Tag: Japan

October 11, 2017

Perspective

WSJ – Daily Shot: Spanish Empire at its Peak 10/10

  • “Since Monday was Columbus day, here is the size of the Spanish Empire at its peak (in 1790).”

WSJ – America’s Retailers Have a New Target Customer: The 26-Year-Old Millennial – Ellen Byron 10/9

VC – How Americans Differ by Age – Jeff Desjardins 10/10

Worthy Insights / Opinion Pieces / Advice

A Teachable Moment – How To Make $5,300 In Commissions on a $43,000 Retirement Account – Anthony Isola 10/9

  • If you are a teacher or have family or friends that are teachers, you should read this. Make sure you’re or they’re not getting fleeced.

NYT – The N.F.L Draft: A Study in Cockeyed Overconfidence – David Leonhardt 4/25/05

  • A worthwhile look at the research that Richard Thaler and Cade Massey did regarding overconfidence.

The Irrelevant Investor – The Price of Progress – Michael Batnick 10/10

  • “The economic machine that we’ve built in the United States has done extraordinary things and I can’t wait to see what we come up with in the future. But what do we do when progress leaves so many behind?”

Markets / Economy

NYT – China Hastens the World Toward an Electric-Car Future – Keith Bradsher 10/9

Economist – American entrepreneurs have not lost their mojo 10/10

  • “Business formation is down, but fast-growing startups are in high gear.”

Energy

FT – Saudi Arabia curbs oil exports to combat glut – Anjli Raval 10/9

  • “Saudi Arabia is allocating fewer barrels of crude for export next month and at a level below current demand, emphasizing the effort by global producers to reduce surplus inventories.”
  • “In a rare statement, the Ministry of Energy on Monday said contracted demand for Saudi crude for November was 7.7m barrels a day, but the kingdom has assigned just 7.2m b/d for export.”
  • “The disclosure of Saudi Arabia’s monthly allocations emphasizes a new focus on foreign sales, alongside production, that Riyadh deems vital to the effort by global producers to reduce surplus inventories.”
  • “’It is very interesting they are now trying to communicate to the market about exports,’ said Olivier Jakob at consultancy Petromatrix. ‘They have gone the extra step of putting out numbers on this, which is the first I’ve ever seen.’”

Finance

WSJ – Daily Shot: Hedge Fund Research – Hedge Fund Fees 10/10

WSJ – Daily Shot: Bitcoin 10/9

  • Bitcoin is rallying again.

WSJ – Daily Shot: Investing.com – Bitcoin Cash 10/10

  • “On the other hand, Bitcoin’s less fortunate twin called Bitcoin Cash has collapsed.”

India

FT – Modi’s pursuit of black money proves drag on India’s economy – Amy Kazmin 10/9

  • “For many Indians the powerful appeal of Narendra Modi, the prime minister, stemmed from his vows to tackle two issues of fierce public concern: the sluggish economy and entrenched corruption.”
  • “But India’s economy has faltered, with growth falling steadily since early 2016 to a three-year low of 5.7% in the second quarter of this year.”
  • “Now, some economists are suggesting Mr Modi’s two big goals are at odds, and that New Delhi’s zealous anti-corruption drive — which reached its apogee with a draconian cash ban — is sapping India’s economic momentum.”
  • “Though disruptive, demonetization failed to purge black money from the economy, because nearly 99 per cent of the cancelled bank notes were deposited or exchanged, rather than being furtively destroyed as forecast.”
  • “Now New Delhi is toughening its stance, with tax officials probing 1.8m individuals or businesses whose cash deposits after demonetization were out of sync with their past tax returns.”
  • “While the quest to unearth Indians’ illicit wealth remains politically popular, economists say it has come at a cost, souring business and consumer sentiment. It is considered one reason why private investment — which has driven past Indian booms — remains stubbornly flat.” 
  • “‘If you’ve got income tax authorities charged up and told to after black money, who is going to invest in a big way?’ said one economist who asked not to be identified given the issue’s sensitivity.”
  • “’The Chinese call this ‘the original sin’ problem,’ he added. ‘Every company has something buried in the past — a sin it has committed. If the government really wants to go after people, it can always find something.’”
  • “Demonetization severely disrupted the property market, previously a favorite parking place for black money and a big growth engine. Real estate prices and sales plunged and, though sales are picking up, there is a huge overhang of unsold inventory.”

Japan

NYT – Kobe Steel’s Falsified Data Is Another Blow to Japan’s Reputation – Jonathan Soble 10/10

