Tag: Markets

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.”

September 14, 2017

Perspective

WSJ – Daily Shot: US Census Bureau, Piper Jaffray – Construction & GDP Correlation 9/13

WSJ – Daily Shot: Moody’s – Impact of Irma on Southwest US 9/13

FT – Chart of the day, offshore tax haven market-share edition – Cardiff Garcia 9/11

  • “In all the micro-data we have access to, offshore wealth turns out to be extremely concentrated: the top 0.1% richest households own about 80% of it, and the top 0.01% about 50%.” – Annette Alstadsaeter, Niels Johannesen, and Gabriel Zucman

Worthy Insights / Opinion Pieces / Advice

WSJ – There’s a Speeding Mass of Space Junk Orbiting Earth, Smashing Into Things – Robert Lee Hotz 9/12

Economist – The lessons of fidget spinners 9/9

  • “Sales might have peaked, but they have changed toys.”

Economist – Mobile technology is revamping loyalty schemes 9/7

  • “If you want loyalty, get big data.”
  • “When Caesars Entertainment, a casino group, went bankrupt in 2015, auditors valued its loyalty database at $1bn, more even than its property on the Las Vegas strip.”

Markets / Economy

WSJ – Daily Shot: US Real Household Median Income (2016) 9/13

WSJ – Daily Shot: US Real Household Income by selected income percentiles 9/13

WSJ – Daily Shot: US Real Household Income by ethnicity 9/13

WSJ – Daily Shot: BMO Wealth Management – Bloomberg – Declining Corporate R&D 9/13

Energy

WSJ – Daily Shot: Bloomberg – Retail Gasoline Price Spike 9/13

  • Never waste a good crisis…

FT – Nigeria to resist cuts to its oil output, minister says – Anjli Raval 9/12

Finance

VC – Comparing Bitcoin, Ethereum, and Other Cryptos – Jeff Desjardins 9/11

Shipping

WSJ – Daily Shot: Baltic Dry Index 9/11

  • “The Baltic Dry shipping index hit the highest level in a couple of years amid better demand for iron ore.”

China

FT – Life sentences, $290m fine for Ponzi scheme in China – Edward White 9/11

  • “The two men who led a massive Chinese lending scam were sentenced to life behind bars by a Beijing court on Tuesday.”
  • “Ding Ning, the 35-year-old founder of Ezubao, was sentenced to life imprisonment after being charged with fraud, smuggling precious metals, illegal procession of firearms and illegally crossing China’s border. The company’s former chairman Ding Dian was also sentenced to life.”
  • “Ezubao was established in 2014 and became one of China’s highest-profile peer-to-peer lending sites, promising investors annual returns of up to 15%, write Edward White and Xinning Liu. According to the official Xinhua news agency, the Ponzi scheme raised more than Rmb50bn ($7.6bn) from 900,000 investors before arrests were made in early 2016.”
  • “The Beijing Intermediate Court issued fines of Rmb1.9bn (US$290m), which one Chinese lawyer said could mark a new precedent for fraud cases in China. Another 24 people linked to the scam, were handed sentences ranging from three to 15 years.”
  • “Ezubao’s risk controller was quoted by Xinhua in 2016 as saying ‘95% of [our] projects are fake’.”

India

Economist – Panipat, the global center for recycling textiles, is fading 9/7

  • A lesson of what happens when companies fade away when they don’t innovate, invest in R&D, and squeeze their capital and labor.

September 13, 2017

Perspective

WSJ – Irma Leaves 6.7 Million Florida Utility Customers in the Dark – Erin Ailworth 9/11

NYT – Houston’s Floodwaters Are Tainted With Toxins, Testing Shows – Sheila Kaplan and Jack Healy 9/11

  • “It is not clear how far the toxic waters have spread. But Fire Chief Samuel Peña of Houston said over the weekend that there had been breaches at numerous waste treatment plants. The Environmental Protection Agency said on Monday that 40 of 1,219 such plants in the area were not working.”
  • “The results of The Times’s testing were troubling. Water flowing down Briarhills Parkway in the Houston Energy Corridor contained Escherichia coli, a measure of fecal contamination, at a level more than four times that considered safe.”

