Tag: Venezuela

September 28, 2017

Markets / Economy

WSJ – Daily Shot: Goldman Sachs – Rise and Fall of New Technology – Share Price Performance 9/27

Real Estate

CNBC – Stop sugarcoating the housing market: Economist warns that buyers face increasing troubles – Diana Olick 9/26

  • “From a broad view, the U.S. housing market looks very healthy. Demand is high, employment and wages are growing, and mortgage rates are low.”
  • “But the nation’s housing market is assuredly unhealthy; in fact, it is increasingly mismatched with today’s buyers. While the big numbers don’t lie, they don’t tell the real truth about the affordability and availability of U.S. housing for the bulk of would-be buyers.”
  • “First, several reports out this week point to both continued heat in home values as well as pushback from homebuyers. Prices remain nearly 6% higher than they were a year ago, nationally, with some local markets seeing double-digit annual price gains. Those prices are being driven by a severe lack of supply at the low end of the market, which is where the most demand exists. That means lower-priced homes are seeing bigger price gains than higher-priced homes because of the competition.”
  • “At the same time, sales are falling, again, because there are too few homes on the low end, and the homes that are available are very expensive.”
  • “‘It sets up a situation in which the housing market looks largely healthy from a 50,000-foot view, but on the ground, the situation is much different, especially for younger, first-time buyers and/or buyers of more modest means,’ wrote Svenja Gudell, chief economist at Zillow in a response to the latest home-price data. ‘Supply is low in general, but half of what is available to buy is priced in the top one-third of the market.'”
  • “Supply on the low end is tight because during the housing crash investors large and small bought hundreds of thousands of foreclosed properties and turned them into rentals. There are currently 8 million more renter-occupied homes than there were in 2007, the peak of the housing boom, according to the U.S. Census.
  • “Investors could take the opportunity of high prices and high demand to sell these properties, but today’s high rents offer them better returns.”
  • “Low supply of homes for sale might also seem like a great opportunity for the nation’s homebuilders. Yes, they went through an epic housing crash, but they have since consolidated market share and righted their balance sheets. Homebuilders are simply not building enough inexpensive houses that the market needs.”
  • “Builders say they would like to build more affordable homes but cannot because the math doesn’t work. The costs of land, labor, materials and regulatory compliance are just too high. In addition, younger homebuyers want to live closer to urban areas, not in the far-out exurbs, where builder costs are far lower.”
  • “‘It’s time we stopped sugarcoating the truth with this data — the simple fact is that we are severely underproducing housing in this country, relative both to basic demographics and currently high demand from buyers,’ wrote Gudell, who notes that inventory is stuck at roughly mid-1990s levels, but the country has grown by more than 60 million people since then. ‘Buying conditions, in theory, are great right now: Jobs and incomes are growing, and rock-bottom mortgage interest rates are helping keep financing costs low. What’s missing from the equation is a lack of homes actually available to buy at a price point that’s reasonable for most buyers.'”
  • “The trouble is, even though the market is woefully mismatched, home prices will not come down as long as there are some buyers out there willing and able to spend more and more money for less and less house.”
  • “So, what does all this mean for the economy and personal wealth? It means the renter nation will persist and fewer Americans will be able to save and grow their money in a home. It also means rents will continue to rise due to high demand, leaving more Americans with less disposable income to spend.”

