Tag: WeWork

July 19, 2018

If you were only to read one thing…

Bloomberg – Panic Roils China’s Peer-to-Peer Lenders – Jun Luo, Alfred Liu, and Crystal Tse 7/16

  • “China’s savers are rushing to pull money from peer-to-peer lending platforms, accelerating a contraction of the $195 billion industry and testing the government’s ability to maintain calm as it cracks down on risky shadow-banking activities.”
  • “In some cases, savers are turning up at the offices of P2P operators to demand repayment, spooked by reports of defaults, sudden closures and frozen funds. At least 57 platforms have failed in the past two weeks, adding to 80 cases in June, the biggest monthly tally in two years, according to Shanghai-based Yingcan Group. The researcher defines failed platforms as those that have halted operations, come under police investigation, missed investor payments, moved into other businesses, or had operators flee with client money.”
  • “’Investors have lost confidence in the smaller platforms, because they have no idea if those companies will survive,’ said Dexter Hsu, a Taipei-based analyst at Macquarie Capital. Only a handful of the 2,000 or so remaining firms are likely to endure, he said.”
  • “China’s P2P industry, the world’s largest, is one of the riskiest and least-regulated slices of the nation’s sprawling shadow-banking system. A government clampdown has weighed on P2P platforms for two years, but the pressure intensified in recent months after China’s credit markets tightened and the banking regulator issued an unusual warning to savers that they should be prepared to lose all their money in high-yield products.
  • “The shakeout has cast doubt on the listing plans of several P2P lenders and underscores the delicate balancing act faced by China’s government as it tries to reduce moral hazard in the financial system without triggering a crisis. While there’s little sign that the P2P turmoil has spread to systemically important wealth-management products issued by banks, much of China’s $10 trillion shadow-lending system faces the same headwinds of rising defaults, slowing economic growth and official calls to end to implicit guarantees on risky investments.”
  • “China’s P2P platforms have about 50 million registered users and 1.3 trillion yuan ($195 billion) of outstanding loans, most of which have short maturities. Normally, savers have to wait for loans facilitated by the platforms to mature before getting their money back. But some are now trying to exit early by selling their rights to others at a discount, or by going to the platform’s offices to demand repayment.”
  • “The turmoil is also hurting companies and individuals who have relied on P2P platforms for financing. They include cash-strapped small businesses seeking working capital, individuals without a credit history, and, more recently, leveraged stock market investors and home buyers in need of down-payments.”
  • “Some P2P platforms were also raising funds illegally for their own use, while others were running Ponzi schemes that collapsed when the flow of new money halted, regulators have said. That helps explain why authorities have so far been steadfast in cracking down.”
  • “Last month, China Banking and Insurance Regulatory Commission Chairman Guo Shuqing warned that any savings or investment product with promised returns of more than 8% is likely to be ‘very dangerous’ and that investors should be prepared to lose all their money if advertised returns exceed 10%. The average yield on P2P loans was 10.2% in the first half, official figures show. Reported default rates vary from zero on the best platforms to 35% on the worst, according to National Internet Finance Association of China.”

Markets / Economy

WSJ – Daily Shot: Gold 7/17

 

WSJ – Daily Shot: Silver 7/17

WSJ – Daily Shot: NASDAQ Composite Index 7/17

 

Real Estate

Bloomberg Businessweek – Britain’s Online Shopping Boom Is a Bust for the High Street – Sam Chambers 7/10

  • “Online retailers typically benefit from lower overhead than their store-based counterparts, but in the U.K. that advantage is bigger than just about anywhere. The country has the developed world’s highest commercial property taxes, and in many areas those levies have jumped even as store sales decline, because land values have risen since the financial crisis. Last year, Tesco paid £700 million in property taxes, and J Sainsbury Plc, the No. 2 chain, paid £550 million. Amazon’s bill: £14 million.”

