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Yellen flinches
<p>It is long past time for the Federal Reserve to start raising short-term rates. The unemployment rate is already very close to the Fed’s (new, lower) long-term projection of 4.9% and set to fall further in the next year, even if the Fed had already started lifting rates. Nominal GDP growth – real GDP growth plus inflation – is up at a 4.1% annual rate in the past two years, slightly exceeding the Fed’s long-run projection of 4% growth.<br /> Regardless, the Fed left short-term rates unchanged at today’s meeting and issued, on net, a more dovish statement than after the last meeting in July. Although the Fed acknowledged better business investment, it also provided three reasons for keeping rates unchanged, including (1) lower market-based measures of inflation, (2) global economic developments (which means China-related issues) and (3) financial developments (the recent correction in equity prices).<br /> We don’t think any of these factors warranted a longer wait for rate hikes. There’s always going to be some excuse to postpone rate hikes. The longer the Fed waits the more likely it is that the US economy eventually requires the kind of aggressive rate hikes that can cause a future recession. Raising rates by 25 basis points today wasn’t going to stop anyone from fracking a well or inventing a new App.<br /> In addition to the dovish statement, the Fed slightly marked down its estimates for the long-run average unemployment rate as well as inflation for the next few years. Both of these changes give the Fed more room to temporarily justify keeping rates unchanged.<br /> Consistent with the changes in the economic outlook, the median forecast from the Fed’s key decision-makers is that the Fed will only raise rates by 25 basis points this year, versus a prior median forecast of 50 basis points. In addition, the median estimate of the long run average federal funds rate fell to 3.5% from a prior estimate of 3.75%.</p> <p>The one bright spot in today’s statement was that Richmond Fed Bank President Jeffrey Lacker dissented. He would have raised rates by 25 basis points today.<br /> So where does that leave the likely course of monetary policy over the next several months? We believe a rate hike by the end of this year is still likely, but not a slam dunk. The next Fed meeting is in late October. But we see third quarter real GDP growth coming in at about a 2% annual rate. And it’s hard to see a Fed so skittish that it didn’t raise rates today willing to raise rates in that environment. Instead, December is more likely than October. By that time we should have some indications that real GDP is accelerating in the fourth quarter. However, we also can’t completely dismiss the possibility of the Fed waiting until 2016.<br /> The smartest investors know that the starting time for rate hikes is much less important than how high rates will ultimately go. In that sense, today’s news was a sideshow and we expect more aggressive rate hikes in 2016 than the Fed and markets now anticipate.<br /> This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the individual strategist. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics. Data is taken from sources generally believed to be reliable but n</p>
Hedgie gives NYC teachers a pay boost
<p>Reward good teachers instead of punishing the bad, says Jim Simons, founder of hedge fund Renaissance Technologies.</p> <p>Simons' philanthropic organization, Math for America, gives high performing teachers a bonus, reports Business Insider. The 20-year-old group awards 800 math and science teachers in New York City public schools $15,000 a year. U.S. teachers are paid about $56,383 annually on average, lower than other developed countries, and about 1.3% lower than 13 years ago.</p> <p>"Beating up the bad teachers" does nothing but hurt the education community, says Simons in a recent TED talk interview. Rewarding the good teachers is a better approach, he says. "There's a great morale among them. They're staying in the field. Next year, it'll be 1,000 and that'll be 10 percent of the math and science teachers in New York [City] public schools," says Simons. </p> <p>&nbsp;<br /> Photo: collectmoments<br /> &nbsp;</p>
VC exit activity remains strong despite rising valuations
<p>U.S. VC exit activity has slowed this year. 2014 exits harkened back to the dot-com days, though last year’s total was partially skewed by the massive $22 billion sale of WhatsApp. Absent that deal, 2014 was still a post-2000 record by both count and value, so a slowdown isn’t surprising. What has changed over the past five years is the sheer number of exits happening, topping out at 986 last year. Through 1H, 2015 totals aren’t too far behind at 427, and capital exited levels should compare favorably to prior years, as well.</p> <p>IPO activity, on the other hand, is well off last year’s pace. 121 VC-backed companies went public in 2014 versus only 42 companies through June of this year. Market volatility will likely dictate IPO activity through the rest of the year, though the number of still-private unicorns hints at stronger IPO numbers—at some point. Until then, acquisitions remain the exit of choice for VC, with another 385 sales finalized in 1H totaling $23 billion in value. M&amp;A made up 90% and 85% of VC exit counts and value, respectively, through the first half.</p> <p>Large exits ($500M+) accounted for the lion’s share (58%) of total capital exited in 1H, down slightly from 63% in 2014. Most years going back to 2006 saw $500M+ exits account for 40% or less of total exit value, and sometimes as little as 21% (in 2009).</p> <p>This article is an excerpt originally posted on ValueWalk. </p> <p>&nbsp;</p>
Jim Chanos reading list
Hedge Funds
