Tag: Japan

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.

July 7, 2017

If you were to read only one thing…

FT – Japan suffers record decline in population – Robin Harding 7/5

  • “Japan’s native population fell by a record amount in 2016, but a jump in the number of foreign residents limited the overall annual decline.”
  • “According to the Internal Affairs Ministry, the number of Japanese fell 308,084 to 125.6m, reflecting decades of low birth rates and population ageing.”
  • “That was offset by a 7% increase in the foreign resident population to 2.3m — a rise of 148,959 people — as increasing labor shortages led to inflows of students and guest workers.”
  • “The figures reflect a fundamental question for Japan in the years ahead: whether it will allow immigration to sustain its overall population or accept a decline to preserve ethnic homogeneity.”
  • “For the first time since the survey began in 1979, the number of annual births fell below 1m, with 981,202 babies born in 2016. Deaths reached a high of 1.3m.”
  • “According to projections from the National Institute of Population and Social Security Research, the pace of decline will rise every year until 2045, by which time Japan will be losing about 900,000 residents a year — equivalent to a city the size of Austin, Texas.”
  • “Given many years of low birth rates, there is no quick way to reverse that decline, so the only alternative is immigration.”
  • “Japan’s population continued to shift towards big cities and Tokyo in particular. The population of the capital rose by 115,000 to 13.5m, an increase of 0.9%, while the surrounding prefectures of Saitama, Chiba and Kanagawa also gained residents.”
  • “But population decline accelerated in isolated rural areas, with Aomori, Akita and Kochi prefectures all losing more than 1% of their residents.”

Perspective

WSJ – Daily Shot: BAML – S&P 500 Market Ownership – Vanguard 7/6

FT – US raises spectre of military action to deal with North Korea – Bryan Harris, Demetri Sevastopulo, and Katrina Manson 7/5

  • “Self-restraint, which is a choice, is all that separates armistice and war. As this alliance missile live-fire shows, we are able to change our choice when so ordered by our alliance national leaders.”

Bloomberg – A Quarter of Euro Area’s Unemployed Resides in Spain – Jana Randow 7/4

Worthy Insights / Opinion Pieces / Advice

WSJ – CEO-Worker Pay Ratio Generates Outrage-And Some Insight – Stephen Wilmot 7/6

FT – Lex in-depth: Together in electric dreams – Tom Braithwaite 7/6

Markets / Economy

WSJ – Daily Shot: Haver Analytics & Renaissance Macro Research – American Auto Preference 7/6

Real Estate

WSJ – Daily Shot: Statistics Canada – Real Estate Transaction Costs as Percentage of GDP 7/6

WSJ – Condo Supply Swells in Manhattan – Josh Barbanel 7/6

China

WSJ – Reality Bytes: A Highflying Tech Entrepreneur Crashes Back to Earth – Li Yuan 7/6

  • “Rather than being a shining star of visionary entrepreneurship, LeEco is turning into a cautionary tale of the hype surrounding China tech. The lesson for investors: When it comes to Chinese tech companies, the rules of economics still apply.”

Europe

WSJ – Italy Formally Takes Control of Monte dei Paschi – Deborah Ball 7/5

  • “The Italian government took control of Banca Monte dei Paschi di Siena on Tuesday, injecting €5.4 billion ($6.1 billion) into the troubled lender as part of a broad plan to bring one of Europe’s weakest banks back to health.”
  • “The state recapitalization is the centerpiece of a deep overhaul of Monte dei Paschi, Italy’s fourth-largest lender, that will also include the transfer of the bank’s €28.6 billion in bad loans to a special vehicle, a cap on remuneration of its top executives and deep cuts in personnel.”
  • “The bank, which is the world’s oldest, gave details of its plan Wednesday in a presentation to analysts, which include the closure of 600 branches and 5,500 job cuts, bringing its total job count to about 20,000 by 2021.”
  • “Under pressure from the European Central Bank, which is pushing European banks to address the problem of bad loans, Italian banks have stepped up efforts to sell and liquidate sour debt, with tens of billions of such loans earmarked for disposal.”
  • “Nonetheless, the Italian banking system is among the weakest in Europe, with about €200 billion in bad loans. The banks have suffered from a combination of poor management, low interest rates, poor profitability and economic growth that has been the weakest in the region for years.”
  • “Italy’s banking woes remain a serious impediment to a stronger recovery in the country, which isn’t enjoying the rebound other European countries have seen. Italy’s economy is expected to grow about 1% this year, slightly more than half the rate for the eurozone as a whole.”