  • “For decades, Japanese manufacturers of cars, aircraft and bullet trains have relied on Kobe Steel to provide raw materials for their products, making the steel maker a crucial, if largely invisible, pillar of the economy.”
  • “Now, Kobe Steel has acknowledged falsifying data about the quality of aluminum and copper it sold, setting off a scandal that is reverberating through Japan and beyond, and casting a new shadow over the country’s reputation for precision manufacturing, a mainstay of its economy.”
  • “Companies ranging from the automakers Toyota Motor and Honda Motor to aircraft companies like Boeing and Mitsubishi Heavy Industry said they were investigating the use of rolled aluminum and other materials from Kobe in their products. They also said they were trying to determine if substandard materials had been used in their products and, if so, whether they presented safety hazards.”
  • “Kobe Steel said on Sunday that employees at four of its factories had altered inspection certificates on aluminum and copper products from September 2016 to August this year. The changes, it said, made it look as if the products met manufacturing specifications required by customers — including for vital qualities like tensile strength — when they did not.”
  • “Kobe Steel added that it was examining other possible episodes of data falsification going back 10 years. It did not provide details about the size of the discrepancies it had discovered, making it difficult to immediately determine if they posed a safety threat.”
  • “Kobe Steel’s problem points to ‘a common organization issue,’ said Shin Ushijima, a lawyer who serves as president of the Japan Corporate Governance Network. He drew parallels between Kobe Steel and Takata and Mitsubishi, as well as with financial-reporting improprieties at Toshiba, which admitted to overstating profit in 2015.”
  • “’Boards aren’t doing their jobs,’ he said. ‘This isn’t an issue that can be solved by the president resigning. There needs to be wholesale change.’”
  • “He continued, ‘The Kobe Steel case is a test of whether we’ve learned anything from Toshiba and these other issues.’”

Mexico

FT – Mexicans hope earthquake will shake up corrupt system – Jude Webber 10/9

  • “There are disasters waiting to happen, says Eduardo Reinoso, a civil engineer who has studied compliance with building codes introduced after 1985. He blames not only corruption and incompetence but also a culture of impunity that has encouraged people to build or modify their homes without planning permission because of a belief they can get away with it.”
  • “As Gabriel Guerra, a former diplomat and government official, put it: ‘Our collective negligence and corruption is coming back to bite us where it hurts.’”

October 9, 2017

Perspective

NYT – Nothing Divides Voters Like Owning a Gun – Nate Cohn and Kevin Quealy 10/5

Worthy Insights / Opinion Pieces / Advice

NYT – For Many on Puerto Rico, the Most Coveted Item is a Plane Ticket Out – Jack Healy and Luis Ferre-Sadurni 10/5

A Wealth of Common Sense – Good Advice vs. Effective Advice – Ben Carlson 10/5

WP – The troubling case of the young Japanese reporter who worked herself to death – Eli Rosenberg 10/5

WSJ – Income Investors: It’s OK to Be Sad, But Don’t Get Desperate – Jason Zweig 10/6

  • “Old bull markets don’t produce new ideas. They just produce new ways for investors to hurt themselves with old ideas.”
  • “With stocks at record highs and the income on bonds not far from record lows, circumstantial evidence suggests investors are getting restless — if not desperate.”
  • “Chasing ‘yield,’ or trying to get higher investment income, is one form of desperation. Last month, $1.6 billion in new money poured into exchange-traded funds holding high-yield corporate bonds, according to FactSet.”
  • “A recent survey of 750 individual investors by Natixis Global Asset Management found that they ‘need’ returns of 8.9%, after inflation, to reach their financial goals. In the same survey last year, investors said they needed a mere 8.5%. Since 1926, the return on U.S. stocks after inflation has averaged about 7% annually, according to Morningstar.”
  • “Such hankering for unrealistic returns can prompt investors to take imprudent risks. Just about any get-rich-quick story can look tempting.”
  • “This past week, an obscure Nasdaq-listed company called Bioptix, which had been licensing fertility hormones for cows, horses and pigs, announced that it was getting into the cryptocurrency business and changing its name to Riot Blockchain. The stock nearly doubled over its levels a week earlier.”
  • “This reminds market veterans of the dozens of companies that changed their names to include ‘Internet’ or ‘.com’ in 1998 and 1999. They outperformed comparable firms by an average of 53 percentage points in the five days surrounding the announcement of a name change, a study found in 2001.”
  • “Consider, too, Strategic Student & Senior Housing Trust, Inc., a firm in Ladera Ranch, Calif., looking to raise $1.1 billion to buy properties that serve college students and the elderly around the U.S.”
  • “Strategic’s prospectus for the offering, filed with the Securities and Exchange Commission on Sept. 26, says the firm will seek to ‘provide regular cash distributions to our investors’ and to sell out, merge with another company or go public within three to five years.”
  • “In the meantime, public investors are being asked to pay up to $10.33 for shares that the company has been selling to a select group of private investors for $8.50. Commissions and fees can exceed 10%, depending on the class of shares.”
  • “Strategic, which commenced operations only on June 28, is a ‘blind pool,’ meaning that the firm hasn’t yet determined what it will invest the proceeds of the offering in. Investors thus can’t ascertain the quality of the assets their money will buy. Strategic’s prospectus also says: ‘There is currently no public market for our shares and there may never be one’.”
  • “At times like these, reaching for yield and taking bigger risks might pay off for a few speculators in the short run. Investors, however, should hoard their cash and remember that in the long run it doesn’t pay to chase returns greater than the markets can realistically provide.”

Bloomberg View – A Volatility Trap Is Inflating Market Bubbles – Alberto Gallo 10/5

FT – Puerto Rico’s recovery depends on debt forgiveness – Gillian Tett 10/5

  • “Either way, the saga should be a wake-up call to investors. Yes, hurricanes may be rare. But Puerto Rico is not the only arena in which asset managers have chased after high yields with scant regard for risk. Just look at emerging markets and the high yield corporate bond world. If the tragedy in Puerto Rico shakes investors out of their complacency, that would be a thoroughly good thing — and long overdue.”

