319 (30 May 2018)

Welcome to week 319!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription to be read in their entirety, although complete articles may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(22 May 2018): These Six Chinese Cities Dominate Global Electric-Vehicle SalesBloomberg.com

——–“After trying for to years to get a license for a gasoline-powered car in Beijing’s bimonthly lottery, Gary Zhong gave up and bought the Qin EV300 electric vehicle from Warren Buffett-backed BYD Co. . . . Zhong exemplifies the early success China is having with its push toward electric vehicles instead of gas guzzlers.”  Six Chinese cities have implemented gasoline-car restriction and they have “accounted for 40 percent of the nation’s electric-car sales of 579,000 last and—and 21 percent of the world’s EV sales.”  It can take years, and a hefty fee, to get a license for a gas-powered vehicle, whereas an “EV license is free and often can be obtained a lot faster.”  Additional “Chinese cities are set to add restrictions on fossil-fuel vehicles as the country fights air pollution and highway congestion.”

********It is hard to imagine people in the U.S. being willing to accept this approach to expanding EV sales.  Still, it indicates that the decisions people make depend upon their “out of pocket” outlays plus any additional costs they must bear.  By substantially increasing the additional costs that prospective gasoline-powered vehicle purchasers must bear, the Chinese cities in question—with more on the way—have made electric vehicles relatively more attractive, leading consumers to purchase more EVs.

(23 May 2018): [SR] “Market Players Envision Stock Exchange Powered by BlockchainThe Wall Street Journal

——–“As regulators crack down on the multibillion-dollar, fraud-tainted business of initial coin offerings [ICOs], some market operators are exploring ways to bring them in line with U.S. securities law.  This week, a U.S. options exchange backed by Canada’s TMX Group said it would team up with online retailer Overstock.com to create the first regulated exchanged for ‘security tokens,’ which are essentially digital versions of stocks.  Security tokens use blockchain, the technology behind bitcoin, to manage the transfer of the shares from one owner to another.  Unlike the tokens sold in many ICOs, they are designed to be compliant with Securities and Exchange Commission rules.  Only a few security tokens have been issued to date.”

********The article goes on to note that, “While the idea of the tokens is largely untested and exchange plan is far from gaining SEC approval, supporters say such tokens could transform the way startups raise money by allowing them to bypass venture-capital firms and effectively sell shares over the internet.”  Much has been written about Bitcoin and blockchain in the past but the possibility of replacing stocks by “security tokens” (and the potential transformation of stock exchanges) ensures that we are going to hear a lot about blockchain, stocks, and security tokens going forward.  As the CEO of Oversotck.com Patrick Byrne has commented, “The ICO craze is the world of the past . . . In the past three to six months, everybody understands it’s going towards security tokens.”

********So, I just set up an Alert using Google Scholar for the terms: blockchain, “security token”, and stock.  As items meeting these terms come up, I will be alerted.  You can learn how to set up such alerts for yourself by reading a post or watching a video.  A good tool to use if you are wanting to follow a topic as it evolves.

(23 May 2018): “U.S. bank regulator encourages banks to reconsider small-dollar lending” Reuters

——–The Office of the Comptroller of the Currency said Wednesday that “banks should consider offering more short-term, small-dollar loans, inviting the industry to engage in lending it had once actively discouraged. . . . The three-page bulletin from the OCC does not alter any existing regulations but makes clear an about-face at the national bank regulator.”  Short-term loans in the $300 to $5,000 range “are usually relied on by consumers to help cover short-term gaps in funds.”  Rules issued in 2013 resulted in few banks offering such loans, “leading borrowers in need of short-term lending or with a subpar credit history to seek out alternative options, like payday lenders.”

********The guidance offered by the OCC can be found here.  The Pew Charitable Trusts has a research project on small-dollar loans, including payday loans.  You can learn about the project here.  According to The New York Times, the new guidance is welcomed by Pew.  What remains is to coordinate the work of the OCC with that of the Consumer Financial Protection Bureau.

(24 May 2018): “Climate Change Warriors’ Latest Weapon of Choice Is Litigation” Bloomberg.com

——–“In the global fight against climate change, one tool is proving increasingly popular: litigation.  From California to the Philippines, activists, governments and concerned citizens ae suing the biggest polluters and national governments over the effects of climate change at a break-neck pace. . . . The wave of activity is about channeling the fervor of a social movement to drive change via the legal systems.  The arguments vary based on both culture and the law.”

********Although the argument is about climate change litigation, it is of far more general application that that.  The benefits and costs of any particular action necessarily depend upon the legal framework—a change in the legal framework will, more often than not, change the benefits, costs, and opportunities for gain.  Not earthshaking news, of course.  That is why lobbyists abound at the state and federal levels, and why groups like the American Legislative Exchange Council and the State Innovations Exchange exist.

——–While we are on the subject of climate change, The New York Times reports a “new study has found that rice exposed to elevated levels of carbon dioxide contains lower amounts of several important nutrients.  The potential health consequences are large, given that there are already billions of people around the world who don’t get enough protein, vitamins or other nutrients in their daily diet.”  Whereas previous studies have focused on crop quantity and climate change, this one encompasses crop quality.

(26 May 2018):How kidnapping insurance keeps a lid on ransom inflationThe Economist

——–“In the early 1970s, leftist guerrillas in Argentina discovered a lucrative new way to make money: kidnap millionaires.  Panicking firms would agree to huge ransoms, more concerned with freeing their executives than driving down the fee.  That was not just bad bur businesses.  It also became a textbook case of how poor negotiating can send future ransoms rocketing and attract new entrants to the kidnapping trade.”  The 1975 ransom of Jorge Born in Argentina for $60m, “$275m in today’s money, is the highest ransom known in modern times.  One reason it marked a high point is the spread of kidnapping-and-ransom (K&R) insurance.”

********Although insurers reimburse ransoms, they also provide “seasoned ‘crisis management’ experts to help with negotiations.”  The Danish movie “A Hijacking” provides a look at the ransom negotiations involving a ship pirated by Somalis in the Indian Ocean.  It is available as a DVD from Netflix.

(29 May 2018):The World Isn’t Prepared for RetirementBloomberg.com

——–A three-question test of basic financial concepts was given “as part of The Aegon Retirement Readiness Survey 2018.”  Many of the more than 14,000 people in 15 countries “failed the quiz, with big potential consequences for their future security.  Regarding the Survey, Catherine Collison, who is executive director of the Aegon Center for Longevity and Retirement, noted: “Across the board . . . workers didn’t seem to recognize the huge impact that basic changes in the labor force, technology and the climate will probably have on their retirement plans.”

********The three question test of basic financial concepts appears at the end of the article; the Retirement Readiness Survey 2018 (72 pages) is downloadable.  Catherine Collison is also the president of the nonprofit Transamerica Center for Retirement Studies.

May you have a good week!  Bruce

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