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Wall Street’s takeover of peer-to-peer lending almost complete
FinTech
<p>Big banks are excellent at creativity and innovation, some of it a legitimate component of the business that helps the economy, and creativity in other areas has proven to be less than beneficial to the economy and market security. This includes finding and exploiting regulatory cracks and arbitrage opportunities, as a recent Financial Times piece observed, applying a sense of historical reflexivity to the recent dominance of the peer-to-peer lending revolution by banks and Hedge Funds.</p> <p>With peer-to-peer lending, sharp-eyed readers might feel a sense of déjà vu<br /> “Sharp-eyed readers might feel a sense of déjà vu,” Gillian Tett, U.S. managing editor of the Financial Times observes today. While discussing Wall Street’s ascendancy to dominate several angles of a “peer-to-peer” lending process that was advertised as a method to disintermediate banks, Tett, in a piece titled “The sharing economy is now a playground for Wall Street,” observes what what algorithmic traders might otherwise call a confirmation pattern. A confirmation pattern is a re-occurring event that often ends with the same conclusion. For Tett, the combination of banks operating in regulatory cracks is something that will end in "tears."</p> <p>"History suggests that whenever innovation and regulatory arbitrage are combined in an era of ultra cheap money, it often ends in tears — somewhere. If nothing else, that also suggests that policymakers need to find ways to stop activity falling between the regulatory cracks; not least because financiers are endlessly creative at dancing in those gaps."<br /> Peer-to-peer lending operating in regulatory cracks as a business model<br /> While she did not specifically identify it, Tett was peeling back the onion on a highly evolved business model. "The idea of using innovations to dance around tough capital rules is hardly new: in the early years of the past decade, banks used structured investment vehicles and collateralised debt obligations in the same way,” she writes, noting a unique relative value strategy. “They also took advantage of cracks in regulatory structures to create products that policymakers could not easily monitor or control (it was unclear, for instance, who was supposed to oversee mortgage derivatives).”</p> <p>This big bank issue has occurred on a frequent basis and can be tied back to 1998 with a man at the center of assisting in creating big bank “cracks” that can be exploited, one who is also at the center of the peer-to-peer revolution today: Larry Summers.</p> <p>In 1998 Summers fought hard to punish then CFTC Chair Brooksley Born, who wanted to study unregulated derivatives that would eventually have a significantly negative impact on the economy on more than one occasion. At that point, regulatory confusion and allowing banks to operate in the “cracks” seemed like the point, as the unwritten rules against questioning questionable bank behavior on derivatives were later codified into law in the form of the Commodity Modernization Act of 2000, stripping away common sense derivatives</p>
Square's imminent IPO could leave its CEO spread thin
FinTech
<p>Payments start-up Square could file the first documents for its IPO in as little as two weeks, according to Fortune.  The news comes packaged with two big unknowns.</p> <p>Firstly, there are the macro-economic issues stemming mainly from fears over the stability of the Chinese economy and the prospect of the Federal Reserve raising interest rates before the year is out.</p> <p>The second issue is how Square co-founder and CEO Jack Dorsey - who is interim CEO of Twitter, which he also co-founded - will handle running two public-listed companies.</p> <p>As Fortune points out, an executive running two public firms is rare. Someone running two firms, when one is actually going through the process of an IPO, is rarer still.</p> <p>Dorsey was a previously rumored to be a favorite for the full-time CEO gig at Twitter, but the company's board has since said it would only consider a full time CEO in a “position to make a full-time commitment to Twitter.”</p> <p>What is certain is that Square will need to clarify Dorsey's commitments before hitting the road to raise money. Until then, the prospect of handling the workload of two public companies is going to make Jack is a very dull boy indeed.<br /> Photo: George Redgrave</p>
Daily Scan: Japan wipes out 2015 gains, Europe health stocks slip
