Tag: Real Estate

March 28, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg Gadfly – Users Built Facebook’s Empire, and They Can Crumble It – Nir Kaissar 3/26

FT – It is Venezuela’s crisis that is driving the oil price higher – Nick Butler 3/25

  • “While the Maduro-military alliance holds, output is likely to fall further.”

NYT – Live in a Drainpipe? Five Extreme Ideas to Solve Hong Kong’s Housing Crisis – Austin Ramzy 3/26

NYT – Repeal the Second Amendment – John Paul Stevens (retired associate justice of US Supreme Court) 3/27

NYT – New Leadership Has Not Changed Uber – Steven Hill 3/26

  • “The problem with Uber was never that the chief executive had created a thuggish ‘Game of Thrones’-type culture, as Susan Fowler, an engineer, described it in a blog post. The problem was, and still is, Uber’s business model: Its modus operandi is to subsidize fares and flood streets with its cars to achieve a transportation monopoly. In city after city, this has led to huge increases in traffic congestion, increased carbon emissions and the undermining of public transportation.”
  • “Most customers who love Uber don’t realize that the company subsidizes the cost of many rides. This is likely a major factor in Uber’s annual losses surging from 2.8 billion in 2016 to $4.5 billion in 2017. This seemingly nonsensical approach is actually Uber’s effort to use its deep pockets to mount a predatory price war and shut out the competition. That competition is not only taxis and other ride-sharing companies, but public transportation.”
  • “Ridership on public transportation is down in nearly every major American city, including New York City (which recorded its first ridership dip since 2009). This is hurting the revenue that public transportation needs to sustain itself. Uber passengers and public transportation users alike now find themselves stuck in heavy traffic for far longer because of what’s been called ‘Uber congestion.’ In Manhattan, there are five times as many ridesharing vehicles as yellow taxis, which has caused average speeds to decline by 15% compared with 2010, before Uber.“
  • “Ride-sharing services could potentially add something positive to our transportation options, but only if they are regulated properly.”
  • “First, regulators should limit the number of ride-sharing cars. Traditional taxis already have a sensible limit to minimize congestion. A balance must be found between having enough taxi-type vehicles but not so many that the streets are choked with traffic. Fix NYC, a panel appointed by Gov. Andrew Cuomo of New York, has called for all Ubers, Lyfts and taxis to be outfitted with GPS technology to track congestion and to charge a fee on for-hire vehicles that could help reduce traffic and generate hundreds of millions of dollars for public transportation.”
  • “Second, Uber should be prohibited from subsidizing its fares. It should be required to charge at least the true cost of each ride. If Uber refuses, a ‘fairness fee’ should be added to each fare.”
  • “Third, ride-sharing companies and their vehicles should be required to follow the same laws as traditional taxis, especially in terms of background checks for drivers and insurance requirements.”
  • “Fourth, Uber should be required to share its data with regulators, including information about its drivers and their contact information, so that members of this ‘distributed work force’ can more easily contact one another and organize collectively if they choose.”
  • “Finally, regulations should ensure that Uber treats its drivers fairly. Mr. Khosrowshahi asserts that drivers’ wages are adequate, but according to one study, more than half of Uber drivers earn less than the minimum wage in their state, and some even lose money once the costs of driving are taken into account. That helps explain why, according to Uber’s own internal study, half of its drivers leave after a year.”

WSJ – Turkey Is the One to Watch for Emerging Markets Risk – Richard Barley 3/26

WSJ – How a Tiny Latvian Bank Became a Haven for the World’s Dirty Money – Drew Hinshaw, Patricia Kowsmann, and Ian Talley 3/26

Markets / Economy

WSJ – Libor’s Rise Accelerates, Squeezing Short-Term Borrowers – Ben Eisen and Chelsey Dulaney 3/27

  • “The three-month London interbank offered rate climbed to 2.29% in the U.S. on Monday, its highest since November 2008. Libor measures the cost for banks to lend to one another and is used to set interest rates on roughly $200 trillion in dollar-based financial contracts globally, from corporate loans to home mortgages.”
  • “Libor has been rising for the last 2½ years as the Federal Reserve lifts its key policy rate, but recently the pace has picked up. It has climbed nearly a full percentage point in the last six months—outpacing the Fed—and could rise further with the approaching end of the quarter, typically a time of elevated demand for short-term funds in the banking sector, analysts say.”
  • “Demand for dollars at the end of the first quarter could send Libor up an additional 0.2 percentage point in the coming days, market analysts say, as investors rebalance their portfolios and banks rein in their balance sheets. The end of March also marks the finish of Japan’s fiscal year, potentially compounding the moves as big investors bring money back to Japan.”
  • “Libor has already sprinted ahead of the rates indicated by central bank policies, an acceleration that has baffled economists and traders. That widening gap has alarmed those who watch it as a signal of stress in the financial system. Others have pinned it on a series of technical factors, such as rising short-term debt sales by the U.S. government and new corporate tax policies.”
  • “Other markets that can be tapped for dollars—including through the swaps market and liquidity lines maintained by global central banks—aren’t yet showing a big dollar squeeze.”

Real Estate

The Big Picture – WeWork: Manhattan’s 2nd-biggest Private Office Tenant – Barry Ritholtz 3/27

FT – House prices falling in two-fifths of London postcodes – James Pickford 3/26

  • “House prices are falling in two out of five London postcodes, according to research that underlines the growing divergence between prices in southern English cities and those elsewhere in the UK.”
  • “The average annual rate of price growth in the capital has slowed to 1%, down sharply from 4.3% a year ago, meaning it is at its lowest level since August 2011, according to research by Hometrack, a housing market analyst. This stands in contrast to UK-wide average house price growth of 5.2% in the year to February 2018, up from 4% a year ago.”
  • “Prices are under greatest pressure in central London, where owners of the most expensive types of property began cutting prices in 2015 responding to the impact of higher taxes. In the past year, however, the trend has deepened in areas beyond the prime zones of Westminster and Kensington & Chelsea. The boroughs that saw the greatest drop in value were the City of London, Camden, Southwark, Islington and Wandsworth, according to Hometrack’s research.”
  • “Hometrack is predicting that the number of areas of the capital experiencing falling house prices will multiply during this year as trapped sellers reduce their asking prices to drive through transactions. ‘The net result will be a negative rate of headline price growth for London by the middle of 2018,’ the research said.”
  • “Outside southern England, house prices are more likely to be rising, in some places at a substantial pace. Edinburgh, Liverpool, Leicester, Birmingham and Manchester are adding more than 7% a year to their average house price, Hometrack found, with Leeds, Nottingham and Sheffield pegging rises of 6% or more.”
  • “The laggards in the 20-city index were Aberdeen (down by 7.7%), Cambridge (down by 1.5%) and Oxford (up by just 0.5%).”

NYT – Grocery Wars Turn Small Chains Into Battlefield Casualties – Michael Corkery 3/26

WSJ – Homeowners Ditch Refinancings as Mortgage Rates Rise – Christina Rexrode 3/26

  • “Last year, 37% of mortgage-origination volume was because of refinancings, according to industry research group Inside Mortgage Finance. That is the smallest proportion since 1995, and the number of refinancings is widely expected to shrink again this year. In 2012, refinancings were 72% of originations.”
  • “While purchase activity has climbed steadily from a post-financial-crisis nadir in 2011, growth in 2017 wasn’t enough to offset a $366 billion decline in refinancing activity. The result: The overall mortgage market fell around 12%, to $1.8 trillion, according to Inside Mortgage Finance.”
  • “What’s more, there are fewer homeowners eligible to refinance because of rising rates. The number of borrowers who could benefit from a refinancing is down about 37% from the end of last year, estimates Black Knight Inc., a mortgage-data and technology firm. At 2.67 million potential borrowers, this group is at its smallest since 2008.”
  • “Home-purchase activity has so far been holding up. Sales of previously owned homes in February rose 1.1% from a year earlier, countering worries that a downturn the previous month signaled a peak for the market.”
  • “Still, rising interest rates, a shortage of housing inventory and higher home prices are all long-term threats to purchase activity.”
  • “For refinancings, rising rates are a more immediate worry. Freddie Mac said last week that the average rate on a 30-year fixed-rate mortgage was 4.45%, up from 3.95% at the beginning of the year.”
  • “The Mortgage Bankers Association expects mortgage-purchase volume to grow about 5% in 2018 but refinancing volume to drop 27%. Refinance applications fell 5% in the week ended March 16 from the prior one, according to the group.”

