Tag: Opioids

April 3, 2018

Perspective

Visual Capitalist – Visualizing the Average Commute Time in U.S. States and Cities – Jeff Desjardins 4/1

Worthy Insights / Opinion Pieces / Advice

FT – Columbus shows Trump how to thrive in the new world order – Rana Foroohar 4/1

  • “The city’s success shows why industrial policy, not tariffs, is the winning strategy.”

Project Syndicate – Will China Really Supplant US Economic Hegemony? – Kenneth Rogoff 4/2

Seeking Alpha – Tesla Model 3 Costs More To Charge Than A Gasoline Car – Anton Wahlman 4/1

WSJ – U.S. Fiscal Future Won’t Be Like Its Carefree Past – Greg Ip 3/28

Energy

FT – Wary shale investors warn against drilling at all costs – Ed Crooks 4/1

Finance

WSJ – Daily Shot: FRED – Federal Reserve Total Assets (Balance Sheet) 4/2

WSJ – Daily Shot: FRED – Commercial and Industrial Loans 4/2

Cryptocurrency / ICOs

WSJ – Daily Shot: Investing.com – Bitcoin v. Bitcoin Cash 4/2

Entertainment

WSJ – Dominant Box Office Run of ‘Black Panther’ Underscores a Growing Hollywood Problem – Ben Fritz 4/1

  • “This year’s box office so far has been a story of one completely dominant movie, ‘Black Panther,’ highlighting a potentially troubling trend for Hollywood in which ticket sales are increasingly concentrated among just a few ultra-successful pictures.”
  • “With $650.7 million and counting, ‘Black Panther’ is on track to become the third highest grossing movie ever in the U.S. and Canada. It accounted for 23% of all ticket sales in the first three months of the year, ending Saturday, according to comScore. That is the second-highest percentage ever behind only ‘Titanic,’ which took 25% in the winter of 1998.”
  • “’Black Panther’ is an extreme example of the trend that Hollywood has been struggling with for some years. In 2015, 2016 and 2017, the top 10 movies raked in between 32% and 35% of total box office, comScore said. Previously, that figure never exceeded 30%. So far this year, it is 58%.

Health / Medicine

Axios – Opioid prescription rates dropping across the country – Stef W. Kight and Lazaro Gamio 3/31

Canada

Bloomberg – Toronto’s Tale of Two Markets Is Hot Condos and Cold Houses – Natalie Wong 3/29

  • “After a decade as one of the world’s hottest housing markets, Toronto is moving in two directions. Transactions have certainly cooled since May as the government introduced new rules to tame runaway prices. But the impact has been largely on big, expensive detached homes, with sales plunging 41% in February from a year earlier, and prices dropping 12% since hitting a record last year. Condo prices, in contrast, soared about 20% since last February.”
  • “The deviation is largely as a result of mortgage regulations that went into effect on Jan. 1 as well as rising interest rates. The rule requires that even people with a 20% down payment, who don’t require mortgage insurance, prove they can make payments at least 2% points above the rates under which they go into contract.”
  • “That’s pushing buyers out of the detached segment and right into the condo market.”

China

FT – China’s P2P lenders brace for renewed regulatory crackdown – Emily Feng 4/1

  • “Thousands of online lenders could be facing extinction as China rolls out a new licensing framework, amid complaints about a lack of clarity on how the regime will work.”
  • “P2P platforms match borrowers with investors online. China’s P2P lending industry recorded transactions valued at $445bn in 2017, according to Online Lending Club, a data company.”
  • “Many P2P lenders, including one of the largest, Hongling Capital, were weeded out in crackdowns in 2016 and 2017 after agencies reporting to China’s central bank began closing fraudulent platforms and those selling high-interest loans.”
  • “Of more than 6,000 online lending platforms launched over the past several years, fewer than 2,000 were still in operation at the end of February, according to Online Lending House, a data provider — a sign of how regulation, competition and fraud have thinned the industry’s ranks.”
  • “As part of the regulatory overhaul, P2P lenders are barred from guaranteeing principal or interest on loans they facilitate; are limited to loans of no more than Rmb1m ($159,000) for individual borrowers and Rmb5m for companies; and must use custodian banks.”

FT – China revives long-stalled property tax to combat housing bubble – Gabriel Wildau and Yizhen Jia 3/31

  • “After years of delay and quiet opposition from vested interests, China will push ahead with a property tax that is viewed as crucial to taming the country’s housing bubble.”
  • “House prices in major Chinese cities are among the highest in the world in terms of price-income ratios, with speculative demand from Chinese investors — who see few other good places to park their savings — as a major driver. The result is an estimated 50m empty homes, according to a broad survey by researchers from Southwestern University of Finance and Economics in Chengdu.”
  • “A landmark blueprint for economic reform that the Communist party leadership approved five years ago included a pledge to push ahead with a property tax. But a subsequent slowdown in the economy, including a housing-market downturn in 2014-15, prompted authorities to shelve those plans.” 
  • “Quiet opposition from wealthy urbanites, including government officials who own multiple homes, also hindered progress.” 
  • “’When will the tax actually come out is difficult to say, but at least the intention has strengthened,’ said Chen Shen, head of property research at China Securities in Shanghai. ‘Two years ago everyone was discussing whether it would ever happen, but now it’s very clear that it will’.” 

