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Daily Scan: Stocks fall with retail shares; Yuan joins IMF reserve basket
Capital Markets
<p>Updated throughout the day</p> <p>November 30,  2015</p> <p>The Dow and the Nasdaq toppled 0.4% Monday, and the S&amp;P 500 fell nearly 0.5%. In-store Black Friday sales disappointed, triggering a dip in retail stocks. Nike and Wal-Mart shares were down more than 1.5% each. Target shares lost 1.3%. Cyber Monday, one the biggest day of the year for online sales, kicked off Sunday evening. More than 121 million shoppers planned to shop online Monday, the National Retail Federation reports.  The IMF announced Monday that the yuan will officially join the fund's basket of reserve currencies. The yuan "met all existing criteria" and should be added by October 2016. The basket hasn't been changed since 2000 when the euro replaced the German mark and the franc.</p> <p>Here is what else you need to know:</p> <p>Morgan Stanley looks to ax a quarter of its fixed income traders. Cuts, possibly up to 25% of the fixed income staff, will happen in the next two weeks. The third quarter was the worst for Morgan Stanley in fixed income, currencies, and commodities in the last five years. Business Insider</p> <p>Cyber Monday shoppers crash websites. Online sales in the U.S. were up 14% Monday from last year, causing web outages for Target, Neiman Marcus, Wal-Mart, Victoria's Secret, and Foot Locker. Reuters</p> <p>Gold on track to lose 7% in November, despite 0.6% gain Monday. That would make the biggest monthly loss since 2013. The metal has been losing its luster as the likelihood of a rate-hike in the U.S. increases. The Federal Reserve meets Dec 15-16 to discuss policy. MarketWatch</p> <p>Chicago PMI surprisingly weak. The Chicago business barometer fell 7.5 points to 48.7 in November from 56.2 in October.  A reading below 50 signals a contraction. The manufacturing sector has suffered from a strong dollar. MarketWatch</p> <p>Obama names new ISIS adviser. Robert Malley, a senior director at the National Security Council, will focus solely on the anti-ISIS fight in the White House's new counter terrorism efforts. CNN</p> <p>Amazon TV may join Apple TV after all. Amazon kicked Apple TV off its website at the end of October. But now the Amazon engineering team is developing an Apple TV app to integrate with its competitor's TV model. TechCrunch</p> <p>BATS Global Markets shoots for 2016 IPO. The second-largest stock exchange operator is valued at more than $2 billion, including debt. The company tried to go public more than three years ago, but was forced to cancel the IPO after technical issues slaughtered its share prices. Wall Street Journal (paywall)</p> <p>Federal Reserve puts limits on emergency lending powers. The Fed unanimously approved a proposal to limit its emergency lending, a change encouraged by Congress after the financial crisis bailouts. Reuters</p> <p>Aberdeen Asset Management drained of more than 40 billion pounds. Investor fears about emerging markets cost Aberdeen heavily, with the firm reporting a 12.5% fall in assets under management between September 2014 and September 2015. Shares for the company fell more than 4% Monday. The Guardian</p> <p>Online rules on Thanksgiving, Black Friday. Online consumers spent $4.45 billion over the two-day shopping period, accounting for 34% of spending -- a record, says Adobe Digital Index. Brick and mortar traffic fell slightly to $12.1 billion on Thursday and Friday from $12.29 billion last year. Reuters <br /> World leaders begin high-level climate talks. A critical U.N. conference aimed at agreeing a new global approach to climate change has begun in Paris. Negotiators from 195 countries will try to reach a deal within two weeks aimed at reducing global carbon emissions. BBC<br /> Pro-choice group blames political rhetoric for shooting. Vicki Saporta, president of the National Abortion Federation, has said the anti-abortion rhetoric had “ignited a firestorm of hate” which contributed to Friday’s shooting at a Planned Parenthood clinic in Colorado. Three people were killed. Washington Times<br /> Trade your Pumpkin Spiced Latte for a Holiday Spice Flat White. Starbucks is
The 10 richest people ever