NYT – In Houston After the Storm, a City Split in Two – Jack Healy 9/8

  • “Life in Houston now comes with a twinge of survivor’s guilt for those in dry neighborhoods, and envy among those still dealing with floodwater.”

Worthy Insights / Opinion Pieces / Advice

WSJ – Why the Markets Keeps Going Up and What Would Bring It Down – Justin Lahart 9/12

  • “Big, fast-growing companies have led the recent rally, and that should continue-but when it ends, get out fast.”

WEF & Business Insider – A neuroscientist who studies decision-making reveals the most important choice you can make – Chris Weller 8/4

  • Spoiler alert, it’s who you surround yourself with.

Markets / Economy

FT – US companies transformed into 800lb gorilla in bond market – Eric Platt, Nicole Bullock, and Alexandra Scaggs 9/12

  • “Thirty US companies together have more than $800bn of fixed-income investments, according to a Financial Times analysis of their most recent filings with the US Securities and Exchange Commission.”
  • “Their holdings of Treasuries, corporate, agency and municipal debt, as well as asset- and mortgage-backed securities, means they collectively have more firepower in debt and credit markets than high-profile asset managers including AllianceBernstein, Invesco and Franklin Templeton.”
  • “’They are asset managers in their own right,’ Ramaswamy Variankaval, head of JPMorgan’s corporate finance advisory group, said of the companies.”
  • “A reluctance by American multi-nationals to repatriate profits generated overseas has pushed the size of the US corporate cash piles to more than $2tn, a rise of 50% over the past decade and more than double the levels at the turn of the century, according to the Federal Reserve.”
  • “In total, the 30 companies, which include venerable household names like Ford, Coca-Cola and Boeing, have more than $1.2tn in cash, cash equivalents, marketable securities and investments, according to the FT analysis.”
  • “The 30 companies have amassed a portfolio of more than $400bn of US corporate bonds, representing nearly 5% of the outstanding market.”
  • “They compete for such debt alongside pension funds, sovereign wealth funds and other investors, helping to drive down borrowing costs for corporate America.”
  • Seems self-serving to an extent…

Finance

WSJ – China to Shut Bitcoin Exchanges – Chao Deng and Paul Vigna 9/11

  • “The policy shift in the world’s No. 2 economy shows how nations are wrestling with bitcoin and its place in the financial system. In China, specifically, the government’s attack on bitcoin comes amid a focus on preventing capital from fleeing to digital currencies.”
  • “After a Chinese news organization Friday reported on China’s commercial-trading ban, Bitcoin slid around 10% to $4,186, from levels above $4,600 on Thursday, according to research site CoinDesk. It has hovered around that level since, closing Monday at $4,211.”
  • “China has long been a major hub for bitcoin, which was created by an anonymous programmer during the depths of the 2008 financial crisis as an alternative to official currencies. Much of the world’s bitcoin is mined—created through powerful algorithms—in China. As recently as this past January, before new rules damped trading in the country, more than 80% of global bitcoin activity took place in yuan.”
  • “The stakes for Beijing grew as prices of virtual currencies like bitcoin soared, adding to the risk that Chinese investors would continue to speculate and expose themselves to big losses. Analysts and investors attribute the sharp rise in bitcoin last year to Chinese investors, who began buying it up while at the same time selling the yuan amid worries that the Chinese currency would weaken.”
  • “While China in the past accounted for the bulk of global bitcoin trading activity, the country’s share has dropped dramatically since the government started making moves to cool the market.”
  • “In April, Japan’s Financial Services Agency implemented rules that recognized bitcoin as a payment method. Since then, Japan has become the top market for bitcoin trading, accounting for almost half of global volumes. The U.S. share of trading has jumped to above 25% from 5% over the past year.”

