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Weekend Scan: Jobs report misses expectations; Lacker still on track to raise rates
Capital Markets
<p>Happy Saturday, folks. While you were sleeping, the U.S. equity markets continued their descent largely thanks to uncertainty over the Fed’s lift-off timing following the non-farm payrolls report. August jobs climbed 173,000, below expectations of a 220,000 rise but Richmond Fed President Jeffrey Lacker was quick to point out that while it didn’t meet expectations, 173,000’s “still a strong number,” and that it isn’t enough to change the picture for monetary policy. The bond market however doesn’t seem to be pricing in that possibility, with short-end yields barely moving from their Thursday levels.</p> <p>Here’s what else you need to know:</p> <p>Chinese pre-crash trading account data inexplicably unavailable. The weekly report published by the China Securities Depository and Clearing Corporation (CSDC) – which details the number of people who opened or closed trading accounts that week – mysteriously ends on May 29, two weeks prior to the Shanghai Composite’s dramatic crash. Whether or not this information was pulled by Beijing, or if the CSDC simply chose to stop publishing these figures, is still unclear. Quartz</p> <p>Mainland banks are going to have a rough year. Ratings agency Fitch says that mainland lenders’ profitability will continue to get screwed in the second half of the year, mostly due to a rise non-performing loans following a sustained deterioration in asset quality. “Weakening asset quality could result in some profit decline in the near term, as banks cannot rely on lowering their provision coverage to generate positive profit growth.” South China Morning Post </p> <p>Egyptian billionaire offers solution to migrants. Naguib Sawiris has offered to purchase an island from Greece or Italy to house hundreds of thousands of migrants that are currently overwhelming Europe. Sawiris says he would give the island independence and provide jobs for the migrants to make it their own country, permanently or temporarily. TIME</p> <p>Good news: there’s more trees than we thought. A new study found 3.04 trillion trees on Earth, 7.5 times the amount thought to exist. On the down side, the number of trees has fallen by 46% since humans arrived on the planet. CNN</p> <p>Top Democrat opposes Iran deal. Sen. Ben Cardin, the top Dem on the Senate Foreign Relations Committee, says he will oppose the nuclear deal with Iran. Cardin’s announcement won’t kill the deal in Congress, but Cardin’s weight does hurt Obama’s efforts. Cardin says he fears the agreement would strengthen Iran in the long run.Politico</p> <p>Indonesia cuts plans for high-speed train. The country has decided to ax what would have been the first high-speed train for the nation, connecting Jakarta and Bandung, because the 93 mile route was deemed too short for a high-speed train. Wall Street Journal<br /> You won’t believe this…<br /> Died: The world’s shortest man. N</p>
Morgan Stanley ranks ‘winning’ and ‘losing’ investment banks in 2015
Capital Markets
<p>Morgan Stanley has published a ‘banking report card’ that sizes up the performance of major investment banks in 2015. Finbuzz has obtained a copy of the report and below is a brief summary.</p> <p>2015 certainly has been no cakewalk for big banks as monetary policy, market corrections, and debt crisis make profitability of some investment banks uncertain.</p> <p>Banking analysts at Morgan Stanley have declared 2015 the year of US banks, as these institutions stand to gain the most wallet share.</p> <p>Things are looking good for Morgan Stanley and Goldman Sachs, who are poised to continue to outperform given the high growth of US capital markets. This year major management and strategy changes are expected at HSBC, Credit Suisse, Barclays, BNP, and Standard Chartered in order to boost their return on equity, which is currently 3-4% lower than US firms.</p> <p>Regional players like Wells Fargo in the US and the Nordic and Baltic Nordea in Europe are both set to increase securities finance because they aren’t as constrained as some of the other big players.