Economist – Big corporates’ quest to be hip is helping WeWork 7/12

  • “Research suggests that employees are happier in co-working environments like those run by WeWork. But the firm’s real genius is that it is also far cheaper for their employers. Property experts estimate that firms typically spend anywhere between $16,000 and $25,000 per employee on rent, security, technology and related office expenses. Mr Neumann insists they can get all of that from WeWork starting at $8,000 per worker. Efficient use of space is one reason. Ron Zappile of Colliers, a property-services firm, reckons that typical corporate offices use some 185 square feet (17 square meters) per employee. WeWork members get by on 50 square feet per head.”
  • “WeWork has more than 250,000 members from a range of industries (see chart) and expects to double revenues this year for the ninth straight year. Last year it made $886m in revenue, 93% of which came from memberships.”
  • But…”WeWork’s net losses also roughly doubled, however, from $430m in 2016 to $884m last year. As with many fast-moving startups, it explains its lack of profitability by pointing to big investments. It will open 15 new offices a month worldwide for the foreseeable future. Its bonds issued in April were rated as junk.”
  • “…the most important source of stability may well be a shift in its customers, from startups to big firms. A few years ago, WeWork’s business was comprised almost entirely of small fry. In the year to September the enterprise segment (firms with over 1,000 staff) grew by around 370%. As of June, big firms accounted for about a quarter of its membership and revenues. More than 1,000 companies now take anything from one to 12,000 desks. In June, Facebook asked WeWork for an entire building for several thousand workers.”
  • “The average enterprise lease is close to two years and many new ones are three to five years long. Whereas big firms, used to conventional office leases of 10-20 years, see WeWork’s contracts as flexible, the firm itself sees them as commitments that will help it weather a downturn.”

Cryptocurrency / ICOs

WSJ – Daily Shot: Barchart – Bitcoin 7/17

WSJ – Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy – Steven Russolillo and Eun-Young Jeong 7/16

Tech

Bloomberg Businessweek – China’s Technology Sector Takes On Silicon Valley – Peter Elstrom, Yuan Gao, and Xiaoqing Pi 7/10

China

FT – China money market funds’ rush into bank credit worries investors – Don Weinland 7/16

  • “Investors have warned of growing systemic risks in China’s $1.09tn money market fund industry, as funds buy up bank credit despite a surge in bad debt this year.”
  • “Comparably high yields and low risk at Chinese money market funds in recent years have made the industry a favorite among retail investors in the country. Assets under management have grown from Rmb600bn at the end of 2012 to an estimated Rmb7.3tn ($1.09bn) in March, making it the second-largest market in the world after the US.”
  • “But in recent months China’s central bank has tightened monetary policy and access to credit, forcing down the funds’ once-attractive yields. At the biggest funds, average returns have dropped to an annualized to 3.7% from about 4.5% at the start of the year.”
  • “In response, funds have rushed into bank credit, such as negotiable certificates of deposit, as a means to boost returns and continue attracting retail investments.”
  • “Investors are now warning that the push into bank credit comes just as regulators are forcing banks to recognize vast amounts of bad debts that were once hidden off their balance sheets, leading to greatly increased risk for the investments. Falling credit ratings at banks could force money market funds to exit their investments, something that could lead to a shock through the massive fund industry.”
  • “Ant Financial’s Yu’e Bao, with about $200bn under management, is the world’s largest money market fund. Last month it reduced the amount of money investors could withdraw within one day to Rmb10,000 ($1,498) per investor from Rmb50,000. About Rmb200bn flowed out of the fund between April and June. The company declined to comment.”
  • “The risks at the funds are centered around their source of high-yielding investments: credit from hundreds of small banks with weakening balance sheets.”

FT – China closes a fifth of foreign university partnerships – Emily Feng 7/17

FT – Hong Kong tightens screws on pro-independence party – Ben Bland 7/17

  • “The Hong Kong government is considering banning a pro-independence political party on unprecedented ‘national security’ grounds, a move decried by activists as the latest violation of the city’s promised freedoms and rights.”

India

NYT – In India, Summer Heat May Soon Be Literally Unbearable – Somini Sengupta 7/17

Other Interesting Links

Maps on the Web: Reddit – White Americans by State 2017 7/4

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July 5, 2018

Hope that you all had a nice 4th of July.