Japan

WSJ – Daily Shot: @NickTimiraos – Change in Home Prices – Japan & U.S. 4/2

Other Interesting Links

WSJ – Dockless Bike Share Floods into U.S. Cities, With Rides and Clutter – Eliot Brown 3/26

 

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March 22, 2018

Perspective

NYT – The Population Slowdown in the Outer Suburbs of the East and Midwest – Robert Gebeloff 3/21

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Headline Risk – Ben Carlson 3/21

Bloomberg Gadfly – The Saudi Aramco IPO Math Problem: Cash > Barrels – Liam Denning 3/15

  • “Getting to a $2 trillion valuation requires some heroic assumptions.”

Bloomberg View – Before You #DeleteFacebook, Try Taking Control – Barry Ritholtz 3/21

  • “A precept from the 1970s, said originally about television (back when TV was free), is applicable to technology and media: If you are not paying for a product, then you are the product.”

FT – Hard-headed deterrence is the antidote to Putin’s poison – Philip Stephens 3/14

FT – The low-paid workers cleaning up the worst horrors of the internet – Gillian Tett 3/16

  • “A new film (The Cleaners) tracks outsourced workers in grim little cubicles watching the depravity that exists online.”

NYT – Trump Hacked the Media Right Before Our Eyes – Ross Douthat 3/21

  • “…the business model of our news channels both assumes and heightens polarization, and that it was ripe for exploitation by a demagogue who was also a celebrity.”

NYT – Fox News Analyst Quits, Calling Network a ‘Propaganda Machine’ – Michael M. Grynbaum 3/20

NYT – Toys ‘R’ Us Case Is Test of Private Equity in Age of Amazon – Michael Corkery 3/15

Pragmatic Capitalism – Why are Money Managers Paid so Much? – Cullen Roche 3/20

  • “Salesmanship. The answer is salesmanship. I’ve been in this business long enough to know that asset management is mostly about selling the hope of superior returns in exchange for the guarantee of high fees.  The problem for the average person is that they don’t actually know enough about the asset management business to quantify whether their investment manager is worth the fees they pay. And in fairness, a big part of that is due to the fact that you have to compare yourself to a counterfactual that doesn’t exist since paying 1.6% per year to invest in a crappy active mutual fund is probably a better result than sitting in cash all the time because you’re too scared to get fully invested. Investment managers, as expensive as they are, at least keep you in the game and you need to be in the game to score any goals.”

Rational Radical – Royal commission shatters housing bubble façade – Matt Ellis 3/21

  • Commentary on the Australian Housing market (read bubble)

The Verge – China will ban people with poor ‘social credit’ from planes and trains – Sean O’Kane 3/16

  • “Starting in May, Chinese citizens who rank low on the country’s burgeoning ‘social credit’ system will be in danger of being banned from buying plane or train tickets for up to a year, according to statements recently released by the country’s National Development and Reform Commission.”
  • “With the social credit system, the Chinese government rates citizens based on things like criminal behavior and financial misdeeds, but also on what they buy, say, and do. Those with low ‘scores’ have to deal with penalties and restrictions. China has been working towards rolling out a full version of the system by 2020, but some early versions of it are already in place.”
  • “The new travel restrictions are the latest addition to this growing patchwork of social engineering, which has already imposed punishments on more than seven million citizens. And there’s a broad range when it comes to who can be flagged. Citizens who have spread ‘false information about terrorism,’ caused ‘trouble’ on flights, used expired tickets, or were caught smoking on trains could all be banned, according to Reuters.”

Wolf Street – Then Why Is Anyone STILL on Facebook? – Wolf Richter 3/20

Markets / Economy

WSJ – Daily Shot: Nomura – Valuations of FANG-type stocks 3/20

WSJ – Daily Shot: Bianco Research – Breaking Down US Household Retirement Assets 3/21

Energy

WSJ – Daily Shot: Venezuelan Crude Oil Output 2/28

Finance

FT – John Paulson takes an axe to his struggling hedge fund – Robin Wigglesworth 3/16

