

India

FT – Payments crunch pushes Indian power producers to brink of default – Simon Mundy and Kiran Stacey 6/20

  • “Possibility of writedowns hangs over banks still struggling from bad-loan crisis.”

June 21, 2018

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Too Big To Be Simple? – Ben Carlson 6/19

  • “…There is no such thing as too big to be simple.”
  • “Problems arise when ultra-wealthy people assume the normal rules don’t apply to them.”

A Wealth of Common Sense – Is The Handmaid’s Tale Fast Approaching – Ben Carlson 6/5

Economist – In praise of ranked-choice voting 6/14

  • “A simple reform might fix America’s dysfunctional politics.”

Economist – China has made progress in tackling financial risks – Leaders 6/16

FT – Beauty contest to host new Amazon base reveals ugly truths – Edward Luce 6/5

  • “Competition for ‘HQ2’ shows how hard it is to ensure city development benefits the poor.”

FT – How millennials became the world’s most powerful consumers – John Gapper 6/5

  • “They are the biggest global generation – and their choices are upending business from the US to China.”

Markets / Economy

WSJ – Food Companies Can’t Figure Out What Americans Want to Eat – Aaron Back 6/5

WSJ – The Other Yield Curve Investors Should Watch as Trouble Mounts – Richard Barley 6/19

Real Estate

Financial Advisor – Nuveen, Starwood, Griffin Follow Blackstone Into NAV REIT Market – Evan Simonoff 6/4

Energy

Economist – Global Coal Consumption 6/14

Health / Medicine

FT – Gaming disorder joins the WHO panoply of diseases – Anjana Ahuja 6/19

  • “Official recognition of social media addiction could well be next in line.”

Britain

FT – ‘Hellish’: UK motorists hit by biggest petrol price rise in 18 years – Camilla Hodgson 6/5

  • “Petrol prices jumped at the fastest pace in 18 years in May, with an average increase of 6p per liter from the previous month, according to roadside assistance and insurance company RAC.”
  • “Unleaded petrol rose from 123.43p to 129.41p ($6.46 per gallon) over the month, taking the cost of filling up a 55-litre (14.53 gallon) family car to £71.18 ($93.79), an increase of £3.29 in just one month, according to RAC Fuel Watch data.”
  • “Price rises were driven by a jump in oil prices combined with the weakening of the pound against the dollar, said RAC.”

China

FT – China’s debt collectors focus in on $200bn P2P debt pile – Don Weinland 6/4

  • “Debt collectors in China are harnessing new technologies such as artificial intelligence in a bid to collect on an estimated Rmb1.3tn ($200bn) debt bubble that has formed in the country’s peer-to-peer lending industry.”
  • “An estimated Rmb1.3tn in outstanding P2P debt as of May, according to online lending intelligence firm Wdzj.com, and a rising number of defaults have opened the door to a wave of start-ups using new technologies to try to recover tardy loans.”
  • “’People’s usage of P2P debt is very high but the government only monitors the banking system closely,’ said Cherry Sheng, chief executive of Shanghai-based debt collection group Ziyitong and a former manager at Citigroup and ANZ Bank. ‘This has become an opportunity for start-ups with advanced technology to move into this market.’”
  • “Ziyitong, which has sought to recover Rmb150bn since it was set up in 2016, recently launched an AI platform to help recover delinquent loans for some 600 debt collection agencies, and more than 200 lenders including Alibaba Group and Postal Savings Bank of China, Ms. Sheng said.”
  • The system scrapes the internet for information on borrowers and their friends, then contacts the borrower via phone using a dialogue robot. The conversations are recorded and analyzed by an algorithm that then determines the phrasing with the highest likelihood of pressuring the person to pay back the loan. The system also calls friends of the borrower and asks them to relay the urgency of making payments.”
  • “In May the AI system had a recovery rate of 41% for large clients on loans delinquent for up to one week, according to Ms. Sheng, compared with a rate of as low as 20% via traditional debt collection methods for similar loans. Ziyitong plans to expand the system to loans that have been unpaid for longer periods of time.”
  • “Yigou, another debt collection start-up, has launched a mobile phone application that allows collection agents to search thousands of individual debt records and choose cases, streamlining connections between lenders and collectors. The company can also provide geo-locational data on some borrowers to help the agents track them down.”

