Tag: Smartphones

April 20, 2018

If you were only to read one thing…

WP – Too Many Men – Simon Denyer and Annie Gowen 4/18

  • “Nothing like this has happened in human history. A combination of cultural preferences, government decree and modern medical technology in the world’s two largest countries has created a gender imbalance on a continental scale. Men outnumber women by 70 million in China and India.”
  • “The consequences of having too many men, now coming of age, are far-reaching: Beyond an epidemic of loneliness, the imbalance distorts labor markets, drives up savings rates in China and drives down consumption, artificially inflates certain property values, and parallels increases in violent crime, trafficking or prostitution in a growing number of locations.”
  • “Those consequences are not confined to China and India, but reach deep into their Asian neighbors and distort the economies of Europe and the Americas, as well. Barely recognized, the ramifications of too many men are only starting to come into sight.”
  • “’In the future, there will be millions of men who can’t marry, and that could pose a very big risk to society,’ warns Li Shuzhuo, a leading demographer at Xi’an Jiaotong University.”
  • “Out of China’s population of 1.4 billion, there are nearly 34 million more males than females — the equivalent of almost the entire population of California, or Poland, who will never find wives and only rarely have sex. China’s official one-child policy, in effect from 1979 to 2015, was a huge factor in creating this imbalance, as millions of couples were determined that their child should be a son.”
  • “India, a country that has a deeply held preference for sons and male heirs, has an excess of 37 million males, according to its most recent census. The number of newborn female babies compared with males has continued to plummet, even as the country grows more developed and prosperous. The imbalance creates a surplus of bachelors and exacerbates human trafficking, both for brides and, possibly, prostitution. Officials attribute this to the advent of sex-selective technology in the last 30 years, which is now banned but still in widespread practice.”
  • “In the two countries, 50 million excess males are under age 20.”

Perspective

WSJ – Daily Shot: howmuch.net – Home Insurance Cost in Every State 4/19

WSJ – Daily Shot: howmuch.net – Health Insurance Rates by State 4/19

Worthy Insights / Opinion Pieces / Advice

BuzzFeed News – This PSA About Fake News From Barack Obama Is Not What It Appears – David Mack 4/17

  • “Oscar-winning filmmaker Jordan Peele has a warning for viewers about trusting material they encounter online.”

Visual Capitalist – America: An Economic Snapshot of Every U.S. State – Jeff Desjardins 4/19

Wolf Street – Subprime Carmageddon: Specialized Lenders Begin to Collapse – Wolf Richter 4/8

  • “The subprime auto lending business is highly cyclical. For example, according to Bloomberg, citing Moody’s data, 41 subprime lenders filed for bankruptcy during the subprime auto loan bust between 1997 and 1999.”
  • “But unlike subprime home mortgages, subprime auto loans won’t take down the financial system. About 25% of the auto loans written are subprime. For new cars, it’s about 20%. Of the $1.11 trillion in total auto loans outstanding at the end of 2017, about $280 billion were subprime – less than a quarter of the $1.3 trillion subprime mortgages before the financial crisis. Even if the total subprime portfolio produced a net loss of 50%, the losses would amount to only about $140 billion.”
  • “And there are other differences: Vehicles are quickly repossessed, usually after three months of missed payments. Even in bad times, there is a liquid market for the collateral at auctions around the country, and vehicles can be shipped to auctions with the greatest demand. The results are that lenders don’t end up holding these vehicles and loans on their balance sheet for years, as mortgage lenders did with defaulted home mortgages and homes.”
  • “But subprime will take down many more of the specialized lenders. And the survivors will tighten lending standards. This will prevent more car buyers from buying a new vehicles. Many of them will be switched to older used vehicles. Or they hang on to what they have.”
  • “So automakers get to grapple with the loss of these customers. When you lose a significant portion of your customers due to credit problems, it hurts. And this is where it adds to ‘Carmageddon.’ Investors and creditors, including PE firms, get to grapple with losses and bankruptcies. But given the limited magnitude of subprime auto loans, and the limited impact on the banks, the Fed will brush it off and continue its monetary tightening, and no one will get bailed out.”

