Media worth consuming – April 2021

Jonathan Rochford

Narrow Road Capital

A monthly wrap-up of interesting and informative media on finance, economics, politics and society that you might have missed.

Short sellers have been pulling back, afraid of taking losses as everything seems to go up. American penny stocks have had their greatest rally in 20 years up over 300% from their lows. Unprofitable companies have three times the market cap today that they did before the tech wreck with plenty of other similarities to the tech bubble of 21 years ago. The current generation of venture capital investments are characterised by unprofitable and fraudulent companies that do little for productivity.

US producer prices are up over 5% year on year, with companies warning that inflation is coming through the pipeline. Ford expects to lose 50% of production this quarter due to the semiconductor shortage. American sawmills are set for record profits as they turn cheap logs into sought after timber. A forklift manufacturer reported negative sales after its stock price rose triggering warrants. A tiny deli in New Jersey with almost no sales has a market capitalisation of over $100 million. When SPACs end their lockups, a wave of selling could bring them crashing down. How Dogecoin started out as a joke on cryptocurrencies but turned into a $50 billion market capitalisation.

What a journalist learnt from 12 years of letters from Bernie Madoff. To avoid losing money to the next Madoff, ask some basic questions. A flashy Singaporean trader who raised $740 million and claimed to deliver quarterly returns of 15% and has been charged with fraud. A failed Hollywood actor allegedly convinced over 200 investors to contribute $227 million to his movie rights Ponzi scheme. The current wave of Ponzi schemes has central bank fingerprints on it. An American cattle farmer lost over $200 million speculating on corn and cattle futures. Three Brooklyn men robbed European banks, but the US police busted them for money laundering.

China’s online lenders have been ordered to stop lending to students and unwind existing loans, a tricky thing to do when most students have limited income. After a lending boom in the first two months of the year, Chinese banks have been told to rein in their lending for the rest of the year. Huarong, China’s largest distressed debt manager, is in financial trouble with its bonds trading at distressed prices. Western and Chinese rating agencies were badly wrong on Huarong. Chinese property developer Evergrande is playing smoke and mirrors games with its debt. Suriname, a tiny South American country, has defaulted on its debts.

The outperformance of ESG funds can be mostly explained by the quality factor and fund flows. The Yale model is outdated with private equity and venture capital now delivering lower returns and higher fees. There’s no free lunch in financial services, as there’s always another way for the provider to make money. A private equity advisor is in hot water after not so subtle digs at a professor known for criticising private equity. Some tips on how to get the most out of asset manager interviews.

American securitised debt and CLOs could have a record issuance year with lawyers, bankers and rating agencies overwhelmed. CCC rated high yield bonds have outperformed so far this year. US high yield default rates have plummeted over the last 17 years as central banks keep intervening. A bidding war has broken out for bankrupt Hertz as rental cars are in short supply. Debt collection is going high tech with computers making fairly accurate predictions of who will eventually pay. Investors are pushing back against greenwashed debt. Credit spreads move proportionately more for companies gaining or losing a notch from BBB-.

Archegos Capital had over $20 billion of leveraged trades forcibly unwound after one of the largest margin calls of all time. The Credit Suisse risk manager that oversaw its losses used to be the bank’s key salesman to Archegos. Credit Suisse flagged uncertain recoveries on $2.3 billion of its $10 billion of Greensill receivables. Greensill stepped in to lend to Gupta companies after several banks pulled out alleging falsified documents. GFG set up a string of domain names that look like major commodity traders.

Politics and culture

Journalists fired for voicing non-woke views are making more money writing independently. A Victorian school achieved global notoriety after making all its primary school boys apologise at assembly for other people’s poor treatment of women and girls. Australia’s ABC has been very active in covering rape allegations involving white women but is deliberating ignoring allegations of extensive sexual abuse of Aboriginal women. YouTube sponsored an award for free speech and the winner was the CEO of YouTube. The Biden administration has continued the prosecution of an air force analyst who blew the whistle on illegal drone strikes. CNN was mocked and called science deniers for stating that “there is no consensus criteria for assigning sex at birth”.

