News > All

NY Fed president says interest rate rise still on for 2015
Capital Markets
<p>An interest rate rise is still, definitely maybe, coming this year, promises New York Fed president William Dudley.</p> <p>"Every meeting's a live meeting," Dudley said during a Wall Street Journal-hosted breakfast Monday. "Let's see what the information is [in October]," he said.</p> <p>But Dudley was reluctant to forecast when the rate rise will happen, or even what exactly the Fed is waiting for. "I don't think it's possible to say if 'X' happens then 'Y' will follow," he said, explaining that there are too many "X"s to take into consideration. As different economic issues come up, such as devaluation of the yuan or the strengthening of the dollar, the U.S. economic situation could change. "We want to assess [the uncertainty in emerging markets] not for itself but for how it effects the U.S. economy," said Dudley.</p> <p>The Fed isn't "chickening out" on raising rates either, said a defensive Dudley. "If things come along...we should change what we're going to do," he said. "The world is not a certain place."</p> <p>And everyone needs to take a chill pill, Dudley indicated. "I think there's an over emphasis on the first [interest rate] move." Once the first move happens, the focus will turn to the second, and then the third, he said. The markets shouldn't count on a "mechanical" approach to interest rates, such as a quarterly raise. The ideal approach to the economic policy is something between mechanical rules and discretionary policies, said Dudley. Rules, like the Taylor Rule, are "guidelines" that need the personal insight of economists before being implemented. And the Federal Reserve needs to communicate those choice carefully, to keep investors on board, he said.</p> <p>"We care about financial stability because of how it can disrupt" the macro economy, said Dudley.</p> <p>Basically, we're still waiting. And may be for a while.<br /> Photo: Michael Daddino</p>
Chicago business school alumni host Booth Night
Lifestyle, 4:01
<p>Alumni snap photos at #BoothNight15</p> <p>Business school graduates from Lima to Abu Dhabi gathered on September 17 in over 97 cities worldwide. Donning silly props and flashing #ChicagoBooth night placards, alumni flooded social media with photos from different geographical gatherings.</p> <p>More than 3000 alumni participated in the virtual get together known as Worldwide Booth Night. The tradition dates back to 2001, and has grown in numbers each year with the support of local Booth alumni chapters around the world.</p> <p>In London, alumni gathered TwoRuba Bar at the Hilton Hotel Tower Bridge. Members from the UK Booth Alumni chapter, which has over 1,000 members, attended the event. In the US, events were held in New York, Chicago, LA, and in more than 30 other cities.</p> <p>Another major cluster of graduates gathered in Dubai’s GQ Bar, hosted by alumni Rezwan Mirza ’99 and John van Zuylen ’10.</p> <p>It’s an opportunity for not only networking and talking finance, but also a pleasant atmosphere to kick back with old schoolmates and meet new alumni in your city.</p> <p>After Harvard, Booth School of Business is the oldest business school in the United States, and the first ever to offer an Executive MBA program. Famous alumni include James McKinsey, Founder of McKinsey &amp; Company, Jon Corzine, former CEO of Goldman Sachs and the former governor of New Jersey, Brady Dougan CEO of Credit Suisse, and Peter Peterson, Founder and Chairman of the Blackstone Group and former CEO of Lehman Brothers.</p> <p>It is one of the top-ranked schools in the United States, and as the photos show, graduates take their Booth experience to all corners of the world.</p> <p>&nbsp;</p> <p>Sailing with Boothies &amp; Booth alums on Venetian Night in Chicago! #BoothNight15 #ChicagoBooth<br /> A photo posted by Grace Ding (@gracie_ding) on Sep 12, 2015 at 5:50pm PDT</p> <p>A glimpse of the people and places that make up our worldwide community! #BoothNight15 #ChicagoBooth pic.twitter.com/RF9pDVFi9A — Chicago Booth (@BoothFullTime) September 21, 2015</p>
Wild ride for leveraged biotech ETFs continues
Asset Management
