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Daily Scan: Fed spooks the markets; Deutsche to slash 35,000 jobs
Capital Markets
<p>Updated throughout the day</p> <p>October 29</p> <p>Asian bourses closed mixed on Thursday as hopes of further easing from the Bank of Japan did very little to quell fears over a December Fed rate hike.  Hong Kong’s Hang Seng Index finished the session down 0.60%, while China’s Shanghai Composite and Japan’s Nikkei Average ended the day up 0.36% and 0.17% respectively. As for the rest:</p> <p> Hang Seng China Enterprises Index: -1.13%<br /> Shenzhen Composite: +0.80%<br /> Straits Times Index: -1.24%</p> <p>Over in Europe, things aren’t looking that great either. At pixel time, the FTSE 100 is down 0.85%, the DAX 30 flat, and the CAC 40 down 0.25%. S&amp;P 500 futures meanwhile are signaling a 0.20% drop over in Wall Street.</p> <p>Here’s what else you need to know:</p> <p>Deutsche Bank to lay off 35,000. Speaking on the bank’s highly-anticipated strategy update, Deutsche Bank CEO John Cryan told the press that he plans to reduce his firm’s full-time workforce by 9,000 and shut down the bank’s operations in 10 countries. The massive overhaul, once finished, will result in around 35,000 jobs lost. CNBC</p> <p>China buys 130 jets from Airbus. The deal, which was announced after Chancellor Merkel’s meeting with Premiere Li, is reportedly valued at roughly $17 billion. Reuters</p> <p>Japanese industrial output surprises to the upside. Japan’s industrial output data climbed 1% in September, well above economists’ expectations for a 0.6% fall and a massive turnaround compared to August’s 1.9% drop. The climb was also the first in three months. Ministry of Economy, Trade, &amp; Industry</p> <p>Samsung unveils $9.9 billion stock buyback program. After reporting its first year-on-year profit climb in two years, Samsung Electronics announced that it will be buying back and cancelling nearly $10 billion worth of its own shares. The buyback program, which will be implemented in several stages, will begin on Friday and end “within one year.” Financial Times (paywall)</p> <p>U.S., China to hold talks over warship patrol. Admiral John Richardson and Admiral Wu Shengli are set to hold an hour-long video teleconference on Thursday over the USS Lassen’s recent patrol near the Spratlys. This will be the third video teleconference between the two. South China Morning Post (paywall)</p> <p>Fed stands pat on rates. The Federal Reserve, in a near-unanimous decision, voted on Wednesday to keep rates unchanged near zero. They did however open the door for a December rate hike. Federal Reserve</p> <p>Ping An to snap up U.S. properties. Teaming up with Blumberg Investment Partners, China’s second largest insurer has formed a $600 million fund meant to snap up logistics properties across the United States. South China Morning Post (paywall)</p> <p>The Starwood Hotel plot thickens. Chinese companies have been vying for the hotel chain, which includes The Westin, W Hotels, and St. Regis. Now H</p>
French billionaire acquires 5 percent of Warburg Pincus
Capital Markets
<p>Groupe Marc de Lacharriere (GML), the family holding company of French billionaire, Marc Ladreit de Lacharrière acquired a 5% stake in Warburg Pincus, a private equity firm with $35 billion of assets under management.</p> <p>In a statement, Mr. Ladreit de Lacharrière said, “We are very pleased to have the opportunity to invest in Warburg Pincus. GML is delighted to become a long-term partner with a global private equity firm and Warburg Pincus perfectly matches our objectives with respect to investing model, culture, and persistence of performance.”</p> <p>GML owns several investments, including 86% in Fimalac, a publicly traded company in France.</p> <p>Mr. Ladreit de Lacharrière is now a Senior Strategic Partner of Warburg Pincus following the investment of GML. The French billionaire plans to invest in the private equity firm’s future funds as a limited partner, according to the private equity firm.</p> <p>A person with knowledge of the matter told the New York Times that Mr. Ladreit de Lacharrière had been looking for private equity firm to invest over the long-term. The person said the French billionaire approached Warburg Pincus regarding the transaction.</p> <p>Charles R. Kaye and Joseph P. Landy serve as co-chief executives of Warburg Pincus. Former U.S. Treasury Secretary Timothy Geithner joined Warburg Pincus as president in 2013.