Markets / Economy

Yahoo Finance – U.S. economy loses jobs in September for first time 2010 – Myles Udland 10/6

Bloomberg Businessweek – Warren Buffett and Truck Stops Are a Perfect Match – Tara Lachapelle 10/3

Energy

Bloomberg – Solar Grew Faster Than All Other Forms of Power for the First Time – Anna Hirtenstein 10/4

  • “Solar power grew faster than any other source of fuel for the first time in 2016, the International Energy Agency said in a report suggesting the technology will dominate renewables in the years ahead.”
  • “The institution established after the first major oil crisis in 1973 said 165 gigawatts of renewables were completed last year, which was two-thirds of the net expansion in electricity supply. Solar powered by photovoltaics, or PVs, grew by 50%, with almost half of new plants built in China.”
  • “The IEA expects about 1,000 gigawatts of renewables will be installed in the next five years, a milestone that coal only accomplished after 80 years. That quantity of electricity surpasses what’s consumed in China, India and Germany combined.”
  • “The surge of photovoltaics in China is largely due to government support for renewables, which are being demanded by a population concerned about air pollution and environmental degradation that has led to deadly smogs. The country is seeking to reduce its reliance on coal and has become the world’s largest market for renewables, particularly solar.”
  • “’The solar PV story is a Chinese story,’ said Paolo Frankl, head of the IEA’s renewable energy division. ‘China has been for a long time the leader in manufacturing. What’s new is the share in the market. This year, it was equivalent to the total installed capacity of PV in Germany.’”
  • “The U.S. and India are among other nations pushing renewables. They along with China are projected to make up two-thirds of the clean-energy expansion worldwide. Despite President Donald Trump’s vow to bolster coal’s position in the power market, the U.S. is expected to be the second-largest market for renewables.”

Finance

WSJ – Daily Shot: Evercore ISI – US Corporate Debt as Percentage of GDP 10/6

VC – The Trillion Dollar Club of Asset Managers – Jeff Desjardins 10/6

Health / Medicine

NYT – As Overdose Deaths Pile Up, a Medical Examiner Quits the Morgue – Katharine Q. Seeyle 10/7

Other Links

VC – U.S. Interstate Highways, as a Transit Map – Jeff Desjardins 10/6

September 8, 2017

Perspective

WSJ – Daily Shot: US Auto Fuel Efficiency 9/7

NYT – An Enormous, Urgent Task: Hauling Away Harvey’s Debris – John Schwartz and Alan Blinder 9/6

  • “Of all the challenges that southeast Texas faces after Hurricane Harvey, few will linger longer or more visibly than the millions of pounds of debris already crowding curbs and edging onto streets. The cleanup, needed from northeast Houston’s neighborhoods to the wealthy suburbs southwest of the city, will take months and cost billions of dollars.”
  • “At the same time, Houston officials are asking residents to separate their Harvey-related waste into five piles: appliances; electronics; construction and demolition debris; household hazardous waste; and vegetative debris. A look at these streets suggested that few people seemed to be heeding the city’s pleas.”
  • “Other cities have been through this battle with a storm’s leavings. After floodwaters inundated East Baton Rouge Parish, La., last year, crews collected about two million cubic yards of debris. Superstorm Sandy, in 2012, led to about six million cubic yards of debris in New York State — the equivalent of four Empire State Buildings, according to the Federal Emergency Management Agency. Katrina left behind 38 million cubic yards. Getting the stuff gone is a long process. It was only last month that Baton Rouge finished the debris removal process it organized in the wake of last year’s flooding there.”
  • “In Houston, where city officials say that some eight million cubic yards of debris will need to be hauled away, collection is farther along in some neighborhoods than in others.”
  • “The job of deciding how to move these mountains has been left to county and local officials, who hire debris removal companies to help them dig out. FEMA will reimburse the local governments for 90% of the cost.”

Economist – How government policy exacerbates hurricanes like Harvey 9/2

  • “The bad news is that storms and floods still account for almost three-quarters of weather-related disasters, and they are becoming more common. According to the Munich Re, a reinsurer, their number around the world has increased from about 200 in 1980 to over 600 last year. Harvey was the third ‘500-year’ storm to strike Houston since 1979.”
  • In regard to encouraging less than desirable behavior, “the National Flood Insurance Program (NFIP) has been forced to borrow because it fails to charge enough to cover its risk of losses. Underpricing encourages the building of new houses and discourages existing owners from renovating or moving out. According to the Federal Emergency Management Agency, houses that repeatedly flood account for 1% of NFIP’s properties but 25-30% of its claims.”

Worthy Insights / Opinion Pieces / Advice

Economist – Lexington: Our columnist bids farewell 9/7

  • “After five years, which included reporting trips to 46 states, this Lexington offers some parting thoughts on American politics.”

Economist – How to provide a protein-rich diet to a growing population 8/31

  • “What goes onto people’s plates matters. So does what gets fed to animals.”

Markets / Economy

WSJ – Daily Shot: Goldman Sachs – Ownership of US equity market since 1945 9/7

NYT – Milestone for BMI: More Than $1 Billion in Music Royalties – Ben Sisario 9/7

  • “The organization, whose hundreds of thousands of members include stars like Taylor Swift, Ed Sheeran and Sting, announced on Thursday that it had $1.13 billion in revenue and distributed $1.02 billion in royalties during its most recent fiscal year, which ended in June. BMI and other performing rights organizations, like its rival Ascap, collect money whenever songs are played on the radio, streamed online or piped into a restaurant.”

