Wednesday, May 20, 2020

"China updates its ‘Art of (Hybrid) War’"

From the Asia Times, May 19:

Chinese General Qiao Liang argues, 'If we have to dance with the wolves, we should not dance to the rhythm of the United States' 
In 1999, Qiao Liang, then a senior air force colonel in the People’s Liberation Army, and Wang Xiangsui, another senior colonel, caused a tremendous uproar with the publication of Unrestricted Warfare: China’s Master Plan to Destroy America.

Unrestricted Warfare was essentially the PLA’s manual for asymmetric warfare: an updating of Sun Tzu’s Art of War. At the time of original publication, with China still a long way from its current geopolitical and geo-economic clout, the book was conceived as laying out a defensive approach, far from the sensationalist “destroy America” added to the title for US publication in 2004.   

Now the book is available in a new edition and Qiao Liang, as a retired general and director of the Council for Research on National Security, has resurfaced in a quite revealing interview originally published in the current edition of the Hong Kong-based magazine Zijing (Bauhinia).

General Qiao is not a Politburo member entitled to dictate official policy. But some analysts I talked with agree that the key points he makes in a personal capacity are quite revealing of PLA thinking. Let’s review some of the highlights.

Dancing with wolves
The bulk of his argument concentrates on the shortcomings of US manufacturing: “How can the US today want to wage war against the biggest manufacturing power in the world while its own industry is hollowed out?”

An example, referring to Covid-19, is the capacity to produce ventilators: “Out of over 1,400 pieces necessary for a ventilator, over 1,100 must be produced in China, including final assembly. That’s the US problem today. They have state of the art technology, but not the methods and production capacity. So they have to rely on Chinese production.” 

General Qiao dismisses the possibility that Vietnam, the Philippines, Bangladesh, India and other Asian nations may replace China’s cheap workforce: “Think about which of these countries has more skilled workers than China. What quantity of medium and high level human resources was produced in China in these past 30 years? Which country is educating over 100 million students at secondary and university levels? The energy of all these people is still far from being liberated for China’s economic development.”....
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ICYMI: Credit Suisse Updated Their "Supertrends"

Probably a good idea.
First up, The Hindu's BusinessLine, May 6:

Credit Suisse updates its Supertrends for long-term investments amid Covid-19
Global wealth management company Credit Suisse has recently published its annual update to the Supertrends, its framework for long-term thematic equity investments in focusing on evolving investment trends amid Covid-19.
The Supertrends which were first introduced in 2017 have updated taking into account how the Covid-19 pandemic has upended the global economy.

“Our normal way of life has ground to a halt because of the coronavirus pandemic. This crisis is challenging existing systems and structures, sowing the seeds for further change ahead as we uncover limitations in how we learn, work and live. Our Supertrends continue to evolve with the changing world around us, and we believe that they remain compelling investment themes for today and the future,” said Michael Strobaek, Global CIO, Credit Suisse.

According to the report, the pandemic has reiterated the importance of the core five long-term investment trends while adding a sixth trend on climate change.

“Climate change – Decarbonizing the economy” trend is based on the investment case for companies that are involved with the transition to a less carbon-intensive world economy. The key areas of focus within this trend are carbon-free electricity production, transportation, oil and gas transition pioneers, and agriculture/food production.

Credit Suisse’s “Anxious societies – Inclusive capitalism” trend “reflects the fact that popular discontent is now focusing more clearly on issues at home, in particular inequalities, rather than on perceived outside threats and a move toward protectionism.”....
....MORE

If interested, here's the CS press release with the link to the update.

"China could face soybean supply issues in Q4 on US-China tensions: sources"

From S&P Global Platts, May 18:
Highlights
Trump threatens to scuttle Phase 1 deal on COVID-19 spread
Brazilian soybeans stock expected to ebb by October
New Delhi — China -- the world's largest soybeans importer and crusher -- could face beans supply issues in the fourth quarter of 2020 due to the US-China tension over COVID-19 and dwindling Brazilian soy stocks, market analysts told S&P Global Platts.

The Asian nation processes over 80% of imported beans into animal feed to fulfill its burgeoning domestic meat production and consumption needs.

China is forecast to import 96 million mt of soybeans and crush in the domestic market 93 million mt, up 4% and 7.5% year on year respectively, in marketing year 2020-21 (October – September), as its livestock sector works to rebuild hog and sow herds decimated by the African swine fever epidemic in 2019, according to the US Department of Agriculture's May supply and demand report.

The Chinese crushing industry is heavily dependent on Brazilian and US soybean imports to meet its crushing needs as its domestic soy output barely fulfills 20% of crush demand, a Chinese trader said. Both Brazil and the US account for over 80% of soybeans supply to the world.
On average, China buys 60% of beans from Brazil and 30% from the US annually, customs report said.

In the first half of a calendar year, Chinese crushers buy more Brazilian soybean shipments, coinciding with the South American country's harvest. In the latter half, while Brazilian soy stocks start to dwindle, China starts buying more US beans.
US-CHINA TENSION Two of the world's biggest economies have been in loggerheads over origin and mismanagement of the coronavirus pandemic. While Trump administration has blamed China for the pandemic deaths and threatened punitive actions, the Chinese government has responded with counter-allegations of conspiracy and rhetoric. ....
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Residence of Both Roger Moore and Lord Lucan Up for Lease.

