Ever wanted to rent out your spare room or holiday home on Airbnb or HomeAway, but had neither the time nor a fondness for dealing with guests? Now you could call on start-ups such as Guesty, Urban Bellhop or Huitly, who will handle the messy business of welcoming visitors and cleaning up after them on behalf of busy hosts.
Or maybe Uber drivers are not sure how to track expenses or get a nicer car to improve their ratings. Those services can now be outsourced to companies such as Zen99, Breeze or Intuit.
The idea of the so-called sharing economy is only a few years old, but a host of even newer start-ups and consultants are popping up in Silicon Valley that aim to make it just that much easier for people to make spare cash by sharing their apartments, cars and odd-job skills. Call them the sharing economy’s back office.
Part of the allure of these start-ups is that the companies they support are so new that they themselves are still working out the kinks in their models, whether it is how to track expenses or how to co-ordinate with guests in another timezone.
Derek Davis, a Los Angeles-based accountant, was in a ride-sharing car when he got the idea for his new start-up, Tabby. His driver did not realise that the company he worked for was not handling his taxes for him as a traditional US employer would. Because Uber, Lyft and other sharing-economy companies such as handyman platform TaskRabbit or courier service Postmates treat workers as contractors not employees, those workers need to track their business expenses themselves and file quarterly taxes.
So he launched Tabby to help with the administrative burdens. It links with workers’ credit and debit cards to pull in automatically a list of their purchases, and allow them to categorise expenses as work or personal by swiping left or right, much like the dating app Tinder. “This is insane. It’s 2015, and we’re still keeping paper receipts,” says Mr Davis.
Likewise, Zen99 helps workers to estimate taxes and find insurance plans. It recently graduated from Y Combinator, the prestigious Silicon Valley accelerator that launched Airbnb, among others.
Then, for when Uber and Lyft drivers are involved in an accident, there is Breeze. The start-up has partnered with Peers, an advocacy group for the sharing economy, to offer a $19.99 a month programme called Keep Driving. It will lend a new car to drivers who are involved in an accident but want to keep working. Breeze also lends out cars to would-be drivers without wheels. For $195 a week and a $250 upfront fee, drivers in San Francisco, Los Angeles or Seattle can use a 2015 Toyota Prius.
Other companies help sharing-economy workers focus more on the niceties of customer service. Most notable are those that work on short-term rentals and holiday listings, such as Airbnb or the publicly listed vacation home rental service HomeAway.
“To be a good owner you need to be a good hotelier, and some are good at that and some aren’t,” says Brian Sharples, HomeAway’s chief executive.
Guesty charges Airbnb hosts a fee of 3 per cent on each reservation to screen potential guests, schedule cleaning, co-ordinate key exchanges and manage the apartment’s profile on the site. One option it does not offer is an in-person concierge service. For that, there are companies such as Airenvy or Urban Bellhop.
“It is a funny thing,” says Alex Chriss, a vice-president at Intuit, who worked on the development of its software for the self-employed.
“This on-demand idea has made it so easy for the consumer to push a button and get a ride or delivery — and on the other side it’s so messy.”
Source: www.ft.com/intl/cms/s/0/2a6735cc-b044-11e4-92b6-00144feab7de.html
Friday, February 20, 2015
Wednesday, February 11, 2015
Why S&P 500 can reach the 3,000 level by 2020
We are working through a curious period in financial history during which neither capital nor labour has pricing power. Neither can generate much income. Average earnings in nominal and real terms have barely grown, while capital sits idly in cash deposits or in government bonds yielding next to nothing. Whether you are working or investing, income is hard to come by.
We know the reasons why. The power of labour to command a greater share of the economic pie has been undone around the world by policy initiatives focused on labour mobility. In most developed countries, labour’s share of GDP has been falling. Even in the US economy, which added a record 3m jobs last year, labour’s share sits at 50-year lows. Employment growth has been offset by weak wage growth. Productivity gains have passed to the owners of capital, allowing operating margins to rise.
Concurrently, the propensity of developed nations to accumulate savings faster than income growth compresses yields everywhere. Wealthy nations with excess savings and little growth, such as Japan, Germany and Italy, can only export capital, lowering yields. Central banks’ quantitative easing programmes exaggerate the yield compression. Their bond-buying further crowds these countries out of their own domestic sovereign and credit markets compounding the effects abroad.
