washingtonpost--2020-06-23--The Fed’s Risky Business Is Worth It

The Fed’s Risky Business Is Worth It

The balance sheet has been growing primarily in three areas .
It currently has about $ 4.2 trillion of Treasuries and $ 1.9 billion of agency mortgage-backed-securities ( MBS ) , and this is rising by $ 120 billion a month ; about $ 353 billion in foreign-exchange swaps with overseas central banks ; and about $ 186 billion in special liquidity and lending facilities .
The liquidity and lending programs probably will get much larger .
They are just starting to ramp up and there is U.S. Treasury support to backstop as much as $ 4.5 trillion of such @ @ @ @ @ @ @ , the Fed ’ s credit risks are very low .
Treasuries and agency MBS are backstopped by the U.S. government .
The foreign-exchange swaps are backstopped by central banks of countries or regions with low sovereign-credit risk and collateralized by the foreign currencies pledged in the swaps .
In contrast , the Fed ’ s special liquidity and lending facilities entail considerably greater credit risk .
After all , the Fed is buying municipal debt , junk-bond exchange-traded funds , BB rated corporate bonds , and it is making loans to medium-sized @ @ @ @ @ @ @ coronavirus .
Nevertheless , these risks are mostly borne by the U.S. Treasury , which has a 10 % first-loss exposure .
As a point of reference , neither the Fed nor the Treasury took any losses on the Fed ’ s special liquidity facilities during the financial crisis .
Yet the Fed is taking on considerable interest-rate risk .
Many of the Fed ’ s assets are longer term , especially its Treasuries and agency MBS holdings .
Moreover , these obligations are primarily funded by overnight bank reserves and currency outstanding @ @ @ @ @ @ @ needed to raise short-term interest rates significantly a few years down the road , it ’ s possible that the cost of the liabilities it uses to fund its balance sheet would exceed the return on its assets , causing the Fed to lose money .
The Fed would also have mark-to-market losses on its assets , but under the Fed ’ s accounting rules such losses would not flow through to the Fed ’ s income or affect its reported capital .
Fortunately , the Fed also has a buffer that makes @ @ @ @ @ @ @ currency outstanding still makes up a considerable amount of the Fed ’ s liabilities ( $ 1.9 trillion ) and the Fed incurs no interest expense on these liabilities , the interest rate that the Fed pays on reserves would have to climb considerably above the rate it earns on its assets for the Fed ’ s net interest margin to turn negative .
That said , the bigger the Fed ’ s balance sheet and the longer it purchases Treasuries and agency securities , the greater its interest-rate risk exposure .
As @ @ @ @ @ @ @ of zero-cost currency funding shrinks .
And , as the balance sheet grows in an extraordinarily low interest-rate environment , the average return on the Fed ’ s assets declines .
Although up-to-date Fed balance sheet information on the interest income on its portfolio is not available , I am confident that a hike in short-term rates to 4 % within a few years would be sufficient to turn the Fed ’ s net interest margin negative , generating losses .
So how worried should we be about this ?
In my view @ @ @ @ @ @ @ .
That is because the benefits of a strong economic recovery that necessitated higher short-term interest rates would be much more valuable to the nation than the consequences of the U.S. central bank losing money .
What would happen if the Fed lost money ?
There are two alternatives .
First , the losses could deplete the Fed ’ s capital .
Although this sounds bad , it is of little consequence .
Several overseas central banks have operated successfully for years with negative capital ; the Fed would be no different .
@ @ @ @ @ @ @ be filled by the Fed booking a Treasury deferred asset .
Essentially , an asset would be created supported by the seigniorage earnings on future increases in the amount of U.S. currency outstanding .
This would enable the Fed to avoid depleting its capital on paper , but substantively would have no consequences for its cash flow or net income .
The biggest consequence of a negative net interest margin would be broader recognition that the Fed ’ s purchases of long-dated Treasuries and agency MBS financed by short-term reserve liabilities does expose @ @ @ @ @ @ @ this is a risk worth taking , there is no free lunch and that should be acknowledged explicitly .
Bill Dudley is a senior research scholar at Princeton University ’ s Center for Economic Policy Studies .
He served as president of the Federal Reserve Bank of New York from 2009 to 2018 , and as vice chairman of the Federal Open Market Committee .
He was previously chief U.S. economist at Goldman Sachs .


washingtonpost--2020-06-23--Analysis | SoftBank’s Son Hawks a Hot Stock for Cool Cash

Son took control of Sprint Corp. in 2013 and then spent years pursuing a merger between the beleaguered wireless carrier and its stronger rival , T-Mobile .
He finally got his way thanks to the Trump administration ’ s lax regulators at the Justice Department and Federal Communications Commission .
Their focus on America ’ s standing in the so-called race to 5G , the next generation of wireless connectivity , overshadowed the antitrust concerns .
Sprint officially became part of T-Mobile in April , handing SoftBank ownership of about 25 % of the combined company ; another 44 % @ @ @ @ @ @ @ Until this week , that left only a small public float for a stock that ’ s long been the envy of its industry — and will likely continue to be .
After the implosion of office-space rental company WeWork Cos. and the Covid-19 pandemic , SoftBank suffered record losses from its investments and is in need of cash .
In turn , the company is undertaking a series of complex transactions to exit most of its T-Mobile stake , generating about $ 20 billion in proceeds .
The deal involves a public @ @ @ @ @ @ @ existing shareholders , a private trust vehicle and a call option for Deutsche Telekom to increase its ownership of T-Mobile down the road when its own balance sheet is in better shape .
The transactions are structured so that even though more T-Mobile shares will be available to the public , the total number of shares outstanding won ’ t change .
T-Mobile also gets $ 300 million for playing banker .
T-Mobile ’ s subscriber base , revenue and stock price are all expected to continue growing for the foreseeable future at @ @ @ @ @ @ @ two larger rivals , Verizon Communications Inc. and AT & T Inc. Its consumer appeal comes from offering cheaper data plans on a network that has improved tremendously over the years , as well as a friendlier customer-service experience .
Led by a larger-than-life CEO whose magenta wardrobe made him a walking T-Mobile billboard , the company was able to distinguish itself over time as a fun brand in an otherwise drab industry .
That CEO , John Legere , left after sealing the Sprint deal and was replaced by Mike Sievert .
@ @ @ @ @ @ @ farewell performance for Braxton Carter , T-Mobile ’ s pink cowboy hat-wearing chief financial officer , who retires next week .
The Sprint merger fundamentally changed the industry by eliminating a low-cost rival that T-Mobile competed with most .
T-Mobile ’ s own porting ratios , a measure of how many customers one carrier steals from another , showed that it was consistently taking a bigger bite out of Sprint ’ s subscriber base than either Verizon or AT & T ’ s .
Now that the deal is done , T-Mobile would @ @ @ @ @ @ @ ) Given that there ’ s so much extra capacity on its network to handle more subscribers , it could cut prices even more .
That would supercharge its own growth while putting pressure on AT & T and Verizon .
2 ) Instead , T-Mobile could keep prices flat or even raise them to improve profit margins more immediately , leaving competition more stagnant .
The latter option is the less innovative , less consumer-friendly route that was feared by opponents of the Sprint takeover .
( T-Mobile ’ s 13-hour outage @ @ @ @ @ @ @ ’ t help to quell the fear that the industry is insufficiently regulated . )
Here ’ s how different T-Mobile ’ s profitability might look if it were to adopt AT & T ’ s pricing : In either case , it may be a win-win for investors .
T-Mobile executives predict that it will save more than $ 40 billion in costs due to the Sprint deal , much of which will come from job cuts and shutting stores in overlapping locations ( another reason the transaction was criticized ) .
@ @ @ @ @ @ @ campaigns to promote their networks .
The combined T-Mobile-Sprint will now be able to save about $ 700 million a year just from lower advertising expenses , according to a report earlier this month by Jonathan Chaplin , an analyst for New Street Research .
Chaplin expects T-Mobile to pursue the less aggressive avenue of growth , but even then he sees its stock price doubling over the next three to five years .
Analysts are generally less optimistic about AT & T and Verizon , as one undergoes a difficult transformation into @ @ @ @ @ @ @ the other remains almost singularly focused on 5G with a less-than-ideal set of wireless spectrum .
After buying Sprint , T-Mobile ’ s future looks to be either grow fast or grow faster .
Still , this week ’ s news shows that for a merger pumped up on American 5G zeal and patriotism , the biggest beneficiary just might be a Japanese billionaire short on cash .

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washingtonpost--2020-02-29--First Death Reported in U.S.; More Cases Likely: Virus Update


washingtonpost--2020-02-29--Analysis | What the Coronavirus End Game Will Look Like

Still , the likely end-point of this outbreak will see it settle down as an endemic disease — one of the suite of respiratory viruses like influenza and the common cold that travel around the world year after year , with most of us regarding them as little more than a nuisance .
The great unknown is what will happen along the way .
Doing the sums can produce alarming figures .
The best estimates so far suggest that Covid-19 kills about 1 % of people it infects .
That number may go up somewhat or fall significantly ; either @ @ @ @ @ @ @ dreadful toll .
If 60 % of the world ’ s population is ultimately infected , as suggested by Gabriel Leung , chair of public health medicine at Hong Kong University , a 1 % fatality rate would kill almost 50 million people — similar to the 1918 Spanish flu .
If that falls to 0.1 % , it could still be roughly 10 times more fatal than the 2009 H1N1 influenza outbreak , which killed several hundred thousand in its first year .
A better comparison might be the influenza pandemics that @ @ @ @ @ @ @ 1960s , according to Benjamin Cowie , a professor of epidemiology at the University of Melbourne — but the differences are still significant .
While our health systems are far better than they were 50 years ago , the channels of infection are more open , too .
“ We ’ re in a very different world now , our world is much more interconnected , ” he said .
“ What happens in one place is much more likely to be on the other side of the world in 24 hours.
” @ @ @ @ @ @ @ hot spots in Asia , the Middle East and Europe appear to be failing .
If that ’ s the case , expect to see low-level movement restrictions spread elsewhere .
Such measures don ’ t serve so much to eliminate as to slow down a highly contagious infection like Covid-19 .
Still , that will spread out the burden of sickness over a longer period , putting less pressure on the health system .
The biggest impact is likely to be on the young and old .
Children are less able to @ @ @ @ @ @ @ measures that help slow infections , so school closures like those imposed in Hong Kong and now in Japan could crop up elsewhere .
Aged care homes may see even more serious restrictions .
Covid-19 seems to particularly target the elderly and those with other existing conditions .
One recent study of more than 72,000 cases in China found a fatality rate of 2.3 % across all age groups , rising to 8 % for people in their 70s and 15 % for people above 80 .
Minimizing the risks to older people @ @ @ @ @ @ @ care facilities , especially if staff are infected themselves , or called away to look after children sent home from shuttered schools .
Fortunately , the most severe period of initial infection could soon be fading .
Respiratory diseases flourish in the cold season and taper off as the weather warms up .
That should cause infection rates to slow in the northern hemisphere , while continuing at a lower level in tropical regions and spiking in temperate parts of the southern hemisphere where winter will be setting in .
When a new @ @ @ @ @ @ @ the disease will shift back to the northern hemisphere , to begin the cycle again .
Subsequent Covid-19 seasons probably won ’ t be as serious .
Those who survive viruses should be immune from reinfection ( though there have been reports of people being diagnosed with Covid-19 for a second time ) , and as the share of survivors in the population rises , it gets harder for a disease to spread .
In a best-case scenario , it ’ s even possible that vaccines may be available in not much more @ @ @ @ @ @ @ that , doctors and nurses will get better at treating the condition and preventing severe illness , both through improved clinical knowledge ; use of antiviral medicines like Kaletra , if they ’ re found to be effective ; and because they ’ ll be much better-equipped to handle the crisis when infection rates are lower and fewer people are crowding into hospitals and clinics .
There ’ s no cause for complacency .
Epidemics often move in waves , so that an apparent early peak in infections can be followed by further @ @ @ @ @ @ @ maintain vigilance around measures like hand-washing and touch-avoidance , even if the pandemic seems to be on the ebb .
All of this will affect society in ways hard to predict .
A global economy that ’ s off sick will struggle to grow in the manner previously expected .
A disease that so aggressively targets older people may even shift the demographic structure of populations .
The large number of men who died in the 1918 Spanish flu and the First World War has often been cited as one reason why the @ @ @ @ @ @ @ so much in the 1920s .
We ’ re not on the brink of doom .
As we ’ ve written , taking modest and sensible precautions should keep most people safe .
In time , Covid-19 may be remembered not so much with dread as with historical curiosity .
But the coming months , and years , will change us .


