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Paul Tudor Jones says Fed constrained by debt
Hedge Funds
<p>Paul Tudor Jones echoed a whisper concern in a Bloomberg TV interview this morning, saying that the U.S. Federal Reserve is restraining itself from raising interest rates because such a move would increase government interest payments. The observation that the Fed was focusing on debt management rather than overall economic conditions, putting yet another mandate in play as a determinant as to when it should raise interest rates, is an issue most often verbalized in private, which makes the public comments even more noteworthy.</p> <p>Paul Tudor Jones: Acknowledgement of government debt a much larger macro issue<br /> With over $18 trillion in government debt, or $154,480 per taxpayer, the interest payments on government debt can be significant. In 2014, for instance, with rates at historic low levels, interest on the debt consumed 7 percent of the budget deficit, the third largest independent line item. “I think it's kind of acknowledging to me a much larger macro issue, which is if you think about the last 50, 60 years,” the Tudor Investment Corporation founder best known in quantitative investment circles for his mathematical approach to problems, said in an interview with Stephanie Ruhle and David Westin. While he was on the show speaking about his cause of choice, JUST Capital, which seeks to provide economic incentive for positive corporate behavior, it is the economics of debt and negative incentives that are concerning him.</p> <p>“There's is a perfect negative correlation between the interest income paid by the Federal government and interest rates,” meaning higher interest rates increase government debt, he said, implying a wider array of corollary impacts. “So the higher the share of GDP that's paid in interest income by the Federal government, typically that correlates high interest rates also. So what the Fed is doing is recognizing there is a tail risk with low interest rates. There's a tail risk with zero. We seem to run perpetual deficits…”</p> <p>The debt problem isn’t just one of the current gap in spending, but with historic levels of seniors retiring, the unfunded liabilities gap is approaching $100 trillion, or $827,000 per taxpayer.<br /> Paul Tudor Jones: Size of balance sheet creates "uncomfortable" situation<br /> Those with their hands on the economic policy steering wheel are “uncomfortable” with the size of the balance sheet. “They're concerned about the expanding global debt-to-GDP.” While concern exists, there appears a yearning to “normalize” interest rates. “I think they're trying to probably insert </p>
New player adds tactical sophistication to robo-advisor landscape
FinTech
<p>Robo-advisors are still a small percentage of the overall wealth management industry, but there is no denying the rapid growth of these online-based money managers.</p> <p>That rapid growth is paving the way for new entrants to the robo-advisor field, including New York-based Huygens Capital LLC, which describes itself as “a systematic, tactical, ETF strategist and robo advisor enabled by proprietary predictive analytics.”</p> <p>Huygens is launching its tactical, risk-focused robo-advisor Monday, and it appears to be a well-timed entry into the robo-advising space. As of December 2014, the 11 largest robo-advisors had a combined $19 billion in assets under management, representing eight-month asset growth of 65 percent, according to Wealth Management.</p> <p>That number has continued surging.</p> <p>Read more at Benzinga. <br /> Photo: Peyri Herrera</p>
Banks around the world unite to explore the use of Blockchain
FinTech
<p>Financial tech firm R3 has created an initiative under which some of the world's largest banks will explore the use of blockchain in the financial sector. The effort represents the first time major banks have joined forces to research how blockchain may influence the sector and improve operations.</p> <p>This week, several big name banks including HSBC Holdings plc (ADR) HSBC, Deutsche Bank AG DB, Citigroup Inc C and Bank of America Corp BAC all signed on to the consortium, which is headed up by David Rutter, the former CEO of ICAP Electronic Trading.</p> <p>Blockchain For Markets</p> <p>The banks are planning to research how blockchain can revolutionize financial markets and whether or not implementing the ledger-like technology would be beneficial. Many believe that financial institutions would benefit from blockchain as the system would make their operations more efficient and increase transparency. Blockchain ledgers are able to keep track of every transaction, and integrating that system within financial institutions around the world would make it easier for banks to monitor cross-border payments and interact with each other.