Many of the biggest sales this quarter have come from technology executives. Thiel, co-founder of data analytics group Palantir, sold $175mn this month, according to regulatory disclosures, his biggest sale since offloading $504.8mn of the company’s stock in February 2021. Amazon founder Bezos sold 50mn shares worth $8.5bn in the ecommerce group in February. Andy Jassy, Amazon’s chief executive, sold $21.1mn of stock this year, compared to $23.6mn in 2023 and 2022 combined. Zuckerberg, Meta’s chief executive, has sold millions of dollars of the company’s shares for years. But he has increased selling this year as its stock hit all-time highs. In early February, he sold 291,000 shares for $135mn, his first sale of that size since November 2021. He still has 13.5 per cent of the company’s outstanding shares, which makes him its largest shareholder.
2. Tamal Bandopadhyay has an excellent article that puts into perspective the RBI's recent regulatory push.
The RBI doesn’t want to see a house on fire and call the fire brigade; instead, it wants to ensure that no fire breaks out. The recent actions against some of the regulated entities point to this... The RBI’s new-found enthusiasm for punishing the naughty boys needs to be seen in the right context. This is the time to do so since the resilience of the financial sector is at its peak. The level of non-performing assets on banks’ books, as a percentage of overall loan assets, is at a historic low. Besides, their provision coverage ratio (the amount of money set aside to take care of bad assets) has been on the rise. Also, the banks are well capitalised. When did we last see such a healthy Indian banking system? Smart regulators take tough calls when the going is good.
3. Merlin Entertainment, the owner of Legoland, Sea Life, and Madam Tussauds announced the introduction of dynamic/surge pricing at its top 20 global attractions by the end of 2024. This comes as a trend emerges where the entertainment industry adopts dynamic pricing by following in the footsteps of the airline and hotel industries. The US restaurant chain, Wendy's had announced dynamic pricing for burgers during peak demand from early 2025.
4. The global unlisted infrastructure market stands at an AUM of $1.3 trillion as on June 2023, with $150 bn aimed at Asia-Pacific. Led by names like Macquarie, Brookfield, Global Infrastructure Partners (GIP), iSquared Capital (seeded and spun off from Morgan Stanley), Stonepeak, Antin Infrastructure (seeded and spun off from BNP Paribas), infrastructure has arrived as a major unlisted asset class.
From a tiny sliver of the private investment market, infrastructure has surged since the global financial crisis. Its scope too has expanded to cover areas like gas export facilities, mobile phone towers, data centres etc., apart from the traditional infrastructure assets. The long period of ultra-low interest rates have been a major driver of this growth.
During the 1980s and 1990s, Macquarie underwrote a wave of privatisations across Australia, Europe and Canada, countries where governments were looking to sell state monopolies such as utilities, airports and toll roads. It then began investing directly in the businesses that were being privatised. But translating that strategy to the US was initially challenging. Federal and state governments were less likely to sell assets, fearing a political backlash. The existence of large municipal debt markets, which carried tax advantages for domestic investors and generated funding for public bodies, meant there was less financial incentive to privatise...
A small number of deals sparked investors’ interest. In 1999, the provincial government of Ontario sold a lease on 407 ETR, a toll road around Toronto, for about $3bn — a price that in Dorrell’s eyes wildly undervalued the highway. Macquarie quickly became a large investor and by 2019, 407 ETR was valued at around $30bn. “It is arguably the most successful infrastructure asset ever,” says Dorrell. Canadian pension funds and those in Europe and Australia began pouring money into infrastructure and US municipalities started to sell assets such as the Chicago Skyway Bridge, acquired by Macquarie and Cintra for $1.8bn in 2004. Before long, large investment banks including Goldman Sachs, Credit Suisse, Citigroup, Morgan Stanley and Deutsche Bank were building their own dedicated investment teams. But the 2007-08 financial crisis brought the boom to an abrupt end and left many institutions nursing big losses.
But the inflows into the sector is mostly bound for North America and Europe, with even Asia-Pacific getting just $7.8 bn out of around $175 bn in 2022, and just $3.1 bn out of $89 bn in 2023.
5. Times has an article on the problems facing Boeing which has been struggling on the face of two fatal recent crashes of its Max 8 planes that killed 350 people.