</p> <p>The private equity firm did not disclose the amount of GML’s investment, and other financial terms in the transaction.<br /> Comments from Warburg Pincus executives<br /> Warburg Pincus said it would use all the proceeds from the transaction to invest in its funds. The private equity firm said the investment would enhance the alignment between its professionals and limited partners. It would also create additional flexibility for the firm.</p> <p>“Warburg Pincus has always valued clearly aligned interests – within our general partnership, with our limited partners who invest in our funds and with the management teams of the companies in which we invest. We know GML shares that commitment and this transaction is consistent with those interests,” said Mr. Kaye.</p> <p>Mr. Landy is looking forward to partnering with GML as they work on improving Warburg Pincus’ network of potential investment opportunities.</p> <p>Mr. Geithner said, “We are honored to introduce a figure of Marc’s standing to our firm.”</p> <p>This story first appeared in ValueWalk.<br /> Photo: Joel</p>
Golden Gate Ventures bets big on Thailand payments startup
Venture Capital
<p>Singapore-based early stage investor Golden Gate Ventures has just made its biggest bet in Southeast Asia yet, an online payments gateway in Thailand called</p> <p>Set up in 2013 by Japanese CEO Jun Hasegawa, Omise is still a relatively new kid on the block, but this is now its second round of institutional funding.  It raised a $2.3 million Series A round investment earlier this year. Golden Gate will not disclose how much it has invested, but the firm's average ticket size is  normally around seven-figures.</p> <p>Ecommerce has been experiencing a renaissance in Southeast Asia for the past couple of years now with major international players like German incubator Rocket Internet, and Japanese internet giants Softbank and Rakuten, backing a slew of  startups. Ecommerce-related payments and logistics solutions are still is lacking however.</p> <p>Omise is trying to lighten the load by offering a simple plug-and-play interface for software developers that make it easier to accept credit card payments.</p> <p>Golden Gate says that Omise grew 56% in Q2, and 269% in Q3. The firm estimates that at this rate the firm will be processing hundreds-of-thousands of monthly transactions in 2016.</p> <p>A big part of this strategy will be Omise's overseas ambitions. Part of the funding will be used for expansion into Indonesia and Singapore, the startup also has it eyes set on Hasegawa's native Japan.</p> <p>We can expect a lot more big deals coming from Golden Gates. The firms raised $50 million for its second fund in the summer and it has a lot more dry powder to burn through. </p> <p>Photo: Tiago Almeida</p>
Daily Scan: Stocks rebound after Fed meeting; Hyatt talking about Starwood bid
Capital Markets
<p>Updated throughout the day</p> <p>October 28</p> <p>Stocks rebounded after the Federal Reserve announced that interest rates are... wait for it... still near zero. But hey, there's always December. The Federal Reserve is hinting more strongly that December could be it for a rate rise. The Dow rose 1.1% at that news. The S&amp;P 500 gained 1.2% and the Nasdaq added 1.3%. Don't forget: The Republican debate is on Wednesday night. The focus for the third gathering, this time in Boulder, Col., will be the economy. A new twist for the GOP candidates: Donald Trump is not the undisputed leader in the race. Neurosurgeon Ben Carson can now say that he is No. 1. Will anyone on Trump's campaign hear the immortal words of displeasure from the Donald if he continues to fade? "You're fired!" World Series Game 2 is also happening Wednesday as the Mets take on the Royals. The Royals won Game 1 Tuesday night after 14 innings, the longest opener ever in a World Series. It's shaping up to be quite the contest.</p> <p>Here is what else you need to know:</p> <p>The Starwood Hotel plot thickens. Chinese companies have been vying for the hotel chain, which includes The Westin, W Hotels, and St. Regis. Now Hyatt is said to be looking at a Starwood purchase. The cash-and-stock bid should be announced in the coming weeks, but discussions remain under wraps for now. New York Times (paywall)</p> <p>Hillary wants the Export-Import Bank reauthorized. Democratic candidate Clinton says she doesn't understand the arguments against reauthorizing the recently closed bank. Clinton's rival Bernie Sanders has opposed the bank for providing "corporate welfare to multi-national corporations." Reuters</p> <p>GoPro