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Questions we should be asking about Ackman vs Herbalife
Hedge Funds
<p>Herbalife has launched a second video attacking  short-selling activist investor Bill Ackman. It is the latest salvo in a war that has now rumbled on for three years.</p> <p>Ackman took a massive $1 billion short position on the nutritional supplement firm in 2012 and since then he has been on a crusade to bring down the firm. His firm Pershing Square Capital even launched a website comparing its multilevel marketing (MLM) business model to a giant pyramid scheme.</p> <p>The battle between Ackman and Herbalife is unprecedented in its longevity and scale. It has backfired for Ackman too. Changes brought about by Ackman's activism have ironically helped the company go from strength to strength.</p> <p>It is a case that Fortune predicts will be studied for years to come, and rightly so. It raises a number of questions, not just about Herbalife, but questions like: is the $34.5 billion MLM industry really just a giant pyramind scheme as Ackman suggests? More importantly: do activist investors make for effective regulators?</p> <p>It's clear Ackman is not only shaping the future of Herbalife, but will no doubt - for better or worse - shape how the businesses community will deal with activist investors for years to come.<br /> Photo: UniversityBlogSpot<br /> &nbsp;</p>
Stage set for first mainland ETF liquidation
Asset Management
<p>It’s pretty safe to say that the past few months have not been kind to the U.S. asset management industry. Here’s a story on Carlyle shutting down some of its funds, and here’s another one on hedge funds getting burned on Black Monday. Well, things aren’t so different over in mainland China:<br />  “ChangSheng Fund Management has asked its unitholders for approval to shut down its Shanghai-listed SSE Market Value Top 100 Index ETF. The Beijing-based manager has invited unitholders to attend a meeting in October for them to vote on the ETF liquidation proposal, according to a statement from the manager.”<br /> Apparently, this will be the first ever ETF liquidation in China according to Asia Asset, and it may be the harbinger of more closures to come as several mutual funds – including a QDII status fund – race to close up shop.</p> <p>ChangSheng has yet to receive approval though, and would need at least two-thirds of the fund's holders to vote in favor of liquidation in order to proceed, but given it’s 25% decline in July alone, chances are high that the DBS-backed firm will receive enough votes for it to push through.</p> <p>The fund, which was launched just two years ago, had just $3.2 million in NAV as of the end of June.<br /> Photo: Robert Daly</p>
Robo-advisors: Rise of the machines
FinTech
Are robo-advisors a threat to their traditional human counterparts? The role of artificial intelligence in portfolio management is still relatively nascent and limited in scope -- by the end of 2014 robo-advisors managed just $19 billion, according a recent Citi study -- but that is changing. Already robo-advisors like Betterment and Wealthfront are proving the space has massive potential. Even the
Betting on Japan, Inc.’s recovery
Capital Markets
<p>Japanese stocks have outperformed their peers the past few years, and we don’t think their run is over. Policies to improve profitability, capital use and productivity should provide a stronger foundation for further gains.</p> <p>The run started when the Liberal Democratic Party, led by Prime Minister Shinzo Abe, returned to power in December 2012. Abenomics brought a weaker yen, providing a tailwind to Japanese-based global corporations. It also boosted import prices, helping break the deflationary trend in Japan. As a result, the profitability of Japanese firms, as measured by return on equity (ROE), has recovered to near historical highs (Display).</p> <p>At this point, there are questions as to how much energy Japanese equities have left: whether it’s mixed macro data, worries about China, or uncertain policy direction. Meanwhile, Japanese equities are trading nearly on par with those of other developed markets based on the price-to-forward-earnings ratio, indicating limited potential for further multiple expansion at current earnings levels.</p> <p>So, is it time to trim our overweight to Japanese equities? We don’t think so.</p> <p>Further Gains Require Structural Economic Changes</p> <p>However, we think the next round of outperformance will come from Japan closing its substantial ROE gap versus its global peers. By closing this gap, our research suggests, Japanese companies could generate more than 30% excess earnings growth over the medium term. But narrowing the gap requires fundamental changes in the way businesses operate.</p> <p>Why should this happen now?</p> <p>The current Japanese ROE gap relative to the US is primarily driven by lower operating margins, but we see signs of improvement that could set the stage for progress.