June 27, 2017

Perspective

Yahoo Finance – Business Insider: Here’s where Americans are moving to and from – Andy Kiersz 6/22

WSJ – For Consumers, Less Debt but Lots of Bills – Justin Lahart 6/23

  • “Americans’ finances are in the best shape they have been in years. As a group, U.S. households’ debt-to-income and debt-to-asset ratios in the first quarter fell to their lowest levels since the early 2000s. A prolonged period of low rates have made that debt easier to bear: The Federal Reserve this week reported that households’ overall debt-service ratio—the share of after-tax income going toward debt payments—are near historic lows.”
  • “But Americans face financial obligations beyond debt payments, such as rents and auto leases, and these are taking a bigger bite out of pay. Indeed, the Fed report shows the share of income going toward non-debt financial obligations is sitting near its highest level since the 1980s. It is a development that particularly for households at lower income levels may be crimping spending.”
  • “Commerce Department figures show the homeownership rate fell to its lowest levels in over a half-century in the years since the financial crisis, and it doesn’t look likely to recover anytime soon. That has tightened the supply of rental units, pushing rents up 18% over the past five years, according to the Labor Department, even as inflation away from housing has been nearly nonexistent.”
  • “So while many people who own their homes have benefited from rock-bottom mortgage rates, renters’ monthly nut has risen. Those renters tend to be poorer: The Fed’s most recent survey of consumer finances, conducted in 2013, showed the median annual income of families that rented was $27,800 versus $63,400 for families that owned.”
  • “Then there are the payments that aren’t included in the Fed’s data on financial obligations, but that consumers are nevertheless obliged to pay. Mobile phone and internet plans, for example, have moved to the essential spending bucket for most households, and they come with a monthly bill. The Labor Department estimates that spending on information and information processing services—a category that includes mobile telephone, landline telephone and internet services—now counts for 3.2% of the average consumer’s spending versus 2.3% in 2000.”

WSJ – Daily Shot: WHO – Global Smoking use under age of 15 6/23

WSJ – Daily Shot: Axios – Number of US Payphones 6/23

Worthy Insights / Opinion Pieces / Advice

FT – Corporate governance minefield awaits China A-share buyers – James Kynge 6/22

  • “A corporate governance minefield awaits fund managers who will be obliged to pour billions of US dollars into Chinese equities after MSCI, the most influential indexer of emerging market equities, decided to include domestic Chinese A-shares in its main global indices.”
  • “Murky or undisclosed ownership structures, regular corruption scandals, exposure to unregulated shadow finance and a predominance of behind-the-scenes state influence over corporate decisions are just some of the governance challenges that global investors in the Chinese A-shares are set to encounter, analysts say.”
  • “A crucial feature of stock market governance is that investors exert influence over the board of directors, who in turn run the company to serve the interests of investors. But for state-owned companies in China, almost the opposite applies. Directors are appointed by the state to run the company for the benefit of state stakeholders who often shy away from engagement with portfolio investors.”
  • “Although the 222 A-shares slated for inclusion a year from now will represent only 0.73% of MSCI’s flagship emerging markets index, the cohort is far from insignificant. UBS, an investment bank, estimates that passive and active investors who track the index will be obliged to invest about $15bn in the Chinese shares.”
  • Caveat emptor.

13D Research – Has the meteoric rise of passive investing generated the “greatest bubble ever”? 6/16

  • “There is, really, no price discovery. And if there’s no price discovery, is there really a market?” – Steven Bregman, co-founder of Horizon Kinetics
  • “It seems algos are programmed with a bias to buy. Individual stocks have risen to ludicrous levels that leave rational humans scratching their heads. But since everything always goes up, and even small dips are big buying opportunities for these algos, machine learning teaches algos precisely that, and it becomes a self-propagating machine, until something trips a limit somewhere.” – Wolf Richter
  • “J.P. Morgan estimated this week that passive and quantitative investors now account for 60% of equity assets, which compares to less than 30% a decade ago. Moreover, they estimate that only 10% of trading volumes now originate from fundamental discretionary traders. This unprecedented rate of change no doubt opens the door to unaccountability, miscalculation and in turn, unforeseen consequence.”