Cryptocurrency / ICOs

Bloomberg – Fewer Americans Hold Cryptocurrencies Than You Probably Think – Olga Kharif 3/16

  • “More than 90% of American adults don’t own cryptocurrencies – and most have a lot of concerns about the coins, a new survey from Finder found.”

Fishing

Bloomberg – Maine’s Lobster Tide Might Be Ebbing – Justin Fox 3/23

  • “The numbers came in earlier this month on Maine’s 2017 lobster harvest. By historical standards, the 110.8 million-pound, $434 million haul was pretty spectacular. But it was a lot lower than 2016’s 132.5 million-pound, $540 million record, and it was another sign that the Great Lobster Boom that has surprised and delighted Maine’s lobster fishermen since the 1990s — and brought lobster rolls to diners from coast to coast — may be giving way to … something else.”
  • “The lobster boom does not seem to be the result of overfishing; Maine’s lobster fishermen figured out a set of rules decades ago that appear to allow them to manage the catch sustainably. There are just lots and lots more lobsters off the coast of Maine than there used to be. Why? In a column last spring, I listed four reasons that I’d heard during a trip to Maine:”
    • “Warmer temperatures in the Gulf of Maine.”
    • “A collapse in the population of cod, which eat young lobsters.”
    • “Reduced incidence of a lobster disease called gaffkemia.”
    • “Increased effort and efficiency on the part of lobstermen, who go farther offshore and can haul in more traps in a day than they used to.”
  • “Given how quickly the lobster harvests grew, though, especially from 2007 through 2012, it’s hard not to wonder whether they might not eventually collapse. They already have in several states farther down the Atlantic coast. Lobster landings were still on the rise as of 2016 (data aren’t available yet for 2017) in New Hampshire and Massachusetts but peaked in Rhode Island in 1999, Connecticut in 1998, New York in 1996 and New Jersey in 1990.”
  • “So that’s some evidence for the warming-ocean-temperatures theory of the lobster boom. This would imply that eventually even the oceans off Maine will get too warm, although it doesn’t give much of a hint as to when.”
  • Canada has been benefiting as well.

 

March 26, 2018

Markets / Economy

FT – IMF warns of mounting debt crisis risk in poor countries – Kate Allen 3/22

  • “The world’s poorest countries are increasing their borrowing at a worrying pace and face the mounting risk of debt crises, the IMF has warned.”
  • “Since 2013, the median ratio of public debt to gross domestic product in low-income countries has risen 13 percentage points to hit 47% in 2017, according to new research by the IMF.”
  • “The research found that 40% of low-income developing countries face ‘significant debt-related challenges’, up from 21% just five years ago.”
  • “Fiscal deficits rose between 2013 and 2017 in nearly three-quarters of the nations the IMF studied, and in nearly half of those cases the deficit increase came despite a decline in investment, an indication that the debt was not being put to productive use economically. “
  • “As a result it is becoming increasingly likely that more poor countries will face a debt crisis, the IMF staff paper said.” 

Real Estate

Bloomberg – The Manhattan Luxury-Home Market Is Screaming: I’m Overpriced! – Oshrat Carmiel 3/23

  • “Homes prices at $4 million or more that went into contract in the first 12 weeks of the year had their asking prices cut by an average of 10%, the most in data going back to 2012, according to Olshan Realty Inc.”

FT – China looks to Reits to ease housing woes – Gabriel Wildau and Yizhen Jia 3/22

  • “Xi’s drive to encourage building of residences for rent opens market worth a potential $2tn.”
  • “Since 2014, 30 quasi-REITs worth Rmb65bn have been issued on the Shanghai and Shenzhen stock exchanges and through private placements, according to the China REITs Alliance, an industry group.” 
  • “But these products trade over the counter, so liquidity is poor. Most are also not accessible to retail investors. Some also differ from true REITs because their yields derive partly from capital appreciation, not only rental income.”
  • “The value of Chinese REITs could reach Rmb4 to Rmb12tn if their share of gross domestic product or of total real estate assets were comparable to the same ratios in the US, according to estimates last year by researchers at Peking university’s Guanghua School of Management.”
  • “But experts say a more active REITs market in China requires action from the tax bureau. The boom in Chinese housing and land prices over the past decade means that absent new policy, older property sold off to a REIT would be subject to large capital gains taxes.”
  • “High property prices also mean that rental yields are low — often less than 3% for commercial real estate and under 1% for residential. Without tax benefits, dividend yields on REITs would be too low to attract investor interest.” 

Environment / Science

BBC News – Plastic patch in Pacific Ocean growing rapidly, study shows – Helen Briggs 3/22

  • “A collection of plastic afloat in the Pacific Ocean is growing rapidly, according to a new scientific estimate.”
  • “Predictions suggest a build-up of about 80,000 tons of plastic in the ‘Great Pacific Garbage Patch’ between California and Hawaii.”
  • “This figure is up to sixteen times higher than previously reported, say international researchers.”
  • “One trawl in the center of the patch had the highest concentration of plastic ever recorded.”

 

March 21, 2018

Perspective

AEIdeas – Creative Destruction, the Uber effect, and the slow death of the NYC taxi cartel – Mark J. Perry 3/17

WP – Toys R Us’s baby problem is everybody’s baby problem – Andrew Van Dam 3/15

  • “There are endless reasons a big-box toy store would collapse during a retail apocalypse — and Toys R Us acknowledged a number of them in its most recent annual filing: the teetering tower of debt incurred by its private-equity owners, competition from Amazon, Walmart and Target.”
  • “They even wrung their hands about app stores, labor costs and potential tariffs raising the costs of the imported goods they sell.”
  • “But one risk stood out. Toys R Us said there just weren’t enough babies…”
  • “It may not have been the biggest existential threat confronting Geoffrey the Giraffe (the store’s mascot), but it’s the one with the broadest implications outside of the worlds of toys and malls.”
  • “Measured as a share of overall population, U.S. births have fallen steadily since the Great Recession. They hit their lowest point on record in 2016 — the most recent year for which the Centers for Disease Control and Prevention has comparable data.”
  • “Even adjusted for the aging population and declining share of women of childbearing age, U.S. fertility rates are at all-time lows.”
  • “That’s problematic for Toys R Us, which also operates the Babies R Us stores. The company claims in its annual report that its income is linked to birthrates, and it appears to be right.”
  • “There are, to be sure, numerous other factors at play. The same economic forces that encourage people to have children may also encourage them to splurge on toys, for example.”
  • “But it’s nonetheless apparent that Toys R Us’s fortunes rise and fall with the population of its target market.”
  • “And that’s why the company’s demise should worry the rest of us. Toys R Us focuses on kids, so it’s feeling the crunch from declining birthrates long before the rest of the economy. But it’s just a matter of time before the trends that toppled the troubled toy maker put the squeeze on businesses that cater to consumers of all ages.”
  • “Eventually, unless the country does something significant to encourage larger families or immigration, that narrowing base of the population pyramid will crawl upward.”
  • “In the end, Toys R Us will just have been the first of many businesses of all descriptions facing the same hard demographic truth: Economic growth is extremely difficult without population growth.“

Worthy Insights / Opinion Pieces / Advice

Bloomberg – How Amazon’s Bottomless Appetite Became Corporate America’s Nightmare – Shira Ovide 3/14

Bloomberg Quint – The World Economy Risks Turning Too Hot to Handle as G-20 Meets – Enda Curran and Rich Miller 3/15

CNN Money – Amazon didn’t kill Toys ‘R’ Us. Here’s what did – Chris Isidore 3/15

Economist – Malaysia’s PM is about to steal an election – Leaders 3/10

  • Impunity…

FactsMaps – US News – U.S. Best States Overall Ranking – 2018

FT – Fresh blood: why everyone fell for Theranos – Andrew Hill 3/18

FT – Saudi Aramco: sand trap – Lex 3/12

  • “Justifying a $2tn valuation for the state oil company requires hard persuasion.”