</p> <p>This graph shows the equities market share change in the first six months of 2015, compared to the same time period last year. The banks on top, such as Goldman Sachs and Morgan Stanley both performed as ‘winners’ in the first half. Barclays had an abhorrent first two quarters.</p> <p>Goldman Sachs and J.P. Morgan were the overall ‘winners’ in equities sales and trading, whereas UBS and Royal Bank of Scotland were ‘losers’.</p> <p>Morgan Stanley, HSBC, UBS, and Credit Argicole topped the fixed incomes and trading this past year. The report attributes this trend to ECB QE, which has given European banks a boost. This is surprising because the ECB QE and de-pegging of the Swiss franc drove many investors to divert their portfolios away from Europe.</p>
Fiat scion Lapo Elkann shows off his new custom speedboat
Lifestyle, 4:01
<p>Flashy Fiat heir Lapo Elkann has just unveiled his latest toy - a new camouflage speedboat designed by his own design and fabrication venture Garage Italia Customs.</p> <p>According to Forbes, Garage Italia had partnered with Italian craftsmen at Baglietto Yachts to create the speedboat. The vessel - imaginatively named Lap1 - is based on Bagiletto's MV13 design and customized with a digital camouflage body work designed by Italia Independent.</p> <p>The boat was hand-painted in five different shade of paint and matte transparent lacquer in the shade of blue Baglietto-built navy craft are known for. Apparently, this will not be the last collaboration between Baglietto and Garage Italia - watch this space.<br /> Photo: Garage Italia Customs via Instagram</p> <p>&nbsp;</p>
Weekend reading from a Wharton professor
Lifestyle, 4:01
<p>It's the last weekend of summer, the perfect time to wrap up summer reading and get in school-mode. Adam Grant, professor of management and psychology at the Wharton School, shares seven new books to read about work and psychology.</p> <p> "Presence" by Amy Cuddy: Cuddy writes about how we can achieve success by changing how we carry ourselves.<br /> "Unfinished Business" by Anne-Marie Slaughter: The CEO of the New America Foundation talks about how individuals and policy makers can push for more gender equality.<br /> "Superforecasting" by Philip Tetlock and Dan Gardner: This behavior science approach examines how we can better predict major events.<br /> "Friend and Foe" by Adam Galinsky and Maurice Schweitzer: This book breaks down cooperation and competition, from social media to gender differences.<br /> "Leadership BS" by Jeff Pfeffer: Leadership advice is generally as good as dirty dishwater, and the wrong people are in power.<br /> "Rising Strong" by Brene Brown: Looking at the concept of bravery, how can we start our own personal revolutions?<br /> "Broadcasting Happiness" by Michele Gielan: Happiness isn't just about individuals, it's about sharing with others.</p> <p>Photo: Ginny<br /> &nbsp;</p>
You've Gotta Be Kidding Me: That story about a fund making $1B on Black Monday? Impossible!
Hedge Funds
<p>Remember those stories you read about a "Black Swan" fund that made $1 billion on Black Monday?</p> <p>"It's all marketing garbage," says Tom Sosnoff, a trader and co-host of TastyTrade. In a 15-minute video, Sosnoff along with his co-host Tony Battista, eviscerate a story that Mark Spitznagel of Universa Investments made $1 billion on August 24, when the Dow Jones Industrial Average plunged 10% at the open.</p> <p>It isn't even remotely possible, says Sosnoff who took out a pencil and paper to do the math.</p> <p>Battista figures that if Universa had $250 million in capital to invest in put options (which Spitznagel claimed to have deployed), the fund would have needed to trade more than 60,000 in options (in one scenario) and more than 300,000 in options, in another possible scenario. The market didn't trade anywhere near that volume. At the open, the open interest stood at 83 in the first scenario and just over 9,000 in the second.</p> <p>"This scares me," says Sosnoff. Spitznagel was splashed on every major media outlet -- from Bloomberg to The Wall Street Journal and The New York Times. "How does it work? I just don''t get it. Can't anybody do the math?"</p> <p>Watch this episode of "You've Got to Be Kidding Me" on TastyTrade and let us know what you think.</p> <p>h/t The Reformed Broker</p> <p>&nbsp;</p> <p>&nbsp;</p>
