FT Weekend This crisis is different, Xi fears Ma? Greensill fraud? US Tax tantrum? and more

10 Apr

Slightly different format in that I’ve noted most of the articles if only in headline.  I hope you find it useful, let me know if you prefer this to the normal format.

Front Page 
Prince Philip 1921- 2021 A picture of Philip, a man of many parts, died aged 99 which leaves the Queen alone at 94 and still resolute to continue. Prince Charles is 72 and Prince William 38.

Suspect Gupta invoices used for Greensill loans stir fears of fraud
• Questions raised over metal empire’s finances • Debt sold on to Credit Suisse investorsThe business empire now looks likely to fail with questions of fraud; that could invalidate some of the insurance that parties may be relying on, which could make the whole scandal far worse. For investors in the scheme fraud could mean no insurance payout; likely to be more bad news for clients of and for Credit Suisse itself For investors in the steel sector it would appear likely that a major player in the steel sector is likely to either radically change or disappear. For some of the specialty areas they are likely to find buyers but for the more standard areas of production the outlook is not good and that will have a major impact on local communities already under pressure from covid.But for the other steel players it is a slight +VE.

French wine harvest in peril as blast of ‘winter frost’ withers spring vines
Severe frost across France this week has badly damaged buds and flowers in vineyards and fruit orchards and will cut grape harvests in some areas by as much as 90 per cent, according to growers and farmers’ organisations.
It tells you something about the news when an article about the prospects for French Wine makes the cover of the FT Weekend and news about Famine in North Korea doesn’t make the print edition.
No doubt bad news for French vineyards already suffering from Covid, US import duties but the agriculture minister has said he’ll mobilise financial support for the farmers. The farmers are blaming global warning.
It is a little surprising wine making remains such a basic business and that the farmers have not applied themselves to seeking out tech that could help. It mentions that some farmers were using braziers in vineyards to protect their finest vines, but one grower said 'Delagrange said he would have needed 4,500 paraffin heaters to cover all his 15 hectares at a cost of nearly €50,000 for the two worst nights. Growers could afford to protect only the vines for their finest wines.’
One wonders how many use vine insurance?

InsidePage 2
AstraZeneca halves Covid jabs for EU
Frustration grows after delayed testing leads to reduction in deliveries. Further problems for the company that must be working overtime trying to solve the issue relating to blood clots; albeit that they are rare.

Other headlines Italy strives to recover from vaccine fiasco
Queue jumping and uneven rollout leave the elderly and vulnerable exposed

Raúl Castro’s exit heralds changing of revolutionary guard
Cuba’s last Castro is set to leave the political stage, as Fidel’s 89-year-old brother Raúl cedes power to a younger generation at next week’s Communist party congress, which must also tackle a dire economic crisis and growing political dissent.Raising conjecture that the regime may be about collapse and inciting some to call for a revolution in the country.

Page 3
Prince’s dissent resonates among Jordanians
Outspoken Hamzah echoes growing tide of dissatisfaction among 10m population of economically stricken country.An interesting read; he has a lot of local support but is untested in the actual running of the country.

France offers mixed jab doses to under-55s
France has become the second country after Germany to recommend that younger people who have had a first dose of the Oxford/AstraZeneca vaccine be given a different jab for their follow-up shot.
An interesting move for which there is no medical support and has previously been warned against. But it notes that Trials studying a combination of vaccines, including AstraZeneca’s and Russia’s Sputnik V shots, are under way.

Merkel set to curb states’ pandemic powers
Angela Merkel is to strengthen the central government’s powers to battle coronavirus as it struggles to stem a third wave of the pandemic. Prior to this the 16 states had been given leeway to decide their own schemes.

Page 4
Dedicated to the late Prince Philip; due to covid there will be no state funeral
Complement to the Queen helped monarchy survive 
Along with From royal moderniser to traditionalist
Obituary UK’s longest-serving consort played a considerable part in shaping the monarchy for nearly 70 years
Also Political leaders pay tribute to ‘man of great purpose’
It is touching to see the respect with which he being treated.

