Twisted Reality and Fake CEOs | Mauldin Economics

Twisted Reality and Fake CEOs | Mauldin Economics



...http://www.mauldineconomics.com/connecting-the-dots/twisted-reality-and-fake-ceos...

For instance, I tried a coal mining VR simulation developed by WDR, a German broadcaster. It portrayed the experience of entering a coal mine from 100 years ago.

To do this, you wear a VR visor and headphones… but that’s not all.

• You stand on a vibrating platform that adds sensations, like doors slamming or riding an elevator.  

• They wrap weights around your wrists, so you “feel” the virtual mining tools in your hands.

• Fans and space heaters blow air on you at certain points in the story.

Those simple little tricks aren’t virtual. You feel actual vibration, weight, and heat that enhance the VR sights and sounds, creating a kind of “mixed reality.” Here I am all geared up for the mines.

Photo: Grace Watson

I also tried a new kind of VR from Sony (SNE). Instead of a visor, you wear a helmet with a high-definition video projector on top. They put you in a white room, and the helmet projects a new reality wherever you look. Not having your face covered makes it a different experience. I thought it seemed more realistic – sort of like the Star Trek holodeck.

All this is still experimental. People are trying different ideas, and some of them won’t work. But I saw a huge leap just in the last year.

In the article I mentioned above, I also wrote:

If you think we’re in a “post-truth” world now, just wait.

The difference between truth and fiction is already blurry on Facebook. Imagine when we can immerse ourselves in entire new worlds that may or may not be real.

Now combine social media with reality-twisting technology, and the problem increases exponentially.

For example, in this fake new world, when you see a familiar face say something surprising, you can no longer assume it’s real.

Walmart in Talks With Humana for Deeper Partnership - Bloomberg

Walmart in Talks With Humana for Deeper Partnership - Bloomberg

Walmart has been buying health care for its workers directly from providers in six different regions -- bypassing insurers who usually negotiate with doctors and hospitals. The idea has been to squeeze out middlemen and drive down costs in the same way that the retail giant’s tough bargaining has brought down prices for shoppers.

Walmart has been testing its new plans, known as accountable-care organizations, or ACOs, for two years. ACOs, which can be set up by employers on their own or with an insurer’s help, limit consumers to a smaller group of care providers.

Trouble in candy land: How Peeps, pensions and a lawsuit threaten to upend the American retirement system - The Washington Post

Trouble in candy land: How Peeps, pensions and a lawsuit threaten to upend the American retirement system - The Washington Post



...The Peeps-making company says, without providing hard numbers, that it pays 39 percent more in pension contributions than what it negotiated under its last union contract.....



...Hostess Brands, maker of Twinkies and Ding Dongs, accounted for 24 percent of all those contributions to the multi-employer pension. It stopped making contributions in 2011 and then filed for bankruptcy in 2012, weighed down by weakened demand, rising competition, and large levels of debt. Federal courts allowed it to escape without paying the pension fund $1 billion in obligations.

With ‘Moneyball’ for Health Care, Israel Seeks Edge in Tech Age - Bloomberg

With ‘Moneyball’ for Health Care, Israel Seeks Edge in Tech Age - Bloomberg



...“It’s really helpful, and if they tie it to genetic data its value will be tremendous.”..

Private Equity's Job Is Made Doubly Hard by Tech in Asia - Bloomberg

Private Equity's Job Is Made Doubly Hard by Tech in Asia - Bloomberg



...From Singapore to India, rivalry is mounting for coveted assets.

It's little wonder. The likes of Alibaba Group Holding Ltd., SoftBank Group Corp. and Tencent Holdings Ltd. have deep pockets and plenty of patience. They invest in firms such as Paytm Mobile Solutions Pvt., Lazada Group SA and Ola to increase usage of their own apps, or sometimes just to kill the competition. Profitability, a key concern of private equity firms, goes out the window when the objective is eyeballs.

Someone should let the world's pension funds and family offices, the main investors in private equity, know. Fundraising for Asian targets continues apace, even as dry powder, or unspent capital, reaches record highs.

