WSJ : our Next Car May Let You Drive Hands-Free. Is That a Good Thing?

our Next Car May Let You Drive Hands-Free. Is That a Good Thing?
More vehicles are hitting showrooms with automated driving features, raising questions about driver distraction

Auto makers are starting to sell cars with automated steering and speed control to ease what they say is the tedium of driving, and might even allow drivers to go hands-free in some situations.

Those features are raising new questions, though: How to keep people from getting distracted behind the wheel—or picking up their phones—if there is little for their hands to do?

Car companies have been adding safety technologies aimed at preventing crashes, such as automatic emergency braking and systems to prevent the car from drifting out of its lane. Now, more are introducing vehicle features that aim to make driving in rush-hour traffic or on road trips less taxing.

Some new systems allow drivers to take their hands off the wheel on highways or in heavy congestion, using sensors, radar and cameras to automatically keep the car centered, control speed and even to change lanes.

General Motors Co. was the first major car company to promote such capabilities in 2017 with its hands-free Super Cruise feature, which can be activated on most U.S. highways by pushing a button on the steering wheel that enables the car to take over steering and speed control.

The Detroit auto maker said it now plans to roll out the technology on about two dozen models by 2023, up from one Cadillac model now.

Ford Motor Co. F -1.45% recently said it would offer similar technology beginning next year on as many as 100,000 F-150 pickup trucks and Mustang Mach-E electric sport-utility models.

Honda Motor Co. HMC -0.45% plans to roll out a sedan in Japan in coming months that will allow the driver to fully cede control of the car in heavy traffic or on highways. The technology will even allow drivers to take their eyes off the road, although they will be expected to take back control at any point, the company said. Japan’s government regulators in November approved its use.

Honda said it hasn’t revealed plans to introduce this technology beyond Japan.

Meanwhile, Tesla Inc. TSLA 2.44% said it recently released to some owners a test version of its upgraded Autopilot, the auto maker’s driver-assistance feature.

The $10,000 feature, which the company calls Full Self Driving, expands the use of automated features to more types of roadways and adds capabilities like navigating highway interchanges.

The promise of fully driverless cars has faded in the past few years, as developers struggle to refine the technology. But auto makers are equipping more models with the building blocks of driverless cars to offer so-called driver-assistance packages, hoping to gain a competitive edge and boost sales.

“They allow auto makers to offer really interesting, differentiated features to the consumer at a reasonable price point,” said Glen De Vos, chief technology officer of Aptiv PLC, a supplier of software and components used in driver-assistance systems.

Consumer Reports recently tested 17 models that combine automated steering and speed control, up from four when the magazine did a similar test two years ago. The magazine said such systems can ease driver fatigue, but performance varies widely on aspects such as how smoothly they brake and accelerate or keep a car centered in its lane.

Yet if drivers have less to do behind the wheel, safety advocates are concerned they will be tempted to look at their phones or indulge in other distractions, leading to crashes.

“If we’re going to put this technology on cars, we need to be mindful of ensuring the driver is reasonably engaged,” said Bryan Reimer, a research scientist at M.I.T. who studies driver-assistance systems.

Some advocates have criticized Tesla for promoting its latest update as self-driving because the system isn’t fully autonomous, and advocates say a pilot system shouldn’t be tested on public roads.

Tesla didn’t respond to requests for comment. The electric car maker has previously said accident rates are lower when drivers have vehicles with the Autopilot driver-assistance system engaged than when it isn’t in use.

Auto makers have installed camera-based systems that monitor drivers’ focus and alert them if their attention is straying, executives and analysts say. GM and BMW AG BMW 1.78% use the technology to keep drivers engaged, and Ford and others plan to use it in future models. Such systems have drawn praise from researchers.

Aptiv’s Mr. De Vos said the company is working with five auto makers to equip vehicles with camera-based driver-tracking systems.

Cadillac owners have logged about 6.5 million hands-free miles using the Super Cruise technology, the company said. A series of audible alerts warn drivers if their attention strays from the road.

Mario Maiorana, chief engineer for GM’s Super Cruise, said it has become a selling point for customers, noting that 85% of owners say the feature would be a major consideration in their next car purchase.

“People have told us they feel like they arrive at their destination feeling more refreshed and relaxed because of the work we’ve handled,” he said.

A recent update improved the driver-monitoring technology, he said. It can now track the driver’s eyes, rather than only the head position, to better detect if the motorist is fixed on the road or elsewhere.

A U.S. Senate bill introduced this year would require the U.S. Department of Transportation to study whether driver-monitoring systems can reduce distracted driving, and potentially require them on future models. The legislation, introduced by Edward Markey (D., Mass.) and Richard Blumenthal (D., Conn.) in July, is pending.

A spokesman for the department’s National Highway Traffic Safety Administration said it is researching whether driver-monitoring systems are effective in identifying and mitigating inattentive or impaired drivers.

The growing availability of driver-assistance systems has led to a hodgepodge of different features that vary by model and auto maker, said Kelly Funkhouser, a vehicle-testing manager who leads coverage of automated vehicles at Consumer Reports.

“These systems all behave so differently and there are no standards for performance or design,” she said. “There needs to be more cohesion.”