Real Estate

Bloomberg Quint – India Trumps Hong Kong as No. 1 for Home-Price Gains in Asia – Pooja Thakur 9/6

  • But when you look at the last 5 years…

Finance

WSJ – Daily Shot: Global High-Yield (HY) Corporate Bond Issuance 9/7

Bloomberg – Bennett Goodman Builds $95 Billion Credit Machine – Nabila Ahmed, Sridhar Natarajan, and David Carey 9/5

China

WSJ – China’s Bad Banks Show It Still Has a Big Bad Loan Problem – Anjani Trivedi 9/7

  • “There are Chinese banks and then there are China’s bad banks. To understand just how worrying the country’s bad-loan problem has become, it’s worth taking a look at the latter.”
  • “China Cinda Asset Management , the second-largest of four asset managers set up in the 1990s to clean up China’s then already large pile of souring loans, is still at it two decades on, managing and restructuring distressed assets offloaded by banks. The company’s latest results offer a lens into the rapidly deteriorating asset quality in China, that’s at odds with the relatively rosy picture of China painted for investors by its near-7% growth and corporate profits that have surged to multiyear highs.”
  • “The current pace at which Cinda is acquiring distressed assets is far outpacing the rate at which it can dispose of these assets. That has pushed down the price at which it can sell bad-loan portfolios to close to 20 cents on the dollar from 30 cents this time last year. Its income from disposing bad assets dropped 64% on the year, with returns on restructured assets falling to 8.7%in the first half from 10.6% a year ago. Losses from impairments on its assets more than doubled in the first half, driven by a more-than 10-fold increase in provisions.”
  • “These trends suggest China’s bad-loan problem is rather more severe than investors would guess from looking at the big banks’ results: The likes of ICBC and Bank of China actually reported improving nonperforming loan ratios in the first half. One reason they were able to do so is that they have been offloading bad assets to the likes of Cinda, which picks up around 60% of its distressed assets from the big banks.”

Japan

Bloomberg – Japanese Companies Cut Bonuses, Pushing Overall Wages Lower – Yuko Takeo and Yoshiaki Nohara 9/5

Russia

FT – Russia seeks to close Ukraine’s window to the west – Jeffery Mankoff and Jonathan Hillman 9/6

  • “Last month, Russia completed a railway that bypasses Ukraine. The project was entrusted to a special military unit and completed a year ahead of schedule, underscoring its importance to the Kremlin. It is the latest of several Russian-led infrastructure projects that, coupled with the devastation wrought by the conflict with Russian-backed separatists in the Donbas region, risk turning Ukraine, historically a bridge between east and west, into an island.”
  • “Isolation from emerging east-west connectivity could be one of the most enduring and most damaging consequences of the war for Ukraine, one that both Kiev and its western partners need to pay more attention to overcoming.”
  • “A UN assessment in November 2014 found that 53 bridges, 45 road sections, and 190 railway facilities had been damaged. Altogether, infrastructure losses were estimated at $440m, and while some repairs have been carried out, funding constraints and security challenges have limited reconstruction.”
  • “For both sides in the conflict, altering patterns of trade and transit is a means of shaping Ukraine’s political and economic destiny. While military forces have destroyed critical infrastructure such as bridges and railways, the governments in both Kiev and Moscow are building new connections that will re-orientate trade flows.”

South America

WSJ – Daily Shot: Brazilian CPI YoY Change 9/7

  • “Brazil’s CPI was lower than expected, which solidified the expectations for another rate cut.”

September 6, 2017

If you were to read only one thing…

FT – China rewrites history with new censorship drive – Ben Bland 9/4

  • “First it put the squeeze on ideologically impure academics. Then it tried to censor foreign publishers such as Cambridge University Press. Now President Xi Jinping’s government is intensifying its drive to rewrite Chinese history by amending the archival record itself.”
  • “New research by a legal scholar reveals that Chinese authorities have been taking advantage of the digitalization of historical documents by systematically deleting Chinese journal articles from the 1950s that challenge the orthodoxy promoted by Mr. Xi.”
  • “In the past if someone wanted to censor, they had to go to the bookshelves and remove copies or pages but today, with a few keystrokes, you can wipe out content everywhere instantaneously.” – Glenn Tiffert, University of Michigan
  • “Mr. Tiffert said that digitalization has become an enabling tool for authoritarian regimes such as China, which has taken the lesson from the collapse of the Soviet Union that Communist governments ‘may not survive critical scrutiny’.”
  • “Although the Communist party has always tried to keep a tight grip on the historical narrative, Zhang Qianfan, a professor of constitutional law at Peking University, said it was getting worse, making ‘society and particularly the younger generations more ignorant about modern history’.”

