News > All

Weekend Scan: Deutsche Bank in major revamp; China GDP slows in 3Q to 6.9%
Capital Markets
<p>&nbsp;</p> <p>Good evening.</p> <p>Earnings madness continues apace this week. Monday, look for earnings from IBM and Morgan Stanley. The big q for Big Blue: Will earnings continue to decline? Morgan Stanley may get a lift from its wealth management business. Also on Monday: Richmond Federal Reserve President Jeffrey Lacker speaks at noon. Housing starts are the next big economic indicator to keep an eye on, Tuesday at 8:30 a.m. ET.</p> <p>Here's what else you need to know:</p> <p>It's official. Even China says it's growth is under 7%. Make that 6.9% to be precise in the last quarter, a six-year low. Makes ya' wonder what it would have been without all the stimulus the government launched this past year. The Guardian</p> <p>Deutsche Bank in major revamp. The bank is splitting its investment bank into two units -- one focused on M&amp;A  and the other on corporate finance and trading. Its former head, Colin Fan, is resigning. The board has been reorganized in an effort to make the bank more competitive after a series of legal and financial missteps. Wall Street Journal (paywall)</p> <p>Goldman Sachs chief economist says December rate hike likely. Jan Hatzius says his confidence level is about 60%, twice that of the Street. Calculated Risk</p> <p>Britain rolls out the red carpet for President Xi and everyone wonders why. Says one advisor:  "(It's) the only place where China is truly influential right now because they are so desperate for Chinese investment." Ouch. Financial Times (payall)</p> <p>10,000 more North Sea oil workers likely to lose jobs. The prediction from two major independent oil producers comes after the sector has already lost 5,500 jobs, 15% of the work force. Financial Times (paywall)</p> <p>Pentagon says Qaeda leader killed in airstrike in Syria. In a statement, the Pentagon said Sanafi al-Nasr, a Saudi national, was the cell he led was involved in planning terrorist attacks in the U.S. and Europe. The New York Times (paywall)</p> <p>Gripping read: "The Lonely Death of George Bell." The story of a man who died alone and the people who piece together a life gone off the rails. The New York Times (paywall)<br /> You won't believe this:<br /> Don't even think about sitting down. A Bronx elementary school principal ordered the custodians in her school to haul all th</p>
Deutsche Bank to create fintech unit as part of restructuring
<p>Deutsche Bank is joining other major banks like Citibank and Wells Fargo and is building a fintech unit as part of a restructuring. The<br /> Wall Street Journal reports:<br /> Henry Ritchotte, Deutsche Bank’s chief operating officer, will leave the management board and work on creating a new digital bank for the company, according to the statement. The effort is seen as a big push by the bank into the so-called “fintech” arena, encompassing everything from retail banking to debt underwriting and digital-currency trading.<br /> Photo: Tech in Asia</p>
The love affair between VCs and the media is unraveling
Venture Capital
<p>It's tough going from hero to zero. But as the startup craze ages and cracks in the facade of many startups (or at least their valuations) are beginning to appear. Most recently, The Wall Street Journal published a searing story on startup sweetheart Theranos, the lab that takes "nanotainers" of blood from the phlebotimically-challenged.</p> <p>Venture capitalists didn't take too well to the challenge to the private company, valued at $9 billion. Business Insider says this is becoming a bit of a pattern these days: The fawning is mostly over.<br /> Nobody likes to be questioned.</p> <p>But lately, some of Silicon Valley's big tech investors seem to be particularly upset that journalists are questioning some of the valley's hottest startups.</p> <p>There's a fundamental difference in point of view here. The funders see first-hand how hard it is to build something and sympathize with the struggle. The journalists are supposed to be as objective and careful as possible and report what they find — even if some people don't like it.<br /> That's an incredibly nice way of saying that some journalists aren't swallowing startup news releases without questions. Seems like a backhand compliment: The press corps that largely missed both the financial crisis and Bernie Madoff can hardly be called fierce or clairvoyant.</p> <p>And BI also notes that for every upset VC there are also some pretty experienced investors who are also ringing the alarm -- including Marc Andreessen and Mike Mortiz of Sequoia. Not bad company to be in.<br /> Photo: Owlana</p>
Deflation watch: Consumers anticipate price cuts, wait to buy
Capital Markets
<p>Halloween is almost here -- which means one thing:  Time to start thinking about Christmas sales, the make-or-break time of year for retailers.</p> <p>The early drumbeat is worrisome. Sunday, Business Insider reviewed all the ways that retailers are playing to the consumers who figure that they can bide their time and buy once the markdowns come rolling in. Some sellers just simply cut to the chase and begin with low prices: Everlane promises high quality, well-priced items compared to department stores. The online retailer along with e-tailer Oliver Cabell share the gory details of their costs and how they price things so much more fairly than those big mean retailers who actually have brick and mortar overhead.</p> <p>The Consumer Price Index tells the story: Apparel prices are down 1.4% from September 2014. Car prices are also down 1.7%.  The huge drop in energy prices -- down 18.4% -- doesn't seem to be encouraging consumers to go and spend their savings. What? Why would they if prices are likely to drop further?<br /> Photo: Eli Christman</p>
Goldman Sachs chief economist sees 60% chance that Fed will raise rates in December
Capital Markets
<p>Bill McBride at Calculated Risk snagged a copy of recent commentary from Jan Hatzius, chief economist at Goldman Sachs. In the research piece, Hatzius says the Federal Reserve is likely to raise rates in December -- despite weak recent numbers. Hatzius says "we are only about 60% confident." The wildcards, of course, are the data.</p> <p>That "only about 60%" confident level is about twice as confident as the rest of the market.</p> <p>Read the full excerpt here.<br /> Photo: Rich Mitchell</p>
Who would you trust for existing home sales estimates: The trade group or this guy?