Health / Medicine

NYT – New Gene-Therapy Treatments Will Carry Whopping Price Tags – Gina Kolata 9/11

  • “The first gene therapy treatment in the United States was approved recently by the Food and Drug Administration, heralding a new era in medicine that is coming faster than most realize — and that perhaps few can afford.”
  • “The treatment, Kymriah, made by Novartis, is spectacularly effective against a rare form of leukemia, bringing remissions when all conventional options have failed. It will cost $475,000.”
  • “With gene therapy, scientists seek to treat or prevent disease by modifying cellular DNA. Many such treatments are in the wings: There are 34 in the final stages of testing necessary for F.D.A. approval, and another 470 in initial clinical trials, according to the Alliance for Regenerative Medicine, an advocacy group.”
  • “The therapies are aimed at extremely rare diseases with few patients; most are meant to cure with a single injection or procedure. But the costs, like that of Kymriah, are expected to be astronomical, alarming medical researchers and economists.”
  • “One drug, to prevent blindness in those with a rare genetic disease, for example, is expected to cost between $700,000 and $900,000 per patient on average, noted Dr. Aaron Kesselheim, director of the program on regulation, therapeutics and law at Brigham and Women’s Hospital.”
  • “Drug makers argue that the prices ought to reflect the value of a curative treatment to the patient. Dr. Kesselheim and other experts are far from convinced.”
  • “Elizabeth Pingpank, a spokeswoman for Bluebird Bio, which is developing several gene therapies, said the company realizes its prices will be a challenge.”
  • “Bluebird and several other companies have set up a consortium with academics to try to figure out novel ways to enable insurers to pay the expected high prices.”
  • “’We recognize that most payers in the U.S. are not currently set up to support one-time therapies that generate long-term transformative benefits,’ Ms. Pingpank said.”
  • “Indeed, health care executives already are rushing to develop new payment models.”
  • “’It’s amazing how many think this is in the future,’ said Dr. Steve Miller, chief medical officer at Express Scripts, said of the looming payment problem. ‘This is right now.’”
  • “The idea favored by Dr. Miller and others is to pay for these novel drugs as you might a mortgage on a house.”
  • “An insurer would pay a large fraction up front, when the patient is treated, and then make regular payments until the entire bill is paid — or the disease returns.”
  • “That would require an unprecedented type of cooperation among insurers. Patients often change insurers, and there is no benefit to a new insurer in continuing payments for an injection that a patient had long ago — even if it was curative.”

China

WSJ – Daily Shot: Natixis – Cross Border M&A Deals by Chinese Corporates 9-12

FT – China’s biggest banks ban new North Korean accounts – Yuan Yang and Xinning Liu 9/11

  • “China’s biggest banks have banned North Koreans from opening new accounts in an unprecedented move to clamp down on financial flows with the country’s unruly neighbor.”
  • “Multiple bank branches, including those of the country’s top four lenders, told the Financial Times they had imposed a freeze on new accounts for North Korean people and companies. Some are going even further, saying they are ‘cleaning out’ existing accounts held by North Koreans by forbidding new deposits.”
  • “The moves give weight to the theory that since Pyongyang’s sixth and most powerful nuclear test this month, policy hawks in Beijing have gained the upper hand in an internal debate over whether to toughen sanctions against the Kim Jong Un regime.”
  • “The measures go further even than what has been agreed internationally.”

Europe

WSJ – Daily Shot: Europace German House Price Index 9-11

September 12, 2017

Perspective

Vox – Why Hollywood keeps making the same kinds of movies, in one chart – Alissa Wilkinson 9/7

WEF – This developed country’s shadow economy is worth one-fifth of its GDP – Charlotte Edmond 8/29

Worthy Insights / Opinion Pieces / Advice

FT – The lessons of Hurricane Harvey – Nick Butler 9/10

  • “The most important lesson for the energy sector emerging from Hurricane Harvey is that the key issue of energy security is no longer physical shortages of fuel supplies but the quality of the infrastructure system that takes energy to the final consumer.”
  • “As the waters recede, Hurricane Harvey should serve as a reminder that we live in a world where stability and continuity are the exception rather than the norm. The systems we depend on have to be built, and wherever necessary rebuilt, to minimize the disruption caused by events that are beyond all prediction.”

