Tag: Japan

March 6, 2018


FT – Shadow banking grows to more than $45tn assets globally – Caroline Binham 3/5

  • “’Shadow banking’ grew by nearly 8% globally to more than $45tn on a conservative measure after international rule makers were able to include detailed data from China and Luxembourg for the first time.”
  • “Shadow banking — the parts of the financial system that perform bank-like functions such as lending but do not have the same safeguards — accounted for 13% of total global financial assets, according to the Financial Stability Board, the international group of policymakers and regulators that makes recommendations to the G20.”
  • “The report covers 2016 figures. But since then China has launched a continuing crackdown on its shadow-banking sector.”
  • “China contributed $7tn, or 15.5%, of the $45tn assets comprising the FSB’s conservative definition of shadow banking, while Luxembourg contributed $3.2tn, or 7.2%.”
  • “But defining shadow banking can be a slippery business. The FSB’s exercise starts with looking at the assets of anything that is not a bank, including pension funds, insurers, and ‘other financial institutions‘, or OFIs. That wider ecosystem accounts for $160tn assets worldwide, compared with $340tn total financial assets globally.”
  • “Meanwhile, OFIs grew by 8% to $99tn; a faster level than banks, insurers and pension funds. OFIs now account for 30% of the entire financial system’s assets; the highest level since 2002.”

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – The Winners Write the History Books – Ben Carlson 3/4

  • “Coming up with explanations for past successes is easy but figuring out who the winners will be going forward never is.”

FT – Venezuela is the one to watch on oil – Nick Butler 3/4

  • “This is Opec’s most unstable country and Maduro could escalate the dispute with Guyana.”

FT – Reports of oil demand’s death have been greatly exaggerated – Chris Midgley 3/2

MIT Technology Review – If you’re so smart, why aren’t you rich? Turns out it’s just chance. – Emerging Technology from the arXiv 3/1

  • “The most successful people are not the most talented, just the luckiest, a new computer model of wealth creation confirms. Taking that into account can maximize return on many kinds of investment.”

Markets / Economy

WSJ – Credit-Card Losses Surge at Small Banks – AnnaMaria Andriotis 3/4

  • “Concerns have been mounting in the broader credit-card industry about the recent trend of rising delinquencies. While overall card losses are still relatively low—below the historical average of the last 30 years, for instance—they’ve been slowly climbing in the last two years.”
  • “But they’ve especially surged at smaller banks, those outside the 100 largest by assets that have less than around $10.4 billion in assets. There, the average charge-off rate is near an eight-year high, while the 3.5% loss rate at large banks remains well below the 10.6% seen in 2010.”

Real Estate

MarketWatch – Over a million Americans may have just lost their shot at refinancing – Andrea Riquier 3/5

  • “Approximately 1.4 million Americans lost the interest rate incentive to refinance their mortgages in the first six weeks of 2018, according to an analysis from real estate data provider Black Knight.”
  • “The benchmark 30-year fixed-rate mortgage averaged 4.43% during the week ending March 1, according to Freddie Mac’s weekly survey. That was up three basis points from the prior week and leaves rates nearly half-a-percentage point higher than the level at which they started the year.”


NYT – California Scraps Safety Driver Rules for Self-Driving Cars – Daisuke Wakabayashi 2/26

  • “The state’s Department of Motor Vehicles said Monday that it was eliminating a requirement for autonomous vehicles to have a person in the driver’s seat to take over in the event of an emergency. The new rule goes into effect on April 2.”


FT – China hedge funds suffer in debt crackdown – Gabriel Wildau and Yizhen Jia 3/4


FT – Yen strengthening and trade rhetoric hit Japan exporters – Leo Lewis 3/4

  • “Currency jumps after Kuroda hints BOJ may exit its massive stimulus in 2019.”

WSJ – Daily Shot: USD / JPY Inverted) 3/4

WSJ – Daily Shot: Nikkei 225 3/4


March 01, 2018


NYT – By Day, a Sunny Smile for Disney Visitors. By Night, an Uneasy Sleep in a Car. – Jennifer Medina 2/27

Worthy Insights / Opinion Pieces / Advice

Economist – How Putin meddles in Western democracies – Leaders 2/22

FT – A world of debt mortgages our economic future – Derek Scissors 2/22

  • “Irresponsible borrowing by the US, China and India imperils global growth.”