China

WSJ – Chinese Developers Face Debt Reckoning After Boom – Dominique Fong 9/27

  • “A wave of local-currency debt coming due next year alongside new stricter lending rules are bearing down on China’s developers and posing a risk to the country’s economy.”
  • “Meanwhile, many yuan bondholders have the option to demand early repayment starting next year and increasingly in 2019 and 2020. The scenario could force a wave of asset sales and deprive developers of cash to build new projects, leading to a further potential deterioration in their finances, credit analysts say.”
  • “Developers also are likely to pay more dearly for debt after home prices slowed for three straight months this summer, save a few small cities. Last year, only about 25% of developers paid 6% or higher for their yuan bonds, according to Wind. This year the ratio is more than 33%. Credit analysts expect that to climb further.”
  • “Since many loans use property as collateral, declines in value could exacerbate any chain of defaults for yuan bonds, bank loans and China’s informal, lightly-regulated lending sector, potentially infecting China’s financial system.”
  • “’The wall of bonds is just one symptom of the whole problem,’ said Anne Stevenson-Yang, founder of J Capital Research.”
  • “Smaller developers are particularly vulnerable because of their high debt loads, experts say. For example, the net debt of state-backed Yunnan Metropolitan Real Estate Development Co. is 57 times earnings before interest and taxes, according to research firm Granite Peak Advisory. The ratio is 37 times for Fuzhou-based commercial real-estate developer Tahoe Group Co., and more than 23 times for Shanghai-based Yango Group Co.”
  • “In comparison, the leverage for all mainland-listed developers is 6.4 times, and 4 times for all Chinese companies excluding financial institutions, according to Granite Peak Advisory.”
  • “Most developers have adequate liquidity if they can’t refinance debt and must repay bonds in full with cash next year, Moody’s says. But their ability to do so is weakening. Rated developers’ cash was 1.6 times short-term debt coverage, compared with 2 times last year, S&P Global Ratings says.”

South America

FT – Venezuelan politicians seek refuge abroad – John Paul Rathbone and Gideon Long 9/26

  • “Exiled mayor David Smolansky says country has moved closer to a totalitarian regime.”

September 18, 2017

If you were to read only one thing…

NYT – How Big Business Go Brazil Hooked on Junk Food – Andrew Jacobs and Matt Richtel 9/16

  • “A New York Times examination of corporate records, epidemiological studies and government reports — as well as interviews with scores of nutritionists and health experts around the world — reveals a sea change in the way food is produced, distributed and advertised across much of the globe. The shift, many public health experts say, is contributing to a new epidemic of diabetes and heart disease, chronic illnesses that are fed by soaring rates of obesity in places that struggled with hunger and malnutrition just a generation ago.”
  • “The new reality is captured by a single, stark fact: Across the world, more people are now obese than underweight. At the same time, scientists say, the growing availability of high-calorie, nutrient-poor foods is generating a new type of malnutrition, one in which a growing number of people are both overweight and undernourished.”
  • “Even critics of processed food acknowledge that there are multiple factors in the rise of obesity, including genetics, urbanization, growing incomes and more sedentary lives. Nestlé executives say their products have helped alleviate hunger, provided crucial nutrients, and that the company has squeezed salt, fat and sugar from thousands of items to make them healthier. But Sean Westcott, head of food research and development at Nestlé, conceded obesity has been an unexpected side effect of making inexpensive processed food more widely available.”
  • “Part of the problem, he added, is a natural tendency for people to overeat as they can afford more food. Nestlé, he said, strives to educate consumers about proper portion size and to make and market foods that balance ‘pleasure and nutrition.’”
  • “The story is as much about economics as it is nutrition. As multinational companies push deeper into the developing world, they are transforming local agriculture, spurring farmers to abandon subsistence crops in favor of cash commodities like sugar cane, corn and soybeans — the building blocks for many industrial food products. It is this economic ecosystem that pulls in mom-and-pop stores, big box retailers, food manufacturers and distributors, and small vendors like Mrs. da Silva.”
  • “In places as distant as China, South Africa and Colombia, the rising clout of big food companies also translates into political influence, stymieing public health officials seeking soda taxes or legislation aimed at curbing the health impacts of processed food.”
  • “For a growing number of nutritionists, the obesity epidemic is inextricably linked to the sales of packaged foods, which grew 25% worldwide from 2011 to 2016, compared with 10% in the United States, according to Euromonitor, a market research firm. An even starker shift took place with carbonated soft drinks; sales in Latin America have doubled since 2000, overtaking sales in North America in 2013, the World Health Organization reported.”
  • “The same trends are mirrored with fast food, which grew 30% worldwide from 2011 to 2016, compared with 21% in the United States, according to Euromonitor. Take, for example, Domino’s Pizza, which in 2016 added 1,281 stores — one ‘every seven hours,’ noted its annual report — all but 171 of them overseas.”
  • “Industry defenders say that processed foods are essential to feed a growing, urbanizing world of people, many of them with rising incomes, demanding convenience.”
  • “’We’re not going to get rid of all factories and go back to growing all grain. It’s nonsense. It’s not going to work,’ said Mike Gibney, a professor emeritus of food and health at University College Dublin and a consultant to Nestlé. ‘If I ask 100 Brazilian families to stop eating processed food, I have to ask myself: What will they eat? Who will feed them? How much will it cost?’”
  • “In many ways, Brazil is a microcosm of how growing incomes and government policies have led to longer, better lives and largely eradicated hunger. But now the country faces a stark new nutrition challenge: over the last decade, the country’s obesity rate has nearly doubled to 20%, and the portion of people who are overweight has nearly tripled to 58%. Each year, 300,000 people are diagnosed with Type II diabetes, a condition with strong links to obesity.”
  • “’What we have is a war between two food systems, a traditional diet of real food once produced by the farmers around you and the producers of ultra-processed food designed to be over-consumed and which in some cases are addictive,’ said Carlos A. Monteiro, a professor of nutrition and public health at the University of São Paulo.”
  • “’It’s a war,’ he said, ‘but one food system has disproportionately more power than the other.’”
  • “Nearly 9% of Brazilian children were obese in 2015, more than a 270% increase since 1980, according to a recent study by the Institute for Health Metrics and Evaluation at the University of Washington. That puts it in striking distance of the United States, where 12.7% of children were obese in 2015.”