China needs more water. So it's building a rain-making network three times the size of Spain | South China Morning Post

China needs more water. So it's building a rain-making network three times the size of Spain | South China Morning Post

Maudlin - Squares, FAANGs, and Stock Valuations

http://ggc-mauldin-images.s3.amazonaws.com/uploads/pdf/180323_TFTF.pdf



...The Square and the Tower. ...Niall’s book is about hierarchy and networks. Squares are where people meet and mingle. They are the source of creativity, invention, innovation. Towers, on the other hand, are where power resides – “hierarchical structured power,” as Niall calls it. The great tension in human history is between those two, the squares and the towers – and technology has increased that tension.



...five of the eight richest men in the world today are rich because of network economics.

He then showed a slide of those five men: Bill Gates, Jeff Bezos, Mark Zuckerberg, Larry Ellison, and Michael Bloomberg. In different ways, they all saw and exploited the value of connecting people via technology.

...2008. Here’s Niall again.

The financial crisis, I think, needs to be understood as a colossal network outage. Very few central bankers understood the extent to which the international financial system had become a giant network. I think regulators and legislators underestimated the fragility of the system in 2008. They failed to see that a single node, a single investment bank that nobody regarded as pivotal to the system was in fact very important. And when Lehman failed, the system, the entire global credit system... you remember? I remember... threatened to collapse completely. Andrew Haldane, chief economist at the Bank of England now, is one of the few central bankers who think about this, and indeed this slide was taken from a deck that he did in 2011.

The way I see it is that since 2008 the rest of us have basically caught on with where the financial world was 10 years ago. Initially it was only the financial world that was networked to the max because it was still quite expensive to be networked 10 years ago. But with the advance of giant platforms like Facebook offering zero-cost networking, all of us are now as connected as only investment bankers were a decade ago.

...This is happening in literally hundreds of industries.

These ubiquitous connections were supposed to empower everyone. Instead, they empowered those who owned and controlled the networks. A handful of “platform” companies essentially gained the ability to micromanage the village square, defining what information each person could see and hear.

...Amazon is in a sense eating retail sales by making price discovery much easier. 

Similarly, Google and Facebook are eating advertising. Apple, Netflix, and their kin are eating leisure time.

Markets Show They Aren't Prepared for the End of Stimulus - Bloomberg

Markets Show They Aren't Prepared for the End of Stimulus - Bloomberg



...As central bankers attempt to normalize policy, there is a risk that carry trades in financial markets will collapse, with a negative spillover to the real economy.

Central banks bought $21 trillion in government debt globally, pushing investors to search for yield in riskier markets. The result is a pyramid of trades dependent on stable interest rates: ...

...While carry trades flourished, the architecture of financial markets has become increasingly fragile. In 1976, Hyman Minsky wrote that a crisis can develop when financial structures amplify rather than dampen an initial shock. Today, there are a number of negative feedback loops across strategies that use leverage, buy illiquid assets or own a large percentage of their asset class. A bank-loan exchange-traded fund issues listed shares, but it takes between 30 and 60 days to settle a loan sale in the secondary market....



.... ETFs own 3.9 percent of U.S. high-yield bonds, more than the inventory of all broker-dealers put together. Together with quantitative funds, passive strategies represent 60 percent of traded volume in equities, according to JPMorgan research. 



...In the February sell-off, junk bond ETFs lost around 13 percent of their shares outstanding. Like instantaneous redemptions, these events force the ETFs to sell bonds in the secondary market to redeem shares, accelerating a sell-off. As the Bank for International Settlements warned in a report issued earlier this month, “The unique structures of ETFs might allow, or even encourage, less stable investment behavior by owners of these products.” Short volatility strategies act similarly. By selling volatility and put options in good times, they keep equities and credit spreads within a narrow range. Lower volatility, in turn, encourages more investors to pile into the same strategies. In a sell-off, however, the mechanism works the other way around.



...growth-linked debt for sovereigns, where coupons go down in a slowdown, reducing the need for austerity.