<p>A week after presidential candidate Hillary Clinton made scathing comments about price gouging by the pharmaceuticals industry, biotechnology stocks and exchange-traded funds remain at the epicenter of what has rapidly become a precariously positioned healthcare sector.</p> <p>However, some bearish leveraged biotech ETFs, namely the Direxion Daily S&amp;P Biotech Bear 3X Shares (NYSE: LABD), are enjoying life in the fast lane.<br /> LABD's Recent Run<br /> After surging more than 30 percent, LABD is up another 15.7 percent at this writing Monday on volume that is already more than double the daily average.</p> <p>LABD underscores how quickly things can change for triple-leveraged ETFs and why the disclaimer that only active traders planning to hold these funds for just a few days should use these products, not buy-and-hold investors, is so often repeated.</p> <p>Read more at Benzinga. <br /> Photo: United States Mission Geneva</p>
Video: Carl Icahn - cabana boy from Brooklyn dishes on the next market meltdown
Hedge Funds
<p>With all the bearishness currently embedded in the markets, I thought it was best to revisit Carl Icahn's Wall Street Week interview from May. Aside from talking about his background, he lays out all his worries about the market, from earnings to high yield bonds, adding that he was "very hedged" back then. Check it out.</p>
HKMA rejects criticism of its approach to Fintech
FinTech
<p>Fintech entrepreneurs are not shy about criticizing Hong Kong for a perceived Luddite attitude to their innovative products and services. At the Cyberport and NexChange Fintech O-2-O Meet up last week, panelists and delegates compared the city’s regulators unfavorably to their more accommodating counterparts in the US, UK and even usually cautious Singapore.</p> <p>Well, on Friday the Hong Kong Monetary Authority (HKMA) hit back at its detractors.</p> <p>Speaking at the Hong Kong Institute of Bankers conference, Arthur Yuen, deputy chief executive, insisted that the HKMA welcomed fintech development, recognizing that it intensified competition in the financial service industry and empowered customers, reports  AsianInvestor.</p> <p>It was the first time for a while that the regulator had clarified its stance on an industry that attracted more than $12 billion of investment in startups last year.</p> <p>He rejected criticism that conservative restrictions inhibited fintech companies in Hong Kong, and argued that although it wants to ensure consumer protection HKMA does not want to stifle innovation.</p> <p>“We want to be technology-neutral,” and allow banks to adopt new technology while retaining safeguards for customers, he said.</p> <p>However, perhaps a little ambiguously, Yuen added that “the same customer protection requirement will more or less remain relevant regardless of the channel used to deliver it,” he said. </p> <p>He is most concerned about new entrants and whether the regulatory framework is sufficiently robust to supervise and the public sophisticated enough to understand the risks.<br /> Photo: Martin Ng<br /> &nbsp;</p>
Is China “fixed”? Short answer: Financial markets say no
Capital Markets
<p>The rally in stocks off of the August low has in some respects alleviated worst case fears about the fate of the Chinese economy. After all, in hindsight it is pretty clear that the selloff was driven by a simultaneous rerating of Chinese growth expectations by market participants combined with the possibility of higher short rates in the US to boot. These fears resulted in vast under performance of growth sensitive asset prices throughout the correction and then a sharp rally in those assets in the days following its terminus.</p> <p>Yet, when viewing the financial markets as a discounting mechanism in which prices represent the probabilistic outcome of future events, the path of asset prices since the August low has not convinced us that China is indeed “fixed”. If the prospects for Chinese growth had improved we would expect to see those better expectations represented by higher prices in things like copper and oil, and outperformance of growth sensitive sectors of the stock market like materials, industrials and energy.</p> <p>Instead, we’ve seen exactly the opposite. After a very brief (8-11 day) rally in Brent crude oil and copper, Brent is below its price of three weeks ago and copper is just three pennies away from taking out its August low to make a new cycle low (charts 1 and 2).</p> <p>Emerging market stocks in the energy, materials, and industrials sectors have followed a similar path in that they rallied for 19 days following their August low and have since turned right back around and are either at new cycle lows or are testing that August low (charts 3-5).