Media worth consuming – October 2024

Top Seven Articles

RBA research clearly shows that excessive population growth has driven Australian residential rents higher, with higher interest rates having minimal impact. Sending international students home after they finish their studies would increase Australia’s housing affordability and productivity.

Britain’s richest woman pays a lot of tax, but her gambling company leaves a trail of broken lives behind it.

Neither major Presidential candidate has a plan to balance the budget, with Trump’s proposals estimated to increase the deficit by more than Harris’s, though Trumps’s proposals are generally better for economic growth. Kamala Harris has been accused of plagiarism in her 2009 book Smart on Crime.

The Arts sector needs to get better at running their businesses instead of looking to taxpayers and philanthropy to pay for a product of limited interest.

A collection of puns used by financial analysts.

Finance

A grab bag of measures points to US equities being overpriced, with the growth in government debt one possible factor. After a poor run over 2020-2023, Renaissance’s public funds are posting much better returns this year.

A JP Morgan analyst has cautioned on the recent China boom that “China attracts foreign capital just before destroying it”. Chinese stocks have badly underperformed Indian stocks over the last decade, with poor capital allocation the key factor. Chinese citizens are using art, cryptocurrencies and shell companies to bypass capital controls and move money out of China, driven by a poor economic outlook and low quality investment opportunities within China. With China’s government debt to GDP ratio now at 102%, the negative consequences from government stimulus are significant. Saudi Arabia is threatening to send the oil price down to $50 a barrel to get OPEC members to accept production cuts.

TD Bank has been fined $3 billion for helping drug cartels launder money, including daily deposits of up to $1 million in cash. After the failure of a small bank in Oklahoma, the FDIC has not chosen not to bail out customers with deposits over $250,000, with their ultimate return to be determined by asset sales. 2024 is set to be a record year for Australian corporate insolvencies, making up for the artificially supressed levels during the pandemic. A former FTX executive has updated his LinkedIn profile with his new position as a prison inmate.

The US high yield debt market is red hot with near record issuance, very low margins and few covenants. Windscreen maker Belron has executed the largest ever dividend recapitalisation, paying a €4.3 billion dividend to its private equity owners. Private equity firms Apollo Global, Clearlake Capital and Platinum Equity all have a significant percentage of portfolio companies that have stressed credit ratings or that have defaulted.

Several private credit funds are reporting over 15% of their income from accrued interest on PIK loans, raising questions about the viability of their borrowers. The easy returns from US private credit are over with greater competition driving down margins and weakening covenants. Private credit is much bigger than just corporate lending. Catastrophe bonds have generally avoided catastrophic losses from hurricanes Helene and Milton.

Using margin loans and options to punt on Tesla, an American man turned $88,000 into $415 million before losing it all. The fusion of trading and gambling is now complete, with brokers offering markets on the Presidential election.

Politics & culture

Trump’s proposed tax cuts would stimulate GDP, but his proposed tariffs would decrease GDP and increase inflation. America needs a budget balancer like Reagan or Clinton, not spendthrifts like Trump and Harris. Americans are increasing reliant upon government welfare but neither Presidential candidate has a plan to reduce this. In a ranking of the fiscal performance of US state Governors, Tim Walz finished dead last due to the massive growth in government spending during his leadership.

In an unusual move for a Democrat, Kamala Harris is happy to tell voters she owns a pistol and will shoot anyone who breaks into her house. The US version of 60 minutes has been accused of editing Kamala Harris’s interview answers to make her seem more coherent. The gender gap in voting in the US is growing wider with men leaning Republican and women preferring Democrats. Increasingly hysterical claims about a potential Trump second term from Democrats and left leaning media outlets are being ignored by voters.

The American government uses taxpayer money to bailout people who build homes in known disaster areas. Some Americans are angry with the stingy response for hurricane victims, citing generous funding for illegal migrants and foreign aid. When American governments were small, people solved local problems much cheaper and faster.

