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The dollar drop and credit spreads: How to fix this
Capital Markets
<p>The dollar drop and credit spreads: How to fix this, by Mauldin Economics<br /> This is a pickle wrapped in a conundrum surrounded by a puzzle, or something like that. The Fed declined to hike rates, which everyone thought was bullish, and then stocks got on the vomit comet. They’ve been going down on an elevator ever since.</p> <p>I think what’s interesting here is how shamefully far behind the Fed is on this. Dudley is out there still talking rate hikes. Like, just the other day. He has gone right out of his tree. It’s almost as if he lost his B-Unit and can’t log into Bloomberg.</p> <p>It was like this in the financial crisis, too. The Fed was very slow to act. It is a known fact that the Fed has never forecasted a recession (in spite of employing hundreds of nerd economists whose job it is to do precisely that). They don’t even react to them very well. I’m not certain we’ll get a recession, but the Magic 8 Ball says, “It is decidedly so.”</p> <p>Like junk bonds, for example.</p> <p>Credit spreads tend to be the best capital markets indicator of bad juju. The underlying bonds are even worse than the ETF. There are bonds that are gapping 10 points lower at a time.  There is no dealer participation.  We are going to get hung bridge loans.  Some of the larger deals are troubled.  It is a mess.</p> <p>My guess is that over the course of the next few weeks, the Fed is going to change their minds on rate hikes. Maybe they have already. It’s been my view that they won’t hike until 2017. I still believe that to be the case. I think you and I know what the Fed is going to do better than the Fed itself.</p> <p>There are some people who think we’re FUBAR, that the Fed is out of ammo and we just have to get run over by the Mack truck because we can’t hike rates anymore, and what good is QE going to do, anyway?</p> <p>Well, the one thing QE did was to raise asset prices, which happens to be the thing that currently ails us.</p> <p>But remember, the Fed has all kinds of tools that haven’t even been explored yet.</p> <p> They can lower reserve requirements<br /> They can lower IOER (interest rate on excess reserves)<br /> They can do some magic stuff with the repo market that I don’t understand<br /> Helicopter money</p> <p>The latter refers to when the central bank prints money and doesn’t buy bonds with it… it just mails out checks to everybody.</p> <p>If I were a gold bear, I’d be nervous.<br /> Let the Dollar Drop<br /> The only way the Fed can get out of this is if they somehow manage to get the dollar to go the other way. To sell off</p>
Are "honey badgers" the new unicorns?
Venture Capital
<p>Unicorns - startups valued at over $1 billion - are so common now that their cachet has waned. In an age of frothy private market valuations a new, even more elite breed of startup is on the rise: the honey badger. </p> <p>Fortune's Dan Primack has coined the term to describe startups that have raised over $1 billion or more in equity funding. They are not to be confused with Decacorns - startups valued over $10 billion - but there is some overlap.</p> <p>Fintech start-up SoFi is the newest member of the honey badger sett. raising $1 billion in round led by SoftBank this week - the startup has now raised $1.42 billion plus $400 million in debt financing.</p> <p>Of all the firms to raise $1 billion or more in private funding, research firm Mattermark puts SoFi at number 26 - 21 of these companies are still privately held. The five that have since gone public are Facebook, Alibaba, Groupon, Clearwire, and Fisker Automotive.</p> <p>Unsurprisingly, Uber tops the list of private honey badgers. Other members of this exclusive group include Chinese Uber rival Didi Kuaidi, AirBnb, and India's Flipkart.</p> <p>This may be the group to watch in the coming months. Looking at the middling public performance of those who have already listed - and the prospect of VC-backed IPO drought - there is as big question mark over where these honey badgers are headed.</p> <p>They may turn just around and give their late stage investors a nasty bite.<br /> Photo: Laurens</p>
The other side of Credit Suisse: baking cookies and pulling weeds
Lifestyle, 4:01
<p>&nbsp;</p> <p>Once a year Credit Suisse employees across the world take part in the bank’s social-volunteer projects. Instead of sitting in the office, curious employees can spend a day volunteering in the community.</p> <p>The volunteer program has been around for 9 years and is extremely popular, since the employees can themselves choose the volunteer activity which interests them. All of the bank’s 45,800 employees, from managers to entry level, are eligible for the program.</p> <p>In 2014, more than 7,800 Swiss employees took advantage of the opportunity and together contributed 63,000 volunteer hours. Most bankers are motivated by the opportunity to help society, as well as learn something new.