</p> <p>But developed market stocks in those sectors rallied for an even shorter period of time and then fared even worse after the initial bounce. The DM materials and industrials sectors have already breached their August lows and the energy sector is within just a few percent of that important low (charts 6-8).</p> <p>If we are to take the market’s discounting at face value then the conclusion that China is not “fixed” is as clear as day. In contrast, the financial markets are telling us that the outlook for cyclical areas of the economy – those most closely linked to Chinese economic growth – has deteriorated. Such a scenario could keep a lid on interest rates as well as keep a relative bid under the less cyclical areas of the stock market.</p>
Silicon Valley's week of schmoozing with Asian leaders
Venture Capital
<p>Last week we saw a who's who of Silicon Valley rub shoulders with two of Asia's biggest leaders: Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. Here we summarize the two visits and how they reflect on Silicon Valley's evolving ties with Asia.</p> <p>China </p> <p>Xi decided to  kick off his trip to the US last week by meeting with 28 top tech executives. Among them was Apple's Tim Cook, Facebook's Mark Zuckerburg, Microsoft's Satya Nadella, and Amazon.com's Jeff Bezos.</p> <p>The meeting - which actually took place in Seattle - was awkward at best. CEOs hoping to talk with the Chinese leader on such pressing issues as cyber attacks and the theft of intellectual property by Chinese companies instead got a brief address and a photo op.</p> <p>There were some brief moments of light relief: Zuckerberg's exchange with Xi in Mandarin, and the Xi's frequent - if somewhat cheesy- references to US popular culture.</p> <p>The most significant development were a series of proposed tech alliances. Among them was an agreement by search engine  Baidu to promote Window 10 to its users if Microsoft made Baidu the default search engine for operating system's China release.</p> <p>Also ride-hailing app Didi Kuaidi -  which recently backed US counterpart Lyft - agreed to a tie-up with social network LinkedIn to develop artificial intelligence solutions.</p> <p>India</p> <p>Unlike his Chinese counterpart, the Indian prime minister went to meet with US tech leaders in their home turf for a two-day tour where he had a much warmer reception.</p> <p>The highlight was Modi's teary one-on-one chat with Zuckerberg at Facebook's campus. Modi, who is one of the world's most popular political leaders on social media, spoke of his commitment to his "Digital India" agenda, which Zuckerberg also pledged to support.</p> <p>He then went on to Google's headquarters where he met with the firm's India-born CEO Sundar Pichai. The visit coincided with Google's announcement that it would bring wireless to 500 Indian railway stations.</p> <p>But perhaps the biggest score following Modi's trip was Qualcomm Ventures - the investment arm of the US chipmaker - revealing its $150 million India-focused venture capital fund for startups in the mobile and internet-of-everything (IoE) ecosystem.</p>
The Sino-American codependency trap
Capital Markets
<p>Increasingly reliant on each other for sustainable economic growth, the United States and China have fallen into a classic codependency trap, bristling at changes in the rules of engagement. The symptoms of this insidious pathology were on clear display during Chinese President Xi Jinping’s recent visit to America. Little was accomplished, and the path ahead remains treacherous.<br /> Codependency between America and China was born in the late 1970s, when the US was in the grips of wrenching stagflation, and the Chinese economy was in shambles following the Cultural Revolution. Both countries needed new recipes for revival and growth, and turned to each other in a marriage of convenience. China provided cheap goods that enabled income-constrained American consumers to make ends meet, and the US provided the external demand that underpinned Deng Xiaoping’s export-led growth strategy.</p> <p>Over the years, this arrangement morphed into a deeper relationship. Lacking in saving and wanting to grow, the US relied increasingly on China’s vast reservoir of surplus saving to make ends meet. Anchoring its currency to the dollar, the Chinese built up a huge stake in US Treasuries, which helped America fund record budget deficits.<br /> Click here to read more<br /> This story first appeared in Advisor Perspectives.</p> <p>Photo: futureatlas.com</p>