Markets / Economy

FT – Sentiment sours for big brand consumer staples – Chloe Cornish 4/18

WSJ – Demand for Batteries Is Shrinking, Yet Prices Keep On Going and Going…Up – Sharon Terlep and Nicole Friedman 4/16

Tech

WSJ – Daily Shot: Bloomberg – IMF Says the Global Smartphone Boom Has Reached Its Peak – Andrew Mayeda 4/19

Britain

Bloomberg Businessweek – Britain Targets Russian Billionaires – Henry Meyer, Yuliya Fedorinova, and Irina Reznik 4/11

  • “As the U.S. goes after a handful of Russian oligarchs with its latest round of sanctions, the U.K. is under pressure domestically and from abroad to tighten controls and shed its reputation as a place to launder corrupt money. The U.K. National Crime Agency estimates that more than £90 billion ($127.5 billion) of such money enters the U.K. each year, feeding a vast industry of property companies, lawyers, bankers, and accountants. A lot of that comes from Russia, and ends up in high-end real estate. About a fifth of suspicious property purchases from 2008 to 2015, £729 million worth, were made by Russians, according to anticorruption watchdog Transparency International. ‘In terms of the levels of financial flows that go through London, it’s likely that it’s one of the biggest hubs of money laundering in the world,’ says Ben Cowdock, the group’s lead researcher on dirty money in the U.K.”
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April 11, 2018

If you were only to read one thing…

WSJ – Americans Face Highest Pump Prices in Years – Stephanie Yang 4/8

  • “Americans are spending more at the pump than they have in years. Prices could rise even higher just as drivers hit the road for family vacations.”
  • “Crude prices have jumped thanks to continuing production cuts by major exporters. As a result, gasoline is also becoming more expensive. According to the U.S. Energy Information Administration, average regular retail gas prices reached $2.70 a gallon last week—the highest level since 2015.”
  • “While higher fuel prices could herald an end to the glut that has plagued the energy market since 2014, they also threaten to dampen demand and hit consumers in their pocketbooks.”
  • “Since the Organization of the Petroleum Exporting Countries and other major oil producers, including Russia, agreed to collectively limit output two years ago, U.S. oil futures have risen about 40%, closing at $62.06 a barrel on Friday. Gasoline futures are up 8.6% this year.”
  • And of course, Venezuela’s drop off in production…
  • “In recent months, the U.S. has also exported record amounts of gasoline, mostly to Latin and South America. In January, exports totaled more than 33 million barrels, near an all-time monthly high set in November.”
  • “’That’s a big difference from a decade ago, or even a few years ago,’ said Tom Kloza, global head of energy analysis at the Oil Price Information Service. ‘We’re kind of refiners to the entire Western Hemisphere right now.’”

Continue reading “April 11, 2018”

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.”

February 8, 2018

Perspective

FT – Super Bowl thriller watched by smallest audience since 2009 – Shannon Bond 2/5

  • “In spite of the upset which saw the Eagles beat the Patriots 41 to 33 in a hard-fought battle in Minneapolis that came down to the final seconds of play, the broadcast drew 7% fewer viewers to NBC with 103.4m watching, according to Nielsen.”
  • “When people who watched the game online were included, NBC counted a total audience of 106m and said it was the most-streamed Super Bowl ever. But this compares with the 111.3m people who tuned in to Fox’s broadcast last year.”
  • “While football remains the most popular programming on US television, the figures from Nielsen underscore the ratings decline that has been plaguing the National Football League for two seasons. Audiences for regular season games shrank 10% in 2017, an acceleration from 2016’s 8% decrease.”

Worthy Insights / Opinion Pieces / Advice

Bloomberg View – Don’t Mistake the Stock Market for the Economy – Robert Burgess 2/6

FT – Bitcoin freeloads on institutions’ trust, warns BIS – Martin Arnold 2/6

  • “Cryptocurrency is ‘a Ponzi scheme and an environmental disaster’ says Agustin Carstens.”

FT – Poland’s death camp law is designed to falsify history – Jan Gross 2/6

  • “The rule barring debate of the country’s role in the Holocaust is a policy disaster.”