NexAmerica People Moves: Fortress exec departs; Stanford Management CEO leaves for Credit Suisse
Hedge Funds
<p>Fortress hedge fund exec departs firm. Stuart Bohart, president of the firm's hedge fund unit, is leaving the firm after five years. Fortress' macro trading business has suffered recently from disappointing performance and outflows. Bohart previously worked as co-head of Morgan Stanley's asset management unit. Wall Street Journal</p> <p>Credit Suisse hedge fund arm hires former Stanford Management CEO. John Powers, former president and CEO, is leaving the Stanford University endowment to lead Credit Suisse Asset Management's new hedge fund initiative. Powers will be launching a strategy that invests in the equity of hedge fund managers. Institutional Investor<br /> Photo: ©iStock.com/ooyoo<br /> &nbsp;</p>
NexAmerica People Moves: Northern Trust adds to Canada team; BlackRock alpha strategies head to retire
Asset Management
<p>Northern Trust added institutional sales v.p. Nick Petruccelli has joined Northern Trust for the newly created position of senior v.p. for institutional sales in Canada. Petruccelli will be responsible for building the custody and asset servicing business with pensions funds, endowments and foundations. Petruccelli most recently worked as head of sales and business development at Larsen &amp; Toubro Infotech. Pensions &amp; Investments</p> <p>BlackRock alpha strategies head to retire. Quintin Price, the lead behind the $944 billion alpha strategies group, will retire next year. Price will return to London, and will continued to work with the firm as senior advisor through next summer. The 54-year-old Price has been with the firm since 2005, and has led the alpha strategies group since its start in 2012. Reuters</p> <p>Nikko Asset Management hires institutional business head. Nikko Australia hired Eddy Schipper to the newly created role. Schipper previously worked as executive director of Asia Pacific investor relations for IFM Investors. Investor Daily<br /> Photo: ©iStock.com/ooyoo<br /> &nbsp;</p>
Slamming Bill Gross in the Twitter-sphere
Lifestyle, 4:01
<p>The Internet has no love lost for Bond King Bill Gross. Gross is known for his, ahem, colorful commentary. His latest blog post was critical of the Fed, and not everyone agreed with Gross. Here are some of the grossest tweets about the King in recent weeks:</p> <p>&nbsp;</p> <p>"That's what [Bill] Gross talks. His own book." -fmr Dallas Fed President Richard Fisher @CNBC<br /> — Kelly Evans (@Kelly_Evans) September 3, 2015</p> <p>Re: Bill Gross: "I don’t think I have ever seen a bond fund drop almost 3% in one day.” http://t.co/9bRZxmcaLF @GZuckerman @kirstengrind</p> <p>— Greg Ip (@greg_ip) August 25, 2015</p> <p>@IvanTheK And that for everything he says, there is an equal and opposite Bill Gross statement some time in the last 3 years<br /> — Mark Dow (@mark_dow) September 2, 2015</p> <p>Is it just me or are these monthly updates by Bill Gross getting more and more awkward? https://t.co/Sw642cZ5eR</p> <p>— Cullen Roche (@cullenroche) September 2, 2015</p> <p>"Skin in the game" talk is silly. Why would Bill Gross care if he lost $10 million? Will change nothing in his lifestyle.<br /> — grodaeu (@grodaeu) August 26, 2015</p>
Daily Scan: Stocks lower heading into holiday weekend
Capital Markets
<p>Updated throughout the day</p> <p>September 4</p> <p>Good evening,</p> <p>Stocks fell Friday after the job report came back mixed. The Dow fell 1.7%, the S&amp;P 500 lost 1.5%, and the Nasdaq slipped 1.1% Friday. Oil also fell, but is still holding above $45/barrel. Nonfarm payrolls rose 173,000 last month, and unemployment fell to 5.1% from 5.3%. Economists had projected a 220,000 jobs boost for the last month. On the up side, revisions for June and July show more jobs were added than originally estimated. The job report doesn't give a clear indication of how the Fed will react at their September meeting, but everyone is antsy for an interest rate decision. Richmond Fed President Jeffrey Lacker said this morning that even though the jobs number didn't meat expectations it is "still a strong number." Lacker says the report didn't chance the picture for monetary policy, and he's still supporting a rate rise. This weekend is Labor Day in the U.S. which means markets will be closed Monday and summer is officially over and there ain't nothing the Fed can do to change that.