Tag: Real Estate

May 15, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – Faced with a housing crisis, California could further restrict supply 5/10

  • “Rent control sounds appealing but is counter-productive.”

Economist – The meaning of the Vision Fund – Leaders 5/12

  • “Succeed or fail, Masayoshi Son is changing the world of technology investing.”
  • “The fund is the result of a peculiar alliance forged in 2016 between Mr Son and Muhammad bin Salman. Saudi Arabia’s thrusting crown prince handed Mr Son $45bn as part of his attempt to diversify the kingdom’s economy. That great dollop of capital attracted more investors—from Abu Dhabi, Apple and others. Add in SoftBank’s own $28bn of equity, and Mr Son has a war chest of $100bn. That far exceeds the $64bn that all venture capital (VC) funds raised globally in 2016; it is four times the size of the biggest private-equity fund ever raised.”
  • “The fund has already spent $30bn, nearly as much as the $33bn raised by the entire American VC industry in 2017. And because about half of its capital is in the form of debt, it is under pressure to make interest payments. This combination of gargantuanism, grandiosity and guaranteed payouts may end up in financial disaster. Indeed, the Vision Fund could mark the giddy top of the tech boom.”

Economist – Will Argentina’s woes spread? – Leaders 5/12

  • “Argentina has much in common with yesterday’s emerging markets, but little in common with today’s.”

FT – Apple sows seeds of next market swing – Rana Foroohar 5/13

  • “Rapid growth in debt levels is historically the best predictor of a crisis. And this year the corporate bond market has been on a tear, with companies issuing a record $1.7tn last year, and over half a trillion already this year. Even mediocre companies have benefited from easy money. But as the rate environment changes, perhaps more quickly than is imagined, many could be vulnerable.” 

WSJ – In a Dollarized World, a Rising Dollar Spells Pain – Greg Ip 5/9

  • “Even as U.S. economic influence shrinks, the dollar’s clout in global trade and borrowing is growing, magnifying impact of its rise in value.”

Markets / Economy

Bloomberg – U.S. Tariffs Lead to Record Increase in Washing Machine Prices – Alexandre Tanzi 5/10

Bloomberg Businessweek – No, the U.S Economy Isn’t Overheating – Peter Coy 5/11

  • “Some indicators are flashing red, but there’s still a little slack in the system.”

WSJ – Company Costs Are Rising, but Getting Shoppers to Pay More Is Hard – Eric Morath, Heather Haddon, and Jacob Bunge 5/9

WSJ – Daily Shot: Bloomberg – Relative Hard Currency Reserves 5/14

Real Estate

WSJ – WeWork, the Workspace Giant, Wants to Be Its Own Landlord, Using Other Investors’ Money – Eliot Brown 5/13

  • “WeWork’s new investment fund aims to buy buildings where the company would become a tenant, raising conflict-of-interest questions.”

Energy

WSJ – Daily Shot: AAA Daily National Average Gasoline Prices 5/13

Finance

FT – Landmark bond sales hit by emerging markets downturn – Kate Allen 5/14

  • “Investors who bought some of the riskiest emerging market sovereign bond sales in the past year have been left nursing paper losses as a strengthening dollar has rattled sentiment for emerging markets.”
  • “JPMorgan’s emerging markets bond index has lost 5.1% since the start of this year.”

WSJ – Daily Shot: FRED – BOJ Assets YoY Change 5/13

Cryptocurrency / ICOs

howmuch.net – The Biggest Cryptocurrency Hacks and Scams – Raul 5/9

Agriculture

Bloomberg Businessweek – These Shipping Containers Have Farms Inside – Adam Popescu 5/9

Construction

WSJ – Daily Shot: CME Lumber (JuL) 5/11

  • “Lumber futures blasted past $600 per 1,000 board feet (mbf).”

Education

NYT – Education Department Unwinds Unit Investigating Fraud at For-Profits – Danielle Ivory, Erica L. Green, and Steve Eder 5/13

South America

Economist – How chavismo makes the taps run dry in Venezuela 5/10

  • “Plentiful rains plus Bolivarian socialism equals water shortages.”

WSJ – Venezuela’s Oil Meltdown Is Getting Worse – Spencer Jakab 5/13

  • “A rush of creditors trying to seize assets has disrupted Venezuela’s oil exports at a time when they already are plunging.”

Other Interesting Links

Cannabis Benchmarks – Weekly Report 5-11-18

May 14, 2018

If you were only to read one thing…

FT – China buys up flying schools as pilot demand rises – Jamie Smyth and Ben Bland 5/10

  • “Chinese airlines are buying foreign flying schools and poaching pilots, amplifying a talent shortage that has affected airlines in other regions.”
  • “’The growth in Chinese aviation is unprecedented in our lifetimes and probably in history,’ said Paul Jebely, a Hong-Kong-based lawyer specializing in aviation. ‘There have been more aircraft ordered than there are pilots to fly them’.”
  • “The squeeze on flying talent has triggered flight cancellations, dented profits and threatened the industry’s ambitious growth targets around the world.”
  • “China is on course to overtake the US as the world’s largest air travel market by 2022, according to the International Air Transport Association.”
  • “US aircraft maker Boeing predicts China will need 110,000 new pilots in the years through to 2035, and its airlines are expected to purchase 7,000 commercial aircraft over the next two decades.”
  • “China’s aviation market grew by 13% last year, with 549m passengers taking to the skies, double the number who flew in 2010. Growth is being driven by the rising middle class, an expansion of routes by Chinese airlines and the easing of visa restrictions by foreign governments keen to attract Chinese tourists.”
  • “The number of pilots and co-pilots working in China almost doubled between 2011 and 2017. Over recent months China’s main airlines — China Eastern, Air China, China Southern and Hainan Airlines — have stepped up recruitment and are expanding their offshore training.”
  • “The starting salary offered to foreign pilots in China has jumped over the past 10 years from $10,000 per month to $26,000 per month, tax free, and was still rising, he said.”
  • “’Some Chinese airlines are offering tax-free salary packages, which can be up to twice what western airlines offer,’ said Murray Butt, president of the Australian and International Pilots Association.”
  • “India’s surging air travel — where passenger numbers have been growing by an average of about 16% a year since the beginning of the millennium — adds more pressure to the global pilot shortage.”
  • “Having seen rapid growth in passenger numbers over the past few years, Indian airlines have been recruiting from the military, from abroad and from their competitors by offering increasingly lucrative contracts. They have also made it more difficult for pilots to leave, forcing commanding officers to give a year’s notice if they wish to leave.”
  • “Chinese airlines pay the tuition of cadet pilots and are intensifying efforts to develop more local talent. But there are only 22 pilot schools in China and restrictions on the use of domestic airspace mean they are increasingly looking overseas to partner with foreign flights schools.”
  • “Almost half of China’s 5,053 trainee pilots last year were trained abroad, creating a flourishing business for flight schools and their owners in the US, Canada and Australia.”

