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By Bilal Hafeez 25-10-2019
In: post | Newsletter

Bilal’s Top Picks: WeWork No Play / Davos In Desert / World Boycotts Dollars

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(total reading time: 6 mins)

After reader’s feedback, we’ve added market implications to our article curations. Let me know what you think.

A common message in our curation is watch out for fake tech companies. Public markets will punish you. WeWork is the poster-boy for this and has simmered up worries of a new dot-com bubble. Meanwhile, new California laws may negatively impact gig-based companies.

On the macro side, heavyweight economist Jeffrey Frankel questions the dominance of the dollar in the global system. Elsewhere, measures are underway to limit Chinese capital flows to the US and the US military is worried about climate change. At the same time, there are now more wealthy Chinese than Americans.

Finally, check out our final article below. You’ll kiss me for it.

P.S. If you are hoping that your talents and hard work will make you wealthy – don’t worry, recent research shows it seems to be all based on pure luck.


Unsurprisingly, this week’s woes around Adam Neumann and his WeWork have been all the hype, raising some worries around a bubble forming. No need to be too concerned, however, as we don’t see a dot-com style crash on the horizon – private markets are learning from their mistakes.

The Not-Com Bubble is Popping (The Atlantic) Sees the recent tech company IPO failures are the exact opposite of the dot-com bubble. Now public investors do the hosing instead of getting hosed. That said, true tech companies, especially software ones, are showing little sign of crisis. Suggests shorting ‘fake’ tech companies and going long ‘true’ tech companies.

Airbnb’s WeWork Problem (Tech Crunch) Wall Street might have greater patience with Airbnb despite its massive Q1 2019 loss. Airbnb has more capital in the bank than it’s raised in the previous 11 years, some “cumulatively” positive free cash flows, and positive EBITDA for two consecutive years. Bullish AirBnB view.

How a Weaponized Dollar Could Backfire (Project Syndicate) The dominance of the dollar is at risk.  Many countries are looking to non-dollar currencies and alternative payment mechanisms to protect themselves from the Trump administration’s exploitation of the currency’s global supremacy. Bearish dollar argument.

With a few new Central Bankers settling in, and the UK about to select its new Governor, the uncertainty around their next move remains. Earlier this week we discussed the few specific ways to make QE work, given it now seems inevitable – now we look at how politics might play with fiscal stimulus. We also feature a great analysis on why the Philips curve is still relevant and why the Fed should do all it takes to foster expansion.

Can Tariffs Have a Deflationary Impact? (The Library of Economics and Liberty) Not all tariffs are inflationary. Famously, the Depression-era Smoot-Hawley tariff reduced aggregate demand by enough to offset any inflationary impact. It contributed to causing the Great Depression. Bearish growth and equities.

Objectives and Boundaries of Monetary Policy: A Governor to Renew the Bank of England’s Monetary Vows (VOX) Warns thatthe credibility of central banks gained after decades of hard work could be unwound by a new era of economic populism. This could be accelerated by central banks issuing short-term debt to help the governments fund their spending sprees. Suggests yield curve steepening.

The Phillips Curve: Dead or Alive (VOX) Argues that the Philips curve, which links employment to inflation, is not dead as many believe but just in hibernation. It will wake up – this has happened before in the 1960s  and history could repeat. Recommends the Fed’s to keep the economic expansion going, especially as unemployment could fall below natural rate estimates. Bulish rate markets.

The way we work and do research is vastly changing thanks to tech and the automation it brings. There are worries around potential protests emerging from low-skilled workers but also from Academics. We also look at the continuing discussion around inequality, some widely dropping revenue sources in cities and how we can possibly tax the rich more.

Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy (NBER) Billionaires’ geographical location is highly sensitive to state estate taxes. For state-level policymaking, one-time tax revenue gains following the death of a wealthy resident often exceeds the foregone revenues over the remaining lifetime of those who relocate. Bearish state finances and munis.

More Power to the People: Electricity Adoption, Technological Change and Social Conflict (VOX) Uses a historical case of a new technology “shock” (electrification) in Sweden to predict potential reactions to the increasing automation. Finds more local strikes are likely, especially from lower skilled workers, but not against the technology itself, but for higher wages. Suggests higher inflation, therefore bearish rates.