Page 6
FT BIG READ. GLOBAL ECONOMY. ‘This crisis is different’
Only a few months ago, the IMF forecast lasting damage to living standards around the world because of the pandemic. Now it says the advanced economies will emerge largely unscathed. Is this too optimistic?
An interesting read, it quotes Neil Shearing, chief economist of Capital Economics, who said 'It is now becoming clear that the pessimism last autumn about the longer term outlook for advanced economies was an “intellectual failure”, he says, because most economists “reached back to the financial crisis and applied the lessons from that period, but this crisis is different”.’
Not everything is rosy and the divide between rich and poor countries looks set to widen, which could in time present further issues.
It looks how countries and people adapted. The willingness of some countries to use fiscal and monetary policy to deal with the pandemic. Before looking at the emerging concerns and optimism.
It says the emerging countries Ex China, have been hit hard and whilst in better shape that in 2013 the outlook is still tough.
It concludes that whilst there are reasons to be optimistic but people should not to optimistic. There is still the potential for new variants and a key element will be how well countries continue to work together and how they will roll back support measures and restrictions.
'Go too fast in this process and there will be excessive pain alongside higher unemployment and bankruptcies. Yet too slow removal of support risks creating an unsustainable boom in the short term followed by a bust alongside highly unstable financial conditions for emerging economies. The consensus view in 2021 is that the world made a mess of this handover from support to self-reliance in 2010 after the global financial crisis, imposing austerity too early before economies were ready.’
A good read, for all that we know and have done there is still a lot of uncertainly out there.

Nobel Prize winner who inspired birth of the euro

Robert Mundell Economist 1932-2021He played a leading role in the birth of “supply-side economics” and was a strong proponent of the European single currency. He won the Nobel Prize for economics in 1999 “for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas”.'Mundell extended the Keynesian “IS-LM” model developed by the British economist Sir John Hicks in the 1930s to the internationally open economy. His analysis showed that there could only be two of “the impossible trinity” of fixed exchange rates, an independent monetary policy and free capital movement.’

A one-off levy will not solve deficit troubles
Case for solidarity tax is based on political reasoning, not economics.Looks at the suggestion 'to reduce government debt loads through a one-off solidarity tax on high earners and companies that have profited from the pandemic. This proposal is a mix of the politically astute and the economically unnecessary.’
A good read and concludes 'Nevertheless, honesty will always be the best policy. Whatever political opportunity is presented by the moment of solidarity during the coronavirus pandemic, it should be primarily used to address long-term structural problems. The new US presidential administration’s attempt to unlock an international compromise on corporate tax avoidance is a good start. Governments should seek lasting solutions to other tax and funding challenges and spurn an easy quick hit on windfall profits.’

Boycotting Beijing 2022 is not the answer
There are more targeted ways to express concern over Xinjiang
Suggests that without other measures like an economic boycott the gesture would ruin the careers of some athletes without affecting an change.
Instead is suggests down playing the event; suggesting that as the UK did with the 2018 World Cup in Russia after the Russian’s had tried to murder Sergei Skripal on British soil. They didn’t send any official representation to the event but allowed the team and fans to attend.
The 2008 Beijing Olympics were to signal the rise of a new China and goes prime coverage. It suggests the 2022 ones should not receive such coverage or official representation. Fans can still watch but the propaganda element be minimised.

Notebook Not OK, computer: music streaming’s diversity issue by Gillian Tett
Looks at bias in music streaming algorithms. Suggests it has arisen because 'This pattern has not arisen primarily because powerful people are overtly sexist or racist; the subtler issue is that financiers prefer to work with colleagues who are a good “cultural fit” (ie are like them) and to back entrepreneurs with a proven record — except most happen to look like them.’
It concludes ‘….You could address this by using something akin to a music algorithm rejig: foundations could deliberately elevate diverse employees and overinvest in funds run by diverse groups to change the feedback loop. Would this work? Nobody knows yet, since it has never been done at scale. The reality is that it is probably even harder to shift human bias than tweak an algorithm. But if you want a reason to feel hopeful, consider this: while computer programs might entrench existing bias, the amazing transparency that Big Data can provide is able to illuminate the problem with clarity. That, in turn, can galvanise action, if we choose it — in music and elsewhere.’