WSJ – The Wayfair Riddle – Elizabeth Winkler 2/26

  • “The furniture retailer’s business has serious flaws, but the stock keeps soaring.”


FT – Rising interest rates punish US power sector – Ed Crooks 2/22

  • “US utilities, sustained for years in a warm bath of favorable financial conditions, are facing a cold shower.”
  • “An expected rise in interest rates and the shake-up of the tax system passed into law at the end of last year are threatening to squeeze utilities’ finances. Already, the S&P 500 utility sector index has dropped 13% from its peak in November.”

FT – Fundamentals do not matter to new breed of oil speculator – Gregory Meyer 2/27


FT – Rising tide of debt to hit rich countries’ budgets, warns OECD – Kate Allen and Chris Giles 2/22

  • “Developed nations face a rising tide of government debt that poses ‘a significant challenge’ to budgets as interest rates increase around the world, the OECD has warned.”
  • “Low interest rates have helped sustain high levels of government debt and persistent budget deficits since the financial crisis, according to the OECD, but the ‘relatively favorable’ sovereign funding environment ‘may not be a permanent feature of financial markets’.”
  • “The warning on the longer-term consequences of high public borrowing marks a shift in stance by the OECD, which as recently as November was praising countries for easing fiscal policy to help global growth.”
  • “In an Economic Outlook, published at that time, the Paris-based organization said that ‘even a lasting increase in 10-year government bond yields of 1 percentage point . . . might worsen budget balances on average by only between 0.1% and 0.3% of GDP annually in the following three years’.”
  • “The total stock of OECD countries’ sovereign debt has increased from $25tn in 2008 to more than $45tn this year. Debt to GDP ratios across the OECD averaged 73% last year, and its members are set to borrow £10.5tn from the markets this year.”
  • “Because much of the debt raised in the aftermath of the financial crisis is set to mature in the coming years, developed nations will have to refinance 40% of their total debt stock in the next three years, the OECD said.”

Health / Medicine

Economist – How to stop lead poisoning – Leaders 2/22


WSJ – Daily Shot: To Stay on the Land, American Farmers Add Extra Jobs – Jacob Bunge and Jesse Newman 2/25

Sovereign Wealth Funds

FT – Norway oil fund posts $131bn return for 2017 – Richard Milne 2/27

  • “Norway’s $1.1tn oil fund returned 13.7% — or NKr1tn ($131bn) — beaten only by 2009 and 2013 in percentage terms.”
  • “Strong stock markets contributed to a 19.4% return for equities while property returned 7.5% and bonds 3.3%.”


Nikkei Asian Review – The hidden risks of China’s war on debt – Yusho Cho 2/28


FT – Huge fraud at Indian bank spurs privatization calls – Amy Kazmin 2/27

  • “In 1969, India’s then prime minister, Indira Gandhi, transformed the country’s banking landscape when she nationalized its 14 biggest commercial lenders, which together accounted for around 70% of the system’s deposits.”
  • “Nationalization was touted as way to protect depositors and force banks — which mainly catered to big industrial houses — to lend to a broader swath of the population, including farmers, traders and small businesses.” 
  • “State dominance over the banking system has not worked out so well for India. Politically driven lending decisions, difficulties agreeing realistic debt workouts when loans sour, as well as uninspired, even fearful bureaucratic management and outdated IT systems have left state lenders with a far higher bad debt burden than their private rivals, hindering India’s economic prospects.” 
  • “Now, the discovery of an alleged $1.8bn fraud at India’s second-largest state lender, Punjab National Bank, is prompting vigorous and concerted calls for New Delhi to admit the failure of Mrs. Gandhi’s bank nationalization — and reverse it.” 
  • “According to PNB, staff at one of its Mumbai branches issued fraudulent bank guarantees for luxury jeweler Nirav Modi, and his diamond-trader uncle Mehul Choksi, to take cash advances from the overseas branches of other Indian banks — all ostensibly guaranteed by PNB.”
  • “Antiquated software systems — guarantees were issued without requisite documents or collateral — meant PNB’s management had no idea of the obligations mounting in its name. Nor did the banks that received the guarantees, mostly other state lenders, suspect any impropriety.” 
  • “Analysts say the scam, which PNB says went on for several years without detection, highlights the rot in state banks and the need for radical change.” 
  • “At the heart of India’s banking crisis, however, is New Delhi’s political control over what should be run as commercial entities and the inherent conflict of interest in the state’s multiple roles as economic policymaker, the largest bank owner and the industry regulator.” 
  • “While New Delhi is now in the middle of a $32bn recapitalization scheme to shore up bank balance sheets after the last wave of bad debts, the PNB fraud has raised fears the government is simply throwing good money after bad.” 
  • “Privatization of some, or even most, of India’s state banks is not a simple or quick solution to the sector’s problems. Analysts say the legacy of five decades of state ownership — and its impact on personnel, incentives and decision-making — will take years to undo. But the PNB fraud has persuaded many Indians it is time to start.”