WSJ : New California Law Could Spoil Some Growth for Food-Delivery Platforms

New California Law Could Spoil Some Growth for Food-Delivery Platforms
Restaurant selection could shrink on food delivery platforms in the new year as regulation mounts

Just how valuable has restaurant selection been to delivery platforms’ growth over the past year? We could soon find out.

A California bill is set to require third-party delivery platforms to have stated agreements in place with merchants to deliver food orders starting Jan. 1. The bill will effectively end the growth-strategy platforms including DoorDash and Postmates have historically employed to rapidly augment their delivery footprints. Delivery platforms will have to remove so-called unpartnered food merchants, or those with which they don’t have a stated agreement, from their apps in California. Without an agreement, a delivery platform can list a restaurant’s menu without permission, sometimes leading to complications for restaurants like dining rooms crowded with unexpected delivery people or orders for items the kitchen no longer makes.

While users might be in for a shock, the companies themselves have been preparing. DoorDash, for example, said in its public-offering filing that over 95% of its gross order value came from partnered merchants in the nine months ended Sept. 30. Similarly, Uber Technologies ’ Uber Eats said it grew active partnered restaurants by 70% year over year in the third quarter.

The California bill won’t affect all players equally. The impact on Postmates, whose largest market is Los Angeles, could be disproportionately large. Postmates has 700,000 merchants on its platform, according to a September regulatory filing from Uber.

Of those, only 115,000 were partnered at that time, according to the company.

In California specifically, Postmates has said it had 40,000 unpartnered merchants as of September when the bill was signed into law. They would have to come off its platform if not converted by the end of the year. Any potential impact would flow through to Uber’s business since it acquired Postmates this year.


No major player is entirely insulated. Grubhub, which only recently started adding unpartnered restaurants to its platform, also could see some of its recent gains reversed. While the company for years prided itself on listing only restaurants with which it had partnership agreements, exceptional growth from competitors forced Grubhub’s hand to also add unpartnered restaurants in order to better compete.

According to regulatory filings, Grubhub grew its restaurant offering 114% in the year ended Sept. 30. As of its third-quarter filing, 55,000 of its total 300,000 restaurants remained unpartnered. While its largest market is New York City, it seems likely that a not-insignificant number of those unpartnered restaurants are in California.

More broadly, many of the temporary Covid-19-relief regulations covering food-delivery commission caps in cities nationwide also include increased transparency measures. Beginning last week, for example, Minneapolis began requiring delivery platforms to get restaurants’ consent for services performed such as delivery. Similar regulations were passed in Philadelphia, Denver, Tucson, Ariz., and elsewhere. An assembly bill introduced in New York in November would prohibit unauthorized listing of food merchants on delivery platforms statewide.

While restaurant selection is just one of many ways in which delivery platforms compete for consumers’ business, it may well be the most important. DoorDash, for example, now has a dominant market lead over its U.S. competitors, even though its food doesn’t arrive the fastest on average and its loyalty program is no cheaper than those offered by competitors. It is now believed to have the largest U.S. network of partnered merchants. Much of that growth was achieved by asking restaurants to partner with them after demonstrating the platform’s value, not before.

The rules will raise barriers to entry, which might be why some in the industry support them. But by requiring a partnership agreement up front, at least some percentage of restaurants will choose not to be on any platform and to simply go it alone. That could crimp the industry’s growth.

FT : 2019 vintage Burgundy report: the best year since 1865?

New California Law Could Spoil Some Growth for Food-Delivery Platforms
Restaurant selection could shrink on food delivery platforms in the new year as regulation mounts

Just how valuable has restaurant selection been to delivery platforms’ growth over the past year? We could soon find out.

A California bill is set to require third-party delivery platforms to have stated agreements in place with merchants to deliver food orders starting Jan. 1. The bill will effectively end the growth-strategy platforms including DoorDash and Postmates have historically employed to rapidly augment their delivery footprints. Delivery platforms will have to remove so-called unpartnered food merchants, or those with which they don’t have a stated agreement, from their apps in California. Without an agreement, a delivery platform can list a restaurant’s menu without permission, sometimes leading to complications for restaurants like dining rooms crowded with unexpected delivery people or orders for items the kitchen no longer makes.

While users might be in for a shock, the companies themselves have been preparing. DoorDash, for example, said in its public-offering filing that over 95% of its gross order value came from partnered merchants in the nine months ended Sept. 30. Similarly, Uber Technologies ’ Uber Eats said it grew active partnered restaurants by 70% year over year in the third quarter.

The California bill won’t affect all players equally. The impact on Postmates, whose largest market is Los Angeles, could be disproportionately large. Postmates has 700,000 merchants on its platform, according to a September regulatory filing from Uber.

Of those, only 115,000 were partnered at that time, according to the company.

In California specifically, Postmates has said it had 40,000 unpartnered merchants as of September when the bill was signed into law. They would have to come off its platform if not converted by the end of the year. Any potential impact would flow through to Uber’s business since it acquired Postmates this year.