<br /> Smart Contracts<br /> Blockchain could also be used to facilitate contract transactions as the system would have the ability to recognize whether or not conditions have been met. Deutsche Bank has been working on this initiative in order to issue corporate bonds through a blockchain-powered smart contract system.<br /> Security Concerns<br /> Of course, as blockchain is a relatively new technology, there are concerns regarding the safety and security of such a system. Several hacking attacks have given bitcoin, the cryptocurrency that runs on blockchain, a bad name and could lead to resistance from the public. However, R3 is hoping that through collaboration within the financial sector, the risks associated with blockchain-powered systems will be addressed and the technology can be used to move the industry forward.</p> <p>This story first appeared in Benzinga.<br /> Photo: 401(K) 2012</p>
Standard Chartered launches FinTech Accelerator Program
FinTech
<p>Standard Chartered launched a new SuperCharger FinTech Accelerator Program in Hong Kong today. In a unique collaboration, the UK bank has partnered with fellow-heavyweights Baidu, China’s top internet search engine, and TusPark Global Network which has already incubated 19 companies in its technology parks that have subsequently listed.</p> <p>The venture aims to encourage innovation and entrepreneurship by helping local and international early-stage as well as more established FinTech companies grow in Asia’s dynamic markets.</p> <p>Technopreneurs will be part of a structured curriculum and receive coaching and mentoring from Baidu’s technologists, Standard Chartered’s bankers together with venture capitalists and industry experts to refine their business model, develop market entry strategies, navigate the regulatory landscape and identify joint ventures opportunities.</p> <p>“Hong Kong’s vibrant international financial ecosystem as well as strategic location as a gateway to China, one of the world's largest FinTech market opportunities, makes it the perfect place to co-create the future of financial services with technopreneurs at the intersection of finance and technology,” said Ericson Chan, Standard Chartered’s regional chief information officer, Greater China and North Asia.</p> <p>The program kicks off today with a call for technopreneurs to come forward with their business ideas. Applications will close on 20 November 2015. Throughout October, a roadshow will travel in search of the best businesses worldwide with stops including London, New York, Tel Aviv, Singapore and Beijing.</p> <p>Between January and April selected businesses will then have the chance “to explore cross-pollination of ideas between other verticals such as IoT, media and hardware, located within this world-class innovation hub,” said Standard Chartered in a statement.<br /> Photo: Thomas Fan</p>
The 10 big challenges for emerging market start-up ecosystems by Dave McClure
Venture Capital
Dave McClure, co-founder of global accelerator 500 startups, recently put out a slideshow listing some of the  challenges faced by emerging market startup ecosystems. The slides accompanied a talk at  StartupIstanbul, a four-day event that took place at the beginning of the month. It is no surprise that McClure has a few things to say about emerging markets, his  firm is
Green shoots in China?
Capital Markets
<p>Those who follow our posts know that we see considerable secular growth potential in China. This view was again affirmed during my most recent trip to Hong Kong last month, where members of our team had the opportunity to meet with management teams throughout Asia that are benefiting from secular growth trends as they navigate near-term cyclical pressures. The country’s geopolitical aspirations (including its bid to internationalize the renminbi), as well as its commitment to transition its economy from public sector and investment-led growth to private sector and consumption-led growth are likely to provide many opportunities for long-term investors.<br /> In addition to this longer-term lens, we also consider risk/reward from short- and intermediate-term perspectives. In the third quarter, our focus on managing near-term volatility contributed to our decision to underweight China. However, as we enter the fourth quarter, we are starting to see some of signs of stabilization in economic data that is contributing to a more constructive near-term view on China.<br /> First, China’s primary measure of manufacturing PMI activity was 49.8 for September. While still hovering below an expansionary level of 50, the reading showed signs of stabilizing and came in ahead of the consensus of 49.7, which we view as positive. Moreover, we were expecting muted manufacturing data in September, due to the massive manufacturing shutdown mandated by the government to ensure blue skies for China’s commemoration of the 70th anniversary of the end of WWII. Our view has been that once the “Victory Blue” shutdown concluded, we would begin to see signs of recent stimulus working through to economic data. State-owned enterprises are likely to show the benefits of stimulus first, with a trickle down to small and medium enterprises in the coming months.