<p>Ever wonder if Warren Buffett's wealth could stand next to Genghis Khan or John D. Rockefeller? Well, it can't.</p> <p>Here's a ranking of the richest people of all time, according to academic economists, historians, and Money Magazine:</p> <p> Mansa Musa- more money that you can dream of- The king of Timbuktu is often called the wealthiest person in history. His West African kingdom produced more gold than the rest of the world during Musa's lifetime 1280 to 1337. Tales say Musa's financial influence was so grand that his spending during a pilgrimage to Mecca caused a currency crisis in Egypt.<br /> Augustus Casear- $4.6 trillion- Augustus ruled an empire, during his life from 63 BC to 14 AD, that accounted for more than a fourth of the world's economic output at the time. At one point Augustus' wealth was the value of about a fifth of his empire's economy.<br /> Emperor Shenzong- ruled empire with more than 25% of global GDP- Shenzong lived from 1048 to 1085, during the Chinese Song Dynasty, one of the most economically powerful empires ever. The highly centralized government meant that Shenzong had enormous economic control.<br /> Akbar I- ruled empire with 25% of global GDP- Akbar, 1542-1605, was an Indian emperor during the Mughal dynasty, when his empire accounted for a fourth of the global GDP. His GDP per capita was comparable to Elizabethan England.<br /> Joseph Stalin- complete control of a nation with 9.6% of global GDP- The dictator of the U.S.S.R, Stalin, 1878-1953, had absolute power over one of the world's largest economies. Three years before his death, the global economic output of the U.S.S.R. was the equivalent of almost $7.5 trillion today. It may not make him traditionally wealthy, but Stalin could put his country's money wherever he wanted.<br /> Andrew Carnegie- $372 billion- Carnegie, 1835-1919, may be the richest American of all time. A Scottish immigrant, he sold his U.S. Steel in 1901 for $408 million, or more than 2% of the U.S. GDP at the time.<br /> John D. Rockefeller- $341 billion- Rockefeller, 1839-1937, invested in the petroleum industry beginning in 1863, and by 1880 controlled 90% of American oil production. In 1918, his federal income tax return valued him at almost 2% of U.S. economic output for the same year.<br /> Alan Rufus- $194 billion- Also known as Alan the Red, 1040-1093, this nephew of William the Conqueror held what would have been 7% of England's GDP during his life.<br /> Bill Gates- $78.9 billion- The richest living person, Gates holds about $8 billion more than Amancio Ortega, his closest runner up.<br /> Genghis Khan- lots of land- The Mongolian emperor, 1162-1227, controlled a swath of land from China to Europe. Although his plundering could have built him many palaces, Genghis was known for generously sharing his wealth with his loyal military.</p> <p>Photo: Chelsea Marie Hicks</p>
When technology gives, it taketh away
<p>Finance firms talk about the “disruptors” making the industry shake in its boots. But finance has always been subject to advances that have made people nervous. At a recent investment conference at Baruch College, industry veterans discussed the changes they’ve seen over the more than 40 years they’ve been working in finance.</p> <p>Electronic trading, “like Venus, sprang out fully formed,” says Art Cashin, UBS Director of Floor Operations at the NYSE. “I like humans because I happen to be one,” he joked, but the speed and efficiency of new technology has made the markets easier for everyone.</p> <p>Trading system crashes used to happen on a regular basis. Now a blip in the trading day sends investors into a tail spin.</p> <p>“Investors are really much better off than they were,” says William Brodsky, chairman of the Chicago Board of Options Exchange. Investing has become more democratized, giving average retail investors easier access to products previously only used by high-net-worth individuals. Retail investors are more competitive with less expensive strategy options. But this reality doesn’t matter if investors feel worse off, he says. The perception is important.</p> <p>“The reality is one thing and the perception is completely different,” agrees Cashin. “Everybody began to look at (the markets) like liquidity had completely disappeared,” he says. “The retail investor really feels the market is not friendly to him, and that’s critical.”</p> <p>With technology has also come some scarier issues that investors should approach with caution, the men said. There are now dozens of stock exchanges. While the New York Stock Exchange is dominant, the country still lacks a solid primary market, says Cashin. Dark pools, and some high frequency trading that hovers in these pools, are also concerning, says Richard Lindsey, CEO of the Callcott Group.</p> <p>“The road to hell is truly paved with good intentions,” says Cashin.</p> <p>Photo: David Foster</p>