Capital Markets
<p>You decide: Calculated Risk has tabulated the monthly existing home sales estimates of the National Association of Realtors vs the estimates of economist Tom Lawler vs the reported data for the past five years. Which ones would you trust? The report for September is due on Thursday.</p> <p>&nbsp;</p> <p>Existing Home Sales, Forecasts and NAR Report<br /> millions, seasonally adjusted annual rate basis (SAAR)</p> <p>Month<br /> Consensus<br /> Lawler<br /> NAR reported1</p> <p>May-10<br /> 6.20<br /> 5.83<br /> 5.66</p> <p>Jun-10<br /> 5.30<br /> 5.30<br /> 5.37</p> <p>Jul-10<br /> 4.66<br /> 3.95<br /> 3.83</p> <p>Aug-10<br /> 4.10<br /> 4.10<br /> 4.13</p> <p>Sep-10<br /> 4.30<br /> 4.50<br /> 4.53</p> <p>Oct-10<br /> 4.50<br /> 4.46<br /> 4.43</p> <p>Nov-10<br /> 4.85<br /> 4.61<br /> 4.68</p> <p>Dec-10<br /> 4.90<br /> 5.13<br /> 5.28</p> <p>Jan-11<br /> 5.20<br /> 5.17<br /> 5.36</p> <p>Feb-11<br /> 5.15<br /> 5.00<br /> 4.88</p> <p>Mar-11<br /> 5.00<br /> 5.08<br /> 5.10</p> <p>Apr-11<br /> 5.20<br /> 5.15<br /> 5.05</p> <p>May-11<br /> 4.75<br /> 4.80<br /> 4.81</p> <p>Jun-11<br /> 4.90<br /> 4.71<br /> 4.77</p> <p>Jul-11<br /> 4.92<br /> 4.69<br /> 4.67</p> <p>Aug-11<br /> 4.75<br /> 4.92<br /> 5.03</p> <p>Sep-11<br /> 4.93<br /> 4.83<br /> 4.91</p> <p>Oct-11<br /> 4.80<br /> 4.86<br /> 4.97</p> <p>Nov-11<br /> 5.08<br /> 4.40<br /> 4.42</p> <p>Dec-11<br /> 4.60<br /> 4.64<br /> 4.61</p> <p>Jan-12<br /> 4.69<br /> 4.66<br /> 4.57</p> <p>Feb-12<br /> 4.61<br /> 4.63<br /> 4.59</p> <p>Mar-12<br /> 4.62<br /> 4.59<br /> 4.48</p> <p>Apr-12<br /> 4.66<br /> 4.53<br /> 4.62</p> <p>May-12<br /> 4.57<br /> 4.66<br /> 4.55</p> <p>Jun-12<br /> 4.65<br /> 4.56<br /> 4.37</p> <p>Jul-12<br /> 4.50<br /> 4.47<br /> 4.47</p> <p>Aug-12<br /> 4.55<br /> 4.87<br /> 4.82</p> <p>Sep-12<br /> 4.75<br /> 4.70<br /> 4.75</p> <p>Oct-12</p>
T-Mobile CEO buys penthouse apartment once owned by William Randolph Hearst for $18 million
Lifestyle, 4:01
<p>You probably already know this: T-Mobile CEO John Legere has mogul fever. But in case you've missed the point for the magenta-loving honcho, Legere just bought a penthouse overlooking Central Park for a cool $18 million. The orignal owner? William Randolph Hearst of Citizen Kane fame.</p> <p>The duplex features a 1,500-square foot terrace and a pretty darned good view of New York City. The monthly fee for the four-bedroom, four-bath prize: $6,907.</p> <p>Do you think he will be decorating in T-Mobile colors?<br /> Photo: Todd<br /> &nbsp;</p>
Struggling to become even an 'emerging' market
Capital Markets
<p>Ghana recently completed an offering of $1 billion of 15-year bonds at 10.75% interest, with a World Bank guarantee of 40% of the issue.</p> <p>That's a hefty price to pay.</p> <p>I have a fondness for Ghana, going back to 1962 when I wrote my masters thesis on West Africa and had the privilege of staying at the Ghanaian Embassy in Washington on the day that the U.S. approved a loan that enabled Ghana to build its first hydroelectric project, the Volta River Dam. Ghana was among the first African nations to become independent of its colonial ruler, it had a young president who had gone to college in the U.S., and dreamers like me thought the nation had a great future. The dam, for example, would provide electricity for the capital city of Accra and for the aluminum smelter for the alumina that Ghana had plenty of. What a great step forward for a new country—from selling the raw material to, eventually, selling the finished goods.