@GSElevator – #1: If you can only be good at one thing, be good at lying… Because if you're good at lying, you're good at everything.
1. Quote Of The Week / 2. Another Look at US Employment Data / 3. Insights To Credit Quality In Consumer Lending / 4. The Global Reach of China’s Investments / 5. Joke Of The Week
1. QUOTE OF THE WEEK
The FT Reports…
More than 4,000 new Chinese hedge and private equity funds have launched in the last three months, fuelling a mass exodus from traditional investment houses, as ambitious fund managers seek to profit from the country's booming stock market. The number of private investment funds — including securities, private equity, and venture capital — totalled 12,285 by the end of May, up from 7,989 three months earlier,
"In the past 14 years I've never seen regulators so encouraging of innovation. In the investment industry, we're taking the lead."
Read the FULL STORY
2. ANOTHER LOOK AT US EMPLOYMENT DATA
This is probably the third time today you’ve read a headline about US Employment data. The truth is that it doesn't keep me up at night either. However, I hear the noise and for some time it simply hasn't been congruent with feedback from people on the ground. What would someone based in Asia know about things on the ground in the US? Probably not much… but I do meet a lot of people travelling in the region and always take the opportunity to ask how things are back home. Generally people say things are better than they were but still tough.
Unemployment in the US is purported to be around 5 percent, which seems pretty low – most would map this to 1 in 20 people are looking for work… not bad. However the official measure of employment attempts to reflect the economy’s changing labor force – defined by well meaning but arbitrary criteria – which can give a distorted view by changing who’s not in the labor force. Looking at two other measures of unemployment paints a different picture:
The employment to population ratio is trending upward but is still well shy of the 62.0 percent that was the worst reading in the aftermath of the 2001 recession.
The U-6 is a broader measure for unemployment and includes those categorised as marginally attached workers (people who are not actively looking for work, but who have indicated that they want a job and have looked for work sometime in the past 12 months, which sounds pretty unemployed to me). Currently at 10.8%, it is trending lower but still in excess of the 2003 peak and only equaled back in 1994.
Both of these measures more accurately reflect the anecdotes shared with me that things are tough but getting better.
3. INSIGHTS TO CREDIT QUALITY IN CONSUMER LENDING
Written by Shelly Banjo for Quartz
The words people use say a lot about their personalities, emotions, and thinking. And it turns out that the ones they use when asking to borrow money also say a lot about whether they are likely to pay others back.
According to a new study, borrowers who try to appeal to their prospective lenders’ emotional side — by mentioning God, divorce, or the needs of family members, for example — are less likely to fulfill their loan obligations. On the other hand, people who mention aspirations like graduate school or weddings are more likely to pay back their loans.
The findings were presented at the Boulder Summer Conference on Consumer Financial Decision Making this week and come from research by Columbia University professors Oded Netzer and Alain Lemaire, and University of Delaware professor Michal Herzenstein whose research is ongoing and is yet to be published.
The team has analyzed the text of more than 18,000 loan requests made between 2007 and 2008 through US peer-to-peer lending website ‘Prosper’ to measure what words appeared most often in the 33% of loans from that timeframe that eventually went into default.
They found, for instance, that the word God was 2.2 times more likely to appear in a loan application where the borrower eventually defaulted. Borrowers who used the phrase “payday loan” in their applications were 2.7 times more likely to default than the average.
Being nice (using words and terms like “hi,” “thank you,” and “bless you”) correlated with higher default rates, as did using the future tense (“will not,” “will have”). Both tend to correlate with making promises a person does not intend to keep, Netzer said at the conference. Meanwhile, people who referred to signals of financial stability and exhibited financial literacy with phrases like “excellent credit” and “lower interest rates” were more likely to repay their loans.
The group found that analyzing the words used in the initial loan applications could improve the ability to predict loan defaults by 4% to 5.7% over traditionally used information like credit scores and other financial metrics, which researchers estimate could have saved Prosper lenders from losing over $1.4 million in loans gone bad.
The findings take on greater importance in a world where a growing amount of lending is starting to occur over the Internet, without a human loan officer who once upon a time might have picked up on dubious body language.
Words or phrases more likely to be mentioned by defaulters: God, payday loan, mistake, hospital, difficult, behind, give me a chance, lost, I promise.
Words or phrases more likely to be mentioned by re-payers: Worth, excellent credit, lower interest, after-tax, minimum, graduate, wedding, student loan, college.
4. THE GLOBAL REACH OF CHINA’S INVESTMENTS
The global reach of China’s investments over the last decade were profiled by the South China Morning Post, broken down by country and industry.
Chinese merger and acquisitions over $100 million are sorted by country and industry. Showing over 1,250 attempted transactions (excluding bonds), this list includes both successful and failed attempts in order to help visualize the ebb and flow of Chinese investments up until mid-2014.
See the full interactive chart…
The largest successful transaction was in 2012, when state-owned CNOOC bought Canadian oil and gas giant Nexen for $15.1 billion. With the crash in energy prices, just years later the Chinese parent company is looking at enormous write downs exceeding $5 billion on its Nexen assets. Chinalco, the world’s second largest alumina miner, bid for some of Rio Tinto’s assets in 2008 in what would be the second largest M&A transaction on the list, but the deal eventually fell through.
5. JOKE OF THE WEEK
This 'singles' ads was listed in the Bendigo (a country town in Victoria, Australia) Newspaper:
SINGLE BLACK FEMALE seeks companionship, ethnicity unimportant. I'm a very good girl who LOVES to play. I love long walks in the woods, riding in your Ute, hunting, camping and fishing trips, cozy winter nights lying by the fire, going to the pub. Candlelit dinners will have me eating out of your hand. I'll be at the front door when you get home from work, wearing only what nature gave me and yes, don't need much coaxing to jump into bed with you ....
Call 0354 43 1111 and ask for Lucy - I'll be waiting.
Over 150 men telephoned and found themselves talking to the RSPCA (animal welfare) office in Bendigo.