Perspective

WP – For six decades, ‘the man with the golden arm’ donated blood – and saved 2.4 million babies – Amy Wang 5/12

  • A great example of human kindness/exceptionalism.

Visual Capitalist – The United States of Beer – Nick Routley 5/12

Worthy Insights / Opinion Pieces / Advice

FT – Memo from Amazon: tell a good story – John Gapper 5/8

  • “Jeff Bezos and Winston Churchill both appreciated the value of skillful narrative.”

WSJ – Mercedes Wants to Borrow Money From You. Should You Bite? – Jason Zweig 5/11

Markets / Economy

WSJ – Record Buybacks Help Steady Wobbly Market – Ben Eisen and Akane Otani 5/10

Real Estate

CoStar – Already Down, Chinese Investment in U.S. Real Estate Evaporates in First Quarter – Mark Heschmeyer 5/10

WSJ – Daily Shot: PlanMaestro – Age of Housing Stock by US Zip Code 5/11

Entertainment

WSJ – Why Box Office Flops Really, Really Hurt – Justin Lahart 5/11

  • “It isn’t rare for a handful of big movies to do much better than anything else during the same year, but over the past few years the differences have become more acute. One way to see this is by applying a standard measure of inequality—the Gini coefficient—to the box office. A Gini of zero would mean all the movies did equally well and a Gini of one would mean one movie made all the money.”
  • “Based on the domestic receipts of the top 100 grossing movies, the box office Gini for last year’s releases was 0.49, versus 0.46 for 2016. Over the previous 10 years, the Gini averaged 0.4 so there has been a big change in an already skewed field. For comparison’s sake, the Gini coefficient for after-tax household income is 0.39 in the U.S. versus 0.46 in Mexico, according to the Organization for Economic Cooperation and Development.”

Environment / Science

FT – Apple looks to ‘green’ metal for use in iPhone and MacBook – Neil Hume and Henry Sanderson 5/10

  • “Apple has joined forces with two of the world’s biggest aluminum producers to develop a ‘carbon-free’ metal it plans to use in its iPhone and laptop computers.”
  • “The consumer electronics group is backing a joint venture between Rio Tinto and Alcoa that is seeking to commercialize a new technology to eliminate greenhouse gas emissions from aluminum smelting.”

Health / Medicine

Gallup – Uninsured Rate Rises in 17 States in 2017 – Dan Witters 5/9

  • “The uninsured rate rose by statistically significant margins in 17 states in 2017, the first time since the full implementation of the major mechanisms of the Affordable Care Act (ACA) in 2014 that any state had a rate increase. Also, for the first time since 2013, no states had a lower uninsured rate than the previous year.”

South America

Reuters – Conoco authorized to seize $636 million in Venezuela PDVSA assets – Mike Willemse, Brian Ellsworth, Alexandra Ulmer, and Tom Brown 5/12

May 10, 2018

Perspective

WSJ – Daily Shot: Charlie Bilello – Global Population Growth and Growth Rate Projections 5/9

Worthy Insights / Opinion Pieces / Advice

FT – Donald Trump declares trade war on China – Martin Wolf 5/8

  • “No sovereign power could accept the humiliating demands being made by the US.”

FT – How the Beijing elite sees the world – Martin Wolf 5/1

FT – Argentines shocked by IMF loan request – Benedict Mander and John Paul Rathbone 5/8

WSJ – Will Argentina’s Nightmare Spread? – Nathaniel Taplin 5/9

  • Strong dollar, surging oil prices, and US growth picking up steam – all bad for investors searching for yield in emerging markets.

Real Estate

Bloomberg Businessweek – Surprise, You Live in a Giant Airbnb – Olivia Zaleski 4/30

  • “Airbnb’s branded buildings promise management companies 5% to 15% of the profit hosts generate. At Domain, residents who rent through Airbnb would pay Niido 25% of their home-sharing income. In exchange, Diffenderfer says, residents will have access to the same hotel-style amenities visitors will receive.”

NYT – Developers Add a Missing Piece to Their Projects: Hotels – Joe Gose 5/8

WSJ – California Set to Require Solar on New Homes – Erin Ailworth 5/9

  • “California is poised to become the first U.S. state to require solar panels on nearly all new homes.”
  • “The California Energy Commission on Wednesday is expected to approve a requirement that residential buildings up to three stories high, including single-family homes and condos, be built with solar installations starting in 2020.”
  • “California is pursuing aggressive policies to reduce air pollution and combat climate change—including a mandate to slash greenhouse gas emissions 40% below 1990 levels by 2030—that are helping drive renewable energy in the state.”
  • “Solar accounted for nearly 10% of California’s electricity generation in 2016, Energy Commission data shows.”
  • “Currently, about 20% of new single-family homes in the state are built with solar, said Bob Raymer, senior engineer with the California Building Industry Association, which represents thousands of home builders, contractors, architects and others. Making solar mandatory on homes is expected to add $8,000 to $10,000 to construction costs, he said.”
  • “While the building-industry organization would have preferred the Energy Commission hold off a few more years on mandating that homes be fitted with solar, it helped shape the rule to reduce compliance costs and increase flexibility, Mr. Raymer said. Builders would have the option to install solar in a communal area if it doesn’t make sense on individual rooftops. By installing batteries that help homeowners save energy for later use, builders can also gain some flexibility in meeting efficiency standards.” 
  • “California has more solar power installed than any other state, with roughly 21 gigawatts of generation capacity, according to the Solar Energy Industries Association. That is far more than the second -largest solar-producing state, North Carolina, which has 4.3 gigawatts.”
  • “The commission expects the cost of adding solar, when combined with other revised efficiency standards, to add about $40 to an average monthly payment on a 30-year mortgage. However it estimates the investment would more than pay for itself, with consumers on average saving $80 a month on heating, cooling and lighting bills.”