washingtonpost--2020-05-21--Analysis | Ford Is the Poster Child for America’s Grand Reopening

This is the reality of manufacturing for the time being as companies fret about worker safety and the legal and reputational risks of not doing enough to protect employees .
Unlike Ford , whose products fall into a category of consumer spending that ’ s become even more discretionary amid the pandemic , wide swaths of the industrial sector were deemed essential and allowed to remain operational .
Those companies , too , have had their share of growing pains as they adjust to a new way of working .
Boeing Co. temporarily closed its factories in the Puget Sound @ @ @ @ @ @ @ of the coronavirus and later briefly shuttered work at its 787 plant in South Carolina .
CBS Minnesota reported earlier this month that a Honeywell International Inc. facility in Minneapolis had closed after a worker tested positive .
Whirlpool Corp. closed its Amana , Iowa , refrigerator plant at least twice after employees tested positive for the virus , according to the Gazette local paper .
Deere & Co. and Altria Group Inc. ’ s Philip Morris USA are among the many others that have had to close plants on a limited basis @ @ @ @ @ @ @ Martin Corp. , meanwhile , said this week it will temporarily slow production of the F-35 fighter jet because of delays at suppliers .
It ’ s a lot harder , though , to bring factories back to life than it is to just figure it out as you go along .
Ford may be a manufacturer , but because it ’ s one of the few to have experienced an extended lockdown , it ’ s arguably a better benchmark for the non-industrial economy .
You better believe that office-based companies that @ @ @ @ @ @ @ are keeping a close eye on how the likes of Ford fare in flipping the switch back on .
Seeing the automaker ’ s setbacks this week , companies that can operate without their employees clustered in the same place may be less keen to rush back .
They ’ re getting a more continuous stream of work out of their employees now than they would if they had to hit the pause button and clear out the office every few weeks .
And the mixed messages from the White House aren ’ @ @ @ @ @ @ @ due to visit a Ford factory in Michigan that ’ s been converted to ventilator production and has been wishy-washy on whether he will adhere to the company ’ s face-mask requirements .
Already , American Express Co. CEO Steve Squeri and Visa Inc. CEO Al Kelly said this week that most of their employees would work from home for the rest of the year .
Some 28 % of employers recently surveyed by Challenger , Gray & Christmas said they would make work-from-home arrangements permanent for at least some employees .
Cryptocurrency @ @ @ @ @ @ @ Inc. are among those who have publicly said remote working will be their indefinite default option .
Facebook Inc. said Thursday it would follow suit and move to a more permanent remote workforce .
At the end of the day , manufacturing or non-manufacturing , it ’ s all interconnected .
How permanent this shift to work from home will be is debatable , but if companies end up needing less office space , by default that means fewer HVAC systems , commercial lighting , fire and security products or even 3M Co. @ @ @ @ @ @ @ workers aren ’ t going to be commuting , do they still need to buy cars from Ford ?
There ’ s a lot riding on getting reopening right .


washingtonpost--2020-05-21--New York Man Charged With $20 Million PPP and SBA Loan Fraud

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washingtonpost--2020-05-20--Fed Receives Bipartisan Critique for Stalled Main Street Lending

“ I ’ m disappointed that it ’ s taken as long as it has , ” Hill said in an interview of the program that was announced April 9 .
The central bank received more than 2,000 comments on the program from April 9 to 30 , and then announced that it would be broadened to include more businesses .
Fed Chair Jerome Powell says the program will be operational by early June and disputed the notion that the central bank could be moving more quickly .
“ We are working literally around the clock and have been for @ @ @ @ @ @ @ Powell said .
Both the Fed and the Trump administration have projected economic hardship at least through June as the U.S. copes with the coronavirus pandemic .
Powell has warned of broad dangers to the economy , saying a recovery would take time and that the country was at risk of long-term economic damage .
Trump ’ s economic advisers say the economy could contract 40 % for the second quarter through June .
More than 36 million people already have lost their jobs .
The Fed and Congress have pumped trillions of @ @ @ @ @ @ @ damage , but the central bank is still grappling with what Powell has called “ complex and challenging ” emergency facilities .
“ Main Street is in a class by itself , ” he told senators Tuesday during a virtual hearing .
“ These are small and medium-sized businesses .
They live in a world of bank lending .
That ’ s a world of negotiated documents .
We ’ re trying to enter that world and make loans to qualifying buyers.
” The Main Street lending facility is also a key area @ @ @ @ @ @ @ Carlos Condarco , a spokesman for Shalala , said the Florida Democrat wants to make sure the terms of the lending programs benefit the small and medium-sized businesses most in need .
The Fed , when it expanded the facility , said participants should make “ commercially reasonable ” efforts to refrain from laying off workers .
Lawmakers say that while Congress did not place restrictions on retaining payroll levels in exchange for federal support that comes from the central bank , the Fed should still require it to follow the spirit of @ @ @ @ @ @ @ to ask Treasury and Fed officials what they mean by “ commercially reasonable.
” “ The principal mission of the Main Street Lending Program is to bridge companies cash-flow needs across this coronavirus impact on the economy and keep as many Americans employed as possible , ” Hill said in the interview .
“ That ’ s certainly the full intent of not only the the law but also the regulations .
”


washingtonpost--2020-05-20--Analysis | Victoria’s Secret Puts India Deals on Edge

Judges usually set the bar high for allowing a deal to be killed because of MAC .
In the Victoria ’ s Secret case , Sycamore argued that the clause had been triggered because current owner L Brands Inc. failed to pay rent and furloughed thousands of workers .
The pandemic was “ no defense ” for L Brands violating terms of the agreement , the buyer said in its complaint in the Delaware Chancery Court .
In the U.S. , Mirae Asset Global Investment Co. is pleading that Anbang Insurance Group Co. breached the terms of its $ 5.8 @ @ @ @ @ @ @ .
That the closures came in response to the outbreak is “ irrelevant , ” Mirae said in court papers .
A unit of Anbang ( now known as Dajia Insurance Group ) has sued to force the Korean investor to complete the transaction .
The MAC risk has come to M & A globally , with 52 publicly filed agreements in the U.S. so far this year excluding pandemics from the definition of material adverse change , the highest in any year , according to Bloomberg Law analyst Grace Maral Burnett .
@ @ @ @ @ @ @ of exclusions typically helps sellers by “ limiting the situations in which the acquirer is able to walk away from a deal.
” These moves and lawsuits are being watched closely in India .
Creditors seeking to recover something from hundreds of billions of dollars of soured corporate loans are nervous .
Successful bidders may try to use the pandemic to wriggle out of commitments — or stall payments .
Buyers are wary of overpaying for assets whose future earnings potential may have been permanently damaged by Covid-19 and the ensuing lockdowns .
@ @ @ @ @ @ @ ticking .
They have raised money globally to pick up an interest in the debt of stressed Indian businesses .
India ’ s 2016 bankruptcy law brought them to the country .
Long delays in concluding large transactions , like the $ 5.9 billion sale of Essar Steel India Ltd. to ArcelorMittal , weren ’ t unexpected , but they did eat into the typical seven-year life of a fund .
If wranglings around MAC drag on in tribunals and courts , India ’ s appeal may fade amid an oversupply of distressed @ @ @ @ @ @ @ billion in defaulted Indian loans are awaiting resolution , according to an analysis of 245 cases by restructuring services firm Alvarez & Marsal .
A yearlong suspension of new bankruptcy filings ranks among the relief measures recently announced by the government of Prime Minister Narendra Modi .
The logic is easy to see .
Even before the pandemic , only one or two bidders were showing up in small in-court bankruptcies .
With the economy in a tailspin — Goldman Sachs Group Inc. forecasts it will shrink an annualized 45 % this quarter @ @ @ @ @ @ @ one corporate rebirth will balloon .
A quarter of the workforce is without jobs .
A further spike in unemployment could ignite social strife .
Yet by acknowledging that the pandemic merits special treatment in bankruptcy , India may have unwittingly shown buyers a way out .
So far , there ’ s only one reported case of an Indian company citing the lockdown to renegotiate a bid , involving the sale of a small auto-parts maker .
Large acquirers are hesitant .
No one wants to be first to tell creditors they @ @ @ @ @ @ @ seek to get the errant buyer barred from future auctions .
The government might not take kindly to such moves , either .
State-owned banks are carrying the can of dud loans ; the less the buyers put up , the higher the taxpayers ’ burden .
However , if there ’ s a barrage of bankruptcy litigation — for instance , around the Covid-19 related debt the government says will be excluded from the definition of default — then those seeking to use MAC to renegotiate or stall may quietly join the @ @ @ @ @ @ @ ’ s extreme impact , “ there may be circumstances ” in which a court might find a material adverse change occurred when it wouldn ’ t have under more normal conditions , M & A counsel Gail Weinstein of Fried , Frank , Harris , Shriver & Jacobson LLP and others wrote in a Harvard Law School article last month .
Buyers in India ’ s distressed market are hoping for just this outcome .
Lawyers are tingling with anticipation .
Banks are dreading it .
And investors who bought defaulted debt @ @ @ @ @ @ @ be conducted swiftly , on merit , and won ’ t end up derailing the bankruptcy gravy train .