No major player is entirely insulated. Grubhub, which only recently started adding unpartnered restaurants to its platform, also could see some of its recent gains reversed. While the company for years prided itself on listing only restaurants with which it had partnership agreements, exceptional growth from competitors forced Grubhub’s hand to also add unpartnered restaurants in order to better compete.

According to regulatory filings, Grubhub grew its restaurant offering 114% in the year ended Sept. 30. As of its third-quarter filing, 55,000 of its total 300,000 restaurants remained unpartnered. While its largest market is New York City, it seems likely that a not-insignificant number of those unpartnered restaurants are in California.

More broadly, many of the temporary Covid-19-relief regulations covering food-delivery commission caps in cities nationwide also include increased transparency measures. Beginning last week, for example, Minneapolis began requiring delivery platforms to get restaurants’ consent for services performed such as delivery. Similar regulations were passed in Philadelphia, Denver, Tucson, Ariz., and elsewhere. An assembly bill introduced in New York in November would prohibit unauthorized listing of food merchants on delivery platforms statewide.

While restaurant selection is just one of many ways in which delivery platforms compete for consumers’ business, it may well be the most important. DoorDash, for example, now has a dominant market lead over its U.S. competitors, even though its food doesn’t arrive the fastest on average and its loyalty program is no cheaper than those offered by competitors. It is now believed to have the largest U.S. network of partnered merchants. Much of that growth was achieved by asking restaurants to partner with them after demonstrating the platform’s value, not before.

The rules will raise barriers to entry, which might be why some in the industry support them. But by requiring a partnership agreement up front, at least some percentage of restaurants will choose not to be on any platform and to simply go it alone. That could crimp the industry’s growth.

FT : 2019 vintage Burgundy report: the best year since 1865?

2019 vintage Burgundy report: the best year since 1865?
Growers believe last year’s crop might break all records

The long, hot dry summer of 2019 created the perfect conditions in Burgundy for a bumper vintage. Bernard Hervet, former director of Faiveley and Bouchard, two of the biggest maisons in the region, went so far as to say that it could “perhaps rival 1865, the greatest vintage of all”. So, as my TGV pulled into Beaune station last month, I was excited to see if the hype was justified.

First the reds. The impact of the combination of low rainfall and above-average temperatures on the wines is certainly evident. Philippe Pacalet, a revered but maverick winemaker based in Beaune, told me the vintages between 2015 and 2020 resemble the great reds of 1945-49: “This climate brings more tannins, more acids, more sugars, more aromatics, more everything.” Tasting his extensive range of wines reveals quality and drama in abundance.

Gevrey-Chambertin also seems to have had a very good year – I was particularly impressed by the wines of one of its makers, Pierre Duroché. His 2019s resemble 2017 for their definition and red fruits but have more concentration, and pitch-perfect ripeness. Meanwhile, the wines of Pierre’s friend Charles Magnien, a grower firmly pushing into the front rank, are more gourmand in style but still more classic than 2018, with better acidity and more fresh Pinot character. Another standout from the village is Jane Eyre’s 1er Cru Les Corbeaux, while Gevrey giant Dugat-Py’s Charmes-Chambertin epitomises the best of the vintage: intensity, depth and precision.

Pommard, further south in the Côte de Beaune, appears to be another strong beneficiary of the hot weather, its heavier soils retaining sufficient moisture to keep the vines happy. Traditionally rather four-square in character, the wines are showing more supple fruit, and plusher, more polished tannins than ever before. Domaine de Montille’s 1er Cru Pommard “Les Pézerolles” is sensational. Meanwhile, I’m falling in love with nearby Corton Grand Cru, after trying a number of fine examples – with Romain Taupenot’s rich and powerful but precise Rognet being especially memorable. 

Benoît Stehly, winemaker at Domaine Georges Lignier in Morey-Saint-Denis, claims to have made “the vintage of [his] lifetime”. His best harmonise the power of 2012, 2015 and 2018 with the elegance and definition of 2014 and 2017. The nearby village of Vosne-Romanée, the jewel in the crown of the Côte de Nuits, has produced gorgeous, intense, richly perfumed elegant superstars – for those with deep pockets, there is an abundance of thrilling, lip-smacking Echezeaux Grand Cru to consider.

Meanwhile, the traditionally slightly more rustic, earthy wines from neighbouring Nuits-Saint-Georges are benefiting from the warmer summers in much the same way as Pommard, continuing to produce wines that are increasingly sophisticated as well as satisfying.

Deep roots that can stretch for water in the hard limestone bedrock and canopies of foliage acting as a sunshade are protecting Côte-d’Or vineyards against extremes of drought and heat. At the same time, historically overlooked sites with less sunny aspects or heavier water-retentive clays are demanding more attention, precisely because the new climate is shining more light on them. I was really encouraged by the outstanding quality of these more affordable appellations like Fixin, Marsannay, Savigny-lès-Beaune, Ladoix, Santenay and the Hautes-Côtes de Nuits.

I’m confident the reds have lived up to their early promise, and am calling the vintage “a supercharged classic”. Instead of the density of 2018, 2019 wines favour concentration and depth, while remaining focused, vibrant and with greater transparency to their terroirs. This also holds true for the whites – which have turned out extremely well too. In fact, I can’t recall such a stellar year for both colours since 2010. 

