Tag: Retail

August 17, 2017

Perspective

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

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

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

Markets / Economy

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

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

WSJ – Daily Shot: Coach Stock Performance 8/15

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

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

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

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

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

  • Thank goodness for the FAANG stocks

Energy

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

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

Shipping

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

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

August 11, 2017

Perspective

FT – The long and winding road to economic recovery – Claire Manibog and Stephen Foley 8/9

Data Is Beautiful – City maps from Airbnb location ratings – txafer 8/9

Worthy Insights / Opinion Pieces / Advice

Bason Asset Management – Shame, Status and The American Dream – James Osborne 7/24

  • Sometimes less is more.

Bloomberg View – Canada’s Housing Bubble Will Burst – Ben Carlson 6/21

  • “The U.S. housing market peaked in late 2006. Since then, based on this index, U.S. housing prices are still down almost 13% from their peak through the end of 2016. In that same time frame, Canadian housing prices are up 56%.”
  • “From the 2006 peak, it took until late 2012 for real estate in the U.S. to bottom. We’ve since witnessed a 19% recovery from what was a 27% decline nationwide, on average. While the U.S. real estate downturn lasted almost six years, Canada’s housing market experienced just a 7% drawdown that lasted less than a year. And house prices in Canada reclaimed those losses in about a year and a half. Canadian housing has also outpaced its neighbors to the south since the 2012 bottom in U.S. real estate, with a 30% gain in that time.”
  • “To recap: On a real basis, Canadian housing prices experienced a much smaller, shorter decrease in prices during the financial crisis and a much larger, longer increase in prices during the recovery. When you couple this unfathomable rise in housing prices with near-record high household debt-to-income ratios, the Canadian housing bubble starts to look scary should the tide turn.”

Business Insider – Maverick Capital, a $10.5 billion hedge fund, is struggling to make money – Rachael Levy 8/9

  • “The proliferation of capital focused on non-fundamental factors confuses short-term stock price responses, causing investors to question links between price and fundamentals. Flows into instruments that allocate capital through predetermined ratios without regard to current or future fundamentals distort prices in the short term, but such distortions create wonderful opportunities that fundamental investors should be able capitalize upon over a longer-term timeframe.” – Lee Ainslie, Maverick Capital

Markets / Economy

WSJ – Daily Shot: Retailer Stock Market Valuations 8/10

WSJ – Daily Shot: Comex Copper Inventory (short ton) 8/9

  • “The COMEX copper inventories have risen significantly lately. It suggests that perhaps the copper market isn’t as tight as the recent rally may indicate.”

WSJ – Do Businesses Need Foreign Workers? Martha’s Vineyard Is Finding Out – Laura Meckler 8/10

  • “Jamaicans and other foreign workers have long powered the summer economy in the upscale tourist haven of Martha’s Vineyard, cleaning hotel rooms, waiting tables and mixing fudge. This year, many local businesses had to come up with a Plan B.”
  • “Facing a shortage of foreign laborers, local restaurants have reduced hours of operation and pared back menus. Managers are cleaning hotel rooms, laundry is piling up and at least one restaurant is using disposable cups to ease the dishwashers’ load.”
  • “The problem is a scarcity of the H-2B visas used to bring foreign seasonal workers to the U.S. It has affected many resorts and other businesses that depend on such workers, including Alaskan fisheries. Isolated locations such as Martha’s Vineyard—it has a tiny year-round population and is accessible only by ferry or plane—are especially vulnerable.”

WSJ – Dairies’ Fix for Souring Milk Sales: Genetics and Bananas – Mike Cherney and Heather Haddon 8/9

Britain

Economist – How to solve Britain’s housing crisis – 8/3

  • This prescription applies to many other places besides Britain.
  • “What makes Britain’s housing squeeze maddening is that, unlike many other problems, something can easily be done about it. Britain needs to get building. The consensus is that, to keep prices in check, it must put up 300,000 houses a year, double what it erected in 2015-16.”