Worthy Insights / Opinion Pieces / Advice

FT – Tech companies in the city: the backlash – Leslie Hook 9/14

  • “Cities and big tech companies usually do not get along very well. Just look at San Francisco or Seattle — many locals love nothing more than a good gripe against Google or Uber or Amazon.”
  • “It’s been curious, then, to watch cities rush forward after Amazon said it was looking for a site to build a second headquarters in North America. Mayors from Pittsburgh to Chicago to Memphis have jumped on Twitter and on the phone to woo Amazon, promising their constituents they will work hard to win the company’s favor.”

Markets / Economy

FT – How Apple and co became some of America’s largest debt collectors – Eric Platt, Alexandra Scaggs and Nicole Bullock 9/15

Finance

NYT – China Bitcoin Exchange to Stop Trading Virtual Currencies Amid Crackdown – Cao Li 9/14

  • “A major Chinese exchange specializing in the trading of Bitcoin announced on Thursday that it would stop trading by the end of the month, amid a broader crackdown against virtual currencies by the authorities in Beijing.”
  • “The announcement by BTC China, the country’s first and largest digital currency exchange, came days after the Chinese authorities banned fund-raising for new digital currencies, and amid worries that regulators would tighten rules surrounding currencies like Bitcoin.”
  • “The exchange’s decision is the first of its kind in China, and it raises the specter of other exchanges shutting down Bitcoin trading in the future.”
  • “The price of Bitcoin dropped more than 10% on Thursday, to around $3,500, in the hours after the announcement.”