The Biden administration has cancelled the debt of five million student loans, lumping taxpayers with a $175 billion bill and encouraging universities to continue overcharging students. After lifting a ban on earmarks in 2021, Congress has gone wild allocating $15.7 billion in 2023 with Republicans worse than Democrats. On almost all measures, Obamacare has worsened the American healthcare system. The US Government received a $7 billion death tax windfall, with the deceased billionaire unusually choosing not to structure his affairs to bypass the tax.

After receiving migrants bussed in by border states, New York is now buying bus tickets for migrants to leave their state. American universities are using taxpayer funds to help the Chinese military. If the Ukraine war continues, Russia will face some hard financial decisions in 2025. The leader of Hamas in Lebanon was killed in an airstrike, with his death highlighting the questionable nature of his employment by UNRWA as a schoolteacher.

Twitter is operating again in Brazil after Elon Musk caved in to the country’s demands. Legislation from the EU and other foreign governments is being used to crackdown on American free speech, with the US Government providing funding for these anti-free speech programs. John Kerry called the First Amendment a “major block” to stopping disinformation as he argued for government to establish a single source of truth. An American retail chain has withdrawn a candle that some have called racist for featuring a snowflake design.

Economics & work

The winners of this year’s Sveriges Riksbank Prize in Economic Sciences answer part of the question of why rich countries have prospered and poor countries haven’t. Along with small government, economic freedom and property rights, institutional quality is a key factor underpinning economic growth.

Five common misconceptions about basic economics. The latest UBI study found that additional welfare payments resulted in slightly less work and slightly more leisure. More evidence that governments are terrible at industrial policy and should stop wasting taxpayer’s money.

Switzerland and Singapore are classic examples of countries powering ahead due to limited government interference in the economy. Greece and Italy lead the candidates for which European country will default first? How Maduro’s socialist government impoverished Venezuela. Both Nazis and Communists are united in their hatred of economic freedom and free speech. Economic freedom leads to prosperity, but the global trend is for governments to stifle free trade. Rising government debt levels and interest rates create a range of problems for central banks and politicians.

Several inflation measures point to Australian inflation finally heading back below 3%. The poorly run NDIS is increasing Australian inflation and decreasing productivity. Australia’s GDP is being propped up by low quality government spending. Australia’s declining GDP per capita and productivity are largely due to outsized growth in non-market sectors and low skill migration. The growth in Australian housing rents is slowing, but without meaningful falls it will remain unaffordable for low income earners. Data from Canada and Australia shows that excessive migration has sent residential rents soaring.

Miscellaneous

A summary of what we know about the microplastics we are regularly ingesting. A Washington state pharmaceutical seller is in hot water for selling the active ingredient in Ozempic direct to consumers at a much cheaper price than the standard retail product. When pharmaceutical manufacturers test their own drugs, they conclude their drugs are far more effective than independent tests. A Montana man has been sentenced to six months imprisonment after he breached import protocols to breed giant sheep.

Facebook has sacked more than twenty employees for misusing meal credits. A Las Vegas woman has been arrested for breaking into a funeral home and stealing an occupied casket while apparently drunk. Baseball players often take short term loans to cover their expenses during the off season, when their paycheques stop. Natural diamond prices have slumped over the last two years as lab grown diamonds now make up the majority of sales in the US.

If we spent time with others instead of on social media, rates of depression and suicide would collapse. The UK, Indonesia and the Netherlands are the highest ranked nations on Ray Dalio’s happiness index.

A World War Two bomb exploded under the taxiway of a Japanese airport, leaving a substantial crater and causing flight delays but no injuries. Debunkbot is an AI chatbot that aims to convince users to disbelieve conspiracy theories. A Minnesota man has invented the “Poopcopter”, a drone that flies around looking for dog poop, then scooping it up. The man who has the job of calling Nobel laureates immediately after they been told they’ve won the prize.