<br /> As we’ve noted in the past, China has many tools at its disposal to support its economy. In recent weeks, we’ve seen several fiscal policy moves that demonstrate the country’s commitment to avoid a hard landing while promoting the transition to a more consumption-driven economy. These include an auto tax cut and a reduction in requirements for property down payments. We’ve also seen a stabilization of the renminbi after a sharp depreciation, with additional capital controls being implemented to manage the flow of capital and reduce the volatility of this exchange rate. Over the medium-term, we should expect further depreciation of the renminbi relative to the dollar, as this currency adjusts to the weakness of other major trading currencies like the euro and yen, but the rate of this depreciation will be important as companies and governments adjust to this new environment.<br /> To be clear, we still believe capital preservation remains paramount in the current environment. Nonetheless, we believe we are seeing encouraging signs that can improve investor perception about China by alleviating concerns about an imminent hard landing, while the correction we’ve seen in the equity markets seems to have more than discounted this risk. As a result, we are using this opportunity to gradually increase our exposure to China, both through equities that we believe have more than priced in this near-term risk and defensive convertibles that appear well positioned to participate in the eventual recovery of the Chinese equity markets.<br /> Over the next weeks, there will be a great deal more data for us to evaluate, including foreign reserves data on October 6. Signs of stabilization in foreign reserves and savings deposits would point to a reduced risk of capital flight, which would give us more confidence in a gradual depreciation of the renminbi. We’ll also be watching for </p>
The City giving day: Lord Mayor checked what banks give back to society
Lifestyle, 4:01
<p>Lord Mayor of the City of London, Alan Yarrow, toured the streets of the City Sep 30th visiting a number of firms who applied for the Lord Mayor’s Dragon Award and seeing first-hand what they do to give back to society, writes FinBuzz.</p> <p>Opening the procession at the Guildhall Yard he said to the representatives of various charities present: “Volunteering is an incredibly important part of all our background. Andrew Haldane [Chief Economist, Bank of England] did a survey into volunteering and it turned out that volunteers create each year economic value of at least £50 billion and potentially higher. When I started to work in the City, I was proud, really proud, to work in the City. And then you think about these poor kids who sit in a pub in Essex or Sussex or somewhere and they say: “What do you do?” I work in a City. And they are like: “Ugh!” That’s got to stop. If you look back at the work the City has done, it is phenomenal. And that’s the point: if we talk about it more, I think more people will do it. It is good for the City, it is good for charities, it is a win-win for everyone”.</p> <p>He then visited offices of Euroclear PLC, NatWest, Alium Partners, Societe Generale, City A.M, Barclays, Lloyds Register, Jardine Lloyd Thompson PLC, UBS Ltd to see first hand what they do to give back to society.</p> <p>Regional Director at NatWest (RBS) Jason Coles explained that about two years ago the City of London offered various companies to team up with the City and encourage employees to give back to the society. Nine months ago the board of directors of RBS has decided to divide England into regions and go out to find charitable organisations to choose ones to support over the next 12 months. They set up a Skills and Opportunities fund (http://skillsandopportunitiesfund.rbs.com) for charities, social enterprises, community groups, state-funded schools and colleges across the UK and Ireland. The fund supports disadvantaged communities by helping people learn new skills, get into the world of work or set up their own business. This year £2.5m is available through the fund. Representatives of the charities and businesses that NatWest helped through the fund were also present to showcase their work to the Lord Mayor.</p> <p>Among them: Ignition brewery that employs people with learning disabilities, Fashion Awareness Direct (FAD) — fashion charity that helps people form disadvantaged backgrounds to learn skills needed to work in the fashion industry, City of London police that works with NatWest to understand fraud and teaches endangered communities how to deal with it.