</p> <p>Tightness in labor markets. Over the past three years, overall labor participation has improved from 59.4% to 60.0%, but labor is likely to be in shorter supply as it becomes challenging to further increase participation. As labor markets tighten, businesses will need to find ways to better use their workforces.</p> <p>Potential increases in capital investment. One way to improve productivity would be with greater capital investment, and government policy seems to be encouraging it. Meanwhile, thin manufacturing capital investment has left aging equipment. The yen’s decline has also fostered signs that Japanese firms may be bringing manufacturing capacity back onshore. As a result, increased capital spending could help improve productivity over the long term, and create a source of domestic demand in the short term.</p> <p>Government encouragement of improved earnings power. Government reform efforts include the introduction of the JPX-Nikkei 400 Index, featuring companies with high returns on equity, high operating profits and at least two outside directors. Index companies must adopt international financial reporting standards and report earnings in English.</p> <p>The Government Pension Investment Fund has increased its domestic equity allocation, which will use the JPX-Nikkei 400 for passive investment. And the Bank of Japan will include the index in its quantitative easing purchases.</p> <p>Reform measures also include a stewardship code and a corporate governance code, which asks firms to set return-on-capital targets, appoint at least two independent directors, and explain the economic rationale for cross-shareholding. A reduction in the corporate tax rate could als</p>
Daily Scan: Fears return; Asia takes a dive
Capital Markets
<p>Updated throughout the day</p> <p>September 10</p> <p>So much for yesterday's soaring optimism. Concerns over China, fueled by producer prices falling for the 42nd month straight, and a surprise drop  in Japanese machinery orders, a gauge for capital spending in the country, helped put Asia's markets in reverse today.</p> <p>The Shanghai and Shenzhen Composite indices closed down 1.39% and  1,58%, respectively, while the Hang Seng expand its losses in the morning to close down 2.57%. The Nikkei meanwhile - after gaining nearly 8% yesterday on hope Japan would expand its stimulus program - was down 2.7%.  The other Asian markets:</p> <p> Straits Times: -1.37%<br /> Seoul Composite: +1.44%<br /> Jakarta Comp: -0.09%<br /> KLSE Comp: +0.66%<br /> Taiwan Weighted: -0.22%<br /> AS51:-2.29%</p> <p>Here is what else you need to know:</p> <p>Yen falls on stimulus speculation. The Japanese yen fell as much as 0.7% against the dollar today following Kozo Yamamoto’s – one of Shinzo Abe’s closest political allies – calls for more stimulus. The world has been jonesing for more stimulus from the land of the rising sun lately, seeing it as practically needed at this point. Financial Times (paywall)</p> <p>Aussie unemployment falls to 6.2%. Bumps in full-time male and female employment down under helped the Australian unemployment rate drop to 6.2% from 6.3% in August, in line with the Australian Bureau of Statistics’ expectations and probably the only positive news we've had all morning. The majority of the increase came from full-time employment for males, which punched in at 10,100 of the 17,000 jobs added last month. Sydney Morning Herald</p> <p>Chinese core price inflation hits 13-month high. Chinese CPI came in at 2% for August – its fastest rate since July 2014 – versus a 1.6% climb from the month before. It’s still well below the PBOC’s 3% target though, and pork prices – which surged nearly a fifth from the year before – appeared to be the main driver responsible for the increase. Financial Times (paywall)</p> <p>Bombardier rejects offer for railway unit. Canada’s Bombardier, the makers of Learjets and Global Express planes, rejected an offer from the state-owned Beijing Infrastructure Investment Co to buy 60% to 100% of its prized Bombardier Transport unit, one of the world’s largest suppliers of monorail and high-speed trains. SCMP (paywall)</p> <p>The Donald shows up in a Mexican soccer ad. He may be trying to rally the U.S. behind him, but Donald Trump’s controversial remarks on immigration are being used to rally something completely different; the Mexican soccer team. The Mexican team is set to play against the U.S. next month in Cali, and a local TV station has been splicing Trump’s remarks to make it look like the U.S. team is in for a world of hurt. CNN</p> <p>The new iPad Pro is gigantic. Featuring an enormous 12.9 inch screen and an optional keyboard, the new iPad Pro seems to be quite a pivot from the previous models. Wall Street Journal (paywall)</p> <p>RBNZ cuts rates. The Reserve Bank of New Zealand slashed its official cash rate by 25 basis points to 2.75</p>
