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World’s most important financiers according to Forbes
<p>Last week Forbes published its annual rating of the ‘World’s Most Powerful People’, based on an internal editorial vote. Russian President Vladimir Putin topped the list for the third year in a row, ahead of Germany’s Chancellor Angela Merkel in second place and US President Barack Obama in third, writes FinBuzz. </p> <p>Besides leading politicians, the list of 73 individuals includes bankers and finance professionals, who are making a great impact in the modern world. In this sub-category, the winner is a woman, US Federal Reserve Chair Janet Yellen.</p> <p>Forbes considers hundreds of candidates from various spheres and bases its decision on four criteria.</p> <p>In compiling their list, Forbes considers hundreds of candidates from various spheres and bases its decision on 4 main criteria: how much influence the person wields over the global population, how successful he/she executes their influence, the financial status of the candidate, and the number of spheres the individual has power over,</p> <p>So without further ado, here are the world’s most powerful and influential figures in banking and finance:</p> <p>#1 (#7 overall)<br /> Janet Yellen, Chair, Federal Reserve, USA</p> <p>The first female head of the Fed in history, Yellen is so influential that even when she coughed during a recent speech at University of Massachusetts, it led to a short-term selloff in the S&amp;P 500, as investors speculated on the banker’s health. She is also the proud wife of George Akerlof, a Nobel Laureate in economics.</p> <p>2 (#11 overall)<br /> Mario Draghi, President, European Central Bank</p> <p>Nicknamed “Super Mario” for his list of achievements in Italian politics, the banker has become known worldwide after launching QE measures in 2015 to fight deflation, an offshoot from the European credit crisis.</p> <p>#3 (#13 overall)<br /> Warren Buffett, CEO, Berkshire Hathaway</p> <p>The 83-year-old Berkshire Hathaway Inc. chairman has been the world’s richest man (now second richest) for the better half of the last decade, thanks to major takeovers by his holding company, the fourth largest in the US. Buffett’s investments have resulted in a more than $60 billion personal fortune.</p> <p>#4 (#20 overall)<br /> Jamie Dimon, CEO of JP Morgan Chase</p> <p>Obama’s “favorite banker” and a recent throat cancer survivor, Jamie Dimon, has been skillfully navigating his bank since taking over in 2005. He is one of the few bank CEOs that survived the 2008-2009 and remains at the helm of his bank.</p> <p>4 (#23 overall)<br /> Christine Lagarde, Managing Director, International Monetary Fund</p> <p>A successful lawyer and an ex-Minister of Finance of France, Lagarde is the first woman to govern the IMF and is considered by many admirers as one of the most efficient antic-crisis managers of our time. She has been uncompromising in her approach towards struggling Greece since taking over the reigns at the lending institution in July 2011.</p> <p>#6 (#26 overall)<br /> Lloyd Blankfein, CEO, Goldman Sachs Group</p> <p>A fabulous example of a self-made man, Blankfein grew up in the projects in the Bronx and managed to get a degree from Harvard University. His overall wealth for now has reached $1.1 billion since his bank’s IPO, and equities have increased fourfold.</p> <p>#7 (#34 overall)<br /> Larry Fink, CEO and Co-Founder, BlackRock</p> <p>Having led the world’s largest asset-management firm since 1988, Laurence (Larry) Fink transformed the boutique fixed income shop into a global asset manager that oversees more nearly $5 trillion in assets.</p> <p>#8 (#44 overall)<br /> Michael Bloomberg, CEO, Bloomberg</p> <p>One of the richest men in the world, Bloomberg served as the mayor of New York three times, and the city thrived under his governance. A descendant of Belorussian immigrants, he started his career at Salamon Brothers where he was responsible for informational systems. In 1981, he founded Bloomberg LP where innovative IT technologies were united with economy analysis. Today Bloomberg’s empire is the leading financial news provider in