misses earnings, driving down its stock. GoPro shares dropped 16% in after hours trading after the company's earnings of 25 cents on revenue of $400 million fell short of the expected 29 cents on $434 million in revenue. CNBC</p> <p>Paul Ryan nominated by GOP as Speaker of the House. The Wisconsin Republican would replace John Boehner as he retires from his post at the end of the month, pending a full House vote Thursday. At 45, Ryan would be the youngest speaker since Reconstruction. Ryan will face a rough battle to lead a party that has been dumping leaders and creating further fractions. The Atlantic</p> <p>Carl Icahn takes stake in AIG and encourages split. The activist investor says he has a "large stake" in the insurer, and he wants it to split its life and mortgage businesses into three public companies. AIG, the poster child of the financial crisis bailouts, should also pursue a "much needed cost control program," says Icahn. Wall Street Journal</p> <p>Walgreens revenue growth lets down investors. The pharmacy, which announced that it is buying Rite Aid, posted earnings of $26 million for the last quarter, compared with a loss of $221 million a year ago. Revenue was up to $28.52 billion from $19.06 billion, but fell short of the expected $28.86 billion. </p>
Elliott discloses huge stake in Cabelas Inc (CAB); stock surges
Hedge Funds
<p>The shares of Cabelas are trading higher after Elliott Associates (referred to as Elliott), and its wholly-owned subsidiaries disclosed a significant stake in the company.</p> <p>The stock price of Cabelas surged almost 20% to $39.99 per share at the time of this writing around 12:12 in the afternoon in New York. Cabelas is a specialty retailer and direct marketer of camping, fishing, hunting, and other outdoor related products.<br /> Elliott’s investment in Cabelas<br /> Based on its 13D filing with the Securities and Exchange Commission (SEC), Elliott acquired 11.1% of the outstanding common stock of Cabelas.</p> <p>The filing indicated that Elliott beneficially owned 1,962,321 shares or approximately 2.8% of the outstanding common stock of Cabelas. Elliott International and Elliott International Capital Advisors (EICA), each beneficially owned 2,202,679 shares or 3.2% of the outstanding common stock of the specialty retailer.</p> <p>Elliott, Elliott International and EICA collectively, beneficially owned 4,165,000 or 6.0% of the shares of the outstanding common stock of Cabelas.</p> <p>The firms have economic exposure comparable to approximately 5.1% of the outstanding common stock of the company under the Derivative Agreements.</p> <p>Under the Derivative Agreements, Elliott and Elliott International have economic results comparable to the economic results of ownership but do not have the power to vote or direct the voting or dispose of or direct the disposition of the shares that were referenced in the agreements.<br /> The firms have a collective voting power of approximately 6% of the outstanding common stock of the company.<br /> Elliott may formulate plans/proposals for Cabelas in the future<br /> Elliott acquired a stake in Cabelas because of its belief that its stock” was “significantly undervalued by the public market and represent an attractive investment opportunity.”</p> <p>The activist hedge fund believed that the company has multiple ways to unlock unrealized value, and it may seek to engage in a constructive dialogue with the Board of Directors of the company regarding opportunities to maximize shareholder value.</p> <p>Currently, Elliott has no plans or proposals to Cabelas. However, the activist hedge fund said it may express its views to the Board and management of the company from time to time in the future as it continues to review its investment.</p> <p>Elliott said it might in the future formulate plans or proposals regarding the company’s business, strategies, assets, corporate governance, Board of Directors composition, and other issues to enhance shareholder value.</p> <p>The shares of Cabelas traded between $33.03 and $58.90 per share. The company lost 25% of its stock value year-to-date.</p> <p>This article was originally published by ValueWalk. <br /> Photo: Zach Dischner</p>
Interest rates stay at zero, for now
Capital Markets