I thought Lucan had been spotted in South Africa.
Anyhoo, this is why we like Sir Roger:
 “I enjoy being a highly paid actor.” He added: “It’s easy to sit in relative luxury and peace and pontificate on the subject of the Third World debts,”
From The Steeple Times:


Bonded to a Short Lease
Eaton Square apartment in a Grade II* listed building that has been home to both Bond star Sir Roger Moore and aristocrat-who-went-missing Lord Lucan for sale for staggering sum given it is on a lease of just 15 years
Best known for playing the British secret agent James Bond in seven feature films from 1973 to 1985, Sir Roger Moore KBE (1927 – 2017) once remarked: “I enjoy being a highly paid actor.” He added: “It’s easy to sit in relative luxury and peace and pontificate on the subject of the Third World debts,” though in his various homes in such places as London, Monaco and Switzerland, he certainly illustrated that he took the bit about opulence seriously indeed.

Now, someone with aspirations to live like “the definitive Bond” has the opportunity to purchase an apartment in an Eaton Square building where not only he resided, but one that was also a childhood home of the most famous aristocrat to go missing ever, the 7th Earl of Lucan (born 1934, last seen alive in 1974, declared dead in 2016).

John Bingham, better known as ‘Lucky’ or Lord Lucan, is said to have returned to London from wartime exile in New York in February 1945 with his siblings to find: “As they walked past their home at Cheyne Walk, they realised the whole building had been bombed. Their other family home at 22 Eaton Square had no windows due to the blow of a bomb and rationing was in full swing.”

The apartment available now has windows complete with actual glass in-situ and is situated in what was once a single-family residence. It extends to 927 square foot and consists of a reception room with open plan kitchen, two bedrooms, one bathroom and one shower room. There are wooden floors throughout and the space has air conditioning also....
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Coming to Auction, May 28: "The bizarre tale of the world’s oldest cognac"

From New Atlas:

https://assets.newatlas.com/dims4/default/acc63cc/2147483647/strip/true/crop/3646x2431+0+0/resize/1200x800!/format/webp/quality/90/?url=http%3A%2F%2Fnewatlas-brightspot.s3.amazonaws.com%2Ff1%2F72%2F77c02f614993b238bf8af7418e93%2Fgautier-cognac-worlds-oldest.jpg
Only three bottle were known of the 1762 Gautier Cognac. The bottle pictured was auctioned by Bonhams in New York on April 30, 2014, selling to Polish company Wealth Solutions for US$59,500 and has subsequently been opened and its contents dispersed into a range of high-priced merchandise - watches, coins and fountain pens. Another of the bottles is now in the Gautier Museum and can be expected to remain there for the foreseeable future. The third and largest bottle will sell at auction on May 28, 2020. It is the only publicly available bottle of the world's oldest Cognac, and competition to own it is expected to be ferocious.
The only remaining bottle of the world’s oldest cognac will sell at auction next week, and will almost certainly set a new price record for a bottle of the famous French brandy. Like many of the world’s most expensive cognacs, the bottle of Gautier Cognac was made prior to the phylloxera plague that wiped out Europe’s grapevines in the late 19th century.
Indeed, this cognac has been authenticated as being a 1762 vintage Gautier Cognac, which means it was distilled 258 years ago during the reign of King Louis XV of France, nearly three decades before the French Revolution of 1789.

Three bottles (two small and one large) of the rare Gautier Cognac 1762 were discovered, having been held in the same family for generations with their original labels attached.
The bottles can been traced back to the 1880s at Lachaise, a town in the Cognac region of France, and were owned by the Donsir family. The glass bottle containers date from around 1840, at which time they were filled with a cognac distilled by Cognac House Gautier in 1762....
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The Rent Is Getting Paid. How?

From CityLab (now a Bloomberg property), May 8:

Four out of five apartment renters in the U.S. were able to make their rent payment in May. But the data only tells part of the story.
Dennis Schvejda, a landlord who owns two apartment buildings with 16 units in Walton, New York, was worried going into May. His tenants are of modest means; rents at his units average about $550 a month. After expenses — which include maintenance and utilities as well as county, town and village taxes — his taxable apartment income is about $115 a week, he says. With the U.S. facing unprecedented job losses and the steepest economic reversal since the Great Depression, he didn’t know if the May rents would be coming. If not, he says, he would have been forced to sell.

To Schvejda’s surprise, May rent was better than April. All but two of his tenants were able to fully pay their rent on time, and one tenant repaid the April payment they had missed. “With Upstate New York beginning to open for business soon, I’m hopeful that my extreme concern about nonpayment of rent was overblown,” he says.

While employers cut 20.5 million jobs last month, most apartment renters nevertheless managed to pay the May rent, according to figures released by the National Multifamily Housing Council on Friday. By May 6, only 19.8% of renters of the nation’s 11.5 million apartment units had failed to pay rent. That’s a surprising figure — not just given the double-digit unemployment rate, but because May 2020 rent payments roughly line up with May 2019.

“Residents and owners are working together with payment plans, allowing credit card payments and other flexible options,” says Doug Bibby, president of the National Multifamily Housing Council. “But a key question is how long will renters be able to continue to rely on unemployment insurance, draw upon savings, or utilize credit cards. This is why Congress must pass legislation to provide direct assistance to renters in the next coronavirus aid package.”

