Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 363

Media worth consuming - June 2020

A monthly look at dozens of local and global media articles that often do not receive mainstream coverage in Australia.

Finance

Close to half of US retail tenants didn’t pay rent in April and May, kicking off a cascade of financial problems. As default notices from American landlords fly out the door, corporate bankruptcies soar. Rating agencies had given leeway to corporates in recent years, now they are set for a wave of catch up downgrades. The SEC has blocked bankrupt Hertz from selling almost certainly worthless shares to naive retail investors. US energy stocks are seeing wild trading in the lead up to filing for bankruptcy.

Chinese investors are taking losses on wealth management products and they aren’t happy. China’s banks are being pressured to make low rate loans to SMEs. German company Wirecard announced that its auditors couldn’t find €1.9 billion in cash it claimed to have and then its CEO was hit with a massive margin call. EY keeps getting caught auditing dodgy companies and attacking internal whistleblowers.

Ray Dalio has gone from “cash is trash” to being concerned about a “lost decade” for equity investors. New research shows that US private equity returns aren’t beating a comparable index, but they are creating an extraordinary stream of fees for managers and their advisors. A profile of the Silicon Valley billionaire who loves to point out the stupidity inherent in many investment firms. The revenge motivated buyout of StubHub right before lockdowns began will go down as one of the worst business deals ever. The author of the book 'Bailout Nation successfully applied for a government bailout for his business.

Calpers is adding leverage to its portfolio as it doesn’t think it can hit a 7% return target without it. Politicians have been pressing pension plan board members not to lower return assumptions. Distressed companies are using weak debt covenants to compel bondholders to take losses. Lenders pressuring companies can be good for operational efficiency and corporate governance. Well performing European banks are opting to leave existing hybrids outstanding rather than replace them with higher-yielding new issues. Japan’s Norinchukin Bank, who owns 10% of the US CLO market, announced it is pulling back its investments in the sector.

Politics and culture

The arguments that America has too many prisons and not enough police. The failure to prosecute violent and lethal actions by American police shows why qualified immunity has to go. In some US states, there’s a very different set of laws for police officers who commit crimes often allowing them to escape punishment. What do people want when they call to “defund the police”?

Black Lives Matter protestors are defacing monuments of people who opposed slavery. When the nicest country in the world has a problem with the Chinese Communist Party, it shows that the problem is the CCP.

A television reporter and crew were arrested for reporting on the Minnesota riots but promptly released after complaints were made to the state’s governor. American businesses have to hire their own security or arm themselves as police forces have failed to stop looters. A Philadelphia newspaper editor was ousted after using the headline “buildings matter too” to respond to looters and arsonists. The American press is destroying itself over trivial matters.

Economics and work

As the Federal Reserve has forced interest rates down, Americans have responded by saving more. Negative interest rates have been proven to harm growth, with the reasons for that quite straightforward. If you are going to use quantitative easing to finance deficits, at least use it to lower taxes as that is proven to create economic growth.

The Federal Reserve has front run treasury issuance pushing asset prices up, but that will reverse unless they print a lot more money. The Fed is pushing ahead with buying investment grade-rated corporate bonds, even though the sector was doing fine without it. With a lot of help from the Fed, high yield bonds are making a comeback. The Fed has openly confirmed it has no concerns with creating asset price bubbles. The hilarious Robin Williams comparison of junkies and markets addicted to central bank liquidity.

There’s a long road ahead for those trying to issue joint EU debt with four countries holding back, knowing that some recipient countries are likely to waste the funds provided. The EU is steam rolling through several economic taboos with its pandemic bailout debt. The ECB lent €1.3 trillion to banks at negative interest rates, with cheap funding encouraging banks to load up on sovereign debt.

Up to 68% of Americans receiving unemployment payments are receiving more than when they were working. Failed economists are claiming that looting is good for the economy. Keynesian economics is on its death bed. The back and forth arguments about modern monetary theory. The US government has a spending problem, driven by the soaring cost of social programs over the past 80 years. The growth in the US money supply looks like Argentina. Zimbabwe is experiencing hyperinflation, again.

Miscellaneous

70% of Sweden’s Covid-19 deaths were in nursing homes with the deceased previoously having had an average life expectancy of less than a year. A Seattle man left hospital after 60 days of treatment for Covid-19 with a $1.1 million bill. The science on how people transmit Covid-19 is becoming a lot clearer, helping guide ways to slow the spread. There’s tens of thousands of people willing to risk infection with Covid-19 as part of helping to develop a vaccine.

A 20-year-old amateur share trader committed suicide after seeing a minus US$730,165 balance on his account, an amount which is expected to have vastly overstated the eventual outcome from his options trading. Swiss police detained and took mugshots of an eight year old boy for trying to use toy money at a local store. Planes flying with few passengers are having unusual safety issues. In the 1990s Pepsi caused riots when it failed to payout $32 billion after it messed up a competition in the Philippines. Ageing wind farms can become far more productive with new turbines. A park in Oregon has been named after the time that the town blew up a dead whale.

 

Written by Jonathan Rochford of Narrow Road Capital. Comments and criticisms are welcome.

This article has been prepared for educational purposes and is not a substitute for professional and tailored financial advice. The accuracy of the material cannot be verified in all cases. Narrow Road Capital advises on and invests in a wide range of securities, including securities linked to the performance of various companies and financial institutions.

 

banner

Most viewed in recent weeks

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Latest Updates

Strategy

$1 billion and counting: how consultants maximise fees

Despite cutbacks in public service staff, we are spending over a billion dollars a year with five consulting firms. There is little public scrutiny on the value for money. How do consultants decide what to charge?

Investment strategies

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Financial planning

Reducing the $5,300 upfront cost of financial advice

Many financial advisers have left the industry because it costs more to produce advice than is charged as an up-front fee. Advisers are valued by those who use them while the unadvised don’t see the need to pay.

Strategy

Many people misunderstand what life expectancy means

Life expectancy numbers are often interpreted as the likely maximum age of a person but that is incorrect. Here are three reasons why the odds are in favor of people outliving life expectancy estimates.

Investment strategies

Slowing global trade not the threat investors fear

Investors ask whether global supply chains were stretched too far and too complex, and following COVID, is globalisation dead? New research suggests the impact on investment returns will not be as great as feared.

Investment strategies

Wealth doesn’t equal wisdom for 'sophisticated' investors

'Sophisticated' investors can be offered securities without the usual disclosure requirements given to everyday investors, but far more people now qualify than was ever intended. Many are far from sophisticated.

Investment strategies

Is the golden era for active fund managers ending?

Most active fund managers are the beneficiaries of a confluence of favourable events. As future strong returns look challenging, passive is rising and new investors do their own thing, a golden age may be closing.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.