Energy

WSJ – As Putin Starts Fourth Term, Higher Oil Prices Give Him a New Edge – Thomas Grove 5/7

May 9, 2018

Perspective

WSJ – Daily Shot: OECD – Levels of Working Poor by Country 5/8

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Bad Advice Can Be Expensive – Ben Carlson 5/6

Bloomberg Businessweek – The Future of News – John Micklethwait 5/3

  • “…is journalism really in such a parlous state? Look closer. News is an industry in transition, not in decline. It is reemerging as something more digital, more personalized, more automated, more paid for—and (eventually) less fake. In many ways history is repeating itself, with the main surprise being the survival of so many established names. And good journalism still does have the power to change lives.”
  • “In a world where the facts are known, commentary will become ever more important…”
  • “That points to the final series of changes: the multiplicity of formats. The standard print news story is being broken up, split among explainers, videographics, podcasts, and so on. Editorship is increasingly a matter of choosing the best way to deliver information to a time-starved consumer. News is likely to get shorter, quicker, and more graphical. But if you need to understand Syria or cryptocurrencies, you may save time reading one long story in Businessweek or the New Yorker rather than endless small ones.”
  • “The newspaper has not so much died as transmuted. News is in a state of transition—and what’s emerging is molded by both new technology and old verities. As journalists, we have to work harder to keep our audiences. But I’m still optimistic—not least about fake news. It won’t go away; it never has. But it will play a smaller role. And the big winner will be you, the consumer. Even if you have to pay a little more for it.”

Economist – So long, farewell – Buttonwood 5/8

The Registry – Does WeWork at All? – John McNellis 5/8

Visual Capitalist – Interactive: Comparing Asian Powers to the U.S. (Lowy Institute) – Jeff Desjardins 5/8

Markets / Economy

FT – Walmart takes on Amazon in India with Flipkart deal – Simon Mundy and Arash Massoudi 5/8

  • “US retailer to pay $15bn for 75% stake in India’s largest ecommerce group.”

FT – Retail: Is the beauty industry ‘Amazon-proof’? – Anna Nicolaou and Aimee Keane 5/6

WSJ – Daily Shot: LPL Research – Length of Economic Expansions 5/8

Real Estate

WSJ – Daily Shot: Green Street Advisors – US Commercial Property Price Index 5/8

Energy

WSJ – Oil Costs How Much? How the Oil Rally Took Forecasters by Surprise – Alison Sider and Georgi Kantchev 5/6

Finance

WSJ – Daily Shot: Bianco Research – State Muni Yields vs. S&P Muni Index 5/8

WSJ – Pension Funds Still Making Promises They Probably Can’t Keep – Heather Gillers 5/8

  • “Retirement plans across the country still project their investments will grow at a median rate of 7.25%, according to Wilshire Consulting, an adviser to pension funds. Yearly returns on public pension plans have returned a median 6.79% over the past decade and 6.49% over the past 20 years, according to Wilshire Trust Universe Comparison Service, a database.”
  • “Unlike corporations, public pensions have wide latitude in projecting investment returns.”
  • “Public retirement systems had an average 72% of assets they need to pay for retirement promises in 2016, according to the latest data available in the Public Plans Database, which tracks about 170 pension funds. The figure a decade earlier was 85%.”
  • “Companies don’t have the same flexibility to set return expectations on their pension plans. Pension plans sponsored by S&P 1500 companies have an average 87% of assets needed to cover their pensions promises, according to Mercer, a consultancy.”

Agriculture

WSJ – Scientist in China Race to Edit Crop Genes, Sowing Unease in U.S. – Jacob Bunge and Lucy Craymer 5/6

Construction

WSJ – Daily Shot: CME Lumber (Jul) 5/7

Education

Axios – The disappearing Chinese student visa – Stef W. Kight 5/6

China

Bloomberg Businessweek – The $94 Billion Mystery: What Will Be Left of HNA’s Empire? – Matthew Campbell and Prudence Ho 5/3

  • “An annual report released in late April revealed that HNA spent more on interest than any nonfinancial company in Asia last year, a $5 billion bill that represented a more than 50% increase from the year before.”
  • “Overall debt rose 21% in 2017, according to the report, with short-term borrowing climbing by 25%, to about $30.3 billion. Total debt amounted to about 20 times HNA’s earnings before interest and taxes…”
  • “Nonetheless, HNA, which Chen co-founded in the 1990s, counting George Soros among its early investors, isn’t at risk of immediate catastrophe. At the start of 2018, according to people familiar with the matter, it told creditors it would sell about $16 billion in assets in the first half to lighten its balance sheet. Happily for the banks that financed its rise, HNA is already nearing that goal, thanks largely to the Hilton sale ($8.5bn).”

FT – Chinese group with $7bn in debt seeks Beijing bailout – Gabriel Wildau 5/7

  • “In a test of Chinese authorities’ commitment to reducing financial risk, a large Chinese manufacturing group has begged for a government bailout to avoid default on up to $7bn in debt after a regional lender withdrew loans.”
  • “Over the past year, China has tightened credit in a bid to tackle an explosion of corporate debt that the International Monetary Fund has called ‘dangerous’. But the plea highlights how painful Beijing’s deleveraging campaign has been for some indebted groups.” 
  • “According to Caixin, a respected Chinese financial news website, the crisis involving DunAn began when Zheshang Bank, a regional lender in Zhejiang, demanded early repayment of loans, causing other banks to restrict lending to the group.” 
  • “DunAn employs 29,000 workers and manufactures a range of equipment including air-conditioning parts, civil explosives and wind power equipment. It has also expanded into asset management and real estate.” 
  • “Government bailouts are most common for state-owned companies, but officials have also rescued private groups when their potential collapse raised the prospect of contagion.” 
  • “The Shanghai government shielded investors from losses on bonds from privately owned Chaori Solar, whose 2014 default was the first in China’s domestic bond market.” 

