Media Worth Consuming - January 2018

Jonathan Rochford

Narrow Road Capital

Goldman Sachs sees investor risk appetite at the highest level since the series began in 1991, whilst Bank of America and TD Ameritrade see investor cash levels at record low levels. Investors struggle to imagine a decline occurring as calls are expensive and puts are cheap. The long arguments for and against a high CAPE ratio. The US CAPE is extreme but other countries are about normal.


US high yield spreads are offering little premium above the risk budget for average defaults. An Irish company sells a second layer of holding company PIK debt, dubbed a SuperHoldCo PIK note. The ECB sold its Steinhoff bonds at a 50% loss. Low testosterone hedge fund managers outperform their high testosterone peers. Hedge funds returned 8.5% in 2017, capping off a decade of paltry returns. Catastrophe bonds were tested in 2017 and came through ok.


Politics & Culture

Puerto Rico’s plan to pay zero to bondholders for five years should scare off lenders from other highly indebted states. Illinois is considering borrowing $107 billion to correct underfunding of its pensions. As New Jersey’s pension hole gets bigger, it keeps losing its best taxpayers to Florida. Wasteful government spending can only be stopped by lower taxes. A decade old border fence has helped reduce crime in El Paso, Texas.


Socialism makes people unhappy as they are always blaming others for their problems. Why socialism always fails. A university named after successful capitalists celebrates Marxism.


Facebook found that Russian involvement in US elections is immaterial but it is helping Cambodia’s government kill democracy. Google continues to target inoffensive conservative content. The James Damore lawsuit exposes widespread discrimination at Google. Twitter has been caught shadow blocking and cutting off followers of conservative posters. The downsides of free speech when social media is the referee. How does a movie about a singing group become military propaganda? Sweden needs a strong dose of the MeToo movement.


Economics & Work

A formerly homeless man critiques the “virtuous poor”. Online task websites are paying well below the minimum wage. The low savings rate is propping up US GDP.



An $11 billion Ponzi scheme collapses with around 200,000 people thought to have been scammed. China’s 9th largest bank is busted for lending $12 billion via shell companies to cover up bad loans. Conglomerate HNA is $2.4 billion short on first quarter debt repayments. Local government debt is getting more expensive after the central government crackdown. The government numbers say GDP is fine, but private numbers say the credit pullback is hitting home. State Owned Entities are ordered to make a profit in 2018. Some residential property prices are down 50-60% with levered buyers underwater. A Hong Kong IPO sees its retail sleeve 1,557 times oversubscribed.



The most successful people aren’t the hardest working, they’ve just learnt to say no. One woman’s experience of running a female only business. Drivers of electric vehicles are mostly leasing as the resale value plummets as technology advances. A French chef hands back his Michelin star because his customers can’t afford it. A drunk Russian man steals a tank and rams a shop to steal a bottle of wine.

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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