washingtonpost--2020-05-20--Analysis | The Robots-Are-Taking-Our-Jobs Threat Gets Real

Re-enter the robot , or more precisely , automation , a trend that was already alarming labor advocates and will be aggravated by Covid-19 .
Nascent signs from the order books of industry giants like Fanuc Corp. , Keyence Corp. and Harmonic Drive Systems Inc. point to businesses wanting to get their operations up and running – increasingly , without humans.Industrial robot exports from Japan , the heartland of automation machinery , grew to some parts of the world from the previous year .
Fanuc , maker of robots used in factories for companies ranging from Apple Inc. to Amazon.com @ @ @ @ @ @ @ quarter to March climb 7 % .
Its revenues in the U.S. and China rose , while inventories of components ticked down as demand edged up .
Bookings also increased for Harmonic Drive , which makes parts for small robots .
This interest was manifested while the world was consumed by the initial shock wave of Covid-19 , suggesting how big a priority automation has become .
There ’ s room for robots .
Worldwide , density remains low as many companies have had little desire to deal with integrating them into operations @ @ @ @ @ @ @ backlash .
Still , nearly 60 % of production work globally is in areas that can easily be automated .
In China , almost 40 % of jobs are machine replaceable .
Differences across and within industries matter — robots do most of the stamping and welding in car factories , while humans conduct final inspections .
Tasks requiring significant dexterity remain difficult for machines.A big change in the Covid-19 era may be the lowering of barriers to adoption , which have largely come down to attitude .
South Korea and Germany can @ @ @ @ @ @ @ have achieved high factory-automation levels while keeping unemployment low .
A more pointed prod , though , may be simple necessity , which has driven most big changes in the way we use technology .
The global health emergency has hamstrung companies in a way most never expected .
A survey by PricewaterhouseCoopers LLC of almost 300 chief financial officers found that they didn ’ t get what they needed to make informed decisions and response times were delayed .
More automation could improve agility .
While most CFOs of industrial production companies @ @ @ @ @ @ @ , only 15 % are planning to cut investments for automation , artificial intelligence and industrial internet-of-things .
The post-coronavirus dilemma looks like the old one , but worse .
The world will need more productivity , and automation is a way to get it .
In Germany , deploying robots led to an increase of gross domestic product per capita of 0.5 % over 10 years .
But what will happen to displaced , less-skilled workers ?
The pandemic could reduce working hours by 6.7 % across the world , equivalent to @ @ @ @ @ @ @ the International Labour Organization .
For now , governments are offering wage subsidies to businesses to retain employees .
The onus will eventually also fall on companies to reskill and accommodate their workers .
Separately , governments are incentivizing the transition to the robotic future .
Japan wants companies to bring supply chains home from China .
Where there aren ’ t enough skilled workers , more machines will be needed to collaborate – or so-called Cobots .
In China itself , industrial subsidies that support automation loom large .
“ New infrastructure @ @ @ @ @ @ @ fiscal stimulus that will put billions of dollars toward 5G and other technologies that will employ far fewer people .
This doesn ’ t mean the end of productive human labor , or the loss of jobs en masse .
It does require more openness to exploring options in addition to , and beyond , people .
The reality is , companies that invest in automating processes now are likely to come out faster – and perhaps stronger — on the other side .
Not only because robots won ’ t be sick @ @ @ @ @ @ @ but because the future of work is changing .
No one wanted the Covid-19 experiment .
But companies and people have to come to terms with it .


washingtonpost--2020-05-13--Analysis | Britain’s Silly Flirtation With Negative Interest Rates

For now the BOE ’ s focus is still on buying more bonds through its quantitative easing programs to manage the Covid-19 economic crisis , and rightly so .
Negative rates would open up a dangerous pathway for Britain .
They should only be used if nothing else manages to stimulate the economy .
The official bank rate has been lowered twice this year already to its current 0.1 % .
With Prime Minister Boris Johnson ’ s post-lockdown plan only just published , we need to see whether it gives an adequate boost to consumer spending , which constitutes @ @ @ @ @ @ @ gross domestic product and is the driver of the country ’ s economy .
There ’ s certainly a lot of room for improvement .
Barclays Plc reported that credit card spending fell 53 % in the last week of March versus the prior year comparison .
And , during normal times at least , Brits don ’ t need much encouragement to start spending : The U.K. household savings rate is about 6 % , significantly lower than the 10.5 % European average .
One possible advantage of a gradual and staggered @ @ @ @ @ @ @ summer holidays in the U.K. , providing a desperately needed leg-up to the domestic hospitality and leisure industries .
Cutting deposit rates to zero or below wouldn ’ t make those who can afford to spend feel any more emboldened .
The experience of negative rates thus far in Europe doesn ’ t really show that they stop citizens from saving and get them to spend more ( the euro area ’ s household savings rate has remained elevated in recent years ) .
They could indeed do the opposite by making savers @ @ @ @ @ @ @ leading in turn to increased hoarding .
From a pure markets perspective , there ’ s also the peril of investors getting into riskier products to try to find yields .
The European Central Bank , which has had negative rates for several years , hasn ’ t cut official rates during this crisis after realizing that such a move wouldn ’ t do much .
Much of the euro area appeared to be heading into recession before the coronavirus struck and lending has been anemic at best .
Sweden has reversed its @ @ @ @ @ @ @ will also be mindful of not crippling those lenders who have offered their customers variable-rate mortgages — particularly less well-capitalized building societies .
More than a quarter of Britain ’ s 1.5 trillion pounds ( $ 1.85 billion ) of home mortgages are subject to variable rates .
If the BOE ’ s rate went sub-zero , that wouldn ’ t be healthy for the profit margins of lending institutions , which have been struggling for a while in a world of rock-bottom interest rates .
Moody ’ s Investors Service downgraded the @ @ @ @ @ @ @ savings deposit taker , Nationwide Building Society , at the end of April and it maintains a negative outlook on the U.K. banking system .
And it ’ s not as though the extra savings for those mortgage customers would really change the situation .
Some 73 % of U.K. residential mortgages are on fixed rates anyway .
Those wealthy enough to have mortgages ( you have to be rich to be able to afford to borrow ) often end up saving the proceeds from lower interest rates rather than spending .
One @ @ @ @ @ @ @ is to shame lenders into passing the cuts onto their customers .
But that won ’ t force banks to lend more , particularly as they ’ re having to offer mortgage payment holidays because of the Covid-19 lockdowns .
The BOE is already encouraging bank lending via super-cheap loans to the industry .
There are better regulatory methods for kick-starting the transmission of monetary policy , such as telling banks that they won ’ t be able to restart dividend payments or generous bonuses unless they start pumping money into the economy @ @ @ @ @ @ @ need to try to make sure banks are in a position to lend and have the right incentives .
Maybe that ’ s an impossible task given the natural fears about bad loans .
Negative rates aren ’ t any kind of solution .


washingtonpost--2020-04-17--Analysis | Ford Shows Traders the Risk in Simply Following the Fed

Ford , fresh off announcing a $ 2 billion first-quarter loss , is seeking to raise money by selling unsecured bonds due in three , five and 10 years .
The longest maturity is being marketed at a yield of about 10 % , higher than the going rate of about 9 % for its outstanding debt that matures in July 2031 .
That yield already came down from 11 % initially and will likely fall again by the time the deal is finalized — look no further than Carnival Corp. ’ s offering two weeks ago for precedent .
@ @ @ @ @ @ @ to be more than twice as much as Ford paid to borrow at its last sale of similar securities in December 2016 .
Its shorter-term debt has yields more in line with single-B rated bonds than double-B .
Obviously , if you believe Ford will always make full and timely interest payments and intend to hold the securities until maturity , a higher yield is a feature , not a defect .
If you ’ re just looking for a quick profit from following the Fed , though , Ford might make you @ @ @ @ @ @ @ beneficiary of the central bank ’ s lifeline to fallen angels struggles to get favorable borrowing costs , maybe bond investors care about the fundamentals after all .
That preliminary $ 2 billion loss for the first quarter reflects just one month in which the coronavirus really began to take an economic toll in the U.S. and Europe .
Ford ’ s indication that it had about $ 30 billion of cash as of April 9 signaled it had burned through about $ 8 billion since the start of the year , a @ @ @ @ @ @ @ grow , Bloomberg Intelligence analyst Joel Levington wrote earlier this week .
Levington pointed out that credit-rating firms historically haven ’ t stopped at one notch when lowering Ford .
That ’ s troubling in its own right for creditors , but it ’ s especially foreboding for those counting on the Fed ’ s backstop to buoy Ford ’ s bonds .
As the central bank ’ s criteria currently stands , its facilities can ’ t buy debt from post-March 22 fallen angels if the ratings slip below the double-B tier @ @ @ @ @ @ @ be repeating itself for automakers .
Earlier this month , a Ford executive called for some form of government stimulus for the industry , with one option being a revival of the 2009 “ Cash for Clunkers ” program that encouraged drivers to turn in older models in exchange for thousands of dollars that could be put toward a new purchase .
Nothing is finalized , though , and it ’ s unclear if the program would work as well at a time when people are encouraged to stay home .
Those social-distance @ @ @ @ @ @ @ automakers including General Motors Co. and Fiat Chrysler Automobiles NV in shutting down work on cars at its North American facilities to help contain the spread of the virus .
It hasn ’ t put a timetable on when the factories will reopen amid a patchwork of stay-at-home orders from the states that threaten to disrupt its supply chain .
There ’ s probably not much of a rush .
About 22 million Americans have filed for unemployment benefits in just one month , raising doubts about how many buyers there will be @ @ @ @ @ @ @ it can start producing them again .
It ’ s also not as if things were going swimmingly for Ford before the coronavirus struck .
The company botched the rollout out of a redesigned Explorer SUV and has little to show so far for an $ 11 billion restructuring program announced in 2018 .
Granted , shares of Ford and AMC Entertainment Holdings Inc. , which was also seeking to borrow on Friday , increased as investors took solace in the fact that the companies could raise cash immediately .
But optimism over @ @ @ @ @ @ @ .
For all the money going into high-yield funds , the asset class hasn ’ t rocketed higher in tandem .
In fact , the largest junk-bond ETF , BlackRock ’ s $ 17.8 billion iShares iBoxx High Yield Corporate Bond ETF ( ticker : HYG ) , has declined from where it ended on April 9 , the day the central bank announced it might purchase such funds .
More speculative-grade companies are borrowing , which is a sign of market stability and staves off a worst-case scenario of a liquidity squeeze @ @ @ @ @ @ @ of those particularly devastated by the coronavirus have a difficult path forward , Ford among them .
Double-digit yields are a reminder that any sort of outlook about the fate of corporate America remains very much a guessing game , regardless of what the Fed is buying .