Perspective

WSJ – Daily Shot: Business Insider – 17 US Companies with Biggest Cash Piles 9/4

WSJ – Daily Shot: recode – Tech companies lead in R&D spending 9/4

Statista – America’s Fattest States – Niall McCarthy 9/4

Bloomberg Businessweek – Love of Coastal Living Is Draining U.S. Disaster Funds – Christopher Flavelle 8/31

  • “Founded (the National Flood Insurance Program – NFIP) in 1968 to make sure homeowners in flood-prone areas could get affordable insurance, the program ends up paying most residential flood insurance claims in the U.S. Partly as a result, development along coasts and riverbanks and in flood plains has exploded over the past 50 years. So have claims for flood damages. The NFIP is now about $25 billion in debt.”
  • “The issues surrounding the NFIP go beyond just insurance and straight to the costs of climate change—specifically, whether the government will concede that the most vulnerable places simply can’t be protected. While hurricanes contribute greatly to costs, putting a sudden spotlight on the insurance issue, it’s the chronic flooding that happens away from the public eye, in places such as Dauphin Island (Alabama), that slowly drains the NFIP. The island has one of the country’s highest concentrations of houses that the Federal Emergency Management Agency calls ‘severe repetitive loss’—those that flood most often. The owners of those 84 properties have gotten almost $17 million since 1978, an average of $199,244 each.”
  • Of course, they’re not alone. “Last year the Natural Resources Defense Council won a lawsuit seeking to uncover how many homes FEMA has designated severe repetitive loss. The data the agency was forced to release showed that about 30,000 properties had cost taxpayers $5.5 billion since 1978.”

Worthy Insights / Opinion Pieces / Advice

Project Syndicate – The Normalization Delusion – Adair Turner 9/4

  • “The psychological bias to expect a return to ‘normality’ will remain strong. But the drivers of post-crisis economic performance are so deep that no return to normality is likely any time soon.”

Real Estate

WSJ – Daily Shot: FRED – Total Private Construction Spending – Office 9/4

Finance

Bloomberg Gadfly – China Herds ICO Cats – Tim Culpan 9/3

  • “The declaration Monday by China’s central bank that initial coin offerings are illegal and should be halted immediately shouldn’t come as any surprise.”
  • “Beijing had been mulling a plan for controlling this year’s boom in cryptocurrencies, with QQ.com reporting last week that authorities met with the chief securities and banking watchdogs. The state-endorsed National Internet Finance Association had also warned that ICOs pose a financial risk and may disrupt social economic order.”
  • “More than $1.8 billion has been raised through the 135 initial coin offerings listed at CoinSchedule this year.”

Tech Crunch – Cryptocurrencies have crashed 20% in two days – Fitz Tepper 9/4

  • “The cryptocurrency correction may have started.”
  • “After months of unprecedented appreciation, almost every digital currency is seeing double digit losses over the last 48 hours.”
  • “The cryptocurrency market as a whole has lost 20% in just two days as it fell to $142 billion, down from a total market cap of about $180 billion on Saturday.”
  • “Of course it’s important to put things into context – this ‘crash’ still leaves Bitcoin at double the price it was just four months ago. But it shows why ‘investing’ in cryptocurrencies isn’t for the faint of heart.”
  • “So why did cryptocurrency crash this weekend? A few reasons:”
  • “This morning China outlawed ICOs, saying they have ‘seriously disrupted the economic and financial order.’ Whenever a government sanctions bitcoin or cryptocurrencies the market always takes a hit, especially right after the SEC warned against the legality of some ICOs.”
  • “Another possibility – the market was simply overheated. This crash started right around the time Bitcoin hit an all-time high of a few dollars under $5,000. In other words this may be a natural cool down – if you look at Bitcoin’s history periods of rapid growth are always followed by some type of downturn – the same thing happens when traditional equities rapidly appreciate.”

China

FT – Hanergy founder disqualified from Hong Kong markets for 8 years – Lucy Hornby 9/4

  • “Li Hejun, the entrepreneur and founder of solar energy group Hanergy who was briefly China’s richest man, has been disqualified from the management of any corporation in Hong Kong for eight years.”
  • “In a series of investigative reports into Hanergy in 2015, the Financial Times detailed creative use by its Hong Kong listed subsidiary Hanergy Thin Film Power of unpaid receivables from its parent to book profits, its reliance on China’s shadow banking market for funding and the tendency of its shares to book all their gains in the last 10 trading minutes of each day.”
  • “The Hanergy investigation drew attention to the role of shell companies in Hong Kong small-caps and the conflicts of interest between Hong Kong-listed businesses and the mainland Chinese parent companies that draw financing from the Hong Kong market without being subject to its disclosure rules.”

Japan

Bloomberg View – How Japan Needs to Change to Welcome Immigrants – Noah Smith 9/3

August 30, 2017

Perspective

WSJ – Daily Shot: Houston is on some the nation’s least absorbent soil 8/29

Worthy Insights / Opinion Pieces / Advice

NYT – Harvey, the Storm That Humans Helped Cause – David Leonhardt 8/29

FT – A happier Japan is a concern for investors – Leo Lewis 8/28

  • “A record 74% of Japanese are satisfied with their lives, and, for the first time in two decades, a majority are content with their income, says a Cabinet Office survey.”
  • “The trouble with all this reported satisfaction, from a market point of view, is that it has happened too early.”
  • “One of the biggest fears is that a too-easily-pleased Japan will lose its hunger for serious reform and salary increases after a couple of years of superficial tinkering. That would undermine many of the big thematic investment cases that have been in place since 2013 — corporate governance reform, womenomics, unwinding of cross-shareholdings and inducing Japanese households to take more investment risk.”
  • On top of that Japanese corporates are basking in the limelight again. “The danger is that, in the glow of public satisfaction they are tending back to the investor-repellent habit of hoarding cash away from the pockets of both their shareholders and employees.”