WSJ – China Tech Giants’ Costly Wars to Go Cashless – Stella Yifan Xie 6/14

Europe

WSJ – The Force Behind Europe’s Populist Tide: Frustrated Young Adults – Eric Sylvers 6/17

 

June 18, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Could Ocean’s 8 Actually Work? – James Tarmy 6/5

  • “Why stealing giant diamonds is a terrible, no good, very bad idea.”

Bloomberg Businessweek – Tears ‘R’ Us: The World’s Biggest Toy Store Didn’t Have to Die – Susan Berfield, Eliza Ronalds-Hannon, Matthew Townsend, and Lauren Coleman-Lochner 6/6

FT – Trump is trading on the protectionist mood – Rana Foroohar 6/10

  • “When even centrists are circling the wagons, we know we have entered a different world.”

FT – Forecasters have an awful record in predicting energy markets – Nick Butler 6/14

  • “Wider uncertainty increases appeal of large, low-cost power projects.”

WSJ – The Stock-Market Price Can Be Wrong. Very Wrong. – Jason Zweig 6/15

  • “Researchers have caught investors in the act of wildly – and unnecessarily – overpaying for a stock.”

WSJ – Venezuela’s Long Road to Ruin – Mary Anastasia O’Grady 6/10

  • “Few countries have provided such a perfect example of socialist policies in practice.”

Markets / Economy

NYT – Power Companies’ Mistakes Can Cost Billions. Who Should Pay? – Ivan Penn 6/14

  • “Utilities say they must be shielded from liability or the electric grid will suffer. Critics say that puts the burden on ratepayers, not investors.”

Real Estate

WSJ – Daily Shot: Bianco Research – Value of US Real Estate relative to GDP 6/15

WSJ – Daily Shot: John Burns RE Consulting – Burns Home Value Index 6/15

WSJ – Daily Shot: John Burns RE Consulting – Burns Intrinsic Home Value Index 6/15

Energy

WSJ – Global Investment in Wind and Solar Energy Is Outshining Fossil Fuels – Russell Gold 6/11

Finance

WSJ – Daily Shot: MagnifyMoney – Auto Loan Rates vs. Fed Funds Rate 6/15

WSJ – Daily Shot: MagnifyMoney – Student Loan Rates vs. Fed Funds Rate 6/15

Fishing

NYT – In the Philippines, Dynamite Fishing Decimates Entire Ocean Food Chains – Aurora Almendral 6/15

Construction

NYT – Piece by Piece, a Factory-Made Answer for a Housing Squeeze – Conor Dougherty 6/7

  • “The global construction industry is a $10 trillion behemoth whose structures determine where people live, how they get to work and what cities look like. It is also one of the world’s least efficient businesses. The construction productivity rate — how much building workers do for each hour of labor they put in — has been flat since 1945, according to the McKinsey Global Institute. Over that period, sectors like agriculture, manufacturing and retail saw their productivity rates surge by as much as 1,500%. In other words, while the rest of the economy has been supercharged by machines, computers and robots, construction companies are about as efficient as they were in World War II.”

WSJ – Historic Rise in Lumber Costs Ripples Through Economy – Ryan Dezember 6/5

Education

WSJ – Judges Wouldn’t Consider Forgiving Crippling Student Loans – Until Now – Katy Stech Ferek 6/14

  • “For decades, college debt was immune from the bankruptcy process. Judges are actively seeking ways to help debtors.”