Maps on the Web – Average ACT score by US State – Reddit 3/19

NYT – Big Sugar Versus Your Body – David Leonhardt 3/11

Markets / Economy

Economist – America’s companies have binged on debt; a reckoning looms 3/8

  • “The total debt of American non-financial corporations as a percentage of GDP has reached a record high of 73.3%”

WalletHub – Credit Card Debt Study: Trends & Insights – Alina Comoreanu 3/8

Real Estate

Business Insider – American homes are more affordable than they’ve been in 40 years – but that could change sooner than you think – Tanza Loudenback 3/19

  • “‘Thanks to low mortgage rates, buying a home is actually more affordable now than in the past 40 years,’ Alexandra Lee, a housing data analyst at Trulia, told Business Insider.”
  • “Mortgage interest rates hit 16.6% in 1981 in response to massive inflation in the US. In 2016, interest rates fell to about 3.5%, and they’re about 4.5% right now.”
  • “Trulia found that the typical household in 1980 could afford only about three-fourths of the median home price, compared with the median household in 2016, which could afford a home 1 1/2 times the median home price.”
  • “Twenty-two US metros crossed the threshold from unaffordable to affordable over the past four decades, according to the data. The markets that are too expensive for the average buyer now, including San Francisco, Seattle, and San Jose, California, were always too expensive.”
  • “Trulia ultimately found that Americans’ homebuying power has strengthened in the past 40 years.”
  • “Take Salt Lake City, for example. From 1990 to 2016, home prices increased 53%, but the affordability index jumped to 131 from 122. That is because interest rates dropped to 3.4% from 10% during that time. Homeownership in Salt Lake City became even more affordable over the 26-year period — and the case appears the same for many of the largest US metros.”
  • “Only the Denver, Miami, and Portland, Oregon, metro areas dropped in affordability during that time, Lee said.”
  • “By the end of 2017, a monthly mortgage payment on the median home in the US required just 15.7% of the typical household income, according to a report by Trulia’s parent company Zillow. Back in the late 1980s and 1990s, a mortgage payment took up 21% of the typical American’s income.”
  • Granted, coming up with a down payment on a house these days is no easy task.

Effect of interest rate rises are starting to bite.

CNBC – Mortgage refinances fall to decade low – Diana Olick 3/14

  • “Interest rates for home loans have risen each week this year, so each week homeowners have had less incentive refinance their mortgages.”
  • “Higher interest rates caused applications to refinance a home loan to fall 2% for the week and 18% from a year ago, when rates were lower. The refinance share of all mortgage applications fell to 40%, the lowest since 2008.”
  • “Housing is more expensive today than it has been in a decade, and a decade ago credit was a lot easier to get. The average monthly mortgage payment is now up nearly 13% from a year ago, according to Realtor.com — a combination of higher home prices and higher interest rates.”

Economist – Asian and European cities compete for the title of most expensive city – The Data Team 3/15

  • “Singapore remains the most expensive city in the world for the fifth year running, according to the latest findings of the Worldwide Cost of Living Survey from The Economist Intelligence Unit.”

FT – WeWork is ‘victim of own success’ as office rivals gather – Aime Williams 3/12

  • “A wave of lease purchases by flexible workspace providers is driving commercial demand in leading cities.”

Honolulu Star Advertiser – Mayor signs bill temporarily banning permits for new ‘monster houses’ – Gordon Y.K. Pang 3/13

  • “Honolulu Mayor Kirk Caldwell signed into law today a bill imposing a moratorium of up to two years on building permits for ‘monster’ houses, giving the city Department of Planning and Permitting time to come up with permanent rules to deal with the growing phenomenon.”
  • “DPP will, for the most part, not approve building permit applications during the moratorium for houses that cover more than seven-tenths of a lot under Bill 110 (2017). For example, a 5,000-square-foot lot could not have a living space that’s 3,500 square feet or larger.”
  • Another instance of a market where housing prices have gone well beyond what local incomes can support. As a result, people come up with ‘work-arounds’ which tend to overburden the local infrastructure and upset neighborhoods, resulting in blunt regulatory reaction. Honolulu is not unique to this problem.

WSJ – The Next Housing Crisis: A Historic Shortage of New Homes – Laura Kusisto 3/18

  • “America is facing a new housing crisis. A decade after an epic construction binge, fewer homes are being built per household than at almost any time in U.S. history.“
  • “Home construction per household a decade after the bust remains near the lowest level in 60 years of record-keeping, according to the Federal Reserve Bank of Kansas City.”
  • “What makes the slump puzzling is that by most other measures, the American economy is booming. Jobs are plentiful, wages are on the rise and the stock market is near record highs. Millennials, the largest generation since the baby boomers, are aging into home ownership.”
  • “A combination of tightened housing regulations, a lack of construction labor and a land shortage in highly prized areas is driving the crisis, according to industry experts.”
  • “Even during the deep recession of the mid-1970s and the downturn in the early 2000s, builders put up significantly more homes per U.S. household than they are constructing now, in the ninth year of an economic expansion. Only at the bottom of the 1981 and 1991 economic downturns were per-household construction levels near what they are now, according to Jordan Rappaport, an economist at the Kansas City Fed. He says the only period when the U.S. might have built fewer homes by population was during World War II.”
  • “The National Association of Home Builders estimates builders will start fewer than 900,000 new homes in 2018, less than the roughly 1.3 million homes needed to keep up with population growth. The overall inventory of new and existing homes for sale hit its lowest level on record in the fourth quarter of 2017, at 1.48 million, according to the National Association of Realtors.”
  • “That, in turn, is pushing up prices at what economists say is an unsustainable pace. The S&P CoreLogic Case-Shiller National Home Price Index rose 6.3% in 2017. That was roughly twice the rate of income growth and three times the rate of inflation.”
  • “Builders cite numerous factors contributing to the construction slump. A decades long push for young people to go to college has driven down trade-school enrollment, depriving builders of skilled labor. Declining numbers of immigrant construction workers have sapped builders of unskilled labor.”
  • “The construction workforce in the U.S. declined to 10.5 million in 2016, from 10.6 million in 2010, when the real-estate market was near bottom, according to an analysis of U.S. Census data by Issi Romem, an economist at BuildZoom, a startup that tracks construction data for building contractors.”
  • “Nationwide, membership in the National Association of Home Builders peaked at 240,000 in 2007, then dropped to 140,000 in 2012, where it has remained throughout the recovery.”
  • “Builders in far-flung exurbs are encountering stiffer resistance from young buyers even as prices ratchet higher for land closer to cities. Economists say that in many large metropolitan areas, suburbanization might simply have reached its limits, as potential buyers increasingly reject long commutes. During the 1950s, buying a home in a new suburb, where land was plentiful and cheap, often meant driving half an hour to a job in the city. Today, commutes from new developments can be several times that long.”
  • “’There’s a tremendous mismatch between the places where people want to live and the places where it’s easiest to build,’ says Edward Glaeser, a professor of economics at Harvard University who studies constraints on housing supply.”
  • “But building remains below historical averages, and economists say it is unlikely to return to those levels before the next recession.”
  • “’It’s hard for me to see on single-family how you can build your way out of this,’ Mr. Rappaport says. ‘Even with these heroic efforts’ to overcome barriers to building new housing, he says, there is little chance ‘that you’re going to get a new stream of single-family homes that can relieve demand.’”
  • “Coastal cities such as San Francisco, Los Angeles, New York and Boston have taken criticism for their restrictive building codes, which make it more difficult to create enough housing to keep up with population growth.”
  • “Even metropolitan areas with more permissive approaches to building are lagging behind their historical construction levels. Housing permits in Memphis, Tenn., were 44% below their historical average in 2017, according to the latest Census figures analyzed by real-estate data firm Trulia, while permits in the Minneapolis metropolitan area were 16% below average.”