Follows yesterday’s opinion piece
Artificial intelligence bias can be countered, if not erased
'The promise of artificial intelligence systems is that they are faster, cheaper and more accurate than dimwitted humans. The danger is they become an unaccountable and uncontestable form of power that only reinforces existing hierarchies and human biases.’
Sets out the problems as highlighted in the Netflix documentary film Coded Bias under six headings and concludes
'Even so, we will never be able to solve the issue of algorithmic bias in isolation, especially when there is no societal consensus about the uses of AI, says Rashida Richardson, a visiting scholar at Rutgers Law School. “The problem with algorithmic bias is that it is not just a technical error that has a technical solution. Many of the problems that we see stem from systemic inequality and partial data,” she says.
One hope is that AI-enabled tools can themselves help interrogate such systemic inequality by highlighting patterns of socio-economic deprivation or judicial injustice, for example. No black box computer system compares with the unfathomable mysteries of the human mind. Yet, if used wisely, machines can help counter human bias, too.’
An interesting read.

Biden’s global corporate tax plans are brave and bold 
By DeAnne Julius a former member of the Bank of England’s monetary policy committee, is a distinguished fellow at Chatham House
Looks at how his plan responds to three factors
1. The post-pandemic need to raise revenue. Coupled with plans to control the rise in public debt. Suggests the tax hike is reasonable and still less than when Trump took office and better than the IMF suggestion of wealth or inheritance taxes.
2. An opportunity to close international tax loopholes 'by building on the OECD’s unmemorably-named work on “base erosion and profit shifting”. Due to tax complexity and the scope for arbitrage, raising taxes in one country often just incentivises companies to shift profits to lower-tax countries, or to havens with zero taxes. Notes some are called not 'tax havens' but ‘investment hubs’. The 21% minimum should bring a halt to the 'race to the bottom’.
3. Focusing on large companies rather than just tech makes it easier to administer. It would also help develop tax structures for a rapidly digitalising global economy. It doesn’t mention that Biden is focusing on 100 large companies, most of them US but the OECD’s proposal would cover around 2,300; I would hope that there is still scope to enlarge the number.
It concludes 'Yet few can defend the current system as economically efficient or productivity enhancing. By contrast, Biden’s tax reform could release substantial gains by aligning companies’ choice of location more closely with underlying supply and demand. As a byproduct, it may also help defuse public distrust of successful global companies. It’s a bold plan then, also a brave and global one, with many potential benefits.’
Well worth a read; if Biden can get support it will also do wonders for building back the trust that Trump so quickly squandered. Foreign countries may once again believe that the US is working in the common good, not just it’s own.
Also worth noting that it would impact Hong Kong and Singapore both of whom have tax rates below 21% and seek to attract international companies via tax benefits. China has been silent on the matter but must be aware this could be another issue that might prompt international companies to leave Hong Kong, no tax advantage, no free speech and potentially no reliance on the law…. That would then leave Hong Kong offering very little. I read that 70% of the international companies in HK are there in part for the tax advantages, to help them invest and do business in China. So it could have an impact.

Person in the News A driven entrepreneur grabs his opportunity
Taxi service founder lines up Asian super app for the world’s largest Spac deal, write Mercedes Ruehl and Stefania Palma.
Looks at the man behind Grab who teamed with Tan Hooi Lin to revamp the Malaysian taxi market.
An interesting read that concludes 'Uber also found Tan a tough competitor during a fierce battle that ended in 2018. The US group sold out to Grab and quit the region. “Anthony is a street fighter,” says Gregory Van, a former Grab employee who now heads a Singapore-based digital wealth management platform.Tan is likely to need those skills: Grab is coming to market just as institutional enthusiasm for Spacs is waning and short sellers are circling.’
Timing could be everything as the US regulators are starting to ask questions about Spacs and the pricing , incentives and conflicts of interest. As with getting a taxi …time could be of the essence.
See Spac boom under threat as deal funding on Wall Street dries up below