In Chassagne Montrachet, Philippe Colin’s 1er Cru whites are powerful with waxed apples, yellow plum and salty farmyard butter, but remain fresh and vital. They have the matière (richness and density) and intensity of the great 2014s with more of the generosity of the warmer vintages. One particular white highlight was Edouard Delaunay’s Puligny Montrachet 1er Cru Les Referts – the nose of ripe orchard fruit and brioche immediately recalled the 1996 that made me fall in love with white Burgundy 20 years ago. It was no shock to learn Delaunay’s winemaker Christophe Briotet has been named an IWC winemaker of the year 2020.

Very hot summers can lead to wines in which the subtle qualities of the terroir are lost but this has not happened in Chablis, where the best, like Christian Moreau’s Les Clos Grand Cru, show the precision and crushed oyster shell salinity one craves. Meanwhile, the southerly Chalonnaise vineyards are actively benefiting from climate change, as the sun shines bright on these traditionally less hallowed sites and brings out riper fruit. From the region, the Jacquesons in Rully, François Lumpp in Givry, and François Raquillet in Mercurey have crafted some of their finest wines to date, both white and red. Other similarly traditionally more modest whites impress generally – from the village of Saint Romain, down to generic Bourgogne Blanc, and even the humble aligoté grape (once only used as the base for kir) are all commendable.

However, while 2019 is a great year, Domaine de Montille’s winemaker Brian Sieve counsels caution: “We are in a window in Burgundy that is slowly closing – we need more water and less sun,” he says. If global warming continues, a couple of degrees’ more sustained heat and a few centimetres less rain could shut that window within a generation. It might not come to that – but just in case, I advise everyone to stock up. If it turns out as well as 1865, it will be money well spent.

WSJ : Japan Plays Catch-Up in Venture Capital as Rivals Boom

Japan Plays Catch-Up in Venture Capital as Rivals Boom
Nation’s startup scene is beginning to show some Silicon Valley swagger, but entrepreneurs and investors say it has a long way to go

TOKYO—As the world’s two biggest economies, the U.S. and China send scores of startups to the public markets—some at jaw-dropping valuations—yet Japan, at No. 3, has been lagging far behind.

The Japanese government wants to kick its startup scene into higher gear, but it won’t be easy.

The country’s star initial public offering in technology this year, and one of the biggest in recent years, is online marketing-tool developer Plaid Co., whose opening trade on Dec. 18 gave it a valuation of around $1.1 billion. Meanwhile, Airbnb Inc. opened this month at a valuation of $102 billion, the largest in a series of blockbuster U.S. listings, while China’s JD Health International Inc. made its debut in Hong Kong at a market capitalization of roughly $38 billion, capping a bumper year for IPOs there.

Japan lacks the self-reinforcing mix of young innovators and financiers that has made places like Silicon Valley and Hangzhou in China, hotbeds of growth. But venture capitalists and entrepreneurs say things are improving. The amount of money startups raise in Japan has increased by more than seven times over the past seven years, to about $4.8 billion in 2019, according to Tokyo-based data tracker Initial Inc.


Venture funds are getting bigger, and the government is pouring in money. A unit of government-owned Japan Investment Corp., or JIC, created a $1.2 billion venture-capital fund this year, the country’s biggest. In recent weeks, it invested nearly $100 million into an initial group of seven companies.

Japan’s Parliament is set to approve early in the new year a fund of nearly $20 billion to be invested over the next decade in environmental innovation. The government hopes to direct public money to strategic areas with high growth potential—such as helping Japan’s famously analog businesses go digital—while stimulating private investment.

“It will help to have an investor with the ability to orchestrate” relationships with big businesses and government organizations, said Takashi Sonoda, founder of Tokyo-based Uhuru Corp., a JIC venture-funding recipient that creates software to manage networks of sensors and other devices.

Previous state-backed investors have stumbled. An initial government fund set up in 2009 to support innovative businesses ended up spending the bulk of its money to prop up struggling hardware companies. Two years ago, most of JIC’s first board resigned after a fight with the government over salaries.

But industry watchers say government support has helped the startup world shed a once-disreputable image and take on a measure of Silicon Valley cool.

“It’s considered less risky or shady, and that’s also been really, really helpful,” said James Riney, founding partner and chief executive of Tokyo-based Coral Capital, which grew out of the Japan arm of U.S.-based venture fund 500 Startups.

Japanese venture capitalists used to joke about ways to overcome “spousal block,” the family opposition faced by people leaving a prestigious and stable job for a startup, Mr. Riney said. Now Japanese newspapers have reporters dedicated to startup news—a sign of growing prestige, he said.

Still, Japan’s venture-deal volume last year was less than a tenth of China’s and 3% of the U.S.’s, according to figures from data providers PitchBook and Initial. In the first six months of 2020, Japanese startup funding sank slightly compared with the previous year to $1.9 billion, while U.S. venture-deal volume rose a bit.


Japan not only lags behind the U.S. and China but also has fewer $1 billion-valued “unicorns” than developing nations such as India. Even Tokyo-based SoftBank Group Corp. , the world’s biggest tech investor, has shown little interest in funding homegrown startups.