WSJ – Samsung Saga Shows Korea Reform Is Going Nowhere – Jacky Wong 2/5

  • “The release of the conglomerate’s de facto leader will do little to allay investors’ concerns about the country’s corporate governance standards.”
  • Mr. Lee (Lee Jae-yong) walked free on Monday after appealing the five-year prison term handed to him in August when he was convicted on bribery and embezzlement charges: He received a reduced and suspended sentence instead. The next stage could see the case go to South Korea’s Supreme Court.”

WSJ – The Stock Market Didn’t Get Tested – You Did – Jason Zweig 2/5

Markets / Economy

FT – China smartphone sales down for first time since 2009 – Louise Lucas, Edward White, Nic Fildes 2/6

  • “Sales of smartphones in China — the world’s biggest market, responsible for about one in every three shipments — fell last year for the first time since 2009, raising fresh concerns about the strength of the global handset market.”
  • “Data from IDC, the research company, showed that smartphone sales slumped 4.9% in 2017 from the previous year as the local market, a growth engine for the global mobile phone industry, contracted.”
  • “Analysts pointed to the fact that Chinese consumers were waiting longer to replace their smartphones than they have in the past, mirroring a similar trend in other markets including the UK.”
  • “IDC’s numbers come just days after data provider IHS Markit said global smartphone sales had dropped 4.5% in the last quarter of 2017, with only Xiaomi and Lenovo’s Motorola experiencing any growth in shipments.”
  • “Apple took the biggest hit in China last year according to IDC, with unit sales down 8.3% year on year, although the company continued to dominate the premium market for phones that cost more than $600.”
  • “In terms of overall value, the China mobile market grew 11% in 2017 — from $120bn in 2016 to $134bn.”

FT – M&A boom heightens fear of credit cycle nearing peak – Eric Platt 2/4

Finance

WSJ – How the Bull Market’s Greatest Trade Went Bust – Spencer Jakab 2/6

  • “Only very rarely has a trade gone from being so good to being so bad so quickly.”
  • “Among the most profitable trades during the bull market has been to short volatility, essentially betting the market would get calmer and stay calm. An exchange-traded instrument, the VelocityShares Daily Inverse VIX Short-Term exchange-traded note, grew to $2 billion by harnessing futures on the Cboe Volatility Index.”
  • “The note, with the symbol XIV, had a 46% compound annual return from its inception in 2010 to two weeks ago. Late on Monday, though, the combined value of the note fell 95% to less than $15 million as trading was halted early Tuesday. Sponsor Credit Suisse says the last day of trading will be later this month.”
  • “The lesson in the trade’s collapse isn’t that volatility is a flawed asset class. Instead, it is one as old as markets—crowded, ‘can’t lose’ trades often end in stampedes.”

Cryptocurrency

Bloomberg Quint – Get Ready for Most Cryptocurrencies to Hit Zero, Goldman Says – Kana Nishizawa 2/7

  • “Are any of today’s cryptocurrencies going to be an Amazon or a Google, or will they end up like many of the now-defunct search engines? Just because we are in a speculative bubble does not mean current prices can’t increase for a handful of survivors…. At the same time, it probably does mean that most, if not all, will never see their recent peaks again.” – Steve Strongin, Goldman Sachs

NYT – Here Are the World’s Virtual Currency Billionaires (or at Least They Were) – Nathaniel Popper 2/7

China

Bloomberg – China’s Next Debt Bomb Is an Aging Population – Yinan Zhao and Jing Zhao 2/5

FT – China developers retreat from Hong Kong property market – Ben Bland 2/6

  • “Chinese property developers have retreated sharply from Hong Kong’s booming land market, becoming the latest industry to be dented by Beijing’s capital controls and intensified scrutiny of outbound transactions.”
  • “Chinese developers won 11% of bids by value in Hong Kong government land auctions since April, down from about 50% in the preceding two years, according to an analysis of official data by Standard & Poor’s, the debt rating agency.” 
  • “Esther Liu, an analyst at S&P, said the main reason for the pullback by Chinese developers was the clampdown on outbound investment by the Chinese government, which began in late-2016. Beijing has since intensified the crackdown as it seeks to stem capital outflows and discipline companies such as HNA that borrowed heavily to fund a flurry of overseas deals.”
  • “Ms. Liu said that Chinese developers were also deterred by the longer development cycle in Hong Kong, compared with mainland China.” 
  • “She said it typically took six to nine months in China for developers to progress from buying land to launching their first off-plan sales. In Hong Kong, by contrast, it can take several years to plan the development of the site and obtain the required permissions.”
  • “Despite the retreat of the mainland developers, analysts forecast that Hong Kong property prices will continue to rise.”

