Tag: Markets

October 9, 2017

Perspective

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

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

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

Markets / Economy

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

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

Energy

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

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

Finance

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

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

Health / Medicine

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

Other Links

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

October 5, 2017

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Financial News Doesn’t Rhyme But It Does Repeat Itself – Ben Carlson 10/3

  • “It’s important for investors to remember that investing based on the headlines is a bad idea. The fact that we have access to more information than ever these days is a great thing, assuming you have the correct filters in place. Most people don’t, so they become consumed by every little snippet or viral headline they glance at.”
  • “One of these days one of these warnings will seem prescient. More likely than not, the next person or firm to ‘call’ the next bubble or crash will be more lucky than good.”

Project Syndicate – Deja Voodoo – Joseph Stiglitz 10/4

FT – Uber: The uncomfortable view from the driving seat – Leslie Hook 10/4

  • “The ride-sharing group faces its biggest challenge: keeping its drivers, some of whom sleep in their cars to make ends meet.”

Markets / Economy

BlackRock – Economic Cycles in Context 10/4

Real Estate

WSJ – Retail Real Estate Holds Steady Despite Store Closures – Esther Fung 10/3

  • “Overall, the retail vacancy rate across different types of malls and retail centers stayed flat at 10% in the third quarter from the second quarter, with asking rents rising 0.4% to $20.74 a square foot from the previous quarter and up 1.8% year-over-year.”
  • “Lower construction activity helped to rein in supply and support occupancy levels. The volume of property completions, or properties that are developed and ready to be leased out, stood at 1.6 million square feet in the third quarter, which was the lowest level since 2014. The change in occupied retail space, or so-called net absorption, stood at 578,000 square feet, the lowest level since 2010.”
  • “While the retail industry is facing headwinds from e-commerce, an oversupply of stores and fast-changing consumer tastes, the restaurant sector as well as grocery stores and fitness centers are continuing to expand, helping to cushion the blow, landlords say.”
  • “In an August report, research and advisory firm IHL Group estimated there will be roughly 4,080 net store openings this year after taking into account 10,168 store closures. Apart from fast-food restaurants and beauty retailers, discount stores such as Dollar General and Dollar Tree are opening almost 2,000 new stores this year, the report added. Many of these dollar stores, however, will be in new build-to-suit locations rather than taking up existing retail space.”

Finance

Bloomberg – Trump Speaks and a $3.8 Trillion Market Hears an Existential Threat – Brian Chappatta 10/4

  • You can imagine that every holder and seller of municipal debt heard it when President Trump indicated that Puerto Rico’s $74 billion in debt would be wiped out.
  • The administration has since walked back from that ledge.

China

FT – Bond investors start to ask questions about Chinese takeovers – Robert Smith 10/3