washingtonpost--2020-04-19--N.Y. on the ‘Descent,’ Casino CEO Pushes to Reopen: Virus Update

Democratic Senator Bob Menendez of New Jersey and Republican Senator Bill Cassidy of Louisiana are proposing a $ 500 billion fund for state and local governments to be in the next rescue package .
The money would be divided into three tranches and distributed according to formulas that reflect population , infection rates and revenue loss to help states hardest hit by the outbreak .
“ We have to really get them information in a much more granular way than a national way or even a state way , ” she said .
“ It needs to be down to @ @ @ @ @ @ @ what happens in their communities and make decisions with the local and health officials and the state officials.
” House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin were optimistic about reaching a deal to top up funds in a loan program aimed at helping small businesses stay afloat during the pandemic .
Discussions are focused on adding an additional $ 300 billion to the Paycheck Protection Program , or PPP , designed to help small businesses keep workers on their payrolls as much of the country remains under stay-at-home orders , Mnuchin @ @ @ @ @ @ @ of the Union.
” A majority of Americans in a Wall Street Journal/NBC News poll are concerned the U.S. will lift restrictions too quickly .
Almost 60 % want to wait longer , with about 30 % saying the economic impact outweighed health concerns .
The survey of 900 registered voters also revealed more anxiety over the virus , the WSJ reported .
Belgium reported 230 deaths from coronavirus during the past 24 hours , bringing the total to 5,683 .
Fatalities fell for a fourth day in a row and are down @ @ @ @ @ @ @ cases as reported Saturday rose by 1,313 to 38,496 .
While 265 patients infected with the virus were admitted to hospitals , 409 were discharged .


washingtonpost--2020-04-19--U.S. Deaths Double in Week; Europe Outbreak Eases: Virus Update

The state also added 1,370 cases .
The daily numbers were derived by subtracting Saturday ’ s data from those provided Sunday by the state .
Newsom reported 87 new deaths on Saturday , saying the state isn ’ t “ out of the woods ” despite some improving signs .
“ It ’ s just the beginning of the next phase , ” he said at a virtual meeting of G-20 health ministers .
WHO will publish its second response plan with an estimate of resources required for the next phase .
“ If this trend holds , we @ @ @ @ @ @ @ Cuomo said .
“ Right now we are on a descent.
” But he cautioned “ we still have a long way to go and a lot of work to do.
” Wynn Resorts Ltd. Chief Executive Officer Matt Maddox is calling for parts of Nevada ’ s economy to start reopening in early May , followed by the Las Vegas Strip in the middle or later part of the month .
Maddox , in an opinion piece published by the Nevada Independent , outlined safeguards such as reduced hotel occupancy , physical @ @ @ @ @ @ @ large gatherings .
He also proposed keeping hospitalizations and deaths relative to the population below the U.S. average .
After May 11 , when the lockdown starts to lift , “ our lives won ’ t be exactly the same as before , ” Philippe warned in a televised press conference .
“ Not right away , and probably not before long.
” Deaths in France rose by 395 to 19,718 , Director General for Health Jerome Salomon said , the slowest pace of increase since March 29 .
The number of people @ @ @ @ @ @ @ a fifth day , while patients in intensive care dropped for an 11th day .
Democratic Senator Bob Menendez of New Jersey and Republican Senator Bill Cassidy of Louisiana are proposing a $ 500 billion fund for state and local governments to be in the next rescue package .
The money would be divided into three tranches and distributed according to formulas that reflect population , infection rates and revenue loss to help states hardest hit by the outbreak .
“ We have to really get them information in a much more granular @ @ @ @ @ @ @ a state way , ” she said .
“ It needs to be down to the communities so the communities can see what happens in their communities and make decisions with the local and health officials and the state officials.
” A majority of Americans in a Wall Street Journal/NBC News poll are concerned the U.S. will lift restrictions too quickly .
Almost 60 % want to wait longer , with about 30 % saying the economic impact outweighed health concerns .
The survey of 900 registered voters also revealed more anxiety over @ @ @ @ @ @ @


washingtonpost--2020-04-19--Analysis | Hedge Funds Will Be Collateral Damage in Japan

Now , cash on the books looks like a strategic asset rather than a drag .
When this crisis ends , there will be great need for capital .
Prime Minister Shinzo Abe is incentivizing companies to retool supply chains away from China , the nerve center of world manufacturing .
The likes of electronics giant Panasonic Corp. and auto-parts maker Aisin Seiki Co. say they ’ re looking at options .
Setting up new factories and logistics operations doesn ’ t happen without significant investment .
Meanwhile , Japan ’ s perennial labor shortages , worsened by the pandemic @ @ @ @ @ @ @ and automation .
Inorganic growth via mergers and acquisitions will be on the back burner until losses are covered .
Capital may also be redirected toward virus-related relief , such as producing ventilators .
So far , a big portion of Japan Inc. ’ s cash has been put toward capital expenditure and research and development , with much smaller though increasing amounts for dividends and buybacks .
Total payout ratios relative to operating cash flows are near 20 % , compared to 60 % in the U.S. Around half of non-financial companies @ @ @ @ @ @ @ versus closer to one-fifth in America or Europe .
Only activist pressure has slowly shifted companies that far .
Hoarding is rooted in previous crises .
Japanese companies , which typically rely less on external financing , have a chronic desire for cushions to survive cycles in an economy that ’ s always verging on a dip in growth .
After the global financial crisis and the 2011 earthquake and tsunami , they resumed building balances to far higher levels than in other developed countries .
So activists zeroed in .
Cash used @ @ @ @ @ @ @ of shareholder equity was around 20.5 % as of last year , below the post-financial crisis average .
Different companies hold their piles for varying reasons : small ones as a precaution ; blue chips tend to want to invest more .
Either seems like a win in the era of the coronavirus .
Sure , there ’ s a valid case for shaking up corporate governance and returning cash to shareholders .
Since the government ’ s stewardship code emboldened investors , Japan ’ s business culture has seen the trappings of @ @ @ @ @ @ @ a stronger role .
Companies with higher dividends have been proven to outperform .
It ’ s helped shake off the cozy relationships between big banks and management .
But even before the virus , resistance was building and a new law hindered foreign investors and activism .
Covid-19 may further take the shine off the reform era .
A recent study showed that hedge-fund activism often turns out to be short term , eventually reducing operating cash flow and investment spending .
That ’ s the last thing post-pandemic business needs.This isn @ @ @ @ @ @ @ t use the virus to bury unpleasant news ; there ’ s always room for bad behavior and opportunism .
However , there is a need to redo the math on what makes sense and reassess capital efficiency against safety cushions .
Activists may not be able to rely on pre-Covid-19 justifications , according to Keith Gottfried and Sean Donahue of Morgan , Lewis & Bockius LLP .
There are just far too many uncertainties from the damage to supply chains , operations and the labor force .
Rising environment , social and @ @ @ @ @ @ @ from banding together behind proxy fights : The coronavirus is , after all , a material social risk as applied to health , safety and human capital .
In this environment , some hedge funds may try even harder to justify the need for change , as Gottfried and Donahue point out .
But beware of corporate raiders in the guise of white knights .
For companies and their shareholders , cash piles will prove to be much safer .


washingtonpost--2020-05-21--Analysis | Why a New Virus Cluster in China Is Triggering Alarms

The first case was reported May 7 in the northeastern province of Jilin , on the border with Russia and North Korea , and as of May 21 had spread to at least 46 people , all linked with each other .
Officials have yet to identify “ patient zero , ” but suspects include a woman who works in the laundry at a police station in the city of Shulan , and may have been in contact with one or more people from Russia , which is behind only the U.S. in number of confirmed cases .
One of @ @ @ @ @ @ @ in Jilin appeared to be asymptomatic for a longer period than was usual in Wuhan , where the coronavirus emerged last year , but didn ’ t elaborate on what those findings were based on .
He told state television the cases in the first two weeks seem to show damage mostly in the lungs , with only 10 % developing into critical cases .
The northeast cluster is tiny compared to the earlier outbreak in central Hubei province , where Wuhan is located .
( More than 68,000 people were infected there @ @ @ @ @ @ @ . )
Yet Beijing is taking the outbreak just as seriously .
Jilin city is already setting up an emergency response that could turn two stadiums into hospitals in 24 hours .
The Chinese government is eager to show stability as its annual political meeting is set to convene this week , with top leaders gathering to assess economic growth in the wake of the pandemic .
The pathogen ’ s makeup .
These coronavirus cases are showing a different gene sequence from the outbreak in Hubei , while identical with imported cases @ @ @ @ @ @ @ ’ s genetic sequence could make it harder for officials to detect .
It also would create hurdles for vaccine research and development for pharmaceutical companies that are racing to stop the spread of Covid-19 .
Researchers worldwide are studying whether the virus is mutating in a significant way to become more contagious , but the likelihood of that has been called overstated in some early research .
The relatively poor region is often viewed as China ’ s Rust Belt due to the decline of heavy industry there such as automobiles .
@ @ @ @ @ @ @ of the three provinces in the region -- Jilin , Liaoning and Heilongjiang -- stood at less than half of prosperous Guangdong province to the south , home to many giant tech companies and factories .
The virus outbreak could add further pressure to the economic redevelopment campaign for the area that central government has been focusing on for years .
Since the Wuhan lockdown , China has been aggressive in virus testing , and is signaling that it will react with a hammer to every cluster , implementing stricter measures as needed @ @ @ @ @ @ @ different approach from other economies such as South Korea and Hong Kong , which have refrained from any lockdown despite new clusters found in clubs and medical centers .
Such harsh methods would be more complicated , however , if infections appear in more economically important provinces or the top cities .


washingtonpost--2020-05-21--HPE Plans Cuts in Jobs, Executive Pay to Temper Sales Slump