</p> <p>That was 53 years ago, as I calculate it, and our hopes have not been realized. The reasons are many. I will not try to detail them here. Suffice it to say that after the passage of over 50 years, there is again some optimism about the future of Ghana, but that optimism wears thin.</p> <p>How can a nation with a growth rate of about 7% (Ghana, lately, if the figures are right) get ahead by paying 10.75% (plus whatever it is paying the World Bank for its support) to fund itself? The use of proceeds section of the prospectus is, as I suppose is usual in such cases, vague. Proceeds will be used for “budgeted capital projects”, three words that sound right in the context but tell the reader nothing. There is nothing there to give a reader any confidence that the funds will be used wisely.</p> <p>How, also, can it make sense for a developing nation to fund domestic projects in dollars when its currency has been depreciating significantly in recent years, as the Ghanaian currency has been doing, it has a seriously negative balance of payments, and its export products have been declining in price in the world’s markets? In all likelihood, Ghana will end up having to plunder other sources of income in order just to pay the interest.</p> <p>Borrowings like these tend to make nations forever developing, never quite emerging.<br /> Photo: Tulane Public Relations</p>
The Week Ahead: China GDP, an ECB rate decision, more guidance for the Fed
Capital Markets
<p>(Note: all times HKT)<br /> Good day. It is a busy economic calendar across the world this week. Markets will scrutinise important data from China on Monday, including quarter 3 GDP figures, for clearer signs that annual economic growth is on course. President Xi Jinping warned last week that maintaining an annual 7% rate is tough, but he has also repeatedly emphasised that the Chinese economy is in transition to a consumer-led model. The retail sales number should indicate whether a shift is underway.</p> <p>In Europe, the ECB will announce its interest rate decision on Thursday. Few analysts expect any change from the current 0.5% benchmark against a backdrop of continued sluggish economic activity in most of the Eurozone and following recent official statements that the ECB’s quantitative easing program might be extended.</p> <p>Housing and employment figures as well as earnings announcements by leading manufacturers will provide further clues about the effects of a strong dollar on the sustainability of US economic growth. Speeches by two Fed officials might give markets a better idea about interest rate intentions – but don’t bet on it.</p> <p>Here is a list of the most important official data releases this week:<br /> Monday, Oct 19 <br /> 09:00    China Gross Domestic Product   (Q3, YoY) - Forecast: 7%; Previous: 7%</p> <p>12:30     China Retail Sales (Sep, YoY) – Forecast: 10.8%; Previous: 10.8%</p> <p>12:30     China Industrial Production (Sep, YoY) – Forecast: 6%; Previous: 6.1%</p> <p>15:30     Hong Kong Unemployment (Sep) – Forecast: 3.4%; Previous: 3.3%</p> <p>17:00     German Buba Monthly Report</p> <p>21:00     US NAHB Housing Market Index (Oct) – Previous: 62 62</p> <p>23:00     US Fed Lacker speech</p> <p>Tuesday, Oct 20 </p> <p>08:30     Australia RBA Meeting Minutes</p> <p>13:00     Germany Producer Price Index (Sep, YoY) – Forecast: -1.7%; Previous: -1.7%</p> <p>19:30     US Housing Starts (Sep, MoM) – Forecast: 1.147m; Previous: 1.126m</p> <p>20:30     US Fed's Dudley speech</p> <p>Wednesday, Oct 21 </p> <p>24h         Hong Kong Chung Yeung Festival – Markets closed</p> <p>06:50     Japan Exports (Sep, YoY) (Sep) – Forecast: 3.4%; Previous: 3.1%</p> <p>06:50     Japan Imports (Sep, YoY) – Forecast: -11.7%; Previous: -3.1%</p> <p>11:30     Japan All Industry Activity Index (Aug