If we are to believe economist Thomas Piketty, income will become even more prized. He argues the capital/income ratio is set to rise for the rest of this century. Private capital stands at 450 per cent of income today and is set to approach 700 per cent by 2100. Net savings (after capital appreciation) are currently rising approximately twice as fast as income. An ageing population will constrain income growth, and further exaggerate the problem, even as rates of return decline. Mr Piketty describes a world in which too much capital chases too little income.
So in this financial climate how would we value an asset class that offered a current real yield and that had consistently increased its income in double digits each year? Highly, one might think.
And yet this is precisely what the S&P 500 has offered. At the close of the third quarter of 2014, the S&P 500 notched up its 15th consecutive quarter of double-digit dividend growth. Dividend per share growth over 12 months to the third quarter of 2014 was 11.3 per cent. Over the 15-quarter period, dividends per share have averaged 14.2 per cent growth. It is little wonder the US equity market has been one of the most rewarding asset classes in recent years.
"We can find no other asset class that offers this level of income growth in dollar terms. Emerging markets offer little dividend growth in US dollar terms. Currency headwinds and falling returns on equity are the obstacles"
Is this set to continue? We think so. We can find no other asset class that offers this level of income growth in dollar terms. Emerging markets offer little dividend growth in US dollar terms. Currency headwinds and falling returns on equity are the obstacles.
In Europe we may hopefully see single-digits, but a lot will depend on the euro/dollar level. Japan, as always, is a wild card and depends largely on corporate governance reform, and the capacity of investors to convince companies to distribute excess cash.
In contrast, dividend per share growth for the S&P 500 is likely to stay at double-digit levels. This is above earnings growth but the payout ratio is 32 per cent. We need to anticipate a fall in dividends from energy companies, but this will be more than offset by dividend growth from the financial sector, which is still low.
S&P 500 dividends benefit from a high level of diversification, unlike other benchmarks where dividends are concentrated in one or two sectors, or even a handful of stocks. More than 400 stocks in the S&P 500 pay a dividend. Nine out of 10 sectors increased dividends in the past 12 months. Six of these increased dividends by 10 per cent or more. Consumer discretionary, IT and industrials were among these, emphasising that the regulatory risk to dividends is lower than elsewhere.
In the age of income investing, the income growth properties of the S&P 500 will continue to be highly valued. According to our estimates, S&P 500 dividends could exceed $48 by 2016 and $60 is not beyond reach by the end of the decade. If we assume a 2 per cent dividend yield, its 10-year median, the S&P 500 could exceed 2,400 before the next president is inaugurated. A level of 3,000 is within reach before the decade is out.
Source: http://www.ft.com/intl/cms/s/0/ff1c88f6-a588-11e4-8636-00144feab7de.html#axzz3RSBoBmRj
We know the reasons why. The power of labour to command a greater share of the economic pie has been undone around the world by policy initiatives focused on labour mobility. In most developed countries, labour’s share of GDP has been falling. Even in the US economy, which added a record 3m jobs last year, labour’s share sits at 50-year lows. Employment growth has been offset by weak wage growth. Productivity gains have passed to the owners of capital, allowing operating margins to rise.
Concurrently, the propensity of developed nations to accumulate savings faster than income growth compresses yields everywhere. Wealthy nations with excess savings and little growth, such as Japan, Germany and Italy, can only export capital, lowering yields. Central banks’ quantitative easing programmes exaggerate the yield compression. Their bond-buying further crowds these countries out of their own domestic sovereign and credit markets compounding the effects abroad.
If we are to believe economist Thomas Piketty, income will become even more prized. He argues the capital/income ratio is set to rise for the rest of this century. Private capital stands at 450 per cent of income today and is set to approach 700 per cent by 2100. Net savings (after capital appreciation) are currently rising approximately twice as fast as income. An ageing population will constrain income growth, and further exaggerate the problem, even as rates of return decline. Mr Piketty describes a world in which too much capital chases too little income.
So in this financial climate how would we value an asset class that offered a current real yield and that had consistently increased its income in double digits each year? Highly, one might think.
And yet this is precisely what the S&P 500 has offered. At the close of the third quarter of 2014, the S&P 500 notched up its 15th consecutive quarter of double-digit dividend growth. Dividend per share growth over 12 months to the third quarter of 2014 was 11.3 per cent. Over the 15-quarter period, dividends per share have averaged 14.2 per cent growth. It is little wonder the US equity market has been one of the most rewarding asset classes in recent years.
"We can find no other asset class that offers this level of income growth in dollar terms. Emerging markets offer little dividend growth in US dollar terms. Currency headwinds and falling returns on equity are the obstacles"
Is this set to continue? We think so. We can find no other asset class that offers this level of income growth in dollar terms. Emerging markets offer little dividend growth in US dollar terms. Currency headwinds and falling returns on equity are the obstacles.
