Juggling Dynamite

The Chinese stock market entered a bear market this week (-20% since January) and the yuan is down 5.5% versus the greenback since February.  A burgeoning trade war with the US is adding pressure, but the story here is not just about China.  It’s about slowing global cash flows and strain building in leveraged emerging economies who borrowed heavily over the past few years, particularly in US dollars.  Typically these pressures are not ‘contained’ but spread from credit to equity markets, emerging and developed.  This Bloomberg radio discussion is on point.

Bloomberg Markets AM with Pimm Fox and Lisa Abramowicz speak with Brendan Brown, Chief Economist and Head of Economic Research at MUFG Securities, on what EM is signalling, central banks and currency manipulation.
Running time 06:15

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Good news for consumers:  a tsunami of used cars coming off lease are continuing to put downward pressure on auto prices, which are on track to decline 20% this year alone. Record vehicle inventories, along with heavily indebted consumers, and the rise of ride hailing and sharing services, all suggest lower prices are unlikely to clear quickly. Anyone looking to buy used in the next couple of years should find themselves in a ‘buyers’ market.

The same developments however, are bad news for investors in auto rental, resale and lease companies though.  Lower resale values equate to lower profits and lower stock and bond prices for companies in this sector.  The hit to car rental stocks year to date offers some insight.  See:  Hertz and Avis plummet on pessimistic used-car predictions.

Being able to send trillions of tons of plastic waste out of sight, by shipping it to landfills in poorer countries, is an unsustainable disaster for our global environment.  Meanwhile companies producing the waste are extracting their profits free of any accountability for the massive public costs being inflicted.

It’s good that China is no longer accepting our mess, as this may force more awareness and responsibility on the issue, as toxic waste piles up all around us.  The answer is in consumers protesting and refusing to accept products in plastic packaging, along with regulation that will force product producers to stop using packaging that they cannot recycle and reuse.

Nearly four-fifths of all that plastic has been thrown into landfills or the environment. A tenth of it has been burned. Several million tons reach oceans every year, sullying beaches and poisoning vast reaches of the northern Pacific. Just 9 percent of the total plastic ever generated has been recycled. China took in just over half the annual total in 2016, or 7.4 million metric tons. See: China just handed the world a 111 trillion ton trash problem.  

Here is a direct video link.