FT – Chinese tycoon sues local government for $640m – Tom Hancock and Xinning Liu 2/5

  • “One of China’s richest men has revealed an attempt to sue a municipal government for Rmb4bn ($640m) over a suspended project to build a new city, the biggest case of its kind brought by an entrepreneur against the state.”
  • “Yan Jiehe said the company he founded, China Pacific Construction Group, had not been paid for its work on Lanzhou New City, a settlement once billed as ‘Las Vegas in the Gobi’, where diggers flattened dozens of hills before officials suspended the project in 2013.”

WSJ – Chinese Police Add Facial-Recognition Glasses to Surveillance Arsenal – Josh Chin 2/7

India

Bloomberg Quint – Jio’s First Profit Is ‘Too Good to Believe’ for Bernstein – Bhuma Shrivastava and Saket Sundria 2/7

February 5, 2018

Worthy Insights / Opinion Pieces / Advice

Bloomberg Gadfly – Still Clutching an Old iPhone? You’re Not Alone – Shira Ovide 1/4

Bloomberg_Smartphone sales growth_1-4-18

Bloomberg Businessweek – What If China Is Exempt From the Laws of Economics? – Michael Schuman 1/24

Bloomberg Businessweek – How Hedge Funds (Secretly) Get Their Way in Washington – Zachary Mider and Ben Elgin 1/25

FT – Forget bitcoin, give me old-fashioned gold as an inflation hedge – Merryn Somerset Webb 2/1

  • Ms. Webb offers an interesting perspective at why inflation may not be that far away. Why…because the primary source of deflation – China – appears to have changed tact.
  • “For years, party officials have been incentivized to force growth out of their regions, regardless of the effects on prices, global macroeconomics or, for that matter, pollution. But in the party conference in October, Xi Jinping shifted emphasis.”
  • “Instead of focusing on growth, China’s leader talked of ‘three tough battles’: against preventing major risks (mainly financial — the new target is to be ‘further deleveraging’); poverty (Xi fancies a ‘moderately prosperous society’ in all respects); and pollution (he wants to see the sky blue again).”
  • “The result has been pretty instant. Almost as the delegates headed home, say the analysts at Gavekal, prices of natural gas (a ‘clean fuel’) doubled; steel output stalled; and cement sector output actually fell even as demand for it and hence prices rose. China doesn’t seem to be adding new capacity to the global economy in the way that it was and that should mean it isn’t exporting deflation to the rest of the world any more either.”
  • “That is a dynamic that is arguably beginning to show up everywhere else. The slack is disappearing. There is no spare capacity left in Japan (or you would see new cuts to it). Industrial production in the US hit a record high in December, despite the US being too busy with buybacks and financial engineering over the past decade to build new capacity. Manufacturing output in the UK is at its highest in 10 years.”
  • “This could all lead us to several interesting conclusions. The first, highlighted by Gavekal, is that it is an explanation for the way stock markets in countries that have been hampered with too much productive space in the past are suddenly breaking out. See China, Japan and Korea — markets you might want to stick with for a bit.”
  • “The second is that, guess what, the boom in the US might not be entirely down to Donald Trump’s policies. The factories could be humming because global capacity constraints are being hit rather than because he’s the best economic manager ever. And the third is that the real inflation our great leaders (the central banks) think is impossible however much they might print, isn’t impossible at all.”