Fidelity eyes robo-advising
<p>Fidelity Investments is testing investment robots in attempts to keep up with the competition.</p> <p>Fidelity Go, an automated investing platform, is currently only available to a few hundred Fidelity employees, reports the New York Times. A small number of customers will be invited to test the product in early 2016, before it goes public.</p> <p>Much like competing platforms from Vanguard, Schwab, or Betterment, Fidelity Go has users fill out a questionnaire about investment goals and risk tolerance before suggesting low-cost investment options. The program is free now, but will eventually charge a fee, likely 0.1% to 0.2% annually plus mutual and exchange traded fund costs.<br /> Photo: frankieleon </p>
The top 10 cities to launch a startup
Venture Capital
<p>The cost of living, competition for talent, and access to capital are just a few hurdles facing startups. Forbes broke down the top 10 cities entrepreneurs should look to launch a startup:</p> <p> Kuala Lumpar- This Malaysian city is cheaper than Singapore, and has a good test market of Chinese, Indonesian, and Indian users.<br /> Beijing- China may not equate with freedom of ideas, but entrepreneurship is becoming more desired in the country. China has set up a venture capital fund for startups, and is giving tax deductions.<br /> Warsaw- With a bigger internal market and strong entrepreneurial history, Poland has more opportunity than nearby Slovakia or Czech Republic. Google is opening a campus in Warsaw this year.<br /> Moscow- The Soviets encouraged a large number of quality engineers, who are now available to the business world.<br /> Bangalore- The startup scene in this Indian city has been heavy on the engineering and tech development. The city hosts a number of startup-related events each week for engineers and entrepreneurs.<br /> Sydney- Startups in Sydney are starting to think more globally, and several collaborative co-working events are encouraging the dialogue.<br /> Tunis- The Arab spring changed the city, spurring the use of tech products to engage and mobilize the communities.<br /> London- There is a record number of venture capital funds pouring into the digital sector of London. The government is eager to offer startup loans and tax breaks to encourage innovation.<br /> Cairo- The Egyptian city has a large number of young, educated graduates ready to work in the startup world. Accelerators and crowdfunding is taking off in the country.<br /> Sofia- The capital of Bulgaria has one of the lowest income tax rates and one of the fastest internet speeds, making it a regional hub.</p> <p>Photo: Aeropixels Photography</p>
Massive UK pension chops hedge funds, private equity in 'ruthless' cost-cutting
Hedge Funds
<p>Railpen, one of the largest U.K. pensions, is cutting all but two of its external hedge funds.</p> <p>The $32 billion pension fund had 10% of its assets in more than 100 hedge funds two years ago, reports the Financial Times. Now, the fund has just 2% of its assets allocated to two hedge funds. The pension's investment director says the cuts are part of the "ruthless" cost reduction program the fund instituted 18 months ago.</p> <p>Railpen is also cutting most of its $3 billion private equity investments in exchange for more co-investing buyout deals, and has also axed a large amount of its external active equity managers, moving from 17 in 2011 to two today.</p> <p>“A lot of things that investors are not fully aware of get charged to funds. Sometimes people put their payroll through [as a cost]. I am not saying there is anything illegal here, but the level of detail is very difficult for end investors to grasp,” says Chris Hitchen, CEO of Railpen.</p> <p>PFZW, the second largest European public pension fund, has also "all but eradicated" its 4.2 billion euro hedge fund investments. The pension voiced concerns about fees, performance, and the hedge funds' "often limited concern for society."</p> <p>Calpers, one of the largest U.S. pensions, culled its hedge fund investments last year, calling them complex and costly. It also moved to cut half of its private equity managers.<br /> Photo: Gabriel Amadeus</p>