  • “Struggling hedge fund magnate John Paulson has taken an axe to his once-imperious firm, with several top executives departing in a ‘rightsizing’ this week after a string of heavy losses.”
  • “Mr Paulson rose to fame after the crisis, when Paulson & Co made billions of dollars from predicting the US housing crisis and astute bets on complex credit derivatives. The hedge fund firm’s assets under management hit a peak of $38bn in 2011.”
  • “But since then Paulson & Co has suffered a string of losses across most of its hedge funds, with its flagship merger arbitrage fund — Mr Paulson’s specialty — losing 18.1% and 23% in 2016 and 2017, respectively, according to the performance update of a mirror fund offered by Schroders.”
  • “Paulson & Co’s assets have now shrunk to about $9bn, of which two-thirds is Mr Paulson’s own money, and this week the hedge fund manager let a string of employees go.”
  • “Since making one of the biggest financial hauls in the industry’s history — Mr Paulson personally made almost $4bn from the financial crisis — the firm has made a series of ill-fated investments, such as on healthcare stocks, banks and gold and by betting against German bonds.”
  • “The most high-profile recent mis-step was a big bet on drug maker Valeant Pharmaceuticals. Paulson & Co is the drug maker’s single biggest shareholder, but the stock has tumbled from a high of $262.50 in 2015 to just $16.80 this week — a loss of more than 93% over the period.”
  • “Paulson & Co’s biggest public holdings, according to regulatory filings, are pharma companies Mylan, Shire, Valeant and Allergan, as well as an exchange-traded fund that tracks the price of gold. The gold ETF has lost about 32% of its value since the hedge fund’s investment peaked at $4.6bn in 2011.”

Health / Medicine

WSJ – Daily Shot: AEI – Geographic Variation in the Cost of the Opioid Crisis – Alex Brill 3/20

Other Interesting Links

FT – Wine’s Wild West: a tasting tour of Arizona – Horatia Harrod 3/16

  • “In Scottsdale’s bars and out on the state’s grassy uplands, an industry wiped out by Prohibition is being revived.”

January 31, 2018

Worthy Insights / Opinion Pieces / Advice

FT – Lex in Depth: the case against share buybacks – Dan McCrum 1/29

  • “S&P 500 companies have spent $1.1tn on share repurchase programs over the past two years, as executives struggled to turn modest economic growth into higher earnings. Lacking opportunities to invest, or at least shareholder support to do so, companies have spent money buying their own stock, which provides a boost to the size of profits reported per share.”
  • “Fresh records for buybacks are likely to be set, with changes to the US tax regime expected to trigger a repatriation of profits that have been held offshore for years.”
  • “A string of companies, including Boeing and Honeywell, have announced close to $90bn worth of share buyback programs since the reforms were agreed in December. Bank of America Merrill Lynch estimates that of $1.2tn parked overseas, perhaps half of the post-tax total, or around $450bn, could be devoted to share buybacks.”
  • “Shareholders are going to be banging on doors saying we want some of that money,’ says Howard Silverblatt, senior index analyst at S&P Dow Jones. No matter that stock markets have set record highs of late, the expectation that spare cash must be returned to its rightful owners is putting managers under pressure.”
  • “They almost have to buy when the stock is high. Timing the market is not something most companies can do,’ adds Mr Silverblatt. But the new flood of dollars raises an old question about whose interest the practice serves.”
  • McCrum does an excellent job of outlining some of the motives and outcomes of the practice. Some highlights:
  • “The only year in the past 14 when big US companies spent less on buybacks than dividends was 2009, when the S&P 500 index hit rock bottom. ‘The best time to do [a buyback] is in a recession, but that’s when everyone is scared stupid,’ says Andrew Lapthorne, a quantitative strategist for Société Générale.”
  • “If a company has more cash than it needs, and nothing better to invest in, it should consider whether buying its own stock is a good investment. Yet the time when companies have plenty of spare cash tends to be when business is good and shares are overvalued.”
  • “Apple has admitted that a primary purpose of its buybacks is to neutralize the impact of stock compensation.”
  • “The company has spent $151bn on repurchasing stock in the past decade, about 17% of its almost $900bn market valuation. The number of shares has dropped by about the same amount — 17%. Yet when Apple started to buy in 2012, the shares could be bought for half today’s price. The difference has been handed to employees.”
  • “Some companies have managed to spend more on buybacks in recent years than the shares are worth today.”
  • “Since 1995 IBM, the consulting and supercomputer group, has spent $162bn to repurchase more than half of its outstanding shares. What is left, for those who did not sell, is a company now valued at $154bn, suggesting the money was spent in the wrong place.”
  • “Any company will wonder what its valuation might have been, were different decisions taken. Prof Lazonick (William Lazonick, professor of economics at the University of Massachusetts Lowell) points to the example of Cisco Systems, the world’s largest networking company. In two decades it has spent $75bn repurchasing stock, more than three times the total for capital investment in property or equipment. A serial acquirer of other businesses, it has long struggled to grow sales.”