</p> <p>Bankers get a chance to do hands-on activities, like learning how to bake traditional Swiss croissants, call ‘gipfels’, from locals. This gives employees an opportunity to spend a day in a bakery and learn about the peculiarities of a new profession and at the same time acquire a new skill set.</p> <p>It’s not all fun and games, the baking volunteer days start at 6:30 am, and the new bankers-turned-bakers must go through rigorous hospital-like hygienic procedures and then dive into baking.</p> <p>Volunteers aren’t given instructions how to make the cookies but have to learn on the job, which takes them out of their comfort zone. Employees get a chance to work with a new team and learn from each other.</p> <p>Besides mastering the art of baking, potential volunteers are exposed to a wide range of other programs, such as managing events for people with limited abilities, repairing items at the Transport Museum, planting fruit trees, or cleaning up the woods.</p> <p>Another activity involves taking a group of bankers into a special forest management zone, where there is a special focus on preserving unique landscapes and taking care of local types of fauna. The essence of the job here is removing weed and removing sedge from ponds. All these activities help preserve a forest and prevent the unnecessary migration of fauna – butterflies, frogs, and birds.</p> <p>Credit Suisse employees constantly give positive feedback on the day spent in the open air.</p> <p>This story originally appeared in FinBuzz.<br /> Photo: Michael Verhoef</p>
A fragile transition supported by (further) policy accommodation
Asset Management
<p>SUMMARY</p> <p> At the Cyclical Forum in September, PIMCO investment professionals from around the world gathered in Newport Beach to discuss and debate the state of the global economy and markets and identify the trends that we believe will have important investment implications over the next 12 months.<br /> The Asia-Pacific region definitely falls in the slow lane of PIMCO’s multi-speed world. While absolute levels of growth in countries like China remain high, the region as a whole is going through a fragile transition, with many countries experiencing slowing rates of growth and/or growth that remains below potential.<br /> This is likely to result in further easing of monetary conditions across the region as policymakers attempt to support cyclical growth, either via lower interest rates, weaker currencies or a combination of both.</p> <p>In the following interview, Portfolio Managers Adam Bowe, Isaac Meng and Tadashi Kakuchi discuss conclusions from PIMCO’s quarterly Cyclical Forum, in which the company’s investment professionals debated the outlook for global economies and markets. They share our views on economies and investment implications across the Asia-Pacific region over the next 12 months.</p> <p>Q: PIMCO has described the global economy as having a multi-speed growth trajectory. How does the outlook for Asia fit within that framework?<br /> Bowe: Asia definitely falls in the slow lane of PIMCO’s multi-speed world. While absolute levels of growth in countries like China remain comparatively high, the region as a whole is going through a fragile transition, with many countries experiencing slowing rates of growth and/or growth that remains below potential. While China continues to grapple with its own domestic transition away from export- and investment-led growth, the rest of the region is struggling to adjust economic growth models to a new environment. China has become a headwind rather than a tailwind, with its continued progress toward financial liberalization causing bouts of volatility across equity and currency markets.</p> <p>This fragile transition is likely to result in further easing of monetary conditions across the region as policymakers attempt to support cyclical growth, either via lower interest rates, weaker currencies or a combination of both. Even in Japan, where we expect growth to improve over the next year as consumption recovers from the valued-added tax hike in 2014, persistently low inflation and the impact of China’s weaker growth trajectory and currency devaluation are increasing the likelihood of an expansion of Abenomics over the cyclical horizon.</p> <p>Q: Could you elaborate on PIMCO’s view on China over the cyclical horizon? What are the implications of the plunge in equity markets and the yuan’s devaluation?<br /> Meng: The Chinese economy is going through a multi-year New Normal adjustment. Growth will inevitably moderate as policymakers rebalance the economy away from investment and toward consumption, over-leveraged borrowers repair their balance sheets and frothy asset prices adjust.</p> <p>Indeed, the adjustments got very bumpy in the third quarter. The credit-fueled equity bubble crashed and China’s A-share market has fallen by about 40% from its peak on 12 June. This sent severe shocks via the wealth, expectations and balance sheet channels. PIMCO estimates that the equity market crash will drag down GDP growth by up to 100 basis points (bps) over the next 12 months.</p> <p>On 11 August, the People’s Bank of China (PBOC) relaxed the yuan’s quasi-peg to the dollar, a move that was followed by devaluation of around 4% in one week. Although thi</p>