<p>Updated throughout the day</p> <p>September 29 </p> <p>Nearly all Asian markets finished in the red today with Tokyo the hardest hit. The Nikkei 225 collapsed 4.05%, wiping out all its gains for 2015.  While slowing growth in China and fears of a commodity slump have impacted everyone, Japan's massive fall today has renewed concerns that the Abenomics growth story may have hit the buffers. The Financial Times offers Sony as an example of how far sentiment has soured: the firm began the day announcing a box-office record for its new animated film Hotel Transylvania 2, only to see it share fall 8%.</p> <p>As markets open in Europe, shares are still sliding. The FTSE Eurofirst 300 opened down 1.3%, following from losses of nearly 2% on Monday. The STOXX Europe 600 Health Care Index is reported to be among the worst-performing sector indices, falling 2.1%, after US pharmaceutical and bitotech stock fells overnight.</p> <p>Here is what else you need to know:<br /> China’s offshore yuan softens versus US dollar. The offshore yuan softened against the US dollar today, at one point trading at a premium against the same day’s mid-price fix for the first time since November. At 6.3710 against the greenback, the offshore yuan was weaker by 130 basis points from Monday’s close, ending the currency’s longest winning streak in one month. South China Morning Post (paywall)<br /> U.S. still on track for 2015 rate hike. William Dudley, president of the Federal Reserve Bank of New York, said Monday the central bank is likely to raise short-term interest rates this year, echoing Chairwoman Janet Yellen’s message last week. Wall Street Journal.<br /> Typhoon Dujuan kills two in Taiwan. Two people were killed by a powerful typhoon which swept Taiwan on Monday night. About 1.8 million homes lost power during Typhoon Dujuan, which brought gusts of up to 227km/h. BBC<br /> China angered by Hillary Clinton tweet on women's rights. From calling her a "big mouth" to making Monica Lewinsky jokes, China has reacted furiously at US presidential candidate Hillary Clinton's recent comments about China's record on women's rights. Clinton said in a tweet that China President Xi Jinping was "shameless" for hosting a UN conference on women's rights. BBC<br /> U.S. launches airstrike after Taliban assault on Afghan city. US forces carried out the airstrike on the northern Afghan city of Kunduz today after after Taliban insurgents fought their way into the major city. The Washington Post.<br /> Ex-VW CEO investigated for fraud. German prosecutors are looking at Martin Winterkorn for fraud over Volkswagen rigging the diesel emissions tests. Reuters</p> <p>Iraq agrees to share IS intel with Russia, Syria, and Iran. The agreement – announce</p>
Daily Scan: Stocks plummet; McCarthy running for Speaker
<p>Updated throughout the day</p> <p>September 28</p> <p>Good evening,</p> <p>Stocks fell hard Monday, dragged down by the health-care sector. The Dow plummeted almost 2%, falling below 16000 for the first time since Sept. 1. The S&amp;P 500 fell 2.6% and the Nasdaq lost 3%. Valeant Pharmaceuticals saw their shares drop 16% after the House oversight committee indicated that it wanted documents from the company explaining the price increases of two heart drugs. Oil fell almost 2.7%, closing below $45/barrel. China’s nasty industrial production numbers weighed heavy on stocks today though a rally in tech shares did lead the Shanghai Composite to retrace losses and close 0.27% higher for the day. The Nikkei was down 1.32%, while Singapore's STI fell 1.45%. Hong Kong, Taiwan, and Korea meanwhile were all closed for a holiday. Over in Europe, things weren't any better. In fact, it might actually be worse thanks to the political risk surrounding Catalonia’s recent elections. The FTSE 100 is currently down 0.95%, the DAX down 1.04%, and the CAC down 1.20%.</p> <p>Here’s what else you need to know:</p> <p>Kevin McCarthy in running to replace John Boehner. The Republican House Majority Leader McCarthy announced his candidacy for speaker of the House Monday. Boehner is set to retire at the end of October. Reuters </p> <p>Trevor Noah is hosting his first official Daily Show tonight. Comedian Kevin Hart will be the first guest on Noah's Comedy Central show.