Energy

WSJ – Daily Shot: Baker Hughes US Crude Oil Rotary Rig Count 9/10

Finance

WSJ – Daily Shot: Swiss Re US Wind Cat Bond Price Return Index 9/8

China

Bloomberg – China’s Latest Bond Default Is a Cautionary Tale for Investors – Lianting Tu, Yuling Yang, Jun Luo, and Judy Chen 9/10

  • “Lulled by years of implicit government support for troubled companies, locals are now having to get acquainted with defaults, which have risen six-fold since the end of 2015 as Beijing shuts down unproductive industries. It’s also placing scrutiny on underwriters, with companies like Wuyang Construction accused by investors of holding back information and providing inconsistent financial figures.”
  • “Beijing’s bailout track record has made Chinese bond investors complacent, according to Yu Lu, a senior analyst at China Chengxin International Credit Rating Co. in Beijing.”
  • “’Investors in China still focus too much on yields rather than risk,’ Yu said. ‘The implicit guarantee in this country has led to poor risk control — they should enhance due diligence and strengthen their analysis of risk.’”

September 8, 2017

Perspective

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

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

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

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

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

Worthy Insights / Opinion Pieces / Advice

Economist – Lexington: Our columnist bids farewell 9/7

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

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

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

Markets / Economy

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

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

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

Real Estate

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

  • But when you look at the last 5 years…

Finance

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

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

China

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

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

Japan

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

Russia

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

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

South America

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

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

August 29, 2017

Perspective

WP – Texas flood disaster: Harvey has unloaded 9 trillion gallons of water – Matthew Cappucci 8/27

Worthy Insights / Opinion Pieces / Advice

Bloomberg Quint – Traders Ditch Risk as Dalio to Gundlach Warn on Emerging Markets – Ben Bartenstein 8/27

  • “More investors are joining the cast of Wall Street veterans from Jeff Gundlach to Ray Dalio in warning that risky assets are overvalued.”
  • “They point to rising global turmoil underscored by the recent terrorist attacks in Barcelona and the racially charged violence in Charlottesville, Virginia, as well as valuations that no longer compensate for potential flare ups in North Korea and Venezuela. That’s not to mention the unpredictability in the U.S., where President Donald Trump is feuding with members of Congress before a critical vote to increase the country’s debt ceiling.”
  • “Among the assets under scrutiny are emerging-market bonds, which for only the third time in history are yielding less than U.S. junk debt. Some of the world’s largest money managers, from Pacific Investment Management Co. to T. Rowe Price Group Inc., are advising investors to reduce risk by trimming holdings of developing-nation assets.”

FT – Big Tech can no longer be allowed to police itself – Rana Foroohar 8/27

FT – Why the oil market should not misread Venezuela – Nick Butler 8/27

  • Despite the political turmoil and the country on the verge of becoming a failed state, it is unlikely that oil supply disruptions will be permanent or significant enough to effect global oil prices materially.

Markets / Economy

WSJ – Slowing SUV Sales Could Signal a Turn in the Market – Mike Colias and Christina Rogers 8/26

Real Estate

TechCrunch – VC doors are wide open for real estate startups – Joanna Glasner 8/26

China

FT – China tech groups to demand ID verification for online posts – Yuan Yang 8/26

  • “The Chinese government will oblige tech companies to keep a record of the identities of people posting comments online, in an extension of this summer’s crackdown on internet speech.”
  • “Under the new regulations announced on Friday, all message board providers must authenticate users’ identities from October 1.”
  • “’Online comments . . . give rise to false rumors, filthy language and illegal messages, which damage the online environment,’ said a government spokesperson.”
  • “’This is a way of threatening the general population and media, especially online media,’ said Beijing-based historian Zhang Lifan. ‘It affects everyone.’”
  • “’They are using lots of different methods to restrict people’s ability to criticize or mock officials — this is not normal, even for China,’ Mr. Zhang added.”
  • “…The new regulations are being implemented under the aegis of China’s first cyber security law, which came into force in June and gives regulators the power to punish tech companies that disobey.”
  • “’Now there is a clear legal basis and a process,’ said a Beijing-based lawyer who wished not to be named. ‘This is the cyber space administration saying, ‘I’m going to monitor content, and I’m going to directly regulate tech companies’.”