Africa

NYT – Corruption Gutted South Africa’s Tax Agency. Now the Nation Is Paying the Price. – Selam Gebrekidan and Norimitsu Onishi 6/10

Britain

FT – Average-sized English homes too pricey for average earners – Judith Evans 6/15

China

FT – Tycoon abducted by China works with authorities to sell assets – Don Weinland and Lucy Hornby 6/10

  • “Xiao Jianhua (Tomorrow Group company) said to be detained in Shanghai a year after being seized in Hong Kong.”

Nikkei Asian Review – How Beijing is winning control of the South China Sea – Simon Roughneen 6/13

  • “Erratic US policy and fraying alliances give China a free hand.”
  • “What China is winning is de facto control of nearly the entire South China Sea, including all activities and resources in it, despite the other surrounding Southeast Asian states’ respective legal rights and entitlements under international law.” – Jay Batongbacal, director of the University of the Philippines Institute for Maritime Affairs and Law of the Sea
  • “At stake is the huge commercial and military leverage that comes with controlling one of the world’s most important shipping lanes, through which up to $5 trillion worth of trade passes each year.”

Europe

Bloomberg Businessweek – Italy’s Young Populists Are Coddling the Old – and Holding the Country Back – Peter Coy 6/6

  • “The country’s economic output is smaller now than it was in 2004, and employment policies are skewed to protecting jobs, not creating them. The number of Italians registered as living abroad rose 60% from 2006 to 2017, to almost 5 million. Among those who stay, it’s common for unemployed young people to live with their parents instead of starting their own families, which is one reason the country has one of the world’s lowest birthrates.”

South America

NYT – Workers Flee and Thieves Loot Venezuela’s Reeling Oil Giant – William Neuman and Clifford Krauss 6/14

Other Interesting Links

Tax Foundation – How High Are Beer Taxes in Your State? – Katherine Loughead 5/24

June 15, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – In investing, as in poker, following rules works best – Buttonwood 5/31

Markets / Economy

Economist – Central banks holdings of domestic government debt 5/31

WSJ – ECB to End Bond-Buying Program in December as Crisis-Era Policies Wind Down – Tom Fairless and Brian Blackstone 6/14

  • “The European Central Bank is closing a chapter on one controversial policy, government bond purchases, while extending the life of another: negative interest rates.”
  • “The central bank Thursday laid out plans to wind down its giant bond-buying program by the end of this year, but said it likely would wait ‘at least through the summer of 2019’ before raising its deposit rate, now at minus 0.4%.”

WSJ – Daily Shot: Deutsche Bank – US Budget Deficit Funding and % Holdings 6/14

Real Estate

WSJ – Daily Shot: Bloomberg – World’s Most Expensive Housing Markets Relative to Salary 6/12

WSJ – Daily Shot: Mary Meeker Internet Trends 2018 – Airbnb vs Hotel ADR 5/31

Wolf Street – Toronoto’s House Price Bubble Not Fun Anymore – Wolf Richter 6/4

Energy

WSJ – Daily Shot: US Total Crude Oil Production 6/14

Finance

FT – US fundraising for ‘blank cheque’ buyout vehicles hits record – Nicole Bullock 6/13

  • “Funds have been raised at a record rate in the US this year for shell companies that offer a ‘blank cheque’ to sponsors to pursue takeovers, providing further evidence of the rehabilitation of a controversial tool that waned in the wake of the financial crisis.”
  • “The so-called special purpose acquisition companies, or spacs, have raised $4.5bn so far in 2018 — the largest amount for this type of fundraising in the period, according to Dealogic, which began recording the deals in 1995. That followed a brisk 2017, the second strongest year on record with nearly $10bn sold.”
  • “The funds are placed in an interest-bearing account until a target is identified — and spac investors can get their money back if they do not approve of the acquisition. They are basically a bet that the sponsors can find a good company at a reasonable price.”
  • “Spacs offer investors, often hedge funds, a cash proxy with the option of the acquisition. Sponsors get a 20% stake in the acquired company, if investors approve it, for a nominal amount of money.”