...explains the recent increased demand for haven assets including long-term U.S. Treasuries, German Bunds, Japanese government debt and emerging-market local currency debt. Investors are preparing for hurricanes while the sun is still out.

Why Silicon Valley's Tech Culture Hasn't Moved to Texas - Bloomberg

Why Silicon Valley's Tech Culture Hasn't Moved to Texas - Bloomberg



...I wondered about that, though. Yes, housing is much more affordable, taxes are somewhat lower 

1 and the roads are marginally less clogged in Texas than in California. Also, the Texas economy has undeniably been booming, creating 3 million new jobs since 2000, compared with 2.7 million in much more populous California.

But I remembered looking through what is now called the PwC/CB Insights MoneyTree Report a couple of years ago and being surprised at how little venture capital Texas attracts relative to Silicon Valley. When I looked at the MoneyTree report again and added up the numbers for the past five years, I was even more surprised to learn that the state hadn't even attracted as much VC funding as the District of Columbia and its environs: 2  

The Biggest VC Magnets

Venture capital investment by region, 2013 through 2017

Source: PwC/CB Insights MoneyTree Report

Texas' share of U.S. VC investment used to be bigger. It averaged almost 6 percent from 1995 through 2012, compared with just 2.2 percent over the past year. Meanwhile, California has gained share since the 1990s and 2000s, and metro Boston (which accounts for the overwhelming majority of New England VC investment) and metro New York have gained share lately.

Big U.S.-China Trade Deficit Is Smaller Than It Appears - Bloomberg

Big U.S.-China Trade Deficit Is Smaller Than It Appears - Bloomberg



The aforementioned value-added trade data also tell us that only 0.7 percent of U.S. GDP depends on Chinese consumption of American-made goods and services, while 3.1 percent of China’s GDP is derived from U.S. demand. So, in any tariff battle, China would likely suffer more.

Korea Aims to Avert a Youth Unemployment ‘Catastrophe’ - Bloomberg

Korea Aims to Avert a Youth Unemployment ‘Catastrophe’ - Bloomberg



...

Key points:

• The government plans to offer up to 27 million won over three years to small-and-medium sized companies for every full-time worker they hire.
• Workers aged 34 or under who get hired by small companies will be exempt from personal income tax for five years.
• For those aged 34 or under who work for a small company, cheap loans to pay for house rentals and deposits will be available.
• To encourage entrepreneurship, young people who open their own businesses will be exempt from personal income and corporate taxes for five years.

A Worrying Shift for Pensions: Retirees Will Soon Outnumber Kids - Bloomberg

A Worrying Shift for Pensions: Retirees Will Soon Outnumber Kids - Bloomberg



... The ratio of active workers to those receiving benefits has dropped to 1.42 from 2.43 in 2002, according to a survey of the largest public pensions conducted by the National Association of State Retirement Administrators....

DowDuPont Says Trump Steel Tariffs Hurt Case for New U.S. Plants - Bloomberg

DowDuPont Says Trump Steel Tariffs Hurt Case for New U.S. Plants - Bloomberg



...Nearly half of all U.S. manufacturing investment for the past two years has been for chemical plants, largely because shale gas provides a cost advantage over other areas of the world, he said. That’s helped turn a U.S. trade deficit for chemicals into a surplus, ...



...DowDupont last year completed construction of $6 billion in new factories along the Texas Gulf Coast to take advantage of abundant, low-cost natural gas from the shale drilling boom. Those plants contained about $1.2 billion worth of steel, Fitterling said Tuesday in an interview. Trump’s proposed 25 percent duty on steel imports would have added about $300 million in costs to the project.



...Shale gas has spurred $185 billion of completed and proposed investments in chemical and plastics factories, with about half of the spending yet to begin, the American Chemistry Council said on Friday. 

Why American Workers Aren’t Getting A Raise: An Economic Detective Story | Mauldin Economics

Why American Workers Aren’t Getting A Raise: An Economic Detective Story | Mauldin Economics



...Something is profoundly broken with capitalism if corporate profit margins do not revert to the historical mean.