August 25, 2017

Perspective

FT – The great Silicon Valley land grab – Richard Waters 8/23

KFF.org – Medicaid and the Opioid Epidemic – Katherine Young and Julia Zur 7/14

Worthy Insights / Opinion Pieces / Advice

MarketWatch – Retailers aren’t hurting because people are buying ‘experiences’ instead of stuff – Rex Nutting 8/22

  • “The brick-and-mortar retail industry is in crisis. For many old-line retailers, sales and market share are plunging fast. The most obvious explanation for their distress is the rise of online shopping, but some analysts mistakenly point to another trend: ‘Shoppers are choosing experiences over stuff, and that’s bad news for retailers.’”
  • “Instead of purchasing a couch, we’re going to Paris! Or maybe buying avocado toast.”
  • “The reality is more mundane: We are spending a smaller portion of our budget at the mall, but the money we’re saving is mostly going for the most expensive health care in the universe.”
  • “If you’ve heard these stories about the shift away from material things and toward experiences, you might be shocked to learn that retail spending hit a record $1.4 trillion in the second quarter. Retail spending has increased in 30 of the past 33 quarters. We still love to buy stuff.”
  • “The problem for retailers is that prices are falling for many retail goods such as clothing, electronics, appliances, furniture, tools, luggage, toys and many other things. That is killing the bottom line for traditional retailers, who get less revenue per unit sale but still have to pay the fixed costs of rent and payroll.”
  • “For consumers, on the other hand, falling prices are a godsend, because we can buy even more stuff and still have some money left over to spend on other things.”
  • “It would be great if we really could afford to shift our spending from the boring things we need to the fun things we want, but in reality most of the money we are saving due to cheaper clothes and cheaper gasoline is going for goods and services that no one would call fun: hospital bills, financial services, rent, and prescription drugs.”
  • “Over the past 20 years, there has been a revolution in our spending patterns. Since 1997, Americans have shifted a significant portion of their spending from physical things like autos, clothing and petroleum to services like health care, rent and internet access.”
  • “At the margin, we are spending a little bit more on having fun than we did 20 years ago, but most of our money still goes for necessities, not experiences.”

Markets / Economy

WSJ – Global Economics Grow in Sync – Josh Zumbrun 8/23

  • “For the first time in a decade, the world’s major economies are growing in sync, a result of lingering low-interest-rate stimulus from central banks and the gradual fading of crises that over years ricocheted from the U.S. to Greece, Brazil and beyond.”
  • “All 45 countries tracked by the Organization for Economic Cooperation and Development are on track to grow this year, and 33 of them are poised to accelerate from a year ago, according to the OECD. It is the first time since 2007 that all are growing and the most countries in acceleration since 2010, when many nations enjoyed a fleeting snapback from the global financial crisis.”
  • “In the past 50 years, simultaneous growth among all the OECD-tracked countries has been rare. In addition to happening last decade, it has only happened in the late 1980s, and for a few years before the 1973 oil crisis.”

Finance

FT – What happened to the ‘too big to fail’ banks? – Patrick Jenkins and Ian Bott 8/23

China

FT – Back to the future for China tycoon sweepstakes – Gabriel Wildau 8/23

  • “To be a Chinese tycoon these days is to live with uncertainty: while some see their wealth and status rise meteorically, others fall out of favor with Beijing — with serious consequences for their wealth and freedom.”
  • “Led by chairman Hui Ka-yan, Shenzhen-based Evergrande has seen its share price almost quadruple this year. Shares in Sunac China, led by Sun Hongbin, have nearly tripled. The price rises have catapulted both up the ranks of China’s rich list.”
  • “By contrast, last year’s upwardly mobile tycoons, Wu Xiaohui of Anbang Insurance and Wang Jianlin of Dalian Wanda, who seemed to represent China’s future as a global investor as they snapped up foreign real estate and entertainment assets, are on the defensive.”
  • “’If you look at Sun Hongbin, he sells bonds offshore and brings the money onshore to build houses. It’s different from Wanda, which borrows from banks onshore to invest offshore. That’s much more sensitive,’ said Yang Guoying, researcher at China Financial Think Tank and a popular commentator on Weibo.”
  • “Offshore investors have a strong appetite for Evergrande’s high-yield debt, despite persistent warnings from analysts and short sellers that the group is highly leveraged. It is a high-risk bet that keeps paying off.”
  • “Evergrande’s net debt of $48bn at the end of last year was the highest among Chinese listed developers, according to data from Thomson Reuters.” 
  • “Tianjin-based Sunac ranked eighth with $8.8bn, and that was before its recent, largely debt-financed deal to buy 13 theme parks from Wanda for $6.5bn. Sunac has spent more than $17.5bn on acquisitions since the start of 2016, according to Dealogic.”
  • “’All these big private enterprises have something in common, which is that they’ve grown very big, very fast, and they’ve done it through debt sales and bank loans,’ said Ai Tangming, chief economics columnist for Sina Finance, a major domestic news website. ‘But Evergrande and Sunac have handled their government relations extremely well, and it’s paying off.’”