Compared with most other mature economies, even those in slower-growing Europe, Japan “has a long way to go,” said Hideki Yarimizu, general partner of JIC’s venture arm. “But that also means there’s a crazy opportunity to grow.”

Japanese venture-investment volume would have to increase by around five or six times to get to a more appropriate size relative to its economy, Mr. Yarimizu said. He said he expected that would happen slowly over five to 10 years.

For decades, big corporations were at the heart of the country’s economy and business culture, and the path to success was seen as leading from a top-tier university to blue chips such as Sony Corp. or Toyota Motor Corp.

Those companies carefully guarded their proprietary technology and supply chains, leaving little space for innovation from the outside, said Hiroyuki Kuroda, secretary-general at the Venture Enterprise Center, Japan, a foundation formed in 1975 to support startups.

In a survey of startup founders by the Venture Enterprise Center this year, more than a fifth said people around them had been opposed to their starting a company. About 45% of those encountering opposition cited resistance from their mothers and 38% from former bosses or colleagues.

The polled entrepreneurs cited broad disapproval of making money as a top factor they hoped would change. And Japan tends to be more unforgiving about business flops than the U.S., meaning fewer companies are formed, said Initial analyst Atsuko Mori. Japan’s corporate “metabolic rate is low,” she said.

FT : What can go wrong? Investors’ views on the big risks to markets in 2021

What can go wrong? Investors’ views on the big risks to markets in 2021
Against a rosy consensus, dangers lurk in inflation, a virus setback, and the sheer weight of optimism

The outlook for markets in 2021 among investors and analysts is easy to describe: cautious optimism.

Almost universally, fund managers believe the year will bring a rebound in economic activity, supporting assets that have already soared in value since the depths of the pandemic crisis in March, but also lifting sectors that had been left behind. Bond yields are expected to stay low, lending further support to stock valuations.

But the virus mutation found in the UK, which caused a brief wobble in markets late this month, highlights how it is not always smooth sailing.

We asked investors: what can go wrong?

The answers below have been edited for clarity and length.

Howard Marks
CO-CHAIRMAN, OAKTREE CAPITAL MANAGEMENT
Rising interest rates, unlikely as they are in the intermediate term, are the main threat.

Today’s high asset prices are highly dependent on low interest rates for their appropriateness. If rates were to rise, asset prices would probably fall. However, there’s little reason to believe rates will rise in the short run because there doesn’t seem to be much inflation, and I believe the Federal Reserve isn’t concerned about inflation.

Valentijn van Nieuwenhuijzen
CIO, NNIP
I don’t think central banks will have to look through inflation, because I don't think there will be any. If I’m wrong and it does accelerate, that’s a meaningful game-changer for markets.

It would mean that a lot of losers in markets that have been left behind could really catch up — think of banks and financials, but also the broader value factor that has suffered secular underperformance over the past decade. Growth stocks would suffer from rising interest rates. They might still rise but less than value. And obviously government bonds would suffer.

Everybody has the same benign outlook. That’s also a risk. We will be monitoring closely to see any concerning concentration in positions.

Sam Finkelstein
CO-CIO OF GLOBAL FIXED INCOME, GOLDMAN SACHS ASSET MANAGEMENT
Fixed income investors face two key risks entering 2021. 

First, the extraordinary Covid-19 policy response has extended the challenge of low yields. Second, central banks have limited policy ammunition in the event of a negative growth shock. This backdrop sharpens our focus on constructing balanced portfolios that are resilient to bouts of market volatility. 

Vincent Mortier
DEPUTY CIO, AMUNDI
The recent market rally is based on blind faith in the vaccine and on the brave assumption that very soon, everything will revert to as it was before, or even better. This is a risk: producing and distributing these vaccines on such a large scale won’t be a walk in the park.

Fiscal and monetary support are keeping economies afloat, but only just. These measures are getting harder to implement. Expect more monetisation of debt and increased pressure on central banks — any withdrawal of measures is unthinkable right now, and the risk of a policy mistake is underestimated by the market. 

The third risk is the consensus itself. The hunt for yield with skyrocketing negative-yielding debt will push the search for yield to the extreme: there is almost $1.5tn tof bonds outstanding in “zombie companies”. The temptation for investors to accept lower quality in their portfolios is high, as is the bet that interest rates will remain low forever. This is dangerous. 

Andrew Law
CHIEF EXECUTIVE OF HEDGE FUND CAXTON ASSOCIATES
The stage may well be set for a great reflation.

Many of the expressions [of this reflation] have been out of favour for the best part of a decade. Most market participants, and consequently their portfolios, are heavily conditioned from decades of disinflation or low inflation.

The change in the inflation regime, and subsequently the investor mindset, will likely have profound implications for asset allocations.

Liz Ann Sonders
CHIEF INVESTMENT STRATEGIST, CHARLES SCHWAB
What concerns me most is sentiment. The success of the market itself recently has bred what I think is its greatest risk, which is overly optimistic sentiment. In and of itself, stretched sentiment doesn’t portend an imminent correction, but it does mean the market is likely more vulnerable to the extent there is a negative catalyst, which could come in any number of forms. 