  • “More than 18 months after ChemChina’s $44bn agreement to purchase Swiss agribusiness Syngenta capped a buying spree by Chinese companies across Europe, debt investors and rating agencies are starting to ask tough questions.”
  • “Their heightened scrutiny has left Syngenta’s investment grade rating in jeopardy, after Standard & Poor’s late on Monday put the company on review for a potential downgrade because of confusion over its support from the Chinese state.”
  • “The Swiss seeds company was last week forced to postpone a $7bn bond deal, intended to refinance bridge loans backing ChemChina’s takeover, as investors questioned its ability to settle class-action litigation in the US while maintaining an investment grade rating.”
  • Essentially, do they have State support or do they not? Who has priority to cash flows? And how much debt do they really have?
  • “Before ChemChina’s acquisition, Syngenta carried strong single-A credit ratings, but Standard & Poor’s now pegs the company at the lowest rung of investment grade.”
  • “Investors’ willingness to subject ChemChina’s financing to a more rigorous examination comes after China’s bank regulator earlier this year ordered domestic lenders to check the ‘systemic risk’ presented by ‘some large enterprises’ that have been acquiring companies overseas.”
  • “That has caused tension for bondholders in European companies owned by private Chinese groups such as HNA and Anbang.”
  • “’If you have implied support from the Chinese government, the ‘when’ and the ‘how’ are very important,’ Andrew Brady, an analyst at credit research firm CreditSights, says of state-owned ChemChina.”
  • “’In Syngenta’s case, we have to now assume it won’t come to protect an investment grade rating. And if support comes in the form of a loan, weak protections in the bond’s documentation mean that they could get layered with secured debt, meaning the exact mechanism of support could damage bondholders.’”
  • “As recently as August, S&P said in a report that ChemChina indicated that both it and China’s state-owned Assets Supervision and Administration Commission (Sasac) ‘remain committed’ to maintaining Syngenta’s investment grade rating ‘under all scenarios’.”
  • “Crucially, the rating agency said that Sasac would need to provide support to mitigate litigation liabilities with equity, to ensure there is ‘no additional debt imposed on Syngenta or ChemChina’.”
  • “A bond investor who looked at Syngenta’s proposed deal says that one of his biggest concerns was that it placed ‘absolutely no restrictions’ on the company’s ability to pay dividends to the heavily indebted ChemChina. S&P has projected that ChemChina will have a 10 to 13 times debt-to-ebitda ratio in 2017 and 2018.”
  • “’Let’s not kid ourselves, you wouldn’t freely put money into any other 13 times levered chemicals company,’ the investor says.”
  • “Lenders to European companies owned by large Chinese conglomerates have become increasingly focused on their ability to take cash out of the groups, with Swissport bondholders recently raising concerns after the airline services group started providing short-term loans to owner HNA.”
  • “A second bond investor says that he is increasingly wary of having exposure to European businesses owned by highly levered Chinese companies, describing them as ‘black boxes’.”
  • “’Nobody can be sure how much debt they have, or who really runs these businesses,’ he says.”

September 29, 2017

Perspective

NYT – Why Aren’t Paychecks Growing? A Burger-Joint Clause Offers a Clue – Rachel Abrams 9/27

  • “As economists try to understand why wages have stagnated across the country’s economy, they are examining the cheap labor part of the equation closely. A few have zeroed in on an obscure clause buried in many fast-food franchise agreements as a possible contributor to the problem.”
  • “Some of fast-food’s biggest names, including Burger King, Carl’s Jr., Pizza Hut and, until recently, McDonald’s, prohibited franchisees from hiring workers away from one another, preventing, for example, one Pizza Hut from hiring employees from another.”
  • “The restrictions do not appear in a contract that employees sign, or even see. They are typically included in a paragraph buried in lengthy contracts that owners of fast-food outlets sign with corporate headquarters.”
  • “Yet the provisions can keep employees tied to one spot, unable to switch jobs or negotiate higher pay. A lack of worker mobility has long been viewed as contributing to wage stagnation because switching jobs is one of the most reliable ways to get a raise.”
  • “Defenders of the practice argue that the restaurants spend time and money training workers and want to protect their investment. But two lawsuits, filed this year against McDonald’s and Carl’s Jr.’s parent company, CKE Restaurants Holdings, contend that such no-hire rules violate antitrust and labor laws.”
  • “The no-hire rules affect more than 70,000 restaurants — or more than a quarter of the fast-food outlets in the United States — according to Alan B. Krueger, an economist at Princeton University and a chairman of the Council of Economic Advisers in the Obama administration who examined agreements for 40 of the nation’s largest fast-food companies.”
  • “The provisions, he said, were ‘ubiquitous’ among the companies and appeared to exist mainly to limit both competition and turnover, which can keep labor costs low.”
  • “The restrictions are different from what are known as noncompete agreements — clauses in employee contracts that keep an employee from jumping to a rival. Such agreements are typically described as a means of preventing employees from bringing trade secrets to a competitor.”
  • “’I think it’s very hard to make the argument that noncompetitive agreements are necessary for low-educated, low-wage workers because they have trade secrets,’ Professor Krueger said. ‘This practice does have the potential to restrict competition and significantly influence pay.’”