Europe

WSJ – Daily Shot: Euro Area GDP 8/24

August 17, 2017

Perspective

FT – Nothing like this has happened in 323 years – Martin Wolf 8/15

  • “Prior to January 2009, the Bank (of England) had never lowered its lending rate below 2%. But it was then lowered to 1.5%, on its way to 0.5% in March 2009 and 0.25% in August 2016. This ultra-easy policy was further buttressed by a huge expansion of the Bank’s balance sheet, which now contains £435bn in UK government ‘gilt-edged’ securities and £10bn in corporate bonds.”
  • “Throughout this prolonged recent period of ultra-easy monetary policy, the concern has never been one of runaway inflation, but rather of the opposite. This time really has been different. What does it mean for the future? Nobody knows.”

WSJ – Household Debt Hits Record as Auto Loans and Credit Cards Climb – Josh Zumbrun 8/15

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – The Peculiar Parable of the Lyft (parking) Lot – Joshua Brustein and Dorothy Gambrell 8/9

  • Free parking obscures the true costs of driving to work… charge for parking and smarter behaviors prevail…

Economist – The Philippine president’s zany ideas have not hurt the economy 8/16

  • “When it comes to jobs and investment, Rodrigo Duterte is more reformer than wrecker.”

Markets / Economy

WSJ – Consumers Keep Spending, but Not in Stores – Justin Lahart 8/15

WSJ – Daily Shot: SPDR S&P Retail ETF – S&P 500 Relative Performance 8/15

WSJ – Daily Shot: Coach Stock Performance 8/15

WSJ – Daily Shot: Dick’s Sporting Goods Stock Performance 8/15

WSJ – Daily Shot: Bed Bath & Beyond Stock Performance 8/15

WSJ – Daily Shot: Bloomberg REIT Regional Mall Index 8/15

WSJ – Daily Shot: SPDR Technology Select ETF – S&P 500 Relative Performance 8/15

WSJ – Daily Shot: Nasdaq 100 Equal Weight Cap-Weight Ratio 8/16

  • Thank goodness for the FAANG stocks

Energy

Bloomberg Businessweek – As Venezuela Spirals, U.S. Oil Confronts a $10 Billion Threat – Alex Nussbaum and Sheela Tobben 8/3

  • “While companies have been trimming Venezuelan imports for months, the nation is still a key supplier for some of America’s biggest refineries. Last month, the country accounted for a more than a quarter of capacity at Valero’s Port Arthur complex in Texas, according to U.S. Customs data compiled by Bloomberg. It was 43% at Chevron’s facility in Pascagoula…”
  • The conspiracy theorist in me wonders (although it is highly unlikely) if OPEC members are issuing shadow loans to the Maduro regime to keep this chaos going. The intent being to limit production efficiencies from Venezuela (the country with largest known oil reserves) – which of course, helps ease the production cut burdens on the more stable OPEC members and Russia.