The Atlantic – Power Causes Brain Damage – Jerry Useem July/August Issue

  • “How leaders lose mental capacities – most notably for reading other people – that were essential to their rise.”

Finance

WSJ – Stock Picking Is Dying Because There Are No More Stocks to Pick – Jason Zweig 6/23

China

FT – Alibaba taps user data to drive growth spurt – Louise Lucas 6/21

  • Data, data, data. The more I know about your customers, the more you’re willing to pay me to broker transactions. And the more I know about you (consumer), the better able I am to match you (sell you) with products you’d want.

FT – Big China companies targeted over ‘systemic risk’ – Lucy Hornby, Yuan Yang, Gabriel Wildau 6/22

  • “This is a game changer for Chinese M&A and could pretty much stop all outbound deal making in its tracks.” – Keith Pogson, EY’s senior partner for financial services in Asia.

FT – Beijing’s video-streaming ban lops $1bn off Sina Weibo market cap – Emily Feng 6/22

  • “Chinese regulators have ordered three major internet platforms to halt all video and audio streaming services, as the country ramps up its control over online content.”
  • “Microblogging site Sina Weibo was one of the three slapped with the streaming ban. Popular news portal site iFeng and video streaming platform ACFUN have also been ordered to stop streaming.”
  • “The three companies did not possess the necessary license to stream audio and visual content and were ‘not in line with national audiovisual regulations and propagating negative speech,’ according to an announcement posted on Thursday night on the website of the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT), China’s media oversight body.” 
  • “Users would now have to apply for a license to continue video or audio streaming, according to a statement issued by the company.”
  • “The abrupt halt on video and audio streaming comes as China steps up its policing of internet content, particularly content it deems salacious. Earlier this month, more than 60 social media accounts, some on Weibo and including many celebrity gossip channels, were shut down for disseminating ‘vulgar content’ and ‘negatively impacting society’.”
  • “Meanwhile, a new cyber security law that took effect in June now mandates that any data relating to national security must be held on Chinese servers and large data transfers abroad must first be reviewed.”

Europe

Wolf Street – Two Italian Zombie Banks Toppled Friday Night – Wolf Richter 6/23

  • “When banks fail and regulators decide to liquidate them, it happens on Friday evening so that there is a weekend to clean up the mess. And this is what happened in Italy – with two banks!”
  • “It’s over for the two banks that have been prominent zombies in the Italian banking crisis: Veneto Banca and Banca Popolare di Vicenza, in northeastern Italy.”
  • “The banks have combined assets of €60 billion, a good part of which are toxic and no one wanted to touch them. They already received a bailout but more would have been required, and given the uncertainty and the messiness of their books, nothing was forthcoming, and the ECB which regulates them lost its patience.”
  • “In a tersely worded statement, the ECB’s office of Banking Supervision ordered the banks to be wound up because they ‘were failing or likely to fail as the two banks repeatedly breached supervisory capital requirements.’”
  • “’Failing or likely to fail’ is the key phrase that banking supervisors use for banks that ‘should be put in resolution or wound up under normal insolvency proceedings,’ the statement said. This is the first Italian bank liquidation under Europe’s new Single Resolution Mechanism Regulation.”

Japan

FT – Toshiba to be demoted to second ranks of Tokyo Stock Exchange – Leo Lewis and Kana Inagaki 6/23

  • “Struggling conglomerate leaves Nikkei 225 for first time since index launched in 1950.”

Turkey

NYT – Turkey Drops Evolution From Curriculum, Angering Secularists – Patrick Kingsley 6/23

  • “Turkey has removed the concept of evolution from its high school curriculum, in what critics fear is the latest attempt by President Recep Tayyip Erdogan’s government to erode the country’s secular character.”
  • What does one do when there is an inconvenient truth… deny its existence and keep future generations in the dark.