Weekend Scan: US says ISIS likely planted bomb on doomed Russian flight; China exports drop sharply
Capital Markets
<p>The consumer takes center stage this week as Fossil, JC Penney, Macy's, Nordstrom, and Priceline report earnings. With all those new jobs reported on Friday (up 271,000 in October) will they be opening up their purses? Last week, same-store sales edged down 0.2%., missing expectations for the seventh time this year. Analysts blamed unseasonably warm weather for keeping shoppers out of the stores. Autos, however, sold at a torrid pace. On Friday, the U.S. Census Bureau will report on sales of durable and nondurable goods. Analysts expect retail sales to rise from 0.1% in September to 0.3% in October; ex-autos, up 0.4%.</p> <p>Here's what else you need to know:</p> <p>Investigators say bomb caused Russian plane crash. The team in Egypt told Reuters they were 90% sure that a bomb was responsible for the disaster that killed 224 people over the Sinai Peninsula. U.S. authorities are also saying ISIS is behind the explosion. Reuters/Los Angeles Times</p> <p>China trade picture deteriorates in October. Exports fell 6.9%, more than twice the anticipated drop. The energy and commodities sector continue to get pummeled. Imports dropped 16%, the 12th consecutive month that they fell. The trade surplus has fallen 8% this year--nowhere near the 6% growth goal. ABC</p> <p>China, Taiwan presidents shake hands for a full minute. Okay, fotogs, did you get your shot? In the first meeting between leaders of the two countries since 1949, the pair did not call one another Mr. President. Afterward the 30-minute meeting, Ma Ying-jeou of Taiwan endured tough questioning in a 30-minute press conference. Xi Jinping of China waltzed through a pretend presser. China's official TV didn't even show what a real free press looks like. The Guardian/Quartz</p> <p>Stock market to be put to the test. Last week, the S&amp;P 500 rose 1%; the Nasdaq gained 1.9% and the Dow Jones Industrials 1.4%. Since the beginning of earnings season, the markets are up more than 6% -- even though S&amp;P 500 companies are on track for a profit decline of 2.2%. Monday, when traders hit their desks they will face tough economic news from China. Traders will also have used the weekend to digest the October jobs report released Friday and think about what its implications are for Federal Reserve policy and the markets. The U.S. Treasury market seemed to be screaming: Here comes rate liftoff. The 2-year note yield rose to 0.889%, the highest since 2010. MarketWatch/Wall Street Journal</p> <p>Facebook wowed. The social media giant turned in robust quarterly numbers, including a new milestone: one billion daily users. Its report also revealed that it is getting 8 billion daily views for its videos. Nipping at its heels: Snapchat with 6 billion daily views. Facebook posted new highs after the quarterly report at $110.65; it faded Friday when it warned that ad-blocking software could hurt revenue. The Street</p> <p>State pensions are sticking with hedge funds despite mediocre returns. Earlier this year the California Public Employees' Retirement System announced it was shedding the high-priced alternative investment managers. Their conclusion: They weren't worth the price. To the surprise of many, other pension funds are not following suit and are even increasing their stakes in a bid to close a yawning trillion dollar funding gap. New York Times (paywall)</p> <p>James Bond rakes in $73 million despite bad reviews. "Spectre" rated No. 1 at the box office at now in the reviews -- second only to "Skyfall," 007 box office of $88.4 million. Forbes called the newest 007 movie the worst in 30 years. "The Peanuts Movie" took in $45 million. USA Today/Forbes</p> <p>Suu Kyi followers jubilant after historic election in Myanmar. The country held its first free elections in 25 years on Sunday. The final results won't be known for at least 36 hours. Reuters<br /> You won't believe this:<br /> This is what happens when you name your kids with cool non-gender specific names. A 30-year-old photographer living in Seattle is getting fan mail intended for country star phenom Taylor Swift, age 25.