Media and counter-protestors were pranked into turning up for “white lives matter” rallies. A government commissioned report found that Britain isn’t systemically racist, so its critics responded with racist abuse of the head of the commission. The City of Oakland will give $500 a month to selected non-white low-income families. Strong educational outcomes help Asian Americans out-earn White, Black and Hispanic Americans. Social justice requires treating people unequally, something its proponents ignore. Switzerland and Finland adjust traffic fines based on the driver’s ability to pay.

Joe Biden has repeatedly lied about changes to voting laws in Georgia, claiming that voters will be disenfranchised when the new laws expand the ability to vote more than many other states. 72% of Americans agree with Georgia that voters should show ID. Major league baseball is taking the all-star weekend away from Georgia but is happy to do business with major human rights violators, Cuba and China. Democrats used the filibuster 327 times in 2020, but in 2021 they now think it is racist and must end.

An explanation and summary of the evidence in the George Floyd murder case reveals many factors ignored by the media. The riots after George Floyd’s death are estimated to have cost over $2 billion. Portland businesses and homeowners are so scared of being attacked by rioters, looters and vandals they put up signs effectively saying please attack someone else. The mainstream media has egg on its face after the officer who died the day after the Capitol Hill riot was found to have died of natural causes. Michigan’s Governor repeatedly mandated lockdowns and told her citizens not to travel interstate, but repeatedly travelled interstate herself.

Dozens of white house staff are being demoted or pushed out for past marijuana use but Kamala Harris and Pete Buttigieg get off scot free. Tobacco stocks crashed after the Biden Administration said it is considering banning cigarettes with addictive levels of nicotine, even though it could result in worse health outcomes. Wealthy Democrats are demanding tax cuts as part of Joe Biden’s proposed tax increases. If Joe Biden wants to crack down on tax havens he should start with his home state of Delaware.

Biden’s infrastructure plan will bring a flood of boondoggles with plenty of money there for his crony friends. US government spending binges have a long history of delivering terrible outcomes. 12 myths governments peddle in times of crisis. Estimates have all levels of US government spending $1 trillion of taxpayers money each year on lobbying each other, with Texas looking to outlaw the practice.

China spat the dummy after a US ambassador called Taiwan a country. The CIA admits it had no material evidence to back up its claims that Russia was paying bounties on American troops. Diners in a Canadian restaurant scared off health officials by yelling “get out” when they were trying to shut down the restaurant for breaking a lockdown. Why does the American government subsidise foods that make people fat? American special forces are everywhere and expected to solve everything.

Economics and work

Los Angeles has attempted to provide cheap housing for homeless people, but the government run program has produced small and basic accommodation at a luxury price. A judge has ordered that the city provide housing for all homeless people within six months. Detroit’s property taxes are nearly as much as the mortgage payments. Berlin’s rent controls have been defeated in the Constitutional Court. The UK government’s scheme to guarantee high LVR mortgages is dumb policy that will makes house prices even more unaffordable. Increasing affordable housing by deregulating zoning is an economic and moral imperative. Joe Biden’s infrastructure plan should require reform of land zoning restrictions. One of the few examples of affordable private housing in the suburbs of Sydney.

The negative impacts of raising corporate taxes are rarely understood, including global data that shows cutting the corporate tax rate hasn’t reduced corporate tax revenues. A global minimum corporate tax rate pitches rich countries against poor countries. The US Government is smashing deficit records with March spending 3.5 times the taxes collected. There’s a strong correlation between more government and less growth. Governments need spending caps to force them to make tough decisions rather than kicking the can down the road. Inflation is a political choice and many politicians choose high inflation.

Free markets deliver greater equality than socialist economies as they improve the quality of goods and services and reduce the cost for everyone. Over the last 40 years, America has swapped capitalism for debtism.

When will central banks realise that much of the excess liquidly they have been creating is ending up in the stock market? Cheap money from the Fed has slashed bankruptcies and increased the number of zombie companies. Money printing has seen US bank deposits soar but loan growth is poor. We need savings for productive investment but money printing discourages that. Canada’s central bank owns 40% of Canada’s government bonds. If the ECB withdrew monetary stimulus Greece and Italy would struggle to avoid default. Italian banks keep loading up doom loop risk by adding more government debt to their balance sheets. The IMF and the World Bank are holding back assistance to Lebanon as its politicians resist basic reforms.