Markets / Economy

WSJ – Daily Shot: Trading activity at retail-focused brokerages 1/29

  • “Retail investor trading activity has accelerated recently. It’s starting to look like the late 90s.”

Real Estate

Bloomberg – Singapore Overtakes China as Largest Asian Investor in U.S. Property – Pooja Thakur Mahrotri 1/28

Bloomberg – Wanda Selling $5.4 Billion Property Unit Stake, to Seek Listing ‘Soon’ – Jing Yang De Morel 1/29

  • More on the Tencent investment below. However, wanted to call attention to…
  • “Separately, Wanda put its last two overseas property developments up for sale, according to people familiar with the matter, in the latest unwinding of a decade-long overseas buying spree that drew scrutiny from Chinese regulators. The group is seeking buyers for a hotel, office and apartment complex in Chicago and a development in Beverly Hills, California, said the people, who asked not to be identified because discussions are private.”
  • Presumably the Beverly Hills site is the “One Beverly Hills,” aka Robinson May, site that was previously purchased by New Pacific Realty Corporation for $33.5m in 2004, sold to the Candy Brothers for $500M in 2007, bought out of foreclosure by Hong Kong based Joint Treasure International for $148M in 2010 and then sold to Dalian Wanda for $420M in 2014.

CNBC – America’s 10 most valuable malls are bringing in billions in sales. Here’s where they are – Lauren Thomas 1/29

NYT – New York’s Hidden Home Buyer Closing Costs: Luxury Boxes and Mint Mojitos – Shane Goldmacher 1/29

Health / Medicine

Economist – America’s opioid epidemic is driven by supply 1/29

  • “A new study shows that economic factors do not fully explain the rising number of drug deaths.”

WSJ – Schools Close as Flu Epidemic Spreads – Tawnell D. Hobbs and Sarah Toy 1/27

  • “Schools in at least 11 states have closed as the worst flu epidemic in nearly a

decade intensifies.”

China

WSJ – Why Tencent’s Latest Property Deal Makes Sense – Jacky Wong 1/30

  • Reminds me of when the Japanese Keiretsu’s were buying stakes in each other.
  • In this instance Dalian Wanda benefits from an association with Tencent and Tencent picks up some real estate equity on the cheap (maybe).

September 5, 2017

Perspective

Howmuch.net – The Working Class Can (Not) Afford the American Dream – Raul 8/31

Howmuch.net – The Rising Costs of Sending Your Kids to a Private School – Raul 8/20

Howmuch.net – Status of US State Economies – Raul 8/15

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Why Private Equity Has $963 Billion in Dry Powder – Melissa Mittelman 8/31

  • “Investors give private equity managers their capital with the expectation that they’ll make it grow. But today these managers are sitting on a record $963.3 billion of dry powder, as they call money that they’ve raised but have yet to invest. The size of that pile, and the fact that it keeps rising, is making everyone antsy. A little dry powder is great if managers are holding out for better deals. But a lot can make for overly itchy trigger fingers, or can start to make investors wonder if there are cheaper ways to do nothing with cash.”

LA Times – Yes, ExxonMobil misled the public – Naomi Oreskes and Geoffrey Supran 9/1

NYT – To Understand Rising Inequality, Consider the Janitors at Two Top Companies, Then and Now – Neil Irwin 9/3

Bloomberg View – The Flaws in India’s Growth Model Are Becoming Clear – Mihir Sharma 9/3

  • “India has a way of confounding expectations. Analysts agreed that, months after Prime Minister Narendra Modi’s ill-fated decision to withdraw 86 percent of currency from circulation overnight, growth would bounce back. Economists polled by Bloomberg expected growth in the April to June quarter to be 6.5%; other estimates were even higher. So when the government’s official statisticians released the real number last week — 5.7% over the equivalent quarter of the previous year — there was general surprise, even shock.”
  • “India’s economy has been growing less and less healthy for awhile. GDP growth has now declined steadily for six straight quarters. This is a slowdown caused by factors deeper than the cash ban or any other temporary phenomenon. Something is broken in the Indian government’s policy mix.”
  • “…Government spending and low oil prices have deceptively boosted the growth numbers, masking the true state of the economy. In fact, if public spending is excluded, growth in the past quarter barely topped 4%. Export growth is terrible and industrial growth is the lowest in five years. And the government will struggle to keep investing at these levels; it started spending big unusually early in India’s financial year, which starts in April, and has already run through 93% of its budgeted fiscal deficit.”
  • “…Effective reform — and political will — is precisely what’s needed now. The government’s first task should be to clean up bad debts far quicker than it has so far — even if powerful people, including company owners, lose money in the process. Second: The government needs to stop chasing after foreign capital to replace shy domestic capital, if it means that the rupee stays high and exports struggle. And third: Officials must quickly fix those parts of the GST that are putting small companies and exporters out of business.”