</p> <p>Here’s what else you need to know:</p> <p>Egyptian billionaire offers solution to migrants. Naguib Sawiris has offered to purchase an island from Greece or Italy to house hundreds of thousands of migrants that are currently overwhelming Europe. Sawiris says he would give the island independence and provide jobs for the migrants to make it their own country, permanently or temporarily. TIME</p> <p>Good news: there's more trees than we thought. A new study found 3.04 trillion trees on Earth, 7.5 times the amount thought to exist. On the down side, the number of trees has fallen by 46% since humans arrived on the planet. CNN</p> <p>Top Democrat opposes Iran deal. Sen. Ben Cardin, the top Dem on the Senate Foreign Relations Committee, says he will oppose the nuclear deal with Iran. Cardin's announcement won't kill the deal in Congress, but Cardin's weight does hurt Obama's efforts. Cardin says he fears the agreement would strengthen Iran in the long run. Politico</p> <p>Indonesia cuts plans for high-speed train. The country has decided to ax what would have been the first high-speed train for the nation, connecting Jakarta and Bandung, because the 93 mile route was deemed too short for a high-speed train. Wall Street Journal</p> <p>It was the best of times and the worst of times for hedge funds. Side by side headlines: "Hedge funds faced a test in August and faltered" AND "Some hedge funds prosper in market tumult." Either way, investors pay 2 and 20. New York Times A and B (paywall)</p> <p>Miserable week for stocks. The Nikkei dropped 7% and the Hang Seng 4.7%. The Shangai Composite, which traded only Monday through Wednesday, lost 2.2%. Friday, European markets were trading about 2% lower and heading for a negative close to the week as well.</p> <p>Hong Kong PMI falls to six-year low. Weak demand, lower output, as well as one the largest and fastest workforce declines since 2003 led the Nikkei Ho</p>
The China survival guide: Foreign funds change strategy
Asset Management
<p>As China’s markets are consumed by panic and paranoia, foreign investment funds are in a scramble to switch their strategies and generate some upside from the chaos, or at least mitigate some of their loses.</p> <p>According to Reuters, there have been range of responses to the implosion. Here are a few of the strategies funds are adopting to survive the rout:</p> <p>Looking to Hong kong. Those who still remain bullish on China’s long terms prospects are now looking for more opportunities in the territory where valuations are lower. Another main attraction is that the market is better regulated and less subject to whims of Beijing officials than Shanghai and Shenzhen. </p> <p>Shorting Asian currencies. While the bearish sentiment on Asian currencies has eased recently, those that still see the decline in the yuan, and fall in national exports, as a precursor to more economic pain down the line are betting against the currencies of China's Asian trading partners.</p> <p>Shorting banks with heavy China exposure. Many of the same pessimists going short on Asian currencies are also banking on the decline of those with massive China exposure, particularly UL-headquartered banks like HSBC Holdings, and Standard Chartered.  </p> <p>Buying US mortgage-backed bonds. Some are investing in this area in the expectation that the wealthy Chinese looking for a safe haven will pull capital out of China and pour it into US real estate.</p> <p>...or just staying focused on China. Instead of fleeing the mainland completely some are just becoming more targeted. Fidelity Investments, for example, is seeking value in specific high-growth business, particularly in the consumer space, that were undervalued even before the meltdown.<br /> Photo: Lwp Kommunikáció, Bear Grylls Ventures</p>