</p> <p>Obama speaks at U.N. President Obama laid into Russian President Vladimir Putin and Syrian President Bashar al-Assad while speaking to the U.N. for the seventh time. Obama is meeting personally with Putin Monday, and is also meeting with Cuban President Raul Castro Tuesday. CNN</p> <p>Ex-VW CEO investigated for fraud. German prosecutors are looking at Martin Winterkorn for fraud over VW rigging the diesel emissions tests. Reuters</p> <p>Spain's Catalonia a step closer to independence. Catalonia’s independence movement won a historic but incomplete election victory on Sunday night, securing a majority of seats in the regional parliament but falling short of winning an outright majority of the vote. The poll was seen as a test of the region’s desire to break with Spain and set up an independent republic. The Spanish bond market meanwhile, is going haywire. Financial Times (paywall)</p> <p>Russia wants 'co-ordination' against IS. Russian President Vladimir Putin has called for a regional "co-ordinating structure" against Islamic State (IS). Mr. Putin reiterated his support for Syrian President Bashar al-Assad, who Western countries and the Syrian opposition have said must go. BBC</p> <p>&nbsp;</p> <p>Xi: “no basis” for long-term yuan devaluation. Speaking to U.S. President Barack Obama, Chinese President Xi Jinping said that “there is no basis for the renminbi to have devaluation in the long run,” adding that “at present, the exchange rate between renminbi and US dollars is moving toward stability.” SCMP (paywall)</p> <p>Iraq agrees to share ISIS intel with Rus</p>
Video: Activist investing is 'changing drastically'
Hedge Funds
<p>Activist investing is changing quickly, says Donald Drapkin Chairman, Founder and Co-Chief Investment Officer at Casablanca Capital, on Wall Street Week. "These guys are ratcheting up who they're going after," and bigger investors are taking a more activist approach, he says.</p> <p>&nbsp;</p>
ETF Outlook: more biotech blunders or a biotech bounce?
<p>&nbsp;</p> <p>&nbsp;</p> <p>Stocks' September shenanigans continued last week as the S&amp;P 500 lost more than one percent and although the Dow Jones Industrial Average notched a triple-digit gain last Friday, a problem is surfacing: Increasingly bearish action in the biotechnology space.</p> <p>&nbsp;</p> <p>It is not a stretch to say that in the week ahead, this is an issue that traders of and investors in exchange traded funds will be heavily focusing on. That much is confirmed when noting the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB), the largest biotech ETF, slumped 13 percent last week and will enter Monday at its lowest levels in a month. With last week's tumble, IBB now resides nearly 11 percent below its 200-day moving average.</p> <p>&nbsp;</p> <p>As an equal-weight ETF, the SPDR S&amp;P Biotech ETF (NYSE: XBI) has heavier exposure to smaller biotechs than does the rival IBB. So it is not surprising that XBI was worse for the wear last week, sliding 15 percent.</p> <p>Read more at Benzinga. <br /> Photo: 401(K) 2012 </p>
Communication lessons from Donald Trump
<p>In a previous article, I discussed the lessons that advisors could learn from the non-verbal behavior of Donald Trump. Today, I will examine his communication skills and ways advisors can benefit from emulating them. To be clear, I’m nottalking about the substance of Trump’s message, as a presidential candidate or otherwise, but the manner in which he presents it.</p> <p>It’s not surprising that Trump is an excellent communicator. He honed these skills as host of the popular Apprentice television shows over an 11-year period. Here’s a summary of why he is so effective.</p> <p>He doesn’t use a teleprompter</p> <p>Trump is unscripted. He speaks with no notes and takes pride in the fact that he does not use a teleprompter. He has derided “traditional politicians” who use this tool and give the same speech every day.</p> <p>His demeanor is informal. His tone is conversational. Regardless of the size of the crowd, he intersperses his remarks with rhetorical questions and waits for an audience reaction.</p> <p>His style is in sharp contrast to many politicians. They tend to be carefully scripted, with “talking points” that are polished by highly paid consultants. They strive to demonstrate an encyclopedic knowledge of their subject matter, often with mind-numbing results.</p> <p>Instead of conversing with their audience, they lecture them.</p> <p>My experience</p> <p>When I started making television appearances, I was terrified. I prepared for hours and tried to anticipate every question. I rehearsed my responses. I recall vividly an experience I had on a Fox morning news program. The anchors were bantering with each other as I entered the set. One of them turned to me and asked this question on air: “Hey Dan. What do you have?”</p> <p>I was like a deer caught in the headlights. I bumbled my way through an answer to a question I never could have anticipated. The interview went downhill from there.</p> <p>I learned a valuable lesson that day. I noted how comfortable the anchors were in front of the camera and how stressed I was by comparison. So I came up with a simple solution. I decided that, in every interview, I would emulate the demeanor of the interviewer. I would be as conversational, relatable and comfortable as they were.