Scott Minerd
GLOBAL CHIEF INVESTMENT OFFICER, GUGGENHEIM PARTNERS
The pandemic has completely reworked our free-market economic system based on competition, risk management and fiscal prudence. It has been replaced by cycles of increasingly radical monetary intervention, the socialisation of credit risk, and a national policy of moral hazard.

This is troubling, as beyond the eyewall lies a poor credit environment judging by credit defaults, rating migration, and corporate fundamentals. In aggregate, the high-yield [debt] market has 4.5 times more debt than last 12 month earnings before taxes and other items, a ratio that already exceeds the 2008—2009 default cycle peak, and is likely to worsen from here.

Gregory Peters
MANAGING DIRECTOR AND SENIOR PORTFOLIO MANAGER, PGIM FIXED INCOME
It’s amazing to me that the market has moved past the “Blue Sweep” idea [of Democrats winning control of both houses of Congress and the White House] . . . I think we could see a “Blue Sneak”, as Georgia’s Senate races are still very much in play to go blue. That could open up the fiscal spigot even more.

I still believe this will be a golden era for credit, but I’m probably more worried about this thesis than I was back in April. Everything is happening at warp speed, so maybe dividends, buybacks and M&A come back quickly as well. 

The biggest market risk continues to be inflation. I think it will only move temporarily higher next year due to base effects and then come back down. But the risk is that it continues to move higher, and that changes everything. We're putting a lot of faith in the Fed to stand its ground and not respond to accelerating inflation. If the Fed loses its nerve, and gets worried about inflation sooner than what they've intimated, then that could be a problem for markets, causing a kind of “Taper Tantrum 2.0” scenario. 

Danny Yong
FOUNDER OF HEDGE FUND DYMON ASIA
The US dollar has crept lower this year, but could at some point fall precipitously. If that happens, the Fed will lose the flexibility of negative [real] interest rates, and may even be forced to pause asset purchases. That's the tail risk scenario.

If there’s no Blue Sweep [in January’s Georgia Senate elections], then the Fed is the back-up. But if you lose the back-up, then the world could be in for a rude shock. It’s plausible, it’s not that crazy a scenario. If the dollar goes significantly lower, then the Fed could run out of easing options, which would lead to an equity sell-off. 

Paul McNamara
EMERGING-MARKETS DEBT PORTFOLIO MANAGER, GAM
Financial markets have held together because of low policy rates and low bond yields, and lower discount rates have supported asset prices and suppressed government debt costs.

Although emerging-market debt burdens are (mostly much) lower than developed-market ones, yields are not, so debt servicing costs have not been suppressed to the same degree. EM central banks have cut rates as aggressively as DM ones, but bond buyers have been more cautious. Unlike DM, EM central bankers have not had the benefit of the doubt.

Turkey is especially instructive — a government refusal to recognise balance of payments constraints led to the need for a near-unique aggressive rate hike. This is the example of what we see as a broader risk: if EM policymakers do not continue to recognise that they face much tighter constraints due to the balance of payments than their DM counterparts, they risk a debt spiral that seems a very remote possibility in DM.

NY Post : Aerospace giant’s convict CEO could pose threat to firm’s IPO plans

Aerospace giant’s convict CEO could pose threat to firm’s IPO plans

A politically charged standoff over an Italian aerospace giant’s convicted fraudster CEO is now threatening to hit America’s shores.

Leonardo SpA — a massive defense contractor that sells everything from missiles to cybersecurity services — is considering a stock listing for its US subsidiary, Leonardo DRS, which does business with the Pentagon.

The IPO talks come as the company comes under fire in Italy because its CEO, Alessandro Profumo, is staring down a six-year prison sentence and resisting calls to step down as he appeals the verdict.

The politically connected Profumo, who’s reportedly earned the nickname “Mr. Arrogance” for his aggressive style, was convicted in an Italian court in October of false accounting and market manipulation for his role in an accounting scheme at a separate company.

But Leonardo has stood by him, arguing that the 63-year-old CEO’s conviction is not final and “entirely unrelated” to his current employer.

“Therefore, as far as Mr. Profumo’s legal concerns are related, we can reiterate that the Leonardo board reaffirmed their confidence in Mr. Profumo’s leadership last October and this will have no impact on his continued ability to lead the group,” the Rome-based firm told The Post in a statement.

Leonardo — the world’s 11th-largest arms merchant with about $11 billion in weapons sales last year, according to the Stockholm International Peace Research Institute — is also seeking to grow its US business, according to Reuters, which reported last month that the Italian parent intends to maintain control of DRS, the unit exploring a US listing.

DRS — which Leonardo acquired in 2008 — already makes up a big chunk of the Italian parent’s business, with about 1.7 billion euros (roughly $2.1 billion) in revenue for the first nine months of the year, accounting for some 19 percent of Leonardo’s total.

The US Department of Defense has been asked to weigh in, but has yet to respond, according to Giuseppe Bivona, a partner at London-based hedge fund Bluebell Capital Partners, who wrote to the Pentagon on Oct. 27.

“If the CEO of a US listed company was sentenced to jail, his/her resignation (pending appeal) would be immediate and irrevocable,” Bivona’s letter read.

