Ukraine's fx drain, passive overtakes active, the globalziation of US migration & underpricing carmageddon
Great links, reading and images from Chartbook Newsletter by Adam Tooze
Landschaft mit Frau und Engel, Lachnit, Wilhelm (1899-1962) Source: SKD online
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Ukraine’s fx losses
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Passive eclipses active in US fund market
Passively managed US mutual funds and exchange traded funds have for the first time amassed more money than their actively managed counterparts, thanks in large part to years of strong inflows into the increasingly popular ETF wrapper. At the end of December, passive US mutual funds and ETFs held about $13.3tn in assets while active ETFs and mutual funds had just over $13.2tn, according to data released by Morningstar. On net, active funds shed about $450bn last year. Passive funds took in about $529bn. The ascent of passive strategies has been years in the making, beginning with Vanguard’s launch of the world’s first index mutual fund in 1976 on the premise that stock pickers do not beat the market over the long term. A decade ago passive funds held about a quarter of the US mutual fund and ETF market, according to Cerulli Associates, a financial research firm. Despite occasional periods of outperformance, active managers have largely fallen short of passive counterparts in recent years. Active assets remain about 70 per cent of the market when alternative investments such as private equity and private credit are taken into account, said Matt Apkarian, associate director of product development at Cerulli.
Source: FT
German wage push
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Unsticking private equity
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Der Tod von Dresden Wilhelm Lachnit 1945
Source: SKD online
The globalization of US migration
Last year seems to have set records for the number of migrants apprehended at the southern border, and Republicans in Congress are demanding reforms to America’s asylum system in return for aid to Ukraine. A deal has proved elusive. Slightly more under the radar, the diversity of the Jacumba camp reflects a big change in who is crossing over. In fiscal year 2023, for the first time, migrants from places beyond Mexico, El Salvador, Guatemala and Honduras made up more than half of all those apprehended at the border (see chart 1). Venezuelans are the largest part of this group. But last year 43,000 Russians, 42,000 Indians and 24,000 Chinese also made the crossing—up from 4,100, 2,600 and 450, respectively, in 2021. America’s northern border has proved porous, too. In total some 40,000 Indian and Chinese migrants came south from Canada last year.
The high rate of asylum applications granted to Indian arrivals in the US is striking to say the least.
Source: The Economist
Underpricing carmaggedon - why US car insurance is FAR too cheap
According to a study published last year by the nhtsa, America’s highway-safety regulator, the direct economic costs of car crashes in 2019 was $340bn, or about 1.6% of gdp. Yet the nhtsa says insurance—and not just car insurance—covered just 54% of that. The agency put the true social cost, including lost life years, at nearly $1.4trn. In 2019, 9m people were involved in serious car crashes; around 4.5m people suffered injuries and 36,000 were killed. America’s spartan car insurance stands out in the rich world. Legal minimum bodily-injury coverage varies state by state, but nowhere does it pass $100,000 per accident. According to the Insurance Research Council (irc), an industry data group, 29% of claims nationally (and over 50% in several states) involve people insured at the state minimums. Few policies go beyond a few hundred thousand dollars of liability. The cost of a serious crash “is never going to be covered by that”, says Dale Porfilio, of the irc. By contrast, in Germany drivers are required to have €7.5m ($8.2m) of bodily-injury coverage, and in Britain liability is unlimited. And in those countries, going into hospital does not mean running up a life-altering bill. Drivers are subsidised, and society at large pays the bill.
Source: The Economist
Why full employment is good for society - Paul Krugman
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Stillleben mit Rose und antiken Gipsen Lachnit, Wilhelm (1899-1962) - Maler, 1945 Source: SKD online
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