Daily Scan: Equities lose momentum; China air pollution reaches record
Capital Markets
<p>Updated throughout the day</p> <p>November 9</p> <p>They may have fallen off their session highs but Chinese and Japanese equities still ended Monday on a high note. The Shanghai Composite – buoyed by the removal of the IPO ban – finished the session up 1.58% and is now firmly in bull market territory while the Nikkei 225 – ignited by a weaker yen – capped the day up 1.96% to close at an 11-week high. The Hang Seng Index meanwhile saw its recovery lose steam shortly after the noon break, leaving the Hong Kong benchmark to finish the day down 0.61%. As for the rest:</p> <p> Hang Seng China Enterprises Index: -0.47%<br /> Shenzhen Composite: +1.82%<br /> Straits Times Index: -0.55%</p> <p>Over in Europe, equities seem to be trading quite mixed. The U.K.’s FTSE 100 is currently up 0.37%, while Germany’s DAX and France’s CAC is down 0.21% and 0.39% respectively.</p> <p>Airpocalypse as China pollution reaches record levels.  Residents of north-eastern China donned gas masks and locked themselves indoors on Sunday after their homes were enveloped by some of the worst levels of smog on record. Guardian</p> <p>US and Israel leaders to hold first post-Iran deal meeting.  Barack Obama and Benjamin Netanyahu are set to meet in Washington for the first time since relations deteriorated over Iran. BBC</p> <p>German exports beat estimates. German exports posted a mighty strong recovery in September, expanding 2.6% versus August’s 5.2% decline and handily beating analysts’ forecasts of a 2% jump. The survey did end before the Volkswagen scandal broke out though, so it might be a little too early to pop those bottles. Financial Times (paywall)</p> <p>China's oldest investment bank CICC jumps in HK debut.  Shares in CICC jumped as much as 11% after the bank raised $811 million in an initial public offering. The  strong start was helped by China's decision on Friday to resume IPOs after a four-month halt. Nikkei</p> <p>Saudi Arabia has no plans to cut oil output. The gulf state is determined to stick to its policy of pumping enough oil to protect its global market share, despite the financial pain inflicted on the kingdom’s economy. Financial Times (paywall)</p> <p>Fires started at Australia detention center. Inmates lit fires at the Christmas Island detention centre in a "major disturbance" that is yet to be resolved. The immigration department confirmed that guards had been withdrawn for "safety reasons." BBC</p> <p>US candidate warns of "Chinese infiltrating" the Carribean. Republican candidate Ben Carson has endorsed US statehood for Puerto Rico, citing its “very strategic” location for military defence, but raised concerns over the influx of Chinese. SCMP (paywall)</p> <p>Chinese trade numbers miss estimates. Exports from the world’s second-largest economy tanked 6.9% in October, well below expectations of a 3% slump, while imports slid 18.8%, better than September’s 20.4% fall but still worse than the expected 16% decline.</p> <p>Vote counting begins in Myanmar. It is the country’s first openly contested national election for 25 years and the turnout is thought to have been 80% in the poll. Aung San Suu Kyi's National League for Democracy (NLD) is expected to win the most parliamentary seats, although she is barred from the presidency. BBC </p> <p>China ramps up anti-graft drive. In the past week alone authorities have ensnared top execs at three multibillion dollar state-owned enterprises this week alone. The arrests of the heads of three industry giants – in banking, aviation and auto manufacturing – belie expectations that President Xi Jinping was ready to wind up his signature campaign. Financial Times (paywall) </p> <p>India’s Modi faces election defeat. Indian Prime Minister Narendra Modi’s party suffered a defeat in pivotal state elections, a political blow that could make it harder for his government to move ahead with its economic agenda. Wall Street Journal </p> <p>U.S. defense secretary accuses China, Russia of endangering world order. Ash Carter expressed concern about Beijing’s expanding influence and Moscow’s inc
Barclays change interest rate call
Capital Markets