WSJ – Daily Shot: TD Securities – Japanese Investors Looking For Returns Abroad 2/27

Puerto Rico

WSJ – Daily Shot: CNN – ‘Exodus’ from Puerto Rico: A visual guide – John D. Sutter and Sergio Hernandez 2/21

South America

Bloomberg – Hungry Venezuelan Workers Are Collapsing. So Is the Oil Industry – Fabiola Zerpa 2/22

  • “Starving employees are growing too weak for heavy labor, hobbling the refineries that keep the economy running.”

February 13, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg – A Driverless Future Threatens the Laws of Real Estate – Jack Sidders and Jess Shankleman 2/5

FT – Trump’s warnings about unfair trade with China ring true – Nick Butler 2/11

  • “There is no sign that Beijing accepts the responsibilities needed to build stronger links.”

FT – Tech companies are the new investment banks – Rana Foroohar 2/11

  • “Economist Zoltan Pozsar has forensically analyzed the $1tn in corporate offshore savings parked in liquid assets, a fortune that he likens to China’s foreign exchange reserves, not only because of its market-moving size, but the idea that both fortunes were created by a macroeconomic ‘crime’ — mercantilism in the case of China, and tax arbitrage for the corporate hoard.”
  • “The largest and most intellectual-property-rich 10 per cent of companies — Apple, Microsoft, Cisco, Oracle, Alphabet — control 80 per cent of this hoard. Their earnings come mainly from IP that can be easily moved across borders. Their offshore savings went from around $100bn in 2008 to $700bn by 2016. And according to Mr Pozsar’s calculations, most of that money is held not in cash but in bonds. Indeed, half of it is in corporate bonds.”
  • “What does this mean? Many significant things. But let us start with the obvious, which is that bonds are not cash. If companies are to bring back those overseas earnings and invest them in growth-enhancing projects in the US, as Donald Trump keeps promising us they will, they would have to sell their bond stash.”
  • “This has serious implications for interest rates. Consider that the Federal Reserve is starting to deleverage its own balance sheet. Now, add in the corporate ‘echo-taper’, as the Credit Suisse report puts it, and you have got a heck of a lot of bonds on the market, which is bound to move the interest rate needle up, perhaps more quickly than is currently expected.”

NYT – America’s Real Digital Divide – Naomi Schaefer Riley 2/11

  • “In 2004, Dimitri Christakis of Seattle Children’s Hospital wrote in the medical journal Pediatrics that ‘early exposure to television was associated with subsequent attentional problems.’ Even when controlling for socioeconomic status, gestational age and other factors, he discovered that an increase of one standard deviation in the number of hours of television watched at age 1 ‘is associated with a 28% increase in the probability of having attentional problems at age 7’.”
  • “Every additional hour of TV increased a child’s odds of attention problems by about 10%. Kids who watched three hours a day were 30% more likely to have attention trouble than those who watched none. A 2010 article in Pediatrics confirmed that exposure to TV and video games was associated with greater attention problems in children.”
  • “Unfortunately, too often the message we send low-income and less-educated parents is that screen time is going to help their children.”
  • “Make no mistake: The real digital divide in this country is not between children who have access to the internet and those who don’t. It’s between children whose parents know that they have to restrict screen time and those whose parents have been sold a bill of goods by schools and politicians that more screens are a key to success. It’s time to let everyone in on the secret.”