Finance

FT – Private equity groups are calling the shots – Javier Espinoza 3/14

  • “In business, the mantra goes, the customer is always right and should get the best deal.”
  • “The opposite is happening in private equity where investors, including large pension funds, endowments, sovereign wealth funds and family money, face unfavorable fund terms and, in all likelihood, lower returns.”
  • “Private equity firms are clearly calling the shots and that is illustrated by the record amount of money they are turning away.”
  • “Huge institutional investors have so much money burning a hole in their pockets (Singapore’s GIC alone has $100bn of assets under management) they are under enormous pressure to find a home for this cash somewhere.”
  • “Hence their willingness to commit their cash to funds even if managers cut or reduce the so-called hurdle rate, which is the return that is guaranteed before a buyout group can claim a share of the profits. The industry standard is a preferred return of 8% on deals.”
  • “Advent International, the Boston and London-based group, raised eyebrows in 2016 when it announced it was closing a mega $13bn buyout fund without offering minimum returns to its investors. Last year, CVC, the former owner of F1, also said it was cutting its hurdle rate from 8% to 6%. The buyout firm also scrapped early-bird discounts given to new investors.”
  • “Rather than take their money and run from unfavorable terms, investors have doubled down on these private equity funds, which raised record amounts of cash in their fastest time ever. Advent had set out to raise $12bn and received more than $20bn of interest from investors. CVC raised €16bn but closed the door on billions more because demand was close to €30bn.”
  • “Rubbing salt into the wound of poorer terms, private equity managers are also warning them that returns should come down.”
  • “’The investors have accepted the idea of lower returns as OK,’ said the head of a private equity group. ‘It used to be that investors would earn 20% net internal rate of returns. Now they are happy with 14% or 15% net internal rate of returns.’”

Cryptocurrency / ICOs

Visual Capitalist – The Rising Problem of Crypto Theft, and How to Protect Yourself – Jeff Desjardins 3/20

Tech

WSJ – The Battery Boost We’ve Been Waiting for Is Only a Few Years Out – Christopher Mims 3/18

Health / Medicine

NYT – How to Stop Eating Sugar – David Leonhardt 3/18

China

Bloomberg – Xi Gives Stark Taiwan Warning in Hands-Off Message to Trump – Keith Zhai, Peter Martin and Dandan Li 3/20

NYT – Hard-Charging Chinese Energy Tycoon Falls From Xi Government’s Graces – Alexandra Stevenson 3/14

  • The tycoon: Ye Jianming. The company: CEFC China Energy.

India

Bloomberg Gadfly – Ambani’s Jio Triple Play Deserves to Upend This Cozy Club – Andy Mukherjee 3/20

Russia

NYT – Russian Election: Videos Show Possible Fraud – Camilla Schick 3/20

  • Did Putin really need the help?…

March 19, 2018

Worthy Insights / Opinion Pieces / Advice

NYT – ‘Testilying’ by Police: A Stubborn Problem – Joseph Goldstein 3/18

Top Down Charts – A Familiar if Ominous Sign in the US IPO Market – Callum Thomas 3/13

Real Estate

WSJ – Daily Shot: John Burns RE Consulting – US Housing Supply Overview 3/15

WSJ – Daily Shot: FRED – US Commercial RE Loans – Percentage Change YoY  3/15

Energy

Bloomberg Businessweek – Was This Oil Giant Smart or Just Lucky? – Kevin Crowley and Javier Blas 3/7

  • “Chevron’s long-ignored acreage in the Permian Basin has made it a shale leader.”

Cryptocurrency / ICOs

Bloomberg – Crypto Advocates Push For Regulatory Guidance at Congressional Hearing – Lily Katz 3/14

Bloomberg – Technology Meant to Make Bitcoin Money Again Is Now Live – Camila Russo 3/15

Automotive

Business Insider – Tesla’s newest rival just highlighted a big problem for the company that no one is talking about – Matthew DeBord 3/10

  • Segmentation.

China

WSJ – China’s Super-Regulator Can’t Kill Shadow Banking – Nathaniel Taplin 3/13

Visual Capitalist – Visualizing China’s Most Ambitious Megaproject – Jeff Desjardins 3/15

Europe

FT – Backlash grows over Chinese deals for Germany’s corporate jewels – Guy Chazan 3/12

Japan

Bloomberg Businessweek – Convenience-Store Squeeze Shows Deflation Dilemma Facing BOJ – Lisa Du and Yuko Takeo 3/5

 

March 12, 2018

Perspective

statista – Proportion Of Female CEOs Is Hugely Overestimated – Niall McCarthy 3/7

Our World in Data – Fertility Rate – Max Roser 12/2/17

WSJ – Daily Shot: OECD – Time spent eating and drinking by Country 3/8

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – The Power of Narrative – Ben Carlson 3/8

Bloomberg Businessweek – Bitcoin Is Ridiculous. Blockchain Is Dangerous. – Paul Ford 3/9

Business Insider – Uber and Lyft drivers are selling candy and snacks in their cars – and it’s indicative of a dark truth – Aine Cain 3/9

Economist – Self-driving cars offer huge benefits-but have a dark side – Leaders 3/1

  • “Policymakers must apply the lessons of the horseless carriage to the driverless car.”

Pragmatic Capitalism – Why is the US Economy Becoming More Stable? – Cullen Roche 3/9

WSJ – Daily Shot: Trump Alienates Allies Needed for a Trade Fight With China – Greg Ip 3/7

Real Estate

WSJ – Mortgage Rates at a Four-Year High Threaten to Roil Housing – Christina Rexrode and Laura Kusisto 3/8

  • “U.S. mortgage rates have hit their highest level since 2014, a new challenge for a housing market that has been central to the economic recovery but remains vulnerable to even modest headwinds.”
  • “The rate for a 30-year fixed-rate mortgage rose to 4.46%, the highest in more than four years and the ninth consecutive week of increases, according to data Thursday from mortgage-finance giant Freddie Mac . At the start of the year, the average rate was 3.95%.”
  • “If the trend persists, it could hamper a sector that represents about 15% of U.S. gross-domestic product. Rising mortgage rates already have crimped refinancing activity and pushed would-be home buyers who are on the margins out of the market as home prices also have risen.”
  • “While the rates remain low by historical standards, millennial buyers, who are often making their first home purchase, could suffer sticker shock. ‘They will be the preponderance of the market purchasing homes over the next 10 years,’ said Ed Robinson, head of the mortgage business at Fifth Third Bancorp. ‘And they’ve never seen 5%’.”
  • “Initially, the housing market often does well when mortgage rates rise. Potential buyers may hurry to complete purchases before rates rise further. Rising rates often signal underlying confidence in the broader economy, which could make some people more apt to buy.”
  • “Historically, there is little correlation between the level of the increases that recently have occurred with mortgage rates and declines in home prices.”
  • “’It takes a pretty big rise in mortgage rates to offset the strength in the economy that causes rates to rise,’ said David Berson, chief economist at Nationwide Insurance and a former chief economist at Fannie Mae.”
  • “Economists expect renters who want to become homeowners will still try to do so, although they may have to look for cheaper homes or make other spending changes. Economists believe mortgage rates would have to rise to roughly 6% before they start to significantly affect borrowers’ decisions about whether to buy a home or what they can afford.”
  • “However, in higher-cost markets, such as New York City and San Francisco, higher rates can have a bigger effect given that loan balances are larger. A 3.5% rate on a $500,000 loan would create a monthly payment of $2,245, according to LendingTree Inc., an online loan information site. At 4.5%, the monthly payment would be $2,533. (That excludes taxes and insurance.)”
  • “Rising rates tend to have a bigger impact on the market for refinancing existing mortgages. The Mortgage Bankers Association expects mortgage-purchase originations to increase about 7% this year. It forecasts the refinancing market, which is smaller, to plunge by nearly 28%, adding to a sharp drop in 2017.”