<p>Barclays' economists have changed their thinking about global monetary policy. They expect the U.S. Fed to hike rates next month as a result of the solid October payroll number and the ECB to extend asset purchases and reduce the depo rate because of rising deflationary risks. Further signs that world's largest economies no longer take the same path.</p> <p>"The recent change in communication, the faster dissipation in uncertainty (VIX mean-reverting faster), and a very solid payroll report necessitate a change in our call to December. We now forecast a federal funds range of 25-50bp in December, up from the current 0-25bp," write Barclays.</p> <p>"The [ECB] Governing Council will likely adjust the degree of monetary policy accommodation in December, given the downside risk to the macroeconomic outlook and the expected slow recovery trajectory for headline inflation, which is likely to remain below the ECB’s target until at least the end of 2017. We expect it to do this by extending the time frame of asset purchases, possibly with a strengthening of the forward guidance. In addition, we now expect a cut in the depo rate of 10bp, to -0.30%," they add.<br /> Photo: Michael Dadino </p>
China exports plunge 6.9% in October, more than twice as much as expected
Capital Markets
<p>Exports in China plunged 6.9% in October, twice the rate expected. The weak numbers are raising important questions for China: How much more stimulus does it have left in its arsenal and will the news re-ignate an exodus of foreign reserves? In October, foreign reserves grew by $11.39 billion, reversing a 5-month run of outflows. Could this mean more yuan devaluation is now back on the table?</p> <p>CNBC reports:<br /> October exports fell 6.9 percent from a year ago, dropping for a fourth month, while imports slipped 18.8 percent, leaving the country with a record high trade surplus of $61.64 billion, the General Administration of Customs said on Sunday.<br /> In September, exports had slid 3.7% while imports crumpled, falling 20.4%.</p> <p>In the first 10 months of the year, exports and imports fell 8.5% from a year earlier -- a far cry from the goal of 6% growth.<br /> Photo: Robert Scoble</p>
NYC discovers Wall Street managers hid nearly $178 million in fees for pensions
Capital Markets
<p>New York City paid $178 million more in fees in fiscal year 2015 -- the "vast majority" in undisclosed incentive fees, The New York Post reports exclusively.</p> <p>The total bill for managing pensioners assets rose to $708 million from $530 million a year earlier.</p> <p>The more than 200 managers didn't even do a bang up job for the City: The pension earned 3.15% net of (known) fees in FY2015 vs 4.48% for the S&amp;P 500 in the same time period. Taxpayers had to cough up $9.9 billion to pay for the shortfall in obligations to pensioners.</p> <p>New York City isn't the only public fund suffering from insufficient disclosure from Wall Street. Last year, the Securities &amp; Exchange Commission found that more than half of 400 private equity firms had overcharged clients.<br /> Photo: Philip</p> <p>&nbsp;</p> <p>&nbsp;</p>
DLA Piper's Veramallay on launching a startup and expanding overseas: NY vs California
<p>Shayne Veramallay, venture pipeline manager for DLA Piper, says New York is a great jumping point for international investing in startups -- but lags the West Coast in its connection to Asia.</p> <p>Veramallay will be part of a New York City panel on November 18 discussing startups seeking to raise funds and go global in Asia. For more information and registration, follow this link here.</p>
Healthcare hedge fund calls Valeant pricing 'outrageous' while recommending Horizon
Hedge Funds
<p>At this moment, there are significant investing opportunities in healthcare, Jim Flynn of Deerfield Partners said at the Invest for Kids Conference in Chicago Wednesday. Yet Valeant Pharmaceuticals is not one of them, he emphatically asserted as he outlined a potential relative value trade when he recommended a long investment in Horizon Pharmaceuticals.</p> <p>Chart via S&amp;P CapIQ<br /> Flynn: Valeant pushes financial structuring to its limit and pricing issues are more a statement on individual companies than pharma industry as a whole<br /> Deerfield Partners is a well-regarded healthcare specialty hedge fund that has delivered to investors 38 times their original investment since their founding in 1994. Flynn, the current managing director of the New York-based fund, surveys today’s specialty pharmaceutical investment environment that has been devastated by scandals at Valeant and Turing Pharmaceuticals, connects dots to pharma’s history with the U.S. government and doesn’t see a pretty picture ahead.</p> <p>The issue that investors should not focus on, however, is the issue that is currently top of the news.  Flynn said the pharmacy distribution issues that is currently at the center of the Valeant scandal is not the ball investors should focus on. “Don’t spend too much time on how product is distributed but more to the point drug pricing,” Flynn explained, saying leverage and sustainability were the real issues that are not much discussed. Valeant is a one off, an industry bad boy that “pushes some of its financial structure to its absolute limit.Philidor is more a statement on that firm’s internal controls than industry in general,” he said.