Bloomberg – The Summer of Bitcoin Ends Badly – Ogla Kharif and Belinda Cao 9/15

Australia

WSJ – Australian Banks Could Finally Head Down Under – Jacky Wong 9/15

  • “Investors have been calling the Australian housing market a “bubble” for years, yet prices keep charting higher. The market, though, could finally be about to turn south. That won’t be pretty for the country’s banks.”
  • “The property market has been skyrocketing Down Under—prices in Sydney have gone up 80% since 2012 while in Melbourne they have gained 54%. In turn, houses have become unaffordable for many Australians as prices keep outpacing income growth. An average home in Sydney now costs more than 12 times the median income there, according to research firm Demographia.”
  • “To keep houses within the reach of buyers, banks seem to have loosened their lending standards. Home lending is big business for Australian banks—more than half of their loan books consist of residential mortgages, amounting to $1.2 trillion, a figure that has risen 47% in the past five years. Analysts say much of this new lending has been dubious: Around a third of Australian mortgage applications contain inaccurate information, resulting in around $400 billion of so-called Liar Loans, according to UBS.
  • “Nearly 40% of outstanding home loans are interest-only. The risk is that borrowers will be unable to repay these loans once their interest-only period expires.”
  • “This is fine as long as the property market keeps going up, as homeowners can sell their houses to cover loan repayments. Once the market stops rising, though, it will become much harder for stretched households to avoid problems.”
  • “Australian regulators are trying to cool the property market, by reining in the use of interest-only loans. But they face another difficulty. Tightened capital controls in China have dampened property demand in Australia, previously a popular venue for Chinese buyers. Direct overseas property investment from China plunged 82% in the first half globally, according to Morgan Stanley , with investors there finding it harder to get their money out of the country.”

South America

WSJ – Daily Shot: Venezuela Econ – Black Market Bolivares to USD exchange rate 9/15

August 29, 2017

Perspective

WP – Texas flood disaster: Harvey has unloaded 9 trillion gallons of water – Matthew Cappucci 8/27

Worthy Insights / Opinion Pieces / Advice

Bloomberg Quint – Traders Ditch Risk as Dalio to Gundlach Warn on Emerging Markets – Ben Bartenstein 8/27

  • “More investors are joining the cast of Wall Street veterans from Jeff Gundlach to Ray Dalio in warning that risky assets are overvalued.”
  • “They point to rising global turmoil underscored by the recent terrorist attacks in Barcelona and the racially charged violence in Charlottesville, Virginia, as well as valuations that no longer compensate for potential flare ups in North Korea and Venezuela. That’s not to mention the unpredictability in the U.S., where President Donald Trump is feuding with members of Congress before a critical vote to increase the country’s debt ceiling.”
  • “Among the assets under scrutiny are emerging-market bonds, which for only the third time in history are yielding less than U.S. junk debt. Some of the world’s largest money managers, from Pacific Investment Management Co. to T. Rowe Price Group Inc., are advising investors to reduce risk by trimming holdings of developing-nation assets.”

FT – Big Tech can no longer be allowed to police itself – Rana Foroohar 8/27

FT – Why the oil market should not misread Venezuela – Nick Butler 8/27

  • Despite the political turmoil and the country on the verge of becoming a failed state, it is unlikely that oil supply disruptions will be permanent or significant enough to effect global oil prices materially.

Markets / Economy

WSJ – Slowing SUV Sales Could Signal a Turn in the Market – Mike Colias and Christina Rogers 8/26

Real Estate

TechCrunch – VC doors are wide open for real estate startups – Joanna Glasner 8/26

China

FT – China tech groups to demand ID verification for online posts – Yuan Yang 8/26

  • “The Chinese government will oblige tech companies to keep a record of the identities of people posting comments online, in an extension of this summer’s crackdown on internet speech.”
  • “Under the new regulations announced on Friday, all message board providers must authenticate users’ identities from October 1.”
  • “’Online comments . . . give rise to false rumors, filthy language and illegal messages, which damage the online environment,’ said a government spokesperson.”
  • “’This is a way of threatening the general population and media, especially online media,’ said Beijing-based historian Zhang Lifan. ‘It affects everyone.’”
  • “’They are using lots of different methods to restrict people’s ability to criticize or mock officials — this is not normal, even for China,’ Mr. Zhang added.”
  • “…The new regulations are being implemented under the aegis of China’s first cyber security law, which came into force in June and gives regulators the power to punish tech companies that disobey.”
  • “’Now there is a clear legal basis and a process,’ said a Beijing-based lawyer who wished not to be named. ‘This is the cyber space administration saying, ‘I’m going to monitor content, and I’m going to directly regulate tech companies’.”