These figures offer only a snapshot of the uncertainty facing renters. The council tracks data for market-rate apartments, which means the numbers exclude tens of millions of renters who live in single-family homes or subsidized rentals. Still, the figures show that apartment renters are making good so far — which for the unemployed means dipping into savings, using one-time stimulus checks, or lucking out in the long waits to receive unemployment benefits....
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Typhoon: "Amphan Pushing Wind, Rain, and Potentially Fierce Surge into Eastern India and Bangladesh"

From Weather Underground, May 19, 2020, 10:26 PM EDT:
Outer rainbands of Tropical Cyclone Amphan were lashing the east coast of India on Wednesday morning IST as the sprawling storm headed for a Wednesday-evening landfall just south of Kolkata. At 00Z Wednesday (8:30 am IST), the Joint Typhoon Warning Center rated Amphan’s top (1-minute) sustained winds at 95 knots, making it a high-end Category 2.
Amphan was centered about 240 miles south-southwest of Kolkata or about 180 miles south-southwest of the West Bengal coast, moving north-northeast at about 10 mph.

Even on the weaker west side of Amphan, the Indian state of Odisha was feeling the storm’s power. Winds gusted to 66 mph at Paradeep around 01Z (6:30 am IST), with a 24-hour rainfall total of 208 mm (8.19”) through 02Z, according to IMD.

With much of the western side of Amphan’s circulation inland across Odisha, and with wind shear on the increase, Amphan’s top winds were predicted weaken a bit more by landfall. However, Amphan continues to pose a major storm-surge threat to coastal areas of India’s West Bengal province and western Bangladesh. Amphan has been pushing immense amounts of water toward the northern end of the shallow Bay of Bengal since its rapid intensification into a large Category 5 cyclone on Sunday into Monday local time. There is a great deal of momentum in the surge pushed by large, powerful storms like Amphan as their peak winds weaken but their overall wind fields expand, as evidenced by 2008's Hurricane Ike in Texas and 2012's Hurricane Sandy in New Jersey and New York.

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"Beyond Meat Gets a New Fan Who Says the Stock Can Rise 24%" (BYND)

And if governments begin mandating you eat their stuff, even higher.
(I'm just crabby because it was looking like a breakdown a couple days ago)

From Barron's, May 19:
Broker BTIG initiated coverage of Beyond Meat shares on Tuesday with a Buy rating and a Street-high $173 price target. It is a bullish call . The price target is almost 40% higher than the next highest analyst target price .

Shares (ticker: BYND) were higher on the news, rising 7.7% to $140.08 by midmorning. The stock always reacts to news flow more than company fundamentals. That is something bullish and bearish investors should take note of.

After recent gains, the stock has arrived at an interesting place. Only a few analysts, out of more than 20 , rate shares Buy and, with the exception of BTIG analyst Peter Saleh, they have price targets below where the stock trades. It appears that even the bulls see stock declines coming.

In fact, the average analyst price target is about $90 a share, about 35% below recent levels. That isn’t typical. The average analyst price target for stocks in the Dow Jones Industrial Average imply about a 13% gain. All but one stock in the Dow have price targets above where shares currently trade. Analysts expect stocks to go up over time....
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In pre-market trade the stock is up $4.10 (3.01%) at $140.30 after closing yesterday at $136.20 +$6.17 (+4.75%)

Recently: May 18
Questions Americans Want Answered: Will The Bump In Beyond Meat's Sales Continue? (BYND)
May 14
Thinking Of Saying Goodbye To Beyond Meat (BYND)
Dear BYND, it's not you, it's me.
A bearish engulfing day yesterday followed by an uninspiring pre-market move higher today:


BYND Beyond Meat, Inc. daily Stock Chart
 

Tuesday, May 19, 2020

"Why Are China's Property Giants Buying Pig Farms?"

As my Chinese friends say: "Chinese people like pork".
They also say that if I was a little bit smarter I could be Chinese.

From Bloomberg, May 20:
This month, China Vanke Co., the third-largest Chinese home builder, announced that it plans to hire an experienced pig-farm manager. This wasn’t some new corporate motivational gimmick. Vanke really aims to start raising pigs — 250,000 a year, in fact.

It may seem like a strange way to diversify for a company previously renowned for its work with prefabricated concrete. But as China’s real-estate market goes into a deep freeze, strong demand for its favorite protein is proving irresistible to companies better known for clearing land than cultivating it. As is so often the case in Chinese real estate, however, things aren’t entirely what they seem.
Even before the coronavirus, China's property developers were struggling amid a slowing economy and heavy debt burdens. The pandemic made everything worse: In the first two months of 2020, net homes sales plunged by 35% and 105 small and mid-sized real-estate firms went bust. In March, Vanke's chairman flatly stated that "survival is a real issue now" as the company warned that it would be late delivering 39,000 homes due to construction delays. Within weeks, the company was looking for qualified pig farmers.

Ignore, for the moment, that Vanke is a property developer, and this has a certain logic to it. In a given year, China consumes about half of the world's pork. Pigs are such an important staple that the government maintains a strategic pork reserve. And thanks to an outbreak of African Swine Fever in 2018, which killed as much as 60% of the country's sow herd, prices have been soaring.