Finance

WSJ – Brokers to Investors: Your Cash Ain’t Nothin’ But Trash – Jason Zweig 3/9

  • “According to the Financial Industry Regulatory Authority, free credit balances — one partial measure of uninvested cash in brokerage accounts — totaled $350.2 billion at the end of January.”
  • “Assuming the average yield of 0.12% that Crane Data estimates for brokerage sweep accounts, investors would earn an aggregate of only $420 million in income on that money over the next year.”
  • “If, instead, investors shopped around to improve their yield and earned an average of 1% on that cash, they would pocket $3.5 billion in income. Overall, then, the cost of that inertia is roughly $3.1 billion.”
  • “If you don’t shop around for better yields on your cash, you’re handing your broker another 1% a year.”

Cryptocurrency / ICOs

WSJ – Daily Shot: Bitcoin 3/8

WSJ – Daily Shot: Ripple 3/8

Canada

Bloomberg – Toronto Home Builders Just Had Their Busiest February Since 1948 – Theophilos Argitis 3/8

Bloomberg – Loonie Slide Fails to Unsettle Forecasts for 2018 Outperformance – Anooja Debnath 3/8

WSJ – Daily Shot: Canada Housing Starts 3/8

  • “Canadian housing starts exceeded expectations and continue to trend higher.”

China

Bloomberg – China’s War on Pollution Will Change the World – Jeff Kearns, Hannah Dormido, and Alyssa McDonald 3/9

  • “China is cracking down on pollution like never before, with new green policies so hard-hitting and extensive they can be felt across the world, transforming everything from electric vehicle demand to commodities markets.”
  • “Four decades of breakneck economic growth turned China into the world’s biggest carbon emitter. But now the government is trying to change that without damaging the economy—and perhaps even use its green policies to become a leader in technological innovation.”
  • “China’s air pollution is so extreme that in 2015, independent research group Berkeley Earth estimated it contributed to 1.6 million deaths per year in the country.”
  • “The smog is heaviest in northern industrial provinces such as Shanxi, the dominant coal mining region, and steel-producing Hebei. Emissions there contribute to the planet’s largest mass of PM 2.5 air pollution—the particles which pose the greatest health risks because they can become lodged in the lungs. It can stretch from Mongolia to the Yellow Sea and often as far as South Korea.”
  • “The country had become the world’s No.1 carbon dioxide emitter as it rose to dominate global exports, a process which began several decades ago but got its biggest lift with World Trade Organization entry in 2001. Emissions have started to fall again.”
  • “The government’s war on air pollution fits neatly with another goal: domination of the global electric-vehicle industry. Elon Musk’s Tesla Inc. might be the best-known name, but China has been the global leader in EV sales since 2015, and is aiming for 7 million annual sales by 2025.”
  • “To get there, it’s subsidizing manufacturers and tightening regulation around traditional fossil-fuel powered cars.”
  • “Worldwide, solar panel prices are plunging—allowing a faster shift away from carbon—thanks to the sheer scale of China’s clean-energy investment. It’s spending more than twice as much as the U.S. Two-thirds of solar panels are produced in China, BNEF (Bloomberg New Energy Finance) estimates, and it’s home to global leaders, including JinkoSolar Holding Co. and Yingli Green Energy Holding Co.”
  • “But China isn’t stopping there. As well as wind and solar, it’s exploring frontier clean energy technologies like hydrogen as an alternative to coal.”
  • “The trend towards clean energy is poised to keep gathering steam worldwide. BNEF projects global investment in new power generation capacity will exceed $10 trillion between 2017 and 2040. Of this, about 72% is projected to go toward renewable energy, roughly evenly split between wind and solar.”
  • “Five years ago, Beijing’s ‘airpocalypse’ unleashed criticism of the government so searing that even Chinese state media joined in. Last year, the capital’s average daily concentration of PM2.5 particles was almost a third lower than in 2015, compared with declines of about a tenth for some other major cities.”
  • “The turnaround isn’t just limited to improving air quality. China has stopped accepting shiploads of other countries’ plastic and paper trash, a response to public concern over pollution and a decreased need for scrap materials.”

India

Bloomberg Quint – Bond Trading Tumbles in India as Banks Stare at $3 Billion Loss – Subhadip Sircar 3/9

  • “If the RBI’s (Reserve Bank of India) reluctance to play the role of savior is any indication, it looks unlikely that Indian bond traders will see their predicament end soon.”

March 8, 2018

If you were only to read one thing…

FT Alphaville – China’s household debt problem – Matthew C Klein 3/6

  • “The rapidity and size of China’s debt boom in the past decade has been almost entirely without precedent. The few precedents that do exist — Japan in the 1980s, the US in the 1920s — are not encouraging.”
  • “Most coverage has rightly focused on China’s corporate sector, particularly the debts that state-owned enterprises owe to the big four state-owned banks. After all, these liabilities constitute the biggest bulk of the total debt outstanding, and also explain most of the total growth in Chinese debt since the mid-2000s.”
  • “Chinese households, however, are quickly catching up. This is bad news.”
  • “The simple story of China’s debt boom is that government-backed companies borrow from government-controlled banks to pay for wasteful investments to support jobs and other political objectives. This creates lots of problems for China today and in the future, but it does have one virtue: the losses from centralized credit allocation can be distributed over a broad population over a long period of time.”
  • “Household debt is different. Borrowers are widely dispersed and lack political power. The lenders are often newer finance companies or loan sharks. Worst of all, there is essentially zero chance that additional household borrowing pays for productive investment. Some of China’s additional infrastructure and manufacturing capacity may prove valuable one day. Household debt probably won’t. Atif Mian and Amir Sufi have ably shown that increases in household borrowing tend to predict slower income growth and higher joblessness.”
  • “This chart is therefore cause for concern:”
  • “As of mid-2017, Chinese households had debts worth about 106% of their disposable incomes. For perspective, Americans currently have debts worth about 105% of their disposable incomes, on average. The difference is that American indebtedness has been basically flat the past few years after steady declines since 2007.”
  • “Chinese households have been experiencing rapid income growth by rich-country standards for a long time, but their debts have grown far faster:”
  • “Since the start of 2007, Chinese disposable household income has grown about 12% each year on average, while Chinese household debt has grown about 23% each year on average. The cumulative effect is that (nominal) income has slightly more than tripled but debts have grown by nearly a factor of nine. The mismatch has been getting worse recently, as can be seen in the kink in the pink line towards the end.”
  • “All this is finally starting to affect the aggregate debt numbers. Household debt in China is still small relative to the total — about 18% as of mid-2017 — but household borrowers are now responsible for about one third of the growth in total nonfinancial debt:”
  • “The problem is that households cannot service their debts out of GDP. Instead they have to rely on their meagre incomes. Since 2007 the share of Chinese national output going to households has ranged from as high as 46% to as low as 42% of GDP. (The rest of China’s national income is mostly captured by government-controlled enterprises and their elite managers.) The household share of income has dropped by about 1 percentage point just in 2017:”
  • “For comparison, disposable income in the US has tended to hover between 71% and 76% of GDP over the past few decades.”
  • “The trick for Beijing now is to bring non-productive investment down as rapidly as it can without causing unemployment to rise to dangerous levels. Because it has proven difficult to replace non-productive investment with productive investment (and, I have long argued, unrealistic even to expect it could happen), the only way to do so is to replace it with consumption. But levered consumption obviously cannot solve the problem of rapid debt growth, so rising consumption must be driven by rising household income, even as declining investment causes workers on investment projects to be fired. In the end this may be politically a difficult problem, but economically it is just an arithmetic problem about wealth reallocation.” – Michael Pettis