Worthy Insights / Opinion Pieces / Advice

FT – Uber: the triumph of wallet over spirit – Robert Shrimsley 9/27

  • “I am quietly pleased London has taken a stand because, frankly, I wasn’t going to…”
  • “Free markets are a general good but they need someone looking beyond instant gratification to the wider consequences because the bottom line is consumers are like children. We need to be told that convenience is not the only issue. We need to be told to eat our greens.”

NYT – With Tax Cuts on the Table, Once-Mighty Deficit Hawks Hardly Chirp – Thomas Kaplan 9/28

Economist – How China is battling ever more intensely in world markets 9/23

Economist – How the use of antibiotics in poultry farming changed the way America eats 9/21

Markets / Economy

Bloomberg Businessweek – Midsize U.S. Sedan Demand Stalls Out to Lowest on Record – Anne Riley Moffat 9/27

  • “Only about one in 10 new cars sold in the U.S. is a midsize sedan, a sharp decline for the best-selling vehicle segment in 20 of the last 27 years, according to data from car-shopping website Edmunds.”

Real Estate

Fortune – The U.S. Housing Market Is Getting Squeezed. See Where Prices Are Spiking the Highest – Nicolas Rapp and Brian O’Keefe 9/15

WSJ – Blame Canada? Toronto, Vancouver Top Housing  Bubble Risks – Brian Blackstone 9/28

  • “Blame Canada?”
  • “It isn’t just the tune made famous by the South Park movie. It may become a motto among economists if frothy housing values around the world turn into a destabilizing bubble.”
  • “UBS published its latest global real estate ‘bubble index’ on Thursday, listing the major cities most at risk of housing bubbles. Canada took two of the top four spots, with Toronto on top and Vancouver at number four, and Northern Europe’s Munich and Stockholm sandwiched between.”
  • “U.S. cities featured pretty highly, with San Francisco and Los Angeles in ‘overvalued,’ but not bubble territory. New York was deemed fairly valued, and Chicago was the only city in the 20 listed that was undervalued.”
  • “UBS lists Boston’s real-estate market as fair-valued. Its uses sub-indexes such as price-to-income and mortgage-to-gross domestic product ratios to construct an overall index. Index readings above 1.5 are in bubble territory and the overvaluation scale slides down from there.”
  • “UBS noted that Toronto and Vancouver weren’t ‘dragged down’ by the global financial crisis, as a weaker Canadian dollar cushioned the blow. ‘Overly loose monetary policy, for too long, in addition to buoyant foreign demand, unmoored their housing markets from economic fundamentals—and both markets are now in bubble risk territory.’”
  • “’A strengthening Canadian dollar and further interest rate hikes would end the party,’ the report added.”
  • “In the U.S., housing prices in cities are still below their 2008 peak in inflation-adjusted terms, UBS said, except for San Francisco which ‘shows signs of overvaluation but no bubble risk, given its strong economic fundamentals amid the astonishing boom of tech companies.’”
  • “Turning to Europe, UBS said that ‘improving economic sentiment, partly accompanied by robust income growth in the key cities, has conspired with excessively low borrowing rates to spur vigorous demand for urban housing.’”
  • “In the Asia-Pacific region, Tokyo shows ‘moderate signs of overheating’ since the Bank of Japan launched its quantitative easing program in 2013, while residential prices in Hong Kong reached all-time highs mid-year ‘thanks to insatiable investor demand and speculative price expectations.’”

Finance

WSJ – Daily Shot: Danske Bank – S&P 500 Volatility 9/28

  • “For the first time since 2005, there hasn’t been a 2% daily move in the S&P 500.”