FT – China’s tech groups are building too much power – Henny Sender 8/28

  • “There is no Silicon Valley comparison to the dominance of Alibaba and Tencent.”

Markets / Economy

FT – US home ownership fall hits young and minorities hardest – Lauren Leatherby 8/28

Energy

WSJ – Harvey’s Lessons for America’s Stretched Energy Infrastructure – Spencer Jakab 8/28

  • “For more than 40 years, the U.S. has worried about the security of its oil supply. Hurricane Harvey is another reminder that the infrastructure that processes and delivers oil is in many ways more important.”
  • “The U.S. has 141 operable oil refineries today, which is 79 fewer than 30 years ago. Those refineries have nearly 30% more capacity and are used much more heavily, about 90% on average over the past 12 months. The heaviest concentration is along the Gulf Coast where the industry has deep roots and has been allowed to expand. Harvey has temporarily knocked out about 15% of U.S. refining capacity.”

Finance

FT – Wall St’s top bankers sell own groups’ shares as Trump rally reverses – Ben McLannahan 8/27

  • “Wall Street analysts have been urging investors all year to buy stocks in the big US banks. But Wall Street itself is not listening.” 
  • “Executives and board members at the top six US banks have been consistent sellers of their own banks’ shares this year, according to an Financial Times analysis of disclosures tracked by Bloomberg.” 
  • “Insiders at the big six banks by assets — JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley — have in total sold a net 9.32m shares on the open market since the turn of the year. Even excluding Warren Buffett’s big dumping of shares in Wells in April, to avoid tripping over rules capping ownership by a non-bank, sales by insiders outnumber purchases by about 14 to one.” 
  • “That is an unusually long streak of net sales, across each of the big six. Last year, for example, insiders at JPMorgan, Citigroup and Bank of America bought more shares than they sold.”

Environment / Science

FT – Blue dogs of Mumbai expose poor pollution controls – Simon Mundy 8/28

  • “Roaming packs of stray dogs are an established part of the landscape of Taloja, an industrial district to the north-east of Mumbai. But when a group of them turned blue this month, environmental activists sounded the alarm at this vivid evidence of industrial failure to adhere to proper standards of pollution control.”
  • Photo from National Geographic
  • “Investigation of the phenomenon by Mumbai’s pollution control board (MPCB) led it to a more prosaic explanation: the dogs had wandered into the grounds of a factory run by Ducol Organics, a local paint and plastic producer.”
  • “The outcry over the colored dogs reflects rising concerns about pollution in India. A study in February by the US-based research group Health Effects Institute found that India was poised to overtake China as the country with the most deaths caused by air pollution.” 
  • “A study this year by researchers at the Indian Institute of Technology in Mumbai estimated premature deaths due to air pollution in Mumbai rose 62% to 32,014 between 1995 and 2015, outstripping the 41% population increase in the same period.”
  • “In New Delhi — which according to some estimates has the worst air of any major city in the world — the estimated death toll rose 147%, to 48,651.”

Economist – Louisiana fights the sea, and loses 8/26

  • “Between 1932 and 2010 the state [Louisiana] lost more than 1,800 square miles (470,000 hectares) of land to the sea, representing about 80% of America’s coastal erosion over the period. Recent losses have been especially severe because of an increase in big storms raging in from the Gulf of Mexico—such as Hurricane Katrina, in 2005, which led to the inundation of New Orleans and 1,836 deaths. Between 2004 and 2008 alone, Louisiana shrank by more than 300 square miles.”
  • For reference to the Hawaii readers, Oahu is 597 square miles and Maui is 727 square miles.
  • “According to a new report by RAND Corporation, a think-tank, infrastructure in the state worth up to $136bn could be threatened by land loss and increased storm damage, a related threat.”
  • “Starved of silt, and with less new organic matter to counteract its settling, coastal Louisiana is sinking back into its former watery state. Meanwhile, because of melting polar ice caps and thermal expansion, the sea level is rising. In the past decade the observed relative sea-level rise in coastal Louisiana—a figure that combines the effects of rising seas and subsiding land—was over a centimeter a year, or around four times the global average. The delta’s system of land creation has thus been thrown into reverse. In 1930, despite much engineering of the Mississippi’s channel, Louisiana was expanding by almost a square mile a year. Since then, an area the size of Delaware has been lost to the Gulf.”
  • One of the principal causes is due to the levees established by the Army Corps of Engineers along the Mississippi river to protect the flood basins back in the day. Trade-offs…
  • “The damaging effect of the levees was predicted. Weighing the benefits of engineering the Mississippi in 1897, a former president of the American Society of Civil Engineers, E.L. Corthell, noted the need to take into account ‘withholding by the levees…of the annual contributions of sedimentary matters” and, because of this, ‘subsidence of the Gulf delta lands below the level of the sea and their gradual abandonment.’ But while he warned that “the present generation should not be selfish,’ Mr Corthell assumed the economic benefits of protecting the flood zone would ‘be so remarkable that people of the whole United States can well afford, when the time comes, to build a protective levee against the Gulf waters.’”
  • “That illustrates two related weaknesses in much environmental policymaking: an assumption that future politicians will take a longer-term view than current ones, and an excessive willingness to discount the future costs of solving environmental problems caused today… In any event, it is doubtful such a scheme would be affordable or otherwise practical, considering the effects of rising sea levels and fiercer storms, both consequences of global warming…”

Britain

WSJ – Daily Shot: Datastream – UK Household Savings Ratio 8/29

  • “UK’s households are struggling. With real wage growth in negative territory, the household savings ratio is collapsing.”

