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Energy excellence: it could be the refiners ETF
Asset Management
<p>Although oil prices have retreated a bit in recent sessions, the United States Oil Fund(NYSE: USO) is still up 3.3 percent over the past month. That move has been enough to boost the fortunes of an array of equity-based energy ETFs.</p> <p>Included on that list is the Market Vectors Oil Refiners ETF (NYSE: CRAK). CRAK, the first dedicated refiners ETF, is higher by 4.3 percent over the past month. That is impressive when considering refiners benefit when oil prices slide due to lower crack spreads, perhaps the inspiration for CRAK's ticker, and the few ETFs with robust refiners exposure have been noticeably less bad this year than traditional equity-based energy sector counterparts.</p> <p>The gains posted by some refining stocks, including several of the 26 held by CRAK, are enough to make investors ponder if the ETF and its holdings can remain firm going forward.</p> <p>Read more on Benzinga. <br /> Photo: Natalie Maynor</p>
Fund managers are snapping up Japanese small-caps
Hedge Funds
Faced with uncertainty over Japan Inc.’s future earnings, hedge funds and asset managers are trying on something a little different from their bread and butter. According to the Nikkei Asian Review, a slew of profit downgrades coupled with a shaky global economy have led investors to flee from Japanese large-caps in favor of the more domestically-oriented small-caps: “Institutional investors are
When Warren Buffett knew he was rich
Lifestyle, 4:01
<p>I’m not exactly a big fan of Warren Buffett, but this answer he had for a student back in 2005 is beyond fantastic, and I thought you guys would like it too – especially those still in the early stages of their careers.</p> <p>Without further ado, here’s Warren Buffett on when he knew he was rich (h/t Josh Brown):<br /> Q: When did you know you were rich?</p> <p>“I really knew I was rich when I had $10,000. I knew a long time ago that I was going to be doing something I loved doing with people that I loved doing it with. In 1958, I had my dad take me out of the will, as I knew I would be rich anyway. I let my two sisters have all the estate.</p> <p>I bet we all in this room live about the same. We eat about the same and sleep about the same. We pretty much drive a car for 10 years. All this stuff doesn't make it any different. I will watch the Super Bowl on a big screen television just like you. We are living the same life. I have two luxuries: I get to do what I want to do every day and I get to travel a lot faster than you.</p> <p>You should do the job you love whether or not you are getting paid for it. Do the job you love. Know that the money you will follow. I travel distances better than you do. The plane is nicer. But that is about the only thing that I do a whole lot different.</p> <p>I didn't know my salary when I went to work for Graham until I got his first paycheck. Do what you love and don't even think about the money. I will take a trip on Paul Allen's Octopus ($400M yacht), but wouldn't want one for myself. A 60 man crew is needed. They could be stealing, sleeping with each other, etc. Professional sports teams are a hassle, especially when you have as much money as him. Fans would complain that you aren't spending enough when the team loses.</p> <p>If there is a place that is warm in the winter and cool in the summer, and you do what you love doing, you will do fine. You're rich if you are working around people you like. You will make money if you are energetic and intelligent. This society lets smart people with drive earn a very good living. You will be no exception.”<br /> Photo: Fortune Live Media</p>
Underserved and uncompetitive: Why VCs are dropping anchor in Vietnam
Venture Capital
Vietnam’s young demographics and increasingly tech-savvy population are making the country a draw for tech investors but the market is still largely underserved, say local venture capitalists (VCs). 500 Startups’ recent decision to add two new venture partners - Binh Tran and Eddie Thai - in Vietnam is the  latest indication that more VCs are interested in the country, The
Blockstream to launch Sidechain
FinTech