WSJ – Daily Shot: Reformed Broker – S&P 500 Maximum Drawdowns 9/28

China

Economist – China’s demographic divisions are getting deeper 9/21

September 28, 2017

Markets / Economy

WSJ – Daily Shot: Goldman Sachs – Rise and Fall of New Technology – Share Price Performance 9/27

Real Estate

CNBC – Stop sugarcoating the housing market: Economist warns that buyers face increasing troubles – Diana Olick 9/26

  • “From a broad view, the U.S. housing market looks very healthy. Demand is high, employment and wages are growing, and mortgage rates are low.”
  • “But the nation’s housing market is assuredly unhealthy; in fact, it is increasingly mismatched with today’s buyers. While the big numbers don’t lie, they don’t tell the real truth about the affordability and availability of U.S. housing for the bulk of would-be buyers.”
  • “First, several reports out this week point to both continued heat in home values as well as pushback from homebuyers. Prices remain nearly 6% higher than they were a year ago, nationally, with some local markets seeing double-digit annual price gains. Those prices are being driven by a severe lack of supply at the low end of the market, which is where the most demand exists. That means lower-priced homes are seeing bigger price gains than higher-priced homes because of the competition.”
  • “At the same time, sales are falling, again, because there are too few homes on the low end, and the homes that are available are very expensive.”
  • “‘It sets up a situation in which the housing market looks largely healthy from a 50,000-foot view, but on the ground, the situation is much different, especially for younger, first-time buyers and/or buyers of more modest means,’ wrote Svenja Gudell, chief economist at Zillow in a response to the latest home-price data. ‘Supply is low in general, but half of what is available to buy is priced in the top one-third of the market.'”
  • “Supply on the low end is tight because during the housing crash investors large and small bought hundreds of thousands of foreclosed properties and turned them into rentals. There are currently 8 million more renter-occupied homes than there were in 2007, the peak of the housing boom, according to the U.S. Census.
  • “Investors could take the opportunity of high prices and high demand to sell these properties, but today’s high rents offer them better returns.”
  • “Low supply of homes for sale might also seem like a great opportunity for the nation’s homebuilders. Yes, they went through an epic housing crash, but they have since consolidated market share and righted their balance sheets. Homebuilders are simply not building enough inexpensive houses that the market needs.”
  • “Builders say they would like to build more affordable homes but cannot because the math doesn’t work. The costs of land, labor, materials and regulatory compliance are just too high. In addition, younger homebuyers want to live closer to urban areas, not in the far-out exurbs, where builder costs are far lower.”
  • “‘It’s time we stopped sugarcoating the truth with this data — the simple fact is that we are severely underproducing housing in this country, relative both to basic demographics and currently high demand from buyers,’ wrote Gudell, who notes that inventory is stuck at roughly mid-1990s levels, but the country has grown by more than 60 million people since then. ‘Buying conditions, in theory, are great right now: Jobs and incomes are growing, and rock-bottom mortgage interest rates are helping keep financing costs low. What’s missing from the equation is a lack of homes actually available to buy at a price point that’s reasonable for most buyers.'”
  • “The trouble is, even though the market is woefully mismatched, home prices will not come down as long as there are some buyers out there willing and able to spend more and more money for less and less house.”
  • “So, what does all this mean for the economy and personal wealth? It means the renter nation will persist and fewer Americans will be able to save and grow their money in a home. It also means rents will continue to rise due to high demand, leaving more Americans with less disposable income to spend.”