</p> <p>“The estimated amount fraud and internet crime costs every year is £52 bn and only 10% of it is reported” said Laura Harris, Community Protection Adviser of NatWest.</p> <p>Not only people were present, but a dog too. Hearing dog. NatWest is also helping to fund the training of a hearing dog Nelson. They raised £10 000, which is 25% of the cost to train a hearing dog who will then work with people with hearing problems.</p> <p>Jason Coles explained: “We at RBS are encouraging employees to use three volunteer days per year to go into the community and pick up with local organisations. Most people now are really conscious about the skills they have and what can they give back to the society, particularly through the charities that resonate with them. We have volunteer days that count as work time. We want to see our stuff out in the communities”.</p> <p>As part of their giving back to the community program NatWest is focusing on: giving skills to the young people and anyone in deprived areas who needs help to get into the workstream, sponsoring buildings across the UK where people can go and work free of charge. Another key th</p>
Daily Scan: Hong Kong sees mixed results, Europe slumps on factory data
Capital Markets
<p>Updated throughout the day</p> <p>October 6</p> <p>Good evening. Asian market's broadly finished on postive territory today with only exception being Hong Kong, which had mixed results. The Hang Seng Index slipped 0.1%, dragged down by a 3.1% fall in China Resources Enterprise. On the other hand, a rally in energy stocks such as PetroChina saw the Chinese Enterpise Index climb 0.5%. Casino stock also continued their week-long rebound today with Sand China, Wynn Macau, and Galaxy Entertainment climbing 8.6%, 7.4%, and 3.9%, repsectively.</p> <p>Over in Europe the markets are trading mostly lower on the back of disappoinitng factory data coming out of Germany. The pull back comes after the continent saw some of its biggest gains in more than a month on Monday on speculation that the U.S. federal reserve would keep interest low for the rest of the year following last week's poor jobs data.  The Stoxx Europe 600 index is on track for its first loss in three days, down 0.2% to 357.70.</p> <p>Here is what else you need to know:</p> <p>Hong Kong uni protests over academic freedoms. Around 2,000 protesters at Hong Kong University marched Tuesday to support academic freedom as fears grow that Beijing is interfering in the city's education system. Channel News Asia<br /> BP in $20b settlement over fatal US oil spillage. Oil giant BP has agreed to pay $20 billion to settle claims with the US stemming from the company's Deepwater Horizon oil spill. An explosion on BP's deep-water drill, off the coast of Louisiana in 2010 killed 11 workers. Millions of barrels of oil were spilled into the surrounding waters. BBC<br /> NATO denounces Russian incursion into Turkish airspace. The U.S. and NATO denounced have Russia for violating Turkish airspace along its frontier with Syria, and Ankara threatened to respond if provoked again, raising the prospect of direct confrontation between the former Cold War adversaries. Channel News Asia<br /> US accidently bombed Afghan Doctors Without Boarders hospital. The hospital was ‘accidentally struck’ by the US military after Afghan forces called for air support to eliminate a threat from the Taliban, a US commander said today. The strike in Kunduz on Saturday killed 12 medical staff and 10 patients, including three children. Daily Mail</p> <p>Greek PM pleads for debt relief with austerity budget. Greek Prime Minister Alexis Tsipras issued a resounding call for debt relief on Monday as his government unveiled an austere 2016 budget sticking strictly to international bailout targets in a new spirit of cooperation with European and IMF creditors. Reuters</p> <p>Chinese artist Ai Weiwei find bugging devices in studio. Ai Weiwei has posted a number of pictures of what he says are listening devices found in his Beijing studio. The Chinese dissident artist captioned one photo of a bug on Instagram with "There will always be surprises". BBC</p> <p>Flash floods in France kill at least 17 people. Four people are still missing after flash floods on the French Riviera killed at least 17 people over the weekend, prompting the government to declare a natural disaster in the southeastern tourist region.</p>
Daily Scan: Stocks buoy; Major TPP deal reached
Capital Markets