Want to eat at Rao's? Sometimes, even $2,500 won't get you a table
<p>What does it take to get a decent table at a New York restaurant -- well, not just any restaurant, but Rao's, the Italian eatery where Jimmy Fallon and Katie Holmes once shared a table?</p> <p>Julian Rubinstein, head of American Asset Management, says he plunked down $2,500 at a charity auction but now can't even get a seat in the men's room.</p> <p>The drama began last year at the Leukemia &amp; Lymphoma Society auction, reports the New York Post. Charles Gargano, a Rao's regular, donated the table, and offered Rubinstein a seating nine months later. But then Gargano canceled the reservation, telling Rubinstein he didn't pay enough, Rubinstein claims.</p> <p>Gargano says Rubinstein bought the table off someone else, and that he only auctions off his table once per year.</p> <p>Nick Mastroianni III, who won the Leukemia &amp; Lymphoma Society man of the year, says he got Gargano to donate the table at Rao's, but it was a misunderstanding. The table was accidentally given to two different charities, and another cancer charity had already been promised the table to auction.</p> <p>This isn't the first table drama Rao's has had. Earlier this month, broker Christopher Bond had his table canceled after spending $6,000 at a charity auction. Investigator and media personality Bo Dietl put the table up at the children's hospital auction, but says he wanted $10,000 for the table. After Bond won, Dietl says he had others offer $10,000 to take Bond's place. That argument got so heated that Dietl threatened to punch Bond in the face if he ever sees him at Rao's.<br /> Photo: H.L.I.T.</p>
Connecting the dots: Kiss Christmas and retail stocks goodbye
Asset Management
<p>In my article from November 17, I touched on the growing number of retailers that report shrinking traffic and disappointing sales:</p> <p>Our consumer-driven economy is not getting any help from suddenly sober shopaholics. In the most recent report, the Commerce Department reported that retail sales rose by a measly 0.1% in September. And it didn’t matter where you wear Gucci loafers or Red Wing work boots.</p> <p>Since then, the retail landscape has gotten even muddier.</p> <p>The Commerce Department reported that retail sales increased by a miserly +0.1% in October, below the +0.3% Wall Street was expecting. Additionally, sales for the month of September were revised downward from +0.1% to 0.0%.</p> <p>So this is what the last three months look like:</p> <p>August 0.0%<br /> September 0.0%<br /> October 0.1%</p> <p>You should pay careful attention to retail sales because there is a strong correlation between plunging retail sales and plunging stock prices!</p> <p>Walmart, Macy’s, and Nordstrom are the three high-profile retailers to disappoint Wall Street, but they have lots of company.</p> <p> Shoe retailer DSW, Inc. lowered its full-year earnings forecast from $1.80 – $1.90 per share to $1.40 – $1.50 per share. The problem? Slow customer traffic.</p> <p> The Gap reported that its October same-store sales dropped by 15% at Banana Republic and by 4% at Gap stores. Additionally, the company warned that it would miss Q3 expectations.</p> <p> Urban Outfitters reported Q3 sales of $825.3 million, well below the Wall Street pipe dream of $868.9 million. Urban Outfitters’ shares closed down 7.4% to a four-year low after spitting up that revenue hairball.</p> <p>&nbsp;</p> <p>The biggest confirmation of the retailing woes came from the Port of Long Beach, the second-busiest US port.</p> <p>The Port of Long Beach handled 307,995 containers in October, down from 310,482 and 0.8% less from the same month last year. More troublesome is the 14% plunge in imported containers since August.</p> <p>That tells me retailers are cutting back their pre-Christmas orders in anticipation of disappointing holiday sales and due to already bulging inventories.