WSJ – Daily Shot: BlackRock – Four big trends to drive ETF growth 5/31

Cryptocurrency / ICOs

WSJ – Daily Shot: Bianco Research – Cryptocurrency Market Caps as of June 11, 2018 6/14

Environment / Science

FT – Nikkei Asian Review: Thailand falls behind in global battle with plastic waste – George Styllis 6/13

  • “’Beating plastic pollution’ was the theme of World Environment Day on June 5, but Thailand is falling behind Asian and European countries in the fight against plastic waste.”
  • “The issue has been brought into focus after a dead whale was found last month to have swallowed 80 plastic bags.”
  • “The whale, found in Songkhla province, served as a reminder of Thailand’s problem with plastic, and the abject failures of the government and retail industry to bring the nation’s environmental consciousness in line with the rest of the world’s.”
  • “Thailand is the world’s sixth biggest contributor to ocean waste, while China is the largest. Thailand generates 1.03m tons of plastic waste per year, with over 3% of that finding its way into the ocean, Tara Buakamsri, Thailand country director for Greenpeace, told the Nikkei Asian Review.”
  • “Of the country’s total waste, plastic accounts for 12% — higher than China’s at 11%. A survey by the government in 2017 found that, on average, Thais each use eight plastic bags per day, which equates to about 198bn per year.”

China

WSJ – Daily Shot: PIMCO – China’s Contribution to Global Credit Creation 6/12

WSJ – Daily Shot: Trading Economics – Hong Kong Home Ownership Rate 6/12

May 29, 2018

If you were only to read one thing…

WSJ – The Tragedy of Venezuela – Anatoly Kurmanaev 5/24

  • “Last weekend, Venezuela’s President Nicolás Maduro dragged his Socialist government into a third decade in power by winning elections that were boycotted by the opposition, ignored by most of his countrymen and rejected by the international community. As sluggish voting drew to a close, a smiling and confident Mr. Maduro posted a video of himself waving not to throngs of adoring supporters but to a largely empty public square.”
  • By the end of 2018, it will have shrunk by an estimated 35% since 2013, the steepest contraction in the country’s 200-year history and the deepest recession anywhere in the world in decades. From 2014 to 2017, the poverty rate rose from 48% to 87%, according to a survey by the country’s top universities. Some nine out of 10 Venezuelans don’t earn enough to meet basic needs. Children die from malnutrition and medicine shortages. An estimated three million Venezuelans, 10% of the population, have left the country in the two decades of Socialist rule, almost half of them in the past two years, according to Tomás Páez, a researcher at the Central University of Venezuela.”
  • “If Mr. Maduro didn’t know when to stop the music, the idea for the endless party came from his predecessor, Hugo Chávez, who died just a month before I arrived in 2013. The strongman charmed his countrymen with a silver tongue, his love of dancing and singing and his disdain for the hated austerity packages imposed by previous Venezuelan presidents. As oil prices shot up in his last decade, Mr. Chavez not only failed to save any of the windfall but buried the country in debt.”
  • “Along the way, he imposed capital controls to try to stop money from fleeing the country. The arbitrary exchange rate system suffocated private enterprise and investment, but the poor got subsidized food and free housing. The middle class got up to $8,000 of almost-free credit card allowances a year for travel and shopping. And the rich and politically connected siphoned off up to $30 billion a year of heavily subsidized dollars through shell companies, according to the planning minister at the time.”
  • “The currency and price controls implemented by Mr. Chávez broke the basic link between supply and demand, creating surreal economic distortions. A business-class Air France return ticket from Caracas to my hometown in Siberia would cost me $400, yet a 15-year-old Suzuki jalopy with no air conditioning and 150,000 miles set me back $4,600.”
  • “Caracas in 2013 reminded me of a tropical version of the Soviet periphery. Basic goods like flour and aspirin had fixed prices and were so cheap that companies had no incentive to make them. When you did find them, it made sense to grab as much as you could carry. Who knew when you would find them again? Like Russia in the 1980s, people dealt with shortages by resorting to the black market, hoarding goods and trading perks of their jobs, like bureaucratic stamps of approval or access to car batteries, for other favors or products.”
  • “But Venezuela’s collapse has been far worse than the chaos that I experienced in the post-Soviet meltdown. As a young person, I was still able to get a good education in a public school with subsidized meals and decent free hospital treatment. By contrast, as the recession took hold in Venezuela, the so-called Socialist government made no attempt to shield health care and education, the two supposed pillars of its program. This wasn’t Socialism. It was kleptocracy—the rule of thieves.”
  • “In Venezuela, I saw children abandon schools that had stopped serving meals and teachers trade their lesson books for pickaxes to work in dangerous mines. I saw pictures of horse carcasses on the grounds of the top university’s veterinary school—killed and eaten because of the lack of food.”
  • “Hyperinflation, set to reach 14,000% this year, has transformed the most basic transactions into Kafkaesque trials. Cash is extremely scarce, card payment networks are overloaded, cell phone coverage is worse than in Syria, and online banking systems constantly crash because of underinvestment. Paying for a cup of coffee can take an hour.”
  • “The crisis has even made it harder for the ruling elite to enjoy its privileged status. Despite access to official dollars and the protection of security details, top apparatchiks now avoid the best restaurants, the plushest resorts and business-class lounges, where they fear encountering the hatred of their compatriots. Sanctions and fears of corruption probes have barred many of them from trips to the U.S. and much of Europe.”
  • “After 2016, I no longer had to travel to report on the toll of the economic crisis. It was visible all around me: in the sagging skin of neighbors, the dimming eyes of janitors and security guards, the children’s scuffles for mangos from a nearby tree. It is profoundly depressing to watch people you know grow thinner and more dejected day by day, year after year. When I look back at my five years in Venezuela, it’s not the time I spent covering riots, violent street protests or armed gangs that stirs the most feeling. It’s the slow decay of the people I encountered every day.”
  • “For most ordinary Venezuelans I know, Mr. Maduro’s foreordained victory last weekend snuffed out the last glimmer of hope that their lives can improve through democratic and peaceful means. What’s left is exile or further misery.”