...The role of high industrial concentration on inequality is now becoming clear from dozens recent academic studies.



...a collapse in the number of publicly listed companies and a shift in power towards big companies. (think of Democrat regulations to make markets safer that cost companies lots of money!)...There is a strong and direct correlation between how few players there are in an industry and how high corporate profits are. 



...Market power has been rising in many industries. Americans have the illusion of choice, but in industry after industry, a few players dominate the entire market:

• Two corporations control 90% of the beer Americans drink.

• When it comes to high-speed internet access, almost all markets are local monopolies; over 75 percent of households have no choice with only one provider.

• Four airlines completely dominate airline traffic, often enjoying local monopolies or duopolies in their regional hubs. Five banks control about half of the nation’s banking assets.

• Many states have health insurance markets where the top two insurers have 80-90% market share. For example, in Alabama one company has 84% market share and in Hawaii one has 65% market share.

• Four players control the entire US beef market.

• After two mergers this year, three companies will control 70 percent of the world’s pesticide market and 80 percent of the US corn-seed market.

The list of industries with dominant players is endless.

...according to a study by Credit Suisse, “between 1996 and 2016, the number of publicly-listed stocks in the U.S. fell by roughly 50%—from more than 7,300 to fewer than 3,600—while rising by about 50% in other developed nations.”(i) It is not lower growth or the global Financial Crisis that caused fewer IPOs. This is distinctly an American phenomenon.

...

Many workers are dealing with a monopsonist

In a monopoly, there is only one seller, while in a monopsony, there is only one buyer....most labor markets are very concentrated and that it has a strong negative impact on posted wages for job openings.(v) They showed that going from a very competitive to a highly concentrated job market is associated with a 15-25% decline in wages.

SIC - Intergenerational Risks

Patrick Cox

Cox said he sees a perfect storm brewing. The impact current anti-aging and life-extension research will have on society is almost something out of science fiction—but it’s actually happening. And it’s coming a lot sooner than most people think.

Although Millennials are about to outnumber Baby Boomers, the old-age dependency ratio—the number of retirees being supported by young workers—is rising. The young are paying the bills of the old. Will they rebel against this intergenerational problem?

Healthcare is driving growing budget deficits and medical costs. Regenerative medicine is the only answer, Cox said. He believes that this imperative will drive radical regulatory change and get these drugs and therapies to market far faster.

Biotech Panel

...Michael West, CEO of BioTime, talked about how the lion’s share of healthcare costs is spent fighting chronic diseases. In a lab setting, scientists have been able to reverse the aging process in cells. This cell process, said West, is now firmly under human control.

The first update email from SIC 2018 - btbirkett@gmail.com - Gmail

David Rosenberg

...On the macroeconomic level, Rosenberg said that long-term deflationary trends such as adverse demographics and high debt levels are stronger than ever. Given these trends, he thinks that the current uptick in inflation is little more than a transitory spurt and will soon fade away.

Finally, Rosenberg said that Gluskin Sheff, which has $9 billion in assets under management, recently moved to 25% cash across all their portfolios.

Louis Gave

Up next was Louis Gave, CEO of Hong-Kong based Gavekal. Gave has consistently been one of the highest-rated speakers at the SIC, and he didn’t disappoint with some unique insights into what is happening in China.

Gave pointed out that China is currently going through a huge economic paradigm shift, one which has profound investment implications.

For the past few decades, the incentive in China has been to grow as quickly as possible. But going forward, China’s incentives will be based around what President Xi Jinping has called a “Beautiful China.”

This means a more sustainable growth model with less use of materials such as concrete and coal.

...investors should be looking at Chinese financial and consumer stocks, plus countries that will benefit from the One Belt, One Road infrastructure build-out.