<p>As bitcoin has gained popularity over the past few years, the system that the cryptocurrency runs on began to face some growing pains.</p> <p>Developers started to worry that the existing framework wouldn't be able to support continued growth; new ideas about how blockchain, the ledger-like technology that bitcoin runs on, could be used in other industries began to emerge.</p> <p>Those issues threatened to tear bitcoin apart, as the cryptocurrency community debated whether changes to the way bitcoin operates would take away from its decentralized nature. However, a startup called Blockstream says it has created a solution that will allow bitcoin to grow while keeping its original framework intact.</p> <p>Read more at Benzinga.<br /> Photo: BTC Keychain</p>
Japanese mutual fund assets fall to 2015 low
Asset Management
<p>Just as the Nikkei was shrinking 8%, apparently, Japanese mutual fund assets did some shrinking of their own.</p> <p>Citing data from the Investment Trusts Association, the Nikkei Asian Review reports that mutual funds in the land of the rising sun saw their assets under management shrink by a whopping ¥3.57 trillion ($30 billion) in September. That’s the same amount needed to rebuild Fukushima.</p> <p>The drop left the industry with just ¥93 trillion ($782 billion) in assets last month – its lowest level for the year – though still above last November’s ¥92.6 trillion ($779 billion) reading, not to mention the dramatic, post-Lehman decline.</p> <p>A lot of variables contributed to this, the surging yen for example ate away at foreign currency-denominated investments, while operating losses – now on its fourth consecutive month – continued to erode value.</p> <p>Still, inflows continue to be positive, and if investor commentary is anything to go on, investors are still in love the region, deteriorating fundamentals or not.<br /> Photo: Moyan Brenn</p>
Macquarie Research turns quant equity research on rugby
Lifestyle, 4:01
<p>Macquarie Research has taken its considerable quantitative talents and put them to work forecasting he Rugby World Cup finals and is finding an unusually high win percentage, one that would make any hedge fund manager salivate.</p> <p>Quant research approach has delivered an 82.5 percent success rate<br /> With an 82.5 win percentage – correctly forecasting 33 of 40 Rugby World Cup matches – the group looks forward and thinks the New Zealand team continues to be the front runner, while Australia is a big move and Whales still has a good chance of beating South Africa.</p> <p>The formula considers five variables: Value, momentum, sentiment, quality and home field advantage. While stressing that the purpose of the recommendations is fun, they note that their equity research models incorporate years of research using academic models. “The World Cup model has been put together by a lone team member in their spare time,” they note.<br /> Quant formula defines predictive modeling based on five major categories<br /> In terms of value, the variables the Macquarie Research team uses to determine value includes world ranking and World Cup Match experience. For momentum they select Change in ranking and win percentage over the previous 12 months. For sentiment they consider public odds of winning and change in odds. To determine quality they consider a best result factor and point differential over the last 12 months along with World Cup points. To top off the formula they place a certain mathematical value on home field advantage.</p> <p>“There were clearly some upsets in the tournament that caught everyone by surprise,” said the report, titled “The Marcquarie Quant Guide to the Rugby World Cup.” Unexpected results that defy past performance expectations are often a point of weakness in quant modeling. “England has been the biggest scalp producing the worst result of a home team ever in a World Cup. Being included in the ‘pool of death’ as the host nation was always harsh (obviously the royal family don’t have the sway they used to) and the pressure ultimately proved too much.”</p> <p>This is not the first time Macquarie has taken a quant approach to predict sporting events. It did so with Australia’s famous Melbourne Cup horse race in 2014, 2013, 2012, for instance, as well as last year’s Football World Cup in Brazil. “These forecasts do not come without pedigree; Macquarie’s Melbourne Cup model has generated some good performances and the Football World Cup model successfully picked Germany to win last year,” they wrote.</p> <p>This story first appeared in ValueWalk.<br /> Photo: </p>
Emerging market debt: an end to the agony?