What was bad for consumers has been a boon for China's biggest pork producers. Between August 2018 and March 2020, shares in Muyuan Foodstuff Co., China's second biggest hog producer, surged 345%. Today, the market value of the country’s biggest pig producers approaches that of its top real-estate developers....
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Maybe Stanley Ho's youngest son could do something similar to generate a bit of cash flow as he rides out his top-tick purchase (SCMP, Feb. 2020):
Casino tycoon Stanley Ho’s son paid US$64 million for Hong Kong house days before coronavirus gathered pace 

Forget Faux and Farmed Fish: $1 Trillion Awaits Those Who Crack The Cellular Fish Business

From The Fish Site:
A compelling case for cellular aquaculture
[climateer here, I thought putting the 'trillion' in the headline was pretty damn compelling]
Seafood that has been produced in laboratories directly from fish cells could be worth more than the lab-grown or plant-based meat in time, with a $1 trillion market ready to be exploited.

So argues Paul Cuatrecasas, founder and CEO of Aquaa Partners, who thinks that “the next major revolution to our society – like the change from the horse and cart to the automobile – is probably going to be in food.”

Speaking in a webinar entitled “COVID-19 – accelerating change in the food industry: how the foodtech sector can help strengthen the industry’s resilience to future shocks”, Cuatrecasas delivered a compelling argument that a number of “small start-up companies in food today are going to change our world, it’s just a matter of time.”

In particular, the author of Go Tech or Go Extinct focused on plant-based and lab-grown meat and fish producers – highlighting the meteoric rise of a number of companies in these fields.
Plant-based proteins “Plant-based protein has really taken off in the last few years, with Beyond Meat doing an IPO last year and then Impossible Foods launching the Impossible Burger in Burger King. In April 2019 it announced it was launching in 57 Burger King stores in St Louis – it was so successful that it increased footfall by 15 percent in one month, which blew away any other experience that Burger King had ever had in any of its 7,000 stores in the US,” he explained.

“They expected it would take a year or nine months, but after 1 month they decided to roll it out nationally. That’s how popular it was,” he added.
Impossible Foods, he pointed out, recently launched in Kroger, while Beyond Meat is now in “many, many stores” and is valued at $8 billion, despite only having a few hundred million in revenue, while Tyson Foods – one of the largest meat processors on the planet – has $40 billion in revenue but is only valued at $16 billion.

“Beyond Meat, this small little plant-based company, is already valued at half one of the largest meat processors in the world,” he pointed out.
He added how Impossible Foods just raised $500 million, in the middle of the COVID-19 pandemic. It has already raised $1.3 billion and has a mission to replace the use of animals as food by 2035.
“You’ve got to give that company the benefit of the doubt,” he predicted.

Lab-grown meat
Cuatrecasas believes that, while labmeat companies might be “2-3 years behind” the plant-based producers, in the long run they “might be even more powerful”...
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Shipping: "Carriers are winning the freight rate battle" (but what about dry bulk?)

Turn half the tanker fleet into floating storage to maintain upward pressure on rates for the other half; do the same with container ships by slowing transit times e.g. the long way round Africa vs the canal.*
Dry bulk? Pray that China's recovery is real and inbound traffic is not just restocking at lower prices.**
From Splash 24/7:
Hapag-Lloyd impressed analysts last week by keeping its full-year financial guidance despite the deleterious effects caused by Covid-19.

Part of the reason for this upbeat forecast was in the carriers’ collective ability to keep rates high in recent weeks, something analysed in the latest report from Danish container shipping consultants, Sea-Intelligence.

“Carriers have been very good at maintaining freight rates – and net of fuel, spot rates are actually 25-40% up in some trades compared to last year,” Sea-Intelligence noted, highlighting the “rapid and hard tactical capacity cuts” – the blank sailings – which have done so well in preserving the bottom line of most of the global carriers this year....MORE
*gCaptain:
Suez Canal Set to Lose $10 Million from Ships Taking the Long Route

**From Reuters India, May 18: 
China targets Australian barley, but what matters is coal, LNG, iron ore
If China was looking to send a political message to Australia by effectively banning the import of a commodity, then barley fits the bill almost perfectly.

China on Monday imposed what it termed anti-dumping and anti-subsidy duties totalling 80.5% on Australian barley imports from May 19, a move likely to end trade that has been worth between $980 million and $1.3 billion in recent years.

Australia’s official reaction has so far been muted, with Agriculture Minister David Littleproud saying the government will consider approaching the World Trade Organization for a ruling on China’s action.

The official reason for the tariffs is that Australia is dumping barley and damaging China’s domestic industry. Finding anyone who believes this is the sole motive behind the duties would be a challenge.
Rather, the move is seen as Beijing’s ongoing expression of displeasure over Canberra’s role in pushing for an international investigation into the origins of the novel coronavirus, and China’s initial handling of the outbreak that has turned into a pandemic, slamming economies around the world.
Beijing has already suspended imports from four of Australia’s largest meat processors, affecting about 20% of the country’s beef exports to China, while its ambassador to Canberra has hinted at wider actions.

The action on barley fits a pattern of Chinese diplomacy, whereby countries that offend Beijing are punished as a lesson, and hopefully brow-beaten into submission.

Now that Australia’s call for an international probe of the coronavirus has been taken up by numerous other countries, Beijing may feel it has done enough, for now.
While Australia’s barley farmers will undoubtedly be impacted by the tariffs, and may not easily find alternative markets, it’s probably more important what China hasn’t done.