Some of the crucial layers of redundancies that are supposed to ensure that Boeing’s planes are safe appear to be strained, the people said. The experience level of Boeing’s work force has dropped since the start of the pandemic. The inspection process intended to provide a vital check on work done by its mechanics has been weakened over the years. And some suppliers have struggled to adhere to quality standards while producing parts at the pace Boeing wanted them... Several said employees often faced intense pressure to meet production deadlines, sometimes leading to questionable practices that they feared could compromise quality and safety... “For years, we prioritized the movement of the airplane through the factory over getting it done right, and that’s got to change,” Brian West, the company’s chief financial officer, said at an investor conference last week...One quality manager in Washington State who left Boeing last year said workers assembling planes would sometimes try to install parts that had not been logged or inspected, an attempt to save time by circumventing quality procedures intended to weed out defective or substandard components. In one case, the employee said, a worker sent parts from a receiving area straight to the factory floor before a required inspection... Employees would also sometimes go “inspector shopping” to find someone who would approve work, the worker said... Several current and former employees in South Carolina and in Washington State said mechanics building planes were allowed in some instances to sign off on their own work. Such “self-verification” removes a crucial layer of quality control... Another factor at play in recent years has been that Boeing’s workers have less experience than they did before the pandemic. When the pandemic took hold in early 2020, air travel plummeted, and many aviation executives believed it would take years for passengers to return in large numbers. Boeing began to cut jobs and encouraged workers to take buyouts or retire early. It ultimately lost about 19,000 employees companywide — including some with decades of experience... the company did not always provide new employees with sufficient training, sometimes leaving them to learn crucial skills from more experienced colleagues... District 751 of the International Association of Machinists and Aerospace Workers union, which represents more than 30,000 Boeing employees, said the... proportion of its members who have less than six years of experience has roughly doubled to 50 percent from 25 percent before the pandemic.
This is another example of how businesses trade off efficiency and profits, against resilience.
6. Good explainer on the troubles associated with GDP estimation in India, specifically the deflator. Rajeswari Sengupta points to two problems.
First, the National Statistics Office (NSO) does not use the international standard measure of output prices — the producer price index — to deflate GDP. This is because India does not have a PPI. The NSO proxies the PPI with the wholesale price index (WPI). However, the WPI does not track producer prices very well. It is, in fact, heavily skewed towards commodities such as oil and steel which are essential inputs in commodity importing countries like India. Also, the WPI does not measure the price of services, and services constitute two-thirds of the economy. This skew in the composition of WPI means that whenever commodity prices fall steeply, the WPI will decline, even if producer prices are still rising. This has been a major issue recently. Since September 2022, consumer price index (CPI) inflation has been above 5 per cent, as producers kept increasing prices, but WPI inflation has steadily declined, because global commodity prices have fallen. During April-December, 2023, WPI inflation averaged -1.0 per cent. This persistent fall in WPI inflation artificially inflated real GDP during 2023-24.Second, most G20 countries calculate real gross value added (GVA) in the manufacturing sector using a methodology known as double deflation. In this method, nominal outputs are deflated using an output deflator, while inputs are deflated using a separate input deflator. Then the real inputs are subtracted from real outputs to derive real GVA. India, by contrast, deflates nominal numbers using a single deflator. It matters because if input prices diverge from output prices, single deflation can misstate growth by a big margin. Consider what has been happening recently. When the price of inputs falls and price of output increases, profits increase and nominal value added goes up (it helps to think of GVA as profits, which go up when input prices fall). Since real GDP is supposed to be measured at “constant prices”, this increase needs to be deflated away. Double deflation will do this easily. But single deflation using an input price index like WPI will amplify the nominal increase. So, if the nominal increase in GVA is 10 per cent as the result of rising profits, while WPI falls by 1 per cent, the real increase will be calculated as 11 per cent, even if real output has not changed at all.
7. Capital expenditure has risen across state governments too
On capital expenditure, the Centre has succeeded in raising it from a level equivalent to 2.5 per cent of gross domestic product (GDP) in 2021-22 to 3.2 per cent in 2023-24. Something similar, and indeed better, has happened with the states. At the aggregate level, these 20 states have raised their capex as a percentage of their gross state domestic product (GSDP) from a lower level of 2.09 per cent to 3.36 per cent in the same period.
8. For all talk of rebalancing, the Chinese economy continues to be excessively reliant on capital investment.
The only rebalancing that's happening is the shifting of credit from property and infrastructure into the three emerging areas of electric vehicles, Lithium-ion batteries, and solar photovoltaic cells manufacturing. The exports of the latter three rose 30% to $147 billion in 2023. This has naturally raised criticism of state-support offered by Beijing.
Beyond China’s shores, many experts and government officials view the prospect of Beijing’s increased reliance on manufacturing for growth as an emerging threat. Comparisons of industrial policy are notoriously difficult. But the Center for Strategic and International Studies describes Chinese state support as “uniquely high”, estimating it at $406bn, or 1.73 per cent of GDP, in 2019. That compares to 0.39 per cent of GDP in the US and 0.5 per cent in Japan. In the US and Europe, politicians fear that such heavy spending will result in a wave of low-cost high-tech exports from China that could displace domestic industries and pose risks around national security... In private conversations with their Chinese counterparts, American economic officials have warned Beijing that the US and its allies will take action if China tries to ease its industrial overcapacity problem by dumping goods on international markets.
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