1. Fascinating account of the social debates taking place in Canada's Atlantic coast areas like villages and towns in New Foundland,
Until recently, Canada’s Atlantic provinces were suffering from so much outward migration that some towns started offering free land to lure workers. But as urban life across the world has been upended by the coronavirus, with lockdowns, shuttered bars and socially distanced gyms, the picturesque region is experiencing the largest inward migration in nearly 50 years. Desperate to escape pandemic doldrums and soaring housing prices, and energized by a global shift to remote working, the newcomers are flocking to Atlantic Canada, where they have been largely welcomed. But in the distinctive coastal region — shaped by the traditional values of its Indigenous peoples and Irish, Scottish, English and French settlers — the migration of moneyed urbanites is also fanning some tensions.Though housing prices remain low compared with bigger urban centers, in Bonavista, population 3,752, they are exploding, and some local residents bemoan the higher property taxes that come with them. The social fabric of the town has also been changing. Traditional craft shops and restaurants offering fish and brewis, a starchy local dish of cod and bread, have been gradually giving way to designer sea salt companies and to purveyors of cumin kombucha and iceberg-infused soap...According to Statistics Canada, about 33,000 people from other provinces migrated to the region of 2.5 million people in the first half of this year alone, compared with about 18,500 in the same period in 2005. Many of the new arrivals are millennials... Reg Butler, a crab fisherman, whose family has been in Bonavista for five generations, credited the newcomers for rejuvenating the local economy after the town emptied in the 1990s following a moratorium on cod fishing. But he said a housing shortage was stoking some resentment.
2. South Korea hallyu facts of the day,
In the last few years alone, South Korea shocked the world with “Parasite,” the first foreign language film to win best picture at the Academy Awards. It has one of the biggest, if not the biggest, band in the world with BTS. Netflix has introduced 80 Korean movies and TV shows in the last few years, far more than it had imagined when it started its service in South Korea in 2016, according to the company. Three of the 10 most popular TV shows on Netflix as of Monday were South Korean... In September, the Oxford English Dictionary added 26 new words of Korean origin, including “hallyu,” or Korean wave... It wasn’t until last year when “Parasite,” a film highlighting the yawning gap between rich and poor, won the Oscar that international audiences truly began to pay attention, even though South Korea had been producing similar work for years.
3. Upshot has this summary of how the pandemic stimuluses have benefited American labour,
Workers have seized the upper hand in the labor market, attaining the largest raises in decades and quitting their jobs at record rates. The unemployment rate is 4.6 percent and has been falling rapidly. Cumulatively, Americans are sitting on piles of cash; they have accumulated $2.3 trillion more in savings in the last 19 months than would have been expected in the prepandemic path. The median household’s checking account balance was 50 percent higher in July of this year than in 2019, according to the JPMorgan Chase Institute... Over the 12 months that ended in September, those in the top quarter of earners experienced 2.7 percent gains in hourly earnings, compared with 4.8 percent for the lowest quarter of earners. For lower earners, that follows years leading up to the pandemic in which pay gains exceeded inflation rates.
4. Barry Eichengreen and Poonam Gupta, along with another, have a reprise of their earlier paper comparing emerging economies during the taper tantrum. Their headline finding on EM vulnerability is on the public debt and fiscal deficit fronts, and India leads on both.
Where emerging markets are weaker is in terms of public-sector indebtedness... interest rates in the U.S. are poised to begin moving up, which will make for higher interest rates in India, as we have shown above. Even without these unfavorable growth and interest-rate developments, it would have been necessary to cut the government’s primary budget deficit to prevent the debt-to-GDP ratio from moving higher. With these developments, larger cuts will be required... What happens when public debt relative to the resources that the government is able to mobilize rises even higher? Either taxes have to be raised or public spending must be cut to generate additional revenues for debt service. If this proves politically impossible, governments have responded, historically, in two ways. When the debt is held externally, they restructure. When it is held internally, they inflate.
The paper is full of graphs comparing EM economies on various indicators. This one is the most disturbing one from India's perspective, even though most government debt is internal (external is just 4% of GDP).
It draws attention to the differential between real interest rate and real GDP growth.
Since the turn of the century, the real-growth-rate-real-interest rate differential has averaged around 5 percentage points. This means that India can run a primary deficit of 4.5 percent of GDP without seeing its debt/GDP ratio move higher...This follows from the standard equation for debt dynamics: Δb = d + (r – g)b, where the change in the debt b is the sum of the primary budget deficit d and the existing debt multiplied by the difference in the real interest rate r and the real GDP growth rate g. With a value for r-g of 5, as posited in the text, and value for b of 0.9, the product yields a value for d of 4.5 percent of GDP in a steady state... if interest rates now go up owing to global factors, the real-interest- rate-real-growth-rate differential could turn even less favorable... yields on the Indian government’s 10-year securities co-move with US 10-year Treasury yields. The elasticity with respect to U.S. rates approaches unity; this is true in both nominal and real terms. If U.S. yields are now going up, this suggests that even stronger steps will be needed to stabilize the debt/GDP ratio. With a growth rate of 6 percent and a real interest rate of 2 percent, the deficit would have to be cut to roughly 3.6 percent of GDP to stabilize the debt/GDP ratio.