China

WSJ – Chinese Developers Face Debt Reckoning After Boom – Dominique Fong 9/27

  • “A wave of local-currency debt coming due next year alongside new stricter lending rules are bearing down on China’s developers and posing a risk to the country’s economy.”
  • “Meanwhile, many yuan bondholders have the option to demand early repayment starting next year and increasingly in 2019 and 2020. The scenario could force a wave of asset sales and deprive developers of cash to build new projects, leading to a further potential deterioration in their finances, credit analysts say.”
  • “Developers also are likely to pay more dearly for debt after home prices slowed for three straight months this summer, save a few small cities. Last year, only about 25% of developers paid 6% or higher for their yuan bonds, according to Wind. This year the ratio is more than 33%. Credit analysts expect that to climb further.”
  • “Since many loans use property as collateral, declines in value could exacerbate any chain of defaults for yuan bonds, bank loans and China’s informal, lightly-regulated lending sector, potentially infecting China’s financial system.”
  • “’The wall of bonds is just one symptom of the whole problem,’ said Anne Stevenson-Yang, founder of J Capital Research.”
  • “Smaller developers are particularly vulnerable because of their high debt loads, experts say. For example, the net debt of state-backed Yunnan Metropolitan Real Estate Development Co. is 57 times earnings before interest and taxes, according to research firm Granite Peak Advisory. The ratio is 37 times for Fuzhou-based commercial real-estate developer Tahoe Group Co., and more than 23 times for Shanghai-based Yango Group Co.”
  • “In comparison, the leverage for all mainland-listed developers is 6.4 times, and 4 times for all Chinese companies excluding financial institutions, according to Granite Peak Advisory.”
  • “Most developers have adequate liquidity if they can’t refinance debt and must repay bonds in full with cash next year, Moody’s says. But their ability to do so is weakening. Rated developers’ cash was 1.6 times short-term debt coverage, compared with 2 times last year, S&P Global Ratings says.”

South America

FT – Venezuelan politicians seek refuge abroad – John Paul Rathbone and Gideon Long 9/26

  • “Exiled mayor David Smolansky says country has moved closer to a totalitarian regime.”

September 25, 2017

Perspective

BBC – ‘Monster’ fatberg found blocking east London sewer 9/12

  • “A 250-metre long fatberg weighing 130 tons has been found blocking a sewer.”
  • “The solid mass of congealed fat, wet wipes, nappies, oil and condoms formed in the Victorian-era tunnel in Whitechapel, London.”
  • “Thames Water described it as one of the largest it had seen and said it would take three weeks to remove.”
  • “The company says fatbergs form when people put things they shouldn’t down sinks and toilets.”

VC – Which Cities are Fueling America’s Craft Beer Boom? – Nick Routley 9/23

Worthy Insights / Opinion Pieces / Advice

WSJ – Americans Are Richer; Why Are They Still Cautious? – Justin Lahart 9/21

  • “Getting richer doesn’t make people spend like it used to. That should give the Federal Reserve less to worry about when it comes to consumers, but more to worry about when it comes to asset prices.”
  • “Lifted by rising home prices and a buoyant stock market, U.S. household net worth reached a record $96.2 trillion in the second quarter, the Fed reported Thursday, up $1.7 trillion from the first quarter. That compared with $68.2 trillion a decade earlier, just before the recession hit. The wealth-to-income ratio hit a new high of 670%.”
  • “But if households are feeling flush they aren’t acting like it. Consumer spending has been tepid, and people have been far less willing to tap wealth to fuel spending than they used to be. Bank of America Merrill Lynch estimates that for each dollar gain in housing wealth, people increase their spending by just two cents, versus five cents in the mid-1990s. For stock gains, the figure has slipped to one cent from four cents.”
  • “There are few likely reasons for the change in behavior. First, people don’t put as much trust in the staying power of wealth gains. The big stock market drops following the dot-com bust and the financial crisis are hard to forget, and the housing bubble ended the old notion that home values are safe. Second, a greater share of U.S. stock market and housing wealth is concentrated in the hands of the rich, who don’t boost their spending in response to wealth gains as much as other people do. Finally, tighter lending standards have made it more difficult to tap into housing wealth than it was before the financial crisis.”

Finance

WSJ – Daily Shot: Goldman Sachs – BOJ Slowing Purchase of JGBs 9/22

China

WSJ – Daily Shot: Natixis – Relative Scale of China Investment in the Middle East 9/22

WSJ – Daily Shot: Natixis – China Capital Projects in the Middle East 9/22

September 21, 2017

Perspective

NYT – Before Wisconsin, Foxconn Vowed Big Spending in Brazil. Few Jobs Have Come. – David Barboza 9/20