<p>Updated throughout the day</p> <p>October 5</p> <p>Good evening. Global stocks got a boost Monday. The Dow rose 1.85%, growing steadily from open. The S&amp;P 500 grew 1.83% and the Nasdaq was also up 1.56%. The Stoxx Europe 600 was up 2.8%. Shares of the embattled commodity giant Glencore surged as much as 71.6% today as word on the strasse spread that it was courting takeover offers. The company’s board however was quick to deny any knowledge of this but nevertheless, Glencore shares in the U.K. were still ripping higher. Over in FX, emerging market currencies continued their blitz against the greenback and among its biggest winners were the Korean won which added 0.7%, the Malaysian ringgit which jumped 0.5%, and the Russian ruble which spiked 0.4%. Doing even better though was the kiwi, which surged 0.9%.</p> <p>Here’s what else you need to know:</p> <p>Trans-Pacific Partnership reaches major trade deal. The TPP reached an agreement in Atlanta Monday that could effect 40% of the world's economy. A barrier-free, liberalized approach to commerce will effect everything from the price of cheese to cancer treatments. The agreement still faces an uphill battle with Congress. Democratic leaders worry that the agreement will hurt manufacturing jobs and the environment, and Republicans say it doesn't do enough. Reuters</p> <p>Yankees pitcher checks into rehab. Veteran starting pitcher CC Sabathia has checked into alcohol rehabilitation, meaning he will miss the postseason. The 35-year-old Sabathia is a six time All-Star and the winning pitcher of last week's game that clinched the Yankees' their postseason Wild Card. Reuters</p> <p>Search is on for missing cargo ship survivors. The U.S. Coast Guard belives that cargo ship El Faro sank during Hurricane Joaquin in the Caribbean Sea. The focus is now on trying to find survivors. The crew included 28 Americans and five Polish nationals. CNN</p> <p>American Apparel files for bankruptcy. The Los Angeles-based retail chain has faced falling sales, high debts, and a lawsuit with its founder. The company was hit with a $19.4 million loss in the second quarter. American Apparel has filed  for U.S. bankruptcy protection, and will restructure its 260 shops over 19 countries in the next six months. BBC</p> <p>Twitter names Jack Dorsey CEO, again. Dorsey has been working as interim CEO for the social media company since Dick Costolo stepped down in June. Dorsey founded Twitter and served as its first CEO from May 2007 to October 2008. He will also remain CEO of Square. Wall Street Journal</p> <p>Amtrak derails in Vermont. At least seven people were injured when the passenger train derailed and went over an embankment. CNN</p> <p>North Korea set to free NYU student. North Korea is set to release Won-moon Joo, a South Korean student at New York University whom it detained in April, the South Korean government said. The student is expected to be handed over to South Korean officials at the border today. </p>
Peltz sets his sights on GE
Hedge Funds
<p>As if turning around GE wasn’t hard enough, Jeffrey Immelt just found another thing to worry about – his good friend, activist investor Nelson Peltz.</p> <p>Peltz, through Trian Fund Management, now owns $2.5 billion worth GE shares, which according to the Wall Street Journal, makes the activist fund one of the conglomerate’s top 10 shareholders.</p> <p>Unlike its usual bets however, Trian’s stake in GE is more of a friendly nudge than an aggressive takeover:<br /> “Trian executives began briefing GE officials on their views starting in May, at the beginning of the fund’s share-buying binge. GE has in recent months indicated it would make a number of moves. On Sunday, both Mr. Immelt and Chief Financial Officer Jeffrey Bornstein said that they largely agree with Trian’s prescription.</p> <p>‘We are completely aligned on the levers that get us from point A to point B,’ Mr. Bornstein said in an interview.</p> <p>Mr. Immelt added: ‘We have the clearest path for GE that we’ve had in the past eight years.’”<br /> That’s not to say Trian’s just going to rest on its laurels.</p> <p>Peltz, in an 81-page white paper titled “Transformation Underway … But Nobody Cares,” laid out a few things that he wanted to see in the company, including:</p> <p> More debt – Peltz apparently wants GE to take on around $20 billion in debt to prop up its EPS.<br /> More stock buybacks – despite GE’s announced $35 billion buyback program, Peltz wants more, calling the company’s limited efforts to reduce its share count “a major factor behind GE’s historically below-average EPS growth.”<br /> Better margins – Trian apparently sees a lot of places where GE can ramp up margins, especially in its services business. Also, the fund sees opportunity in lowering the company’s $2.4 billion in corporate costs.</p> <p>Trian’s activist holding in GE is its largest and most ambitious. In fact, only Carl Icahn’s Apple campaign and ValueAct’s Microsoft crusade was bigger.</p> <p>With Peltz's affinity for big companies however, I don’t doubt that he’ll aim for something bigger sometime soon.<br /> Photo: @mjb</p>