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Video: Jim Chanos on Tesla
Hedge Funds
<p>Is Tesla a great company? Billionaire short-seller Jim Chanos seems to think so, though he’s not quite convinced that it could take on the likes of BMW and GM yet, and apparently, that's where its stock is priced at right now.</p> <p>Photo: Fatima</p>
Video: Richard Thaler: The less attention you pay, the more money you’ll have
Asset Management
<p>&nbsp;</p> <p>Merryn Somerset Webb talks to author, academic and ‘father of behavioral economics’ Richard Thaler about pensions freedom, central bankers and fund management fees.</p> <p>This video first appeared in ValueWalk.<br /> Photo: Chatham House</p>
Daily Scan: Shanghai up over 3%; Yuan reaches two-month high on dovish pose at US Fed
Capital Markets
<p>Updated throughout the day</p> <p>October 12</p> <p>Good evening everyone. Chinese shares ended the session higher today amid speculation that Beijing will ramp up stimulus measures as the PBOC announced it would expand its relending pilot program. The Shanghai Composite surged 3.28%, while the Shenzhen Composite climbed 4.18%. Japan was closed but Singapore and Hong Kong were able to join the party:</p> <p> Hang Seng Index: +1.21%<br /> Hang Seng China Enterprises Index: +1.26%<br /> Straits Times Index: +1.04%</p> <p>Over in currencies, the yuan surged 0.42% today to hit a two-month high of 6.3187 a dollar. Emerging market currencies rallied over the past week in response to the Federal Reserve policy minutes, which revealed a very dovish attitude at the central bank. Oil prices continued their blitz  after the U.S. rig count fell for the fifth straight week. WTI gained 0.5% and Brent crude climbed 0.8%. Here’s what else you need to know:</p> <p>HK secondary market home sales hit 21-month low. The Hong Kong property market is feeling the heat again as home sales in the secondary market fell to a 21-month low of zero over the weekend. Sellers are reportedly willing to slash prices by as much as 5% at the moment, though buyers are still holding out for double-digit drops. SCMP (paywall)</p> <p>The prancing horse launches its IPO. After delaying its vaunted subsidiary’s offering earlier this year, Fiat Chrysler Automobiles announced that Ferrari has just launched its long-awaited IPO. The offering will see 17,175,000 of the prancing horse’s shares sold to the public, each valued between $48 and $52 per share. Fiat Chrysler Automobiles</p> <p>Kuroda: “Inflation dynamics is as we anticipated.” Bank of Japan Governor Haruhiko Kuroda dashed all hopes for an uptick in QE Monday. Kuroda told CNBC the bank can turn up monetary policy whenever necessary but “at this moment the inflation dynamics is as we anticipated.” The central banker also said  “unless oil prices decline further, the negative impact from oil will eventually dissipate, fade out, disappear and then 1 percent inflation is quite likely to come.” CNBC</p> <p>PBOC: market “correction” almost over. PBOC deputy governor Yi Gang, speaking at the IMF and World Bank meeting in Peru, was quoted saying that after several rounds of “corrections,” the Chinese stock market rout is “almost over.” Foreign and local investors, scrambling to take their capital elsewhere, missed the memo. Reuters</p> <p>Glencore to sell Chilean, Australian copper mines. The shares had halted trading in Hong Kong ahead of the announcement. Glencore is down 55% for the year; the mining and commodities giant is struggling to reduce $30 billio in debt. Last week, Glencore announced plans to dramatically reduce its zinc production. BBC</p> <p>China detains two more Japanese “spies.” In a move likely to strain its already troubled ties with Japan, China has detained two more Japanese nationals on susp</p>
Banks are more talk than action when it comes to innovation, survey shows