  • “Before the Taiwanese manufacturing giant Foxconn pledged to spend $10 billion and create 13,000 jobs in Wisconsin, the company made a similar promise in Brazil.”
  • “At a news conference in Brazil, Foxconn officials unveiled plans to invest billions of dollars and build one of the world’s biggest manufacturing hubs in the state of São Paulo. The government had high expectations that the project would yield 100,000 jobs.”
  • “Six years later, Brazil is still waiting for most of those jobs to materialize.”
  • “Foxconn’s experience in Brazil and other parts of the world illustrates how difficult it has been for it to replicate its enormously successful Chinese manufacturing model elsewhere.”
  • “In China, Foxconn has built vast factories backed by large government subsidies. Its operations — assembling iPhones for Apple, Kindles for Amazon and PlayStations for Sony — employ legions of young assembly-line workers who often toil 60 hours a week for about $2.50 an hour. Labor protests in China are rare, or quashed swiftly.”
  • “But the model does not translate easily to other countries, where Foxconn must navigate different social, political and labor conditions.”

VC – These Maps Show Where a Dollar Goes Furthest in the U.S. – Jeff Desjardins 9/20

WSJ – Some NYC K-12 Schools Cross $50,000-a-Year Mark – Leslie Brody 9/18

  • “Five years ago, parents gulped when the price for attending some private K-12 schools in New York City hit $40,000 a year.”
  • “Now, a few have crossed the $50,000 threshold.”
  • “The cost of private education in the city has long risen faster than inflation, and is almost double the national average for such schools. Median tuition and fees at Manhattan private schools climbed to $44,050 last school year, up 23% from $35,867 five years earlier, according to the National Association of Independent Schools.”
  • “The charges, many private-school leaders say, don’t cover the full cost of the rigorous educations provided. Their customers want small classes, arts, extracurricular activities, intensive college advising and teachers with advanced degrees. Leaders of these institutions say most depend on fundraising to fill the yearly shortfalls, in addition to holding capital campaigns for new construction.”
  • “Drivers of mounting tuitions include teacher salaries, health insurance, technology upgrades, more services for students with learning disabilities, and maintenance for expanded facilities, school leaders said.”

Worthy Insights / Opinion Pieces / Advice

Medium – Starting Your Day on the Internet Is Damaging Your Brain – Srinivas Rao 9/18

  • “If we start our days by checking email, instagram, or the internet, we keep reinforcing the behavior of distraction until it becomes our new habit. Some of the smartest behavioral scientist and designers in the world have worked really hard to make sure that their products are addictive, habit forming, and only provide you with a temporary sense of fulfillment so the you are always jonesing for your next fix. As Mark Manson so brilliantly said, cell phones are the new cigarettes, And a significant amount of what’s on the internet is nothing more than junk food for the brain.”

A Wealth of Common Sense – Social Proof in the Markets – Ben Carlson 9/19

  • “Social proof is the idea that we look to others to figure out what the correct behavior should be. We follow narratives instead of evidence. It feels more comfortable to go along with the crowd when making tough decisions because we look at what others are doing in times of uncertainty.”
  • I’m always surprised how people latch on to a narrative because it sounds right, regardless of its likelihood or the conditions that would have to exist to make it so.
  • “Being right is easy. How you handle being wrong is the true test of any successful investor or decision-maker.”
  • “Many investors assume they must be right no matter what the market does.”
  • “‘I’m not wrong, I’m just early. It’s the market that must be wrong and all of those other idiots, but surely not me.'”
  • “One of the most fascinating aspects of the markets today is that most investors assume everyone else must be crazy. Those who have been sitting on the sidelines in cash assume everyone in the markets at current valuation levels must be nuts. And everyone who is sitting on gains from being invested in the markets assumes that those who are worried must be nuts because they’ve missed out. Maybe everyone is right (or no one) depending on the time frame.”
  • Just because something should be so, doesn’t mean it will be so.