Shoppers pay high prices for closing borders 
Starts 'There is a moral to this week’s stories that Brompton, the UK maker of expensive folding bicycles, is likely to raise its prices by 10 per cent this year, while LG, the South Korean electronics group, will stop producing mobile phones. Companies that can charge more are doing so; those that cannot are in trouble.’
Looks at rising prices, which for the past 20 years have been declining and are now set to rise. The question is it temporary as the Fed suggests?
'But prices may not fall again easily: other obstacles lie in the way of a return to goods constantly getting cheaper. One reason for the growth in home building costs in the US is that several raw materials, including steel, aluminium and lumber face import duties and tariffs. Some of these were imposed by Donald Trump when he was president on the grounds of national security.’'
Voters had their reasons to want to restrict global supply chains, which had not only reduced the prices of consumer durables, but also allowed many jobs to move overseas. But they are experiencing the impact when shopping at home: it costs more, and may keep doing so.’
It concludes 'Some will think this justified, but it is going to strain those who cannot afford it. The fastest price rises of the past two decades have been in luxury goods, or services aimed at the affluent, such as private education and healthcare. It is nice for them that televisions are cheap, but not necessary.Inflation in consumer durables and traded goods will eat into more of the budgets of people on lower incomes, who lack the cushion of wealth. It has not occurred for so long that it will come as a shock — appliances that were once updated constantly will have to be kept instead.
Those able to pay £3,000 for a Brompton may not mind if the price goes up. For others, inflation will be harder’

I think inflation is coming and I don’t expect to be temporary. But I also think the Fed is less worried about CPI or Core PPI and is now focused on wage inflation having learnt the lessons from the last crisis about tightening too quickly, basically before wages stated to rise

Companies & Markets
Beijing forces Ma’s business academy to suspend classes
• Crackdown on tycoon’s empire widens • ‘Elite community’ stirs party fears
As I wrote earlier I think President Xi sees him as a threat, because of his popularity in China with both ordinary people and business leaders.
It has shut down his Human University Business School which was said to be harder to get into than Harvard in an FT article. It indicates the crackdown is against Ma rather that Alibaba. The article notes the pulling of the Alibaba IPO but probably went to press before the news that Alibaba was fined $2.8bn (4% of 2019 revenue) by the State Administration for Market Regulation (SAMR) after an anti-monopoly probe said it abused its market dominance with its choose one policy. It will also have to file self-examination and compliance reports to the SAMR for three years. The article mention the probe had been started.
It notes 'The Chinese Communist party had grown increasingly suspicious of Ma’s clout in society, according to people familiar with the matter, setting the stage for the move.“The government thinks Hupan has the potential to organise China’s top entrepreneurs to work towards a common goal set by Jack Ma instead of the Communist party,” said a person close to the school. “That cannot be allowed.”’

Ma an ex teacher has made education key part of his philanthropic work, both with the business school and rurally and that may be Presdient Xi’s biggest fear, especially when so many of his goals seem to be under pressure.
Made in China 2025 under pressure because of the US sanctions and trade war. Annexation of Taiwan becoming impossible not just because the Taiwanese don’t want it but as Taiwan sees increasing support from the US and others against it. Deteriorating relations with the EU over Xiajinag putting the CIA traded deal at risk. Confrontation with Japan and Philippines over islands. Unresolved blame for covid from some quarters. Limited success of BRI and rising bad debts. Simmering problems in Hong Kong, to mention just few. All just ahead of the 100 year anniversary of the Chinese Communist Party. Not what he had hoped for. So seeing the popularity of Ma must have struck a nerve.

An interesting read and worth noting that to get into Hupan 'Prospective students must have founded a company, have paid corporate tax for three years, employ more than 30 people, and generate at least Rmb30m in annual revenue.’
The alumni include; Jean Liu, president of Didi, and Shen Peng, founder of insurance platform Waterdrop.