August 21, 2017

If you were to read only one thing…

WSJ – China Tightens Rules on Cash Leaving Country as Growth Slows – Liyan Qi 8/18

  • “China formalized existing measures to curb outbound investment, underscoring persistent capital-outflow pressure faced by Beijing.”
  • The government must restrict overseas investment in sectors such as property, hotels, cinema, entertainment and sports teams, the State Council said in guidelines released on the main government website Friday.”
  • A cannon was just fired through the hallway.
  • “Officials have warned against rising risks in such investment over the past year, but it is the first time the cabinet has publicized such controls in the form of official guidance.”
  • “Establishment of equity-investment funds and any investment platforms that aren’t linked to any specific projects are also restricted by the government, according to the measures jointly drafted by the country’s top economic planner, Commerce Ministry, central bank and Foreign Ministry.”
  • “Authorities must also step up oversight of investment projects that aren’t considered to meet the technology, environment and security standards required by the governments of the destination countries, according to the guidelines dated Aug. 4.”
  • “The government is setting up a list to track down and penalize offenders, the cabinet said.”
  • “China’s outbound direct investment outside the financial sector declined 44.3% over the first seven months from a year earlier, with investment in property and entertainment down by 81.2% and 79.1%, respectively, the Commerce Ministry said on Tuesday.”
  • “’Irrational outbound investment has been effectively contained further,’ the ministry said.”

Perspective

WSJ – Daily Shot: Tax Foundation – What is the Real Value of $100 in Metropolitan Areas? – Kari Jahnsen 8/17

FT – Trump says it is ‘foolish’ to remove Confederate symbols – Neil Munshi 8/17

Worthy Insights / Opinion Pieces / Advice

Project Syndicate – The Lost Lesson of the Financial Crisis – Mohamed El-Erian 8/17

NYT – We Need Immigrants With Skills. But Working Hard Is a Skill. – Jeff Flake 8/18

Energy

WSJ – OPEC’s Sick Man, Venezuela Could Jolt Oil Market – Spencer Jakab 8/17

  • “Venezuela’s already falling oil production will get worse, maybe much worse, before it gets better, potentially roiling global energy markets. The cash-strapped country has been unable to maintain its oil fields, meaning some of the production losses will be permanent.”
  • “The country now produces between 1.9 million and 2.2 million barrels a day, depending on whether one uses unofficial or official data, down from around official estimates of 2.5 million in late 2015 and 3.4 million before Hugo Chávez took power in 1999.”
  • “The decline in production is so dramatic that Venezuela, home to the world’s largest proven crude reserves, is actually importing barrels of light crude, which it needs to mix with its heavy varieties to make them usable.”
  • “The problem is cash, debt and production. Venezuela is struggling under $120 billion in debt, and it has pledged barrels of oil as repayment for Russian and Chinese loans. After supplying the domestic energy market and paying for crude imports, Venezuela only has 600,000 to 800,000 barrels a day left over to generate net cash flows, according to Columbia University’s Center on Global Energy Policy. The country earns some 90% of its foreign currency revenue from oil exports.”
  • “If the country can right itself, output might stabilize, but any rebound would be modest. Years of underinvestment may have done permanent damage to Venezuela’s conventional oil reservoirs. Reviving output would require substantial foreign investment, including in heavy-oil deposits. Now that Venezuela has burned not just western multinationals but also state companies from Russia and China, doing so will be a tall order without regime change.”

China

NYT – Joshua Wong and 2 Others Jailed in Hong Kong Over Pro-Democracy Protest – Alan Wong 8/17

  • “The sentences risked casting the three young men as Hong Kong’s first prisoners of conscience, undermining the city’s reputation as a haven of civil liberties with special status in China.”