The company said it was putting in place a plan to cut costs , with a goal of $ 1 billion in savings by the end of fiscal 2022 .
Measures will including simplifying its product portfolio and supply chain as well as changing customer support , marketing efforts and real estate strategies , HPE said in the statement .
“ It definitely was a tough quarter by every measure and I ’ m disappointed in the performance , but I don ’ t see this as an indication of our capabilities , ” Chief Executive Officer Antonio Neri said @ @ @ @ @ @ @ clearly driven by supply chain disruptions because of coronavirus , ” including a shortage of chip components from China , disrupted logistics and social-distancing guidelines in some regions .
Neri said he expected HPE ’ s sales to “ recover sequentially , ” with the third quarter posting better results than the second and the fourth improving further .
Still , he said , it ’ s unknown just how bad the economic downturn will be .
The company withdrew its annual profit forecast last month , citing uncertainty from the Covid-19 pandemic @ @ @ @ @ @ @ to stay home to prevent the spread of the virus .
Neri has struggled to spark sales growth at the computing and networking company , which has seen year-over-year revenue declines in all but one quarter since the company split from HP Inc. in 2015 .
Competing with larger hardware rival Dell Technologies Inc. and dominant cloud-computing companies such as Amazon.com Inc. and Microsoft Corp. , HPE has hitched its future to edge computing , which distributes data-processing capacity closer to customers rather than at centralized data centers .
More immediately , the @ @ @ @ @ @ @ offering $ 2 billion of financing for clients trying to preserve cash in the pandemic .
Under the company ’ s three-year plan to reduce expenses , senior executives including Neri will take 20 % to 25 % cuts to their base salaries and the board reduced each director ’ s cash retainer by 25 % from July to the end of the fiscal year .
The hardware maker will consolidate offices where possible , Neri said .
He expects more than half of HPE ’ s employees won ’ t return to @ @ @ @ @ @ @ in for meetings and collaboration when necessary .
The number of employees who may lose their jobs under the cost-cutting plan hasn ’ t been determined , Neri said .
The company will spend the next few months working out the details and evaluating how much it can save in other areas .
HPE has already instituted some temporary pay cuts and has frozen employee raises and promotions , executives said on a conference call after the results were announced .
In the fiscal second quarter , revenue declined in all of HPE @ @ @ @ @ @ @ dropped 20 % to $ 2.64 billion and storage hardware fell 18 % .
Neri said the company saw “ steady ” demand from large enterprises while small and mid-sized businesses struggled .
HPE wasn ’ t able to produce as much data-center hardware as clients were ordering , he said .


washingtonpost--2020-05-22--Analysis | Why Delisting Chinese Firms Has Gained Traction in Washington

It would force greater disclosure by non-American companies that sell shares on U.S. exchanges .
Specifically , public companies with foreign accounting firms would be banned from America ’ s equity markets unless the U.S. Public Company Accounting Oversight Board is granted access to review their audits .
Those companies would also have to confirm that they ’ re not owned or controlled by a foreign government .
China ’ s refusal to let the PCAOB examine Chinese audits , including those for companies registered in Hong Kong , has long been a point of contention .
Chinese firms claim @ @ @ @ @ @ @ national security law prohibits them from turning over audit papers to U.S. regulators .
“ All I want , and I think all the rest of us want , is for China to play by the rules , ” including the rule that the PCAOB double-checks company audits , said Senator John Kennedy , a Republican who introduced the bill with a Democratic colleague , Chris Van Hollen .
“ Everybody has to comply with that rule -- American companies , British companies , Malaysian companies , Turkmenistan companies -- except one : @ @ @ @ @ @ @ No.
’ ” The NYSE and Nasdaq had previously pushed back against the idea of threatening delistings , but they ’ ve come under increasing government pressure amid the growing fervor for action against China .
It will if the House adopts a companion bill introduced by Democrat Brad Sherman and President Donald Trump then signs the measure .
House Speaker Nancy Pelosi has said her chamber will review the bill but hasn ’ t promised to hold a vote .
As for Trump , he ’ s voiced general support for the @ @ @ @ @ @ @ how the legislation figures into the White House ’ s broader China strategy .
Should the bill become law , the SEC would have to write rules for how companies could certify they aren ’ t really run by a foreign government .
It would take a while .
Under the bill ( S. 945 ) , companies would be de-listed only after three consecutive years of non-compliance .
In the event of de-listing , a company could return to the U.S. ’ s good graces by certifying it retained a registered public @ @ @ @ @ @ @ and Exchange Commission .
( A subsequent failure to comply with audit inspections could land companies in a five-year ban . )
The PCAOB says it ’ s blocked from reviewing the audits of about 200 companies based in China or Hong Kong .
They include such well-known companies as Alibaba Group Holding Ltd. , PetroChina Co. Ltd. , Baidu Inc. and JD.com Inc. , which trade on major U.S. exchanges like the New York Stock Exchange and Nasdaq .
As of February 2019 , the U.S.-China Economic and Security Review Commission , @ @ @ @ @ @ @ Chinese companies listed on major U.S. exchanges that were at least 30 % state-owned .
Even those companies where the state doesn ’ t own a stake can be subject to pressure from the central government , such as when it tried to stop Anbang Insurance Group Co. ’ s acquisition spree before finally taking control of the debt-laden conglomerate in 2018 .
But when China ’ s government involvement is behind the scenes , it ’ s much harder to prove .
Companies from around the globe are attracted by the liquidity @ @ @ @ @ @ @ markets .
They offer access to a much bigger pool of capital , in a potentially speedier time frame .
China ’ s own markets , while giant-sized , remain relatively underdeveloped .
Fund-raising for even quality companies is constrained in a financial system that remains dominated by state-owned lenders .
Trading in China ’ s domestic stock market is dominated by retail , not the institutional investors and deep mutual-fund base active in the U.S. And until recently , the Hong Kong exchange had a ban on dual-class shares , which are @ @ @ @ @ @ @ control of their startups after going public in the U.S .
It was relaxed in 2018 , prompting big listings from Alibaba , Meituan Dianping and Xiaomi .
It ’ s another front in the U.S.-China economic conflict that had escalated under the Trump administration even before the coronavirus pandemic that Trump blames on China .
Trump and his trade advisers have long sought to level what they see as a playing field tilted in favor of Chinese companies , which enjoy the trading privileges of a market economy -- including access to @ @ @ @ @ @ @ support and operating in an opaque system .
The Trump administration also accuses Chinese companies of undermining the intellectual property of their U.S. counterparts .
Alarm has grown among U.S. lawmakers that American money is bankrolling efforts by China ’ s technology giants to develop leading positions in a variety of high-tech fields .
The Foreign Ministry said all sides benefit from the overseas listings : The companies can raise funds , the markets have more to offer and investors have a chance “ to share the benefits of China ’ s economic @ @ @ @ @ @ @ officer of internet search giant Baidu , which listed on the Nasdaq in 2005 , told state media China Daily that he was “ very concerned about the U.S. government ’ s continuous tightening of controls ” on Chinese companies .
He said Baidu has for some time been considering adding a secondary listing in Hong Kong , as Alibaba did last year , but that it ’ s “ not so worried ” about a U.S. crackdown having an “ irreparable impact ” on the business .
“ Our fundamental judgment is @ @ @ @ @ @ @ , there are so many options for listing , and it is not limited to the United States , ” he said .


washingtonpost--2020-06-02--Analysis | Take China’s U.S. Farm Threats Seriously, Not Literally

Threats to limit China ’ s voracious appetite for commodities are a tried-and-tested way for the country ’ s leadership to turn the diplomatic thumbscrews .
Still , American farmers should take a deep breath before deciding that all is lost .
For one thing , any embargo on American soy would be barely perceptible for the next few months .
Typically , no more than 5 % to 10 % of China ’ s U.S. soybean imports arrive between May and September , with the vast bulk shipping during the balance of the year , when Brazil ’ s @ @ @ @ @ @ @ China ’ s buying activity starts to make a difference to the U.S. farm belt again , the next presidential election and a possible diplomatic reset will be just weeks away .
As we ’ ve argued previously , this pattern has been repeated in multiple products , whether it ’ s Australian coal or Canadian pork .
So many individual shipments are involved in any large trading relationship that Beijing can get a remarkable amount of diplomatic leverage from threats to hold up or cancel a few purchases , even if it @ @ @ @ @ @ @ agricultural traders aren ’ t in the business of doing anything that would upset their political masters , and it ’ s notable that one of the people familiar told Bloomberg News the restrictions don ’ t apply to private companies .
The attempt to gain leverage is real enough , and Beijing is counting on the American farm lobby complaining to Washington about the situation .
Ultimately , though , it ’ s up to the U.S. government to decide whether that ’ s reason to reverse course on other aspects of @ @ @ @ @ @ @ $ 200 billion in increased Chinese imports from the U.S. in the phase one trade deal signed in January was already looking challenging .
A near-doubling of inbound trade was always going to be a stretch , and that was before the damage that the coronavirus has done to demand in China and supply chains in the U.S .
The current diplomatic tensions will surely put the figure still further out of reach — but if you were counting on that at this point , you haven ’ t been reading the news @ @ @ @ @ @ @ that commodities are traded on a global market .
While America has undoubtedly lost soybean market share in China to Brazil in recent years , that ’ s probably a welcome shift for a business that was looking over-exposed to a single country .
Despite a 4.7 million metric ton drop in U.S. soy exports to China between 2015 and 2019 , total exports are up by about 4.2 million tons as Egypt , the European Union , and other Asian countries such as Indonesia , Taiwan , Thailand and Pakistan soaked up @ @ @ @ @ @ @ dependent on a single unreliable buyer than it was a few years ago — and while export prices have indeed fallen , the price drop is a phenomenon that has quite as much to do with worldwide supply , demand and inventories as it has to do with China .
Despite a 42 % increase in Brazil ’ s exports to China over the same period , average export prices in 2019 were lower than those earned by the U.S.
There ’ s plenty to worry about in the sharper tone between Beijing @ @ @ @ @ @ @ concern should be a diplomatic one .
After a difficult few years , farm incomes in the U.S. are running at long-term average levels .
Selling produce has almost always been a loss-maker for the median American farm anyway , with work done away from the fields normally the main earner .
While China is slowly diversifying parts of its food supply chain away from its rival across the Pacific , nothing ’ s going to change overnight .
Its threats should be taken seriously , not literally .
David Fickling is a @ @ @ @ @ @ @ well as industrial and consumer companies .
He has been a reporter for Bloomberg News , Dow Jones , the Wall Street Journal , the Financial Times and the Guardian .


washingtonpost--2020-06-02--Analysis | Kylie Jenner Has Something Else to Pout About

