Saturday, January 6, 2018
Althouse Likes the Joviality and Lightweight Cruelty of This Morning's Trump "I am a Genius" Tweets
While mocking the triggered psychiatrists and favorably citing Scott Adam's assertion the tweets are "absolute genius"
Friday, January 5, 2018
Thursday, January 4, 2018
Wednesday, January 3, 2018
Grant's Interest Rate Observer
More China Creditor Concerns
Sweet and sour
Even in friendly markets, borrowing has its limits. That axiom is increasingly demonstrated by a trio of acquisitive and privately held Chinese conglomerates, all former high flyers who have run afoul of creditors in recent weeks.
Dalian Wanda Commercial Property, a subsidiary of tycoon Wang Jianlin’s Dalian Wanda Group (the largest property holder in China with over 300 million square feet under its dominion), saw its credit rating cut to double-B-plus from triple-B at Fitch today after the company missed a regulatory window (it expired on Dec. 31) to issue senior notes. Fitch notes that: “Wanda’s liquidity position may come under substantial pressure if its offshore syndicated loan lenders demand for early repayment and Wanda fails to meet these demands promptly; or it fails to raise sufficient offshore liquidity to repay the $510 million second tranche of its offshore syndicated loan due in March 2018.” Following its downgrade, the second since 2016, Fitch kept Dalian Wanda Commercial Property on watch negative.
Last week, Chinese state media website The Paper reported that Wanda’s Internet Technology subsidiary will cut at least 1,000 jobs this year (it currently employs about 6,000), while Variety suggests the total could be much higher: “Some employees who joined less than a year ago were asked instead to ‘resign’ from their current positions. Including these, the staff numbers could fall from 6,000 at present to just 300, a 95% reduction.” Qu Dejun, president of Wanda Internet Technology Group, confirmed on his WeChat social media account that: “The group is readjusting in order to better develop more quickly and in a healthy manner.”
Tech-focused LeEco, which American website CNET described in 2016 as an “Apple-Samsung-Netflix-Tesla mashup”, has left creditors and suppliers alike in the lurch after its listed subsidiary, Leshi, reported a RMB 637 million ($96 million) loss in the first half of 2017. In July, a Chinese court froze $180 million of assets owned by co-founder Jia Yueting and his wife following missed loan payments, while a month ago regulators ordered Jia to return to the country to attend to his unpaid debts. Instead, Jia authorized his wife and brother to negotiate on his behalf, writing on his Weibo social media account that he needs to remain in the U.S. due to the “immense work” that is required for his electric car startup, Faraday & Future, Inc.
The Financial Times on Dec. 26 noted how LeEco’s troubles shine a spotlight on China’s less than streamlined bankruptcy system. Dan Harris, a lawyer who specializes in China, told the FT that: “Near as I can tell, [the bankruptcy process] doesn’t really exist. It’s there on paper, and I vaguely recall hearing of a few cases, but for the most part, it is ignored.” Shaun Wu, a Hong Kong-based lawyer, added that: “Creditors feel they must move swiftly and aggressively to safeguard their interests in China. There is less of a willingness to stand in line and wait for everything to be sorted.”
Perhaps the most prominent of the now-flagging Chinese conglomerates is HNA Group Co. HNA, which jumped to 170th in the 2016 Forbes 500 list of the world’s largest corporations from 464th two years prior, reported $53 billion in revenues for 2016 while making high profile deals such as buying a 25% stake in hotel chain Hilton Worldwide Holdings, Inc. from the Blackstone Group LP for $6.5 billion in cash.
Financial gravity appears to be kicking in. After three of its subsidiaries (Tianjin Airlines Co., Hainan Airlines Holding Co., and Bohai Capital Holding Co.) abandoned plans to issue debt in December, the Wall Street Journal reported on Dec. 29 that HNA pledged its Hilton stake as collateral for additional funding from a lending group led by JPMorgan Chase & Co. Today, the WSJ reported that HNA is in arears on short term loans it obtained from individual investors, including its own employees, via JBH.com, its own online lending platform.