Finance

Visual Capitalist – The Unparalleled Explosion in Cryptocurrencies – Jeff Desjardins 9/1

FT – University start-ups aim for the Facebook formula – Hugo Greenhalgh 8/31

  • Rather than watch their students leave University to pursue a worthwhile business start-up, Universities are getting in on the venture capital business seeking to support and nurture the talent within.

FT – Credit cards: dealing with delinquency – Lex 8/31

Tech

Fortune – Everything You Needed to Know About Overvalued Unicorns in One Chart – Anne VanderMey 8/24

Fortune – 5 Ways Businesses Are Already Using Blockchains – Jeff John Roberts – 8/21

Health / Medicine

NYT – The First Count of Fentanyl Deaths in 2016: Up 540% in Three Years – Josh Katz 9/2

  • “The first governmental account of nationwide drug deaths in 2016 shows overdose deaths growing even faster than previously thought.”
  • “Drug overdoses killed roughly 64,000 people in the United States last year, according to the first governmental account of nationwide drug deaths to cover all of 2016. It’s a staggering rise of more than 22% over the 52,404 drug deaths recorded the previous year.”
  • “Drug overdoses are expected to remain the leading cause of death for Americans under 50, as synthetic opioids — primarily fentanyl and its analogues — continue to push the death count higher. Drug deaths involving fentanyl more than doubled from 2015 to 2016, accompanied by an upturn in deaths involving cocaine and methamphetamines. Together they add up to an epidemic of drug overdoses that is killing people at a faster rate than the H.I.V. epidemic at its peak.
  • “It’s an epidemic hitting different parts of the country in different ways. People are accustomed to thinking of the opioid crisis as a rural white problem, with accounts of Appalachian despair and the plight of New England heroin addicts. But fentanyls are changing the equation: The death rate in Maryland last year outpaced that in both Kentucky and Maine.”

Canada

WSJ – The Underappreciated Risks to Canadian Banks – Aaron Back 8/31

  • “Americans looking north to Canada see a housing market that echoes their own before the financial crisis. While there are substantial differences that make Canadian lenders more resilient, investors still should be on guard.”
  • “Canadian housing prices have been rapidly rising for years, prompting local governments in frothy areas to take draconian measures such as a 15% tax on foreign buyers.”
  • “It isn’t all foreign cash—Canadian debt levels also have soared. Last year its households had debt equivalent to 176% of disposable income, according to the OECD. That compares to 112% in the U.S., down from a 2007 peak of 144%.”
  • “Canada’s banks, however, are showing no signs of stress. The country’s six biggest lenders that dominate this highly concentrated market have just reported solid quarterly earnings. Mortgage delinquency rates are remarkably low, at only around 0.2%.”
  • “It helps that most Canadian mortgages are ‘full recourse’ loans, making it much harder for borrowers to default and walk away. Around half of the mortgages written by the big six banks are also insured, directly or indirectly, by the Canadian government.”
  • “Nonetheless, the risks are substantial. Unlike in the U.S., where 30-year fixed rates are the norm, the standard Canadian mortgage rate resets every five years. In July, Canada’s central bank raised rates for the first time in seven years. Analysts expect more hikes, especially after Canada reported strong 4.5% annualized gross domestic product growth for the second quarter. That will make regular debt payments even more burdensome for Canadian households.”

China

FT – Beijing’s uneasy deals with overseas car groups under strain – Charles Clover 8/31