Daily Scan: Hang Seng finishes 3.2% higher; European shares rise
Capital Markets
<p>Updated throughout the day</p> <p>October 2</p> <p>Good evening everyone. Asia’s major stock indices finished mostly in the black today led Hong Kong’s Hang Seng Index which gained a mammoth 3.2%. Property developers – fueled by a decrease in mortgage requirements – did most of the morning lifting, while Macau gaming shares – this time buoyed by reports of a Beijing-backed “support” plan – helped the index stay in orbit. It’s currently up 1.84% for the week. Here’s how the rest of Asia’s doing:</p> <p>Day<br /> Week</p> <p>Hang Seng China Enterprises Index<br /> +2.99%<br /> +2.70%</p> <p>Nikkei 225<br /> +0.02%<br /> -1.10%</p> <p>Topix<br /> +0.15%<br /> +1.26%</p> <p>Straits Times Index<br /> -0.41%<br /> -1.28%</p> <p>&nbsp;</p> <p>Over in Europe, things are looking pretty solid as well. The U.K.’s FTSE 100 is currently up 1.1%, Germany’s DAX is up 0.8%, and France’s CAC is up 1.1%. U.S. stock index futures meanwhile are also pointing to some pretty decent pops at the open. Contracts on the S&amp;P 500 are signaling a 0.14% bump, futures on the Dow are hinting to a 0.12% climb, while contracts on the Nasdaq point to a 0.35% jump. So much for pre-jobs report trepidation.</p> <p>Here’s what else you need to know:</p> <p>Japanese unemployment surprises, edging up to 3.4% in September from 3.3%. Unemployment in the world’s third largest economy unexpectedly climbed in September, quashing any good vibes spread by the surprisingly good household spending report. Analysts expected the figure to be unchanged. Investing</p> <p>Japanese consumer spending rebounds. Great news for Japan! After worrying economists for the better part of the year, consumer spending in the land of the rising sun jumped 2.9% in August from the year before, well above July's 0.2% decline and handily beating an expected 0.3% climb. Financial Times (paywall)</p> <p>Survey says: HK real estate prices will fall next year. Great news, perennially priced-out Hong Kong home buyers, a recent survey by the Hong Kong Institute of Asia-Pacific Studies at the Chinese University of Hong Kong shows that 37.5% interviewers believe that “property prices will go down regardless of the magnitude or frequency of the increase” should Yellen et cie decide to hike rates. This view seems to be corroborated by several analysts, so cross your fingers. SCMP (paywall)</p> <p>Singaporean home prices notch longest losing streak in 13 years. Home prices in Singapore dipped for an eighth-straight quarter, largely thanks to mortgage lending measures designed to cool the market. Apartment prices in prime districts fell 1.3% in the third quarter, while those in the suburbs slipped 1.6%. SCMP (paywall)</p> <p>Burkina Faso coup leader detained.  General Gilbert Diendéré, who took power in a recent short-</p>
Private equity goes off-Broadway
Lifestyle, 4:01
<p>Private equity deals are full of drama, and now they're hitting off-Broadway.</p> <p>Beginning March 1, "Dry Powder" will show "the people molding and messing with the American economy" and "the price of success and the real cost of getting the deal done," reports the New York Post. John Krasinski, better known as Jim on "The Office," will star in the play.</p> <p>The show was written by Sarah Burgess and will be directed by Thomas Kail, the director of "Hamilton."<br /> Photo: Herman Yung</p>
Daily Scan: Stocks crawl; Oregon shooter goes on rampage
Capital Markets
<p>&nbsp;</p> <p>Updated throughout the day</p> <p>October 1</p> <p>Good evening,</p> <p>The bloom is already off the October rose. Stocks crawled at a turtle-like pace into the month. The Dow closed down 0.1%. The S&amp;P 500 scraped up 0.2% and the Nasdaq added 0.15%. Jobless claims were somewhat higher in the past week but remain historically low. The Institute for Supply Management reported the index dipped for September to 50.2 as did the PMI -- suggesting a slowdown in the sector. Oil dropped slightly, but still hovers just above $45/barrel.</p> <p>Here’s what else you need to know:</p> <p>At least 10 dead after Oregon shooting rampage. A gunman opened fire at Umpqua Community College in Oregon, killing at least 10 people and working more than 20 others. The suspect was killed. CNN</p> <p>Here comes Joaquin. The eastern U.S. is being pummeled by heavy rain as a hurricane makes its way through the Bahamas to the Atlantic Coast. Several U.S. governors have ordered a state of emergency in preparation for flash floods and rough storms. New York Times</p> <p>Credit Suisse wins exemption to manage pension funds. The Swiss bank plead guilty last year to aiding American tax evasion. Credit Suisse was granted a temporary exemption to continue managing pension funds that was set to expire next month. This new exemption covers the bank until Nov. 2019. Wall Street Journal</p> <p>Hillary Clinton email gap. About two months' worth of emails are missing from the archive Clinton handed over to the State Department -- and officials can't recover them. Wall Street Journal (paywall)</p> <p>Glencore stages 3-day rally after massive drop Monday. The U.K.’s FTSE 100 is currently up 1.5%, led by – get this – Glencore. Glencore had plunged 29% on Monday as investors fled the debt-laden commodities producer. Over the past three trading sessions, Glencore has virtually wiped out that loss as management defended the company's viability, sharing strategies to tackle its debt load. Germany’s DAX rose 1.3% and France CAC gained 1.6% respectively. Not a bad way to start the fourth quarter.