Markets / Economy

FT – Bridgewater investment chief sees new era of volatility – Robin Wigglesworth 2/11

  • “Bob Prince, co-chief investment officer at Bridgewater, said last week’s market turbulence, which helped trigger record outflows from global stock funds, was set to continue.”
  • “‘There had been a lot of complacency built up in markets over a long time, so we don’t think this shakeout will be over in a matter of days,’ Mr Prince, who runs Bridgewater’s $160bn of investments alongside the fund’s founder Ray Dalio, said in an interview. ‘We’ll probably have a much bigger shakeout coming’.”
  • “Brian Levine, co-head of global equities trading at Goldman Sachs, on Friday sent out an email to the investment bank’s bigger clients that also warned that the market probably still has not hit its bottom.”
  • “’Historically shocks of this magnitude find their troughs in panicky selling,’ he said in the email, seen by the FT. ‘I’ve been amazed at how little ‘capitulation selling’ we’ve seen on the desk . . . The ‘buy on the dip’ mentality needs to be thoroughly punished before we find the bottom’.”
  • “The improving health of the global economy has sparked concerns that long-dormant inflationary pressures will finally emerge, forcing central banks to reduce bond-buying programs and raise interest rates more aggressively than expected.”
  • “While Mr Prince doubted inflation would become a real problem, he expected central banks to start draining the global economy of some of the trillions of dollars they have pumped into the financial system in recent years — further challenging the post-crisis bull market.”
  • “That meshes with the view of Mr Levine at Goldman Sachs, who said that ‘longer term, I do believe this is a genuine regime change, one where you sell-the-rallies rather than buy-the-dips’.”
  • “However, Mr Prince expects global growth will stay on track despite tighter monetary policy and more turbulent markets. ‘The real economy will outperform financial economy this year, the opposite of what we’ve seen in recent years,’ he said.”

Real Estate

Bloomberg – Blackstone Weighs Bidding for Assets It Sold to Anbang – Jun Luo, Dingmin Zhang, Cathy Chan, and Ben Scent – 2/12

  • “Blackstone Group LP, which scored big four years ago when a company it owned sold New York’s Waldorf Astoria hotel for a record-setting price to a little-known Chinese insurer, may soon get a chance to own the iconic landmark again.”
  • “The U.S. private equity firm has held initial discussions about bidding for Anbang Insurance Group Co. assets in a sale overseen by the Chinese government, people with knowledge of the matter said. The assets include the Waldorf as well as Strategic Hotels & Resorts Inc., which Blackstone sold to Anbang in 2016, said the people.”
  • “Anbang is among a crop of Chinese serial acquirers that spent tens of billions of dollars snapping up trophy assets over the past few years, only to lurch into turmoil once their strategies backfired. Blackstone was one of the biggest beneficiaries of Anbang’s largesse, selling at least a combined $9.5 billion of assets to the insurer, data compiled by Bloomberg show.”


Bloomberg Businessweek – What Big Hedge Fund Fees Pay For – Neil Weinberg 2/9

  • “One corner of the investing world that’s been more resistant to these trends is ‘alternative’ investments, including private equity and hedge funds, which are sold to institutions and affluent individuals. The fees charged—traditionally 2% of assets plus 20% of any profits—can be hundreds of times higher than those of the lowest-cost mutual funds. The industry frames the fees as the price investors must pay to tap into top money managers.”
  • “A close look at where the money flows suggests a more complicated story. Alt funds regularly share major chunks of their fees with the bankers, brokers, and other salesmen who steer clients their way. The payments come in a number of forms and go by different names: placement fees, payment for shelf space, and retrocessions, among them.”
  • “Placement agents, who get paid by fund managers for lining up investors, have been such a big source of corruption that New York and Pennsylvania have banned their public pension funds from using them. The European Union in January banned many advisers from receiving inducements to sell investments to individuals.”
  • “’Contrary to what the clients generally believe, half the fees they’re paying are going not to investment geniuses but to marketing,’ says Edward Siedle, an attorney who represented a whistleblower in the JPMorgan settlement. ‘The marketing payments explain why hedge funds have persisted, despite ample evidence that they underperform.’ Hedge funds that invest in stocks returned 7.2% annually from 2009 to 2017, which was less than half the S&P 500’s return, according to data from Hedge Fund Research.”


