Untested Performance through a Full Economic Cycle: Loans originated and serviced via online platforms, such as Prosper’s, do not yet have a performance history through a recessionary environment. Furthermore, as the underlying consumer loans are unsecured and primarily intended for debt consolidation, Fitch expects borrowers to treat paying down these loans as a lower priority relative to other borrowings, such as an auto loan or a mortgage. As such, the pool could experience especially elevated default frequency in an economic downturn.
At a presentation this week on their 2016 outlook, Morgan Stanley’s Elga Bartsch said the ramifications of the influx of refugees and migrants entering Europe is one of the three big risks they’re watching. (Along with politics, the other two are the start of the Fed’s tightening cycle and the risk of deflation in China.) For context, the UNHCR said this week that about 140,000 refugees and migrants traveled to Europe by sea in November, which is down from October likely due to weather in the Aegean as well as a crackdown on smuggling by Turkey, according to Reuters. In total, 886,662 people have so far reached Europe, UNHCR’s William Spindler said, adding that it is “not unrealistic to say we could reach 1 million by the end of the year”.
In 1989, Greg Mankiw and David Weil attempted to link changes in the US population with changes in demand for housing and house prices. They argued that the big increase in real house prices in the 1970s could be attributed to the maturation of the generation born during the postwar baby boom. This also implied the subsequent baby bust would push house prices progressively lower over the next several decades:
JPMorgan’s silver-headed fox and chief executive Jamie Dimon dropped a little nugget of market-moving news yesterday, telling a bunch of people at a Treasury Department conference that America’s biggest bank was planning a partnership with “one of these peer-to-peer, small-business lenders”. There are two games in town when it comes to publicly-traded “peer-to-peer” lenders. One is OnDeck Capital, which is a small business lender. The other is Lending Club, which largely refinances credit card debt and only started doing business lending this year. Guess whose shares tanked almost 10 per cent yesterday and whose shares peaked up nearly 6 per cent after Dimon’s comments?
The tentative steps Saudi Arabia is taking towards economic liberalisation are, it seems, unleashing a strong case of Soviet-era glasnost and perestroika anxiety among Saudi upper echelons. The kingdom’s first flirtation with market liberalisation came in June with the opening up of the Tadawul, the biggest stock market in the Middle East. But with oil prices collapsing from a June 2014 high of $115 a barrel to below $50, coupled with the theocracy’s political and cultural fears connected with liberalising too fast, Citi’s chief political analyst Tina Fordham and chief economist Willem Buiter say Saudi Arabia will be mindful of not repeating the mistakes of the Soviet Union in that regard by letting go of too much control. One case in point: A Palestinian poet was sentenced to death last week for renouncing Islam. The collapse of the Soviet Union in the wake of Gorbachev’s reforms is a true Saudi obsession at the moment, Buiter and Fordham told FT Alphaville at a sit-down last week. As Buiter added, “when the Soviet Union tried it, it all went oink.”
So maybe China doesn’t need to hire a battery of statisticians to ironically count its unemployed? You know, as a ward against a sudden spike sneaking up on the Chinese government, a government that prizes stability and its own continued rule above much else? We’d suggested previously that China’s powers-that-be might have just as useless an insight into the true nature of China’s employment as the rest of us. Or at least, that was the fear. It wasn’t that anybody thought there was an immediate problem in the Chinese labour market — it was the not knowing, and the potential for a surprise, that got people ruffled. That and China’s preternaturally still unemployment rate, of course, which (say those who just want to lash out at the world) has the dubious distinction of being considered the least informative among all key Chinese stats.
Warren East is trying to prevent Rolls-Royce going west with his restructuring plan, Pfizer is under fire for its tax inversion deal with Allergan. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can
With Goldman raising the spectre of a $20 crude price, here’s an alternative scenario from Ecstrat strategist Emad Mostaque… ___________ After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher.