</p> <p>Speaking of bulging inventories, I want to point out two retailers with ballooning inventories that I think are profit time bombs just waiting to kill investors.</p> <p> Lululemon Athletica (LULU): Yoga-pants maker Lululemon has been suffering from an inventory bulge. Inventory hit $280 million, a 55% year-over-year increase.</p> <p> Under Armour (UA): Inventory ballooned to $867 million at the end of Q3, a 36% increase.</p> <p>I’m not suggesting that you rush out, sell all your retail stocks, or short Lululemon and Under Armour tomorrow morning. As always, timing is everything. However, it is crystal clear to me that the Grinch is definitely going to steal Christmas… and that retail stocks are one of the worst places to invest your money.</p> <p>Find out what other stocks are in peril—and how to make money from the demise of the losers.</p> <p>Tony Sagami</p> <p>30-year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here. To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.<br /> The article Connecting the Dots: Kiss Christmas and Retail Stocks Goodbye was originally published at</p> <p>This post was originally featured on ValueWalk.</p> <p>Photo: Random Retail</p>
Market peak? Private equity stepping up investments in hedge funds
Hedge Funds
<p>What happens when you cross a private equity fund with a hedge fund? No, this isn't a joke. It's the newest trend in investing -- PE firms investing in hedge funds for a cut of the famously rich "2 and 20" fees -- 2% asset management, 20% of profits. The Financial Times reports:<br /> Private equity groups and others are increasingly turning to hedge funds as they seek to capitalise on the maturing industry’s rich fees and growth.<br /> Credit Suisse is restarting a business that buys minority stakes in hedge fund management businesses, and Goldman Sachs is near to closing its second fund to do the same, both in private equity-style vehicles.</p> <p>The question:  Does this mark market peak for these industries?<br /> Photo: Paxson Woebler</p>
Treasury snapshot as we appoach the month's end
Capital Markets
<p>&nbsp;</p> <p>As we approach the end of November, let's take a close look at US Treasuries. The yield on the 10-year note ended the day on Friday at 2.22%, which is at the higher end of the year-to-date range of 1.68% to 2.50%. The yield on the 2-year note closed the week at 0.92%, two bps off its 5-year high set this past Monday.</p> <p>The first chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the St. Louis Fed's FRED repository for the Fed Funds Rate.</p> <p>Here is a closer look at the 2- and 10-year yields along with the FFR.</p> <p>A Long-Term Look at the 10-Year Note Yield</p> <p>A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well before the 1973 Oil Embargo that triggered the era of "stagflation" (economic stagnation with inflation). The trendline (the red one) connects the interim highs following those stagflationary years. The red line starts with the 1987 closing high on the Friday before the notorious Black Monday market crash. The S&amp;P 500 fell 5.16% that Friday and 20.47% on Black Monday.</p> <p>The dashed lines on the chart above were provided by Bob Bronson of Bronson Capital Markets Research. Bob comments:<br /> "The blue dashed lines are much more closely parallel to the all-data, log-linear best fit line — very similar to the high-low mid-channel line — since 1980. Then there is the even more currently relevant downtrend (black dashed line) since the 2007 high."<br /> The 30-Year Fixed Rate Mortgage</p> <p>The latest Freddie Mac Weekly Primary Mortgage Market Survey puts the 30-year fixed at 3.76%, off its low of 3.59% in early April, but its lowest level since early May. Here is a long look back, courtesy of a FRED graph, of the Freddie Mac weekly survey on the 30-year fixed mortgage, which began in May of 1976.</p> <p>Now let's see the 10-year against the S&amp;P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior.</p> <p>For a long-term view of weekly Treasury yields, also focusing on the 10-year, see our Treasury Yields in Perspective, which we usually update on weekends.</p> <p>This post originally appeared on Advisor Perspectives.</p> <p>Photo: Nathan Rupert<br /> &nbsp;</p>