Perspective

WSJ – Daily Shot: CNN – Global School Shootings Since 2009 5/25

Slate – Eighties Babies Are Officially the Brokest Generation, Federal Reserve Study Concludes – Jordan Weissmann 5/23

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – When Fees Go Up in Seconds, It’s Time to Go – Dina Isola 5/25

FT – New York property jitters herald declines elsewhere – Gillian Tett 5/24

  • “Clouds are hovering over New York’s housing market. A couple of years ago, property prices were spiraling ever higher — much like the new luxury skyscrapers now springing up in midtown Manhattan.”
  • “But estate agents say that sales volumes in the first quarter of 2018 were at their lowest level for six years. Meanwhile the median price per square foot was 18% lower than a year earlier, according to some reports.”
  • For those of you not living in Manhattan and that don’t own property there, you think, so what? The thing is … “last month the IMF published its first comprehensive analysis of global property and this suggests that real estate is becoming prone to synchronization too. Two decades ago, only 10% of property price movements could be blamed on global — not local — factors. Now it is 30%.”
  • “…What is striking is that this real estate synchronization is affecting urban centers in both emerging and advanced economies. Or as the report notes: ‘House prices in major cities outside the United States — Beijing, Dublin, Hong Kong SAR, London, Seoul, Shanghai, Singapore, Tokyo, Toronto and Vancouver — are positively associated with US house price dispersions’.”
  • “This might seem unsurprising. After all, the global elite hop across borders at dizzying speed. So does financial capital, and sentiment-shaping news. Meanwhile, the market capitalization of the real estate investment trust sector has tripled in the past 15 years, and large asset managers allocate on average of 11% of their portfolios to property.”
  • “This has made the housing market more ‘financialized’, since some investors are treating housing more like a tradeable asset, chasing yields around the world. No wonder that a decade of ultra-loose monetary policy in the west has lifted so many geographically dispersed real estate boats.”
  • “…the key point is this: if (or when) global financial conditions eventually become less benign, there will probably be downward movement in housing markets too, with some unexpected spillover effects.”
  • “Indeed, the most intriguing point in the IMF report is that ‘heightened synchronicity of house prices can signal a downside tail risk to real economic activity, especially when taking place in a buoyant credit environment’.”
  • “In plain English, this means that a correlated boom in global real estate markets can signal trouble ahead. We should keep a close eye on those estate agents’ reports in New York — as well as London or Hong Kong. The Big Apple’s jitters might yet be a canary in the coal-mine.”