China

FT – Chinese top official warns economy ‘kidnapped’ by property bubble – Gabriel Wildau 8/10

  • “A top Chinese lawmaker has warned that profiteering by real estate developers is sapping the lifeblood from China’s economy, as authorities make efforts to contain runaway property prices.”
  • “The real estate industry’s excessive prosperity has not only kidnapped local governments but also kidnapped financial institutions — restraining and even harming the development of the real economy, inflating asset bubbles and accumulating debt risk. The biggest problem currently facing the country is how to reduce reliance on real estate.” Yin Zhongqing, deputy director of the finance and economics committee of the National People’s Congress

FT – China targets mobile payments oligopoly with clearing mandate – Gabriel Wildau 8/9

  • Apple is not the only company that must yield to China.
  • “China’s central bank has ordered online payment groups to operate through a centralized clearing house, a move likely to undercut the dominance of Ant Financial and Tencent by forcing them to share valuable transaction data with competitors.”
  • “China is the world leader in mobile payments, with transaction volumes rising nearly fivefold last year to Rmb59tn ($8.8tn), according to iResearch. They are now widely used for everything from high-street shopping to peer-to-peer lending.” 
  • “In addition to generating fees directly, online and mobile payments are a source of valuable data that can be used for such purposes as targeted advertising and credit scoring.” 
  • “Now the People’s Bank of China is requiring all third-party payment companies to channel payments through a new clearing house by next June, according to a document sent to payment companies on August 4 and seen by the Financial Times.” 

FT – Chinese crackdown on dealmakers reflects Xi power play – Lucy Hornby 8/9

  • President Xi, the master of the long game.
  • “For China’s ruling Communist party, its foreign exchange reserves are a symbol of national strength and are a crucial buffer against economic shocks. So the alarming announcement that forex reserves had fallen below $3tn in January marked a shift in political fault lines that is only being felt this summer.”
  • “As more than $1tn left the country over the previous 18 months amid a flurry of large overseas acquisitions, a sense of crisis grew within the party.”
  • “Technocrats in Beijing had already prepared the ground to take action. In December, they had managed to link the phrase ‘national security’ to the concept of financial risk at the annual agenda-setting economic work conference. Backed with the reserves figures, they were poised to strike against what they saw as the leading culprit — the new generation of highly acquisitive private Chinese companies.”
  • “These tensions within the system have exploded into the open in the past two months with the humiliation of some of China’s best-known and most well-connected private companies, which in recent years have acquired high-profile foreign assets such as New York’s Waldorf Astoria Hotel and French leisure company Club Med.”
  • “In an abrupt turn, a group of businessmen once lauded as the international face of China are now derided in state media as the instruments of systemic financial risk. The private sector has been shaken by leaked documents, smears and the detention of China’s brashest businessman.”

NYT – A Missing Tycoon’s Links to China’s Troubled Dalian Wanda – Michael Forsythe 8/10

FT – Dalian Wanda reshuffles $1bn of assets – Emily Feng 8/10

Bloomberg – China Is Taking On the ‘Original Sin’ of Its Mountain of Debt – Emma O’Brien, Eric Lam, Adrian Leung, Jun Luo, Jing Zhao, Helen Sun, Xize Kang, and Vicky Wei 8/8

Economist – China tries to keep foreign rubbish out – 8/3

  • “China dominates international trade in many goods, but few more than waste for recycling. It sucked in more than half the world’s exports of scrap copper and waste paper in 2016, and half of its used plastic. All in all, China spent over $18bn on imports of rubbish last year. America, meanwhile, is an eager supplier. In 2016 nearly a quarter of America’s biggest exporters by volume were recyclers of paper, plastic or metal. Topping the list was America Chung Nam, a California-based supplier of waste paper which last year exported a whopping 333,900 containers, almost all of them to China.”
  • “This may soon change. On July 18th China told the World Trade Organization that by the end of the year, it will no longer accept imports of 24 categories of solid waste as part of a government campaign against yang laji or ‘foreign garbage’. The Ministry of Environmental Protection says restricting such imports will protect the environment and improve public health. But the proposed import ban will disrupt billions of dollars in trade. Recyclers worry that other categories of waste may soon receive the same treatment.”