Capital Markets
<p> Capitulation by many EMD investors has created opportunities in many of the more resilient countries.<br /> We favor countries moving down the reform path and where there is significant impetus to reign in excessive government spending.<br /> Valuations have reached the extremes that allow a selective approach to EM to now represent a key part of an income-oriented portfolio.</p> <p>Emerging markets (EMs) have endured a miserable year. Slowing Chinese growth, collapsing commodity prices, rising indebtedness and geopolitical turmoil have all taken their toll on fundamentals. The worsening EM story has, in turn, had a negative impact on capital flows, impacting performance both in absolute terms and relative to developed markets.</p> <p>More recently, China’s devaluation has led to fears that deflation could be exported to the rest of the world. The haphazard nature of China’s policy response to the economic downturn has weakened investor resolve that Chinese authorities can engineer a "good" outcome. The problems do not end there. The Federal Reserve is stating a desire to tighten policy, prompting concerns that a continued rise in the U.S. dollar will undermine EM local returns.</p> <p>Unsurprisingly, sentiment toward emerging markets has soured. The above trends are self-reinforcing, prompting many to call for EM to enter a protracted period of weakness. Given all the uncertainties, should investors simply ignore EMD altogether, or might a more selective approach to EMs produce better results?</p> <p>It is far too late in the cycle to “give up” on emerging markets</p> <p>Abandoning EMD altogether is akin to throwing the baby out with the bath water. The adjustment in EM assets is hardly new, and underperformance has been marked since at least 2012. Consider Brazil — a constant source of discouraging news. Brazilian equities, as measured by the Ibovespa, are down by 36% over the five years ending September 30 in local terms. For a U.S. dollar investor, however, depreciation of the Brazilian real has pushed the return to -71.7% over the period. Local rates in Brazil have risen to over 15%. Other markets — in USD terms — have also posted deeply negative returns. Russia, Ukraine, Turkey and Argentina have all endured periods of notable stress in the last 24 months.</p> <p>Prices could, of course, move lower, but valuations suggest that EM challenges are well-recognized in the market. We fully expect a protracted period of emerging market economic weakness, but we are at a stage in the current cycle that demands a focus on dislocations and valuation. Many opportunities appear compelling. EM growth will be positive and will continue to exceed developed market growth (Exhibit 1), notwithstanding the risk of further downward growth revisions that have dominated this cycle (Exhibit 2). This is a recipe for further volatility, despite much-improved valuations.</p> <p>Exhibit 1: IMF GDP growth forecast — advanced economies</p> <p>Sources: Columbia Threadneedle Investments, IMF, 07/15</p> <p>Exhibit 2: IMF GDP growth forecast — emerging economies</p>
Daily Scan: Equities rip higher; Bank of England 'ringfences' banks
Capital Markets
<p>Updated throughout the day</p> <p>October 15</p> <p>Good evening everyone. SOE consolidation hopes, stimulus wishes, and a spooked-out Fed led Asian shares soaring today with the Hang Seng Index up 2%, the Shanghai Composite up 2.32%, and the Nikkei 225 up 1.15%.</p> <p>European indices meanwhile appear to be on the up and up as well. The U.K.’s FTSE 100 has so far climbed 0.8%, Germany’s DAX has jumped 0.9%, and France’s CAC has surged 0.9%. As for Wall Street, it looks like they’ll be joining the party too. S&amp;P 500 futures are pointing to a 0.5% pop at the open while Dow and Nasdaq futures signal a 0.5% and 0.6% climb respectively.</p> <p>Here’s what else you need to know:</p> <p>Bank of England lays out “ringfencing” laws. In an effort to strengthen the U.K. financial system, the Bank of England laid out two proposals today, one on ringfencing and one on operational continuity. Under the former proposal, “ringfenced” banks will need to seek permission from the BOE to pay out dividends to its affiliates, as well as pay market rates for services rendered by its partners. The new rules will come into force in 2019. Wall Street Journal (paywall) / Bank of England</p> <p>PBOC injects liquidity. With 70 billion yuan worth of liquidity set to drain this week, the People's Bank of China topped up the money markets today