The online edition has an article on the fine imposed on Alibaba.Chinese regulators fine Alibaba record $2.8bn
Ecommerce group penalised for abusing market dominance as Beijing steps up scrutiny of tech sector
The fine from the State Administration for Market Regulation (SAMR) after an anti-monopoly probe said it abused its market dominance with its choose one policy. It will also have to file self-examination and compliance reports to the SAMR for three years.
Alibaba said it fully cooperated with the investigation, conducted a self-assessment and already implemented improvements to its internal systems.
“Alibaba would not have achieved our growth without sound government regulation and service, and the critical oversight, tolerance and support from all of our constituencies have been crucial to our development,” the company said.
The FT points out 'The more significant part of the penalty, said Li Chengdong, chief executive of Dolphin Think Tank, was the fact that Alibaba had been found guilty of serious abuses, meaning it would be more likely to yield in future regulatory disputes over tax and counterfeit goods. “Whereas Alibaba used to have a strong, assertive stance with regulators, now it will be on the back foot,” said Li.
Whilst the fine is manageable it is not the end of the saga and there are still questions over whether it will be forced to divest some business interests. It is also facing increased competition in its markets.
I think the whole of the tech sector will be more cautious in the short term in trying to determine what is acceptable
The company will hold a conference call on Monday at 8 am. Hong Kong time to discuss the fine. Its ADR was -0.4% in US trading before the fine was announced.

Amazon warehouse staff say no to unionisation
The “no” vote secured 1,798 ballots to the union’s 738. Still the union will appeal. Amazon won this time but that doesn’t mean they always will.
LEX Amazon/workers: a disunited state
Starts 'Non-union workers in the US earn 84 cents for every dollar union members make, according to the US Bureau of Labor Statistics. Yet in the private sector, just 6 per cent of US workers belong to a union.’
Concludes 'In the past two months, the US president has spoken out in favour of unions. The US economy is rebounding and Democrats control Washington. Amazon will have to increase pay anyway — but by less than a unionised workforce might have insisted on.’
It does note that Amazon is far more exposed to labour cost than other tech giants.

Rio Tinto investors oppose pay report after cave blast
'High-profile Rio Tinto shareholders have voted against the miner’s remuneration report, which handed former chief executive Jean-Sébastien Jacques a pay rise despite the destruction of a sacred Aboriginal site on his watch.’
Notes 'Although Jacques was stripped of performance bonuses worth an estimated £2.7m, his total remuneration last year rose 20 per cent to £7.2m.'
Does make you wonder if he or they should be giving that money to trying to make some sort of recompense to the Aborigines or trying to make up for the destruction in some other way.

Greensill founder cited Cameron in failed Australian lobbying
WhatsApp message named ex-premier in effort to impress Canberra over loan scheme
More on the Greensill saga.

London Whale lessons for Credit Suisse and Nomura
Both instance happened despite tougher regulatory conditions with regard to outsized risks.
Both were in what were considered to be ‘low risk’
Both cases has seen significant internal accountability.
'You can argue that another common thread is that the gnashing of teeth is overdone’
Concludes 'However tough the banks’ internal remedies, a public airing is necessary. So far Credit Suisse has said very little, Nomura almost nothing. Fortunately, the US Congress has taken an interest and may force more disclosure. It is a strange world where US lawmakers have to police Swiss and Japanese banks, but it is for the good. No bank should be able to lose billions on a single client. We need to know exactly how they managed it.’
Whilst it may seen strange the US lawmakers can find out more, the reality is that it the latest one happened in the US under US rules. The JPM one was a US banks again regulated but the US.
Whilst he says we need to know exactly how it happened I think most of us have a good idea. Effectively greed and only a boxing ticking attitude to KYC. Surely a reasonable question to Bill Hwang would have been ‘are you running this strategy anywhere else?’ If not then maybe from now on it should be?

Corporate person in the news. ‘Clean slate’ Credit Suisse boss buffeted by series of crises  Looks at Thomas Gottstein Chief executive, Credit Suisse
An interesting read. Seems like a good guy and makes you wonder then whether these banks are really too big to be managed under by one person. The management structures seem to be failing. As the previous article shows even the much respected Jamie Dimon has failed.

