With faith quickly disappearing in the ability of Illinois and Connecticut to pay their general obligation debts, the states are employing a new method that draws directly from tax revenues to secure financing. The Wall Street Journal editorial board provides the example of Puerto Rico as a warning that this gambit may not work out as well as intended. The editors write: Detroit’s Chapter 9 bankruptcy in 2013 set a precedent by subverting GO bondholders to pay public workers and retirees. Prior to Detroit, creditors considered GO bonds sacrosanct and figured courts would compel local … [Read more...]
Archives for November 2017
Orders Stacking up for Tesla’s Semi-Truck
Major shippers like Wal-Mart and shipping company J.B. Hunt are ordering Tesla's recently showcased new semi truck. The Wall Street Journal reports the truck will run up to 500 miles on a single charge. Jennifer Smith writes: The Semi is designed to run up to 500 miles on a single charge, and incorporates Tesla’s semiautonomous driving system, which the company said could allow big rigs to travel in autonomous convoys with other of its trucks. The company did not provide a sticker price, but said the truck would be cheaper to operate than diesel rivals and could potentially cost less than … [Read more...]
Is Chinese Growth Running out of Steam?
Here Michael Pettis makes the case that China’s growth miracle has run out of steam. China’s 19th Communist party congress ended last month with an indication that Xi Jinping’s new administration plans to rein in debt by abandoning the country’s long-term economic targets and allowing gross domestic product growth to fall. Typically, analysts assume that changes in reported GDP reflect movements in living standards and productive capacity. In China, however, this is not the case. Local governments are expected to boost spending by whatever amount is needed to meet the country’s targets, … [Read more...]
Trust in Money, Store of Value
How is the trust level in our current monetary system as a “store of value?” Not good, especially if the price of bitcoin or record art sales are any indication of investors looking for places to stash their money. Da Vinci Christ Painting Sells for $450 Million Bloomberg's Katya Kazakina writes: “Jesus Christ.” That was the reaction of mega art dealer Larry Gagosian after a rediscovered painting by Leonardo da Vinci became the most expensive work ever sold, soaring to $450.3 million at a Christie’s auction in New York on Wednesday. Alex Rotter, the auction house’s … [Read more...]
November RAGE Gauge Tells Me Investors are Too Comfortable
My goal for you with my monthly RAGE Gauge is to provide you with a quick reading of how risk is being perceived right now—how risk is being interpreted. In my line of work, there is never enough attention given to downside protection—keeping what you have—too much energy is wasted thinking about keeping up with the other guy. In that world, the grass is always greener because of: How much “they” have, where their kids go to school, what they do for a living, and where they live. “They,” take up an enormous amount of energy. A more efficient use of energy focuses on what you do to … [Read more...]
Wal-Mart Shares Soar
Wal-Mart shares soared yesterday (up 10.9%) after the company reported its best sales in years. Sales at existing stores rose 2.7% in the latest quarter—the 13th consecutive quarter of gains and the fastest since May 2009. Wal-Mart is making an aggressive push online. Online sales are up 50% over the last year. The WSJ has more. The world’s biggest retailer posted its strongest quarterly U.S. sales growth in nearly a decade Thursday, boosted by a big jump in e-commerce and strong store traffic at a time when many traditional retailers are struggling to keep their business … [Read more...]
Malls: Back Already?
The financial press has been trashing malls for months now, but it doesn't make much to turn the tide. With a bid by Brookfield Property Partners to purchase the remaining shares of GGP, a REIT that is significantly invested in malls and retail operations, Wall Street is taking a second look at mall properties. Esther Fung writes: Shares of A-mall real-estate investment trusts Taubman Centers Inc., TCO -0.16%Macerich Co. MAC +0.32% and GGP all have risen between 14% and 24% since the start of November after having underperformed the broader REIT market since August 2016. “Two weeks ago … [Read more...]
Manufacturers Thrive in New Era
Attitudes are optimistic in the manufacturing sector. Owners of manufacturing businesses are excited to have an ally in the White House. Manufacturing employees are excited about increased hiring here in the U.S., in part thanks to rising wages for foreign workers. The rising wages and supportive environment for manufacturing are driving hiring and investment here in the U.S. Andrew Tangel and Josh Zumbrun report: Employment numbers point to the overall progress. The U.S. manufacturers have added 156,000 workers since Donald Trump was elected president in November 2016, according to … [Read more...]
Is This the Start of a Major Downturn or Just a Healthy Correction?
The FT reports on the sell-off in the $1.3 Trillion high-yield bond market. We wrote about the shifting landscape in the high-yield bond market last week. The high-volume sell-off in junk bond ETFs is continuing. High-yield bonds are on pace for their worst month since January of 2016, the month of the last major stock market correction. Even if you don’t invest in high-yield bonds, the market should be watched closely as it can be a harbinger of things to come in equity markets. Junk-rated debt has already lost 1.1 per cent in value so far during November, on pace for its worst month … [Read more...]
Total Buys $2 Billion LNG Business to Supply the Future of Power
Pointing to the increasing use of natural gas as a fuel for generating electricity, Total has purchased the LNG business of French utility Engie. Total is hedging its exposure to the oil market by diving deep into natural gas. Sarah Kent reports: The acquisition is a down payment on Total’s strategic bet that lower-carbon natural gas will replace coal and play a central role in future power supply. More than any other major oil company, Total has identified the power sector as a hedge against oil’s eventual decline and has been building a business around that strategy. “We think gas-to-power … [Read more...]