</p> <p>It proved to be easier than I thought, because that is how people relate to each other in their everyday lives. It also markedly reduced my anxiety. Instead of trying to live up to my image of how one should act on television, I just had to be myself.</p> <p>He dumbs-down complex subjects</p> <p>Immigration policy and the proposed nuclear agreement with Iran are very complex subjects. They are also hot-button issues for voters.</p> <p>Whatever you may think of it, Trump’s solution to illegal immigration is remarkably simple:</p> <p> He would build a wall.<br /> He would get Mexico to pay for the wall.<br /> He would deport illegal aliens.<br /> He would end birthright citizenship.</p> <p>However, his plan is replete with flawed assumptions, glosses over daunting practical obstacles and rests on a dubious legal premise.</p> <p>The Iran agreement is similarly intricate. Trump has another “easy </p>
Traits of a successful investor
<p>During my stay within Yellowstone National Park, I was reflecting and pending down my thoughts on what makes a successful investor. I know that I have written a post similar to this in the past, however, I felt that it was time to write a new one – partly because there are new traits that I feel that are important, shaped through my experiences and interactions.<br /> Traits of a Successful Investor Insatiable Curiosity<br /> I find that the route to becoming a successful value investor is not just solely being curious about researching on companies or investing strategies. That will make us a better investor compared to those who do not put in the effort to learn more about the different strategies and all, however, I do not believe that is sufficient. Many a times I find that the materials that make me a better investor are materials solely unrelated to value investing. Take for instance, I was reading an article titled, “Doing Business in Japan“. It was a really interesting article from the point of view of a foreigner who migrated to Japan and his experiences of working and starting a business in Japan. However, from such an article it gave me insights and understanding of the business culture and corporate governance within Japan. Hence, don't just narrow down your curiosity to one aspect but broaden your interests. While value investing may be an investment strategy, it too is a way of thinking about various issues.<br /> Traits of a Successful Investor Networking<br /> Built up a great network of investors to talk to, be it seasoned or new investors. I have always found myself fortunate to have my friend/partner to start my value investing with and over the years it is this mutual help that has deepened our understanding towards value investing. Furthermore, over the years, we have constantly been meeting other like-minded individuals and this has definitely been rewarding. I once believed that the road of a value investor is often lonely due to our contrarian nature, however, this belief has changed over the years. It is all a matter of whether one is willing to look and put in the effort to make that connection. Hence, to all value investors out there be it seasoned investors or those starting their journey out, we are always willing to meet up for a chat to share our insights and hear about yours.<br /> Traits of a Successful Investor Humility<br /> I have once said that as value investors, we require that necessary arrogance to allow us to have the conviction in our investments when we are going against the herd. To achieve greatness, I believe a balance of the two is required. One needs to know what you can do and what you can't, and be grounded in reality. The greatest dangers some face are when they have been through a period of successful investments, such as since post Global Financial Crisis. A rising tide lifts all boats, during this period every stock has benefitted from an extremely long period of cheap interest rates. To immediately attribute one's success over this period to successful stock picking resulting in a conviction that one can never be wrong again is very dangerous. We have to constantly keep our self belief in check and know when to listen to others.<br /> Traits of a Successful Investor Attention to detail<br /> I have seen many formulas being taught out there and many investors have started applying it. While the formulas are not wrong, however, value investing is not just some mathematical problem where formulas are sufficient in solving it. Hence, this is why it is both a form of science and art. It is not a</p>
The very best of… Dan Loeb’s letters to CEOs
Hedge Funds