Under the hood Hotels suffer as travellers switch to self-catering alternatives
Prices of holiday homes hold up better than room rates due to preference for privacy and lack of business trips during pandemic.

Marsalek’s Wirecard deal role in spotlight
The fugitive former operating chief worked behind the scenes to ‘pretty up’ websites of small Indian businesses later acquired.Another ongoing scandal.

Equities. Elevated valuations. US investors look warily at gathering tax rise ‘storm’
Biden plans for higher rates on business may knock corporate America’s profits, analysts fear
An interesting read. It concludes 'Earnings of S&P 500 companies for the first quarter, which will start being announced in coming weeks, are expected to have soared by almost a quarter compared with the same time last year, FactSet data show.
That has bred a complacency that Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, warned could eventually prove hazardous.
Expected volatility in US equities — as measured by the Vix index — has fallen sharply with Wall Street’s fear gauge now hovering below its long-run average of 20. In the midst of the coronavirus-induced market turmoil last March, it spiked as high as 85.
“When the green light is flashing all clear to invest and when unexpected bad news comes along, the market can’t withstand it,” warned Slimmon. “The biggest risk is that investors seem to think the coast is clear.”

The key thing to remember is that they are talking about how the tax rises may shave some off the profits. The key is that there are profits and that in some cases those profits may improve because of the better infrastructure. I think if we were talking about it making companies unprofitable investors would have a lot more to worry about.
Biden’s team has given this a lot of thought, so I think a lot of the concerns are overdone and are more about a tantrum from businesses spoilt by the actions of Trump that were more about getting re-elected than ensuring a better America. Remember Trump promised infrastructure spending but that turned out to be an empty promise!

Surging green wave creates launch of largest ETF
Institutional investors have put $1.25bn into the BlackRock US Carbon Transition Readiness fund aimed at identifying the winners of the transition to a low-carbon world, making it the largest exchange traded fund launch ever and underscoring the surging demand for ESG products.
'Rather than exclude companies that rate poorly on climate-related metrics, the new ETFs take an underlying equity index — the Russell 1000 and MSCI All World ex-US index, respectively — and assign portfolio weightings that reflect a carbon transition readiness score.“Winners and losers will emerge in every sector and industry based on each company’s ability to adapt and pivot their strategies and business models,” said Larry Fink, chief executive of BlackRock.’
It concludes ‘The expectation is that companies actively transitioning to the low-carbon economy will outperform long-term, benefiting investors, said Ailman.’ (CIO Calstrs)
An interesting read.

Spac boom under threat as deal funding on Wall Street dries up
It starts by saying 'Advisers to special purpose acquisition companies, which float on the stock market and then go hunting for a company to buy, say they are struggling to find so-called “Pipe” financing to complete their planned acquisitions. Pipe is short for private investment in public equity.’
Potential investors are being put off by the number of offerings and the valuations. So far only 25% of Spacs listed since 2019 have found deals, typically after two years the sponsors have to return the money.
Additionally Pipe investors have been 'negotiating lower valuations for businesses, giving them larger stakes for the same amount of money, and better pricing terms.“There’s only so much illiquid exposure investors are going to want to take,” said another bank executive who has worked on numerous Spac deals.
The Pipe slowdown is bad news for banks, which are unable to collect on advisory fees if they cannot sell a deal to investors.’
Concludes '“Where we had been at a crazy, mad, rush pace in January and February, we’re kind of at a standstill right now on the IPO side,” said Ari Edelman, partner in Reed Smith’s corporate practice.For those that had already gone public and were looking for a target, he added, “the hope is this is just a bump in the road. And then ultimately the deal gets done”.’
But on Thursday the FT ran an article US regulator turns spotlight on rosy Spac projections. 
SEC official says companies going public through blank-cheque mergers should face IPO-like scrutiny.
It re-runs that here. That could be another reason for investors to worry. It noted 'Spac critics say the companies engage in a form of regulatory arbitrage because young companies that do not have revenues, or sometimes even a prototype, can present lofty projections to the public about future growth.’ With concerns on electric vehicles especially.
Also it warned about Spac’s promoted by celebrities and it is looking into how the backers benefit from the deals, especially ‘favourable terms’ from the deals.