California Parking Regulations Are a Big Part of Its Housing Crisis - Bloomberg

California Parking Regulations Are a Big Part of Its Housing Crisis - Bloomberg

How Rich Professionals Can Exploit a Tax Break for Farms and Small Firms - Bloomberg

How Rich Professionals Can Exploit a Tax Break for Farms and Small Firms - Bloomberg



...A cooperative is a worker-owned, worker-run enterprise whose members earn salaries and share profits paid out as so-called patronage dividends. Members then pay ordinary rates on them. The dividends are deductible to the cooperative, which pays the corporate rate on anything retained for reinvestment in the business. Employees who aren’t members typically receive regular wages.



...The new law lowers the top individual rate to 37 percent from 39.6 percent. With the new 20 percent deduction, pass-through owners taxed at the top rate can now get their rates as low as 29.6 percent.

Critics say this creates an incentive for top earners to recast themselves as independent contractors and funnel wages taxed at ordinary rates through a pass-through entity.

Gross Income

Now, tax advisers are exploring another move: to recast a pass-through as a cooperative, because the new law lets cooperatives apply the deduction to their gross income.

...Adopting cooperative status could be as simple as changing your bylaws to reflect the three pillars of being a cooperative: control of capital by the owners, who are also called members; giving each owner one vote; and distributing profits to owners.

Steel History Shows How America Lost Ground to Europe - Bloomberg

Steel History Shows How America Lost Ground to Europe - Bloomberg



...American companies continued to add completely inefficient open-hearth furnaces to their shop floors, doubling down on an obsolescent technology....



...As soon as prices began to rise so that the steel companies began to be profitable, they stopped modernizing,”...

Sachs_Will Economic Illiteracy Trigger a Trade War?

Project Syndicate
https://www.project-syndicate.org/commentary/trump-economic-illiteracy-trade-war-by-jeffrey-d-sachs-2017-04?utm_source=Project%20Syndicate%20Newsletter&utm_campaign=c1427ae595-sunday_newsletter_4_3_2018&utm_medium=email&utm_term=0_73bad5b7d8-c1427ae595-93854061&barrier=accessreg


...The current-account balance, measuring the balance of trade in goods, services, net factor income, and transfer payments from abroad, is equal to national saving minus domestic investment. That’s not a theory. It’s an identity, save for any statistical discrepancy between gross national product (GDP) and gross national income (GNI). It’s true whether you are liberal or conservative, populist or mainstream, a Keynesian or a supply-sider. Even Trump and all his deal making can’t change that. Yet he is threatening a trade war because of deficits that reflect America’s own saving-investment imbalance.

A country runs a current-account deficit if investment exceeds national saving, and runs a surplus when investment is less than national saving. For a country with a balanced current account, a deficit can arise if its investment rate rises, its saving rate falls, or some combination of the two occurs.

EL-ERIAN _ Working Toward the Next Economic Paradigm

https://www.project-syndicate.org/commentary/economic-paradigm-after-washington-consensus-by-mohamed-a--el-erian-2018-02?utm_source=Project+Syndicate+Newsletter&utm_campaign=c1427ae595-sunday_newsletter_4_3_2018&utm_medium=email&utm_term=0_73bad5b7d8-c1427ae595-93854061

For decades, the Western world put its faith in a well-defined and broadly accepted economic paradigm with applications at both the national and global levels. But, against a background of declining confidence in the ability of “experts” to explain, let alone predict, economic developments, that faith has deteriorated. With a new paradigm having yet to emerge, the world economy faces a heightened risk of fragmentation, with already-vulnerable countries being left even further behind.

...

Trump Tariffs Are Gift OPEC Russia Not US Shale Oil Gas Pipelines - Bloomberg

Trump Tariffs Are Gift OPEC Russia Not US Shale Oil Gas Pipelines - Bloomberg



...A study conducted by consultants ICT International on behalf of five pipeline industry bodies found that approximately 77 percent of the steel used in line pipe in recent years was imported, either in the form of finished pipe or the raw material used to fabricate it in the U.S. (The report also noted that while the U.S. imports $2.2 billion of steel products related to line pipe from 29 countries, it exports steel and steel products worth five times as much to those same 29 nations).