Barely represents a miniscule part of Australia’s overall trade with China, and is a commodity that Beijing can easily source from other suppliers.

Australia’s total exports to China were worth A$194.6 billion ($126.5 billion) in the 2017/18 fiscal year, according to official data, meaning barley is around 0.5% of the total.

If China was determined to send a stronger message to Canberra it would no doubt target exports that were of more value, but that it could still source competitively from other suppliers.

IRON ORE ELEPHANT
Top of mind is liquefied natural gas (LNG), of which Australia is the world’s top producer, accounting for 9.7 million tonnes of China’s imports of 19.8 million tonnes in the first four months of the year, according to Refinitiv ship-tracking data....
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And via Hellenic Shipping News, May 13: 
Weekly Dry Time Charter Estimates, May 13 2020
Another negative week for the capesize period market, few fresh fixtures have emerged as, unusually for this time of year, the market continues to move lower with little hope of improvement in the near future....MORE

"Rabobank: A Broad US Dollar Shortage Would Erupt If There Is A New Trade War With China"

The world does not need a more expensive dollar.
From ZeroHedge, May 14:
Submitted by Michael Every of Rabobank
Hand A, Hand B, Handout
Yesterday saw Fed Chair Powell in the spotlight, and he had a few key things to say. First, things are looking grim for the economy. Rather than merely cheer-leading that H2 and 2021 were going to see a V-shaped US recovery he stated “the path ahead is both highly uncertain and subject to significant downside risks.

The UN would agree, with what looks like a vast underestimate that 130m people may slip into poverty globally in the wake of the virus: we could actually see that happening in just one or two large economies if things aren’t handled right. Even Australia just saw a jobs number of -594K, even worse than expected, and the US equivalent of nearly 8 million. (The wunderkind at the ABS did manage to replicate their usual monthly statistical bafflement, however, in showing that the unemployment rate only rose from 5.2% to 6.2% vs. 8.2% expected. *Sigh*.)

However, Powell dismissed the need for negative interest rates, even if US futures markets have been flirting with the idea, adding that the evidence that they are effective as policy “is very mixed”. That’s being generous given negative rates have failed to generate a recovery in Japan or Europe, and technically are a form of partial default reflecting that there is just too much private-sector debt out there.

Then Powell made clear that the Fed can only lend, not spend, and that the path forward needs to be fiscal. Indeed, “Additional fiscal support could be costly, but worth it,” he added. Indeed. And what a refreshing change from the economic illiteracy displayed by Trump economic advisor Stephen Moore, who talking on The Hill argued that state spending can never create a job or produce any kind of recovery because it just moves money from one hand to another. Is this mantra really what they are thinking in the White House? ‘Moore is less’?

Moore openly implies if a bank makes a loan to company A for project X, creating USD de novo to do so, and that new USD debt/money circulates around the economy, then this is economic growth – even if that loan has to be paid back with interest from within the same economy (so from hand A to hand B). Yet if a government issues a bond for project Y, which the central bank buys with USD created de novo, and that new USD debt/money circulates around the economy, this is NOT economic growth – even when the debt carries almost no interest and/or does not have to be paid back at all in some cases. (Even Italy, within the straightjacket of the Euro, which the German constitutional court wants to tighten the straps on further, is expanding state spending by EUR55bn: yes, it’s completely inadequate – but it will help growth.)

This is not to say that all state spending is good, or useful, or even necessary; this is not to say monetization is how we should all start our day. Yet not all private borrowing is good, or useful, or even necessary – and they can’t monetize in an emergency. To not understand the role of government stimulus in this new age of MMT and unprecedented socio-economic crisis surely displays an awesome political tin ear or an iron skin, or both. (On which note, the UK Daily Mail yesterday flagged that the currently very generous British government is going to tighten its belt post-Covid, with pay freezes --even for the heroes currently getting clapped? I guess claps are free…-- and tax hikes. Won’t that help a struggling, demand-weak economy?)

Powell, by contrast, does perhaps get it(?) However, what’s interesting is he is saying this even as stocks are still riding high overall, the last few days aside, with debates over whether this is a bear-market rally or a new bull market.

So let’s be a little cynical. Perhaps --just perhaps-- the Fed is happy to see a larger fiscal deficit because it knows this not only counters a huge shift to net saving by the private sector as unemployment soars and corporations sit on their hands or downsize; it also helps keep the US external balance in the negative. In other words, the larger the US fiscal deficit, the larger the current-account deficit, and the more USD might be able to leak out to emerging markets. That is likely going to matter again soon....
....MORE

In 1994 Jeff Bezos Pitched 60 People To Invest In Amazon (AMZN)

Following up on the post immediately below.*
The day this story was published AMZN closed at $1,460.09 vs. today's last trade at $2,476.23 up 49.97 (+2.06%)
From the Guardian, 25 Apr 2018:
In 1994, Jeff Bezos held 60 meetings with family members, friends and potential investors in an attempt to persuade them to invest $50,000 (£35,000) in his revolutionary idea to create an online bookshop. He failed to convince 38 of them, and 24 years later some of them still cannot bring themselves to talk about what life might have been like if they had taken a punt on Bezos and this “Amazon thing” that the then 30-year-old hedge fund manager wouldn’t shut up about.