China

WSJ – Evergrande’s Ever More Risky Bet on Chinese Housing – Jacky Wong 8/28

FT – China orders videotaping of retail investment sales – Tom Mitchell 8/29

  • “China’s banking regulator has issued new rules requiring financial institutions to make video and audio recordings of all investment product sales, saying they were needed to ‘further regulate market order and protect customer rights’.” 
  • “The recordings will also help state-owned banks and the government fend off compensation demands from retail customers when their investments turn sour.” 
  • “’If investors make irrational choices after sales staff have clearly explained the risks, then they will have to accept the consequences,’ said Zhao Xijun, a finance professor at Renmin University in Beijing. ‘In the event there is a dispute, the recordings can be used as evidence’.” 
  • “The new surveillance rules issued by the China Banking Regulatory Commission require financial institutions to preserve the recordings for six months after the relevant investment product has expired. Banks are also not allowed to market investments to customers who refuse to be recorded.” 
  • “The value of outstanding [Wealth Management Products] WMPs has soared from Rmb4.6tn ($690bn) at the end of 2011 to Rmb29tn last year, according to data from Wind Information. But year-on-year growth moderated in 2016 to 23%, compared to a 56% increase in the value of outstanding WMPs in 2015.” 
  • “Data for the value of WMP products sold this year are not yet available. In volume terms, Chinese financial institutions sold 43% more WMP contracts through August 25 compared to the same period a year earlier.” 

FT – Huarong chief warns of bubble in China’s distressed debt market – Don Weinland 8/28

  • “Bubbles in credit and real estate have led to a steady flow of bad debt in China for years. But now a bubble is forming in the market for the bad loans themselves, says the chairman of China’s largest state-controlled ‘bad bank’.”
  • “Banks in China are dealing with an onslaught of non-performing loans that have resulted from poor risk controls and years of loose monetary policy. Investors estimate that China’s stock of bad debt has risen to $3tn this year, in step with a decelerating economy. One prominent analyst said recently that the figure could be as high as $6.8tn.”
  • “As the pool of bad assets rises, so too has the number of Chinese investors willing to chase after bad debt portfolios.”
  • “But many of the newcomers had little experience investing in distressed debt and were pushing up prices for the assets at auctions, said Lai Xiaomin, chairman of China Huarong Asset Management, and a deputy to the 12th National People’s Congress.”
  • “Inexperienced investors presented the risk of creating new losses while also failing to resolve troubled loans, he said.”
  • “China has experienced steady deregulation in how distressed debt is bought and sold since the industry was launched 18 years ago.”
  • “Huarong, along with three other centrally controlled asset managers, was created by the ministry of finance in 1999 to absorb perilously high levels of bad debt from China’s largest commercial banks. At the time, the government directed banks to transfer $1.4tn to the four groups.”
  • “Since then, the asset managers have greatly expanded their businesses in China and globally, operating more like investment banks than bad debt investors. Huarong went public in Hong Kong in late 2015.”

India

Economist – Undue reverence for company founders harms Indian firms 8/26

August 23, 2017

Perspective

Visual Capitalist – Interactive: tableau – Visualizing Median Income For All 3,000+ U.S. Counties – Jeff Desjardins 8/22

Worthy Insights / Opinion Pieces / Advice

Bloomberg View – The Energy Revolution Will Be Optimized – Liam Denning 8/16

  • “The primary job of the 20th-century oil major or utility was to raise the capital required to build enormous energy production and distribution networks to feed industrialization. The onus was on providing ever more supply, since growth in demand was a given.”
  • “The latter no longer holds true. Energy efficiency matters more now, especially as concerns about pollution, including carbon emissions, have intensified. The job of the 21st-century energy provider, therefore, will be less and less about sheer quantity and more about both quality and smart consumption. Think software-as-a-service rather than just getting Windows 95 installed on as many desktops as possible.”

Markets / Economy

WSJ – How Retiring Baby Boomers Hinder U.S. Wage Growth – Eric Morath 8/21

  • “Departing older employees are being replaced by younger and cheaper workers, San Francisco Fed study finds.”

Real Estate

WSJ – The Price Isn’t Right for Home Builders – Justin Lahart 8/22

  • “Shares of home builders look pricey and vulnerable to a correction as costs rise and affordability is strained.”

Finance

FT – Here is the big reason banks are safer than a decade ago – Alan Smit and Martin Arnold 8/21

  • “The build-up to the financial crisis was marked by a rapid growth in wholesale funding, where banks borrow from one another and other financial institutions, rather than raising money through deposits from retail banking customers.”
  • “When the subprime mortgage meltdown began, banks lost faith in each other and those wholesale funding markets seized up.”
  • While western banks have backed off of it, “wholesale funding now accounts for more than a third of many Chinese banks’ total liabilities — three times as much as five years ago. Some analysts fear Chinese banks may yet generate another ‘Lehman moment’.”