“There is a reputational issue, [a] suitability issue,” Bivona told The Post. “If your main client is the US Department of Defense … I can tell you that they’re going to pick up the phone and ask you, ‘What the hell is going on?’”

Bivona — who helped uncover the fraud Profumo allegedly committed at Banca Monte dei Paschi di Siena, an Italian state-owned bank — said he hasn’t heard back from the Pentagon, which also didn’t respond to The Post’s request for comment.

Bivona — who is advising an institutional fund that’s suing Monte dei Paschi di Siena — claims Profumo is being protected by his ties to Italy’s Democratic Party, a plank of the coalition government that controls the Ministry of Economy and Finance, which is also Leonardo’s largest shareholder.

But pressure also appears to be mounting in Italy where Profumo has also been blasted by lawmakers on both sides of Italy’s parliament. The ruling 5 Star Movement party urged him to step down soon after he was convicted, while Matteo Salvini, head of the opposition Northern League party, has said he could weaken Leonardo’s business.

“It is difficult to take home orders from across the world with a managing director sentenced to six years,” Salvini said in a Dec. 10 speech.

Profumo joined Leonardo in 2017 after a banking career that landed him at Italian bank Monte dei Paschi di Siena, where he was chairman. He developed a reputation as an aggressive dealmaker, reportedly earning the nickname “Mr. Arrogance” along the way.

US experts say the Leonardo scandal has the potential to create bumps in the defense contractor’s road to a US listing.

“I’d be shocked if any self-respecting investment bank would partner with them and take them public pending this state of affairs,” Shivaram Rajgopal, an accounting and auditing professor at Columbia Business School, told The Post.

Profumo’s conviction wouldn’t legally bar Leonardo DRS from going public in the US, but the company would very likely have to disclose the situation in its filings with the Securities and Exchange Commission, a disclosure that could raise eyebrows among investors.

“Even if he’s a great guy and all that, if he’s out of pocket and is put in jail and the company relies upon him, that’s a pretty significant risk factor,” noted Francis Curran, a securities litigation attorney at Manhattan law firm Kudman Trachten & Aloe.

FT : UK doctors flag mental pressures pandemic puts on young people

UK doctors flag mental pressures pandemic puts on young people
Coronavirus has mostly spared teenagers physically but it is taking an alarming toll on their mental health

Most teenagers have fended off the physical effects of Covid-19 or avoided symptoms altogether. But there is growing evidence of the worrying toll the pandemic is taking on the mental health of children and adolescents in the UK.

One general practice doctor working in a coastal town near Bristol, in the west of England, said she began noticing this in October when an unusual number of young people began coming to her clinic with anxiety and depression.

“I have had a lot of primarily teenagers but also younger kids. A couple were self-harming. Some said they didn’t want to be here. It was really tough,” said the doctor who asked not to be named, adding that colleagues had told her they were experiencing a similar trend.

NHS data tells a similar story. In a recent 2020 follow-up to a nationwide study carried out in 2017, the health service found that one in six children between the ages of 5 and 16 were likely to have a mental illness, up from one in nine three years ago when the same sample of 3,500 young people was surveyed.

The research found this increased with age, with a marked and growing difference between the sexes. Some 27.2 per cent of women aged 17-22 were likely to have a mental illness compared to 13.3 per cent of young men.

Psychiatrists, psychotherapists and doctors operating in varied environments across the UK, all noted that the experience of lockdowns, school disruptions, and family life this year varied greatly and was not all bad. Some children had benefited from having more time at home with their parents.

But, said Ryan Lowe, speaking for the Association of Child Psychotherapists, 2020 was, on balance, bad in particular for adolescents. She said the exam grading fiasco last summer, being cut off from friends, and in cases overexposure to the darker influences of social media, inevitably took a toll.

“If you were to paint a picture of the perfect setting to grow up in, it would be the opposite of where we are now,” she said. “What you want to have is real certainty and hope in the future, stability while dealing with adolescence which is difficult at the best of times, and to have a really good social circle where you can learn about yourself independently of parents.”

A private practitioner working in London, Ms Lowe said the most distressing thing had been the number of young people presenting with serious enough conditions (either self-harming or at risk of suicide) that they needed to be referred to psychiatrists. Even those able to afford a private consultation were having to wait weeks for an appointment on account of the demand. Going through the NHS usually takes far longer.

“It used to be that around 10 per cent of clients referred to us saw psychiatrists and the rest were [treated with] psychotherapy. At the moment, around 40 per cent are needing to go to psychiatry, and I can’t keep up with those being referred to me,” she said. “It is heart breaking.”

Bernadka Dubicka, chair of the child and adolescent faculty at the Royal College of Psychiatrists, said that in Oldham, the Greater Manchester town where she practises, there had initially been a dramatic fall in the number of children turning up at hospital and at the Child and Adolescent Mental Health Service (CAMHS) during the first lockdown that began in March.

Parents may have been reticent about their children going to clinicians for fear they would be infected, she said. But this had translated later in the year into greater numbers of young people turning up with more serious conditions.

“Particularly with psychosis, the longer you leave it the more difficult it is to treat,” she said, adding that the virus had arrived at a time that young people were already increasingly anxious about issues such as climate change, recession and unemployment.