Markets / Economy

NYT – Cash-Strapped Chinese Giant Taps a New Money Source: Its Workers – Alexandra Stevenson and Cao Li 2/1

  • “Just before payday, an email went out to employees from top executives: Give us your money, and we’ll make it worth your while.”
  • “It was one of many pitches by HNA Group, a Chinese conglomerate struggling under an estimated $90 billion in debt accumulated during a global shopping spree that included buying stakes in multinationals like Hilton Hotels and Deutsche Bank.”
  • “The company, in an email, advertised an ’employee treasure’ product with an 8.5% return if workers handed over $1,500. A similar one dangled 9%. A third mentioned a return as high as 40% if employees ponied up $15,000.”
  • “These pitches, more than a dozen of which were reviewed by The New York Times, were not part of an employee stock program. Instead, they appear to be high interest loans, with the company as borrower and its workers as lenders.”
  • “The conglomerate has seen its borrowing costs rise sharply on the global bond market in recent months, an indication that some investors are increasingly worried about the company’s ability to pay its debts. Seven public companies under the umbrella of HNA have suspended trading of their stock, suggesting that big announcements that could affect key businesses are in the works. The company is also starting to sell assets.”
  • “It is unclear how much money HNA has raised from employees. The company has long offered such investments to its employees as a way to incentivize them and to share in the company’s success, Thomas A. Clare, an attorney for HNA, said in an email.”
  • “Companies around the world allow employees to buy stock or provide other ways for workers to invest in the business. But the HNA pitches do not offer direct ownership stakes in the business.”
  • “The offers reviewed by The Times had similar hallmarks, namely high returns for funding certain operations.”
  • “Chinese companies have often turned to individual investors or their own workers to raise money. But such moves, according to some China finance experts, can signal problems.”
  • “’It’s a desperation measure when companies really have no other source of financing and they are stuck,’ said Anne Stevenson-Yang, co-founder of J Capital Research, a corporate research firm.”
  • “A small company in the southeastern Chinese city of Wenzhou called Wenzhou Liren Educational Group made national news in 2011 after it went bankrupt and was unable to pay nearly $790 million it borrowed from employees and local residents. In 2015, an online peer-to-peer platform called Great Group pressured employees to buy investments in order to raise funds when it found itself in a financial bind, the Chinese news media widely reported. The two companies did not respond to requests for comment.”
  • “As HNA has faced more questions about its operations by both the local and foreign media, the company has issued groupwide emails urging employees to not speak to reporters. In January, HNA’s human resources department told employees they would be required to take a test on how to deal with the news media, according to an internal document reviewed by The Times.”

Real Estate

Bloomberg – Rental Glut Makes NYC the Worst Performer for Equity Residential – Oshrat Carmiel 1/31

Energy

eia – U.S. monthly crude oil production exceeds 10 million barrels per day, highest since 1970 – Jack Perrin and Emily Geary 2/1

eia_US monthly crude oil production_2-1-18

eia_US monthly crude oil production by production method_2-1-18

eia_US monthly crude oil production by location_2-1-18

Reuters – Suncor to cut 400 jobs as it rolls out self-driving trucks – Julie Gordon 1/31

  • “Suncor Energy Inc said on Wednesday that it expected to cut some 400 heavy-equipment operator positions over the next six years as it rolls out a fleet of self-driving trucks at its Canadian oil sand mining operations.”

Finance

Bloomberg – Tesla Sells $546 Million of Bonds as Buyers Can’t Get Enough – Claire Boston 1/31

Cryptocurrency

WSJ – Daily Shot: Investing.com – Bitcoin 2/1

WSJ_Daily Shot_Investing.com - Bitcoin_2-1-18

WSJ – Bitcoin Is Falling Fast, Losing More Than Half Its Value in Six Weeks – Steven Russolillo and Kenan Machado 2/2

WSJ_Bitcoin sell-offs_2-1-18

Britain

FT – Chinese investments in UK fail to materialize – Andy Bounds and Tom Mitchell 2/1

  • “Even as Theresa May inks new deals in Beijing, English cities left waiting for cash.”

China

Bloomberg Businessweek – China Starts Experiment to Tame Its Wild Property Market – Emma Dong and Paul Panckhurst 1/24

Bloomberg_China housing price gains in comparison_1-24-18

WSJ – China’s Bad Banks Face a Case of Indigestion – Anjani Trivedi 2/2

India

Economist – Low-caste Indians are better off than ever-but that’s not saying much 1/25

Economist_Indian caste statistics_1-25-18

South America

FT – Bolivar rallies after Venezuela unifies exchange rates – Gideon Long 2/1

New Zealand

FT – British and US migrants flock to New Zealand – Jamie Smyth 2/1

  • “Immigration surges after Brexit vote and Trump election shocks.”