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 14, 2017

If you were to read only one thing…

FT – China ‘granny gang’ jailed in lending clampdown – Emily Feng 8/10

  • “A Chinese court has sentenced 14 members of a roving band of elderly female debt collectors to as many as 11 years in jail, in the latest sign of the country’s clampdown on informal channels of lending.”
  • “A court in the mountainous province of Henan this week found that members of the ‘granny gang’, as local media dubbed them, used loudspeakers to publicly cajole and intimidate borrowers into paying up.”
  • “The women, aged 50 to 70, were found guilty of engaging in ‘provocative and disturbing behavior’ that resembled ‘participating in gangster-like organizations’.” 
  • “The women were largely unemployed and looking for work when local debt-collection agencies recruited them at outdoor dancing classes in 2013. In return for helping secure loan repayments, the ‘grannies’ received Rmb200 ($30) per day as well as meals.”
  • “’I had nothing to do every day. When I was asked to help, I did it as a kind of fun,’ Gao Yun, one of the women, told a local newspaper.”
  • “The grannies employed a variety of tactics, including hitting and spitting at borrowers. A more common method was to give debtors an aggressive verbal dressing down until they handed over the money.”
  • “On their most recalcitrant targets, the women took more creative measures. In one 2015 incident, eight of the women began stripping to intimidate male borrowers to pay up, according to an interview that a debtor surnamed Zhao gave to local media.” 

Perspective

Howmuch.net – Do You Want the Best Bang for your Tuition Buck? Check out this College Rankings – Raul 8/10

Bloomberg – Venezuelan Currency Madness Valued Local Bank More Than Apple – Christine Jenkins 8/11

  • “What does it take to surpass Apple Inc. as the world’s most valuable traded company? One way is to be listed in Venezuela, with its massively overvalued currency.”
  • “Venezuelan stocks are ascending the ranks of the most valuable companies on Earth, with lender Mercantil Servicios Financieros CA briefly topping Apple’s market capitalization last week, and now back in the No.2 spot. Five other top-20 companies are also Venezuelan, a mirage caused by currency controls combined with the world’s fastest inflation.”
  • “Most of the lender’s theoretical $775 billion market capitalization evaporates if you stop using the official exchange rate of 10 bolivars to the dollar. The value would be 0.1% of that at the black-market rate that most Venezuelans have to use if they want hard currency.”

Markets / Economy

FT – The credit crisis did not lead to deleveraging – Martin Sandbu 8/10

Real Estate

Why Department Stores Remain on the Down Escalator – Miriam Gottfried 8/10

Energy

Vox – Solar eclipse 2017: how the solar power industry is prepping for a huge sunlight blip – Annette Choi 8/9

  • “The total solar eclipse passing over the United States on August 21 is going to be disruptive. Authorities are predicting huge traffic jams, strained cellphone networks, and insufficient bathrooms for the masses driving to the center of the show.”
  • “But there’s another disruption that will be brought on by the eclipse: power.”
  • “Since the last total solar eclipse passed over part of the US in 1979, we’ve grown a lot more dependent on solar to electrify our homes and businesses. According to the Solar Energy Industries Association, solar energy has grown by an average of 68 percent per year in the past decade. The country now has about 45 gigawatts of solar capacity installed, with 260,000 Americans employed in the industry.”
  • “The solar eclipse will significantly diminish that capacity for a couple of hours on August 21, especially in California and North Carolina.”
  • “The federal Energy Information Administration expects 1,900 utility-scale solar photovoltaic (PV) power plants in all will be affected.”
  • “Solar facilities have long been anticipating this eclipse, mapping out step-by-step demand management for the day of and arranging substitute energy sources to dispatch depending on various demand scenarios. Thanks to the unusually wet winter in California, hydroelectricity is abundant this year, says Greenlee (Steven Greenlee, spokesperson for the California Independent System Operator – CAISO).”
  • “In the past few months, CAISO — which manages 80% of California’s electric flow — has been busy seeking advice from German solar facilities.”
  • “During a 2015 solar eclipse that passed over Europe, 80% of Germany’s sunlight was cut off. For a country whose electricity is 40% powered by solar, it was hit hard. But despite the dramatic seesawing of solar production, the eclipse came and went without major disturbance.”