“We have a crisis on top of a pre-existing crisis. The level of uncertainty [in young people’s lives] is phenomenal in terms of what we have seen in our lifetimes,” she said.

YoungMinds, a charity working with young people, found that 39 per cent of those surveyed in the summer agreed that coronavirus had made their mental health worse and 41 per cent of them “much worse.” Often this was because of feelings of anxiety, isolation and a loss of “coping mechanisms” and motivation.

Peter Fonagy, a clinical psychoanalyst who heads the Anna Freud centre for research and treatment of children, praised teachers for having done a remarkable job in the circumstances but said they too had paid a price in terms of their mental health.

However, for young people, he said, the virus had created a “feeling that life is on hold.”

The Department of Health and Social Care said it had been an exceptionally difficult year but young people’s mental health services had stayed open throughout the pandemic.

“We are expanding and transforming services backed by an extra £2.3bn investment in mental health per year by 2023/24,” it said.

FT : Rise in Iranian traditional medicine as Covid crisis grows

Rise in Iranian traditional medicine as Covid crisis grows
Increase in demand for ancient treatment proves contentious even as it reflects frustration with conventional medicine

In recent months, as coronavirus has ravaged Iran, more and more people have come to Ahmad Karbalaei’s 200-year-old attari, a shop selling traditional herbal medicine, in search of help.

One of his medicines is named after Imam Kazim, an infallible Imam of Shia Muslims, and is recommended by the clergy. It includes red sugar, mastic and fennel and is mixed with honey before being taken. Another is based on a prescription from Avicenna, a famous Persian physician of the 10th century, and includes sweet violet, horsemint, thyme and maidenhair fern.

“Around 50 people on average come to this shop every day to ask about or buy Imam Kazim drugs. The demand is very high,” said Mr Karbalaei, the owner of the attari. He typically recommends the one based on Avicenna, which he was taught as a treatment for asthma by a 70-year-old patient half a century ago. “Now, I sell it to coronavirus patients.”

The rising demand for traditional medicines has attracted controversy, even as it reflects frustration with conventional medicine during the pandemic.

More than 54,000 people have died from coronavirus in Iran, making it one of the worst hit countries in the region. President Hassan Rouhani has warned about the difficulty Iran will face in accessing the vaccine. He assured Iranians that his government would procure vaccines from foreign companies and domestically produce them despite the US sanctions, which he said had “brutally” limited the country’s access to medicine under the pandemic.

“We will overcome problems [in importing vaccines] at any price” but “people should know that whatever we do, whenever we want to import medicine, equipment or vaccines, we curse [Donald] Trump,” he said.

One of the world’s oldest medicines, along with Ayurvedic and Chinese treatments, Persian medicine was repressed under the Pahlavi dynasty.

After the 1979 revolution that saw the overthrow of this dynasty and established the theocratic state, the Islamic republic began to encourage traditional medicine more than a decade ago. Medical students were able to specialise in it — once they had received a general medical education — and about 420 traditional physicians are licensed to treat patients.

“Traditional medicine is deeply rooted in our culture as we are given herbal medicine from childhood by our parents alongside chemical drugs,” said Dr Roja Rahimi, vice-dean for research affairs of the School of Persian Medicine affiliated to the Tehran University of Medical Sciences.

Persian medicine centres on creating an internal balance by pairing “warm” and “cold” ingredients. Lamb, considered warm, is recommended to prevent a deadly virus that is believed to survive longer in cold environments. Sales of warm herbs such as those of the mint family have also increased.

But the popularity of these medicines proved contentious early on in the pandemic when Abbas Tabrizian, a cleric, said sweet violet oil could cure Covid-19. He set fire to Harrison’s Principles of Internal Medicine, an American textbook, prompting uproar across Iran.

“This approach is thorough fanaticism by which everything is linked to Islam and the Imams,” said Nasrin, a 55-year-old retiree. “What this man said about sweet violet oil was absolutely ridiculous but what he did to Harrison’s book was utterly outrageous.”

Fatemeh, a 47-year-old nurse from Tehran said her religious husband only took a sip of Imam Kazim medicine when he was infected with coronavirus. “But almost immediately he got a rash all over his body,” she said.

Still there are many who swear by the treatment. One cleric in the holy city of Qom said traditional medicine had cured him. “Modern medicine has no solution for coronavirus but this drug has so far proved the best and saved me and many other people,” he said.

Health authorities have made clear they do not recognise what the clergy calls Islamic medicine, resisting moves by some clergy to treat patients. Kianush Jahanpur, the health ministry’s head of public relations, said “folklore medicine” and “superstitions” would not be acceptable.

“The school of Persian medicine has more than 3,000 years of history,” he said. “While the health ministry will resist radical behaviour, we recognise the cultural and scientific heritage as an invaluable asset and will help its development.”

At the School of Persian Medicine, there is a lot of hope in the future. “The future belongs to integrative medicine by which students go to medical schools and learn modern medicine while developing their knowledge about classic medicine whether Persian, Chinese or Indian,” said Dr Mehrdad Karimi, vice-dean for international affairs of the centre. “This is only the beginning.”