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Russian ETFs best performer in a very rough and tough August; commodities outperform stocks
Capital Markets
<p>This just in from Bespoke Investment:</p> <p>Russian ETFs edged down just 0.88% in August, outperforming other emerging market ETFs by a wide margin. Australia, China, Hong Kong, India, Brazil -- those ETFs all sank more than 10%</p> <p>Surprise, surprise, surprise: Oil ($USO) gained 1.92% in August after roaring back to life the last three days of the month. The S&amp;P 500 ($SPY) sank 6.10%.</p> <p>&nbsp;</p>
Daily Scan: Global markets slide; officer killed in Chicago
Capital Markets
<p>Updated throughout the day</p> <p>September 1</p> <p>Good evening,</p> <p>China continues to roil the markets: U.S. markets closed about 3% lower all around. The Dow lost 2.8%, after falling 2% right at the open. The S&amp;P 500 fell 3% and the Nasdaq dropped 2.9%. Oil slid about 8%, but continues to float just above $45/barrel. Car sales are bit more robust than expected and are likely to maintain their 17 million annualized pace for the fourth month in a row. The manufacturing orders report was a disappointment, still expanding but less than expected at 51.1%.</p> <p>Here's what else you need to know:</p> <p>Police officer fatally shot near Chicago. The Lake County officer was killed Tuesday morning while pursuing three suspects on foot. Police are currently looking for the suspects. CNN</p> <p>Kentucky clerk continues to defy court. Rowan County Clerk Kim Davis is refusing to issue marriage licences to same-sex couples, citing "God's authority" over the U.S. Supreme Court. Two gay and two straight couples filed a federal lawsuit against Davis in July after she refused to issue any marriage licenses. Davis may face fines if held in contempt of court. Reuters</p> <p>Pope Francis wants to forgive abortions. The pope announced Tuesday that all priests can absolve Catholics of the sin of abortion during the upcoming Extraordinary Jubilee Year of Mercy. The holy year, beginning December 8, is meant to focus on spiritual renewal. Only bishops have traditionally held the authority to forgive the gravest sins, including abortion, but in the past they have sometimes shared that power with priests. The pope's announcement doesn't give a pass on abortion for Catholics, but instead offers the opportunity of forgiveness and a change of heart in the Church. TIME</p> <p>Netflix ends relationship with Epix. The streaming service decided not to renew a deal with film distributor Epix, effecting pulling top movies including Hunger Games and Transformers. Netflix says it wants to focus more on exclusive content. Hulu is snapping up the Epix films for its subscribers instead. BBC</p> <p>Calpers, Calstrs want to separate Bank of America's CEO and Chairman roles. The two giant California pensions announced Monday that they would join shareholders in opposing the bylaw change that would allow Brian Moynihan to hold both roles in the company. Calpers and Calstrs, the two largest U.S. public pensions, hold a total of 63.6 million Bank of America shares, less than 1% of the total shares outstanding. Wall Street Journal</p> <p>U.S. to sanction Chinese hackers. The White House is reportedly creating sanctions against Chinese individuals and companies as U.S. tech firms – and the government itself – worry about the growing threat of China’s cyber-espionage. Financial Times </p> <p>UN confirms Palmyra temple destruction. A satellite</p>
Now there’s a “matchmaking service” for banks and fintech start-ups
FinTech
<p>So banks now have a matchmaking service where they can hook up with financial technology startups. Its called Matchi.</p> <p>The Financial Times reports that Barclays, AIB, and Standard Bank are among a group of lenders partnering with fintech companies through Matchi. </p> <p>Accountancy firm KPMG has also struck an alliance with the online platform which it will introduce to its banking clients. Matchi will then support these clients with technology integration and advise on deals.   </p> <p>By “sponsoring” the platform, banks get privileged access to innovations developed by the startups. For example, the platform recently connected an Israeli fintech firm offering customer authentication with a global bank in India.</p> <p>It is another case of banks looking to embrace fintech start-ups, and the digital services they developing, rather than competing directly with them. In other words, keeping your enemies closer. </p> <p>Hopefully, the banks are getting into fintech for the long run, and not just a meaningless one-night stand they might regret in the morning.<br /> Photo: Jamz196</p>
Secret agents, pirates and cheaters: Bitcoin’s darkside
FinTech
<p>Bitcoin has always had a reputation problem. While the former currency of choice for drug-dealers and porn-peddlers on the so-called dark-net has gained some mainstream acceptance, its shadier past has come to the fore this week.</p> <p>The most recent scandal is the story of Shaun Bridge, a 33-year-old former US secret agent who has pleaded guilty to stealing of $800,000 using bitcoin. According to Reuters, Bridges was supposed to be part of the investigation that brought down Ross Ulbricht, AKA Dread Pirate Roberts, the founder of dark-net marketplace Silk Road. Instead he exploited the chance for an illicit bitcoin windfall.    </p> <p>But perhaps an even more sordid story out this week was about the affair site, Ashley Madison. According to Business Insider, recently leaked user account information from the site is being used to blackmail hapless adulterers en masse...for bitcoin. Here is the message the blackmailers sent:<br /> Unfortunately your data was leaked in the recent hacking of Ashley Madison and I now have your information. If you would like to prevent me from finding and sharing this information with your significant other send exactly 2.00000054 bitcoins (approx. value $450 USD) to the following address…<br /> Unfortunate indeed. While it may be difficult to feel sympathy for people who play away, it does highlight how criminals can easily exploit the anonymity of bitcoin - something that no doubt puts many potential bitcoin adopters and investors ill at ease.   <br /> Photo: Vincent Diamante via Flickr</p>
DoubleLine Capital unveils new commodity fund
Asset Management