Nope indicator offers clues to trading volatility
Looks at how markets have seen strange trading recently, (GameStop,Viacom Etc) but even stronger has been the equity option market; where volumes have surged.
Which has an impact on equity markets; as the sellers of options need to hedge their positions (the delta a factor of time and expectation of the hitting the strike price). The problem is that the delta changes as the underlying does, which can mean to hedge; if the underlying is rising means buying more of the underlying which could force the price higher. Hence the snowball impact for GameStop for example.
'The punchline is that the state of the equity options market at any given moment tells you something about pressures that will subsequently felt in the equity market itself — and it should be possible to trade on this fact. The rather unlikely standard bearer for this sort of trade is Lily Francus, a twentysomething PhD student in bioinformatics.'
Her 'core concept is an indicator called Nope — the “net options pricing effect” — which is a rough-and-ready (or as she says, “hand-wavey”) gauge of the weight the options market is exerting on the stock market.’It is only an estimate because traders can use other means to hedge; its 'calculated as the delta of all the outstanding “call” options to buy stocks, less the delta of all the “put” options to sell them, divided by the total daily volume trading of the shares.'
It gives a guide when its unusually high the market as a tendency to reverse. 'Her explanation is that, as a stock moves fast and options dealers pile in to make sure they are hedged, this pushes the rally to extremes. But when the rally finally exhausts itself, the options dealers quit buying all at once and the market quickly reverts to the mean. '
So keeping an eye on it can help to know which rallies to sell.
But it illustrates another interesting fact; something that was designed to manage risk becoming a risky instrument; just like swaps and the London Whale’s credit derivatives.
It concludes 'With Nope, Francus has crystallised a concept that may give us a deeper understanding of market volatility. But the appetite for dangerous levels of risk, especially in bull markets, will persist.’
An interesting read

Long-run historical data on pandemics makes grim reading for owners of capital
Suggests that wealthy people are going to give up a substantial part of their wealth. He says that 'Patterns in very long-run historical data are like insider information. They offer an information advantage for investors since few seem to want to take the trouble to read dense historical documents’
He looks at a paper from the Federal Reserve Bank of San Francisco on “The Longer Run Economic Consequences of Pandemics”. 'The authors studied the rates of return on assets in the wake of 19 major pandemics stretching back to the 14th century. As they say, “the results are staggering, and speak of the disproportionate effects on the labour force relative to land (and later capital) that pandemics have had throughout the centuries”.’
He also looks at 'a 2018 Bank for International Settlements paper called ‘The Enduring Link Between Demography and Inflation”. Where 'the authors find that inflation increases in a population with a rising proportion of dependants (such as children and retirees) and decreases with a rising proportion of working people. The effects are similar in populations across the world and over time. This might be due to decreases in savings rates when proportion of dependants rise and vice versa.

A slightly confusing read and I am not convinced that the impact of a plague in the 14th century can be compared to the current covid pandemic. The availability of technology and robotics must make a significant impact on the outcome and the globalisation of trade from commerce that focused largely on agriculture to todays tech driven one.
But most of all it makes you wonder why the San Francisco Fed would be researching such things last year as the pandemic started.
It really shows how everybody is grasping at straws because as an earlier article said….this crisis is different.

LEX Golf/country clubs: drive for show
Notes how golf is back in fashion as a socially distanced covid approved sport, impacting the cost of club memberships and the makers of golf clubs; which has been +VE for Hong Kong’s Honma (6858 HK) which rebounded at the end of 2020 and peaked in Feb but has subsequently eased back but sold down 12.8% on Friday.
Also mentioned Mizuno which peaked mid March and Sumitomo Rubber Industries which is trading around highs.
Notes also that virtual golf is starting to attract more interest too.Concludes 'For country clubs and golf clubs, higher pricing creates a virtuous circle. The loftier the bar, the greater demand will be from the status-conscious wealthy. Nothing says luxury quite like a $1m membership.’ Especially true in Asia!

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