  • “A spate of new foreign joint ventures in China’s car industry has revived debate about an often criticized three-decade-old policy of trading market access for technology.”
  • “This week, the Renault-Nissan alliance became the latest car group to sign a joint venture to produce electric vehicles with longtime partner Dongfeng Motor Corporation, based in Wuhan, following an announcement by Ford in August that it plans to partner with little-known Zotye Auto to make EVs.” 
  • “The Renault-Nissan Dongfeng partnership is significant because it goes further than other JVs and calls for the groups to share a common technological platform. It is not clear whether other overseas car groups will follow this course because of issues over trust on the sharing of technology.”
  • “The new EV joint ventures are part of a Chinese effort to master the technology for electric vehicles — and rely on a tried and tested model of working with the global car industry since the 1980s. In a nutshell, joint ventures are the only way for foreign groups to access the world’s largest and most lucrative market. China gives the overseas companies the right to sell cars in exchange for their technology, management expertise and a share of their profits.” 
  • “’China’s central planners said ‘how can we basically force global automakers to participate and bring their very best electric vehicle technology to China?’’ says Michael Dunne, president of Dunne Automotive, a Hong Kong-based car consultancy.” 
  • “Since 1984, starting with Jeeps, foreign carmakers have been allowed to produce cars in China — but only in concert with a local partner holding at least 50 per cent of the venture. In practice, this is almost always one of six anointed state companies.”
  • “The results of the three-decade-old policy have been mixed. Rather than transforming Chinese car companies into technology giants, the joint venture companies have arguably made Chinese carmakers complacent, according to Chinese policymakers. He Guangyang, a former minister of industry, controversially described the JVs as ‘like opium’ in an interview five years ago.”
  • “Bart Demandt of carsalesbase.com says this is a legacy of the joint ventures. ‘The state-owned companies, especially those which have 50/50 joint ventures with foreign automakers, have had little incentive to invest in their domestic brands as the profits have been pouring in from producing import-brand cars for their partners.’” 
  • “However, the Chinese government is still relying on this model, and recently set its sights on the nascent battery powered car industry. Last year it included EVs as one of 10 sectors that it wants to be internationally competitive by 2025 as part of a new industrial policy ‘Made in China 2025’.” 
  • “Foreign carmakers are wary of the new requirements and have pressed on China to delay the EV quotas by at least a year. But they have few alternatives. ‘The global automakers say ‘wow, this really has teeth, because if we want to grow in this market we don’t have a choice. There is no work around’,’ says Mr Dunne.” 
  • “The second prong of the policy is to pressure foreign carmakers to ‘localize’ their electric vehicle technology, meaning in practice to share it with their joint venture partners.” 
  • “Bill Russo, head of Gao Feng Advisory in Shanghai, calls this ‘a real game-changer for the multinational carmakers’.” 
  • “’They must comply with a new set of regulations for both component localization and credits for EV sales in order to be in the game. As carmakers will be required to pay fines if they are not selling EVs, they will be required to add EV production in order to sustain their existing business in China.’” 
  • “This has created fears that their proprietary technology could be stolen. Over the past two decades, foreign makers of everything from high-speed trains to fighter planes have licensed the technology to local Chinese partners only to find a few years later that their partner is a major international competitor.” 

FT – Anbang sells stakes in Chinese megabanks amid troubles – Gabriel Wildau 8/31

  • “Anbang Insurance Group, the Chinese conglomerate that captured global attention with splashy foreign acquisitions, sold stakes worth as much as $1bn in the country’s largest banks this year, as the company struggles with a sudden drop in premiums.”
  • “In May, China’s insurance regulator banned Anbang’s life insurance unit from selling policies for three months and accused the group of ‘wreaking havoc’ on the market with aggressive pricing.” 
  • “Anbang had relied on sales of high-yield investment products to fund foreign private-equity acquisitions as well as stakes in Chinese listed companies. Chinese investors flocked to so-called ‘universal insurance’, which combined high yields with short maturities and bore little resemblance to traditional insurance.” 
  • “But an industry-wide crackdown on universal insurance has caused premiums from such products to drop more than half in the first half of the year, according to data from the China Insurance Regulatory Commission. At Anbang, such premiums fell 98%, due in part to the CIRC ban.” 
  • “The sales of shares in China’s ‘big four’ state-owned commercial banks appear to suggest that, with cash inflows from product sales drying up, Anbang sold assets to meet payouts on maturing products. Anbang said the share sales did not reflect cash flow problems.” 
  • “Last month, a Chinese credit-rating agency downgraded Anbang’s Life Insurance, saying that ‘income has fallen substantially [and] the availability of debt financing is reduced’. The agency also noted that Anbang Life posted a net loss in the first half.” 
  • “Anbang dropped off the lists of the top 10 shareholders in three of China’s big four state-owned commercial banks in the second quarter, according to the banks’ financial statements released this week. In the fourth bank, Anbang also reduced holdings but remained in the top 10.” 
  • “Anbang is also not the only insurer to sell stakes in big banks in the second quarter. Ping An Insurance, the country’s largest insurer by assets, sold down in ICBC.”

NYT – As Bike-Sharing Brings Out Bad Manners, China Asks, What’s Wrong With Us? – Javier Hernandez 9/2