5. The Ken has an investigative report on abusive practices by baby food manufacturers,
On 18 October, Union health Secretary Rajesh Bhushan received an unusual letter. It was a complaint penned by an employee of Nutricia International, the Indian arm of French food-products conglomerate Danone. The employee, one of 216 sales executives tasked with pushing the company’s infant milk substitutes and baby food, accused Danone India of a host of illegal and unethical practices in order to garner better sales in the baby food category. Danone had, according to the letter, sponsored overseas trips for doctors under the garb of an education grant, hosted liquor-fuelled parties for them, arranged for their transport, and even offered them financial inducements and gifts. If true, Danone would be in blatant contravention of India’s Infant Milk Substitutes (IMS) Act. The Act prohibits companies involved in manufacturing baby milk formula and food for babies upto two years of age from indulging in promotional activities. The allegations against Danone are damning... between January 2019 and May 2021, the Ministry of Health and Family Welfare (MoHFW) received 33 complaints about violations of the IMS Act. That’s more than one complaint a month. The alleged offenders included baby food manufacturers such as Nestle, Abbott, Mead Johnson, Danone, and Amul, but also extended to Apollo Pharmacy, Amazon, and even YouTube.
6. The surge in tech IPOs in Indian equity market - tech listings in India has so far raised $2.6 bn in 2021, a jump of 550% compared to last year's total!
From an FT long read about the Chinese crackdown benefiting India,
For every dollar invested in Chinese tech in the quarter that ended September, $1.50 went into India, according to the Asian Venture Capital Journal.
This is a good indicator of the growth potential of Indian markets,
While listed “new economy” companies account for 60 per cent of China’s MSCI index, they make up only 5 per cent of India’s, according to Goldman Sachs.
And this about what's happening now,
Analytics platform Venture Intelligence says 35 Indian start-ups have become “unicorns” worth over $1bn this year, more than every year since 2013 combined.
7. Scott Galloway has a stunning graphic which shows that the middle 60% of Americans now own less wealth than the top 1%.
In 1989, the middle class in the US owned 36% of wealth, compared to just 17% for the top 1%.
8. The recent break-ups of GE, Toshiba, and Johnson&Johnson have triggered a debate on the demise of the conglomerate model. In the context of India, Shyamal Majumdar writes
Though the aggregate financial ratios of some of the conglomerates still look respectable, that’s primarily because one company usually makes up for all the other underperforming businesses in the group. For example, Tata Consultancy Services accounts for 67 per cent of the combined market capitalisation of all listed Tata group companies and over 90 per cent of the group holding company Tata Sons’ dividend income. TCS has virtually funded the group’s growth for over a decade now. Similarly, Aditya Birla group’s financial ratios would look less impressive if Ultratech Cement and its parent Grasim Industries are excluded.
9. Putting the PayTm fiasco in perspective,
In a letter to investors last year, David Einhorn of Greenlight Capital suggested that the low valuations of industrial companies might in themselves be inflationary. If traditional industrial companies have low valuations, and hence an implicitly high cost of equity, it makes sense for holders of the stock to demand that dividend payouts and share buybacks take priority over capacity expansion: if the market attributes little value to your business, why expand it? That leads to continued under-investment and, due to lack of new supply, to “sustained higher prices in a number of industries”, wrote Einhorn.
11. The rise and rise of private equity giants,
The BRIC markets are still below their Halloween 2007 peak.
Authers points to the possibility of an interesting trend - decoupling of EM equity markets from that of China.
13. The ASER 2021 is out. An interesting graphic is the sharp rise in student enrolment in government schools, shifting away from private schools.
The share of private schools has been rising for a long period, and now the trend appears to have reversed. It's hard to believe that the quality of government schools have improved across India and that of private schools have similarly declined across to warrant this near universal trend since 2018. Is it a proxy for economic distress translating into parents forced to exit private schools and fall back on government schools.
This is the full report.
14. Finally, on Udaan, a B2B online retailer which may be more sensible bet for investors than the other inflated unicorns,
Currently Udaan has 35 lakh installed customers on the platform and as many as 25 lakh undertake regular transactions. From an average 10 per cent of their total transactions going through the Udaan platform two years ago, that share has gone up to 40 per cent. “There are 30 million retailers in the country but three to four million of them account for 85-90 per cent of the trade. So while the number of retailers on our platform might go up slowly to 40-45 lakh, we are targeting the most relevant of them in the ecosystem and ensuring that they source the bulk of their products from us,’ said co-founder Sujeet Kumar. To do so, Udaan will also focus on the availability of those stock keeping units (SKUs) which sell the most for a retailer. For instance, in the FMCG and food space, Kumar says the top 200 SKUs account for 80 per cent of the sales. “We want the retailer to source 90 per cent of these items from us,” he said.
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