<p>Banks are more talk than action -- at least that's what insiders are saying in a recent survey.</p> <p>In its quarterly State of Banking study, Bank Innovation reports that industry insiders rank themselves on innovation a mediocre 2.67 on a scale of 1 to 5 (5 is the best).  That's way below estimates in 2014 and 2013. But when it comes to perception, banks score very high on the innovation scale at 4.65.</p> <p>“Banks wants to be perceived as innovative, rather than actually innovate," one person told Bank Innovation.</p> <p>Success, by that measure, has arrived for the industry.</p> <p>The quarterly survey of 115 bankers, conducted last week, also asked where they saw the industry headed by 2020. The answers were all over the place. In other words, the crystal ball is cloudy.  Some predicted greater specialization while others saw more aggregation. More APIs were on the list. There was confidence and insecurity. Some stated they would remain "trusted advisors" while others expected greater competition from non-traditional sources. They also expected to deploy more analytics to customize products. And, of course, no list of the future would be complete without mention of blockchain technology -- something everyone calls revolutionary but have yet to figure out how to use.<br /> Photo: Nancy I'm gonna SNAP!</p>
Goldman touts Iran investment opportunity
Asset Management
<p>On the day last week when Israeli Prime Minister Benjamin Netanyahu was delivering a speech at the United Nations bemoaning the Iranian nuclear arms deal and those around the world “rushing to embrace and do business with a regime openly committed to our destruction,” a report from Goldman Sachs Group Inc (NYSE:GS) points to “The Awakening of Another Oil Giant” in Iran.</p> <p>Iran has "huge potential" but it is an investment wrapped in "significant uncertainty"<br /> The October 1 report asked the question, “Why focus on Iran,” then proceeded to answer: “Huge potential” that can be tapped but one that requires investors to do so in an environment of “significant uncertainty.”</p> <p>Iran possesses the 4th largest oil reserves in the world and largest gas reserves which has potential to be a key driver of global supply growth. Significant uncertainty remains, however, around the lifting of sanctions, the investment required in fields and infrastructure, and the framework to be put in place by the Iranian regime for international investment, the report noted.<br /> If sanctions are lifted, Iran could grow to fulfill nearly 25 percent of the expected global demand growth in 2016. Currently Iran accounts for 4.1 percent of global oil production and 5 percent of global natural case production.</p> <p>Unlocking Iran and its investment potential may take time and money<br /> However, don’t expect an investment in Iran to be an overnight success. “Growth may take time,” the report said, echoing a common investment pitch phrase that is most often followed by a call for cash. Such an investments is “requiring attractive contract terms and significant investment,” which Goldman estimates at $30 billion over 5 years. “There is potential for production growth far in excess of our base case, with the limiting factors ultimately being above ground issues, primarily around the level of investment that is incentivized. This potential growth could maintain pressure on oil prices, and delay the re-balancing of oil markets,” they wrote.</p> <p>The dropping price of oil is a concern for U.S.-based production, but those laws of gravity don’t necessarily apply to Iran, which has a much lower price of production. The report estimated that the average break even could be near $20 to $35 per barrel. With the price of oil hovering near $45, that appears as an attractive return on investment.</p> <p>This article was originally published by ValueWalk.<br /> Photo: </p>
Video: Fintech innovators focus on 'new needs' among savers
<p>Fintech innovators are focusing on 'new needs' among savers from NexChange on Vimeo.</p>
Bubbles or stagnation: Pick your poison (or how Summers and Trump are brothers)
Capital Markets
<p>     </p> <p>While writing a column on how and why financial bubbles are created, I was interrupted by Professor Lawrence Summers’ typically bombastic article in the FT. “Secular stagnation”, “hysteresis” and being stuck at the zero bound require that governments borrow a lot more to provide fiscal stimulus, Summers argued. Only by that means can the world free itself from the torpid pull of deflation and slow or negative growth. (Please do not worry if secular stagnation and hysteresis are not terms you understand. You will get the picture anyway.)