...A 25 percent increase in the cost of imported line pipe, fittings and valves would raise the cost of a 280-mile oil pipeline -- typical of those needed to carry shale oil from the Permian Basin to the Gulf coast -- by $76 million. For a mega-project, like the Dakota Access pipeline, also championed by President Trump, the cost increase could be as much as $300 million.



...The shale industry is already facing the prospect of pipeline bottlenecks hampering output growth. Further obstacles to pipeline construction would hurt jobs in the oil patch, too.



But it's easy to see one result -- U.S. oil output growth will slow. ...

Welcome to Dubai 2.0 - Bloomberg

Welcome to Dubai 2.0 - Bloomberg



...Much of the Arab world is mired in violence, poverty and unemployment, and yet in Dubai they’re busy working on sending a probe to the red planet within three years. It’s part of the latest package of eye-catching ambitions that include printing three-dimensional buildings, running the city on blockchain data technology and introducing hoverbikes and driverless drone taxis.



...Now it’s about how to keep the party going, even one in a country where unmarried couples can’t legally live together and where free voice calls over the Internet and Apple’s FaceTime are blocked.

Bruce

...At the Mohammed bin Rashid Space Center in a desert area outside downtown Dubai, the plan is for the Mars probe to launch in summer 2020 with help from three universities in the U.S. It’s being developed by a team of about 160 Emiratis—40 percent of them women—with an average age of 27.

Inside the space center, civil engineer Shaikha Ahmad Al Falasi, 24, gives a tour of a prototype of a smart house that lowers energy consumption by using solar energy only, an air conditioning system based on chilled water and thermal and air insulation techniques.

There’s a belief among Emiratis that “impossible isn’t a notion because we saw visual changes that happened right in front of us,” said Al Amiri, the minister. “It’s this understanding that people abroad don’t get.”

Rakuten will roll its $9B loyalty program into a new blockchain-based cryptocurrency, Rakuten Coin | TechCrunch

Rakuten will roll its $9B loyalty program into a new blockchain-based cryptocurrency, Rakuten Coin | TechCrunch



The company is planning a new cryptocurrency called Rakuten Coin — built on blockchain technology and the company’s existing loyalty program, Rakuten Super Points — which it plans to use to encourage loyalty services globally and to help customers to buy goods across different Rakuten services and markets.

As a U.S. Ally, Turkey Is Turning Into the Next Pakistan - Bloomberg

As a U.S. Ally, Turkey Is Turning Into the Next Pakistan - Bloomberg



scary



...At a rally at Kahramanmaras, the Turkish leader brought a trembling 6-year-old girl on stage dressed in military garb and told her she would be honored if she died as a martyr. He sounded like a terrorist. We expect this kind of child abuse from the fanatics in Hamas or Hezbollah. Erdogan though is the leader of an important NATO ally.

Turkey is beginning to resemble Pakistan, a perpetually failing state whose military leadership has tolerated and advanced a vision of political Islam deeply hostile to U.S. and Western interests.

China Is Turning Ethiopia Into a Giant Fast-Fashion Factory - Bloomberg

China Is Turning Ethiopia Into a Giant Fast-Fashion Factory - Bloomberg



...“The government is very committed to us,” he says. “They had workers here 24 hours, day and night, to build this place. And there is no corruption. None!”

Hawassa Industrial Park did go up quickly, thanks to a state-owned Chinese construction company that banged out 56 identical hangar-size, red-and-gray metal sheds devoted to textile production in nine months, for $250 million, according to the Ethiopian Investment Commission.

Boeing Is Getting Ready to Sell Flying Taxis Within a Decade - Bloomberg

Boeing Is Getting Ready to Sell Flying Taxis Within a Decade - Bloomberg

The Middle of an Era | Mauldin Economics

The Middle of an Era | Mauldin Economics

Today's WorldView: Venezuela's Maduro hollows out his nation - btbirkett@gmail.com - Gmail

Today's WorldView: Venezuela's Maduro hollows out his nation - btbirkett@gmail.com - Gmail



As many as 4 million Venezuelans — more than 10 percent of the population — have already left the country, according to the Brookings Institution.