  • “There are now more than 16 million shared bicycles on the road in China’s traffic-clogged cities, thanks to a fierce battle for market share among 70-plus companies backed by a total of more than $1 billion in financing. These start-ups have reshaped the urban landscape, putting bikes equipped with GPS and digital locks on almost every street corner in a way that Silicon Valley can only dream of.”
  • “But their popularity has been accompanied by a wave of misbehavior. Because the start-ups do not use fixed docking stations, riders abandon bicycles haphazardly along streets and public squares, snarling traffic and cluttering sidewalks. Thieves have taken them by the tens of thousands, for personal use or selling them for parts. Angry and mischievous vandals hang them in trees, bury them in construction sites and throw them into lakes and rivers.”
  • “Such problems have raised questions about the sustainability of China’s bike-share boom. But the debacle has also led many Chinese to look for deeper explanations and ask if bike-sharing has revealed essential flaws in the national character, prompting a far-reaching debate about social decay and the decline of decorum and morality in the country.”
  • “Some say abuse of the bicycles reflects an every-man-for-himself mentality in China that has its roots in the extreme poverty of the last century. Others are bothered by what they see as a lack of concern for strangers and public resources. The transgressions have been chronicled in the local news media with a tone of disbelief, in part because Chinese generally see themselves as a law-abiding society and crime rates are relatively low.”
  • “In many cities, the supply of bicycles far exceeds demand, bringing chaos to sidewalks, bus stops and intersections and prompting grumbles that excessive competitiveness — seen as a national trait — is spoiling a good thing. In Shanghai, where officials have struggled to maintain order, there is now one shared bike for every 16 people, according to government statistics.
  • “In some places, the authorities have confiscated tens of thousands of bicycles and imposed parking restrictions. News outlets have documented the waste with astounding images of mountains of candy-colored bicycles, each hue representing a different bike-share company.”

FT – China’s migrant workers feel pinch as Beijing pulls back on wages – Tom Hancock 9/3

Europe

Bloomberg Businessweek – Germany’s Housing Market is Red Hot, But Don’t Call It a Bubble – Stephan Kahl and Andrew Blackman 8/21

  • A different way of engaging with rising real estate values…

South America

Bloomberg Businessweek – Brazil’s Lost Decade: The Invisible Costs of an Epic Recession – David Biller and Gabriel Shinohara 8/21

  • “Once the emerging-market darling of Wall Street, Brazil’s economy went from growth of 7.5% in 2010 to shrink by virtually the same amount in the last two years. Unemployment has risen to a near-record high, GDP per capita fell to 2009 levels and the budget deficit is hovering around 10% of GDP. There is no sign the Latin American giant will recover its investment-grade status any time soon.”
  • Fortunately…

FT – Brazil ends worst recession as GDP expands for second straight quarter – Joe Leahy 9/1

  • “Brazil’s gross domestic product expanded for the second consecutive quarter in the three months ended June, officially ending the worst recession in Latin America’s largest economy.”
  • “GDP grew just 0.2% in the quarter compared to the first three months of the year and 0.3% compared with the same quarter a year earlier, the state statistics agency, IBGE, said.”

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 7, 2017

If you were to read only one thing…

FT – Venezuela suspended from South American trade bloc – Andres Schipani 8/5

  • “South American trade bloc Mercosur has suspended Venezuela indefinitely in a symbolic show of force following President Nicolás Maduro’s decision to push ahead with an election for an all-powerful constituent assembly, which critics fear will crush the last vestiges of democracy in the crisis-ridden nation.”
  • “Foreign ministers of Argentina, Paraguay, Uruguay, and Brazil said after a meeting in São Paulo on Saturday that they have triggered its ‘democratic clause’ and decided ‘unanimously to suspend Venezuela from the bloc for a rupture of the democratic order’. They said they would not allow it back in the group until democracy is restored.”
  • “Mr. Maduro’s move to install the assembly has met widespread international condemnation, including from the Vatican on Friday. The two biggest exceptions are China and Russia. Beijing, which has loaned Caracas $60bn, said the elections were ‘generally held smoothly’, though noting ‘the reaction from all relevant sides’.” 
  • “Venezuelan attorney-general Luisa Ortega Díaz, who has become a vocal critic of Mr. Maduro’s government, had also filed a motion for a court order to block the constituent assembly’s installation. But on Saturday, Ms. Ortega Díaz was sacked as members of the constitutional assembly moved ahead with vows to swiftly punish foes.”
  • “For Raúl Gallegos, a Venezuela analyst at Control Risks: ‘The new assembly will give a new lease on life to the unpopular Maduro government. Maduro is far from cornered, despite violent anti-government protests and a hostile international community.’”

Perspective

NYT – Short Answers to Hard Questions About the Opioid Crisis – Josh Katz 8/3

Worthy Insights / Opinion Pieces / Advice

Bloomberg Quint – Paul Singer Says Passive Investing Is ‘Devouring Capitalism’ – Simone Foxman 8/4