<br /> Flynn: Drug pricing issue is “outrageous” and won’t go away unless specific companies change their pricing policies<br /> What is material to the entire healthcare industry is price gouging. Flynn anticipates if practices don’t change, pricing along with tax haven issues will be dealt with severely by government, staring with Congressional hearings over the next month, along with tax haven issues. “This is not going away” as a political issue, he said.</p> <p>To understand the significance of today’s health care issue and forthcoming government scrutiny is to look back in history to last time the pharmaceutical industry came under intense political pressure. The year was 1993 and Congress was livid, led by Sen David Pryor (D-AK), as drug prices had risen by 15 to 20 percent. This led to Congressional pressure and ultimately an agreement from the pharma concerns that they would limit price increases in line with general inflation, Flynn stated, which at the time was considered beneficial to the pharma industry.<br /> Flynn points to the key argument that swayed regulators is one that rings hallow today. In 1993 the argument that higher drug prices were required to fuel research and development ultimately won the day for pharma. Flynn notes that given the current situation, where drug roll-up companies raise prices to improve profits and slash research and development, he expects Congress to take tough action. He notes that Valeant raised drug prices on 85 drugs by 24 percent on average in the last year while spending much less than average companies on drug development and almost nothing on drug discovery. Led by firms such as Valeant and Turing Pharmaceuticals, who raised prices by 5,000 percent on a lifesaving drug, Flynn calls the current drug price increases “historic and outrageous,” not in line with the drug manufactures 1993 pledge to keep price increases in line with inflation.<br /> Drug companies moving tax authority off shore is a double edged sword that will also be dealt with, he anticipates. Raising drug prices increases the costs for Medicare and Medicaid while offshoring profits takes away government revenue to fund these programs. In the end the math doesn’t work and something will have to give, Flynn.<br /> Flynn: Valeant has patent and leverage issues and is paying down outstanding debt is only one potential path, many of which are negative<br />
The yanks are coming as European banks re-trench
Capital Markets
<p>&nbsp;</p> <p>News comes from Europe almost every day that suggests European banking is changing fairly radically. The change is being driven by an entirely new political climate.</p> <p>For as many years as I have studied banks (going on half a century now), European governments have coddled their banks and used them as props for establishment politicians and their supporters. As part of that system, sovereigns have in practice guaranteed the liabilities of their banks and regulators have gone easy on capital requirements. Circularly, the banks also have financed the sovereigns.</p> <p>Basel I (adopted in 1988) supposedly required 8% capital, but the definition of risk-weighted assets allowed, by design, very low capital ratios against gross assets. Basel II (implemented in Europe in 2002) was designed by the banks to fool the regulators; it was embraced wholeheartedly by big banks everywhere; and it played a role in stoking the real estate booms of 2003-2006 that caused the busts of 2007-2009. (European banks played a significant role in the U.S. boom as well as the Irish, Spanish and English incidents.)</p> <p>European governments finally have got the message that guaranteeing the nation’s banks’ creditors can be dangerous to the nation’s financial health. See Ireland (contrast Iceland), Spain, Belgium, Greece, Cyprus, for examples. That gradual recognition led to adoption of Basel III (2010 but still being implemented gradually), which imposes the first real capital requirements on European banks. Now governments have recognized that banks need to have capital in order to survive when economic times get tough. And that has led to the ECB becoming the euro area regulator of large banks and to the ECB applying stress tests to bank capital.</p> <p>Evaluating bank capital on a forward-looking basis (which is what stress tests do) makes “all the difference”, as Robert Frost said about taking the road less traveled. A forward look at capital that includes a significant recession shows which bank activities are likely to lead to losses. Tested banks then must either curtail those activities or keep more capital against them.