What else is hurting right now is Jenner ’ s reputation : After Forbes dubbed the former lip-injection aficionado the youngest “ self-made ” billionaire last year , the magazine stripped her of the title last week , saying that Jenner misrepresented sales of her Kylie Cosmetics products .
The brand launched in 2015 and is still best known for its $ 29 “ lip kits , ” which come with a pencil to outline one ’ s lips bigger than they are and then a matte liquid lipstick to fill them in , like so : In November , @ @ @ @ @ @ @ to Coty Inc. , the parent of CoverGirl and Rimmel , for $ 600 million .
That deal valued Kylie Cosmetics as a whole at $ 1.2 billion .
Coty said that Kylie Cosmetics ’ revenue in the 12 months leading up to the purchase was $ 177 million , sending a strong signal that it may have overpaid .
Not only that , but the figure was also a far cry from the $ 360 million for 2018 that representatives for the reality-TV star and Kris Jenner , her mom and manager @ @ @ @ @ @ @ ’ s known ) , reportedly passed along to Forbes when it was trying to assess the younger Jenner ’ s net worth .
Based on updated figures , “ a more realistic accounting of her personal fortune puts it at just under $ 900 million , ” Forbes reported May 29 .
Jenner Tweeted that the article contained “ a number of inaccurate statements ” and dismissed its relevance .
Fans and critics can have fun continuing to debate whether Jenner is a billionaire , or even “ self-made ” at that @ @ @ @ @ @ @ doesn ’ t matter all that much ( except maybe to Forbes ) .
However , Coty and its peers that pursued the Kylie-pout trend do have a separate but related problem to worry about : the future of lipstick sales in the age of coronavirus .
While no one knows how long face coverings will be required or advised in public spaces , they do seem like a feature that will be around for a while even as the U.S. tries to get back to normal .
And as long as we @ @ @ @ @ @ @ s no point in wearing lipstick .
According to a McKinsey & Co. report citing Stackline data , lip care and color sales on Amazon dropped 15 % in the four weeks ended April 11 from the year before .
Mass-market makeup sales dropped 46 % on a rolling four-week basis by mid-April and 26 % by mid-May , according to Information Resources Inc. Euromonitor International estimates that the U.S. lip-products market specifically will shrink 6.5 % this year to $ 3.59 billion — Coty has an almost 5 % share .
It @ @ @ @ @ @ @ naturally taking a disproportionately larger hit than , say , eyeliner or mascara , which aren ’ t obscured by most masks .
The social-media-driven obsession with full , painted-on lips was one of the top makeup fads in recent years , and therefore , lipstick has been at the very center of makeup businesses .
Even now , a lipstick product is splashed across the top of Revlon Inc. ’ s homepage .
Companies such as Coty and Revlon will have to shift gears and fast , which has never been easy @ @ @ @ @ @ @ do you do when the trend is to go makeup-free and spend more time at home ?
Coty is betting on Kylie ’ s direct-to-consumer sales and skincare products , which have been more resilient during the pandemic .
“ It means we have confirmation that the skincare range of Kylie has a lot of future in front of her and we need to develop that , ” Chief Financial Officer Pierre-Andre Terisse said on last month ’ s earnings call .
Even so , it ’ s hard to imagine that will @ @ @ @ @ @ @ lip kits did .
After all , it ’ s her lips that she ’ s known for .
Coty replaced its CEO on Monday in conjunction with a deal involving KKR & Co. that sent the company ’ s shares up 21 % ( though they ’ re still near a record low ) .
The private equity firm bought 60 % of Coty ’ s Wella professional hair-dye business , a beauty category that is likely to recover more quickly as salons reopen .
Lipstick demand will come back eventually , @ @ @ @ @ @ @ the staying power of the Jenner lip fad — even without the pandemic .
Knowing the Kardashian-Jenner clan , they ’ ll come up with something new in no time .


washingtonpost--2020-06-02--Health-Care Small Businesses Are Top U.S. Relief Loan Recipients

In the latest report , which combines totals from the first round and the second round that launched on April 27 , health-care firms had received 470,369 loans worth $ 65.9 billion , followed by professional services with 581,708 loans totaling $ 65.1 billion , the report shows .
Construction and manufacturing were the other two industries with more than 10 % of the total funding so far .
Through May 30 , almost 4.5 million loans had been approved worth $ 510.2 billion .
The loans can become grants if at least 75 % of the proceeds are spent @ @ @ @ @ @ @ money is received .
That net dollar amount is more than $ 3 billion less than the net dollars approved as of May 16 , even though almost 134,500 additional loans were approved during that time because loans are being canceled .
Almost $ 21 billion in PPP loans have been canceled since May 8 , according to calculations by Bloomberg News using SBA data .
Canceled loans include returns , duplicates and loans that weren ’ t closed for other reasons , according to the SBA .
Some larger , publicly traded @ @ @ @ @ @ @ outrage over their getting funding at the expense of smaller businesses .
While SBA hasn ’ t provided an accounting of cancellations , advocates for small firms expect the bulk of returns are from companies that don ’ t think they can spend proceeds in the eight-week loan-forgiveness period or are concerned about a promised audit of loans of more than $ 2 million .
Restaurants and others firms are pushing Congress to extend the loan-forgiveness period to 24 weeks and to allow more flexibility for spending proceeds because they can ’ t @ @ @ @ @ @ @ weeks and don ’ t want to repay portions of a loan they thought would be a grant .
The House passed a bill 417-1 last week to make those changes , and Senate Majority Leader Mitch McConnell said on Monday he anticipates the Senate will soon act “ to further strengthen the Paycheck Protection Program so it continues working for small businesses that need our help.
” About $ 130 billion remains from the $ 320 billion in the second round of funding approved by Congress .
The initial tranche of $ @ @ @ @ @ @ @ 3 was exhausted in just 13 days as millions of businesses flooded lenders with applications .


washingtonpost--2020-05-26--Analysis | What Hertz Had Under the Hood Wasn’t Pretty

The proximate cause of Hertz ’ s demise was of course the sudden collapse in bookings caused by coronavirus travel restrictions .
The company ’ s monthly revenue fell 73 % year-on-year in April , a shortfall that even the most resilient companies would struggle to withstand for long .
But Hertz ’ s complicated financial plumbing contributed to it becoming one of the most high-profile companies to seek protection from creditors during the corona crisis .
This byzantine organizational chart from the bankruptcy filing gives you just a taste of what lies underneath the company ’ s hood : @ @ @ @ @ @ @ Hertz took on too much debt , participated in overpriced M & A and was accused of playing accounting games to pad its earnings .
( For more , read this colorful account from Bloomberg ’ s David Welch . )
So when disaster struck and a request for a government bailout was rejected ( rightly in my view considering top shareholder Carl Icahn is worth some $ 18 billion ) , Hertz was already standing far too close to the precipice .
Regrettably Covid-19 will probably expose more of this type of @ @ @ @ @ @ @ around the world .
Hertz ’ s debt binge began when it was acquired by private equity firms from Ford Motor Co. in 2005 ; the new owners quickly took out a $ 1 billion dividend .
Piling on debt juiced the potential returns for the owners and helped pay the inflated $ 2.3 billion price tag for the Dollar and Thrifty brands in 2012 , which Hertz struggled to integrate .
Special-purpose financial entities purchase cars on Hertz ’ s behalf , and investors in the asset-backed securities make a return via @ @ @ @ @ @ @ to stump up .
Put another way , Hertz leases cars long term from the financing subsidiary — typically for about 18 months in the U.S. — and then rents them out to customers for shorter periods .
In theory , this is a stable and low-cost way for a risky borrower such as Hertz to fund the large capital outlays needed to keep its fleet looking fresh .
Hertz ’ s corporate credit has been rated junk for the past decade but many of the asset-backed securities it issued were triple-A rated @ @ @ @ @ @ @ , economic shutdowns stemming from efforts to curb the new coronavirus suddenly threw a lot of sand in Hertz ’ s gears : The resale value of its vehicles fleet fell sharply , requiring the company to inject more cash into the financing structure .
With only about $ 1 billion of cash on its books , Hertz was ill-placed to fund that collateral call , and the pandemic meant it wasn ’ t able to sell vehicles to generate cash because potential buyers were confined to their homes and auctions and dealerships @ @ @ @ @ @ @ chief financial officer describes these acute pressures in this filing . )
Asset-backed securities holders appear to have decided that allowing Hertz to fall into bankruptcy will prove no impediment to them getting most of their money back , at least for those holding the better-rated tranches of debt .
The same can ’ t be said , however , for Hertz ’ s unsecured lenders , or its shareholders .
Building a 39 % stake since 2014 probably cost Icahn about $ 1.6 billion , based on a Bloomberg average share-cost estimate @ @ @ @ @ @ @ out .
Hertz ’ s predicament was made more severe because in the U.S. it couldn ’ t hand back most of its surplus vehicles to the manufacturer , as is common practice in Europe .
Instead it faced the task of selling them itself and bore the risk of any unexpected depreciation .
The company is one of the 10 largest sellers of used vehicles in the U.S .
The preponderance of these so-called “ risk vehicles ” in its half-a-million strong U.S. car fleet has increased since 2014 because it was @ @ @ @ @ @ @ the manufacturer to guarantee a fixed repurchase price .
There ’ s no reward without risk , though , as Hertz ’ s bankruptcy filing made abundantly clear .
Having lost money in three of the past four years , Hertz did seem to have turned a corner lately : It raised capital to pay down debt last year and was ranked No .
1 for customer satisfaction in J.D .
Power ’ s North American car rental rankings .
Not that customers have much choice .
Consolidation has given just three groups @ @ @ @ @ @ @ owner of the National and Alamo brands ) and Avis Budget Group Inc. — control of almost the entire U.S. market for airport car rentals in the U.S. New competition from ride-hailing companies and a litany of management missteps meant Hertz never achieved the pricing power that Icahn and other recent investors probably assumed would come from all that merger activity .
Because the industry ’ s fortunes are so closely tied to air and business travel , car rental demand is likely to remain weak for a while .
Still , Hertz @ @ @ @ @ @ @ the more lenient Chapter 11 process it should get another chance to make a success of that oligopoly , albeit as a smaller company with different shareholders and a new capital structure .
Next time you return a rental car , expect the attendant to check even more thoroughly for dents and scratches .


washingtonpost--2020-03-17--Analysis | Nimble Corporate Cash Managers Face a Reckoning