How Much.net – Cryptocurrency Transaction Speed per second – Raul 1/10


Bloomberg – Wall Street Bank That Fed on HNA’s Rise Now Get to Dismantle It – Ben Scent 2/11

  • “Wall Street bankers gorged on fees from HNA Group Co. as they helped the debt-laden Chinese conglomerate clinch $55 billion of acquisitions around the world. They’re set for another bonanza as the company offloads some of those same purchases to stave off a liquidity crisis.”
  • “HNA doled out as much as $200 million in advisory fees during a three-year investment spree, according to Freeman & Co. Now strapped for cash and facing pressure from creditors, the Chinese company is planning to sell about $16 billion of assets in the first half, people familiar with the matter said last month.”

FT – Xi takes aim at military in anti-graft drive – Charles Clover 2/11


Bloomberg Quint – $3.6 Billion in Hidden Bad Loans Spotlight India Bank Stress – Anto Antony 2/12

  • “India’s regulator unearthed about $3.6 billion of bad loans in the books of the country’s biggest bank, amplifying questions about distress in the financial sector given underreporting by some rivals as well.”
  • “State Bank of India on Friday said an audit by the central bank showed soured debt was about 232 billion rupees ($3.6 billion) higher than what the state-run lender reported for the end of March 2017.”
  • “State Bank of India’s admission is particularly striking because the lender is often seen as a proxy for the nation’s economy, where the ratio of bad loans has surged to be among the highest in the world.”


WSJ – Daily Shot: Nikkei 225 2/9

  • US markets were not the only ones with a sell off last week.

January 30, 2018


statista – Super Bowl LII – Felix Richter 1/26

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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


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

Environment / Science

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

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

Health / Medicine

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


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

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

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

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


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

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

January 19, 2018


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

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

Markets / Economy

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

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

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

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

Real Estate

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

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


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

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

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


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

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

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

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


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

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

WSJ – Daily Shot: Ripple 1/17

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


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


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


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

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

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

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

South America

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

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

January 11, 2018


Reuters – Eastman Kodak unveils cryptocurrency, stock doubles – Noel Randewich 1/9

  • Really…

WSJ – Daily Shot: FactsMaps.com – US States Population Growth by Rate 1950-2016 1/9

Worthy Insights / Opinion Pieces / Advice

Economist – A small town in Japan doubles its fertility rate 1/9

  • “Subsidizing parenthood appears to work wonders.”

Economist – After a bumper 2017 will 2018 be kind to the financial markets? – Buttonwood 1/6

Markets / Economy

WSJ – Daily Shot: Advisor Perspectives – Buffett Indicators 1/9

Real Estate

Bloomberg Businessweek – Landlords Woo Startups With Built-In Clubs and Office Beers – Prashant Gopal and David M Levitt 1/5

  • “Stodgy office towers around the U.S. are getting millennial-friendly makeovers.”


MarketWatch – Ripple’s market cap cut in half as the cryptocurrency keeps falling – Victor Reklaitis 1/10

  • “Bitcoin falls below $14,000 while Ether coins rally.”

FT – China moves to shutter bitcoin mines – Gabriel Wildau 1/9

FT – US government bond sell-off gathers pace – Eric Platt and Robin Wigglesworth 1/10

  • “Ten-year yields near 2017 high as big bond investors declare the start of a new era.”

Environment / Science

UCSUSA.org: NOAA – U.S. 2017 Billion-Dollar Weather and Climate Disasters – Rachel Cleetus 1/8


Economist – China’s great firewall is rising 1/4

FT – Australia lashes out at China’s ‘useless’ Pacific projects – Mark Wembridge 1/10

  • “Canberra accuses Beijing of building roads to nowhere in developing nations.”

