Media worth consuming – May 2024

Top Six Articles

Germans haven’t forgotten the lessons of hyperinflation but American governments have.

A surge in government jobs is a bad sign for economic growth and productivity.

BB rated American high yield bonds are at their lowest margin over treasuries since they cracked in 2007.

A study from Norway found that banning mobile phones in schools led to better grades and better mental health.

A former military lawyer has been sentenced to five years and eight months jail for passing files to journalists that resulted in the exposure of war crimes committed by Australians in Afghanistan.

Jimmy Lai’s fight for free speech and the rule of law in Hong Kong greatly embarrasses the Chinese government.

Finance

Subway sold $3.35 billion of asset backed bonds in the largest ever whole business securitisation. Private debt funds are using “synthetic PIK” structures to get around rules restricting the leverage on their funds. An American lender is offering “no money down” mortgages to first home buyers with below median incomes. Freddie Mac is planning to offer guarantees on second ranking mortgages.

A formerly AAA rated tranche of an American single asset office CMBS has taken a principal loss of 26%. Oaktree has taken control of Italian soccer champions Inter Milan after the Chinese owner defaulted on its debts. The non-profit association Romance Writers of America is looking for a second chance after filing for bankruptcy, brought on by dwindling attendance at its annual conference. Once distressed exchanges are included, American leveraged loan defaults have jumped in the last year.

Barclays is renting Blackstone’s balance sheet by offloading the risk but keeping some of revenue from its US credit card business. Japan’s Norinchukin Bank is planning a $6.4 billion capital raising to cover losses on US treasuries. Cocoa futures trading has become highly volatile with two of the biggest producers understood to have overcommitted on future sales leaving buyers struggling to obtain reliable supply. Credit ratings agency AM Best has been hit with legal action in an attempt to stop it from downgrading two insurers.

China is working on a bailout for its property industry including governments buying excess inventory and reduced downpayments for buyers. However, some have criticised the plan for being too small to make a meaningful reduction in the nation’s unsold inventory. A Chinese government bond was twice suspended from trading after retail buyers pushed its price up by as much as 50%. For the first time in 19 years, China recorded a monthly fall in total credit.

The US government is expanding programs that give financial awards to whistleblowers, while the Australian government continues to prosecute whistleblowers. Anti-money laundering laws are very expensive to enforce but there’s little evidence they produce substantial results. Trump Media has lost its third audit firm in less than two years with the latest auditors banned by the SEC for “deliberate and systemic failures” in over 1500 audits.

Google Cloud deleted the private data of UniSuper, with key systems taking two weeks to come back online. The bankruptcy of a 46 year old hedge fund was largely due to years of excessive spending. Hedge fund indices typically exclude larger and better performing funds, lowering industry returns by 2.4% per annum. Private equity returns are now similar to the S&P 500, with returns dragged down by unsold investments

Highly leveraged, unprofitable and emerging market equities have all substantially underperformed lower risk equities over the last 20 years. US REITS are getting hit with redemptions and may need to close the gates on investors. ProShares and ARK take four of the top five spots on the list of funds that have destroyed the most investor wealth.

Politics & culture

The Biden campaign is advertising for a “meme manager” in an attempt to attract younger voters. Joe Biden was right to criticise Donald Trump for trade tariffs in 2019, but now he’s implementing even more tariffs. He also let the cat out of the bag when he called illegal migrants “Hispanic voters”. If Donald Trump isn’t protected via Presidential immunity for actions taken when he was President, Republicans could weaponize the law against a string of former Democratic Presidents. There’s plenty of grey area in the unusual legal construction required to obtain Trump’s hush money conviction that gives him a decent shot of overturning the decision.

The Chinese citizen who reported on the early Wuhan Covid outbreak has disappeared after her four year jail term ended. Hong Kong’s court of appeal has banned a protest song that is widely considered to be Hong Kong’s unofficial anthem. Chinese activists covered up Tibetan and Taiwanese flags during President Xi’s trip to Hungary. Modi’s regime retaliates against its critics both in India and abroad while bribing poor voters with “free” sacks of rice. Ukraine keeps postponing elections with President Zelensky expected to lose if an election was held.

Iran has used the suffering from the war in Gaza to cover up the suffering of Iranian and Palestinian residents under their own governments. Iran has offered scholarships to American university students involved in anti-Israel protests. Major Democrat donors and outside agitators are organising the “student” protests on US campuses. After being operational for only 12 days, the US built pier to help deliver aid to Gaza broke up in heavy weather.

UCLA medical school has seen its student failure rates soar after allegedly lowering the entry standards for some students based on their race. Oxford University hosted a debate on whether populism is good or bad. Administrative staff at American Universities have been growing at ten times the rate of tenured faculty, which explains much of the soaring cost of a university education. Cancelling student debt is an unnecessary, expensive and regressive policy aimed at winning over higher income voters. If governments stopped funding schools, schools would become more efficient and effective.

Economics & work

Australia has a relatively large construction industry that builds lots of homes, but it can’t keep up with the enormous migration surge. Queensland’s Labor Premier and Housing Minister have called for migration to be cut to allow the state to deal with its significant housing shortage. The debate over the costs and benefits of hosting international students in Australia has kicked off. The RBA expects Australia’s housing shortage to last for the long term. Ordinary Australians recognise that migration must be slashed to make housing affordable but politicians and the mainstream have long refused to listen. Mainstream economists are finally starting to point out the obvious problems that Australia’s migration surge brings with it.

Norway increased its wealth tax in 2022 and wealthy Norwegians have responded by moving to Switzerland. A poorly designed stimulus program has seen Italian citizens claim €219 billion in tax refunds, equivalent to 10% of the nation’s GDP. A string of US states are working on legislation to block local governments from using taxpayer funds to run guaranteed income programs. The global economy is doing fine but governments are still running enormous deficits.

By having a small government and high levels of economic freedom, Singapore has quickly become one the most prosperous nations in the world. Critics of small government and free markets typically resort to lies to make their case, because they can’t name a nation that has become rich with heavy government intervention. Claims that rich Americans pay less tax than working class Americans are based on highly manipulated data.

Miscellaneous

The US Government wants to triple America’s nuclear output by 2050, but the pathway to doing that requires picking a handful of designs and sticking to them. Nuclear is a key part of Finland having relatively cheap, green electricity. The world’s largest floating solar panel system was badly damaged by a storm days after commencing operations. Oil and gas drilling in the Permian Basin has led to the land sinking. The FTC has released evidence that points to collusion between Texas shale producers and OPEC to raise oil prices.

The sacking of an executive at Baidu for tyrannical behaviour highlights the generation gap in work expectations in China. People often think life is unfair when they are unwilling to consider the views of others. A Toronto baseball fan has her own limited edition trading card after she was hit by a foul ball travelling at over 100 miles per hour.