As a result they often have what ’ s called negative working capital : Their trade payables exceed the sum of inventories and customer receivables .
In other words , they owe more to their suppliers than their customers owe them .
When revenues are growing , this is a big advantage .
Cash pours into the business which can be used to fund investments .
It ’ s certainly a very efficient way to run a business — Amazon.com Inc. excels at it — but negative working capital can make a balance sheet look stronger than it really is @ @ @ @ @ @ @ is reversed when sales suddenly slow down or shrink .
Suppliers still need paying but there ’ s little new customer cash coming in .
As a result , cash rushes out the door .
This is what threatens to happen now that much of the world is cooped up at home due to coronavirus .
“ In periods in which our vehicle shipments decline materially we will suffer a significant negative impact on cash flow and liquidity as we continue to pay suppliers for components purchased in a high volume environment during @ @ @ @ @ @ @ proceeds from vehicle shipment , ” Fiat Chrysler Automobiles NV warned in its annual report .
A rule of thumb is that French , Italian and U.S. automakers have negative working capital , while their German peers do not .
A six-week production hiatus caused by strike action lowered General Motors Co. ’ s free cash flow by $ 5.4 billion .
Like merger partner Fiat , Peugeot has now been forced to shutter its European car plants .
If sales slump for a prolonged period , its 17 billion-euro ( $ 19 @ @ @ @ @ @ @ Tour operators are accustomed to large swings in working capital : They typically get paid by customers ahead of the busy summer season and pay their suppliers afterwards .
( 1 ) Bank overdrafts can tide them over during the winter period when cash tends to be lower .
Still , a sudden slowdown in demand can upset those calculations , as Thomas Cook Group Plc discovered last year .
Customers delayed bookings , suppliers tightened credit terms and the U.K. tour operator went bust .
Shares in rival TUI AG slumped this @ @ @ @ @ @ @ of its travel , cruise and hotel operations and said it would apply for state-aid guarantees .
The company has 1.4 billion euros in cash and available banking facilities but this is far exceeded by a deeply negative working capital position — at the end of December it held about 2.9 billion euros of advance payments from customers .


washingtonpost--2020-03-17--Analysis | What to Know About Recessions, as Virus Threatens One

The dictionary definition is a period when economic output contracts for two straight quarters .
The National Bureau of Economic Research ’ s Business Cycle Dating Committee , which makes the official U.S. determination , uses a different approach , considering factors such as inflation-adjusted GDP , employment , industrial production and income .
The International Monetary Fund , in designating recessions on a global scale , looks at several indicators including a decline in inflation-adjusted per-capita GDP that ’ s backed up by weakness in industrial production , trade , capital flows , oil consumption and unemployment .
The @ @ @ @ @ @ @ period of relative stability around the globe beginning in the mid-1980s , spawned the view that modern-day recessions don ’ t happen without an unexpected economic shock like a sharp increase in oil prices -- a cause of U.S. downturns of the 1970s and 1980s -- or accumulated imbalances like the massive buildup in the subprime-lending industry that preceded the Great Recession of 2007-2009 .
A global pandemic that stifles travel , shutters businesses , cancels sports events and sends stock markets into freefall certainly has the potential to be that kind of @ @ @ @ @ @ @ Group Inc. and Morgan Stanley believe so , and the debate is shifting to how long and deep the slump will be .
The economies of Japan , Germany , France and Italy were already shrinking or stalled before the virus outbreak , and as of March , China was on course for what could be its first quarterly contraction in decades .
As the virus spreads , the threat grows of a phenomenon economists refer to as a feedback loop -- a vicious cycle in which a country that starts to recover @ @ @ @ @ @ @ as other nations succumb , prolonging the downturn .
The International Monetary Fund has counted only four global recessions tracing back to 1960 , compared to the 11 counted in the U.S. since World War II by NBER .
An increasing number of economists believe the almost-11-year U.S. expansion is coming to an end , with many expecting the economy to contract in the second quarter , which ends on June 30 .
Uncertain times may lead to widespread hiring freezes and job losses -- especially among those that work in transportation or @ @ @ @ @ @ @ means the main engine of the U.S. economy , consumer spending , may crumble .
Not everyone agrees .
The U.S. Treasury secretary , Steven Mnuchin , said on March 15 that he expects the coronavirus pandemic will slow growth but not tip the U.S. economy into recession .
Even if we ’ re in a recession right now , an official declaration may be months away .
NBER typically takes about a year to make the call on when a U.S. expansion ends and a recession begins .
A recession could be @ @ @ @ @ @ @ as reality before any declaration , though .
Its duration , for one thing .
The 2007-2009 recession lasted 18 months , making it the longest since the Great Depression .
The recession of 1980 , by contrast , lasted just six months .
Other measures of a recession ’ s severity are how much the economy contracts and how bad unemployment gets .
The worst recessions tend to be those paired with some sort of collapse in the financial system , as happened in the U.S. in 1929 and 2008 .
Another @ @ @ @ @ @ @ is how broadly the economy suffers a contraction .
The relatively short and mild 2001 recession , for instance , was largely confined to the tech sector , with modest fallout to the rest of the economy .
Federal Reserve Bank of Cleveland researchers found little evidence that duration of an expansion influences how bad the subsequent recession .
They did , however , find reason to think severe recessions ( like the one that ended in 2009 ) spawn strong expansions .
It ’ s impossible to know .
On the positive @ @ @ @ @ @ @ a recession , American households are in a good spot .
They ’ re carrying less debt and an increase in mortgage refinancing has put more cash in consumers ’ pockets .
Additionally , unlike the last U.S. recession , which stemmed from a systemic imbalance , the coronavirus is an economic shock .
However , the magnitude of that shock is unknown .
It could lead to no recession , a short and shallow recession or something much darker .
Central banks are already racing to stop a recession either by cutting @ @ @ @ @ @ @ buying corporate assets or helping banks to keep lending to businesses .
The People ’ s Bank of China has injected billions into the economy , and the Bank of Japan boosted asset purchases to stabilize markets .
The U.S. Federal Reserve cut its benchmark interest rate to near zero .
But this time the onus may be on governments in part because central banks have used up a lot of their interest-rate ammunition over the last decade .
“ The response should be fiscal , first and foremost , ” European Central @ @ @ @ @ @


washingtonpost--2020-03-17--Mnuchin Discusses $850 Billion Stimulus and Checks to Americans

The new proposal is expected to include $ 400 billion in steps taken by the executive branch -- including delay of tax deadlines and relief for student loan interest payments -- in addition to existing legislation now in Congress to expand sick leave and offer financial support for virus testing , Trump ’ s economic adviser Larry Kudlow said Monday .
Kudlow said the administration was ready to double the next package to $ 800 billion , with “ most ” of that coming from a temporary cut in payroll taxes , which lawmakers from both parties have resisted .
@ @ @ @ @ @ @ the government to provide as much as $ 60 billion in grants and loans , though it is unclear how much Trump will sign on for , according to a person familiar with the matter .
The administration is most likely to approve loans , but the Office of Management and Budget has yet to be asked to provide cost estimates , the person said .
Among the possible provisions for small businesses , Mnuchin is considering postponing the due date for quarterly tax payments , and options for fast cash loans .
@ @ @ @ @ @ @ to ask what aid they might need from the government as the coronavirus dents their income , according to other people familiar with the discussions .
“ The president has instructed his team to look very expansively on what we need to do and not be impeded by the potential price tag of what ’ s necessary here , ” Eric Ueland , the White House legislative director , said Monday on Capitol Hill .
Alfredo Ortiz , president of the conservative Job Creators Network , said as busy as Mnuchin is , @ @ @ @ @ @ @ to listen to us and quite frankly even act on some ” stimulus suggestions .
Ortiz said he had three separate calls directly with Mnuchin on Monday .
“ One idea we proposed and he likes , ” Ortiz said , is delaying the quarterly April tax payments for 90 to 180 days .
Businesses would still have to file their taxes , but if a tax payment is due , the government could defer the cash payments .
“ That would be huge for small business owners , ” Ortiz said .
@ @ @ @ @ @ @ could be an additional benefit for small and medium businesses beyond the tax filing deadline Trump announced last week .
This could allow them to delay paying their estimated taxes for the first quarter , and potentially the second quarter , of 2020 in addition to an extended deadline for paying any outstanding taxes due from 2019 .
The Treasury Department has not yet announced the details of a tax filing delay .
Also under consideration is a plan to encourage states to leverage unemployment insurance , and to pay workers 80 % @ @ @ @ @ @ @ used to , as well as paying tipped employees 80 % of their weekly average income rather than their hourly wage .
Trump has urged the payroll tax cut , which has been resisted by lawmakers on both sides of the aisle because it provides a slow infusion of cash over a long period , only helps people who have jobs , and would provide more to wealthier workers .
The administration has said it would not affect Social Security .
An alternative proposal by Mitt Romney to send checks of $ 1,000 @ @ @ @ @ @ @ some bipartisan support .
Some senators , including Democrat Brian Schatz of Hawaii , want to target relief to those people who really need it .
Businesses bracing for a drop-off in business could cut staff and still meet demand .
For example , a hotel could cut cleaning workers and food service staff to get below 100 workers and still be able to meet demand during the downturn and get the perk of the tax break .
The House on Monday passed technical corrections to its coronavirus bill , which was first @ @ @ @ @ @ @ virus was intensifying in the U.S. Now the White House and most lawmakers are eager to send the bill to Trump for his signature and to follow up with more ambitious bills .


washingtonpost--2020-03-17--Egypt Makes Largest-Ever Rate Cut to Tackle Fallout of Outbreak

“ It ’ s a very bold and unexpected decision , ” said Radwa El-Swaify , head of research at Cairo-based Pharos Holding .
“ A foreign exit from fixed-income portfolios in emerging markets will happen anyway , regardless of the rates .
That is why it was critical to cut rates in support of the local economy , irrespective of foreign portfolio investments or the carry trade.
” Egypt , which has offered investors the world ’ s second-most profitable carry trade this year , is joining a parade of rate cuts around the world as countries look to @ @ @ @ @ @ @ the coronavirus .
With emerging markets swept up in an unprecedented sell-off , Egypt has already seen the pound weaken in recent days .
The central bank may also have been emboldened by the first slowing in Egyptian inflation since October .
“ We believe the rate cut is likely to accelerate portfolio outflows from the Egyptian local market , and that risks of a depreciation have risen materially , ” Farouk Soussa , a Goldman Sachs Group Inc. economist , said in a report .
The Arab world ’ s most populous @ @ @ @ @ @ @ virus , including four deaths , as of Tuesday .
It acted on rates the day after the U.S. Federal Reserve unexpectedly cut its benchmark by a full percentage point to near zero .
Gulf nations , including Saudi Arabia and the United Arab Emirates , followed suit earlier Monday .
Egypt , where the tourism industry is vital to the economy , has announced it ’ s halting flights from the nation ’ s airports from Thursday through the end of the month to stem cases of the illness .
Many civil @ @ @ @ @ @ @ home .
The government said it has allocated 100 billion Egyptian pounds ( $ 6.4 billion ) to combat the coronavirus , without specifying what the funding will go toward .
The central bank Sunday announced a range of measures to protect the economy .
It ’ s giving businesses and individuals a six-month extension for credit repayments and canceling ATM withdrawal fees for the same period .
“ The MPC ’ s preemptive decision provides appropriate support to domestic economic activity given the current challenging external environment , ” the central bank @ @


washingtonpost--2020-03-17--Analysis | How Short Sellers Become Targets During Market Routs