Shipping

Bloomberg Quint – Global Shipping Industry Bounces Back From Its Lehman Moment – Kyunghee Park 8/15

  • “A massive consolidation is underway in the $500 billion global industry and the survivors now enjoy big economies of scale and increased demand, one year after excess capacity caused the sector’s worst-ever crisis — the bankruptcy of South Korea’s Hanjin Shipping Co.”
  • “The five biggest container lines control about 60% of the global market, according to data provider Alphaliner. Shipping rates are climbing, and an index tracking cargo rates on major routes from Asia is about 22% higher than it was a year earlier.”
  • “’Container shipping is now a game only for big boys with deep pockets,’ said Corrine Png, chief executive officer at Crucial Perspective, a Singapore-based transportation research firm. The rising market concentration will ‘give the liners greater pricing and bargaining power,’ she predicts.”
  • “Hanjin’s collapse, in August last year, upended the industry in much the same way that the bankruptcy of Lehman Brothers roiled the financial sector during the 2008 crisis. One of the world’s largest shipping firms at the time, Hanjin faced a cash crunch as supply outstripped demand in the industry, weakening pricing power and profits for carriers.”
  • “’Since the demise of Hanjin Shipping, flight to quality has become more noticeable in the container shipping business,’ said Um Kyung-a, an analyst at Shinyoung Securities Co. in Seoul. ‘That’s why the market is becoming more and more dominated by top players with big ships and those that don’t have could become more and more obsolete.’”
  • “The growing use of mammoth ships is key to the turnaround. Companies who own them are able to deploy fewer vessels and move more cargo on a single journey to benefit from higher rates, said Um.”
  • “By her estimates, there are now about 58 of these huge carriers worldwide that can transport more than 18,000 containers, and the number is expected to double in two years. About half the new vessels will be added by the biggest firms.”
  • “The excess supply that derailed growth last year hasn’t completely disappeared as new entrants expand and as older vessels still remain. Capacity in the container shipping industry is expected to grow 3.4% this year and 3.6% in 2018, according to Crucial Perspective.”
  • “Still, recovery in demand seems to be on track. After posting losses in 2016, companies are seeing signs of business picking up.”
  • “Earlier this year, Maersk, South Korea’s Hyundai Merchant Marine Co. and other shipping lines reached agreements with their customers to raise annual rates from May for cargo headed from Asia to U.S. stores like Wal-Mart and Target. Retailers in the U.S. usually increase inventory during the third quarter, ahead of the year-end holidays, and Lee said freight rates are expected to rise further as the peak season for the container shipping industry kicks off.”
  • “For retailers, ‘if container costs go higher, obviously it’s a headwind,’ said Brian Yarbrough, an analyst at Edward Jones. ‘Retailers have three choices: They can pass that through to the customer or find efficiencies to offset that within the organization, or they come out and say gross margins will be pressured due to higher freight costs.’
  • “BIG SHIPPING DEALS:”
    • “In 2015, Cosco Group and China Shipping Group announced a merger to create Asia’s biggest container line, Cosco Shipping Holdings Co.”
    • “In 2016, CMA CGM SA bought Singapore’s Neptune Orient Lines Ltd.; Maersk agreed to buy Hamburg Süd and Japan’s three shipping companies agreed to consolidate their container shipping businesses.”
    • “In 2017, Hapag-Lloyd AG completed its acquisition of United Arab Shipping Co. and Cosco Shipping offered to buy Orient Overseas International of Hong Kong.”

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.

August 8, 2017

Perspective

FT – US haul from credit crisis bank fines hit $150bn – Kara Scannell 8/6

  • “A single bank, Bank of America, has paid more than one-third of all recoveries to US authorities, according to an analysis by the Financial Times. Its $56bn in settlements with state and federal regulators and the DOJ cover its own mortgage sales and actions by two companies it acquired — subprime mortgage lender Countrywide and broker Merrill Lynch.”
  • “JPMorgan Chase, which acquired Bear Stearns and Washington Mutual, has paid the second-largest amount, with $27bn in fines and relief.”