<p>The Federal Reserve is keeping short-term interest rates near zero for now, but the central bank more strongly hinted that a rate rise could happen this year, reports The Wall Street Journal. Officials are less concerned about the global financial markets now than they were in September, and they specifically mentioned the next Fed meeting December 15-16 as a time to assess interest rates.</p> <p>“In determining whether it will be appropriate to raise [interest rates] at its next meeting, the [Fed] will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation,” the Fed said in its statement.</p> <p>But hey, don't hold your breath waiting for rates to rise.<br /> Photo: Ekke</p>
Passive management: 1, Active management: 0
Asset Management
<p>Nine out of 10 actively managed European equity funds have underperformed their benchmark over the last 10 years, reports the Financial Times. Three-fourths of active U.K. equity managers continually fell short of their benchmark in the last decade. Less than half of the 489 U.K. equity funds and 1,192 European equity funds launched 10 years ago are still around.</p> <p>So active managers, are you worth your fees?<br /> Photo: Hans Gerwitz </p>
Next robo-advisor target: ETFs
<p>Robo-advisors are seeping into the market, and in 10 years, they could be managing the $13 trillion of U.S. unadvised assets, reports Daily Fintech. Those robo-advisors could then push the ETF assets under management from $3 trillion globally to a massive $75 trillion in 10 years.</p> <p>&nbsp;</p>
3 reasons Microsoft has finally turned it around
Capital Markets
<p> The share price of Microsoft Corporation (NASDAQ: MSFT) has appreciated 23.46 percent over the past month, reaching a high of $54.25 on Monday.<br /> FBR &amp; Co.’s Daniel H. Ives has maintained an Outperform rating and price target of $60 on the company.<br /> Ives believes that CEO Satya Nadella has made three major strategic changes over the last 18 months that have helped the company turn around.</p> <p>Analyst Daniel Ives mentioned that the “three major fundamental and strategic changes” made by Nadella include realizing that the Nokia Corporation (ADR) (NYSE: NOK) acquisition would not be a ...</p> <p>Full story available on</p> <p> Photo: Mike Mozart </p> <p>&nbsp;</p>
The scariest thing for investors this Halloween: volatility
Asset Management
<p>Volatility has become the zombie of the markets, lurking like the undead in the corners, waiting for its chance to suck the life out of a portfolio. Or at least that's how investors feel.</p> <p>More than half, or 55%, of financial advisors told Eaton Vance in a recent survey that protecting client wealth from volatility has become increasingly important in the last year. "Volatility's unpredictability has made investors uncomfortable in the current market environment and reduced confidence in their ability to reach their goals," says John Moninger, managing director at Eaton Vance, in a press release.</p> <p>Volatility doesn't have to mean the end of the world, says Eddie Perkin, Chief Equity Investment Officer at Eaton Vance, at an event Tuesday. "History has shown that the best opportunities tend to present themselves when uncertainty is running high," he says. The bears hawk volatility as a warning signal. "We're still living with the 2008 financial crisis," says Perkin. The Great Depression effected an entire generation, and it should be expected that 2008 will do the same. Pure equity funds have been in nothing but outflow-mode, he says. "There's still a lot of fear out there and I don't think it's going away any time soon."</p> <p>The financial advisors vary in just how scary they think the volatility is. For 39% this volatility is somewhat likely to lead to a bear market. Another 16% say it most likely will mean a bear market. But 38% say a bear market isn't likely at all. Some of the divide comes from the age of the investors. Younger adviors are more likely than their baby boomer counterparts to see an impending bear market, Eaton Vance found. Women too are much less bullish than male advisors.</p> <p>People need to focus on earnings and interest rates, says Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, speaking at the Tuesday event. "Everything else that people are worried about is completely irrelevant," he says. It helps to know what to expect from earnings and interest rates. For instance, when interest rates go up, stocks get hurt. That shouldn't shock anyone.</p> <p>Fear is currently overriding greed in investors, and that's not a bad thing, says Bernstein. "[Confidence] leads to stupid things," he says. "When you start reporting how great everything is...realize we're in the eighth or ninth inning."<br /> Photo: Daniel Hollister <br /> &nbsp;</p>