Perspective

CNBC – 42% of Americans are at risk of retiring broke – Jessica Dickler 3/6

© GOBankingRates

US Census Bureau – Irish-American Heritage Month and St. Patrick’s Day 2/6

Worthy Insights / Opinion Pieces / Advice

Business Insider – Underpaying drivers is ‘essential’ to Uber’s business model, according to a new study on low wages – Shona Ghosh 3/7

Economist – How the West got China wrong – Leaders 3/1

  • “It bet that China would head towards democracy and the market economy. The gamble has failed.”

FT – Forget flu, it’s time for your fake-news jab – Hannah Kuchler 3/6

  • “News literacy should be taught like sex and drugs education, to protect individuals and society as a whole.”

Medium – A Lack of Clarity is The Biggest Inhibitor of Progress Towards Your Goals – Srinivas Rao 3/5

Real Estate

WSJ – Daily Shot: Cresset Wealth Advisors – US Housing Price Change from Pre-Crisis Peak 3/7

WSJ – New York Housing Is Getting (Gasp!) More Affordable – Josh Barbanel 3/7

  • “Housing costs are taking a smaller bite out of the typical household’s monthly budget, according to a new U.S. Census Bureau survey that is conducted every three years. The survey also shows a record amount of new housing and the third-highest rental-vacancy rate since the bureau’s first survey in 1965.”

WSJ – That Much Prophesied Commercial Property Bust Still Hasn’t Happened – Esther Fung 3/6

  • “The delinquency rate for securitized loans in the commercial real-estate industry has dropped for eight consecutive months, defying expectations in recent years of a wave of defaults.”
  • “According to real-estate data provider Trepp LLC, the delinquency rate for real-estate loans in commercial mortgage-backed securities clocked in at 4.51% in February, down from 5.31% in the same period a year earlier. The rate hit an all-time high of 10.34% in July 2012.”
  • “Investors had been expecting an increase in defaults in 2016 and 2017 as the large volume of CMBS packaged during the 2006 to 2007 period reached maturity. But rising real-estate values, low interest rates and a surge of debt capital from insurers and other sources have allowed property owners to refinance or restructure their debts.”

Yahoo Finance – Foursquare CEO: There are 2 types of malls that are seeing growth – Melody Hahm 3/6

  • “While consumers are getting lured online by cost savings and the convenience factor, there’s still ample data on foot traffic into physical stores, said Foursquare CEO Jeff Glueck. In fact, he’s found that the rise in online shopping has largely affected middle-market malls. Malls serving high-end and low-end customers are actually seeing growth.”

Finance

WSJ – The New ID Theft: Millions of Credit Applicants Who Don’t Exist – Peter Rudegeair and AnnaMaria Andriotis 3/6

Cryptocurrency / ICOs

Bloomberg – Bitcoin Dives After SEC Says Crypto Platforms Must Be Registered – Camila Russo and Lily Katz 3/7

Construction

WSJ – Daily Shot: Change in Construction Producer Price Index 3/7

  • “US construction firms continue to struggle with rising materials costs. Higher steel prices will exacerbate the problem, especially for commercial property developers.”

Asia – excluding China and Japan

WSJ – In China’s Shadow, Communist Vietnam Links Arms With Old Enemy, the U.S. – Jake Maxwell Watts 3/2

China

WSJ – China’s Financial Reach Leaves Eight Countries Vulnerable, Study Finds – Josh Zumbrum and Jon Emont 3/4

Europe

WSJ – Daily Shot: FRED – European Central Bank Balance Sheet 3/7

Puerto Rico

WP – Exodus from Puerto Rico grows as island struggles to rebound from Hurricane Maria – Arelis R. Hernandez 3/6

March 7, 2018

Perspective

Bloomberg Businessweek – Asian Cities Dominate Expat Salary Rankings – Andy Hoffman and Zoe Schneeweiss 2/26

US Census Bureau – Stats for Stories – Academy Awards 3/4

Worthy Insights / Opinion Pieces / Advice

Bloomberg Businessweek – Anbang Out With a Whimper – Nisha Gopalan 2/22

FT – How the Middle East is sowing seeds of a second Arab spring – Andrew England and Heba Saleh 3/4

NYT – State Dept. Was Granted $120 Million to Fight Russian Meddling. It Has Spent $0. – Gardiner Harris 3/4

Markets / Economy

Bloomberg Businessweek – KFC’s Big Screw-Up Left Restaurants Without Chicken – Christopher Jasper and Eric Pfanner 2/28

WSJ – Big Banks Enter Branch Warfare – Aaron Back 3/5

  • “Banks are entering a new period of growth, bolstered by healthy capital levels, less burdensome regulation and higher interest rates. Branch openings will remain a key competitive tactic for banks. As for Wells Fargo, with the Federal Reserve capping its growth and new sales controversies still emerging, it looks like a sitting duck to rivals.”

Real Estate

WSJ – Daily Shot: BofAML – Genworth Mortgage Insurance: US First-time homebuyers 3/6

WSJ – Daily Shot: BofAML – NAR: US Home Affordability and Mortgage Payment Components 3/6

WSJ – Daily Shot: John Burns RE Consulting – Home Price Relative Values 3/6

Finance

WSJ – Daily Shot: John Burns RE Consulting – Changes in American Debt 3/6

Environment / Science

Economist – The known unknowns of plastic pollution 3/3

Economist – Only 7% of the world’s plastic is recycled – Daily Chart 3/6

WEF – The Arctic is sending us a powerful message about climate change. It’s time for us to listen – Jennifer Francis, Jeremy Wilkinson, and Gail Whiteman 3/5

Automotive

Bloomberg Businessweek – The Car of the Future Will Sell Your Data – Gabrielle Coppola and David Welch 2/20

  • “As smarter vehicles become troves of personal information, get ready for coupon offers at the next stoplight.”

China

WSJ – China Spends More on Domestic Security as Xi’s Powers Grow – Josh Chin 3/6

South America

Bloomberg – Venezuelans, Go Home: Xenophobia Haunts Refugees – Ezra Fieser and Matthew Bristow 3/5

March 6, 2018

Perspective

FT – Shadow banking grows to more than $45tn assets globally – Caroline Binham 3/5

  • “’Shadow banking’ grew by nearly 8% globally to more than $45tn on a conservative measure after international rule makers were able to include detailed data from China and Luxembourg for the first time.”
  • “Shadow banking — the parts of the financial system that perform bank-like functions such as lending but do not have the same safeguards — accounted for 13% of total global financial assets, according to the Financial Stability Board, the international group of policymakers and regulators that makes recommendations to the G20.”
  • “The report covers 2016 figures. But since then China has launched a continuing crackdown on its shadow-banking sector.”
  • “China contributed $7tn, or 15.5%, of the $45tn assets comprising the FSB’s conservative definition of shadow banking, while Luxembourg contributed $3.2tn, or 7.2%.”
  • “But defining shadow banking can be a slippery business. The FSB’s exercise starts with looking at the assets of anything that is not a bank, including pension funds, insurers, and ‘other financial institutions‘, or OFIs. That wider ecosystem accounts for $160tn assets worldwide, compared with $340tn total financial assets globally.”
  • “Meanwhile, OFIs grew by 8% to $99tn; a faster level than banks, insurers and pension funds. OFIs now account for 30% of the entire financial system’s assets; the highest level since 2002.”