Wall Street’s takeover of peer-to-peer lending almost complete
FinTech
<p>Big banks are excellent at creativity and innovation, some of it a legitimate component of the business that helps the economy, and creativity in other areas has proven to be less than beneficial to the economy and market security. This includes finding and exploiting regulatory cracks and arbitrage opportunities, as a recent Financial Times piece observed, applying a sense of historical reflexivity to the recent dominance of the peer-to-peer lending revolution by banks and Hedge Funds.</p> <p>With peer-to-peer lending, sharp-eyed readers might feel a sense of déjà vu<br /> “Sharp-eyed readers might feel a sense of déjà vu,” Gillian Tett, U.S. managing editor of the Financial Times observes today. While discussing Wall Street’s ascendancy to dominate several angles of a “peer-to-peer” lending process that was advertised as a method to disintermediate banks, Tett, in a piece titled “The sharing economy is now a playground for Wall Street,” observes what what algorithmic traders might otherwise call a confirmation pattern. A confirmation pattern is a re-occurring event that often ends with the same conclusion. For Tett, the combination of banks operating in regulatory cracks is something that will end in "tears."</p> <p>"History suggests that whenever innovation and regulatory arbitrage are combined in an era of ultra cheap money, it often ends in tears — somewhere. If nothing else, that also suggests that policymakers need to find ways to stop activity falling between the regulatory cracks; not least because financiers are endlessly creative at dancing in those gaps."<br /> Peer-to-peer lending operating in regulatory cracks as a business model<br /> While she did not specifically identify it, Tett was peeling back the onion on a highly evolved business model. "The idea of using innovations to dance around tough capital rules is hardly new: in the early years of the past decade, banks used structured investment vehicles and collateralised debt obligations in the same way,” she writes, noting a unique relative value strategy. “They also took advantage of cracks in regulatory structures to create products that policymakers could not easily monitor or control (it was unclear, for instance, who was supposed to oversee mortgage derivatives).”</p> <p>This big bank issue has occurred on a frequent basis and can be tied back to 1998 with a man at the center of assisting in creating big bank “cracks” that can be exploited, one who is also at the center of the peer-to-peer revolution today: Larry Summers.</p> <p>In 1998 Summers fought hard to punish then CFTC Chair Brooksley Born, who wanted to study unregulated derivatives that would eventually have a significantly negative impact on the economy on more than one occasion. At that point, regulatory confusion and allowing banks to operate in the “cracks” seemed like the point, as the unwritten rules against questioning questionable bank behavior on derivatives were later codified into law in the form of the Commodity Modernization Act of 2000, stripping away common sense derivatives</p>
Square's imminent IPO could leave its CEO spread thin
FinTech
<p>Payments start-up Square could file the first documents for its IPO in as little as two weeks, according to Fortune.  The news comes packaged with two big unknowns.</p> <p>Firstly, there are the macro-economic issues stemming mainly from fears over the stability of the Chinese economy and the prospect of the Federal Reserve raising interest rates before the year is out.</p> <p>The second issue is how Square co-founder and CEO Jack Dorsey - who is interim CEO of Twitter, which he also co-founded - will handle running two public-listed companies.</p> <p>As Fortune points out, an executive running two public firms is rare. Someone running two firms, when one is actually going through the process of an IPO, is rarer still.</p> <p>Dorsey was a previously rumored to be a favorite for the full-time CEO gig at Twitter, but the company's board has since said it would only consider a full time CEO in a “position to make a full-time commitment to Twitter.”</p> <p>What is certain is that Square will need to clarify Dorsey's commitments before hitting the road to raise money. Until then, the prospect of handling the workload of two public companies is going to make Jack is a very dull boy indeed.<br /> Photo: George Redgrave</p>