through an auction of 50 billion yuan worth of seven-day reverse bond repurchase agreements. Reuters</p> <p>Hong Kong continues reign as most expensive place to rent office space. Annual Hong Kong office rent has apparently reached $255.5 per square foot, $5 more than last year’s showing, and easily eclipsing New York’s $153 and Tokyo’s $125. The pace of growth however has appeared to slow, but yeah, tell that to the tenants. SCMP (paywall)</p> <p>Australian jobs surprise to the downside. After registering gains the previous four months, the Australian labor market lost 5,100 jobs in September, a huge contrast to the additional 9,600 jobs expected by analysts. Financial Times (paywall)</p> <p>Bank of Korea keeps rates steady, slashes outlook. As expected, Korea’s central bank kept interest rates steady for the fourth month in a row. It did however, cut its GDP and inflation forecasts, with 2015 growth now expected to be 2.7% instead of 2.8%, while inflation is currently pegged at 0.7% instead of 0.9%. Bank of Korea</p> <p>Sumitomo Mitsui Banking to issue green bonds. In a first for a Japanese megabank, SMBC is set to issue around $500 million worth of green bonds as early as today, with the proceeds meant to bankroll a variety of renewable energy projects. The five-year bonds are expected to carry a coupon of around 2%. Nikkei Asian Review</p> <p>Volkswagen loses designated North American chief. Winfried Vahland was named to run the North America business three weeks ago  after working for the car manufacturer for 25 years. Vahlan</p>
Daily Scan: Stocks fall after Wal-Mart scare; IPOs beware
Capital Markets
<p>Updated throughout the day</p> <p>October 14</p> <p>Good evening everyone.  Economic data in the U.S. Wednesday did little to dispel the fear of deflation: producer prices in September fell 0.5%, the biggest drop in eight months, and retail sales were weak. The Fed’s survey of its districts, the beige book, revealed modest expansion but no wage pressures anywhere. Meanwhile, Wal-Mart shocked investors with a dismal outlook and nosedived, pulling down the Dow Jones Industrials 0.92% to 16,925, marking the first back-to-back drop this month. The S&amp;P 500 trimmed 0.48% to 1,994.  And the U.S. 10-year note did just what you would expect in the face of this dismal economic news: yields fell below 2%, hitting a 5-month low at 1.97%. What was the Fed was saying about a rate hike?</p> <p>Here's what else you need to know:</p> <p>IPOS beware. Albertson’s scotched its $2 billion IPO scheduled for Wednesday but First Data soldiered on with its offering, lowering the price to $16/share, from the $18-$20 originally anticipated. The weather is getting rougher and rougher for IPOs. KKR must have been very anxious to price First Data, the largest processor of e-commerce transactions. Street Insider</p> <p>Square braves the treacherous IPO market. The payment startup, led by Jack Dorsey – CEO at both Square and Twitter -- doesn’t appear to have a weather vane. The company is going where many tech companies have turned away from. Wall Street Journal (paywall)</p> <p>Wal-Mart slammed after earnings outlook. Wal-Mart shocked investors by predicting a huge drop in earnings next year, with per-share profits to fall between 6% and 12% in 2017. Shares for the company plummeted 10% in response, a 3-year low and the worst drop for the company since 1988. The stock is now down almost 30% this year. Wal-Mart says profits are being sucked by the increase in employee wages. CNN</p> <p>Volkswagen loses designated North American chief. Winfried Vahland was named to run the North America business three weeks ago  after working for the car manufacturer for 25 years. Vahland is leaving the company due to differences about the organization in North America, not the current diesel engine scandal, he says. Wall Street Journal</p> <p>First Jamaican writer wins Man Booker prize. Marlon James was awarded the prestigious writing award for his fictional account of the attempted murder of Bob Marley in 1976. The judges were unanimous in their decision to award "A Brief History of Seven Killings" because it "kept surprising the judges." The Guardian</p> <p>Hillary Clinton emerges strong from first Democratic debate. That's the consensus. She even got a boost from rival Bernie Sanders who lambasted the media for spilling so much ink on Clinton's email controversy.</p> <p>Sharp differences on Wall Street. Clinton would tweak while former Maryland Governor Martin O'Malley would re-introduce </p>