June 22, 2017

Perspective

Data Is Beautiful – Adult Obesity rates in the United States – zonination 6/20

Worthy Insights / Opinion Pieces / Advice

Project Syndicate – Brexit In Reverse? – George Soros 6/19

  • “Economic reality is beginning to catch up with the false hopes of many Britons. One year ago, when a slim majority voted for the United Kingdom’s withdrawal from the European Union, they believed the promises of the popular press, and of the politicians who backed the Leave campaign, that Brexit would not reduce their living standards. Indeed, in the year since, they have managed to maintain those standards by running up household debt.”

A Teachable Moment – How Can We Fix a Broken 403(b) System? – Anthony Isola 6/21

Markets / Economy

Reuters – For thousands of U.S. auto workers, downturn is already here – Nick Carey 6/21

Real Estate

WSJ – Avocado Toast Looks a Better Bet Than Australian Housing – Jacky Wong 6/20

  • “Chinese buyers have been gobbling up houses all over the world in recent years. There could be some nasty surprises when the buying stops.”
  • “There are already signs of imminent pain for the global property market, thanks to China’s efforts to stop money pouring out of the country. Inquiries from China for foreign real estate fell 31% in the first quarter from a year ago, according to Juwai.com, a portal that connects potential Chinese buyers to property listings overseas. For some of the most popular destinations, the drop was even bigger—42% for the U.S. and 39% for Australia.”
  • “The property market Down Under looks particularly vulnerable. China accounts for four in every five foreign buyers in Australia, with their interest a prime reason why home prices have surged to unaffordable levels: Prices in Sydney, for example, are up 72% since 2012.”
  • “Some are waking up to the potential trouble ahead, with Australia’s household debt now nearing 200% of disposable income. Moody’s downgraded 12 Australian banks and their affiliates Monday, citing rising risks associated with the housing market, following a similar move by Standard & Poor’s last month. The country’s four biggest banks alone have a $1.1 trillion exposure to Australian housing loans, making up 55% of their total portfolios, according to Morgan Stanley.”
  • “Worse still, nearly 40% of home loans now are interest-only, meaning borrowers don’t need to repay the principal for a certain period, usually five years. Such loans work fine when house prices keep rising. The worry now is that prices will start falling as Chinese buying interest wanes: Meanwhile, homeowners who have only had to pay interest on mortgages could see a rise in payments as the interest-only period on their loans expires.”

Energy

WSJ – Oil Returns to Bear Market – Stephanie Yang, Alison Sider, and Timothy Puko 6/20

  • “Prices are down 20.6% since Feb. 23, marking the sixth bear market for crude in four years and the first since August. Crude prices have lost 62% since settling at $115.06 a barrel three years ago. A bear market is typically defined as a decline of 20% or more from a recent peak, while a bull market is a gain of 20% or more from a recent trough.”

Finance

FT – Argentina’s 100-year bond cannot defy EM playbook forever – Jonathan Wheatley 6/20

  • “Really? A dollar-denominated bond that pays back 100 years from now, from a junk-rated country that has barely managed to stay solvent for more than half that time in its entire history as a creditor? While there is certainly an investment case for taking part, several analysts warn that this issue is a classic sign of a market getting ahead of itself.”
  • “The point, though, is not the 100 years. The complexities of bond math mean that, once maturities go beyond 30 years, the investment case barely changes. Barring default, with a yield of nearly 8%, the bond will repay investors in full in about 12 years, all else (such as inflation) being equal — and that’s leaving aside its resale value. Many investors will have much shorter horizons.”
  • “In a world starved of yield, the 7.91% on offer proved to be quite a pull and the bond attracted orders of $9.75bn for the $2.75bn issued. ‘People are looking out over the next 12 to 24 months and see a pretty positive outlook [for Argentina],’ says David Robbins, head of emerging markets at TCW in New York. ‘Duration in high yield is something they are more comfortable with.’ Argentina, he notes, is in effect selling equity in its economic recovery.”
  • “Sérgio Trigo Paz, head of emerging market fixed income portfolio management at BlackRock, says the rationale and the pricing are all good. But, he adds: ‘When you put it into perspective, it gives you a sense of déjà vu.’”
  • “He sees two scenarios. In one, the Fed is right about inflation and rates will continue to rise. This would turn the Argentine bond into ‘a bad experience’. In the other, markets are right, US inflation and payrolls will disappoint and we will be back in a low rate environment, which will be good for the bonds — until deflation rears its head again, hurting the Argentine economy and its ability to pay.”
  • “In the meantime, he says, there is a ‘Goldilocks’ middle ground in which investors can suck up an 8% coupon. Beyond that: ‘It doesn’t look good either way — which is why you get an inflection point.'”