In Europe we may hopefully see single-digits, but a lot will depend on the euro/dollar level. Japan, as always, is a wild card and depends largely on corporate governance reform, and the capacity of investors to convince companies to distribute excess cash.
In contrast, dividend per share growth for the S&P 500 is likely to stay at double-digit levels. This is above earnings growth but the payout ratio is 32 per cent. We need to anticipate a fall in dividends from energy companies, but this will be more than offset by dividend growth from the financial sector, which is still low.
S&P 500 dividends benefit from a high level of diversification, unlike other benchmarks where dividends are concentrated in one or two sectors, or even a handful of stocks. More than 400 stocks in the S&P 500 pay a dividend. Nine out of 10 sectors increased dividends in the past 12 months. Six of these increased dividends by 10 per cent or more. Consumer discretionary, IT and industrials were among these, emphasising that the regulatory risk to dividends is lower than elsewhere.
In the age of income investing, the income growth properties of the S&P 500 will continue to be highly valued. According to our estimates, S&P 500 dividends could exceed $48 by 2016 and $60 is not beyond reach by the end of the decade. If we assume a 2 per cent dividend yield, its 10-year median, the S&P 500 could exceed 2,400 before the next president is inaugurated. A level of 3,000 is within reach before the decade is out.
Source: http://www.ft.com/intl/cms/s/0/ff1c88f6-a588-11e4-8636-00144feab7de.html#axzz3RSBoBmRj
Wednesday, February 4, 2015
China finds opportunities in oil price drop
This week, Cnooc announced plans to reduce capital spending as the government and large state-owned enterprises respond to the collapse in oil prices. China’s third-largest oil producer said it would cut development spending by 67 per cent and, albeit less dramatically, reduce exploration and production capital expenditure.
At the same time, the Beijing government and refiners such as Zhuhai Zhenrong have increased their purchases of crude oil to record levels. Sinopec, another big state-owned energy enterprise, opened up a tank farm for crude oil on the resort island of Hainan in November.
These apparently contradictory signals reflect changes in the sources of growth in a slowing Chinese economy and show how the government and corporate China are exploiting the collapse to reduce their longer-term vulnerability to price swings in the volatile energy market.
It is easy to understand why Cnooc is cutting back spending. The economy is growing slightly below the level the cadres have commanded and slowed to 7.1 per cent in the final quarter of 2014. Reinforcing that trend is the fact that the energy intensity of Chinese production has gone down. Chinese crude oil demand per unit of gross domestic product has been dropping by 4.3 per cent a year since 2005, according to data from JPMorgan Private Bank.
Moreover, as the sources of growth shift slowly from manufacturing to services and from exports to domestic demand, that drop will probably accelerate, making further oil capex cuts likely — and shareholders happier.
But China is also looking ahead and taking advantage of the speedy and unexpected reversal in the oil price.
The increase in demand for crude on the mainland comes because China is exploiting lower oil prices to dramatically boost its storage capacity for both commercial and strategic reasons. By doing so, it will address one of its perennial weaknesses, its reliance on imported energy, and make itself more competitive.
The move comes at a moment when pessimism about Chinese prospects generally is on the rise. That downbeat attitude reflects chronic excess capacity, an overbuilt property market and concerns about a corporate sector that has borrowed too much, whether in renminbi or appreciating US dollars.
The way China is taking advantage of the declining oil price also suggests that some of the pessimism is unwarranted. The dramatic expansion in commercial and strategic holdings of crude while the price is half of what it was just months ago is only part of the story. The government is also increasing taxes rather than pass on the full benefit of bargain fuel prices to consumers.
Those taxes will go partly to dealing with China’s monumental environmental issues, according to Miswin Mahesh, Barclays’ commodities analyst in London. That spending should be good for China and its neighbours, if the past is any guide.
Up to now, Chinese growth has been good news for the rest of the world. In 1990, China’s contribution to global GDP growth was 5 per cent. Since 2010, the figure has swelled to more than 40 per cent. Its role as a crutch for world growth has become especially important as the growth rate of other emerging markets has fallen. (Last year emerging markets as a whole grew only 4 per cent — the worst figure since 2009 — and this year may even drop slightly below that.)
China’s demand for crude is already lifting the fortunes of shippers and others. Among the biggest beneficiaries of the increase in Chinese appetite for crude is Iran, says Amrita Sen, chief oil analyst with Energy Aspects in Houston and London. Indeed, Chinese demand for oil from Iran accounts for more than India, Japan, and South Korea combined. (All these countries have received specific exemptions from US-imposed sanctions on Iran, and they may also import more than the level the waivers allow.)