 

May 8, 2018

If you were only to read one thing…

HuffPost – America’s Housing Crisis Is Spreading To Smaller Cities – Michael Hobbes 5/5

  • “It’s tempting to look at the housing crisis in Boise as just a miniature version of what’s already happened in the Bay Area and the Pacific Northwest and the Northeastern corridor. But in the last 10 years, the American economy has transformed in ways that are going to make it even harder for smaller cities to respond to growth.”
  • “In 2007, the city of Boise was issuing more than twice as many building permits as it is now. Despite having 125,000 more residents, Boise’s metro area built fewer homes in 2016 than it did in 2004.”
  • “The reason, says Gary Hanes, a retired HUD administrator based in Boise, is that the recession wiped out the city’s construction sector. Between 2008 and 2012, Boise home prices fell by 40%. With homebuilding stalled, thousands of construction workers took other jobs or left for North Dakota or Alaska. By 2012, once all the low-cost and foreclosed homes had been scooped up and the city needed new housing again, there was no one left to build it.”
  • “This isn’t just a Boise problem. Construction workers, even in high-paid jobs and booming cities, are in short supply. Plus, thanks to increasing international demand, prices for timber, steel and concrete are going up nationwide.”
  • “The higher costs of materials, financing and labor, combined with the years-long lag in homebuilding, have made construction unbearably expensive. Fred Cornforth, the CEO of the CDI/Idaho Development and Housing Organization, builds affordable housing in 17 states. He tells me that his last project in Boise cost around $155,000 per apartment ― cheaper than Seattle, where he also develops properties, but not by as much as you’d think.”
  • “This, Cornforth says, is the fundamental challenge of the housing crisis in Boise and everywhere else: The only way make prices fall is to overbuild. You need vacancy rates of 8% or more before rents start to come down. But the backlog is so great, and the costs of building are so high, that it’s impossible even to meet the current demand. Every year, he says, as the backlog grows, the costs go up and the challenge of meeting the need gets worse.”
  • “Ultimately, the housing crisis is not about housing. It is about the inability of American cities to grow.”
  • “’It’s hard to acknowledge change,’ says Mike Kazmierski, the president of the Economic Development Authority of Western Nevada. He’s been watching Reno, another medium-size boomtown, play out the same debates as Boise for over six years now. ‘If you say your city is going to grow, that means you need another fire station, more schools, more staff. Cities don’t have the budgets for that, and asking for it means raising taxes. The pushback is, ‘We don’t want to pay for that growth. Let them pay for it when they get here.’”
  • “This is where Boise starts to look depressingly familiar. In the last few years, as the city’s growth has become more visible, NIMBY groups have taken over the political conversation. Of the 21 speakers at a town hall meeting last month, only two said they welcomed more growth. Signs reading ‘OVERCROWDING IS NOT SUSTAINABLE’ are showing up in front yards. Some local residents, taking a page from the San Francisco playbook, are trying to get their neighborhood classified as a ‘conservation district‘ to block new buildings from going in.”
  • “Some of the complaints have merit ― it’s hard not to be sympathetic to residents asking for sidewalks on their streets or more frequent bus service ― but many are simply pleas for the growth itself to stop. A comment on the Facebook page for Vanishing Boise, one of the local anti-development groups, is emblematic of the argument: ‘Why are they coming in the first place?????’”
  • “As in other cities, this dynamic reveals a fundamental weakness in the American political system: Opposition to growth comes from homeowners and voters, entrenched interests who already have the ear of local politicians. Supporters of growth, the beneficiaries of all the new development, haven’t even moved here yet.”
  • “…most local advocacy groups are making the same argument San Francisco homeowners have made for decades: If we don’t build it, they won’t come.”

Perspective

FactsMaps – US States by Population Growth Rate 1950-2016

WSJ – Daily Shot: OECD – Levels of Income Inequality 5/7

Worthy Insights / Opinion Pieces / Advice

FT – Access to energy is an essential step in African development – Nick Butler 5/6

  • “Investment in infrastructure can unlock the continent’s potential but is far too low.”

FT – Fight the Faangs, not China – Rana Foroohar 5/6

  • “The Trump administration must break the power of big tech.”

NYT – Save Barnes & Noble! – David Leonhardt 5/6

WSJ – Xiaomi’s Valuation Isn’t Anywhere Near $100 Billion – Jacky Wong 5/3

WSJ – Tesla’s Numbers Are Even More Dramatic Than Its CEO – Charley Grant 5/5

WSJ – Why It’s Not Crazy to Buy a Mall Giant in the Age of Amazon – Stephen Wilmot 5/6

Real Estate

MarketWatch – With no letup in home prices, the California exodus surges – Andrea Riquier 5/7

  • “Over a million more people moved out of California from 2006 to 2016 than moved in, according to a new report, due mainly to the high cost of housing that hits lower-income people the hardest.”
  • “There are many reasons for the housing crunch, but the lack of new construction may be the most significant. According to the report, from 2008 to 2017, an average of 24.7 new housing permits were filed for every 100 new residents in California. That’s well below the national average of 43.1 permits per 100 people.”
  • “If this trend persists, the researchers argued, analysts forecast the state will be about 3 million homes short by 2025.”
  • “California homeowners spend an average of 21.9% of their income on housing costs, the 49th worst in the nation, while renters spend 32.8%, the 48th worst. The median rent statewide in 2016 was $1,375, which is 40.2% higher than the national average. And the median home price was — wait for it — more than double that of the national average.”
  • “One coping strategy: California residents are more likely to double up. Nearly 14% of renter households had more than one person per bedroom, the highest reading for this category in the nation.”
  • “Coping can also mean leaving.”
  • “The Next 10 and Beacon Economics researchers used Census data to track migration patterns by demographic characteristics. More than 20% of the 1.1 million people who moved in the decade they tracked did so in 2006, at the height of the housing bubble, when prices were, as they write, ‘sky-high’.”
  • “As the housing market imploded and prices came back to earth, migration out of the state slowed. But as prices recovered, ‘out-migration’ has not only picked up steam, it’s accelerated.”
  • “Those migration patterns are shaped by socioeconomics. Most people leaving the state earn less than $30,000 per year, even as those who can afford higher housing costs are still arriving. As the report noted, California was also a net importer of highly skilled professionals from the information, professional and technical services, and arts and entertainment industries. On the other hand, California saw the largest exodus of workers in accommodation, construction, manufacturing and retail trade industries.”