Japan

FT – Toshiba picks government-backed group as chip unit buyer – Kana Inagaki and Leo Lewis 6/20

  • “After a chaotic months-long search for a buyer, Toshiba has picked a consortium led by a Japanese government-backed fund as the preferred bidder for its prized memory chip business.”
  • “The group — which includes the Innovation Network Corporation of Japan fund, private equity group Bain Capital and the Development Bank of Japan — competed against rival offers topping ¥2tn ($18bn) from US chipmaker Broadcom and Apple supplier Foxconn.”
  • “’Toshiba has determined that the consortium has presented the best proposal, not only in terms of valuation, but also in respect to certainty of closing, retention of employees, and maintenance of sensitive technology within Japan,’ the company said in a statement on Wednesday.”

South America

NYT – Venezuela Opens Inquiry Into a Critic: Its Attorney General – Nicholas Casey 6/20

  • Long a Chavista, attorney general Luisa Ortega is being investigated now that she has expressed concern at how far those in power are willing to go to quiet dissent.

June 14, 2017

Perspective

Economist – Climbing without ropes 6/8

  • “A series of remarkable feats increases the appeal of a niche sport.”

FT – Diplomatic victory for China as Panama ditches Taiwan – Ben Bland 6/13

  • “Panama has cut ties with Taiwan and established diplomatic relations with China, as Beijing intensifies efforts to isolate the self-governing island, which it considers Chinese territory.”
  • “Isabel Saint Malo, Panama’s foreign minister, signed a communiqué with her Chinese counterpart Wang Yi on Tuesday in Beijing to formalize the switch, leaving Taiwan with just 20 diplomatic allies.”
  • “Juan Carlos Varela, the president of the central American nation, said that signing up to Beijing’s ‘One China’ principle would generate ‘great potential in all areas’ including investment and job creation.”
  • “Beijing has tightened the squeeze on Taiwan since the election last year of President Tsai Ing-wen and her pro-independence Democratic Progressive party.”
  • “Panama’s defection is the latest diplomatic coup for Beijing, which is capitalizing on the uncertainty surrounding President Donald Trump’s foreign policy by exerting its influence from Southeast Asia to South Korea.”
  • “’China is exercising smart power more often, while the US is retreating from mainstream international politics,’ said Huang Kwei-bo, a professor of diplomacy at National Chengchi University in Taipei.”
  • “Taiwan still has expansive political and economic relations with many countries that do not formally recognize it, including the US, Japan and China itself, which consumes about 40 per cent of Taiwan’s exports.”

Worthy Insights / Opinion Pieces / Advice

Economist – America is no longer a force for stability in the Gulf 6/10

NYT – ‘No Such Thing as Justice’ in Fight Over Chemical Pollution in China – Javier Hernandez 6/12

Real Estate

WSJ – The Mall of the Future Will Have No Stores – Esther Fung 6/12

  • “Some landlords plug empty spaces with churches, for-profit schools and random enterprises while they figure out a long-term plan. Others see a future in mixed-use real estate, converting malls into streetscapes with restaurants, offices and housing. And some are razing properties altogether and turning them into entertainment or industrial parks.”
  • “In all, retailers have announced 2,880 store closings from January to April 6 of this year, more than twice as many as in the same period a year earlier, according to Credit Suisse . For the full year, the investment bank anticipates more than 8,600 stores to close. Analysts predict that 400 or so of the roughly 1,100 malls in the U.S. will close in the coming years.”
  • “Many mall owners are trying to liven up the experience, bringing more dining and entertainment tenants and eschewing the traditional mix of middling food courts, fashion retailers and department stores.”
  • “In GGP’s holdings of more than 130 shopping centers, apparel takes up half of the portfolio by gross leasable area. Food has risen to 13% from 6% and is projected to go to 20% by 2025, said GGP Chief Executive Sandeep Mathrani in a recent earnings call. Apparel will fall by another 10% or so by the fall, and stabilize at around 40%, he said.”

