Michael Casey says that China is the fragile epicenter of a digital finance revolution. First thing to consider is that China is really two economies: there’s the state-owned and controlled economy, which is “kept afloat by cheap loans from state-run banks subsidized by repressed Chinese savers,” and there’s the online, e-commerce economy, represented mostly by Alibaba and Tencent. “The problem is that regulators can’t control the vibrant new economy and its 500 million independent actors with anywhere near the same hands-on control they apply to the state-run economy.” Meanwhile, the United States has no idea how big the peer-to-peer economy is: “we are, in sum, looking for answers to several questions: How many people are layering this type of Internet-enabled more nebulous work (e.g. giving a ride on UberX, selling crafts on Etsy or hosting someone on Airbnb) on top of more traditional labor?” Speaking of Airbnb, the “cyber-cowboy” peer-to-peer pioneer has agreed to share information about its hosts with the NY attorney general (alt), who wants “to pursue anyone who’s running illegal hotels.” Furthermore, “the marketplace of the Internet — and the lowered barriers of related services like PayPal and Square — has turned these activities into something larger, something potentially more viable for many people.” Meanwhile, “legions of advisers have broken away from the big Wall Street brokerages (alt) to join an independent firm or create their own…The ranks of independent investment advisers have swelled to 47,000 from 36,000 in 2007…the number of wirehouse advisers (Merrill Lynch, Morgan Stanley, Wells etc.), now at about 48,000, is projected to shrink to 41,000 by 2017.” Also, the traditional brokerages “have all expanded their Bay Area operations as firms like Facebook have gone public.” They are chasing the newly minted millionaires in Silicon Valley “who are skeptical that the wealth management industry offers much value.” Furthermore, young tech entrepreneurs “don’t really believe that a person is going to be watching their money 24/7, but they believe that a computer is.” Also, articles like this don’t really help. Meanwhile, Rebecca Lynn said some things about the future of wealth management: “U.S. investors have $13 trillion in mutual funds that are unadvised..if you have a ton of money there is no way after the Madoff scandal you are going to put all that money in one person…FutureAdvisor is disrupting, but at the same time, they will find ways to work with the financial services companies.” Then she went all Sarah Palin on Tesla: “people ‘Geek Out’ on these really cool technology things, like Tesla. And I look at that and I think, ‘That’s just not America.’ But I do think being a mom and being a woman helps and forms some of my decisions in terms of products and what’s really going to resonate.”
Boeing really wants to be more like Apple, but maybe they should want to be more like Google? “Innovation, artificial intelligence and a whole bunch of valuable partnerships helped push Google to the top of the BrandZ Top 100 Most Valuable Global Brand rankings for 2014. In the process, the backer of the Android mobile OS knocked Apple off the lead spot for the first time in three years…In third, fourth and fifth place respectively were [IBM, Microsoft and McDonald’s].” Also, the guy who commissioned the survey said “this year’s index marks ‘the end of the recession,’ with brand value recovering across the board and real growth across every category.” Meanwhile, GM has already recalled more cars this year than it sold all last year.
More On Housing
“The National Association of Realtors said on Thursday existing home sales increased 1.3 percent to an annual rate of 4.65 million units, marking the second increase in sales in nine months. While that was a bit less than the 4.68-million unit pace that economists had expected, it was a hopeful sign for a sector that stumbled in the second half of 2013…the months’ supply increased to 5.9 months, the highest since August 2012, from 5.1 months in March. Six months’ supply is normally considered as a healthy balance between supply and demand.” Meanwhile, Goldman Sachs would like to clear up the debate on the affordability of purchasing a home. On the one hand, mortgage rates are at record lows, and home values are still below their bubble-era peak. In fact, “the National Association of Realtors’ housing affordability index shows that housing is still more affordable than anytime between the early 1990s and 2008.” While this may be true for the median homebuyer, Goldman says the reality is much different, however, for first-time and marginal homebuyers, thanks to two things: their incomes aren’t as strong, and their credit isn’t as good. Also, don’t even think about mentioning He-who-shall-not-be-named around this guy: “I’m quite confident that a significant, sustained economic recovery will go a long way to ease credit conditions and eventually revert homeownership to the mean and we can stop with the ‘cart before the horse’ orientation. While homeownership has never been right for everyone, recent calls that it’s not right for anybody is just as flawed.” Meanwhile, VoxEU thinks it has an explanation for the high-youth savings rate phenomenon in China: “sharing the parental home is a potential mechanism for lowering consumption by the young, thus permitting higher savings rates. If a young adult desires to save, subsidisation of consumption via shared housing can facilitate savings. Of course, this begs the question of why the young would want to save. One reason is the high costs of housing, which would also make shared residence more desirable.”
But did Putin win?