MarketWatch – Americans haven’t been this optimistic about house prices since just before the crash – Quentin Fottrell 5/7

  • “House prices are soaring and, despite warnings from some analysts, most Americans believe they will continue to soar.”
  • “A majority of U.S. adults (64%) continue to believe home prices in their local area will increase over the next year, a survey released Monday by polling firm Gallup concluded. That’s up nine percentage points over the past two years and is the highest percentage since before the housing market crash and Great Recession in the mid-2000s.”

Environment / Science

WP – Hawaii’s silent danger: Volcanic smog, otherwise known as ‘vog’ – Allyson Chiu 5/7

South America

WSJ – Daily Shot: Argentina Central Bank 7-Day Repo Rate 5/4

May 7, 2018

Perspective

Economist – Remittances 4/26

Visual Capitalist – A World of Languages – Iman Ghosh 5/5

WP – America is more diverse than ever – but still segregated – Aaron Williams and Armand Emamdjomeh 5/2

Worthy Insights / Opinion Pieces / Advice

A  Wealth of Common Sense – Schrodinger’s Portfolio – Ben Carlson 4/29

Bloomberg – The Return of the Brick-and-Mortar Store – Conor Sen 5/1

Economist – In China’s cities, young people with rural ties are angry 5/3

Economist – Behind the teacher strikes that have roiled five states 5/3

Economist – Where will the next crisis occur? – Buttonwood 5/3

Mauldin Economics – Us vs. Them – Ian Bremmer 4/25

Pragmatic Capitalism – Three Things I Think I Think – China, Tesla And Weird Stuff – Cullen Roche 5/4

Markets / Economy

FT – Argentina stuns markets as it pushes interest rates to 40% – Cat Rutter Pooley, Adam Samson, and Roger Blitz 5/4

NYT – A Fast-Food Problem: Where Have All the Teenagers Gone? – Rachel Abrams and Robert Gebeloff 5/3

WSJ – Apple Allays iPhone Worries, Adds $100 Billion to Buyback Plans – Tripp Mickle 5/1

  • I count $300 billion in total dividends since 2013…geez.

  • If that wasn’t enough…

Real Estate

BI – Uber and Lyft are changing where rich people buy homes – Sarah Jacobs 5/3

  • “A report released this week from MetLife Inc.’s asset-management business confirmed that the premium cost of apartments near public transit has begun to decline due to services such as Uber and Lyft.”

FT – Priced out of the American dream – Sam Fleming 5/2

Health / Medicine

Bloomberg Businessweek – Silicon Valley Wants to Cash In on Fasting – Tom Giles and Selina Wang 4/24

Automotive

FT – UK to ban most hybrid cars, including Prius, from 2040 – Peter Campbell and Jim Pickard 5/4

  • Nothing formalized at this moment, just be aware of the direction of this effort.
  • “Hybrid cars that rely on traditional engines, such as the Toyota Prius, would be banned by 2040 under clean-air plans being drawn up by the UK government that would outlaw up to 98% of the vehicles currently on the road.”
  • “Three people involved in the decision-making process said the proposed rules would limit new car sales to those that can travel at least 50 miles using only electric power.”
  • “The change would outlaw more than 98% of the vehicles currently sold in Britain and require manufacturers to switch to vehicles predominantly driven by batteries — though they might be able to have petrol engines for back-up or support.”

South America

FT – Venezuela’s oil decline reaches new depths – John Paul Rathbone 4/30

  • “In addition to hyperinflation and a $70bn bond default that has cut off the country from fresh finance, the drop in oil production to 30-year lows has slashed government revenues, making it ever harder for Mr Maduro’s regime to import basic necessities and deploy the patronage he needs to maintain military and political support.”
  • “Caracas has also alienated key allies such as Beijing. Chinese state banks, which extended over $60bn in oil-backed loans between 2007 and 2016, last year made no fresh loans. A two-year grace period on a remaining $19bn debt to China expired last week, Reuters reported, meaning that Venezuelan export revenues will fall further.”

April 30, 2018

This will be the only post this week from me. This week I’m attending the ULI Spring Meeting in Detroit, MI.

Cheers,

Duff

Perspective

WSJ – Why Tech Titans Are Betting on India, in 14 Charts – Newley Purnell, Min Jung Kim, and Rosa de Acosta 4/18

  • Clearly there is some disconnect between showing just this chart and the title. Emphasis less on India and more on the gender split of Facebook users.

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – China Quietly Rolled Out a Very Big Bang – John Micklethwait 4/19

Bloomberg – Latest Climate Threat for Coastal Cities: More Rich People – Christopher Flavelle 4/23

Financial Samurai – Why Households Need To Earn $300,000 A Year To Live A Middle Class Lifestyle Today – Sam

WSJ – Real Estate Stocks Are on Sale but No One Is Buying – Ken Brown 4/27

Markets / Economy

WSJ – Cable TV’s Cord-Cutting Woes Grow, Highlighting Divergence With Netflix – Shalini Ramachandran 4/27

Energy

Reuters – Venezuela faces heavy bill as grace period lapses on China loans – Corina Pons 4/27

Finance

FT – WeWork bond finds home in yield-starved market – Alexandra Scaggs 4/26

  • “This week high-yield bond investors faced a puzzle: how to value a bond sold by an unprofitable company that does not own hard assets or offer a clear outlook for its free cash flow?”
  • “The company in question was WeWork, the office-sharing company that last year attracted a $4.4bn equity investment from Japan’s Softbank. WeWork, which hired JPMorgan to lead the sale but had more than a dozen other banks working as well, attracted enough demand to increase the sale to $702m from $500m.”
  • “Several investors who steered clear of the bond — and one who bought it — said WeWork’s debt was not the type that typically appealed to high-yield investors. But nor was it the first company vowing to disrupt an industry to have found buyers in the junk market. Last year electric carmaker Tesla sold a $1.8bn high-yield bond, and in March, Uber raised $1.5bn in a leveraged loan.”
  • “A combination of low interest rates and shrinking supply has made it harder for money managers to find bonds with attractive yields. WeWork’s bonds were sold at a yield of 7.875%.”