China

Economist – China’s rockiest environmental problem: its soil 6/9

  • “Cleaning filthy soil is much harder than cleaning foul air.”

FT – China drive to relocate millions of rural poor runs into trouble – Tom Hancock 6/12

  • “Villagers return home after struggling with lack of jobs in urban apartments.”

FT – China accuses 2 more provinces of faking data – Lucy Hornby 6/12

  • “Corruption watchdog cites concerns over figures from Jilin and Inner Mongolia.”

FT – Anbang confirms chairman detained by Chinese government – Tom Mitchell and Lucy Hornby 6/13

Japan

FT – Japan Inc’s silence over Toshiba sends chill across Tokyo – Leo Lewis and Kana Inagaki 6/12

  • “For almost 70 years, Japan Inc, a support network of invisible corporate allegiances, binding investments and unwritten understandings, has stood behind the nation’s companies as the ultimate guarantor of stability.”
  • “But for Toshiba, one of its famous industrial names, corporate Japan has gone missing in its darkest hour of need.”
  • “The failure of Japan Inc to bail out Toshiba is not only a shock for the embattled group — it suggests the framework that has previously helped rescue troubled megabanks and distressed electronics makers may be disintegrating.”
  • “’The deal of Japan Inc was: ‘I will help you when times are tough’,’ says Jesper Koll, head of fund manager WisdomTree Japan, pointing to the diminishing grip of the ‘keiretsu’ — the business groupings whose closeness and mutual support underpinned Japan’s postwar economic growth.”
  • “The Japan Inc concept, say economic historians, evolved over decades to remedy precisely the problem thrown up by Toshiba. It is an unwritten code that demands that, even if the result is unsuccessful, an all-Japanese solution will not only be attempted but will receive broad support from big business, banks and government.”
  • “So far, say people involved in the talks, not a single Japanese company has submitted a bid for the chip division even though business leaders have voiced dismay at the prospect of Toshiba’s technology falling into the hands of Asian rivals.”
  • “Thinning financial ties have contributed to the unravelling of the Japan Inc structures. A long-term trend, accelerated under Prime Minister Shinzo Abe’s governance push, has been the unwinding of the cross-held share stakes between friendly companies.” 
  • “According to Nomura Securities, the ratio of holdings of Japanese stocks by listed Japanese banks and non-financial companies was 10.3% at the end of the financial year that ended in 2015. At its height in 1990, the ratio was 34%. Nomura optimistically predicts Japan’s megabanks will reduce their shareholdings in Japanese companies over the next few years by 20-30% from current levels.” 
  • “The question remains, according to Mr Koll, whether it is still meaningful to talk about Japan Inc, as the Toshiba situation has clearly shown that the old safety nets are gone.”
  • “The chief executive of a large Japanese company, who is close to top METI (Ministry of Economy, Trade and Industry) officials, adds that it is not just a lack of willingness to help. ‘I don’t know if you would call this the ‘end of Japan Inc’ but it is certainly true that the task of resolving the Toshiba problem has taken everyone here by surprise because of its difficulty,’ he says.” 
  • “’I think it has been a wake-up call for METI and Japan for what they can really do in a crisis. Less than they thought, is the frank answer.’”

South America

WSJ – Daily Shot: Caracas Stock Exchange 6/12

  • “Venezuela’s stock market was up another 10% on the day.”

WSJ – Daily Shot: Venezuelan Black Market value for one US dollar 6/12

  • “This rally has little to do with the stock market and everything to do with the collapsing Venezuelan bolivar. It takes over 7k bolivares to buy one dollar on the black market.”

