Analysis Shows Counties That Flipped to Trump Still Lagging Behind Economically (Economic Innovation Group, 2 min read). This report focuses on counties in the US that Barack Obama carried in the 2008 and 2012 elections, but whose subsequent turns were decisive in President Donald Trump’s victory in 2016. The analysis finds that these counties experienced slower growth in employment, a slower rise in the number of business establishments, and a more pervasive decline in prime age workers. This doesn’t augur well for Trump’s re-election prospects.
Facebook, Libra, and the Long Game (Stratechery, 11 min read). Probably the best article I’ve read on Libra so far. It describes the Facebook-led new “cryptocurrency” Libra as a halfway house between a fully open block-chain currency like Bitcoin and a centralised payment system like China’s WeChat Pay. By having a consortium of validators of transactions, rather than just Facebook (the WeChat model), Libra will have less trust issues. Facebook’s play is to be the pioneer of services around Libra, including a wallet for the currency (Calibra). If it is widely adopted (a big if), it would be a challenger to credit card companies (hence another negative for banks) and even traditional currencies (Libra is tied to a basket of currencies). Other articles worth reading on this: Most Interesting ETF Filing Ever: Libra (views Libra as an ETF) and Will Libra Destroy Cryptocurrencies Or Vice Versa? (views Libra as a version of Paypal).
Rise of the Greens = Deindustrialization of Germany (Mish Talk, 4 min read). A slightly hyperbolic but useful piece arguing that the popularity of the Greens in Germany is forcing the country to deindustrialise before it is ready to do so. The Greens, of course, oppose diesel, coal, chemicals, and big business, stances that hit most DAX companies. The governing CDU is making overtures to the Greens and so are shifting policies in that direction. This presents a bearish case for Germany and by extension the Euro area.
Special report: Weed, Inc. (Axios, 2 min read). Since marijuana seems to be the new crypto-currency for adventurous investors, I suggest reading this excellent summary of the sector. Venture capitalists are investing record sums in marijuana and related business start-ups. In fact, investment is growing twice as fast as it was in 2018. These investments are essentially a bet that marijuana will be legalized in the US at the federal level, as it has been already in Canada. This is all well and good, but many adjacent business start-ups that are needed to build out the industry (logistics, finance, retail, accessories, etc.) may become obsolete after legalisation. It’s a catch-22 for investors.
The Phillips Curve in Recession and Recovery (Macro Mania, 5 min read) An original take on a well-trodden topic. The author finds that the U.S. Phillips curve appears to be negatively sloped when unemployment is rising (as in a recession) and is either flat or even positively sloped when unemployment is falling (as in a recovery). This has been the case for decades. This argues for a less activist central bank during recoveries, and at the very least less need for hikes. The Fed seems to have taken notice with its recent tilt to dovishness.
The 10 Most Powerful Hedge Fund Managers This Year (Worth, 10min read). Bill Ackman of Pershing, Steve Cohen of Point72, Chase Coleman of Tiger, Ray Dalio of Bridgewater, Ken Griffin of Citadel…
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