April 29 – May 5, 2016

Beware of ‘investments’ being peddled by Chinese banks. China no longer getting the same bang for the buck. Industry concentration tends to result less money going to employees.

Headlines

Briefs

    • “The economy in China’s industrial province of Liaoning contracted in the first quarter, making it the first region to register negative growth in seven years as a severe downturn in energy and heavy industry sectors hits hard in the country’s north-east.”
    • “China’s national growth clocked in at an annual rate of 6.7% in the first quarter, but that headline figure masks sharp discrepancies between provinces reliant on heavy industry, mining or oil, and the southern and eastern regions with more diversified economies.”
    • “Chinese newspaper 21st Century Business Herald reported this week that Liaoning would book a 1.3% contraction in real GDP for the quarter…”
  • Daniel Thomas of the Financial Times covered that Global smartphone sales fell for the first time.  It was bound to happen eventually.
    • “Global smartphone shipments fell for the first time as “iPhone fatigue” dragged down sales for Apple’s once-unstoppable franchise amid a general weakening in the market for new devices.”
    • “After close to a decade of stellar growth, analysts say a tipping point in the smartphone market has been reached as most people already have a phone, phablet or tablet device.”
    • “Apple popularized the smartphone market with the launch of the first iPhone in 2007. The US group said this week that it had suffered a 16% fall in unit sales in the first quarter and warned that the next quarter could be even worse…”
    • “Apple was not totally to blame, however, as global smartphone shipments fell 3% in the first quarter of 2016 to 334.6m, down from 345m units in the same quarter of 2015. The quarter was the ‘first time ever since the modern smartphone market began in 1996 that global shipments have shrunk on an annualized basis.'”
    • “As the China market matures, the appetite for smartphones has slowed dramatically as the explosion of uptake has passed its peak.” – IDC, a research firm.
  • For those of us in Hawaii, we’re quite familiar with the concept of leasehold property, and generally if you can avoid it for your primary residence you do.  Well in China all residential property is leasehold and some of those lease terms are rolling over in short order.  Lucy Hornby of the Financial Times discusses the angst this is causing.
    • “The simmering issue of property rights in China has burst into the open with the upcoming expiry of residential leases in several wealthy cities and a contentious plan to charge homeowners to renew them.”
    • When the Communist party entered into power in 1949 property ownership was abolished only to be renewed via a mixed bag of leasehold rights in the 1980s and 1990s.  Now these rights are “…in the spotlight with the upcoming expiry of 20-year residential land use rights in Wenzhou in eastern China… Leases granted in the 1990s will also soon come due in Shenzhen and other coastal cities, although the more common tenure of 70 years means most of the current generation of urban homeowners will hand the problem on to their heirs.”
    • “Wenzhou has asked homeowners to pay up to a third of their homes’ value to renew their rights, according to a city government document, sparking an outcry across China. The Property Law of 2007 says land-use rights can be renewed but does not specify the criteria for doing so.”
    • “Many Chinese bought their homes under the expectations that the long leases would be transformed into full ownership.”
  • Enough with all this bad news.  No really, as Lingling Wei reports in the Wall Street Journal, China is pressing Economists to brighten their outlooks.
    • “Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and economic commentators with knowledge of the matter.”
    • As Scott Kennedy, a deputy director at the Center for Strategic and International Studies (a Washington think tank), puts it “vigorous debate among economists and public confidence in this conversation is critical if China is to successfully navigate the choppy economic waters. If the party and government only want to hear good news, then they’d be better off hearing nothing because the value of the words would be less than zero.”
    • “While restrictions on foreign media have always been tight, they are becoming tighter, with a growing list of foreign publications having their websites blocked from view within China, including The Wall Street Journal.”

Special Reports

Graphics

FT – Will duration risk rear its head for bond investors? 4/28

FT_Negative yielding bonds by country of origin_4-28-16

FT_Bond Duration_4-28-16

FT – Rise of the robots is sparking an investment boom – Richard Waters and Tim Bradshaw 5/2

FT_Rise of the robot economy_5-2-16

FT – US producers Ultra and Midstates fall victim to low oil price 5/3

FT_US high yield energy_5-3-16

Featured

*Note: bold emphasis is mine, italic sections are from the articles.

