Economic data is generally solid, one example being the very robust December and January readings for the Cass freight index. Bottom up earnings per share for the S&P 500 is forecast at $157.57 for 2018 with a record level of upward revisions in first month and half of 2018. If delivered, that will take some pressure off elevated P/E ratios.
Greece sold €3 billion of 7 year bonds at 3.50% but it is still a long way from being fixed. Municipal bond buyers are giving away covenants and security to get allocations. 85% of single B corporate loans are cov-lite so far in 2018. The Fed is worried about excessive leverage and overvalued stocks, risks that it helped create. Private equity has underperformed since 2010 and is likely to continue to underperform in the medium term. More than half of fund managers weren’t around in 2008, so they might have trouble spotting the next crisis.
Calpers ups its contribution rates as cities claim they will go broke paying it. Rhode Island wins a Federal Court case allowing it to cut pension benefits. Cuts are looming for Spain’s nearly broke pension system.
The founder of Ethereum said cryptocurrencies “could drop to near zero” so invest only what “you can afford to lose”. The Telegram ICO has raised $850 million even though it is widely considered to be a scam.
The US has hit VW with $25 billion in fines and sent a manager to jail, but Europe hasn’t issued any punishment yet. Confirmed cases are surfacing of RBS staff forging customer signatures. After over-charging customers Wells Fargo sent refunds to the wrong people. Crooked companies want short sellers to be forced to disclose their positions. A US whistleblower received a $30 million reward for helping the regulator punish JP Morgan’s misdeeds.
Politics & Culture
Denmark has a great social system – but it is built on trust that doesn’t exist in many countries. People who have lived under socialism hate it. Arguments for and against taxpayer funding of high school and university.
Democrats argue in court they had a first amendment right to blackball Bernie. A former CIA chief admits the US meddles in other countries’ elections. Google and the Democrats created the term “fake news” then Donald Trump beat them with it. Taiwanese nationals working in Australia are sacked for stating the obvious, that Taiwan is not part of China. France taking steps to modernise and moderate Islam.
Economics & Work
Warren Buffett loves monopoly and oligopoly investments and has plenty of tolerance for their bad deeds. There’s good evidence that the growth of monopoly companies partly explains low wage growth. The percentage of American households making middle income is shrinking but the high income proportion is growing faster. Bastiat wasn’t a great academic economist but he was the greatest at taking economics to the people.
France has 3.5 million unemployed and businesses that can’t fill jobs – it must be time for welfare reform. Thousands of manufacturing jobs are vacant in Ohio due to a lack of drug free candidates. People who didn’t save for retirement are finding out they have to keep working. Almost equal pay for equal work - JP Morgan pays around 99% of the male salary to women and minorities. Trump’s proposed changes to food stamps acknowledge the incentives associated with welfare. How Insulin became unaffordable for average Americans.
The regulators take control of insurer Anbang after the Chairman is charged with fraud. Anbang is part of a wider pullback on overseas property buying. China needs a debt clean-out like South Korea’s chaebols had in the Asian financial crisis. Bankers are begging for deposits on WeChat. Retail investors blame the securities regulator and the US for stock falls. The BIS has mapped China’s rapidly growing, complex and opaque shadow banking system.
How not to lose wealth like the Vanderbilt family did and 5 basic rules to avoid investment disasters. Venezuela squandered their oil revenues whilst Norway built enormous wealth. The beanie baby bubble is back. A Michigan dog was approved for unemployment benefits.