<p>It’s been awhile since we’ve seen Dan Loeb’s poison pen put to good use so, here are the nastiest, the most scathing, and above all, the most hilarious letters of his from back in the day – just in case you forgot why the New Yorker called him the “angry investor” back in 2005.</p> <p>Enjoy.</p> <p>Letter to InterCept Inc., 2004<br /> “Do not confuse our $22 million stake as a vote of confidence in the Company’s senior management or its Board of Directors. On the contrary, it is our view that your record in management, acquisitions and corporate governance is among the worst that we have witnessed in our investment career… “</p> <p>“…The Company’s proxy statement provides us with our first indication that a “good ol’ boy” (“GOB”) set of ethics prevails at the Company rather than standards dictated by fairness and good judgment. First, the Company employs the C.E.O.’s daughter, Denise, and her husband David Saylor, who received total compensation of $238,776 in 2003. I called Mr. Saylor last Friday at 4:00 p.m. at the Company’s offices to learn more about the core product that he presumably sells. He had his calls forwarded to his cell phone since it was still business hours. I identified myself as a shareholder interested in learning about the core product lines to which he replied that he could not speak as he was “on the golf course.” I was not sure whether it was his relation with his father-in-law or the $238,776 salary that affords him the opportunity to work on his golf game during business hours.”<br /> Letter to Ligand Pharmaceuticals, 2005<br /> “When one analyst was queried about the reputation of the senior executives at the Company, he said that you [Ligand C.E.O. David Robinson] are “the worst CEO in biotech”, and another analyst we spoke with attributed the significant valuation disparity between the current stock price and the much higher intrinsic value of the Company to the “David Robinson Discount”. I must wonder how in this day and age the Company’s Board of Directors has not held you and [Ligand C.F.O.] Paul Maier responsible for your respective failures and shown you both the door long ago—accompanied by a well worn boot planted in the backside.”<br /> Letter to Star Gas Partners, 2005<br /> “Sadly, your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America. (I was amused to learn, in the course of our investigation, that at Cornell University there is an “[Star Gas C.E.O.] Irik Sevin Scholarship.” One can only pity the poor student who suffers the indignity of attaching your name to his academic record.)”</p> <p>“…how is it possible that you selected your elderly 78-year old mom to serve on the Company’s Board of Directors and as a full-time employee providing employee and unitholder services? We further wonder under what theory of corporate governance does one’s mom sit on a Company board. Should you be found derelict in the performance of your executive duties, as we believe is the case, we do not believe your mom is the right person to fire you from your job…. We insist that your mom resign immediately from the Company’s board of directors.”“<br /> Letter to Potlach, 2003<br /> “Since you ascended to your current role of Chief Value Destroyer (“C.V.D.”) when you assumed the formal title of C.E.O. in 1999, the shares have dropped over 45%, a destruction of shareholder value in excess of $520 million. This negative sum does not include the declin</p>
Didi Kuaidi snaps up stake in Ola
<p>This week in unicorns, Chinese decacorn Didi Kuaidi and its backers have turned their fight against Uber all the way up to 11.</p> <p>According to TechCrunch, China’s largest ride sharing firm taken part in funding round worth about $500 million for India’s dominant ride-hailing app, Ola.</p> <p>How much the Beijing-based company invested in Ola is still unknown, what we’re sure of though is that the round valued the Bangalore-based firm at $5 billion, making it one the largest ride-app companies currently going.</p> <p>This is the latest salvo in a war being waged against Uber being waged by a global consortium that also includes the likes SoftBank, Alibaba and Singapore fund Temasek. As the raging quinquagintacorn continues to scale up, the coalition has been backing Uber's competitors in all its key markets – including Uber’s home turf.</p> <p>Didi inked a deal with US-based Lyft this month that will allow the two companies to shares riders across the world, and just to be sure, it invested $100 million in the firm as well. It also injected an unspecified amount of cash in Southeast Asia’s GrabTaxi, an investment that will surely cement Didi’s place in the region’s burgeoning car service arena.</p> <p>How Uber will respond to this is anyone’s guess, but given Didi’s great choice of investments, CEO Travis Kalanick is no doubt having some sleepless nights.<br /> Photo: Abhijit Patil</p>