</p> <p>When banks see the amount of capital that an activity really needs, they typically find that their internal allocations have been made with rose-colored glasses. Therefore we see Deutsche Bank, Barclay’s, the Swiss banks, and many others reevaluating their business plans and changing their managements, hopefully to find managers who are capable in the new world of capital and technology.</p> <p>Yes, I just threw in technology, as anyone reading about Deutsche would have to do. Both the need for management to understand technology better and the need to allocate capital more realistically require entirely different mindsets from those that have prevailed in most European banks. Indeed, until recently, in most U.S. banks as well. I recall a fairly large bank CEO asking a few friends (of whom I was one) what he should be investing in—this was about 15 years ago. I said software. He pooh-poohed that idea. Marketing was what interested him. Market share was what interested him.</p> <p>What will these changes mean for Europe’s economy? My guess is that stress-tested banks that must have real capital are going to be more cautious lenders. That means the capital markets will have to become more robust—and it is the American banks are best positioned to lead those capital markets.<br /> Photo: WordShore</p>
Apple maintains a competitive advantage in consumer payments
<p>What is the natural cost of a consumer payment? Close to zero. Electronic signals are almost costless. Once in place, verification systems are low upkeep. Fraud costs something, and someone other than the consumer has to cover that. Whether payment is from an account or as credit seems irrelevant.</p> <p>Costs of course will not be zero and providers will naturally want to charge whatever they can for the service. But JPMorgan Chase coming out with its own system and undercutting Apple Pay by offering more to merchants shows how competition will work here, as it has worked in every other electronic system. Think about a phone call or a stock transaction or an email or text—the costs keep being driven down.</p> <p>That does not make JPMorgan Chase wrong to start its service. The payments system is one of the most profitable parts of banking. The large banks have to try to defend their franchise, and consumers will benefit the most from the competition.</p> <p>The WSJ recently  wrote about this subject, fairly intelligently for the most part. But then it threw in this clunker:</p> <p>J.P. Morgan has already lined up a huge group of merchants, including Wal-Mart and Best Buy to accept payments through its technology. How the bank won this business is instructive: The fees for Chase Pay transactions will be lower than for payments made with traditional methods such as debit and credit cards. That effectively means J.P. Morgan is willing to cannibalize profits from its traditional payments business to win market share.</p> <p>While that can be painful, it is less so for banks. They can offset lower fee income with what they make lending money. The same largely isn’t true for tech rivals. As the struggle heats up, it is likely anyone who wants to be a big payments player will have to offer increasingly expensive incentives to merchants and consumers.</p> <p>What I am focusing on here is the notion that banks can make up for lower fee income by making more on loans. If anyone has been around banking for more than a few years, they will remember that the search for fee income came about because banks were not sufficiently profitable based solely on the spreads they earned. And lending is a dangerous business because it is pro-cyclical. It makes money when times are good and loses money when times are bad. Fee income is less cyclical and therefore provides a suitable balance to spread income.</p> <p>Have the WSJ writers forgotten this history? Or do they think that lending has changed? Whatever the reason, there is no difference between the profit per transaction for a bank or for a non-bank. Both have to use capital to create the system they use and both have to operate the system. Profit for either depends on cost per transaction, what they charge per transaction, and volume (crucially, volume). The conglomeratization of a bank through its several business lines or Apple through its far broader set of business lines or of PayPal through its narrower set of business lines is irrelevant. All the players will drive costs as close to zero as they can, and all will compete for business by charging consumers as little as they can while earning profits. The advantage that Apple has is that it sells the phones that originate the transactions; therefore it potentially benefits not only from Apple Pay transactions, but also from everyone else’s transactions that are originated using iPhones—and maybe the iWatch even newer devices as well.<br /> Photo: LWYang </p>