“I’m in touch with a few of them now,” Bezos revealed in an on-stage interview at a charity dinner in Washington DC last year. “It’s kind of a study in human nature ... Some of them take it in their stride, and they recognise that they actually have ridiculously happy lives. [But] others of them just cannot talk about it – it’s too painful.”

That pain comes from knowing that they opted out of the chance to become billionaires. Each of the 22 investors – who included Bezos’s parents, his younger brother Mark and sister Christina – were granted just under 1% of Amazon’s stock on average. If they held on to all of the shares their stakes could now be worth up to $7bn (£5bn) each. “That’s just human nature,” Bezos, now 54, says. “Some people are just better at rolling with the punches.”

The biggest winners from investing early in Bezos’s idea were his parents, Mike and Jackie Bezos, who pumped in $300,000 in return for 6% of the company, which sold its first book – about artificial intelligence – in July 1995. “It couldn’t happen to two nicer people,” Bezos says of his parents’ windfall. 

They have given away $68m of it through their Bezos Family Foundation, which focuses on education. The foundation’s mission statement is a Winston Churchill quote: “What is the use of living, if it be not to strive for noble causes and to make this muddled world a better place for those who will live in it after we are gone?”....
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Among the names:
Miguel Bezos, Jeff Bezos' Father
Mark Bezos, Brother
Christina Bezos Poore, Sister
Nick Hanauer
Tom Alberg
Scott D. Cook
Patricia Q. Stonesifer

There is some discrepancy between the Guardian story and this spreadsheet put together by Jordan Elpern-Waxman in answer to a Quora query:

https://docs.google.com/spreadsheets/d/1M---QLabFZ3XRSVbH0Yl75awm5lvcxUnx-8m8q00piE/edit?hl&hl#gid=0

And some additional names via amendments to the 1997 S-1:
SHAREHOLDER'S AGREEMENT (SHELDON KAPHAN) Vice President, CTO
SHAREHOLDER'S AGREEMENT (SCOTT LIPSKY) Vice President of Business Expansion
SHAREHOLDER'S AGREEMENT (JOY D. COVEY)  Vice President, Finance, CFO

No. 1:  
4 SHAREHOLDER'S AGREEMENT WITH RICK R. AYRE


5 SHAREHOLDER'S AGREEMENT WITH JOHN D. RISHER


6 SHAREHOLDER'S AGREEMENT WITH JOEL R. SPIEGEL


*If You Were Concerned For Jeff Bezos, What With the Divorce and the Economy And All, He Is Still On Track To Be A Trillionaire In 2026 (AMZN)

If You Were Concerned For Jeff Bezos, What With the Divorce and the Economy And All, He Is Still On Track To Be A Trillionaire In 2026 (AMZN)

From Business Insider, May 14:

Jeff Bezos is on track to become a trillionaire by 2026 — despite an economy-killing pandemic and losing $38 billion in his recent divorce
  • Jeff Bezos could become the first trillionaire by 2026 if his wealth continues growing at 34% a year, according to an analysis from Comparisun.
  • That's before accounting for the coronavirus pandemic, which has sent the value of his Amazon shares soaring, and despite the $38 billion he lost in his recent divorce settlement.
  • Bezos is worth an estimated $143 billion, thanks to a $28 billion bump in 2020, according to Bloomberg.
  • Bezos' wealth is growing rapidly as Amazon faces increasing criticism from employees and lawmakers over its labor practices.
If Jeff Bezos' personal fortune keeps growing at its current rate, he could become the first trillionaire by 2026 at the age of 62, according to an analysis from the software-review site Comparisun.
Bezos' wealth has been increasing at an average yearly rate of 34% over the past five years, according to Comparisun, and that's despite him turning over Amazon shares worth an estimated $38 billion to his ex-wife, MacKenzie Bezos, as part of their recent divorce settlement.

Comparisun looked at 25 of the richest people and found that only 11 had a realistic shot at becoming trillionaires during their lifetimes. Bezos will likely get there first, but Facebook CEO Mark Zuckerberg could be the youngest, with his current growth rate on pace to put him in the four-comma club by 2036, when he will be 51....
comparisun trillionaires bezos

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"Hedge Fund That Timed Big Short, Crypto Rally Eyes Venezuela "

From Bloomberg:
Venezuela’s bond market has been rocked over the past few years by defaults, sanctions and a collapse in crude oil prices. Yet the disastrous cocktail is attracting hedge funds including London’s Altana Wealth Ltd. that say the situation can’t get any worse.

Altana is pitching the South American nation’s government notes, which can be bought at pennies on the dollar, as the “trade of the new decade,” according to two letters to investors seen by Bloomberg.
In one of the letters, founder Lee Robinson said he plans to launch a Cayman Islands-based portfolio next month to capitalize on Venezuelan bond prices that he says could eventually multiply tenfold. He compared the risk-reward to returns delivered during the dot-com craze of the 1990s, shorting sub-prime mortgages before the collapse of that market in 2008 and riding the cryptocurrency rally in recent years.
https://img-s-msn-com.akamaized.net/tenant/amp/entityid/BB14grnb.img?h=450&w=799&m=6&q=60&o=f&l=f
“At these levels, the downside is low and the upside is the best we’ve ever seen for a sovereign debt restructuring,” Robinson and his colleague Steffen Kastner wrote in one of the letters.
A spokesman at Altana declined to comment.
Robinson, who previously worked for hedge fund billionaire Paul Tudor Jones, has a track record with opportunistic wagers. In 2014, he started a digital currency fund, which rode a rally in Bitcoin to four-digit returns.
Altana manages about $300 million across a number of funds including currency and distressed debt money pools.
Only a small pool of investors have both the patience and the legal ability to make the trade. Sanctions imposed by the Trump administration last year prevent U.S. funds from buying Venezuelan debt. That means firms from Europe to Latin America and the Middle East are the primary buyers, oftentimes through vehicles domiciled in the Cayman Islands for tax purposes.....
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I once told a wealthy investor that a certain situation had to have bottomed, it couldn't get any worse.
His reply?
"That statement indicates a lack of imagination"