WSJ – Real News on Fake Data in China – Nathaniel Taplin 1/10

  • “There was some bad news from Inner Mongolia last week: Apparently its headline economic statistics are complete nonsense. The remote northern Chinese province, famous for its sweeping Midwest-like plains, said its 2016 industrial growth had been overstated by 40%, while government revenue was inflated a mere 26%.”
  • “The lesson is that Chinese GDP represents a reasonable long-term indicator of overall trends, but isn’t particularly helpful in capturing cyclical shifts, in part because figures from the more volatile, less diversified inland economies may be fudged during sharp slowdowns.”

January 8, 2018


Visual Capitalist – Visualizing the Global Millionaire Population – Jeff Desjardins 1/4

Worthy Insights / Opinion Pieces / Advice

Bloomberg Gadfly – A French Challenge to Gundlach’s ‘Disaster’ Bond Theory – Mark Gilbert 11/17/17

  • “A record month for inflows into corporate bonds is ‘setting up a disaster for when rates rise & `investors’ learn that, yes, these bonds have rate risk’ was yesterday’s latest tweeted warning from Jeffrey Gundlach.”
  • “French utility Veolia Environnement SA is one of a handful of low-rated borrowers—assessed at BBB or lower by Standard & Poor’s—with fixed-rate debt repayable in three years or longer that trades at yields below zero in euros.”
  • “Veolia already has three-year paper that trades at a negative yield. Those bonds, however, were sold in 2005 at a yield of almost 4.5%; they dipped below zero for the first time last year, and recently turned negative once more.”
  • “But on Thursday, Veolia went one better by pulling off the neat trick of persuading investors to pay it directly to borrow, selling 500 million euros of bonds repayable in three years at a negative yield of 0.026%—’a first for a BBB issuer,’ the company trumpeted in a press release. What’s more, the sale was oversubscribed by more than four times.”
  • “Now, you could view the sale one of two ways. For the optimists, it provides evidence that investors are awash with cash and still confident that the European Central Bank’s bond-buying program will continue to support the market.”
  • “If, like Gundlach, though, you’re concerned that the world of fixed-income is in for a rude awakening and that the stress will first show up in the corporate bond market, you’ll probably view it as a last hurrah before reality hits home with a vengeance.”

FT – Iran and the oil price – Nick Butler 1/2

  • “Increasing oil exports would be an obvious way to fund more public spending.”

FT – Watch 10-year Treasury yields for signs of danger in 2018 – John Authers 12/29

  • “Investors should stay in stocks as a big bear market looks unlikely as early as 2018.”

Mauldin Economics – Outside the Box: Et Voila – Grant Williams 1/3

NYT – How Do You Vote? 50 Million Google Images Give a Clue – Steve Lohr 12/31

  • The more our world becomes ‘codified,’ the more insights will be derived, the less privacy we will have, and the more predictive the models will become…

WSJ – The Limits of Amazon – Christopher Mims 1/1

  • “The tech giant is very good at delivering what customers need, but is it as well positioned to sell them things they want?”

WSJ – Bitcoin Isn’t a Currency, It’s a Commodity – Price It That Way – Nathaniel Taplin 1/3

Real Estate

Housing Wire – Value of U.S. housing market climbs to record $31.8 trillion – Kelsey Ramirez 12/29

  • “The total value of all homes in the U.S. increased in 2017 to a total $31.8 trillion, according to the latest report from Zillow.”
  • “This is up from last year’s record high of $29.6 trillion, data from 2016 shows.”
  • “This is so high, that total homes in Los Angeles and New York City metro areas are worth $2.7 trillion and $2.6 trillion, respectively, the size of the U.K. and French economies.”
  • “This is an increase of $1.95 trillion over the past year, more than all of Canada’s GDP or two companies the size of Apple, Zillow’s report showed.”
  • “And renters are also now spending more money than ever before on housing, spending a record $485.6 billion in 2017. This is an increase of $4.9 billion from 2016.”
  • Renting in San Francisco is especially expensive as renters collectively paid $616 million more than renters in Chicago, despite having 467,000 fewer renters in San Francisco.
  • “Of the 35 largest U.S. markets, most home value growth occurred in Columbus, Ohio, which saw an increase of 15.1% to $152.3 billion in 2017.”