Worthy Insights / Opinion Pieces / Advice

Economist – At any given time in their lives, people have two dozen regular haunts 6/28

Economist – America Inc and the rage against Beijing – Schumpeter 6/28

FT – Lex in depth: Why WeWork does not deserve a $20bn price tag – Elaine Moore and Eric Platt 7/2

  • “WeWork’s steep valuation depends on a blinkered faith in its originality despite a crowded market of competitors. If the company’s equity value was based on the same multiple of sales as flexible workspace peer IWG (formerly Regus) it would be worth less than $3bn.”
  • “The company’s pitch is scale. WeWork envisions a world in which offices are so attractive that workers will choose to spend more time in them. Eventually, it pictures global cities of We-flats and We-offices, where members work out at We-gyms, learn at We-schools and network at We-events — all the while tracked by the We-operating system.”
  • “WeWork’s valuation comes courtesy of the deep pockets of Japan’s SoftBank and the Saudi-backed $100bn Vision Fund , which led a $3bn investment last year. That came with an additional $1.4bn raised for WeWork’s Asian subsidiaries. The fundraising round transformed WeWork into one of the world’s top 10 most valuable start-ups. Further financing from the Vision Fund, valuing WeWork at $35bn, has been mooted. This would exceed the value of SpaceX, Elon Musk’s space technology company.”
  • “In the meantime, WeWork needs financing. It is likely to require at least $2bn from investors in the next two years. To plug future outflows, it may seek far more. A successful initial public offering will require WeWork to convince investors that its value is based on more than giddy markets and a millennial-friendly aesthetic.”
  • “Unfortunately for WeWork, costs are growing just as steeply. Some look extravagant. Last year the group spent an additional $6.5m on events that included a weekend summer camp. The company justifies this as the price of growth.”
  • “However, WeWork’s valuation is based on its growth potential. Airbnb might therefore be a better comparison. It is valued at a higher $31bn. Yet even this is a more sober reflection of business than WeWork’s. The value is equal to 12 times trailing sales versus 20 for WeWork.”
  • “For now, WeWork is far from self-sustaining. The company lost nearly $1bn last year. Office occupancy at 82% is higher than IWG’s 75%. However, average membership fees are falling. There is little reason to think the decline will reverse while expansion is driven by Asia, where rates are lower.”
  • “Funding rounds were the only reason the company ended 2017 with cash of $2bn on the balance sheet. On FT estimates it is likely to need about $2bn more by the end of 2019.”

Markets / Economy

WSJ – Daily Shot: Deutsche Bank – US-Europe monetary policy divergence 7/3

WSJ – Where is Joblessness the Lowest? Hint: Cities With College Students and Tourists – Sharon Nunn 6/28

Real Estate

Bloomberg Businessweek – Startups Front Cash to Homebuyers in Bidding Wars – Noah Buhayar and Patrick Clark 6/28

  • “FlyHomes’ ability to turn clients into cash buyers exploits a quirk in the capital markets that’s arisen since the housing meltdown: Consumers are being put through more rigorous standards when they apply for a mortgage. Meanwhile, it’s comparatively easy for companies—even those with new, barely tested ideas—to get buckets of money from banks, venture capitalists, and other institutional investors.”
  • “Redfin CEO Glenn Kelman says these new ventures are part of a shift in how homes will be bought and sold. ‘There is just money coming out of every possible part of the world, and it isn’t going toward the consumer,’ he says. ‘It’s going toward real estate businesses who charge the consumer for access to that money.’”

Bloomberg – U.S. Retail Vacancy Rate Jumps on Toys ‘R’ Us Store Closings – Jordan Yadoo 7/2

  • Considering the headwinds of retail over the last few years, I’d say things are doing not too shabby considering it took the closure of Toys ‘R’ Us to push the absorption rate negative (granted local situations vary).

Bloomberg – Manhattan Homebuyers Demand Bargains, Walk Away-Anything But Overpay – Oshrat Carmiel 7/2

Environment / Science

Bloomberg – Stemming the Tide of Plastic Pollution – The Editors 7/2

Asia – excluding China and Japan

FT – Samsung finds unlikely ally in stance on worker safety – Song Jung-a 7/2

  • “S Korea commerce ministry backs view that transparency may compromise tech secrets.”

FT – South Korea to cap working week at 52 hours – Song Jung-a 7/2

  • “Cut from 68-hour maximum aims to improve life balance for country of workaholics.”
  • “The country is home to the longest working hours and highest suicide rate in the developed world. South Koreans put in an average of 2,024 hours in 2017, the second-most after Mexico among members of the Organization for Economic Cooperation and Development (OECD). But the long hours have not translated into better productivity, with the country’s per-hour productivity ranking near the bottom.”

