What we’re reading (9/20)
“Natural-Gas Prices Surge, And Winter Is Still Months Away” (Wall Street Journal). “It is supposed to be offseason for demand, and prices haven’t climbed so high since blizzards froze the Northeast in early 2014. Analysts say that it might not have to get that cold this winter for prices to reach heights unknown during the shale era, which transformed the U.S. from a gas importer to supplier to the world…[t]he number of rigs drilling for gas has been basically flat since spring despite much higher prices. When prices rose above $5 in 2014, there were more than three times as many rigs drilling gas wells as the 100 operating now, according to Baker Hughes Co.”
“How Did Investors End Up On the Other Side of This Trade?” (Institutional Investor). “The stock market selloff in early 2020 took with it a number of high-profile volatility-trading funds that were designed to do the opposite: provide a source of uncorrelated returns. Now Markov Processes International has produced new research indicating that at least one fund was behaving as though it was selling risky hedges, or insurance in simple terms, against a stock selloff to other market participants. That’s the opposite of many of the funds’ objectives, according to investors familiar with the funds. It’s unlikely that investors intended to be in the business of providing tail-risk hedges. But that may be exactly what they did[.]”
“Amazon Is Piling Ads Into Search Results And Top Consumer Brands Are Paying Up For Prominent Placement” (CNBC). “Search for ‘toothpaste’ on Amazon, and the top of the web page will show you a mix of popular brands like Colgate, Crest and Sensodyne. Try a separate search for ‘deodorant’ and you’ll first see products from Secret, Dove and Native. Look a little closer, though, and you’ll notice that those listings are advertisements with the “sponsored” label affixed to them. Amazon is generating hefty revenue from the top consumer brands because getting valuable placement on the biggest e-commerce site comes with a rising price tag.”
“You Can Kill Single-Family Zoning, But You Can’t Kill The Suburbs” (Slate). “ Symbolically, the passage of SB 9 is a huge deal in the national movement to break down the apartment bans that effectively segregate American cities and shows just how far the policy window has shifted in the past five years…[o]n the ground, however, the reality will not be instant housing abundance—or the destruction of the suburbs, for better or for worse. Zoning is a powerful obstacle to denser, more affordable development—but reforming zoning can only do so much.”
“Why Taxing Stock Buybacks Is the Wrong Fix For Executive Pay” (DealBook). “The system of public capital depends on corporations’ selling stock, but we do not require that companies sell stock. There is no public duty (except in regulated industries such as banking) to maintain any specific level of capital. Here’s one way to think about it: If it is not wrong for a corporation to sell $3 billion in stock, is it wrong for it to sell $4 billion and later buy back $1 billion? In the end, it is the same thing. Buybacks are simply a means, via the intermediary of investors, of reallocating capital from companies with a surplus to companies with a capital need. And too much capital can be just as harmful as too little, leading to a misallocation and a waste of social resources.”
