Hi Newsletterest, here's what you need to know for May 12th in 3:15 minutes.

🧐 Finimized while watching the best ballet of the Bolshoi Theatre in Tel Aviv, Israel (25°C/77°F ☀️)

Today's big stories

WeWork’s missing of its rental payments sent shockwaves through the real estate investment market
One major fund manager is arguing that the demand for and value of one relatively safe investment will keep climbing – Read Now
As other countries try to spend their way out of coronavirus, Saudi Arabia announced a fresh round of cuts

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Awkward Silences

What’s Going On Here?

Speak now, WeWork, or forever hold your lease: the coworking office space company has skipped some of its rental payments, and that’s had knock-on effects for bond investors.

What Does This Mean?

Rental and mortgage payments are similar to bonds in that they both pay a regular income (in rent or interest) for a specific amount of time. Investors, then, might want to benefit by buying into “commercial mortgage-backed securities”, or CMBSs: these bonds-of-sorts combine mortgage payments from multiple payers into something investors can buy, sell, and earn their own income from.

Clearly, stay-at-home orders mean there aren’t many (if any) people paying WeWork to rent office space. So when the company decided not to pay its rent on some properties and renegotiate terms on others, other payments reliant on that income – like CMBSs' – suddenly found themselves at risk.

Why Should I Care?

For markets: Stand together, fall together.
Given the company’s sheer size, investors haven’t been able to ignore the bigger-than-normal ripples in the bond market WeWork’s caused. According to Bloomberg, one particularly risky CMBS – based on the income from an office that’s more than 50% rented by WeWork – has lost almost 30% of its value since March. That’s likely down to the often short-term nature of WeWork’s leases: the company is now more at risk of rising vacancies than traditional office buildings, which tend to lock in tenants for longer.

The bigger picture: Great views, purgatorial location.
Investing in real estate is often thought to be a relatively safe haven, even in a downturn. And that’s even truer of physical properties now that potential buyers can’t view them, locking their prices in limbo. But since real estate stocks and bonds are more liquid markets that quickly reflect property firms’ changing fortunes, those investments are much more at risk of dips in value. Investors in mall operator Intu, for one, probably started sweating when the mall operator only received 30% of the rent it was owed in March.

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2/3 Premium

Buying Power

What’s Going On Here?

A new report from fund manager Guggenheim reckons that, as the Federal Reserve strengthens its bond-buying programs, demand for US government bonds will more than match this new supply – and prices are set to rise.

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3/3

Lockdown Chic

What’s Going On Here?

With coronavirus having left Saudi Arabia’s finances looking somewhat disheveled, the country took matters into its own hands by announcing new austerity measures that cut a little close to the skin.

What Does This Mean?

Saudi Arabia has more than just coronavirus to worry about: the oil price has fallen by more than 50% since March, impacting the income the country makes from the slippery elixir. So it now plans to find an extra $27 billion, and to use it to support healthcare efforts and troubled businesses. Yep, “find” it – in the pockets of its own citizens.

The $266 monthly living allowance for Saudi Arabia’s 1.2 million government workers will be scrapped from June, and the country’s value-added tax will triple from 5% to 15% in July (tweet this). That’ll make buying goods and services more expensive for everyone, but it'll help line the government’s pockets in the process.

Why Should I Care?

For markets: A cut below the rest.
The Saudi Arabian stock market fell 3% on Monday, as investors perhaps worried that higher taxes – and the lost income for government workers – would curb consumer spending. And with government spending on major infrastructure also slowing down, industries like the country’s all-important oil sector will probably suffer an earnings hit too. What’s more, some economists have questioned Saudi Arabia’s wisdom in trying to save money when most other governments are decidedly spending their way out of the crisis.

The bigger picture: A cut ahead of the rest.
With some $8 trillion already committed to the coronavirus response globally, Nervous Nellies and Debbie Downers have started to wonder how it’ll all be paid for. And like it or not, Saudi Arabia has offered an answer: governments might find they’re forced to increase taxes and lower their spending to balance their budgets. That’d make times tough for everyone, sure, but it’d be tougher still for those people and businesses who depend on government programs in their day-to-day lives.

Learn more: How this new plan could impact Aramco, the world’s most valuable company.

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💬 Quote of the day

“Technique and ability alone do not get you to the top. It is the willpower that is most important.”

– Junko Tabei (a Japanese mountaineer and the first woman to summit Everest)

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🤔 Q&A · RE: Culture Shock

“Why might central bank government bond-buying programs make bonds a less exciting prospect for investors?”

– Robin in New York, USA

“If a country’s central bank ends up doing what the Bank of Japan has done – that is, buying up the majority of the country’s government bonds – there’ll be fewer of those bonds available in the market to buy and sell on a given day. In other words, there’ll be less ‘liquidity’. It’d then be harder for investors to make and exit bond investments, and would therefore turn a previously relatively stable asset – one whose return is pretty much guaranteed – into a riskier proposition, without necessarily offering a higher reward.”

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🌍 Finimize Community

💪 Zoom or bust

We’re starting to get the hang of this “virtual” thing. Step one: log in to Zoom. Step two: turn on your camera. Step three: never stand up or someone will see you spilled soup on your sweatpants earlier.

🇦🇺 Australia: Financial Awareness During Tough Times – 7.30pm AEST, May 12th
🌍 Global: Finimize Live AMA – 1.30pm UK time, May 13th
🇦🇺 Australia: Financial Health Check During A Pandemic – 5.30pm AWST, May 13th
🇬🇧 UK: Investing in Brands During COVID-19 – 3pm UK Time, May 15th
🇺🇸 USA: Raising Capital During a Pandemic – 1pm EST, May 20th

📚 What we're reading

Can fashion start a revolution? (WWD)
The story of one man and his computer virus (BBC)
Someone get this dog a car (BuzzFeed News)

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Image credits: WeWork (YouTube) | Shapovalova Elena, Eric Isselee, N Azlin Sha, IB Photography - Shutterstock

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All content provided by Finimize Ltd. is for informational and educational purposes only and is not meant to represent trade or investment recommendations. You signed up to this mailing list at finimize.com or through one of our partners. © Finimize 2020

Finimize - 👎 WeWork won’t pay

Today's big stories

Awkward Silences

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Buying Power

Lockdown Chic

What’s Going On Here?

What Does This Mean?

Why Should I Care?

💪 Zoom or bust

Older messages

🤮 20 million jobs lost

🤭 The biggest recession ever

⚠️ UBS says don’t sell

📈 Whoa, Microsoft and Facebook

📉 Google's 4 billion dollar void

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