WSJ – You Got Priced Out of … Philadelphia? The Spread of Hot Housing Markets – Scott Calvert and Laura Kusisto 1/3

  • “The gentrification of the Fishtown neighborhood here looks like something city planners dream of, with developers renovating old row houses as young professionals, along with new restaurants and businesses, pile in.”
  • “But home prices have shot up so quickly in recent years that the latest wave of young professionals say they are having a hard time making the finances work.”
  • “Now several Philadelphia City Council members want to pass a law requiring property developers to set aside 10% of new projects as below-market units, to improve overall affordability in a city that once was among America’s biggest bargains.”
  • “Soaring housing costs aren’t confined to New York or San Francisco. Cities including Pittsburgh, Detroit, Buffalo and Nashville all have explored or adopted policies that, like Philadelphia’s, seek to create more cheap housing by an approach known as inclusionary zoning.”
  • “’It really underscores the housing-affordability problem is much more widespread than simply a problem in the 10 most expensive coastal cities,’ said Stockton Williams, executive director of the Terwilliger Center for Housing at the Urban Land Institute in Washington, D.C.”

WSJ – Private-Equity Funds Focused on Property Raising Less Capital – Peter Grant and Shefali Anand 1/4

  • “Private-equity funds that focus on real estate have been raising less money for the past few years, and chances are dim that there will be much pickup in fundraising in 2018.”
  • “But the reason for this trend isn’t that pension funds, endowments and other institutions that invest in private equity have lost their appetite for commercial property. A big part of the slowdown is that private-equity funds haven’t been able to spend all of the money they have raised, according to investors, analysts and fund managers.”
  • “The declining pace of fundraising and spending is partly due to the old age of the current real-estate cycle. Prices started rising in 2009 and remain near record levels in many cities, including San Francisco and New York, making it trickier to make new investments.”
  • “This is especially true for the most aggressive opportunistic private-equity funds that typically try to produce returns of at least 20%. Fundraising by these funds has fallen particularly sharply, dropping to $33.5 billion as of Dec. 27, compared with $43.8 billion in 2016 and $63.7 billion in 2015, Preqin said.”
  • “Still, the large amount of unspent cash sitting in the vaults of private-equity funds has been comforting to investors who are concerned the markets are due for a steep correction. As long as demand for property stays strong, prices are likely to remain healthy.”
  • “Green Street Advisors says that there was $136 billion of buying power sitting with private-equity firms and real-estate investment trusts at the end of 2017. That compares with about $120 billion at the end of 2016 and less than $80 billion at the end of 2011.”
  • “Another trend that some expect to accelerate in 2018: investors who buy stakes in real-estate fund managers. Dyal Capital Partners, which raises money to buy minority equity stakes in alternative asset managers, in 2016 purchased an interest in Starwood Capital Group.”
  • “Park Hill is seeing a number of large foreign investors who invest in real estate express an interest in buying into managers, Mr. Stark said. They are saying: ‘Rather than investing through some third-party manager, why don’t we buy into a manager,’ he said. ‘If you have enough capital you can leverage the talent and buy the machine, not just pay to rent one’.”

WSJ – Peak Commercial Real-Estate Prices Force Investors to Get Creative – Peter Grant and Shefali Anand 1/2


FT – Private equity turns to early loans to boost returns – Henny Sender 12/31

  • “Borrowed money improves fund rating on key metric of results over time but is risky.”

FT – How high-frequency trading hit a speed bump – Gregory Meyer, Nicole Bullock, and Joe Rennison 1/1

  • “Smaller volumes and a fall in market volatility have dented business – so much so that some are quitting.”