MoM) – Previous: 0.2%</p> <p>15:30     UK Public Sector Net Borrowing (Sep) – Previous: £11.305B</p> <p>Thursday, Oct 22 </p> <p>08:30     National Australia Bank's Business Confidence (QoQ) (Q2)</p> <p>13:00     Spain Unemployment Survey (Q3, YoY) – Previous: 22.37%</p> <p>15:30     UK Retail Sales (Sep, YoY) – Forecast: 4.7%; Previous: 3.7%</p> <p>15:30     Hong Kong Consumer Price Index (Oct, YoY) - Previous: 2.4%</p> <p>18:45     ECB Interest Rate Decision</p> <p>19:30     US Continuing Jobless Claims (Oct 9) – Previous: 2.158m</p> <p>19:30     US Initial Jobless Claims (Oct 16) - Previous: 255,000</p> <p>19:30     US Chicago Fed National Activity Index (Sep) – Previous: -0.41</p> <p>19:30     ECB Monetary Policy Statement</p> <p>20:00     US Housing Price Index (Aug, MoM) – Previous: 0.6%</p> <p>21:00     US Existing Home Sales Change (Sep, MoM) – Previous: -4.8%</p> <p>21:00     US CB Leading Indicator (Sep, MoM) – Forecast: 0.0%; Previous: 0.1%</p> <p>21:00     Europe (Prelim.) Consumer Confidence (Oct) – Forecast: -7.5; Previous: -7.1</p> <p>Friday, Oct 23 </p> <p>08:35     Japan: Nomura/JMMA (Prelim) Manufacturing Purchasing Manager Index (Oct)</p> <p>09:00     China Leading Economic Index (Sep) – Previous: 1%<br /> Photo: </p>
The darlings of active managers: most crowded trades
Asset Management
<p>The “darlings” of mutual funds and institutional funds is a popularity contest tracked by Credit Suisse that might be almost used as a contrarian indicator, in a note titled The Darlings of Active Managers The Most Crowded Names in US Small, Mid &amp; Large Cap Funds. As a general rule, the report authors note, “owning too many darlings given less opportunity for differentiation.”</p> <p>Crowded Trades<br /> Large cap darlings underperformed while “Cherished Cousins” delivered<br /> Following darlings in large caps has not been a profitable strategy, the report noted, as twenty five of the most popular stocks are trading below the S&amp;P 500 total return index benchmark. The current darlings of large caps reads like a who’s who of Wall Street’s most discussed names, seven of which are in tech, including Apple Inc., owned by 398 funds, Microsoft owned by 347 funds. Banks on the list include JPMorgan Chase, which is set to report earnings on Tuesday, is owned by 291 funds, Wells Fargo, owned by 268 funds and Citigroup, owned by 209 funds, are expected to report later this week. Bank of America was a notable off the darlings list.</p> <p>What has generated performance is the “Cherished Cousins,” Credit Suisse notes. These are the most popular names in large cap funds, when managers move down cap to the Russell 2500. Relative to the S&amp;P 500 total return index these stocks outperformed by nearly 12 percent since December of 2012. In particular, this stock grouping has rocketed since December of 2014.  Notable names include Lear Corporation, owned by 63 large cap funds, Alaska Air Group, owned by 48 funds and Jones Lang LaSalle, owned by 44 funds.</p> <p>Crowded Trades<br /> Crowded Trades – Large cap rising stars have good then less than stellar performance<br /> Large cap rising stars got off to an early start in the Credit Suisse report, but have had difficulty out-performing more recently. The 25 stocks with largest increase in large cap fund ownership topped out with 15 percent outperformance in March 2014, but are now outperforming by near 5 percent relative to S&amp;P 500 Total Returns Index. The study also revealed that Fading Star stocks generally lagged in the quarter after names were sold, while highly owned Fading Stars have tended to rebound and outperform.</p> <p>Each quarter Credit Suisse c</p>