"Tesla has a new product: Autobidder, a step toward becoming an electric utility" (TSLA)

We are not fanbois and can think of a half-dozen reasons why so many people are attracted to the immense size of the electricity market only to be stymied in their quest to make money out of it. The usual course is to then game the system to make up for the loss of profits from failed attempts to front-run demand.

On the other hand Mr. Musk has some tricks up his sleeve in the form of his experience with software-as-a-sometimes-lousy-service and AI that may mean he won't have to resort to the 'ol Phi Scamma Jamma of Enron and others.

On the third hand, if the crooked E's approach is where your passions lie,  see 2012's post "How to Manipulate Non-storable Commodities Markets" which links to a paper from the University of Houston's Craig Pirrong and which I described as "snappy" and this paper from Janet Netz, which at the time of the earlier post was gated, "The Effect of Futures Markets and Corners on Storage and Spot Price Variability" for a broader overview of what the Streetwise Professor is zooming in on.

From Electrek, May 3:
Tesla aims to eventually become a massive distributed electric utility, and we’ve now learned of a new product, Autobidder, which appears to be the next step in that direction.
Last year, Elon Musk said that Tesla Energy, the energy division of the automaker, is becoming a distributed global utility, and it could even outgrow its automotive business.

The idea is that Tesla would keep deploying more solar and energy storage systems, big and small, at the residential level and on utility-scale, and manage those distributed systems to act as a giant electric utility.

Tesla has developed software to control those energy assets, and now we’ve learned of a new one: Autobidder. It has apparently been used for a few years, but we are only now learning about it.
The company describes Autobidder on its website:
Autobidder provides independent power producers, utilities, and capital partners the ability to autonomously monetize battery assets. Autobidder is a real-time trading and control platform that provides value-based asset management and portfolio optimization, enabling owners and operators to configure operational strategies that maximize revenue according to their business objectives and risk preferences.
Tesla says that Autobidder is currently being used in Australia to manage the Hornsdale Power Reserve (HPR), which is also known as the “Tesla Big Battery”:
Autobidder is succesfully operating at Hornsdale Power Reserve (HPR) in South Australia, and through market bidding, has added competition to drive down energy prices.
While it is known as the “Tesla Big Battery” because it uses Tesla’s Powerpacks, it is owned by Neoen, a French renewable energy company that also operates a wind farm next to the battery system....
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Charting the Carnage: REITs in Ruins

In a social distancing world how many people will be allowed into an elevator car?

From Top Down Charts, May 18:
Chart of the Week – REITs in Ruins
May 18, 2020
Mike Zaccardi, CFA, CMT
How quickly things change. REITs are traditionally seen as a way to get into real estate, though still featuring risky equity-like characteristcs. After all, REIT ETFs plunged 70-80% during the Great Financial Crisis. Massive rallies took place in the early-mid 2000s and again from the March 9, 2009 bottom through the early part of 2020.

Then COVID-19 struck... and REITs basically went from defensive asset to covid asset.

Thus, REITs are now becoming a proxy for life normalizing in a post-COVID-19 world. Retail spaces, hotels & leisure activity businesses make up a decent chunk of the asset class. Tenents unable to pay their rents due to economic shutdowns obviously crushes the businesses of REITs who usually have reliable cash flow and make big dividend payments to their investors. Looking at daily price-action of late, you’ll see that REIT funds are either among the top gainers and biggest losers – it’s all or nothing.

What’s more, fundamentally, lending standards have tightened. Sure, interest rates are essentially at record lows, but if banks are unwilling to take on risk, it doesn’t matter much. It will take time for the credit environment to loosen even with the Fed stepping in to back significant areas of the debt market. In fact recent data from the latest bank loan officer survey suggests credit conditions have tightened.

It’s not all dire though. Some REIT niches have held up nicely. Industrial & Specialty REITs are flat to even higher from a year ago. The hard hit spots include Retail & Hotel/Resort/Leisure REITs – those are down some 60% year-on-year. 
https://static.wixstatic.com/media/542496_7530f37f4aaf4735bddc67017c8e9c29~mv2.png/v1/fill/w_626,h_223,al_c,q_85,usm_0.66_1.00_0.01/542496_7530f37f4aaf4735bddc67017c8e9c29~mv2.webp
That’s the narrative and performances, but what about the current valuations?