China

FT – Dalian Wanda drops £470m London property purchase – Don Weinland and Judith Evans 8/22

  • “Chinese property developer Dalian Wanda has walked away from a plan to buy London’s Nine Elms Square amid mounting pressure from Beijing to curtail high-profile overseas acquisitions.”
  • “The 10-acre plot is part of London’s largest residential development site, where a number of real estate companies are building 20,000 mainly luxury homes south of the river Thames.”
  • “However, the land will still be acquired by Chinese buyers after a last-minute adjustment to the deal.”
  • “Hong Kong-listed Guangzhou R&F Properties stepped in to make its second hastily arranged deal involving Wanda in a matter of weeks. In July, R&F, which is based in the southern Chinese city of Guangzhou, agreed to purchase 77 Wanda hotels on the Chinese mainland.”
  • “R&F told reporters in Hong Kong that it bought the site jointly with CC Land, another Chinese property developer that this year acquired London’s ‘Cheesegrater’ skyscraper. R&F also owns the nearby Vauxhall Square site.”
  • “Wanda still owns the One Nine Elms site in the same area, which is slated for a 200-metre-high development that includes 437 homes and 3,584 sq ft of retail space, as well as one of the first Wanda Vista hotels to be built outside of China.”

Japan

FT – Japan looks to staunch regional student exodus – Leo Lewis 8/21

  • “Japan is planning an enrolment cap for Tokyo’s private universities to reverse a tide of ambitious 18-year olds eager to abandon the provinces and study in the capital.”
  • “The plan to clip Tokyo’s academic wings is part of a broader drive to protect regional economies from implosion — a fate some consider inevitable as the country’s population ages and shrinks.”
  • “Particularly acute, say government officials, is the ‘drastic decline in the population of 18-year olds’ — a group whose ranks not only want to study in Tokyo, but are increasingly keen to remain in the capital after graduating, to work.”
  • “To reduce Tokyo’s magnetism in an uneven economy, proposed regulation will place an indefinite ban on any private university within Tokyo’s 23 wards from applying for an increase to its annual intake of new students.”
  • “The plan’s success, say officials, hinges upon regional universities — and the job markets nearby — raising their game. ‘Universities have a major role in realizing regional revitalization but not many of them are that successful in driving structural changes in regional industry,’ said a report justifying the Tokyo quota cap.”
  • “The report, which recommended the cap come into force within the current fiscal year, which ends in March 2018, warned that unless Tokyo’s dominance was offset, regional university finances would deteriorate.”
  • “Regional revitalization policies have included encouraging bank mergers and legalizing casino gambling. But despite these policies, the annual number of 20-24 year old Japanese moving into Tokyo has risen 35% since Mr Abe became prime minister.”

August 15, 2017

Perspective

Brilliant Maps – Would You Feel Comfortable If Your Child Was In A Relationship With X? 8/13

Worthy Insights / Opinion Pieces / Advice

WSJ – The Olympics: the Harshest Hangover in Sports – Jason Gay 8/14

  • “It’s barely a year later, and any lingering good feeling appears to have crumbled. Literally. A staggering new report from ESPN’s Wayne Drehs and Mariana Lajolo found the 2016 host country’s Olympic legacy racing toward ruin—vacant stadiums, decaying infrastructure and a sprawling athlete village that is effectively a ghost town. Plans to convert properties into schools and housing have been ditched. A solicitation to manage the country’s suburban Olympic Park drew zero bids. The Rio Olympic Committee is still $40 million in the hole.”

Markets / Economy

WSJ – Daily Shot: FRED – Consumer Price Index – Used Cars and Trucks 8/14

  • “Deflation in used cars persists due to scores of vehicles coming off lease.”

WSJ – Daily Shot: FRED – Consumer Price Index – New Vehicles 8/14

  • “A robust supply of used cars is putting pressure on new vehicle inflation, which has turned negative last month. In fact, new car prices are now declining at the fastest pace since the recession.”

WSJ – Daily Shot: FRED – Consumer Price Index – Education 8/14

Finance

FT – Short sellers target high-flying US technology stocks – Robin Wigglesworth and Nicole Bullock 8/13

  • “Betting against the tech industry has mostly been painful this year. Despite the losses several big tech stocks suffered last week, S3 estimates that the ‘mark-to-market’ losses on the 10 biggest tech shorts now stand at $7.7bn this year. Tesla alone has inflicted a $4.5bn loss on bearish investors in 2017.”

Health / Medicine

FT – Drug industry faces ‘tidal wave’ of litigation over opioid crisis – David Crow 8/11

  • “US officials seek tobacco-style settlements to help deal with epidemic of addiction.”

Japan

NYT – Japan’s Economy Grows Again in Longest Streak in 11 Years – Jonathan Soble 8/13

  • “Japanese gross domestic product increased by 4 percent in annualized terms in the three months through June, the government’s Cabinet Office said in a preliminary estimate on Monday. The economy has now expanded for six consecutive quarters, the first time it has gone that long without a contraction since the 2005-6 period.”
  • “The pace of expansion also accelerated from the previous quarter, and was stronger than economists had expected. Analysts surveyed by Reuters had forecast a growth rate of 2.5%”
  • While the jolt came from home, “not all of the domestic growth came from private citizens and businesses. Mr. Abe announced a major government spending program a year ago, and the data suggest the money is beginning to find its way from account books to the real economy. Public investment grew at a 22% pace.”
  • Keep in mind Tokyo is making ready for the 2020 Summer Olympics.