Buffett is voting Hillary, but 'admires' Bernie
Lifestyle, 4:01
<p>Bernie Sanders may be reaching out to the middle and lower classes, but he has at least one fan in the 1%.</p> <p>Billionaire Warren Buffet told CNBC that he admires the Sanders campaign, reports Business Insider. "I think Bernie Sanders has been a terrific campaigner. He campaigns exactly as I would campaign if I were a candidate," Buffett says.</p> <p>Buffett has openly supported higher taxation for the rich, but Sanders' tax-reform proposals would increase even beyond what Buffett has suggested. Buffett says he respects Sanders' refusal to attack opponent Hillary Clinton, as well as his advocacy for regulations on political spending by businesses and unions.</p> <p>Alas, Buffett is still backing Clinton. He says Clinton has been too glib about her email controversy, but he supports her policies.</p> <p>Sorry, Bernie. "He's not going to get elected," says Buffett, "but I admire him."<br /> Photo: Marc Nozell </p>
U.S. ETFs/ETPs gathered $2.4 billion in new assets in August
Asset Management
<p>LONDON — September 9, 2015 — After a roller coaster August for investors, ETFs/ETPs listed in the United States gathered just US$2.4 billion in net new assets, according to ETFGI’s preliminary ETF and ETP global insights report for August 2015.</p> <p>In the first eight months of 2015 record levels of net new assets have been gathered by ETFs/ETPs listed globally, with net inflows of US$219.7 Bn marking a 16% increase over the prior record set during the first eight months of 2014. In the United States net inflows reached US$127.5 Bn, which is 19% higher than the prior record set last year, while in Europe year to date (YTD) net inflows climbed to US$59.7 Bn, representing a 17% increase on the record set YTD through end of August 2014. In Japan, YTD net inflows were up 74% on the record set last year, standing at US$28.9 Bn at the end of August 2015.</p> <p>“Worries about China’s stock market, currency and economy mixed with falling commodity prices helped to cause a correction in the US stock market. Investors in the United States are concerned given the uncertainty of when the Fed will raise interest rates. The S&amp;P 500 index ended August down 6%.", according to Deborah Fuhr, managing partner at ETFGI.</p> <p>At the end of August 2015, the US ETF/ETP industry had 1,768 ETFs/ETPs, assets of US$2.03 trillion, from 85 providers listed on 3 exchanges.<br /> U.S. ETFs/ETPs see net inflows of US$2.4 Bn in August<br /> In August 2015, ETFs/ETPs listed in the United States gathered net inflows of US$2.4 Bn.  Fixed income ETFs/ETPs gathered the largest net inflows with US$4.7 Bn, followed by commodity ETFs/ETPs with net inflows of US$822 Mn while equity ETFs/ETPs experienced the largest net outflows with US$6.4 Bn.</p> <p>YTD through end of August 2015, ETFs/ETPs have gathered net inflows of US$127.5 Bn.  Equity ETFs/ETPs gathered the largest net inflows YTD with US$83.9 Bn, followed by fixed income ETFs/ETPs with US$30.1 Bn, and commodity ETFs/ETPs with US$1.5 Bn.</p> <p>Vanguard gathered the largest net ETF/ETP inflows in August with US$3.6 Bn, followed by Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) x-trackers with US$1.4 Bn, VelocityShares with US$1.3 Bn, ProShares with US$969 Mn and Schwab ETFs with US$812 Mn net inflows.</p> <p>YTD, Vanguard gathered the largest net ETF/ETP inflows with US$49.2 Bn, followed by iShares with US$46.8 Bn, WisdomTree with US$20.8 Bn, Deutsche Bank x-trackers with US$15.9 Bn and First Trust with US$9.2 Bn in net inflows.</p> <p>This article was originally published by ValueWalk. <br /> Photo: GotCredit<br /> &nbsp;</p>
Chanos tells CNBC that Tesla and Solar City are shorts
Hedge Funds
<p>"Amazon is a great business," Jim Chanos tells CNBC Squawk Box. The founder and president of Kynikos founder says, however: "It's a lot less attractive today than it was a few years ago."</p> <p>Also in the interview, Chanos shares his views on the computer hardware business and other of his favorite shorts.</p>
Daily Scan: Stocks lose Tuesday's gains; Apple rolls out new iPad Pro
Capital Markets
<p>&nbsp;</p> <p>Stocks trimmed practically all their gains after a jobs surveyed revealed the biggest number of job openings in the 15-year-old series. According to the JOLTS report for July, released Wednesday, job openings surged to 5.75 million from 5.32 in June. Job openings are up 22% year-over-year. Quits are up 6% year-over-year and are likely to expand as workers become more confident that they can find new jobs. The good news on employment may embolden the Fed to take the gigantic, ginormous, improbable step of raising interest rates one whole quarter of a percentage point at its meeting next week. So now we know what Wall Street finds really scary: 25 basis points. The Dow closed down 1.45%. The S&amp;P 500 lost 1.4%, and the Nasdaq fell 1.15%. Oil slipped too, falling below $45/barrel.