- Listen - The "gray rhino" theory
- James Heckman tells us why IQ is overrated
- Mihir Desai explains the wisdom of finance — Now with transcript!
- Mihir Desai explains the Wisdom of Finance
- Can we avoid another financial crisis?
- Hirschmania, the final chapter
- The life and speeches of Sadie Alexander
- Kim Rueben on the fiscal impact of immigration
- A sit down with Adair Turner
- Stephen Kotkin explains how Stalin defined the Soviet system
- Richard Florida on geographic inequality
- Further reading
- Jeremy Adelman on Albert O Hirschman’s “Exit, Voice & Loyalty”
- Dan Drezner on the marketplace of ideas
- Robert Lustig on the science behind our addictions
- The economic impact of immigration
- Further reading
- Ricardo Hausmann on the tragedy in Venezuela
- Does Amazon present an anti-trust problem?
- Mary Waters on the integration of immigrants into the US
Alphachat is available on Acast, iTunes, and Stitcher.
From the FT’s Kate Allen this weekend: Data published last week showed that new housing construction has surged by 19 per cent in the past year to 155,080 new homes. That figure is a quarter higher than previously reported government statistics, which suggested that only 124,520 new homes had been built during the period. The figures for London, where the housing shortage is biting the hardest, show the greatest difference. Last week’s data showed that over 24,000 new homes were created in 2014-15, whereas the communities department’s quarterly statistics show only 18,270.
The way we work now is changing rapidly: Self-employment is up, workers are putting their own money into what once would have been company purchases, and there’s endless chatter about the future of robot labour transforming the landscape. On the first big shift, the Office for National Statistics data released Wednesday shows that self-employed people in the UK increased by 30,000 to 4.55m for July to September compared to the same period a year ago. From ONS:
Elsewhere on Tuesday, - “How can Mr. Ackman find comfort in Valeant’s management … while at the same time calling Herbalife’s chief executive “a predator” running a “a criminal enterprise”?” - Ben Bernanke thinks the House’s plan to pay for highway construction by drawing on Fed capital is a bad idea. - Satoshi Nakamoto for the Nobel?
Compare and contrast time. Which is an apt way to start a post about lax copyright laws in China. First from the FT’s Charles Clover today: China has placed innovation firmly at the centre of its new five-year plan, with President Xi Jinping putting the country on course to catch up with the west in everything from aircraft engines to “quantum teleportation”… But for many the Star Trek-like ambitions go boldly — nowhere. China’s innovation bulls believe the country is already on the path, spending huge amounts on R&D and leapfrogging technologies in telecoms and tech with agility. Detractors meantime demur that innovation simply means copying…
The UK has outperformed almost every rich country at creating jobs since the crisis, yet has done poorly at boosting living standards. Real take-home pay, while on the rise, is still substantially below the 2007 peak:
Lots of uninformed people got excited this morning when they read the Chinese government will remove the last vestiges of its “one-child policy”. David already explained why a higher Chinese birth rate could be helpful — the number of young people has been shrinking for more than 15 years — as well as the limited significance of what actually happened given the massive exceptions and loopholes introduced over the past few decades. (The bigger reform was two years ago, when the government chose to allow people without siblings to have multiple kids of their own without paying a fine.) We thought we’d add a little context by putting China’s fertility rate in perspective. If you didn’t know about China’s legacy of population suppression, including horrific forced abortions, sterilisation, and infanticide, you wouldn’t be able to guess by looking at the numbers.
Elsewhere on Wednesday, - Department of “Huh!?!?”: QE has retarded business investment!? - Of Utopias past and present. - Semper et ubique investing. - “Among the 12 conference rooms is a space named Bastille and another dedicated to Liberty Island, where tourists collectively gaze upon a statue. It’s unclear if meetings held in Robben Island, a room named after the infamous prison where Nelson Mandela spent 18 years, feel as if they drag on.” - Will the Tories’ “planning shakeup” suffocate London?