July 11, 2017

Perspective

Fortune – This Is the Average Pay at Lyft, Uber, Airbnb and More – Erika Fry & Nicolas Rapp 6/27

Worthy Insights / Opinion Pieces / Advice

WSJ – How Fixing Italy’s Banks Is Helping Europe Heal – Paul Davies 7/10

NYT – How the Growth of E-Commerce Is Shifting Retail Jobs – Robert Gebeloff and Karl Russell 7/6

Markets / Economy

WSJ – Tesla Sales Fall to Zero in Hong Kong After Tax Break Is Slashed – Tim Higgins and Charles Rollet 7/9

  • “Tesla Inc.’s sales in Hong Kong came to a standstill after authorities slashed a tax break for electric vehicles on April 1, demonstrating how sensitive the company’s performance can be to government incentive programs.”
  • “Not a single newly purchased Tesla model was registered in Hong Kong in April, according to official data from the city’s Transportation Department analyzed by The Wall Street Journal.”
  • “In March, shortly after the tax change was announced and ahead of the April 1 deadline, 2,939 Tesla vehicles were registered there—almost twice as many as in the last six months of 2016.”
  • “As a result of the new policy, the cost of a basic Tesla Model S four-door car in Hong Kong​ has effectively risen to around $130,000 from less than $75,000.”
  • “Hong Kong’s decision is effective through March 2018, and the government has said it would review the policy before then.”

China

NYT – China’s Wanda Signals Retreat in Debt-Fueled Acquisition Binge – Sui-Lee Wee 7/10

  • “A year ago, the Chinese billionaire Wang Jianlin declared the dominance of his vast entertainment empire, Dalian Wanda Group, boasting that his theme parks were a ‘pack of wolves’ that would defeat the lone ‘tiger’ of Disney’s Shanghai resort.”
  • “Now, Mr. Wang is retreating, in a sign that Wanda could be reaching the limits of its debt-fueled expansion.”
  • “Wanda said on Monday that it would sell the theme parks as part of a $9.3 billion deal that includes 76 hotels and a major chunk of 13 tourism projects. The cash from the deal, with the property developer Sunac China, would be used to pay down debt.”
  • “The deal announced on Monday would help Wanda pay off some of its debt.”
  • “Sunac would pay $4.4 billion for a 91% stake in each of the 13 tourism projects, all in China, and would take over the loans for the projects. Wanda also agreed to sell 76 hotels for $4.9 billion.”
  • “In the deal with Sunac, Wanda would continue to operate all of the projects under the company’s brand name, and it would own fewer underperforming hotels.”
  • About the assets…
  • “…Only four of the 13 theme parks being sold are up and running; most are in the planning stages. Wanda opened its first theme park, an indoor one, in the Chinese city of Wuhan. But it closed after 19 months for ‘upgrades and renovations,’ and it has yet to reopen.”
  • So why would Sunac buy underperforming hotels and theme parks – at a premium? You’ll note that Dalian’s hotel stock (Wanda Hotel) price was up 155% on the news…
  • “I don’t understand this move by Sunac. Where are they getting this endless flow of money?” – Deng Zhihao, a real estate economist with Fineland Assets Management Company based in Guangzhou, China.
  • “’Last year, they were the property developer that bought the most number of properties,’ he added. ‘And this year, they’ve spent a lot of money to save LeEco.’”
  • LeEco is an embattled company with a charismatic founder with grand ambitions but appears to be insolvent (which would result in a $2.2 billion loss to Sunac).