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – The Winners Write the History Books – Ben Carlson 3/4

  • “Coming up with explanations for past successes is easy but figuring out who the winners will be going forward never is.”

FT – Venezuela is the one to watch on oil – Nick Butler 3/4

  • “This is Opec’s most unstable country and Maduro could escalate the dispute with Guyana.”

FT – Reports of oil demand’s death have been greatly exaggerated – Chris Midgley 3/2

MIT Technology Review – If you’re so smart, why aren’t you rich? Turns out it’s just chance. – Emerging Technology from the arXiv 3/1

  • “The most successful people are not the most talented, just the luckiest, a new computer model of wealth creation confirms. Taking that into account can maximize return on many kinds of investment.”

Markets / Economy

WSJ – Credit-Card Losses Surge at Small Banks – AnnaMaria Andriotis 3/4

  • “Concerns have been mounting in the broader credit-card industry about the recent trend of rising delinquencies. While overall card losses are still relatively low—below the historical average of the last 30 years, for instance—they’ve been slowly climbing in the last two years.”
  • “But they’ve especially surged at smaller banks, those outside the 100 largest by assets that have less than around $10.4 billion in assets. There, the average charge-off rate is near an eight-year high, while the 3.5% loss rate at large banks remains well below the 10.6% seen in 2010.”

Real Estate

MarketWatch – Over a million Americans may have just lost their shot at refinancing – Andrea Riquier 3/5

  • “Approximately 1.4 million Americans lost the interest rate incentive to refinance their mortgages in the first six weeks of 2018, according to an analysis from real estate data provider Black Knight.”
  • “The benchmark 30-year fixed-rate mortgage averaged 4.43% during the week ending March 1, according to Freddie Mac’s weekly survey. That was up three basis points from the prior week and leaves rates nearly half-a-percentage point higher than the level at which they started the year.”

Automotive

NYT – California Scraps Safety Driver Rules for Self-Driving Cars – Daisuke Wakabayashi 2/26

  • “The state’s Department of Motor Vehicles said Monday that it was eliminating a requirement for autonomous vehicles to have a person in the driver’s seat to take over in the event of an emergency. The new rule goes into effect on April 2.”

China

FT – China hedge funds suffer in debt crackdown – Gabriel Wildau and Yizhen Jia 3/4

Japan

FT – Yen strengthening and trade rhetoric hit Japan exporters – Leo Lewis 3/4

  • “Currency jumps after Kuroda hints BOJ may exit its massive stimulus in 2019.”

WSJ – Daily Shot: USD / JPY Inverted) 3/4

WSJ – Daily Shot: Nikkei 225 3/4

 

March 2, 2018

Perspective

Economist – The hidden cost of congestion – Daily Chart 2/28

  • “In rich countries, city-dwellers lose nearly $1,000 a year while sitting in traffic.”

Tax Foundation – Sources of Personal Income 2015 Update – Erica York 2/27

Visual Capitalist – The World as 100 People over the last two centuries – Jeff Desjardins 2/28

WEF – These will be the world’s most populated countries by 2100 – Rob Smith 2/28

Worthy Insights / Opinion Pieces / Advice

Economist – Black Americans are over-represented in media portrayals of poverty – C.K. 2/20

  • “The poverty rate amongst black Americans, at 22%, is higher than the American average of 13%. But black people make up only 9m of the 41m poor Americans.”

FT – Millennials poorer than previous generations, data show – Sarah O’Conner 2/23

  • “Stagnant wages and rising house prices hit disposable income levels.”

NYT – Is Bitcoin a Waste of Electricity, or Something Worse? – Binyamin Appelbaum 2/28

  • “Money is supposed to be a means of buying things. Now, the nation’s hottest investment is buying money. And the investment rush is raising questions about whether one reason for the slow pace of economic growth in recent years is that the nation is busy distracting itself. While Bitcoin mining may not be labor intensive, it diverts time, energy and capital from other, more productive activities that economists say could fuel faster growth.”
  • “By a wide range of measures, America has a productivity problem. The economy is growing slowly, and almost 20% of adults in their prime working years are neither working nor trying to find work. Americans who do have jobs are less likely to start their own companies. Even the most basic kind of production is in decline. Americans are having less sex and making fewer babies.”

Real Estate

PBN – Hawaii homebuyers top nation with highest mortgage debt-to-income ratio – Janis Magin 2/28

  • “Homebuyers in Honolulu have the highest mortgage debt-to-income ratio in the nation, while homebuyers on Maui have a ratio that’s third-highest in the U.S., topped only by San Jose in California’s Silicon Valley, according to a report by the personal finance company SmartAsset.”
  • “Homebuyers in the Honolulu metropolitan area have mortgages worth 3.959 times their annual income, on average, according to an analysis of data from the Consumer Financial Protection Bureau.” 
  • “The data showed that Honolulu homebuyers have an average income of $131,639 and that the average mortgage is for $521,201.”
  • “Maui homebuyers in the Kahului-Wailuku-Lahaina metro area have an average income of $131,681, and the average mortgage there is $468,597, putting their mortgage-to-income ratio at 3.559.”
  • “By contrast, homebuyers in San Jose have an average income of $207,062 and an average mortgage of $740,693, giving them a ratio of 3.577.”
  • “California had 17 of the top 25 cities with the largest mortgage-to-income ratios on the list, while Hawaii had two of the top three.“
  • “Nationally, the average mortgage-to-income ratio was 2.119.”

WSJ – Retailers Post Strong Numbers – And Mall Shares Keep Falling – Esther Fung 2/27

  • “Prospect of higher interest rates a worry to shopping mall REIT investors.”
  • “While mall landlords generally have shown they are able to keep occupancy levels buoyant, there are growing concerns about pressure on rents and higher capital expenditures as they look to attract and retain tenants, many of which are shrinking their store footprints.”
  • “Recent comments by Starbucks Corp. Executive Chairman and founder Howard Schultz that he expects rents to fall also weighed on the retail property sector Tuesday.”
  • “’Over the last few weeks I have been in a number of U.S. cities and observed firsthand the abundance of empty storefronts across the country, in prime A1 locations,’ Mr. Schultz said in an email to Starbucks senior leadership team on Sunday.”
  • “’We are at a major inflection point as landlords across the country will be forced (sooner than later) to permanently lower rent rates to adjust to the ‘new norm’ as a result of the acute shift away from traditional brick-and-mortar retailing to e-commerce,’ he added.”

Energy

WSJ – Daily Shot: US Total Crude Oil Production 2/23

Finance

Bloomberg – Investing in Index Funds Is No Longer Passive – Dani Burger 2/27

  • “Passive has gotten so large that it’s killed everything in its path — including itself. Welcome to the ‘Passive Singularity‘.”
  • “There are now so many indexes that putting your money in an index-tracking fund is a move requiring an active decision, according to researchers at Sanford C Bernstein & Co. The industry’s growth has even forced active managers to focus on selecting indexes themselves — be that to invest in, or to benchmark against.”
  • “It’s the latest broadside from Bernstein’s team, which in 2016 labeled passive investing ‘worse than Marxism’. Investors so far aren’t paying heed: passive mutual funds and ETFs absorbed $692 billion last year, compared to $45 billion in outflows for active funds, according to data compiled Bloomberg Intelligence.”
  • “The Bernstein strategists base their conclusions around the millions of indexes in existence, which far surpass the number of single securities. Do a little math and the madness is clear: with 3,000 easily-investable stocks, the number of possible combinations to turn into an index is a Googol (that number, written out, would be 1 followed by 100 zeros.)”
  • “With nearly half of equity assets managed passively in the U.S., there’s no sign that investors will stop gravitating toward cheaper, index-tracking products. Bernstein’s new research wrestles with a world where passive is larger than ever, and active managers have to fight for the trust of their clients. The team concedes that ‘passive investing has been a great force for democratizing access to capital markets and reducing the costs to society of managing assets’.”
  • “But a massive bull market rally across equities and debt markets has left many investors blind to the risks, which smart asset allocation can help to mitigate, Bernstein said.”
  • “In January, investors added $25 billion to active ETFs and mutual funds while allocating $103 billion to passive vehicles, data from Bloomberg Intelligence show.”
  • “’By all means, investors should save money on implementation by using passive vehicles as part of their allocation,’ the strategists wrote. ‘But the myth of purely passive investment will be exposed by a low-return world.’”