August 10, 2017

Perspective

NYT – Public Works Funding Falls as Infrastructure Deteriorates – Binyamin Appelbaum 8/8

FT – Who was convicted because of the global financial crisis? – Kara Scannell and Richard Milne 8/8

Worthy Insights / Opinion Pieces / Advice

NYT – The Political Payoff of Making Whites Feel Like a Minority – Lynn Vavreck 8/8

NYT – Our Broken Economy, in One Simple Chart – David Leonhardt 8/7

A Teachable Moment – Do You Own this Ticking Time Bomb in Your Retirement Account? – Anthony Isola 8/8

  • Watch out for single entity stable value products.

Real Estate

WSJ – The Best Place for a New Warehouse? An Old Mall – Esther Fung 8/8

  • “The pressure for speedy online package delivery is prompting companies to look for distribution facilities closer to residential areas or highways.”
  • “Some of the best locations, it turns out, are dead malls.”
  • “Warehouse landlords say they like former malls because the shopping centers occupy swaths of space relatively close to where consumers live or near main highways.”
  • “But it isn’t easy to convert a mall into logistics space quickly. Developers say it takes a community ready to accept that the mall has failed as well as understanding that there are viable job opportunities in logistics real estate.”
  • “The dramatic shift in the retail industry and growth of e-commerce have led some analysts to estimate that 400 or so of the roughly 1,100 malls in the U.S. will close in the coming years.”
  • “Meanwhile, the appetite for industrial space continues unabated. Roughly 247 million square feet of industrial space is expected to be delivered this year, according to real-estate services firm JLL.”

Finance

WSJ – Daily Shot: TheAtlasInvestor.com – Euro Junk Bonds & US Treasuries 8/9

South America

NYT – As Maduro’s Venezuela Rips Apart, So Does His Military – Nicholas Casey and Vanessa Herrero 8/8

  • “A growing number of Venezuelan officers are openly breaking ranks with the president and taking up weapons.”
  • “Venezuela has a history of coups and attempted overthrows at times of crisis, and many in the country now wonder if this is one of those times.”
  • “But the nation’s leaders are keenly aware of that, too, and as they face their greatest turmoil in years, they appear to have come prepared: The government has spent years ensuring that the military’s top commanders are deeply invested in the status quo.”
  • “In a single day Mr. Maduro promoted 195 officers to the rank of general. Venezuelan generals, more than 2,000 strong, enjoy a range of privileges, from lucrative control of the food supply to favorable rates for exchanging dollars.”
  • “Eleven of the 23 state governors in Venezuela are current or retired generals, along with 11 heads of the 30 ministries, giving them an extraordinary stake in preserving the government’s control over the country.”
  • “And the defense minister, Vladimir Padrino López, an army general, has been granted an even more lucrative arrangement, with expanded powers to control the country’s ports, as well as parts of the oil and mining industries.”
  • “’Maduro has made sure to give many rewards to senior military officers in exchange for loyalty,’ said John Polga-Hecimovich, a political scientist who studies Venezuela at the United States Naval Academy. ‘While he is completely dependent on them to stay in power, they have much to lose if he is gone.’”
  • But…
  • “Most midlevel officers, however, are far removed from the high ranks or patronage systems on offer from the government. Instead, said Raúl Salazar, a retired general who served as defense minister under Mr. Chávez, they see a deepening poverty caused by the food and medicine shortages that are plaguing the country.”
  • “’Their families, their friends, their acquaintances, everyone is suffering and they begin to ask themselves if it’s getting better or worse,’ General Salazar said. ‘Everyone has the same voice that talks to them each day, and that is their conscience.’”