Other Links

WSJ – Daily Shot: Tax Foundation – U.S. Beer Taxes by State 6/13

May 4, 2017

Worthy Insights / Opinion Pieces / Advice

FT – The era of ‘deflationary progress’ means betting on automation – David Eiswert 5/3

  • “Investors need to come to reconcile themselves to the contradiction of progress and slower growth.”

A Wealth of Common Sense – Experts on an Earlier Version of the World – Ben Carlson 5/2

Markets / Economy

FT – US car sales drop faster than expected – Peter Campbell 5/2

WSJ – Daily Shot: BMI Research – Peak Auto Demand 5/2

Real Estate

WSJ – Japan’s Pension Fund Plows Into Real-Estate Investing – Peter Grant 5/2

China

WSJ – The China Debt Crisis Is Still Ripening – Nathaniel Taplin 5/2

  • “Chinese firms are still borrowing heavily and the Chinese banks backing them continue to rely heavily on risky interbank funding-eventually both firms and banks will need to pay the piper, or Beijing will need to absorb much more debt itself.”
  • “But as in the U.S., the breaking point is more likely to come when borrowers start feeling the pinch from slowing incomes and higher real borrowing costs. If the Chinese real-estate sector and inflation surprise on the downside later in 2017, or the dollar and rapid capital outflows bounce back, the piper could come knocking quicker than expected.”

WSJ – The Hot-Air Model of Chinses Asset Markets – Nathaniel Taplin 5/2

  • “Total financing to the real economy (including local government debt) was up more than 15% on the year in March, just marginally below the 17% peak in 2016.”
  • “All than money needs somewhere to go. And with stocks and bonds under pressure, and sending money abroad to buy Italian soccer clubs and dollar bonds getting tougher, cash is instead heading back into Chinese investors’ old standby: real estate.”

Puerto Rico

WSJ – Puerto Rico Placed Under Bankruptcy Protection – Andrew Scurria 5/3

  • “Federal officials placed Puerto Rico under bankruptcy protection, setting up a showdown with Wall Street firms owed billions of dollars in the largest-ever U.S. municipal debt restructuring and further complicating the U.S. territory’s efforts to pull itself out of a financial mess.”
  • “Puerto Rico and its agencies owe $73 billion to creditors, dwarfing the roughly $18 billion owed by the City of Detroit when it entered what was previously the largest municipal bankruptcy in 2013. The territory racked up its tremendous debt load during a decade long recession, beginning when tax credits that had built up its manufacturing based expired.”

April 28, 2017

Worthy Insights / Opinion Pieces / Advice

  • ZeroHedge – Canada’s Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History – Tyler Durden 4/27
    • “Call it Canada’s ‘New Century’ moment.”
    • “We first introduced readers to the company we said was the ‘tip of the iceberg in Canada’s magnificent housing bubble‘ nearly two years ago, in July 2015 when we exposed a major problem that we predicted would haunt Home Capital Group, Canada’s largest non-bank mortgage lender: liar loans in particular, and a generally overzealous lending business model with little regard for fundamentals. In the interim period, many other voices – most prominently noted short-seller Marc Cohodes – would constantly remind traders and investors about the threat posed by HCG.”
    • “Today, all those warnings came true, when the stock of Home Capital Group cratered by over 60%, its biggest drop on record, after the company disclosed that it struck an emergency liquidity arrangement for a C$2 billion ($1.5 billion) credit line to counter evaporating deposits at terms that will leave the alternative mortgage lender unable to meet financial targets, and worse, may leave it insolvent in very short notice.”
    • “As part of this inevitable outcome, one which presages the company’s eventual disintegration and likely liquidation, Bloomberg reports that the non-binding rescue loan with an unnamed counterparty will be secured by a portfolio of mortgage loans originated by Home Trust, the Toronto-based firm said in a statement Wednesday. Home Capital shares dropped by 61% in Toronto to the lowest since 2003, dragging down other home lenders. Equitable Group Inc. fell 17%, Street Capital Group Inc. fell 13%, while First National Financial Corp. declined 7.6%. In short, the Canadian mortgage bubble has finally burst.”