Earlier on, before China received permission from the US to procure Iranian oil, the country paid for its Iranian imports in renminbi. But today, Ms Sen says, the Chinese are using dollars. That benefits both sides. Tehran finds dollars more useful than renminbi as there are still controls on what Iran can do with its Chinese currency.
At the same time, China has clearly decided it is better to obtain real assets such as oil with its dollars than to purchase paper securities. Right now, both US Treasuries and the US dollar look attractive, while oil does not. But China always takes the long view — and in the long term neither Treasury securities nor the greenback seem as attractive as they do today — at least as seen from Beijing.
Source: http://www.ft.com/intl/cms/s/0/b083f7b4-ab8d-11e4-b05a-00144feab7de.html#axzz3Qnw9Fh8K
At the same time, the Beijing government and refiners such as Zhuhai Zhenrong have increased their purchases of crude oil to record levels. Sinopec, another big state-owned energy enterprise, opened up a tank farm for crude oil on the resort island of Hainan in November.
These apparently contradictory signals reflect changes in the sources of growth in a slowing Chinese economy and show how the government and corporate China are exploiting the collapse to reduce their longer-term vulnerability to price swings in the volatile energy market.
It is easy to understand why Cnooc is cutting back spending. The economy is growing slightly below the level the cadres have commanded and slowed to 7.1 per cent in the final quarter of 2014. Reinforcing that trend is the fact that the energy intensity of Chinese production has gone down. Chinese crude oil demand per unit of gross domestic product has been dropping by 4.3 per cent a year since 2005, according to data from JPMorgan Private Bank.
Moreover, as the sources of growth shift slowly from manufacturing to services and from exports to domestic demand, that drop will probably accelerate, making further oil capex cuts likely — and shareholders happier.
But China is also looking ahead and taking advantage of the speedy and unexpected reversal in the oil price.
The increase in demand for crude on the mainland comes because China is exploiting lower oil prices to dramatically boost its storage capacity for both commercial and strategic reasons. By doing so, it will address one of its perennial weaknesses, its reliance on imported energy, and make itself more competitive.
The move comes at a moment when pessimism about Chinese prospects generally is on the rise. That downbeat attitude reflects chronic excess capacity, an overbuilt property market and concerns about a corporate sector that has borrowed too much, whether in renminbi or appreciating US dollars.
The way China is taking advantage of the declining oil price also suggests that some of the pessimism is unwarranted. The dramatic expansion in commercial and strategic holdings of crude while the price is half of what it was just months ago is only part of the story. The government is also increasing taxes rather than pass on the full benefit of bargain fuel prices to consumers.
Those taxes will go partly to dealing with China’s monumental environmental issues, according to Miswin Mahesh, Barclays’ commodities analyst in London. That spending should be good for China and its neighbours, if the past is any guide.
Up to now, Chinese growth has been good news for the rest of the world. In 1990, China’s contribution to global GDP growth was 5 per cent. Since 2010, the figure has swelled to more than 40 per cent. Its role as a crutch for world growth has become especially important as the growth rate of other emerging markets has fallen. (Last year emerging markets as a whole grew only 4 per cent — the worst figure since 2009 — and this year may even drop slightly below that.)
China’s demand for crude is already lifting the fortunes of shippers and others. Among the biggest beneficiaries of the increase in Chinese appetite for crude is Iran, says Amrita Sen, chief oil analyst with Energy Aspects in Houston and London. Indeed, Chinese demand for oil from Iran accounts for more than India, Japan, and South Korea combined. (All these countries have received specific exemptions from US-imposed sanctions on Iran, and they may also import more than the level the waivers allow.)
Earlier on, before China received permission from the US to procure Iranian oil, the country paid for its Iranian imports in renminbi. But today, Ms Sen says, the Chinese are using dollars. That benefits both sides. Tehran finds dollars more useful than renminbi as there are still controls on what Iran can do with its Chinese currency.
At the same time, China has clearly decided it is better to obtain real assets such as oil with its dollars than to purchase paper securities. Right now, both US Treasuries and the US dollar look attractive, while oil does not. But China always takes the long view — and in the long term neither Treasury securities nor the greenback seem as attractive as they do today — at least as seen from Beijing.
Source: http://www.ft.com/intl/cms/s/0/b083f7b4-ab8d-11e4-b05a-00144feab7de.html#axzz3Qnw9Fh8K
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