</p> <p>Bonds post largest quarterly gains for 2015. Despite all of the Fed’s hawkishness, a continued flight to safety saw Treasury yields post their largest quarterly declines for the year. The 10-year yield fell 27.4 bps to 2.061% this quarter, while 30-year bond yields dipped 23.2 bps to 2.873%. Prices rise when yields fall. MarketWatch</p> <p>Wal-Mart plans to cut 100s from staff in Bentonville, Ark. The world's largest retailer reported a 15% drop in net income in its second quarter from a year earlier and lowered the outlook for the entire fiscal </p>
Forbes' richest Americans
Lifestyle, 4:01
<p>The annual Forbes 400 list is out, ranking the richest Americans from Bill Gates to Richard Yuengling, Jr. or $76 billion to $1.7 billion. David Rockefeller, Sr. is holding strong to the title of oldest American billionaire, with $3 billion at age 100. At age 96, Henry Hillman holds $2.5 billion. Evan Spiegel of Snapchat tips the other end of the scale, racking up a net worth of $2.1 billion at the young age of 25. Close by is his Snapchat partner, 27-year-old Bobby Murphy with $1.8 billion.</p> <p>Here are the top 10 richest Americans today:</p> <p> Bill Gates, Microsoft- $76 billion<br /> Warren Buffett, Berkshire Hathaway- $62 billion<br /> Larry Ellison, Oracle- $47.5 billion<br /> Jeff Bezos, $47 billion<br /> Charles Koch- $41 billion<br /> David Koch- $41 billion<br /> Mark Zuckerberg, Facebook- $40.3 billion<br /> Michael Bloomberg, Bloomberg LP- $38.6 billion<br /> Jim Walton, Wal-Mart- $33.7 billion<br /> Larry Page, Google- $33.3 billion</p> <p>Photo: Stock photo © EdStock</p>
Softbank brings more VC muscle to fintech, with record $1b deal
Venture Capital
<p>Japanese telecoms titan and early stage heavyweight SoftBank has just led a $1 billion Series E round for SoFi, the San Francisco-based online service that offers a way for debt-ridden students in the US to refinance their federal or private student loans.</p> <p>Softbank is calling it "the largest single financing round in the fintech space to date". The round included Third Point Ventures, Wellington Management Company LLP, Institutional Venture Partners (IVP), RenRen, Baseline Ventures, DCM Ventures and others.</p> <p>The investment is set to aid SoFi - short for social finance - in its expansion into other areas of consumer finance including mortgages and personal loans. Nikesh Arora, president and COO of SoftBank Group Corp. said this:<br /> “SoftBank seeks to invest in large industries or geographies that are ripe for change. This investment gives SoftBank exposure to the financial services sector, which is one of the largest and most important industries in the world. SoFi is clearly a game changer in the fintech space.”<br /> SoftBank is an active early stage investor and has backed a plethora of tech start-ups via a variety of subsidiaries, affliates, and related funds. It tendrils have reached many of the largest e-commerce players around today and now there are early signs it is grasping for influence in the fintech.</p> <p>This deal comes just four months after SoftBank injected $1 billion into South Korean group buying platform Coupang and also invested $500 million in Snapdeal. It is also worth noting that this deal comes within days of Alibaba - in whom SoftBank owns a one-third stake - investing $680 million in India payments and e-commerce firm Patym.</p> <p>&nbsp;</p>
China Development Bank joins angel round for P2P lender
<p>China’s economy may be in the doldrums but its appetite for peer-to-peer (P2P)lenders sure looks stronger than ever.</p> <p>According to China Money Network, state-backed behemoth China Development Bank (CDB) has just joined a $34 million angel round for Kaixindai Financing Services.</p> <p>How much it invested in the firm was not disclosed, and neither were the identities of CDB’s co-investors, and neither was anything about the identities of CDB’s co-investors, other than the fact they are from Jiangsu province. What we do know though is that Kaixindai, a Jiangsu-based P2P lender, was created by the provincial government and CDB back in 2011, and that it has racked up nearly $2 billion in transactions since then.</p> <p>It apparently plans to use the proceeds from the round to expand into other areas in China, a tall order for most given that there’s nearly 2,300 P2P companies fighting for their share in the region.</p> <p>With backing from the state however, something tells me Kaixindai is going to do fine.<br /> Photo: uberof202 ff</p>