Monday morning news drop
How Masai Ujiri Builds a Team The acclaimed N.B.A. executive on trading players, experiencing injustice, and going home. (New Yorker)
An influx of French immigrants to Quebec highlights a cultural shift ... and rift Drawn by a cultural and economic openness they can’t find at home, many young French people have fallen in love with Quebec. (Globe and Mail)
9 cities that could be underwater by 2030 With sea levels rising worldwide, several major metropolises are at risk of being submerged (Time Out)
Why Facebook Is More Worried About Europe Than the U.S. Unlike the ongoing partisan divide in Washington over regulating social media, politicians in the European Union and United Kingdom are already on the same page and they are about to make Facebook do something it has long tried to avoid: take legal responsibility for content.(Politico)
Here’s Why Rapid COVID Tests Are So Expensive and Hard to Find Months-long silences. Mysterious rejections. Here’s what’s behind the shortages of a critical tool for ending the pandemic. (ProPublica)
Meat Prices Will Continue to Surge If Meatpackers Can’t Find Workers Fast Recruiting is only getting harder for a U.S. industry that demands grueling work and has the taint of deadly Covid outbreaks. (Bloomberg)
How American leaders failed to help workers survive the ‘China Shock’ It was not a surprise to economists that China, with its endless supply of cheap labor, killed American manufacturing jobs. But most economists, like most American leaders, had believed that workers would adapt. Standard economic theory said that the non-college-educated workers who lost their jobs would move or retrain and find work in other places or sectors. But they didn’t. Most stayed put and were never fully employed again. (NPR)
All Those 23andMe Spit Tests Were Part of a Bigger Plan CEO Anne Wojcicki wants to make drugs using insights from millions of customer DNA samples, and doesn’t think that should bother anyone. (Businessweek)
Rivian: The Most Remarkable Adventure: A Deep Dive Into the 12-year-old, Amazon-backed, EV Adventure Company Rivian’s IPO will be one of the biggest and most hotly-anticipated of the year. SoFi will have no trouble finding buyers to fill its allocation. But this is the very early innings of a transition in which retail investors will hopefully get more and more access to IPO shares in the best deals. Companies are often nervous about retail investors, though. They’re worried we’re less likely to hold shares and more likely to sell on a pop. In order for retail to get more direct access, we need to not fuck it up. That means understanding what we’re buying, or not, and why. Knowledge makes the diamond hands. (Not Boring)
Is Bitcoin Too Big to Fail? The hand-wringing has been at its fiercest over Bitcoin’s possible exposure to systemic risk, both existential and otherwise. Chief among those concerns is whether a crypto crash, taking place in what is effectively a parallel, decentralized financial universe, might spill over into the traditional financial system. The fact that so many exchanges and crypto intermediaries remain offshore and unregulated continues to fan fears. (Institutional Investor)
How to Dabble Safely in the Bubble of Cryptos, NFTs, and Meme Stocks. This isn’t a valuation screed—not solely, at least. The world doesn’t need another asset-allocation traditionalist carrying on about Bitcoin not having cash flows. This is a hopeful note for ordinary savers and investors who no longer recognize their surroundings—who see abstract things selling for startling prices and wonder, on one hand, whether that’s dangerous for stocks, bonds, and traditional money, and, on the other, whether it’s too late to grab a stake in some new, fun, potential moon rocket. (Barron’s)
This year is shaping up as the worst ever for bond ETFs, but there are some bright spots So when we say the current year is shaping up as the worst ever for exchange-traded funds holding bonds, it means something.
Year-to-date declines for these funds are minor league by the standards of the stock market. But if you regard bonds as a safe investment, the events of 2021 have to be unnerving. Bonds remain the best way for the everyday investor to shield a portfolio from the worst of a stock market crash. But bonds can bite at times like now, as financial markets worry that interest rates will snap back from their pandemic lows harder and faster than expected.
The anticipation of rising rates causes some investors to sell the bonds they already own, thereby pushing bond prices lower. Yields move in the opposite direction of bond prices, which explains why yields have moved sharply higher this year. If you put new money into bonds today, you’ll get a better yield than a year ago.
Short-term bond ETFs are one way to limit your portfolio’s vulnerability to rising rates. Check out the iShares Core Canadian Short Term Bond Index ETF (XSB) – it was down only 1.6 per cent on a total return basis for the first 10 months of the year.
Corporate bonds are another possibility for the ETF investor looking to tweak a portfolio to address vulnerability to rising rates. In a rising rate world, expect them to fall less in price than government bonds. The performance this year of the Vanguard Canadian Corporate Bond Index ETF (VCB) backs this up – the fund was down 3.1 per cent, about two percentage points less than VAB, with its hefty weighting in government bonds.
Floating rate bond ETFs have eked out tiny gains this year, which is something of a win in present conditions. These funds hold bonds that adjust their interest payments to reflect what’s happening with interest rates. Note the paper-thin yield from these bonds.
Much better results were produced by high-yield bonds, which hold bonds issued by financially weaker companies than those that turn up in conventional corporate bond funds. The NBI High Yield Bond ETF (NHYB) has produced a 4.6 per cent total return so far this year, according to Morningstar Canada.
Here’s the catch with high yield bond ETFs – though they do well in a rising rate world, they tend to fall hard when stocks crash. If you want a hedge against the next stock market decline, they’re no substitute for ETFs holding government and investment-grade corporate bonds.
Real return bonds seem a promising option for investors right now because they adjust their principal value higher to compensate for increases in inflation. Rising prices are a big reason why rates are expected to rise more than expected.
Here are how some popular bond exchange-traded funds in various categories have held up in 2021.