Chinese banks disguise risky loans as ‘investments’. Yuan Yang and Gabriel Wildau. Financial Times. 28 Apr. 2016.

“Chinese banks are using complex financial engineering to disguise risky loans as ‘investments,’ rendering traditional risk metrics such as non-performing loan ratios virtually useless.”

“Analyst say most of these assets are in effect loans but are structured to appear as holdings of investment products issued by a third party. Such financial alchemy allows banks to evade regulations designed to limit risk.”

“Banks are required to set aside fewer provisions against ‘investment’ assets than traditional loans.”

“Because the investments are not classified as loans, defaults are not reflected in these banks’ non-performing loan ratio. Many analysts believe China’s official NPL ratio of 1.67% is all but irrelevant in assessing banks’ overall asset quality.”

“Fitch, the rating agency, believes this practice, also known as channel lending is used to provide credit to the likes of ‘cash-strapped property developers and local governments’ that cannot obtain formal loans.”

“Now that overcapacity sectors such as steel and cement are facing restrictions on formal borrowing, channel lending could become even more important to zombie companies.”

“Banks classify the assets they hold in these third parties as ‘investment receivables’ or ‘debt receivables,’ not loans.”

“Shadow lending in debt receivables increased 63% to Rmb14tn ($2.16tn) last year, according to an analysis of 103 Chinese banks by Wigram Capital Advisors, equivalent to 16.5% of the formal loan book.”

“Aggressive balance sheet expansion by midsized lenders has also increased their systemic importance to China’s overall banking system. The big four’s share of total banking assets has fallen from 51% in 2009 to 38% at the end of 2015, according to Wigram’s calculations.”

China’s fizz goes flat, even with far bigger credit stimuli. James Kynge. Financial Times. 4 May 2016.

Bottom line: “money is losing the power to energize important economic muscles. Asset prices in the all-important property market – which drove China’s recovery from the 2008 financial crisis – are now so high relative to household incomes that it is hard to envisage another sustained rally.”

“On average, it would take 25 years, 33 years, 36 years and 19 years of household income in Beijing, Shanghai, Shenzhen and Guangzhou respectively for a family to buy a 90 sq m (969 sq ft) apartment, according to calculations by Mizuho Securities in Hong Kong. By contrast, London house prices are 9.2 times average earnings for first-time buyers, according to Nationwide data.”

“The International Monetary Fund estimates that $1.3tn in corporate debt – or almost one in six of the business loans on Chinese banks’ books – was owed by companies that brought in less in revenues than they owed in interest payments.”

“So unleashing a new tide of credit to ease debt problems is ‘like smoking opium to look healthy,’ said Professor Li Weisen of Fudan University, according to the South China Morning Post.”

“China expanded total domestic credit by Rmb12tn, or 34% of gross domestic product, in the year to November 2009 – significantly less than the Rmb27.9tn, or 40% of GDP, in the year to February this year, according to Bernstein Research.”

“But while the 2009 stimulus reinvigorated growth from 6.1% in the first quarter to a full-year GDP growth rate of 9.2%, the flood of credit seen in the year to February has been accompanied by a gentle decline in GDP headline numbers.”

Rising Profits Don’t Lift Workers’ Boats. Peter Coy. Bloomberg. 5 May 2016.

“Big business is getting bigger, and workers’ slice of the economic pie is getting smaller. Those trends have bred resentment toward large corporations. Now research shows a surprisingly tight link between the two phenomena: The share of the pie that goes to workers has been shrinking most in precisely those industries where ownership is becoming more concentrated.”

“Increasing industry concentration ‘may explain one of the transcendent issues confronting the U.S. economy,” namely labor’s declining share and profits’ rising share of the value a company creates, Michael Feroli, the chief U.S. economist at JPMorgan Chase, wrote in an April 25 research note.”

Bloomberg_Tale of two payrolls_5-5-16

As an explanation of the trend, “Feroli says, is that industries with more concentrated ownership can charge higher prices. They pay out their extra profits to shareholders, or to the government in taxes, but not to workers.”

“One hopeful sign for workers: The share of national income going to wages and salaries has rebounded since 2012, erasing about 30% of its post-1997 decline.”

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