</p> <p>As I wrote last week, China most likely will do as Summers now recommends. China will do so because it must continue to grow, and it is only by continuing massive construction projects that it can do so. The fact that China has built too much in the last 10 years and has a bubble in real estate will not deter the Chinese. They will add to their bubble until some outside event intervenes. But as I said, bubbles cannot inflate forever.</p> <p>Summers seems to be recommending that the rest of the world emulate China: No bubble is too dangerous to be avoided. Despite the high prices of financial assets and real estate, the world’s governments, presumably led by the U.S. government, should borrow in order to inflate those bubbles still further. Why, according to Summers logic? Because the spending will be counted as GDP, assuring growth.</p> <p>This is the perfect time for such borrowing and spending because interest rates are low and the world is seeking additional safe assets, Summers asserts. I assume he means that governments should borrow long, but he does not specify.</p> <p>The choice, Summers seems to be saying, is between super-bubbles and relative stagnation. He chooses super-bubbles.</p> <p>I disagree with Summers. First, as I wrote here, I think the global supply of investable funds is about to shrink. Therefore governments that borrow heavily may find their paper in less demand. Second, bubbles do not pop conveniently. They pop when the world is least prepared for them. And, even worse, the world cannot prepare for them to pop because the natural process of popping is self-reinforcing.</p> <p>Summers and some other macroeconomists think they have the answers to how to deflate a bubble gently. They are arrogant beyond words. No one has managed to achieve such a thing. The U.S. did as well as anyone ever has in 2008-2009. Summers says the U.S. was late in dealing with the bubble and it could have done much better. That is true only if one assumes that politics is capable of doing something early and perfectly. That assumption would be contrary to human nature.</p> <p>Professor Summers strikes me as an angry man. He is not happy with the world as it exists, and he is willing to run large risks to change it. In that regard, he is in company with many Americans of all political stripes. Everyone seems angry about something. And therefore many people are willing to adopt radical policies in order to change what they do not like. Thus Trump and Summers are speaking the same language, though either might be horrified to discover that was true.</p> <p>I will be writing more about the theory of financial bubbles over the next few weeks. It remains an important subject because bubbles affect the entire financial system, as well as the economy, for years after they have popped. I will leave you with one thought about bubbles for today: Historically, the dangerous financial bubbles all have been created by </p>
What we're reading: The global hangover and the Valley's Simon and Garfunkel
Capital Markets
<p>From a flipside view on the global economic slowdown, to an intimate peek at Silicon Valley's most legendary duo, here are some great reads we saw this week.</p> <p>World’s economic slowdown is a hangover not a coma. The popular diagnosis is that the global economy is doomed to decades of secular stagnation. But what if this is wrong? Could the world economy instead be in the later stages of a debt “super cycle”? Financial Times (paywall)<br /> China's monetary-policy choice. The popular line  of thinking is that China growth continues to slow due to long-term structural factors, such as demographic transition. But, so far, few studies have indicated that structural factors are adequate to explain the extent of the decline. Does a more convincing answer lie in China  monetary-policy stance? Nikkei<br /> Speaking to Steve Wozniak was like ‘taking to Garfunkel about Paul Simon,’ Aaron Sorkin says. Sorkin, screen writer of the cinema biopic  “Steve Jobs,”reveals how his conversations with Apple co-founder  Steve Wozniak offered intriguing insight in Silicon Valley's legendary odd couple. Business Insider<br /> From Fifth Avenue penthouse to Hong Kong jail. A remarkable story of how an American socialite became an unwitting drug mule for crystal meth. US philanthropist Elizabeth Kummerfeld had long been falling for online African cash scams, but the one she walked into in 2014 would land her in a Hong Kong prison cell. South China Morning Post (paywall)<br /> An odd way to make friends. At first glance, Russia's invasion of Syria is a sure fire way to lose friends and alienate people - but that's not the intent. To the contrary, the invervention was intended to build relations. It's not working. The Economist (paywall)</p> <p>Photo: YouTube</p>