Environment / Science

Market Watch – Hurricane Maria upgraded to Category 5 as it smashes into Caribbean – Ciara Linnane 9/19

Health / Medicine

NYT – Playing Tackle Football Before 12 Is Tied to Brain Problems Later – Ken Belson 9/19

  • “Athletes who began playing tackle football before the age of 12 had more behavioral and cognitive problems later in life than those who started playing after they turned 12, a new study released on Tuesday showed.”
  • “The findings, from a long-term study conducted by researchers at Boston University, are likely to add to the debate over when, or even if, children should be allowed to begin playing tackle football.”
  • “In phone interviews and online surveys, the researchers found that players in all three groups who participated in youth football before the age of 12 had a twofold ‘risk of problems with behavioral regulation, apathy and executive function’ and a threefold risk of ‘clinically elevated depression scores.'”
  • “’The brain is going through this incredible time of growth between the years of 10 and 12, and if you subject that developing brain to repetitive head impacts, it may cause problems later in life,’ Robert Stern, one of the authors of the study, said of the findings.”
  • “A growing number of scientists argue that because the human brain develops rapidly at young ages, especially between 10 and 12, children should not play tackle football until their teenage years.”

China

WSJ – Too Little, Too Late? China Can’t Seem to Get a Grip on Fintech Regulation – Chuin-Wei Yap 9/18

Europe

FT – Norway’s oil fund tops $1tn in assets for first time – Richard Milne 9/19

  • “Norway’s oil fund, the world’s largest sovereign wealth fund, has topped $1tn in assets for the first time in its history.”
  • “The oil fund, which started in 1996, reached NKr7,811bn ($1.001tn) in market value on Tuesday. Officials confirmed it was the first time it has breached the trillion-dollar barrier.” 
  • “In a country of just 5.2m people, the oil fund has been an extraordinary success, growing faster than ministers imagined to become one of the world’s largest investors, owning on average 1.3% of every listed company in the world.”
  • “The fund was set up to help manage Norway’s oil wealth for future generations by taking all the revenues the state receives from petroleum and investing it in financial assets abroad.”
  • “The fund has grown at a dizzying pace, with its assets rising 13-fold since 2002.”
  • “At the end of 2016, about half of the fund’s assets were due to the returns on its investments, approximately 45% due to inflows from oil and gas revenues, and the rest due to currency movements.”
  • “The oil fund has undergone significant changes over its history. It started by investing purely in bonds but now holds close to 65% of its assets in shares.”
  • “It made its first investment in property in 2011 and has now built up a $30bn portfolio, mostly in the US and Europe.”

September 19, 2017

Worthy Insights / Opinion Pieces / Advice

FT – Big Tech makes vast gains at our expense – Rana Foroohar 9/17

  • “Data-driven companies have a license to print money, with few restrictions.”

Bloomberg – The Way Humans Get Electricity Is About to Change Forever – 9/13

Markets / Economy

WSJ – New Data Shows Retirees Are on the Move, But Young Folks Are a Different Story  – Andrew Van Dam and Paul Overberg 9/15

Health / Medicine

BuzzFeed – Harvey Damaged 13 Toxic Waste Sites. It Could Take Years to Know The True Health Risks. – Nidhi Subbaraman and Peter Aldhous 9/3

Shipping

FT – Container shipping: surf’s up – Lex 9/17

  • “If only investors in shipping had the equivalent of a mariner’s tide tables. They can see where the low water mark in share prices lies, but must divine for themselves how high the waters might now rise.”
  • “In this particular cycle, the ebb lasted a long time after container lines ordered too many ships and then struggled to fill them. The low point was probably last autumn, when Korean line Hanjin filed for bankruptcy.”
  • “The market has improved markedly since then. Industry volume growth is expected to hit 5% this year, from 3.8% last year. Scrapping rates have picked up, while new capacity on order is finally falling. Such newfound discipline might last longer than in previous cycles because consolidation has increased the market share of the top six operators to almost two-thirds, from two-fifths in 2013. Four alliances have become three. In other industries — airlines, for instance — concentration of this sort led to greater self-control.”
  • “Such developments have not gone unnoticed. Antitrust regulators have raised concerns about the shrinking number of alliances and their control over certain routes. And the Dax global shipping index has risen 15% (in dollar terms) since January.”