Environment / Science

LAT – A Hawaiian island got about 50 inches of rain in 24 hours. Scientist warn it’s a sign of the future – Heidi Chang 4/28

Construction

WSJ – Daily Shot: CME Lumber (Jul) 4/26

China

FT – China’s HNA reports debts have soared to $94bn – Lucy Hornby 4/28

Middle East

Visual Capitalist – Knight Frank: A Time-lapse of Dubai’s Astonishing Growth – Nick Routley 4/28

  • Very cool animation.

South America

NYT – ‘Their Country Is Being Invaded’: Exodus of Venezuelans Overwhelms Northern Brazil – Ernesto Londono 4/28

April 27, 2018

Perspective

WSJ – The New Test for Cash-Strapped U.S. States: Teacher Protests – Heather Gillers and Michelle Hackman 4/22

indeed – Teachers in Low-Pay States More Likely to Seek Jobs Outside Education – Andrew Flowers 4/24

Compare cards – Cities Where Credit Card Debt Has Increased and Decreased the Most – Chris Horymski 4/23

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Americans Are More Eager Than Ever to Put Down Roots – Sophie Caronello and Brendan Murray 4/24

FT – GoPro CEO salary slashed to $1 after poor 2017 – Tim Bradshaw 4/26

  • “Nick Woodman goes from highest paid US boss in 2014 to bottom of the pack.”

Visual Capitalist – Global Population by Region From 1950 to 2100 (Animation) – Simon Kuestenmacher 4/25

Real Estate

BI – WeWork documents reveal it owes $18 billion in rent and is burning through cash as it seeks more funding – Shona Ghosh 4/25

FT – US housing: how Fannie Mae and Freddie Mac became rental powerhouses – Alistair Gray 4/25

  • “Established to make mortgages more affordable and expand US home ownership — Fannie during the Great Depression and Freddie in 1970 — the Treasury propped them up with about $188bn in bailout funds after the housing market meltdown. While Fannie and Freddie have private shareholders, they send most of their profits to the Treasury.”
  • “Since then, far from being reined in as critics demanded in the aftermath of the crisis, the two ‘government-sponsored enterprises’ remain as important as ever; even more so for commercial real estate markets.”
  • “Fannie and Freddie are best known for their principal role as the leading source of financing for owner-occupied mortgages. But for decades, they have played another role in supporting the market for rental housing, by helping finance property companies that acquire or refinance investments in apartment blocks. This second, lower-profile, part of their business has boomed since the crisis.”
  • “By the end of last year the pair had a financial interest in almost $500bn of commercial mortgages, equivalent to 38% of the total outstanding across the US. That compares with almost $200bn, or 25% of the market, a decade ago. Last year alone, the pair financed almost 1.6m rental units.”
  • “The expansion has raised eyebrows in the industry. Competitors that provide this type of finance — banks, life insurance companies and other institutional investors — say the taxpayer’s backing allows Fannie and Freddie to offer borrowers better terms than they can.”
  • “Supporters say the pair have also helped stave off an affordable housing crisis, especially as a new generation of renters has been locked out of the post-crisis recovery. ‘If they didn’t exist, there would be a major problem for multi-family housing,’ says Shekar Narasimhan, managing partner at the real estate group Beekman Advisors, who was the first chair of Fannie Mae’s advisory committee on this type of housing.”
  • “For critics, the pair have played a central role in financing the boom. Developers have completed about 1.3m rental units in the US over the past five years, according to RealPage data, including a record 365,000 in 2017.”
  • “’Aggressive lending practices by the GSEs this cycle have been an important factor in the degree of over-investment and over-valuation of multi-family properties in certain key markets,’ says Michael Shaoul, chief executive of Marketfield Asset Management.”
  • “’I do not think that the GSEs have been as critical in commercial real estate as they were in traditional mortgages a decade ago — but they have perhaps allowed some of the more marginal projects to minimize equity capital this time around.’”

WSJ – Clouds From the Retail Storm Reach Hawaii Real Estate – Esther Fung 4/24

WSJ – Retail Rents Plunge in Major Manhattan Shopping Districts – Keiko Morris 4/25

  • “In all, first quarter annual asking rents for ground floor retail space declined in 13 out of 16 shopping corridors, and the overall average asking rent for those areas dropped 19.5% from the previous year to $653 a square foot, according to a report from real estate services firm CBRE Group Inc.”
  • “The continued drop in retail asking rents comes as no surprise—as traditional companies reshape their businesses to the growth in online shopping, retailers reduce the number of brick-and-mortar stores they operate. Also, merchants continue to balk at high rents. Between 2010 and 2014, average asking rents in Manhattan jumped more than 100% across the 16 retail corridors, according to an earlier report from CBRE.”

Energy

Reuters – Chevron evacuates Venezuela executives following staff arrests – Alexandra Ulmer, Marianna Parraga, Ernest Scheyder 4/25

  • “U.S. oil major Chevron Corp has evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA, according to four sources familiar with the matter.”
  • “The Chevron workers may face charges of treason for refusing to sign a supply contract for furnace parts drawn up by PDVSA executives, Reuters reported earlier this week. The workers balked at the high costs of the parts and a lack of competitive bids.”