Short sellers borrow shares and sell them , hoping to buy them back at a lower price to profit from the difference .
But getting the timing right is crucial .
If the stock price rises , they could lose money instead .
Most shorting is done by hedge funds and institutional investors to cushion their investments or to bet that shares have risen too high .
There are also so-called activist shorts , who research companies to find targets that they allege have dodgy business or accounting practices , spread the word ( sometimes anonymously ) and , if @ @ @ @ @ @ @ stock slump .
Many authorities dislike short selling .
The former head of the New York Stock Exchange has described the practice as “ icky and un-American.
” France ’ s AMF regulator halted such trades in 92 stocks for a day on March 17 , while Italy ’ s Consob blocked the transactions in shares of 20 companies and Belgium ’ s FSMA imposed a similar restriction .
Spain went further , telling market participants they couldn ’ t bet on share declines for a month .
Madrid , as well as @ @ @ @ @ @ @ ban on short selling in the March 13 sessions .
South Korea has banned short-selling of shares in the benchmark Kospi index , tech-heavy Kosdaq index and small-cap Konex from March 16 to Sept. 15 .
China ’ s securities regulator in February suspended securities lending , one of the few short selling tools available in China , until further notice , according to people familiar with the situation .
The European Union ’ s market regulator has ordered hedge funds and other traders to disclose more information when they bet that stocks @ @ @ @ @ @ @ could come .
Oh yes .
The U.S. targeted short selling during the Great Depression and joined the likes of the U.K. , Germany and Japan in limiting short selling or banning it in 2008 during the global financial crisis .
China ’ s regulator blamed “ malicious ” short selling in part for a stock market crash in 2015 , placing limits on the practice as well as arresting traders .
It ’ s legal in most major stock markets , though some may issue temporary restrictions during periods of market turmoil @ @ @ @ @ @ @ the stock market started tanking in February .
French politicians prepared a report last year on ways to rein in short sellers and activist investors , and German authorities began an investigation into speculators who criticized the accounting of payments company Wirecard AG .
What is banned either partially or fully in several markets is so-called naked short selling -- betting on a stock ’ s decline without having first borrowed the shares .


washingtonpost--2020-03-17--Analysis | Give Boeing the Bailout It Doesn’t Deserve

The company ’ s cash woes wouldn ’ t be nearly as great if it wasn ’ t for the Max crisis , and the blame for that rests not with greater forces behind anyone ’ s control but with Boeing itself .
The company made the fateful decision in 2011 to adapt its existing 737 model for new engines , rather than starting from scratch , after rival Airbus SE surprised with an update of its own that quickly gained traction .
Boeing advocated against more rigorous simulator training on the Max for pilots of its older models because @ @ @ @ @ @ @ .
It abandoned that stance only recently as it became painfully clear the degree to which the pilots on board the doomed Max jets struggled to assess the problem and regain control .
Employee messages suggest a cavalier attitude toward global regulators .
The natural response to Boeing ’ s cash crunch and the weakened demand for the only planes it can currently sell is deep layoffs .
This is the route the company has gone before , as in 2001 , when then-CEO Phil Condit announced layoffs of as many as 30,000 @ @ @ @ @ @ @ one week after the 9/11 attacks , as the Seattle Times notes .
Such wide-scale layoffs this time around would be devastating to the U.S. economy .
It ’ s a situation that the federal government should do everything in its power to prevent .
That doesn ’ t make it any easier to stomach the idea that a company responsible for so recently killing 346 people will be handled a chunk of government cash .
Any money that does come should have heavy strings attached that force Boeing to make substantial changes @ @ @ @ @ @ @ aircraft and interacts with regulators.If anyone deserves a helping hand , it ’ s Boeing ’ s supply-chain , which has had to suffer first through the pre-Max crisis squeeze on their profit margins and then through the jet ’ s global grounding and production halt .
Boeing has stepped up with financial assistance to those suppliers hardest hit by the Max ’ s woes , but its ability to continue doing so will be challenged as airlines defer deliveries to cope with the demand slump .
Ironically , if it wasn ’ @ @ @ @ @ @ @ nightmare , the airlines would actually be in worse shape today .
The grounding kept a lid on capacity expansion plans for many of the biggest buyers and forced airlines to become adept at making massive adjustments to their flying schedules .
Those airlines , by the way , are hardly as innocent as Trump made them out to be .
The coronavirus is indeed not their fault , but it certainly hasn ’ t helped that the biggest carriers spent 96 % of their free cash flow over the last decade on @ @ @ @ @ @ @ no atheists in foxholes , there are precious few saints in government bailouts .


washingtonpost--2020-03-17--Analysis | Utilities Suffer But Offer Some Coronavirus Market Immunity

Despite that , utilities ’ premium to the S & P 500 — as measured on forward price/earnings multiples — has risen to more than 21 % , the highest in almost seven years .
That ’ s a slippery measure in the midst of a crisis , though , as forward estimates for many S & P sectors are in flux .
The more useful metric for utilities is the relationship of their dividend yields to interest rates and debt markets .
Utilities ’ regulated earnings and high payouts mean they are often treated as bond proxies , and @ @ @ @ @ @ @ with corporate bond yields .
A few weeks ago , I noted one danger for the sector was that fear would spread to investment grade bonds , causing spreads to widen out , pulling utility yields with them .
And that ’ s what happened .
While it ’ s dangerous to make any hard or fast predictions in this climate , there are good reasons to expect utilities to perform relatively better in the near term .
The spread between utility yields and the bond index stood at about 74 basis points @ @ @ @ @ @ @ latest reading for the index ) , tighter than the 10-year average of 118 points .
That suggests there is some room for utilities to decouple even if anxiety levels remain high in bond land .
And this is an overwhelmingly domestic sector that is largely insulated from virus-related economic dislocation , both because power and gas demand aren ’ t likely to be impacted too much ( except for some industrial plants ) .
Most importantly , utilities earn a regulated return on their assets .
The sector displays a comforting lack @ @ @ @ @ @ @ long term .
Even as S & P earnings continue to drop , those of utilities should remain relatively steady .
That in itself should narrow the premium on that metric .
Looking further ahead , when virus fears abate and some semblance of calm returns , it is likely the more beaten-down sectors directly affected by everyone staying home will outperform as they recover .
For this strangest of times , though , poles and wires still look like a decent place to hide out .
Liam Denning is a Bloomberg Opinion @ @ @ @ @ @ @ .
He previously was editor of the Wall Street Journal ’ s Heard on the Street column and wrote for the Financial Times ’ Lex column .
He was also an investment banker .


washingtonpost--2020-03-17--Analysis | Huawei Bonds Outshine Alibaba, Tencent in Downturn

At the heart of this relative optimism is the knowledge that while a private company , Huawei is cushioned from short-term consumer sentiment and economic shocks by its dominant domestic position .
It ’ s the leading supplier of equipment used in communications networks , and the largest vendor of smartphones .
No matter what happens around the world , Huawei has a home market that still needs its gear as part of China ’ s strategically important , long-term 5G mobile rollout .
The same must-have factor doesn ’ t apply to the major internet companies , which are @ @ @ @ @ @ @ .
Debt investors are pricing that difference .
The price of Tencent bonds due in 2026 has climbed 0.5 % over the same period , while Alibaba bonds for 2027 are down 3.4 % .
It ’ s worth noting that Tencent and Alibaba are both rated A+ by Standard & Poor ’ s Financial Services LLC , the agency ’ s third-highest rank , which means they ’ re part of the investment-grade indexes .
A Bloomberg Barclays index for U.S. dollar investment grade debt has climbed 0.5 % .
Huawei ’ @ @ @ @ @ @ @ according to Bloomberg data , and are considered high-yield , which puts them in indexes under that category .
We ’ ve observed debt investors ’ underlying belief in Huawei before , despite the company facing significant opposition from foreign governments such as the U.S. that deem its equipment a security risk .
In October , I noted that four different series of U.S. dollar bonds continued to march upward even as Washington sought to stop Huawei ’ s communications gear from being used in global 5G mobile networks .
In fact , @ @ @ @ @ @ @ Covid19 coronavirus to end a 10-month bull run on Huawei bonds , which peaked on March 9 .
Huawei ’ s shares aren ’ t listed , which means we can ’ t assess equity sentiment .
But the view toward Alibaba is clear .
Its shares are down 18.6 % over the past month as investors come to realize that even China ’ s most prominent names won ’ t be able to dodge a slowdown in the global economy .
Tencent ’ s shares haven ’ t fared much better , @ @ @ @ @ @ @ largely to their home market , Alibaba and Tencent managed to dodge the trade war with the U.S. and growing concerns over the security of Chinese technology .
As a result , sales and profits continue to climb .
Huawei , on the other hand , has had its global ambitions thwarted over such fears , hurting revenue .
Yet the longer-term picture remains intact because China is determined to build out the world ’ s most-advanced mobile network , and it can ’ t do so without Huawei .
For bond investors @ @ @ @ @ @ @ chance it will pay its bills .


washingtonpost--2020-06-13--Businesses Transformed by Covid-19 Plan to Keep the Changes

“ I think everybody just kind of accepted it now , ” Schrader said in an interview .
“ It ’ s just something that ’ s in our lives .
We ’ ve learned during this time , and I think a lot of these are good practice to carry forward.
” For many owners suffering business losses during the lockdown , changes are going well beyond adopting new safety measures .
At least 10 % are beginning to offer new services and almost 20 % have started to consult remotely , according to a survey of almost 700 @ @ @ @ @ @ @ matches customers and small-business professionals .
About a third of the survey respondents saw revenue holding steady or increasing .
Some companies , such as Peak Cleaning Service in Scottsdale , Arizona , reckoned that changing their marketing approach might help offset declines .
Peak lost almost half its customers -- vacation rentals -- when virus concerns caused travel to dry up .
In just one day , “ that piece of our business practically went down to zero , ” said Patryk Gawlak , who co-owns the business with his mother , @ @ @ @ @ @ @ that a deep cleaning of residences could help kill virus germs .
“ But there was a bigger concern to not have people outside of immediate family in and out of the house , ” Gawlak said .
To quell safety worries , Peak changed some of its operating practices to avoid cross-contamination , including using different cleaning equipment for each house .
The company also switched to more hospital-grade cleaning products and started screening to make sure employees aren ’ t going into homes with sick people .
“ I think taking @ @ @ @ @ @ @ with our customers to assure them that it ’ s clean and safe and all that , we will carry that forward , ” said Schrader , the owner of the plumbing company .
“ I think we ’ ll be more prepared if this happens again.
” For more articles like this , please visit us at bloomberg.com