FT View – A wise autocrat knows what he does not control 5/23

  • “Turkey’s president risks losing his fight with the financial markets.”

The Irrelevant Investor – Never Begin With the End in Mind – Michael Batnick 5/25

NYT – Elon Musk, the Donald of Silicon Valley – Bret Stephens 5/25

WSJ – Banks Won Big in Washington. What It Means for Investors – Jason Zweig 5/25

Real Estate

WSJ – Daily Shot: US Existing Homes Sales 5/24

WSJ – Daily Shot: NAR US Existing Homes Months Supply 5/25

WSJ – Daily Shot: Change in US Single-Family Homes Sales 5/25

WSJ – Daily Shot: Bloomberg – Zillow – Rise in Home Sales – Select markets 5/25

Energy

WSJ – Daily Shot: eia – US Average regular gasoline price 5/25

Shipping

FT – Maersk raises shipping rates as oil price spike bites – Joe Leahy and Richard Milne 5/24

  • “The world’s biggest container shipping group Maersk Line told customers it is raising prices in response to increased marine fuel costs, showing how the surge in oil prices to their highest levels in four years is rippling through the global supply chain.” 
  • “Bunker prices, as marine fuel is known, have risen more than 20% since the start of the year, and in Europe have hit $440 per metric ton, the highest since 2014. That has forced Maersk to introduce an ’emergency bunker surcharge’, the company told customers in a note.” 

Education

WSJ – Mike Meru Has $1 Million in Student Loans. How Did That Happen? – Josh Mitchell 5/25

  • “Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department. Five years ago, 14 people owed that much.”
  • “More could join that group. While the typical student borrower owes $17,000, the number of those who owe at least $100,000 has risen to around 2.5 million, nearly 6% of the borrowing pool, Education Department data show.”
  • “For graduate-school students especially, there is little incentive for universities to help put the brakes on big borrowing. The government essentially allows grad students to borrow any amount to cover tuition and living costs, with few guardrails on how the final sum will be repaid.”
  • “More than a third of borrowers from one of the government’s main graduate school lending programs have enrolled in some form of federal loan-forgiveness plan.”
  • “Dental school is the costliest higher-education program in the U.S. Private nonprofit schools during the 2015-2016 school year charged an average of $71,820 a year, the Urban Institute found. The USC program now costs $91,000 a year, and $137,000 when living expenses are included.”
  • “Mr. Meru’s financial records—provided to The Wall Street Journal—show he borrowed $601,506 to attend USC—a debt swelled to more than $1 million by fees and interest.”

Asia – excluding China and Japan

FT – Malaysia police seized $28.6m cash in 1MDB probe raid – Ben Bland 5/25

  • “The cash confiscated last week from a luxury Kuala Lumpur apartment linked to the 1Malaysia Development Berhad investigation was worth RM114m ($28.6m), Malaysian police said on Friday.”
  • “The hoard, composed of Malaysian ringgit, US dollars and 24 other currencies, was seized alongside 284 luxury handbags and 37 other bags full of jewelry and watches from an empty apartment at the Pavilion Residences condominiums.”
  • We’re talking liquid-hard currency…
  • “Amar Singh, the head of the commercial crime unit, said it took police and 21 officers from Malaysia’s central bank three days to count the stash, which is now being held in the bank’s vaults.”

Japan

WSJ – In Booming Japan, the Phillips Curve Is Dead – Greg Ip 5/23