WSJ – Go Home Already! South Korea Pulls the Plug on Overworked Desk Warriors – Timothy W. Martin and Yun-Hwan Chae 7/1

China

WSJ – Daily Shot: Shanghai Shenzhen CSI 300 Index 7/3

India

Bloomberg Businessweek – India’s Push to Fast-Track Bankruptcies – Iain Marlow 6/26

WSJ – Bankrupt Indian Companies Are Clogging the Economy-but Now the Clock Is Ticking – Corinne Abrams and Debiprasad Nayak 7/1

 

June 25, 2018

Worthy Insights / Opinion Pieces / Advice

WSJ – Anger Over Tourists Swarming Vacation Hot Spots Sparks Global Backlash – Rachel Pannett 5/22

  • “In Venice, Barcelona, Thailand and New Zealand, ‘overtouristing’ is straining local infrastructure and prompting restrictions; the ‘Lord of the Rings’ effect.”

Markets / Economy

NYT – Your Recycling Gets Recycled, Right? Maybe, or Maybe Not – Livia Albeck-Ripka 5/29

  • “Plastics and papers from dozens of American cities and towns are being dumped in landfills after China stopped recycling most ‘foreign garbage.'”

Real Estate

FT – How WeWork’s revenue-sharing leases could affect property investors – Aime Williams 6/21

  • WeWork is starting to work percentage rent deals with some of its landlords/co-investors.

Tech

FT – Mary Meeker warns tech giants that growth will be harder to find – Tim Bradshaw 5/30

  • “Veteran Silicon Valley analyst sees competition intensifying now half the world is online.”

Health / Medicine

FT – Spread of western lifestyle hampers battle against cancer – Darren Dodd 5/31

  • “The good news is that about 40% of cancer cases are preventable and that smoking, the biggest single cause, is in decline across much of the world. The bad news is that overall rates are shooting up as more countries adopt western lifestyles.”
  • “By 2035, the number of new cases is set to rise by 58% to 24m, according to a report from the World Cancer Research Fund.”
  • “’Over the next 20 or 30 years, unless anything is done to stop it, [obesity or being overweight] is going to overtake smoking as the number one risk factor for cancer,’ says Dr Kate Allen, executive director of science and public affairs at the WCRF.”
  • “The report is a synthesis of a decade of research on cancer risks with a new set of recommendations (see graphic) to minimize a person’s chances of developing the disease. It says 12 cancers are now linked to being overweight or obese.”
  • “’It has taken 40 or 50 years to make a big dent in tobacco consumption,’ Dr Allen says. In dealing with the problems of obesity, ‘it’s going to take at least that to get some traction,’ she adds.”

Canada

NYT – In Vancouver, a Housing Frenzy That Even Owners Want to End – Conor Dougherty 6/2

  • “Vancouver is so expensive that politicians want to tax its real estate market into submission, and many homeowners — who will lose money if home prices fall — think it’s the best idea they’ve heard in years.”
  • “Like many cities around the world, Vancouver is grappling with punishing housing costs that have pushed out large swaths of residents — and are causing distress among young adults who can’t afford rent today and take it for granted that they will never own a home.”
  • “Vancouver, surrounded by snow-capped mountains and wide maritime views, has never been especially cheap. But home and condominium prices are up by close to 16% over the past year, and about 60% over the past three, according to the Real Estate Board of Greater Vancouver.”
  • “What makes these gains so remarkable is that unlike Silicon Valley, London or New York — where the presence of high-paying tech and finance jobs helps explain housing costs — Vancouver has relatively low salaries. As part of their bid for Amazon’s second headquarters, Vancouver officials boasted about having ‘the lowest wages of all North American tech hubs’.”

May 15, 2018

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

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

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

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

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

Markets / Economy

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

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

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

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

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

Real Estate

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

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

Energy

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

Finance

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

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

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

Cryptocurrency / ICOs

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

Agriculture

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

Construction

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

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

Education

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

South America

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

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

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

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

Other Interesting Links

Cannabis Benchmarks – Weekly Report 5-11-18

May 9, 2018

Perspective

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

Economist – So long, farewell – Buttonwood 5/8

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

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

Markets / Economy

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

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

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

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

Real Estate

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

Energy

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

Finance

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

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

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

Agriculture

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

Construction

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

Education

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

China

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

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

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

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

 

April 30, 2018

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

Cheers,

Duff

Perspective

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

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

Markets / Economy

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

Energy

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

Finance

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

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

Environment / Science

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

Construction

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

China

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

Middle East

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

  • Very cool animation.