Worthy Insights / Opinion Pieces / Advice

NYT – The Debt-Ceiling Crisis Is Real – Edward Kleinbard 8/7

FT Alphaville – Electric vehicle realities – Izabella Kaminska 8/3

  • “Electric vehicles (EVs) are all the rage. But they’re also fast becoming the sacred cows you can’t criticize for fear of being shredded by the EV, renewable, and tech lobbies.”
  • “Questioning the cost structures of the industry in general is not allowed in public forums. My colleague Jonathan Ford discovered this recently when he dared to question the economic realities underpinning the renewable sector.”
  • “Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.”
  • “The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.”
  • A couple of points.
    • Battery packs are expensive and more expensive than generally claimed.
    • Batteries degrade and the cost of replacing them are expensive (more so than the manufacturers let on).
    • Additionally, think of your experience with the value of your old cell phones or computers. While the hardware may still work, the value of your device tends to decline rapidly with an old battery.
  • Back to the subsidies.
  • “Nevertheless, most people are encouraged to buy EVs because of the fuel subsidies or free parking promises. Yet is difficult to assess how long EV subsidies will persist. Fundamentally, the economics dictate that they can only really be affordable to governments as long as the number of vehicles sold remains small. If EV sales accelerate swiftly, these subsidies would get very costly for government coffers very quickly — straining public finances if not creating massive implied contingent liabilities.”
  • “On that basis, when electric car subsidies start eating into the funding that’s available for other vital government services, public perceptions of EV efficiency will change markedly.”
  • All for EV adoption, just trying to be more aware of the factors in play.

Bloomberg Gadfly – OPEC’s Existential Sucker Punch – Julian Lee 7/30

Markets / Economy

WSJ – Daily Shot: FRED – US Prime-Age Labor Force Participation 8/7

WSJ – Daily Shot: FRED – US Civilian Labor Force Participation by Gender 8/7

Environment / Science

NYT – Let Forest Fires Burn? What the Black-Backed Woodpecker Knows – Justin Gillis 8/6

  • “Scientists say that returning forests to a more natural condition would require allowing 10 million or 15 million acres to burn every year, at least.”
  • “Today, closer to four million or five million acres burn every year.”

Agriculture 

WSJ – Daily Shot: CBOT Soft Red Winter Wheat 8/7

  • “The US wheat rally has been fully reversed on improved crop conditions.”

India

FintechFT – India’s fintech revolution – Don Weinland 8/7

Bloomberg Gadfly – Indian Banks’ Soaring Price-to-Truth Ratio – Andy Mukherjee 8/7

  • Several Indian banks have more non-performing loans in their books than they are letting on and are aware of. Worse, there a quite a few loans issued to companies (i.e. Videocon) with too few restrictions, who are then using the funds to pursue moonshot projects out of their core competencies.

Middle East

WSJ – Egypt’s Leader Makes a Risky Bet on the Healing Power of Economic Pain – Yaroslav Trofimov 8/6

  • “Egypt’s President Abdel Fattah Al Sisi is cutting food and fuel subsidies, a program long plagued by waste and corruption, in a high-stakes gamble to aid the stalled economy that none of his predecessors dared execute.”
  • “The economic shock therapy, coupled with a steep currency devaluation, has rocked the Arab world’s most populous country. Fuel prices went up 50% in June, cooking-gas prices have doubled and the annual inflation rate has surpassed 30%.”
  • “Every day, millions of Egyptians line up at government bakeries to buy five loaves of bread for less than two U.S. cents, a fraction of the wheat’s cost. The food subsidies extend to some 80% of Egypt’s families and were first instituted as part of rationing during World War II.”
  • “Farmers across Egypt nurture their crops with water pumps operating on diesel that, even after June’s 55% increase, still retails for 77 cents a gallon, less than a third of retail prices in the U.S.”
  • “The government’s goal is to end the subsidies in three to five years, according to Mr. Kabil, the trade and industry minister. ‘The right thing to do is to lift them totally,’ he said. ‘But you cannot do it today because you cannot correct 40 years of problems in one day.’”
  • The question is whether or not the people of Egypt will be able to make to that point without changing course?

South America

WSJ – Daily Shot: Caracas (Venezuela) Stock Exchange Market Index 8/4

  • If you live in Venezuela, there is nowhere else to preserve your money (outside of hard currencies – if you can get them).

WSJ – Daily Shot: Black Market Bolivar (Venezuela) USD Exchange Rate 8/7

Other Links

NY Post – Hedge fund manager (Raymond Montoya) charged for scamming investors out of millions – John Aldan Byrne 8/5