Unions badly lost a vote in Atlanta convincing only 31% of Amazon warehouse workers of the need for their services. Amazon claimed its workers weren’t so pressed for time that they had to pee in bottles, so twitter was flooded with stories from Amazon workers of having to do it or risk getting fired, then the company apologised. DoorDash drivers are combining to decline low paying deliveries to try to force minimum rates higher. Minimum wage jobs are a stepping stone to better paid work, providing skills and experience. Seven Los Angeles lifeguards made over $300,000 in a year.

American small businesses can’t find workers to fill vacancies, with excessive unemployment payments blamed. Australian job vacancies are at their highest level in 10 years. If Australia actually had a skills shortage there would be plenty of wage inflation. The argument that the RBA kept unemployment higher than it should have been is garbage.


The people who run slander sites make their money by charging for removing the posts. A Florida couple thought they could hold their wedding at an apparently vacant mansion, but got booted out when the owner called police. A Japanese man was busted for dating 35 women hoping to get birthday presents from them. NBA Top Shot is delaying withdrawals for months, citing fraud controls. Digital art is trading at crazy prices including $1.4 million for a single pixel. A South Korean gallery left paintbrushes and paint in front of a graffiti art display and were shocked that passers-by added to the display.

If you want to reduce your environmental impact, having fewer kids has by far the biggest result. Major oil companies are selling high pollution projects to second tier operators to improve their climate credentials. China consumed 53% of the world’s coal power in 2020, with its rising use of coal offsetting reductions elsewhere. Increasing levels of carbon dioxide are greening the planet. After an unusually warm spring, Japan’s cherry blossoms have peaked at their earliest in 1200 years just beating the previous record from 1409. 30 of the best nature photos from 2020.

Masculine men make better fathers. How to stop living paycheque to paycheque. America has 1.45 million real estate agents but only 1.04 million homes for sale. The Oscars viewership continues to plummet.

Carlo Cipolla’s five laws of human stupidity. Mental asylums have been replaced by homelessness, imprisonment and hospitalisation. A group of teenagers in New Jersey learnt the hard way that you need a licence to ride a bicycle there. Google Maps says a Queensland town is 85 kilometres away from where it actually is.

US mass vaccination hubs are starting to close as the number of people seeking a vaccine declines. Avoiding being a Covid long hauler is another reason to get the vaccine. The Brazilian strain of Covid is more infectious and deadlier for younger people. The data is now clear that Sweden’s approach worked out better than most of its European brethren for immediate health outcomes and far better for economic and long term health outcomes. The WHO’s report on the origins of Covid is a whitewash filled with Chinese propaganda.

America’s FDA halted the Johnson and Johnson vaccine for a one in a million blood clot risk, allowing many more people to contract and die from Covid. Governments should get out of the way and let their citizens take vaccines and the tiny risk that comes with them. We keep being told to follow the science on Covid, but we should follow the maths as well. Heart disease and cancer killed far more Americans in 2020 than Covid. Scientists are working on an open source Covid vaccine using ingredients that can be bought online. mRNA has good prospects for vaccinating against the flu and malaria, and possibly even cancer.

A 12 year old boy from North Carolina will graduate from school and college in the same month. The American agency in charge of nuclear weapons allowed a child to access its twitter account. An Illinois man used his father’s ashes in a bowling ball and bowled a perfect game with it. A dog from Utah joined in a women’s track relay and blitzed the field. 

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This article has been prepared for educational purposes and is in no way meant to be a substitute for professional and tailored financial advice. It contains information derived and sourced from a broad list of third parties and has been prepared on the basis that this third party information is accurate. This article expresses the views of the author at a point in time, and such views may change in the future with no obligation on Narrow Road Capital or the author to publicly update these views. 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.

Jonathan Rochford
Portfolio Manager
Narrow Road Capital

Narrow Road Capital is a credit manager with a track record of higher returns and lower fees on Australian credit investments. Clients include institutions, not for profits and family offices.

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