Markets / Economy

Bloomberg Businessweek – Zombie Nation: In Japan, Zero Public Companies Went Bust in 2016 – Jason Clenfield 4/4

  • “Corporate Japan achieved a rare feat in the fiscal year that ended in March. Not one of its almost 4,000 publicly-traded firms filed for bankruptcy protection.”
  • But they’re not alone.
  • “In China, roughly 10% of the country’s publicly-traded companies are ‘among the walking dead,’ being kept alive by continuous support from government and banks, according to research by He Fan, an economist at Beijing’s Renmin University.”
  • “Across much of Europe, inefficient bankruptcy laws are partly to blame for rising numbers of undead companies. The problem is especially acute in Italy, where zombies represent 6% of all businesses, double the rate in 2007, according to the OECD report.”
  • “A 2016 academic paper co-authored by University of Maryland economist John Haltiwanger showed the rate of business start-ups has been falling steadily since the 1980s. The drop has been so steep since the financial crisis that in some recent years more U.S. companies have closed than opened-there’s destruction but not much creation.” Referencing Austrian economist Joseph Schumpeter’s concept of ‘creative destruction.’
  • “Paul Donovan, global chief economist at UBS Wealth Management in London, says that cheap credit has made business around the world less efficient, and that the real walking dead will remain hidden until borrowing costs begin to climb.”

Real Estate

Bloomberg – Robots May Help Build Your Next Home and Fill the Labor Gap – Prashant Gopal and Heather Perlberg 4/17

WSJ – The Hedge Fund Manager Who’s Shorting America’s Malls – Serena Ng and Esther Fung 4/26

WSJ – S&P’s Warning: Here Are 10 Public Retailers Most in Danger of Default – Khadeeja Safdar 4/26

  • “The number of bankruptcies so far this year has already come close to the total in 2016, with 14 retailers filing compared with 18 last year, according to S&P Global Market Intelligence.”
  • Further, “researchers at S&P Global Market Intelligence last week released a list of 10 publicly traded retailers they consider most at risk of default within the next 12 months.”
    • Sears Holdings Corp.
    • DGSE Companies Inc.
    • Appliance Recycling Center of America Inc.
    • The Bon-Ton Stores Inc.
    • Bebe Stores Inc.
    • Destination XL Group Inc.
    • Perfumania Holdings Inc.
    • Fenix Parts Inc.
    • Tailored Brands Inc.
    • Sears Hometown and Outlet Stores Inc.

Finance

WSJ – There’s Trouble in Capital One’s Wallet 4/26

  • “Credit losses aren’t at dangerous levels, though the rising charges are a bit worrisome given the strong jobs market. More concerning is the inability of Capital One to predict its own losses. Investors should be on guard for more nasty surprises from the entire credit-card industry.”

Bloomberg – Wells Fargo, JPMorgan Wary of Auto Loans, Pack Them in Bonds – Matt Scully 4/27

  • “Depending whose money they’re using, Wells Fargo & Co. and JPMorgan Chase & Co. either love subprime car loans or fear them.”
  • “Both banks have grown more reluctant to make new subprime loans using money from their own balance sheets. Wells Fargo tightened its underwriting standards and slashed the volume of all loans it made to car buyers in the first quarter by 29% after greater numbers of borrowers fell behind on payments. JPMorgan’s consumer and community banking head Gordon Smith earlier this year said the bank had cut its new lending for subprime auto loans ‘dramatically.'”

China

The Real Deal – Rumors circulate of Chinese government detaining Anbang chief Wu Xiaohui – EB Solomont and Cathaleen Chen 4/26

  • “According to the media reports, the investigation into Wu is connected to a $14.5 billion loan the Anbang chairman allegedly obtained illegally from Minsheng Bank. Wu used the illegal loan to invest in the stock market, the reports say. He may also have partly funded Anbang’s acquisitions with the loan, according to the reports.”
  • Oh by the way, “in January 2015, Reuters reported that Anbang had upped its stake in Mingsheng, the country’s largest private lender, to nearly 20%.”
  • Isn’t there a conflict of interest there?

Other Links

Bloomberg Businessweek – How a Gift of Coke Shares Helped Make These Colleges Richer – Janet Lorin 4/20

Bloomberg Businessweek – This Lawsuit Goes to 11 – Robert Kolker 4/20