</p> <p>Here is what else you need to know:</p> <p>Hey, Siri, wassup?  Apparently, a lot. Apple revealed its new giant iPad Pro, as well as updates to the Apple Watch and the new iPhone 6s and iPhone 6s Plus. Rolling out with the super-cool $799 iPad Pro is the $99 Apple Pencil. We promise, it's way better than a No. 2. ABC News</p> <p>Died: BlackRock co-president Charles Hallac. Hallac, a 27 year BlackRock veteran, has died after a four year battle with cancer. Hallac was responsible for developing the Aladdin investment operating system for the asset manager. Reuters</p> <p>United Airlines hangar collapsed at Newark Liberty International Airport. Several workers were injured. The collapse was triggered by workers prepping the building for demolition. Talking Points Memo</p> <p>Mortgage applications drop 6.2% as refinancings dry up.  For the week ending September 4 the Mortgage Bankers Association said higher rates prompted a 10% drop in refis.  New home purchase applications rose 1% week-over-week and are 41% year-over-year. CNBC</p> <p>Hillary Clinton apologizes for using private server as Secretary of State. The Democratic candidate for president said in a televised interview: "That was a mistake. I'm sorry." Clinton has dodged apologizing and her standing in the polls has suffered. She now lags behind rival Bernie Sanders in New Hampshire. ABC</p> <p>European Commission President announces plan for 120,000 migrants. Jean-Claude Juncker is proposing a mandatory quota system that would force member countries to take in asylum seekers. BBC</p> <p>World Bank chief economist warns Fed to delay rate rise. Chief economist Kaushik Basu has warned the US Federal Reserve that it risks triggering “panic and turmoil” in emerging markets if it opts to raise rates at its September meeting and should hold fire until the global economy is on a surer footing. Financial Times (paywall)</p> <p>China leader firms up plans for US state visit. President Xi Jinping will </p>
Daily Scan: Global rally continues as U.S. stocks gain 1%; Juncker proposes solution to refugee problem
Capital Markets
<p>Is the worst behind us? Asia surged overnight again, bringing the Shanghai Composite 10% above its August low. The U.S. markets gained about 1% at the open, with the S&amp;P 500 now standing at 1988 Wednesday, continiuing a global rally. And, after days and days of speculation, we will learn Wednesday afternoon what Apple is planning for its TV and next generation of phones at its "Hey, Siri" event. Overall, look for incremental changes. Maybe a bigger iPad, a zippier phone, a new payment system. Tune in for online coverage at zillions of media outlets at 1 p.m. ET.</p> <p>Here is what else you need to know:</p> <p>Mortgage applications drop 6.2% as refinancings dry up.  For the week ending September 4 the Mortgage Bankers Association said higher rates prompted a 10% drop in refis.  New home purchase applications rose 1% week-over-week and are 41% year-over-year. CNBC</p> <p>Hillary Clinton apologizes for using private server as Secretary of State. The Democratic candidate for president said in a televised interview: "That was a mistake. I'm sorry." Clinton has dodged apologizing and her standing in the polls has suffered. She now lags behind rival Bernie Sanders in New Hampshire. ABC</p> <p>European Commission President announces plan for 120,000 migrants. Jean-Claude Juncker is proposing a mandatory quota system that would force member countries to take in asylum seekers. BBC</p> <p>Stimulus promise drives Japan's Nikkei  7.7% higher. The index is back from a seven-month low after Prime Minister Shinzo Abe told a Bank of America-Merill Lynch conference in Tokyo Wednesday that he pledged to cut corporate tax rates by a least 3.3% next year. AP</p> <p>World Bank chief economist warns Fed to delay rate rise. Chief economist Kaushik Basu has warned the US Federal Reserve that it risks triggering “panic and turmoil” in emerging markets if it opts to raise rates at its September meeting and should hold fire until the global economy is on a surer footing. Financial Times (paywall)</p> <p>Bittersweet victory for Serena. On her way to making history on the professional tennis circuit, Serena Williams needed to defeat her sister and "best friend" Venus -- which she did at the U.S. Open in three sets. ESPN</p> <p>UK suffers worst drop in exports in five years. Weak demand  and a drop in car manufactuing were behind a surge in the trade deficit to £3.4 billion pounds in July from  £2.6 billion in June. The Guardian</p> <p>Southeast Asian reserves shrinking rapidly. The lowering of the yuan's reference rate and expectations of a U.S. interest rate hike has spurred sell-offs of South Asian currencies.  From July to August, Malaysia and Indonesia saw the steepest drops in their currency reserves. Nikkei<br /> China leader firms up plans for US state visit.</p>