South America

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

April 27, 2018

Perspective

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

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

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

Real Estate

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

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

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

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

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

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

Energy

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

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

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

Health / Medicine

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

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

China

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

April 25, 2018

If you were only to read one thing…

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

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

Perspective

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

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

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

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

Markets / Economy

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

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

Real Estate

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

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

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

Energy

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

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

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

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

Finance

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

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

Sports

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

China

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

Japan

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

March 28, 2018

Worthy Insights / Opinion Pieces / Advice

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

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

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

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

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

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

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

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

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

Markets / Economy

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

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

Real Estate

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

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

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

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

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

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

Cryptocurrency / ICOs

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

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

Fishing

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

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

 

February 20, 2018

Perspective

Tax Foundation – State Corporate Income Tax Rates for 2018 – Morgan Scarboro 2/7

Visual Capitalist – Mapping the World’s Wealthiest Cities – Jeff Desjardins 2/16

WSJ – Daily Shot: Credit Suisse – Timeline of Relative Market Capitalizations Since 1900 2/16

WSJ – Daily Shot: TRACE – NRA Contributions to select political candidates 2/15

Worthy Insights / Opinion Pieces / Advice

University of Oxford – Stranded Property Assets in China’s Resource-based Cities: implications for financial stability? – Gerard Dericks, Robert Potts, & Ben Caldecott February 2018

The Atlantic – The Plot Against America – Franklin Foer – March 2018

  • In depth profile on Paul Manafort.

The Atlantic – How WeWork Has Perfectly Captured the Millennial Id – Laura Bliss – March 2018

  • “The company sells a somewhat uneasy combination of capitalist ambition and cooperative warmth.”

WSJ – Growth Is the Missing Ingredient for Kraft Heinz – Aaron Back 2/16

Markets / Economy

FT – Food industry giants struggle to keep up with changing tastes – Anna Nicolaou 2/16

  • “Sales woes at Kraft Heinz, Danone and others force groups to cut costs and eye deals.”

Real Estate

CoStar – Oaktree Becomes Latest Investment Manager to Launch Non-Traded REIT, Looking to Raise up to $2 Billion – Mark Heschmeyer 2/16

  • “Oaktree joins a growing list of major investment firms to expand into non-traded REIT fundraising. The Blackstone Group kicked off the trend in September 2016. So far, other big investors that have followed its lead into the non-traded REIT sector include Nuveen’s TH Real Estate, BGC Partners’ Cantor Fitzgerald, Starwood Capital Group, KKR & Co., and TPG Capital.”

WSJ – New York’s Commercial Property Slump Shows Signs of Slowing – Keiko Morris 2/11

Finance

Bloomberg – Hedge Fund Startups in Asia See Signs of Revival – Bei Hu and Klaus Wille 1/21

WSJ – The Rise of Private Assets Is Built on a Mountain of New Debt – Paul J. Davies 2/15

Cryptocurrency

WSJ – Daily Shot: Bitcoin 2/15

Tech

FT – SpaceX joins race to make web truly worldwide – Richard Waters 2/15

  • “SpaceX will on Saturday officially enter the race to bring internet access to all parts of the earth’s surface with the planned launch of its first test satellites for a globe-encompassing communications network.”
  • “The latest trial from Elon Musk’s private space company is a world away from last week’s spectacular first launch of Falcon Heavy, the world’s biggest rocket. Undertaken with none of the Tesla chief executive’s usual showman flair — he has not even mentioned it on Twitter — it is an early technical trial for a communications service that could be years from completion.”
  • “If successful, however, SpaceX has said it plans to start launching its first commercial satellites next year, with a constellation of more than 11,000 circling the earth in low-earth orbit by the time the network is complete in 2024.”
  • “SpaceX’s application for approval to test a satellite internet service from the Federal Communications Commission (FCC) is one of 12 made to the US regulators, highlighting the extent of the potential competition.”
  • “SpaceX plans to connect its constellation of satellites to form a so-called mesh network, passing information among them and blanketing the earth.”

Health / Medicine

FT – Good bacteria can help brain function better – Clive Cookson 2/15

  • “Researchers are discovering remarkable new links between gut bacteria and the brain. Problems from poor sleep to memory loss could be helped by manipulating the microbiome, the trillions of bacteria living inside healthy human bodies, the American Association for the Advancement of Science heard on Thursday.”