Cryptocurrency / ICOs

WSJ – Daily Shot: Bitcoin 2/28

  • “Bitcoin has been much less volatile in the past few days.”

Health / Medicine

Our World in Data – Causes of Death – Hannah Ritchie and Max Roser Feb. 2018

Construction

WSJ – With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices – Benjamin Parkin 3/1

  • “A lumber shortage has pushed prices to record highs as builders stock up for what is expected to be one of the busiest construction seasons in years.”
  • “Builders say the higher lumber costs are making homes more expensive. Lumber prices started rising last year after fires destroyed prime forests and a trade dispute between the U.S. and Canada restricted supplies. Now a shortage of railcars and trucks is forcing builders to pay even more.”

  • “Prices are rising as lumber yards try to stock up ahead of what looks likely to be a busy building season this spring. A strong economy and tight supply of houses are heating up the home-building market. The number of new units under construction in the U.S. rose almost 10% in January, the Commerce Department said, as strong demand kept builders working through the winter. Permits for new homes, a sign of anticipated construction, also rose.”
  • “Material prices now rival labor shortages as builders’ main concerns, a National Association of Home Builders survey showed in January. Prices for common building varieties like spruce and southern pine are at or near records, according to price-tracking publication Random Lengths. March-dated lumber futures at the Chicago Mercantile Exchange hit a record of $532.60 per 1,000 board feet last week after climbing more than 50% in 14 months.”
  • “That run-up began with a trade dispute between the U.S. and Canada, which provides about a third of U.S. timber, leaving many dealers hesitant to restock at elevated prices. The Trump administration eventually instituted tariffs of 20% or more on Canadian sawmills.”
  • “Problems mounted. The worst wildfires on record hit Canada’s Pacific coast. Hurricane Irma temporarily closed mills in the forests of Florida and Georgia. And then came a shortage of railcars and trucks to transport timber from forests in places like the Pacific Northwest. Rates for flatbed trucks rose 24% in January from a year earlier, according to DAT Solutions LLC.”

February 27, 2018

Perspective

Visual Capitalist – How Money is Spent by Different Income Groups – Jeff Desjardins 2/25

WSJ – Daily Shot: U.S. Racial / Ethnic Demographics 2/26

WEF – Business Insider: Gun control in four countries around the world – Chris Weller 2/21

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Now & Then – Ben Carlson 2/25

Bloomberg Businessweek – In Exile, Bannon Sounds the #MeToo Alarm – Joshua Green 2/13

  • “He sees female empowerment as the next great political backlash, which means trouble for Republicans.”

Economist – Why Cape Town is running out of water 2/15

  • “The politics of drought.”

The Registry – Is the 1031 Exchange Panacea or Placebo? – John McNellis 2/26

Markets / Economy

WSJ – Have We Seen Peak Prices for Smartphones – Dan Gallagher 2/25

WSJ – Playing With $100 Billion, Warren Buffett Is Giant Trader of U.S. Treasury Bills – Nicole Friedman and Daniel Kruger 2/23

Real Estate

FT – JPMorgan plans to build massive HQ tower in New York’s Park Ave – Ben McLannahan 2/21

  • “JPMorgan Chase has given a big boost to the old business heart of midtown Manhattan, agreeing a deal to tear down its 60-year-old Park Avenue headquarters and replace it with one of the tallest towers in New York City.”
  • “The biggest US bank by assets had been considering a move from its 270 Park Avenue location to the west side of Manhattan, as an anchor tenant of a new development known as Hudson Yards. But on Wednesday the bank said that it had struck a deal with Mayor Bill de Blasio to stay put, moving staff from several buildings in the Park Avenue area into a new, 2.5m sq ft tower.” 
  • “At 70 to 75 floors, it should be the tallest bank building in the country upon completion in 2024, topping Bank of America’s 55-floor tower a few streets away, on the north-west corner of Bryant Park. It will also surpass BofA’s 60-floor headquarters in Charlotte, North Carolina, which looms over the 42-floor Wells Fargo Tower.” 
  • “Stuart Saft, head of the New York real estate practice at Holland & Knight, described the deal as a ‘fabulous’ one for midtown Manhattan, likening the threat from Hudson Yards to the development of Canary Wharf in London in the late 1980s. Already, white-shoe law firms such as Milbank, Tweed, Hadley & McCloy and Boies Schiller Flexner have agreed to move to the complex emerging by the Hudson River.” 
  • “JPMorgan will expand its floor area by buying unused development credits, known as ‘air rights’, from landmark properties in the area such as St Patrick’s Cathedral, St Bartholomew’s Church and Central Synagogue.”

SF Chronicle – Google’s Bay Area real estate empire equivalent to 14 Salesforce towers – Wendy Lee 2/23

WSJ – Tough Start for Housing – Justin Lahart 2/21

  • “Homes sales slowed in January, even before higher rates and the tax law hit the market.”

Finance

FT – Private equity ‘secondaries’ deals hit record $58bn – Chris Flood 2/25

FT – Blockchain ‘could save asset managers $2.7bn a year’ – Attracta Mooney 2/21

  • “Blockchain could save asset managers $2.7bn a year if the investment industry shunned the laborious manual practices involved in buying and selling funds in favor of using online ledger technology, according to research published on Thursday.”
  • “Technology company Calastone said blockchain, which is a giant online ledger, could revolutionize the processes involved in buying and selling funds, generating large savings for investors in the process.”
  • “It estimated that based on daily trade volumes of funds in the UK, Ireland, Luxembourg, Hong Kong, Singapore, Taiwan and Australia, £1.9bn — or $2.7bn — in savings was possible.”
  • “Earlier this year, BNP Paribas Asset Management said it had successfully completed a full end-to-end fund transaction test using blockchain technology. The project involved a tie-up between BNP Paribas Securities Services’ blockchain program, Fund Link, and FundsDLT, a blockchain-based decentralized platform for fund transaction processing.”

WSJ – Daily Shot: Goldman Sachs – ICOs outpacing Venture Capital 2/26

Asia – excluding China and Japan

FT – Top Indonesian bank eyes $50bn of assets stashed in Singapore – Wataru Suzuki 2/25

  • “Indonesians declared more than 750tn rupiah ($52.5bn) worth of assets in Singapore during Indonesia’s tax amnesty program — which gave immunity from prosecution to those who came clean about untaxed wealth and paid a small penalty — ended last March. That is more than the combined total they declared in the next four top destinations — British Virgin Islands, Hong Kong, Cayman Islands and Australia.”

China

Economist – China is trying new ways of skimming housing-market froth 2/15

  • “The party wants people to rent.”

FT – Chinese embrace digital red envelopes for lunar new year – Louise Lucas 2/21

  • “Tencent, a Chinese technology group with an equity value greater than Facebook’s, said 768m people sent and received hongbao, the red packets stuffed with cash, over Weixin Pay, its third-party payments business, during the six-day holiday period. Typically people will hand out scores or even hundreds of hongbao: according to Tencent, one person sent 2,723 while another received 3,429.”

South America

Economist – Fending off the flood from Venezuela 2/17

  • “The rise in migration has alarmed Latin American governments.”