Christopher Whalen, publisher of the Institutional Risk Analyst, interrupted his vacation to tell Grant’s that the HNA saga is well worth keeping tabs on, as the aftermath of last fall’s 19th Party Congress and President Xi’s apparent consolidation of power may allow Beijing to avoid riding to the rescue:
The rise and fall of Chinese conglomerate HNA is instructive for investors and Sinologists alike. Neither a private company nor explicitly sovereign, HNA grew to gigantic size during China's period of financial liberalization. Now with newly enthroned Emperor Xi Jinping restricting financial activities abroad, HNA may be the first significant default event of 2018.
Tuesday, January 2, 2018
Here's one source of funds for paying for the wall:
Cash Remittances to Mexico Set $26B Record in 2017, Says Central Bank
Victor Davis Hanson/Never Trump National Review
The Great Political Experiment: From Hard Left Under Obama to Hard Right Under Trump
Grant's Interest Rate Observer.
Holders of 10-year German government bonds, which currently fetch a 0.47% nominal yield and a negative 1.2% real one, continue to show no evident concern. As CPI inflation pushes higher, borrowing costs hold steady.
Amid that modest but visible inflationary onset, the bond market’s ace in the hole may not stick around for too much longer. In an interview last week with Caixin Global, the European Central Bank’s Benoit Coeure hinted that the central bank is considering an exit: “Given what we see in the economy, I believe that there is a reasonable chance that the extension of our asset purchase program decided in October can be the last.”
At the tail end of the 1946-1981 bond bear market, investors increasingly referred to Treasurys (which featured, by the end of 1982, a 10.4% nominal yield on the 10-year note against 3.8% year-over-year CPI inflation) as “certificates of confiscation.” That phrase has been understandably mothballed in the intervening decades. In the case of German 10-year sovereigns, we say it’s time to take it out of layaway.
Ich bin ein bond bear
Last Friday’s release of German CPI for December surprised with a 1.7% year-over-year uptick, against the consensus of 1.5%. That pushed the average year-over-year rise in consumer prices at 1.8% for 2017, far above 2016’s 0.5% average and the 0.3% seen in 2015. Strip out energy prices, and 2017’s 1.6% mean compares to 1.2% over the prior two years.Holders of 10-year German government bonds, which currently fetch a 0.47% nominal yield and a negative 1.2% real one, continue to show no evident concern. As CPI inflation pushes higher, borrowing costs hold steady.
Amid that modest but visible inflationary onset, the bond market’s ace in the hole may not stick around for too much longer. In an interview last week with Caixin Global, the European Central Bank’s Benoit Coeure hinted that the central bank is considering an exit: “Given what we see in the economy, I believe that there is a reasonable chance that the extension of our asset purchase program decided in October can be the last.”
At the tail end of the 1946-1981 bond bear market, investors increasingly referred to Treasurys (which featured, by the end of 1982, a 10.4% nominal yield on the 10-year note against 3.8% year-over-year CPI inflation) as “certificates of confiscation.” That phrase has been understandably mothballed in the intervening decades. In the case of German 10-year sovereigns, we say it’s time to take it out of layaway.
Monday, January 1, 2018
On this day in 1863,
Lincoln Signs Emancipation Proclamation
Frees Slave in Confederate States Only - None in Union States
On this day in 1862, President Abraham Lincoln used his executive war powers as justification for issuance of the Emancipation Proclamation effective only in the states of the Confederacy and nowhere else in the United States. The proclamation effectively recast the Civil War as a fight against slavery and discouraged foreign powers from supporting the Confederacy.
Sunday, December 31, 2017
Who didn't see this coming?
Baltimore Residents Blame Record-High Murder Rate On Lower Police Presence Following Controversies
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