FT – Venezuela shows how not to run a socialist government – Alan Beattie 8/3

  • “‘Venezuela shows that socialism always fails’ is perhaps one of the most common and least interesting reactions to the collapse of that country into economic and political chaos.”
  • “Without doubt, radical leftism accompanied by massive state intervention in the economy has a terrible record in Latin America, and indeed elsewhere — though whether that constitutes the entirety of ‘socialism’, given the prevalence of successful center-left, self-styled socialist parties in western Europe, is highly tendentious.”
  • “More interesting is whether progressive redistributive governments can ever succeed in poor countries marked by deep inequality. This particularly applies to those rich in minerals and hence vulnerable to the ‘resource curse’ that unbalances their economies and poisons their politics.”
  • “Venezuela shows what happens when it all goes wrong.”
  • “Meanwhile Bolivia, another, much poorer, South American country, has shown that it is perfectly possible to use oil and gas revenue to achieve widescale redistribution. In the 11 years that Evo Morales has served as Bolivia’s president — and despite a similar line in frothy revolutionary rhetoric to Messrs. Chávez and Maduro — he has managed to reduce the poverty rate in the country by a third while maintaining economic stability.”
  • “Mr. Morales must be one of the world’s few presidents who inveighs fervently against the iniquities of global capitalism while receiving regular plaudits from the International Monetary Fund. Like Mr. Chávez, he has increased social spending, though not always efficiently. Unlike Venezuela, Bolivia has maintained fiscal buffers, cushioning public spending from falls in the oil and gas price.”
  • “Meanwhile, although the rest of the economy remains under-developed, Mr. Morales’s government has been restrained in taking over private businesses, including those owned by foreign investors, and the currency has been pegged against the dollar at a reasonably competitive rate with free movement of capital.”
  • “The point is not that Mr. Morales is a technocratic wizard who has come up with an unprecedented way of managing natural resources. He has simply been one of the few leaders who has — thus far — managed to stop a mineral-rich country becoming an all-out scramble for loot.”
  • “There are serious reasons for concern about the political situation, including Mr. Morales’s plans to ignore a referendum barring him from seeking a fourth term in office, and some high-profile instances of corruption.”
  • “But economically, there is no particular reason that Bolivia’s redistributive model, whether or not called socialism, must collapse.”
  • “Venezuela is what happens when a corrupt and thuggish socialist regime gets hold of oil revenues and then destroys the economy. But it does not follow that large-scale income redistribution in a natural resource state must necessarily end in disaster.”

WSJ – Why Jobs, Wages and Savings Mean Weaker Profits – Justin Lahart 8/4

  • “Weak wage growth has Americans saving less. That can’t go on forever.”

Real Estate

FT – Debt investors cool on ailing US retail sector – Joe Rennison 8/3

  • The prophecy is becoming self-fulfilling. Want to see retail landlords really struggle… It probably won’t be from tenant fallout. However, if you cut off access to credit, it will only be a matter of time.
  • “The inclusion of loans to bricks-and-mortar retailers in commercial mortgage-backed securities has halved since 2010, as investors cool over providing financing for an industry under siege from ecommerce.” 
  • “The retail sector has accounted for an average of just over 24% of the loans underlying newly issued CMBS assessed by the credit rating agency Fitch. That is down from 31.4% last year and 51.5% in 2010. Figures from S&P Global, another rating agency, illustrate the same trend.”
  • “’The entire investor community is definitely more conscious of retail exposure and the quality of that retail exposure,’ said Darren King, a portfolio manager at Semper Capital. ‘There are fewer secondary and tertiary quality assets appearing in CMBS because of those concerns.’”
  • “As retail concentration has declined, mortgages on office properties have increased as a proportion of CMBS, in part thanks to investor demand. Offices comprise 43.3% of the CMBS transactions rated by Fitch so far in 2017, up from 28.7% in 2016.” 
  • “Following the election of Donald Trump in November, expectations of a stronger economy prompted analysts to forecast the need for more office space.”
  • “But Tracy Chen, head of structured credit at Brandywine Global Investment Management, said the prices of office-backed loans have begun to falter given the combination of tepid economic data and the new administration’s struggles to pass stimulative economic policies through Congress.”
  • “‘Office exposure has been increased to compensate the decline in retail. But business needs for space have reduced,’ she said. ‘You have multiple sectors to worry about.’”

August 2, 2017

Worthy Insights / Opinion Pieces / Advice

Politico – My Party Is in Denial About Donald Trump – Jeff Flake 7/31

  • “We created him, and now we’re rationalizing him. When will it stop?”

Markets / Economy

WSJ – Late Credit-Card Payments Stoke Fears for Banks – AnnaMaria Andriotis 7/31

Health / Medicine

Bloomberg Businessweek – Here’s Why Yellen’s Fed Cares About America’s Opioid Epidemic – Jeanna Smialek 7/19

  • “An estimated 2.7 million adults over the age of 26 were misusing painkillers as of 2015, while another 236,000 currently used heroin, based on test Substance Abuse and Mental Health Administration data. While opioid abusers account for a tiny sliver in a workforce of 160 million, they probably make up a greater share of the 7 million who are unemployed.”

Mexico

Bloomberg Businessweek – Dead Bodies Start Piling Up as Fuel Theft Booms in Mexico – Amy Stillman 7/25

  • “Gasoline theft costs Mexico’s state-owned oil company more than $1 billion a year. And the country stands to lose a lot more if investors are spooked by the growing violence.”