Financial Fragmentation of the Eurozone in Pictures (Money Maven) Funds have been increasingly flowing towards “central” Eurozone countries from “peripheral” European countries since the financial crisis. The general distrust of the “peripheral” countries’ banking systems lies at the heart of the fragmentation problem. Bearish European banks.

Amid heated debates on Big Tech’s market power, the new legislation in California, called AB5 is gaining traction. We feature Laura Tyson, a former chair of the US President’s Council of Economic Advisers arguing that rather than allowing technology to accelerate the hollowing out of the middle-class, governments at all levels should be strengthening worker protections. We also feature analysis claiming that the determining factor behind your wealth seems to be pure luck.

Middle Management, Geographic Frictions, and Firm Establishment (VOX EU) Geographic frictions, such as the distance between a firm’s headquarter and its establishments, may adversely impact the firm’s performances. Hiring “middle managers” who function like CEOs in regional offices is an effective way to offset this negative externality. Argues middle management may be positive for international firms.

A New Approach to Protect Gig Workers (Project Syndicate) California has passed a new law to make it harder for the Ubers and Lyfts of the World to classify workers as independent workers instead of employees. Given that Trump is against the legislation, it can expected to spur major legal and political battles in 2020. Could see higher wages, so potentially negative gig economy companies.

If You’re So Smart, Why Aren’t You Rich? Turns Out It’s Just Chance (MIT Technology Review) Researchers from the University of Catania simulate how people utilise their talents to exploit opportunities in life and accumulate wealth. Results show that the wealthiest individuals are nowhere near “the most talented” – an important factor is, in fact, pure luck. Suggests taxing the rich.

We looked at how populism is turning left-wing in one of our specials this week. This might be holding true for Eastern Europe too, as some excellent Brookings analysis points at. Elsewhere, we picked out a curious list of the financiers attending “Davos in the desert”.

Is the Tide Turning Against Right-Wing Populism and Nationalism in Central Europe? (Brookings) Argues that the uniting of opposition parties is a key strategy to the diminishing power of right wing in European politics. Could support rise of left populism = less business friendly = lower stocks

The Grandees Headed to Saudi Arabia’s “Davos in the Desert” (Axios) Axios compiles the list of guests who will attend the Future Investment Initiative in Riyadh later in October – heads of state, high-profile Trump administration cabinet members, executives of the world’s largest financial institutions and all made it to the list. Saudi unaffected by human rights issues.

U.S. Military Could Collapse Within 20 Years Due to Climate Change (Vice) A Pentagon research report highlights several climate-trigged factors that could be detrimental to the US Military in the upcoming two decades: a collapse of the power grid, disease epidemic and geopolitical tensions stemmed from climate-related population displacement.

China’s laundry list of issues continues as the Government is searching for new ways to revive the slowing economy and protect investors and companies against a US large-scale backlash. We look at their plan to double spending on infrastructure. At the same time, the rich Chinese are becoming richer and hoping to surpass their American peers.

China’s Growth Much Worse Than Reported, What About the US?  (Money Maven) Argues that the Chinese economy is doing worse than might be currently portrayed. Desperate to avoid a slowdown, the Chinese government is launching 770bn yuan infra projects to boost the economy, double that of last year. Bullish near-term Chinese growth and hence stocks

Locking China Out of the Dollar System (Project Syndicate) Given the dominance of the dollar, a US restriction on capital flows have more far-reaching effects than any trade tariff. Trump is reportedly considering restrictions on US portfolio flows into China, including a ban on US pension funds from investing in China and delisting Chinese firms from US stock exchanges. Capital controls are coming to the US – could hurt dollar.  

There Are More Wealthy Chinese than Americans for the First Time (CNN) The average American is still much richer than their Chinese counterparts and China still has only a quarter of the millionaire count of the US, but it’s rising up the charts quickly. Now there are more rich Chinese than Americans in the top 10%.

Which Cheek and How Many? In France and Beyond, a Kiss Isn’t Just a Kiss (The Conversation) Looks at data on how Europeans like to greet each other and finds that cheek kisses are not just a French phenomenon – it’s used in Germany, Belgium, Russia and some Arabic countries. Most commonly, 2 kisses are enough, but in some places – 4 are the convention.