As noted in the latest Weekly Macro Themes report, REIT valuations are still elevated versus their long-term average. Keep in mind that the 40-year bull market in bonds has certainly been a tailwind for anything to do with real estate or just plain yield for that matter. REIT valuations have been trending higher for decades. Compared to more recent history though, their multiples have eased to about the lowest level since Q3 2011 and could present an opportunity. But other areas of the equity markets are trading much cheaper....
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Capital Markets: "Optimism Burns Eternal"

Burned a few shorts as well.
From Marc to Market:
Overview: Hopes for a vaccine and a German-French proposal to break the logjam at the EU for a joint recovery effort helped propel equities higher yesterday. There was strong follow-through in the Asia Pacific region, where most markets advanced by more than 1% today. However, the bloom came off the rose, so to speak, in Europe. After a higher opening, markets reversed lower, and the Dow Jones Stoxx 600 is off about 0.75% in late morning turnover. All the major sectors are lower, led by utilities and industrials. The US 10-year yield closed yesterday at 72 bp, its highest in a month, and sent Asia Pacific yields higher. However, the German-French proposal and ideas that the ECB will likely increase its bond purchases saw peripheral yields fall more than core rates. The US 10-year yield is also a little softer. The risk appetites were expressed as a weaker US dollar, yen, and Swiss franc, while high-beta dollar-bloc currencies and Scandis jumped, and this has continued today. The JP Morgan Emerging Market Currency Index rose by nearly 1% and is up another 0.2% today and is at new highs for the month. Gold reached $1765.4 yesterday before stabilizing, and today it is consolidating around $1726-$1740. Oil is also consolidating after yesterday's surge. The July WTI contract reached $33 yesterday. It bottomed in late April a little above $17. It is trading today between $31 and $33 a barrel.


Asia Pacific
China is adding pressure on Australia.
Even though Beijing has not formally linked its actions against Australian barley and beef as retaliation for its calls for an investigation into Covid-19 and the wet markets, there is little doubt about the subtext. China is threatening to widen the trade dispute, and reports suggest it could extend to other products, such as wine, seafood, and oatmeal. On the other hand, Australia is the largest producer of iron ore, and Chinese demand has lifted prices to eight-month highs. Brazil, the second-largest producer, is being hobbled by a surge in virus cases and is now the world's third-largest hotspot. Still, China's apparent willingness to disrupt trade, as it has with Canada over Huawei, is unsettling.

The Bank of Japan's next scheduled meeting is on June 18, but officials signaled an emergency meeting at the end of this week
. The ostensible purpose is not to adjust monetary policy itself. Instead, it is expected to unveil a new program to support small businesses. The central bank left its bond-program unchanged today and stepping into the market to buy JPY1.2 bln of ETFs and REITs....
                                                                     *****
.... Europe
It has been up to the individual European countries to respond to the virus.
The federal or joint effort has been limited largely to the ECB. However, that will change in the coming weeks as the EU prepares to respond. Yet, that is a point in itself, the level is not the monetary union but the larger group of 27. The vehicle is the EU's budget seven-year financial framework that has been a bone of contention even before the pandemic. Germany and France jointly proposed a 500 bln joint borrowing as part of the EU budget that will be used to help spur economic recovery. Germany and France envisioned grants, while several countries want loans. The funds would be raised by the EU and available based on need, while the repayment will be according to the share of the EU budget (tied to the size of an economy).....
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Monday, May 18, 2020

Pricing For Q4 2020 European Power Market Is Jumping Around On EDF Nuke Guidance

This is one of the Commodity Tracker: 5 charts to watch this week from S&P Global Platts, May 18: 

4. EU power market jumpy on drip-drip of EDF nuclear guidance

EU winter power
What’s happening? French Q4 2020 power prices climbed over 40% after EDF slashed its 2020 nuclear output target in April, but some of these gains were lost last week as Q4 availability improved in the latest maintenance adjustments, and EDF management hinted the current maintenance schedule was not set in stone, with winter supply security of overriding importance.

What’s next: Almost anything EDF says about nuclear is market moving and sure enough, the generator’s May 14 comment that its dire winter reactor availability outlook was “cautious” sliced around 12% off the fourth quarter French power contract. Traders must be exhausted by the eternal vigilance required as EDF pumps out daily updates on reactor availability, but there is no let-up in view. This is partly because of other hard-to-predict outcomes relating to the easing of lockdowns and the timing of new interconnection projects between France, the UK and Italy. The 2-GW IFA2 link between the UK and France remains on course for Q3 testing, potentially doubling trading capacity and easing supply concerns – if schedules hold together....
....MORE (the other four charts)

HT: ZeroHedge

"Estimating the burden of SARS-CoV-2 in France"

From the Journal Science, May 13:
Abstract
France has been heavily affected by the SARS-CoV-2 epidemic and went into lockdown on the 17 March 2020. Using models applied to hospital and death data, we estimate the impact of the lockdown and current population immunity. We find 3.6% of infected individuals are hospitalized and 0.7% die, ranging from 0.001% in those <20 10.1="" age="" in="" of="" those="" to="" ya="" years="">80ya. Across all ages, men are more likely to be hospitalized, enter intensive care, and die than women. The lockdown reduced the reproductive number from 2.90 to 0.67 (77% reduction). By 11 May 2020, when interventions are scheduled to be eased, we project 2.8 million (range: 1.8–4.7) people, or 4.4% (range: 2.8–7.2) of the population, will have been infected. Population immunity appears insufficient to avoid a second wave if all control measures are released at the end of the lockdown.....20>
https://science.sciencemag.org/content/sci/early/2020/05/12/science.abc3517/F1.large.jpg


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HT: FT Alphaville's Further Reading post, May 13
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