WSJ – Daily Shot: US Gross Crude Oil Exports 4/20

Health / Medicine

Economist – A typical American birth costs as much as delivering a royal baby – The Data Team 4/23

WSJ – Retirees Are Less Confident About Having Enough to Live On – Anne Tergesen 4/24

China

Bloomberg – A $7 Trillion Debt Pile Looms Large Over Chinese Households – Tian Chen, James Mayger, Heng Xie, Ling Zeng, and Emma Dong 4/24

April 26, 2018

If you were only to read one thing…

Economist – High prices in America’s cities are reviving the suburbs 4/19

  • “The Great Recession, combined with a mortgage crisis, hindered mobility and curtailed home-buying, dragging down the growth of the suburbs. At the same time, urban cores began to grow more quickly than they had before, inspiring questions about the future of America’s development. Academics began theorizing that perhaps the ‘back to the city’ movement would endure, driven by millennials who cared less about white picket fences than about being within strolling distance of cafés hawking cold brew and avocado toast.”
  • “Recent migration trends suggest otherwise. Analysis of United States Census Bureau data by William Frey, a demographer at the Brookings Institution, a think-tank, shows that lower-density suburbs and exurbs—areas separated from cities by rural land—have been growing more quickly since the Great Recession, while the growth of urban cores is slowing. Since 2012, considered the peak year of the urban renaissance, the growth of urban cores has fallen by half and exurban county growth has quadrupled.”
  • “Looking at the same data, Wendell Cox, who runs Demographia, an urban planning consultancy in St Louis, found that between 2016 and 2017 nearly 438,000 net residents left the counties that included urban cores, while suburban counties of the same metro areas gained 252,000 net residents. Growth in America’s three largest metropolitan areas is sluggish. Los Angeles grew by just 0.19% from 2016 to 2017, while New York expanded by 0.23% and Chicago actually shrank by 0.14%. In 2017, five times as many Americans moved to New York’s suburbs as moved to the Big Apple. The large metro areas that have added the most people—Dallas, Houston and Atlanta, for example—have relatively small downtown areas and are dominated by residential neighborhoods that feel every bit as suburban as Stepford.”
  • “The last time Americans fled the cities for the suburbs, from the 1950s to the 1980s, they were driven primarily by fear of crime. This time the migration is the consequence of the cities’ success, not their failure. Housing and rental prices in many of the country’s largest metro areas have soared, inspiring residents to pack up and move out. In Los Angeles and San Francisco median home prices are more than ten times median household incomes. The ratio is only slightly better in Boston and Seattle.”
  • “According to the National Association of Realtors, a trade association for estate agents, more than half of Americans under the age of 37—the majority of home-buyers—are settling in suburban places. In 2017, the Census Bureau released data suggesting that 25- to 29-year-olds are a quarter more likely to move from the city to the suburbs than to go in the opposite direction; older millennials are more than twice as likely.”
  • “Despite the widespread perception that millennials are allergic to cars, gardens and chain stores, they are actually less urban than the previous generation. Analysis by FiveThirtyEight, a data-journalism website, found that while the share of 25- to 34-year olds with bachelor’s degrees living in hyper-urban neighborhoods grew by 17% from 2000 to the period between 2009 and 2013, as a whole millennials were less likely to live in urban areas than young people were in 2000.”

Worthy Insights / Opinion Pieces / Advice

Economist – America is on track to admit the fewest refugees in four decades 4/21

Economist – Poland’s ruling Law and Justice party is doing lasting damage 4/21

Economist – China wages war on apps offering news and jokes 4/19

Vice – San Francisco Is Fighting the Scooter Trend With Poop and Vandalism – Sarah Emerson 4/24

WSJ – Retirement Shock: Need to Find a Job After 40 Years at General Electric – Thomas Gryta 4/22

  • “Roughly $140 billion in GE stock-market wealth was lost in the past year, not just at Wall Street firms but among former employees who, like many small investors, long believed the company invincible.”

Markets / Economy

WSJ – The Next Challenge for Global Growth: Keeping Up With Demand – Richard Barley 4/24

  • “Order backlogs in manufacturing have reached their highest level since May 2004.”

Real Estate

WSJ – Daily Shot: US New Single-Family Home Sales 4/24

WSJ – Daily Shot: FRED – US New Single-Family Home Sales between $300k-$399k 4/25

WSJ – Daily Shot: FRED – US Median Sales Price for New Single-Family Homes 4/25

WSJ – Daily Shot: S&P CoreLogic Case-Shiller 20-City Index YoY Change 4/24

India

Economist – The humbling of India’s tycoons – Leaders 4/21

  • “A new era of Indian capitalism may be dawning. For the first time a large number of struggling tycoons face the prospect of having their businesses seized from them. The fate of 12 troubled large concerns is due to be settled within weeks; another 28 cases are set to be resolved by September. Between them, these firms account for about 40% of loans that banks themselves think are unlikely to be repaid.”
  • “Reforming the state-owned banks is the most important task of all. Their balance-sheets are where you find 70% of loans and nearly 100% of problems. Ensuring banks make commercial decisions can only realistically be achieved by privatizing at least some of them. Privatized banks would also be free to pay salaries to attract talented staff. The bosses at state-owned banks currently earn under $50,000 a year, a pittance even by Indian executive standards—and it shows.”

Other Interesting Links

Economist – A group of people with an amphibious life have evolved traits to match 4/21

April 25, 2018

If you were only to read one thing…

Bloomberg – These Are the U.S. Cities With the Fastest-Growing Wealth Gaps – Vincent Del Giudice and Wei Lu 4/19

  • “The analysis of Census Bureau data tracks the differences in annual income between household income groups. The rich versus poor gap compared households in the top 20% to those in the bottom 20% by metropolitan area.”
  • “At No. 1 is San Jose, California, the Silicon Valley city where the rich versus poor gap widened by $73,600 to $339,000. At No. 100, with the smallest change among 100 largest metro areas, is the border city of El Paso, Texas, where the gap widened by $2,600 to $131,200.”
  • “Nationally, the rich versus poor gap expanded by $31,000 to just over $197,000. Last year’s measure, using data from 2010 to 2015, showed an increase of $29,500 to $189,600.”
  • “The Bloomberg ranking also shows the change in the gap between the super-rich to middle class which widened in 98 of 100 metropolitan areas, led by Bridgeport, Connecticut, which overlaps entirely with Fairfield County. The gap narrowed in Ogden, Utah and Colorado Springs, Colorado. The super-rich to middle class gap is defined by those in the top five percent of income vs households in the middle 20%.”
  • “A third take of data shows the middle class income span — defined as the gap between those within 30 and 80% of an areas income. The middle class span grew the most in San Francisco where it rose to $140,800 in 2016 from $108,300 five years earlier.”

