[ISSUE 48] - Interesting Things...

@GSElevator – #1: “Most taxi drivers understand that we'll never be friends. Uber drivers, not so much.”

1. Quote Of The Week / 2. It's Cheaper To Rent A Dry-Bulk Tanker Than A Ferrari / 3. Hong Kong’s Derivative Led Sell-Off / 4. Interesting Links / 5. Joke Of The Week

1. QUOTE OF THE WEEK

“The EU is on the verge of collapse” - George Soros

See the full interview with the NY Book Review here.

2. IT’S CHEAPER TO RENT A DRY-BULK TANKER THAN A FERRARI

China’s slowing growth has crushed shipping rates to such an extent that hiring a 1,100-foot merchant vessel would set you back less than the price of renting a Ferrari for a day.

Rates for Capesize vessels have fallen 90 percent since August to $1,500 a day amid slowing growth in China. That’s less than a third of the daily rate of $5,500 to rent a Ferrari F40, the price of which has also fallen slightly in the past few years, according to supercarexperiences.com.

The Baltic Exchange’s rates reflect the cost of hiring the vessel but not fuel costs. Ships burn about 35 metric tons a day, implying a total cost of about $4,000 at current prices.

3. HONG KONG’S DERIVATIVE LED SELL-OFF

Despite the collapse in Chinese stocks, Bloomberg reports annual sales of Chinese equity-linked structured notes across AsiaPac rose to a record (prompting Korea's financial regulator to warn investors in August that their holdings had become too concentrated in notes tied to the China H-Shares index). When banks sell the structured products to investors, they take on an exposure that's similar to purchasing a put option on the index... which needs to be hedged via index futures; and if BofA is right, Chinese stocks in Hong Kong are poised for a fresh wave of selling now that HSCEI has crossed 8,000 as banks are forced to hedge.

As Bloomberg reports:

[The selling pressure] is because the benchmark Hang Seng China Enterprises Index is approaching a level that forces investment banks to pare back their bullish futures positions, according to William Chan, the head of Asia Pacific equity derivatives research at BofA’s Merrill Lynch unit in Hong Kong. The trades, tied to banks’ issuance of structured products, are likely to start unwinding when the index falls through 8,000, a level it briefly breached on Wednesday.

Banks have purchased futures on the gauge of so-called H shares to hedge exposure to structured products that they’ve sold to clients, according to Chan. Many of those products have a “knock-in” feature at the 8,000 level that will spur banks to cut futures positions to maintain the effectiveness of their hedges, he said. Additional pressure points may also come at lower levels, Chan said.

“As the market goes lower from here, the downward move may accelerate,” he said. “There will be a large amount of hedging in futures which dealers need to unwind.”

4. INTERESTING LINKS

Market Macro myths [GMO White Paper]; 50 years of Berkshire Letters to shareholders for $3 [Amazon]; David Einhorn Q4 letter [Greenlight Capital]; Hedge fund compensation trends [Valuewalk]; Howard Marks investor letter [OakTree]; Drone footage of Syria’s third largest city [YouTube]; How to read fifty books a year [Fast Company]; How Hitler came to power [theburningplatform]; ISIS cuts fighter’s salary [Zero Hedge]; Real hedge funds outperform [Research Links].

5. JOKE OF THE WEEK

Career Advancement Opportunities

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Overall Employee Satisfaction

March 2024 Investment Banking

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Professional Growth Opportunities

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Total Avg Compensation

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