FT – China steps up capital controls with overseas withdrawal cap – Charles Clover and Tom Mitchell 12/31

  • Under the guise of preventing money laundering and terrorist financing, “China’s authorities have capped overseas withdrawals using Chinese bank cards at Rmb100,000 per year.”
  • “China has sought to limit foreign exchange purchases by its citizens in an effort to conserve forex reserves. The new measure plugs one of the few remaining ways Chinese citizens get money out of the country by broadening the Rmb100,000 ($15,400) limit from a single account to a single individual.”
  • “Previously, the annual limit of Rmb100,000 for overseas withdrawals was set for a single bank card.”
  • “An annual purchase limit of $50,000 worth of foreign currency per person remained unchanged, said the State Administration of Foreign Exchange (SAFE) in a statement on Saturday.”
  • “A regional currency analyst said that the move appeared to be a tightening of capital controls. ‘I was not expecting this since outflows have been slowing. But by doing this it clearly shows China’s desire to manage the outflows more aggressively, particularly on individual flows’ he said.” 
  • In other words, if you happen to make or to have made a meaningful amount of money in China, don’t plan on taking it home. It’s like a casino, the house always wins if you play long enough – especially, if you’re not allowed to leave the table with your chips.
  • The follow up question: will U.S. companies with meaningful overseas cash balances be allowed to repatriate funds in 2018 now that the U.S. tax laws have changed?

FT – Dalian Wanda to slim down ecommerce unit as it refocuses on core – Emily Feng 1/2

NYT – China Offers Tax Incentives to Persuade U.S. Companies to Stay – Sui-Lee Wee 12/28


FT – Japan Inc: a corporate culture on trial after scandals – Peter Wells and Leo Lewis 1/2

  • “Public admissions by some of the country’s greatest companies reveal deeper problems in how they are run.”

South America

WSJ – Cash-Strapped Venezuela Offers to Pay for Medicines With Diamonds – Kejal Vyas 1/4

  • “With hospital shelves bare and the government stumped on how to settle $5 billion in arrears to pharmaceutical companies, cash-strapped Venezuela recently offered some foreign suppliers alternative compensation: diamonds, gold and coltan, the rare metal used to make cellphones and Playstations.”
  • “While it isn’t clear if any of the companies accepted it, the proposal underscores how Venezuela’s economic collapse is forcing President Nicolás Maduro’s embattled administration to improvise to pay for goods as severe dollar shortages push the country toward a barter society.”
  • “Bartering is also creeping into daily street transactions for staples, partly because the government is too broke to print enough currency. The so-called Strong Bolivar, which the government created in 2008 by lopping three zeros off its previous currency, lost 97% of its value in 2017 alone as the oil-rich country plunges further into hyperinflation.
  • “Using commodities as payment isn’t uncommon for large global companies trading in mining or oil, but is almost unheard of as a way to settle debts to other sectors like pharmaceuticals, according to Caracas-based economic consultant Orlando Ochoa.”
  • “Given the country’s opaque finances, it isn’t clear how much Venezuela holds in certified precious metals and stones.”
  • “As for the Health Ministry’s proposal to pharmaceutical suppliers, ‘It feels like a bluff,’ Mr. Ochoa said. ‘It’s as if they want to show off their assets to give the illusion that there’s still an intention of paying even though they can’t pay’.”
  • “Lower crude prices and nearly two decades of profligate public spending have left Venezuela’s economy—once Latin America’s most prosperous—in tatters. Gross domestic product shrunk by more than 16.5% in 2016, according to the government, and there is scant evidence of improvement in 2017. The International Monetary Fund estimates inflation will top 2,000% in 2018. The government has defaulted on more than $700 million in bonds in recent months, spurring drastic cuts in imports that have resulted in chronic shortages of food and medicine.”
  • “Tito López, head of Venezuela’s Pharmaceutical Industry Chamber, says because companies in his sector haven’t received payments from the government in more than a year, 95% of medications that were available three years ago aren’t now. Antibiotics and treatments for chronic illnesses like hypertension and diabetes are among those hardest to find.”
  • In the past pharmaceutical companies operating in Venezuela have considered accepting bonds or even oil as payment, but the government has never followed through, Mr. López said. ‘What we’re missing is a serious system that actually guarantees payments,’ he added.”