Perspective

Economist – A study finds nearly half of jobs are vulnerable to automation – The Data Team 4/24

Worthy Insights / Opinion Pieces / Advice

Economist – The Republican Party is organized around one man – Leaders 4/19

The Irrelevant Investor – How? – Michael Batnick 4/24

  • “How can Netflix be worth nearly as much as Disney?”

Mauldin Economics – China Plays It Cool – John Mauldin 4/20

NYT – We Don’t Need No Education – Paul Krugman 4/23

Pragmatic Capitalism – The Fed is in a Pickle – Cullen Roche 4/24

WP – The craft beer industry’s buzz is wearing off – Rachel Siegel 4/10

  • “A new report by the Brewers Association — a trade association representing small and independent American craft brewers — showed that craft brewers saw a 5% rise in production volume in 2017. Yet with that growth comes an increasingly crowded playing field, leading to more closures of small craft breweries. In 2017, there were nearly 1,000 new brewery openings nationwide and 165 closures — a closing rate of 2.6%. That’s a 42% jump from 2016, when 116 craft breweries closed.”

Markets / Economy

FT – WeWork to test junk bond appetite with $500m sale – Eric Platt, Alexandra Scaggs, and Richard Waters 4/24

  • “WeWork, the lossmaking provider of shared office space, will seek to raise money from debt investors for the first time in a sale that will provide a stern test of sentiment in the junk bond market.”
  • “The $20bn US company has hired more than a dozen banks to pitch a bond sale to US money managers this week, according to five people with knowledge of the planned sale.”
  • “Sales at the company more than doubled to $886m in 2017 from the year before, although its loss also widened to $884m, according to bond documents reviewed by the Financial Times. WeWork said sales had continued to quicken and by last month had reached an annualised pace of between $1.4bn and $1.5bn.”
  • “WeWork has raised nearly $7bn through equity investments over the past seven years. Its ambitions received a big boost in the middle of last year with a $4.4bn injection of cash from SoftBank and the Japanese conglomerate’s Saudi-backed technology fund, laying the ground for more rapid expansion around the world.”
  • “The move by WeWork to tap the $8.8tn US corporate debt market, a vital source of funding for companies, will bring new investor scrutiny to the company at a time when corporate borrowing costs are on the rise.”
  • “The bond offering drew junk labels from the leading US credit rating agencies, underlining the risk of investing in the debt. One person briefed on the sale added that the seven-year bond could price with a yield as low as 7%, although a second added that the final price WeWork pays could be higher.”

Real Estate

WSJ – Daily Shot: US Existing Home Sales 4/24

WSJ – Daily Shot: NAR – US Existing Homes Months Supply 4/24

WSJ – Daily Shot: NY Fed – US Households average probability of moving 4/24

Energy

FT – US shale groups reach self-financing milestone as oil price rises – Ed Crooks and Nicole Bullock 4/23

  • “Since the shale oil boom began a decade ago, exploration and production companies have needed a steady inflow of capital to pay for drilling and completing new wells but thanks to the rise in crude prices, many can now finance themselves.”
  • “From the time the first shale oil test wells were drilled in the US in 2008-09, the industry’s capital expenditure has exceeded its cash from operations, with producers only able to stay in business by attracting hundreds of billions of dollars in financing from bond and share sales and bank loans. From 2008 to 2017, US exploration and production companies raised $293bn from bond sales, according to Dealogic.”
  • “Another factor that has helped producers turn the corner is the continued improvement in the techniques of horizontal drilling and hydraulic fracturing, which have brought costs down sharply.”

FT – Halliburton writes off investment in crisis-hit Venezuela – Ed Crooks 4/23

  • “Halliburton, one of the world’s largest oilfield services groups, wrote off its remaining investment in Venezuela at a cost of $312m on Monday, highlighting the decline of the crisis-hit nation’s oil industry.”
  • “Halliburton said it would continue to operate in the country ‘at a reduced level’, but would be careful about its future exposure. It last year wrote down $647m for late payment by PDVSA, Venezuela’s national oil company, and the fall in the value of a promissory note intended to cover some of those bills.”
  • “Venezuela’s crude production has dropped 30% from 2.15m barrels a day in 2016 to 1.5m b/d last month. It is less than half its level when Hugo Chávez, the former president, was elected in 1998.”
  • “Schlumberger, the world’s largest listed oilfield services group, similarly wrote off its investment in Venezuela at the end of last year, taking a pre-tax write down of $938m. It continues to operate a cash business in the country, but that has continued to decline into this year.”
  • “Paal Kibsgaard, Schlumberger’s chief executive, said Venezuela’s oil production was in ‘free fall’.”
  • “Although the rise in oil prices since last year has offered some help to Venezuela, the benefit has been muted because most of the oil PDVSA produces does not generate cash, according to Francisco Monaldi of the Baker Institute at Rice University.”
  • “He argued in a recent report that of the roughly 1.8m b/d that PDVSA produced last November, 400,000-450,000 b/d were used in the domestic market at a huge loss, while about 500,000-600,000 b/d were committed to repaying loans from China and Russia and owed to joint venture partners.”

Finance

Bloomberg – ECB Seen Delaying QE Exit Decision as Trade Concerns Mount – Alessandro Speciale and Andre Tartar 4/19

WSJ – Daily Shot: US – Germany 2yr Government Bond Spread 4/24

Sports

PBJ – MLB prices climb, but Diamondbacks deemed best value in sport – Patrick O’Grady 4/24

China

WSJ – Daily Shot: IIF Global Debt Monitor – YoY Change In Chinese Sectoral Debt 4/24

Japan

FT – Tokyo struggles with worst hay fever outbreak on record – Robin Harding 4/23