The Week Ahead: Fed speeches; BoJ releases minutes
Capital Markets
<p>(Note: all times HKT)<br /> Good afternoon. The week starts off with speeches from both the U.S. Federal Reserve and  big releases from the Bank of Japan. The market rebounded last week on the hope that the Fed will further postpone its decision to hike interest rates, while the possibility the Bank of Japan could expand stimulus helped keep Tokyo markets in positive territory. </p> <p>Investors will be listening closely on Monday then when we hear speeches from three Fed officials: Atlanta’s Dennis Lockhart; Chicago's Charles Evans, and board member Lael Brainard. On Tuesday the BoJ releases its monetary policy meeting minutes and monthly report. BoJ’s Kuroda will speak on Friday. We can also expect a slew of important macro data from Australia, Japan, the U.S. and, most importantly, China.  Here’s what else you should look out for:</p> <p>Monday </p> <p>1pm – Malaysia August industrial production – Forecast: 4% from 6.1%</p> <p>9pm – India August industrial production –  Forecast: 4.8% from 4.2%</p> <p>9pm – India August manufacturing production</p> <p>9pm – India September inflation rate </p> <p>9.10pm –  Fed’s Lockhart speech</p> <p>10.30m – Russia August balance of trade – Forecast $10.7b from $10.3b</p> <p>11.3opm – Fed’s Evans speech</p> <p>Tuesday</p> <p>5.30am - Fed’s Brainard speech</p> <p>6am – Korea September import and export prices</p> <p>8.50am – Japan September bank lending</p> <p>8.50am - Bank of Japan (BoJ) monetary policy meeting minutes</p> <p>09.30am - National Bank of Australia September business confidence </p> <p>11am – China September balance of trade – Forecast: $48.21b from $60.2b</p> <p>11am – China September exports  – Forecast: -6.0% from 5.5%</p> <p>11am – China September  imports – Forecast: -13.8% from 15%</p> <p>2pm – BoJ monthly report </p> <p>2pm – Japan September consumer confidence </p> <p>3pm – Germany September final inflation rate </p> <p>5pm UK September inflation rate</p> <p>Wednesday</p> <p> 08.30am –  Australia October Westpac consumer confidence index</p> <p>9am - Singapore Q3 YoY GDP growth rate – Forecast: -1.3% from 1.8%</p> <p>10.30am –  China September YoY inflation rate – Forecast: -1.8% from 1.3%</p> <p>10.30am – China September YoY PPI – Forecast: unchanged</p> <p>8.30pm – India September balance of trade</p> <p>9.30pm – U.S. September retail sales</p> <p>Thursday </p> <p>9.30am –  Australia September unemployment rate – Forcast: 6.3% from 6.2%</p> <p>10am – South Korea interest rate decision </p> <p>1.30pm – Japan August YoY industrial production  final – Forecast: 0.2% from 0%</p>
The hidden debt burden of emerging markets
Capital Markets
<p>LIMA – As central bankers and finance ministers from around the globe gather for the International Monetary Fund’s annual meetings here in Peru, the emerging world is rife with symptoms of increasing economic vulnerability. Gone are the days when IMF meetings were monopolized by the problems of the advanced economies struggling to recover from the 2008 financial crisis. Now, the discussion has shifted back toward emerging economies, which face the risk of financial crises of their own.</p> <p>While no two financial crises are identical, all tend to share some telltale symptoms: a significant slowdown in economic growth and exports, the unwinding of asset-price booms, growing current-account and fiscal deficits, rising leverage, and a reduction or outright reversal in capital inflows. To varying degrees, emerging economies are now exhibiting all of them.</p> <p>The turning point came in 2013, when the expectation of rising interest rates in the United States and falling global commodity prices brought an end to a multi-year capital-inflow bonanza that had been supporting emerging economies’ growth. China’s recent slowdown, by fueling turbulence in global capital markets and weakening commodity prices further, has exacerbated the downturn throughout the emerging world.</p> <p>Click here to read more</p> <p>© Project Syndicate</p> <p>This story originally appeared in Advisor Perspectives.<br /> Photo: Wiki</p>