<p>Commodity prices have not been kind to its proponents lately. Glencore is in doldrums, so is Noble, while over in the U.S., Cargill has been forced to shut down one its commodity funds. A group of bond guys in L.A. however, seem to think that now’s the perfect time to launch one of their own.<br /> “DoubleLine Capital, the investment firm overseen by Jeffrey Gundlach, on Monday opened a new mutual fund to give investors exposure to commodities markets and help them diversify.”<br /> That’s right, DoubleLine Capital has just unveiled the DoubleLine Strategic Commodity fund, a fund that Reuters says will seek long-term returns through a variety of long and short positions on “commodity-related investments, including through the use of derivatives and leverage.”</p> <p>The portfolio manager appears to be Jeffrey Sherman, the long-haired wizard behind some of the firm’s derivative-based and multi-asset strategies, who had this to say regarding their new launch:<br /> “A broad mix of commodities historically has shown low correlations to stocks, bonds and cash. So commodities can diversify a portfolio invested in traditional asset classes…In addition, commodities can serve as a hedge against unexpected inflation. Finally, incremental returns potentially can be obtained by exploiting the term structure of prices of individual commodities.”<br /> As previously mentioned, now seems to be an importune time to be launching such a fund – could this be DoubleLine’s way of calling the bottom? These people are far from stupid, and there's no way they’d take the time to manage something that wouldn’t earn its keep.<br /> Photo: me and the sysop</p>
SmarTone’s Kiss of death to cash payments
FinTech
<p>Hong Kong mobile operator SmarTone has elbowed its way into the payments space with the launch of a new service called “Kiss.”</p> <p>The online-to-offline platform, which took two years to develop, is intended for medium-to-large-sized business, reports the South China Morning Post. </p> <p>Using Kiss, merchants will be able to connect with their customers through the Kiss Wallet platform that links digital marketing and loyalty programs with data analytics and mobile payments. The first batch of retailers have already signed up and the service will be rolled out in December. </p> <p>SmarTone is starting with Hong Kong, but the biggest opportunities lie overseas. By licensing out the technology behind the platform to third party network operators, SmarTone hopes to eventually tap other markets, the plump prize of course being Mainland Chinese networks. </p> <p>New York-based research firm eMarketer predicts mobile e-commerce sales in mainland China will make up 10.9% of all retail sales in the country next year and 55.5% all online retail shopping.</p> <p>That said, Smartone will be entering a crowded space in China where e-commerce players  like Alibaba Group and JD.com have already rolled out their own payments platforms.<br /> Photo: Walt Stoneburner</p>
If you need to reduce risk, do it now
Capital Markets
<p>The single most important thing for investors to understand here is how current market conditions differ from those that existed through the majority of the market advance of recent years. The difference isn’t valuations. On measures that are best correlated with actual subsequent 10-year S&amp;P 500 total returns, the market has advanced from strenuous, to extreme, to obscene overvaluation, largely without consequence.<br /> The difference is that investor risk-preferences have shifted from risk-seeking to risk-aversion. That may not be obvious, but in market cycles across history, the best measure of investor risk preferences is the behavior of market internals, as measured by the uniformity or divergence of market action across a wide range of individual stocks, industries, sectors, and security types, including debt securities of varying creditworthiness.<br /> Our observations on that are not new at all. Extreme overvaluation coupled with deterioration in market internals was the same set of features that allowed us to avoid the 2000-2002 and 2007-2009 market collapses. Given our success in prior cycles, why did we stumble in the advancing half of this one? The fact is that in 2009, I insisted on stress-testing our methods of classifying market return/risk profiles against Depression-era data, setting off a sequence of inadvertent but related challenges in the recent cycle, which we fully addressed last year. I’ve detailed the central lessons in nearly every weekly comment since mid-2014. The full narrative is detailed in our 2015 Annual Report. As I observed in the accompanying letter:<br /> If there is a single lesson to be learned from the period since 2009, it is not a lesson about the irrelevance of valuations, nor about the omnipotence of the Federal Reserve. Rather, it is a lesson about the importance of investor attitudes toward risk, and the effectiveness of measuring those preferences directly through the broad uniformity or divergence of individual stocks, industries, sectors, and security types. In prior market cycles, the emergence of extremely overvalued, overbought, overbullish conditions was typically accompanied or closely followed by deterioration in market internals. In the face of Fed induced yield-seeking speculation, one needed to wait until market internals deteriorated explicitly. When rich valuations are coupled with deterioration in market internals, overvaluation that previously seemed irrelevant has often transformed into sudden and vertical market losses.</p> <p>If you review my concerns in recent years, prior to mid-2014, you’ll notice that they focused on the extreme nature of the “overvalued, overbought, overbullish syndrome” that had emerged. Examining these syndromes across history, these overextended conditions were typically accompanied or quickly followed by deterioration in market internals, and then by vertical air-pockets, panics or crashes. Because of that regularity (which was picked up by the methods that emerged from our stress-testing efforts), we shifted immediately to a defensive outlook when those overvalued, overbought, overbullish syndromes emerged. The problem, in this cycle, was that the Fed aggressively and intentionally encouraged persistent yield-seeking speculation regardless of valuation extremes. One needed to wait until market internals deteriorated explicitly before taking a hard-negative outlook on the market – a requirement (“overlay”) that we imposed on our methods last year.<br /> It may not be obvious that investor risk-preferences have shifted toward risk aversion. It’s </p>