<p>Jim Chanos started Kynikos Associates in 1985 and the group has since become the world's largest exclusive short-selling investment firm. As of mid 2015, The hedge fund manages approximately $6 billion in assets.</p> <p>Throughout his investment career, Chanos has identified and sold short the shares of numerous well-known<br /> corporate financial disasters; among them Baldwin-United, Commodore International, Coleco, Integrated Resources, Boston Chicken, Sunbeam, Conseco and Tyco International. His celebrated short-sale of Enron shares was dubbed by Barron's as "the market call of the decade, if not the past fifty years."</p> <p>Chanos’ most famous short landed Chanos on the cover of Barron’s in 2002 as “The Guy Who Called Enron.” But the list of his targets stretches from Michael Milken’s junk bond empire through the real estate boom of the late 1980s, the telecom bubble of the late 1990s, Dennis Kozlowski’s Tyco and Bernie Ebbers’s WorldCom at the turn of the century, subprime mortgage lenders and home builders in 2007, and most recently China.</p> <p>For more on Jim Chanos, head over to ValueWalk’s Jim Chanos Resource Page, where you can find a detailed rundown of his background, bio and investment philosophy.<br /> Jim Chanos: Recommended books<br /> The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals<br /> Frank Paternoy. The story of a 20th century Swedish businessman named Ivar Kreugar, who convinced everyone that he's a tycoon in the match business. Really, he just borrowed money in the U.S. and loaned it out in Europe in exchange for match companies.</p> <p>Bernard Baruch: The Adventures of a Wall Street Legend<br /> James Grant. This biography of Bernard Baruch considered to be renowned as the definitive story about the notorious financial wizard and presidential advisor.</p> <p>Waterloo: The History of Four Days, Three Armies, and Three Battles</p>
What we’re reading: Stanley Druckenmiller, China’s currency reserves, and Lucille Bluth
<p>From Mark Dow’s thoughts on the Fed rate decision to a speech from the former right hand of Soros, here are some are some great reads for you this weekend:</p> <p>Stanley Druckenmiller at the Lost Tree Club. Stanley Druckenmiller’s the man, and here’s an older speech from him detailing his early years, his mistakes, his triumphs, and his thoughts on ZIRP circa January 2015. Sam Reeves’ epic burning of Bill Gross in the intro alone is well worth your time. Check it out. Cove Street Capital (pdf)</p> <p>The Fed, international weakness, and the impotence of monetary policy. Here’s a short, sweet, and excellent take on Federal Reserve Chair Janet Yellen’s recent presser. Will ZIRP remain this year or will the Fed take a leap of faith? It’s hard to tell, that’s for sure. Behavioral Macro</p> <p>Is China running out of reserves and does it matter? With Beijing defending the yuan with the fury of a thousand Vikings, everyone seems to have an eye on the nation's currency reserves, questioning what its erosion could mean for the country. Here’s an interesting take on it. PIIE</p> <p>This is nuts, when’s the crash? FT Alphaville had this intriguing piece on VC’s, Unicorns, and the “sharing economy,” littered with graphs on how awesome the whole thing really is. Or not. FT Alphaville</p> <p>Who said it: Donald Trump or Lucille Bluth? With Trumpalooza raging on, BuzzFeed decided to play around with the Donald’s gaffes and compare them with those of that delightful juggernaut of political incorrectness – Lucille Bluth. BuzzFeed<br /> Photo: Marketa</p>
Singapore lets wealthy motorists live the high-life with a "sky garage"
<p>We have all been there. You have just bought a brand spanking new Lamborghini Huracán LP 610-4 but you live in a luxurious high-rise apartment in the heart of the city, meaning most of the time your new purchase is left stowed away in a basement carpark, unseen and unloved. It’s a classic dilemma.</p> <p>Well, the Hamilton Scotts residential building in Singapore has a way to bring your Lamborgini into your living room, so you can gaze upon its loveliness from the comfort of your chaise lounge. It called the Sky Garage.</p> <p>CNN reports that this building’s unique feature lets residents drive their cars into the basement and park it on a movable metal plate before entering a code that moves the car into an elevator shaft that brings it to one of 56 units across 36 floors - high-tech super villain style. The project’s director Calvin Sim Chen-Min explains:<br /> “Basically the way we conceived the parking lot in the sky was that you would park your beloved toy ... and it (would) became part of the living room ensemble.”<br /> The aim, he adds, is for the car to be a piece of furniture that from the living room you could admire like a piece of artwork.<br />  Photo: Reignwood</p>
Weekend Scan: Stocks across the globe dip; Deutsche Bank says do svidanya to Russia
<p>Happy Saturday, folks. With ZIRP still in place, uncertainty has reared its ugly head again to clip gains and send stocks tumbling. In the U.S., the S&amp;P 500 tanked 1.61%, while over in Europe, the FTSE 100, the DAX, and the CAC fell 1.34%, 3.06%, and 2.56% respectively. Asian shares fared slightly better, though much worse than how they did earlier in the trading day. Bonds across the globe meanwhile ended the week with strong gains, while havens such as the Swiss franc and gold surged against the almighty dollar.</p> <p>Here’s what else you need to know:</p> <p>Deutsche Bank pulls i-banking out of Russia. Deutsche has been making moves to significantly cut company costs worldwide. By the end of the year, about 200 investment bank employees in the Russian deal advisory and securities-trading services teams will be affected. Technology, cash management, and other financial services employees however, will stay in place. Wall Street Journal (paywall)</p> <p>Moody’s downgrades France’s credit rating. Citing several issues such as low growth potential, political constraints, and eroding competitiveness, New York-based Moody’s has downgraded France’s government bond ratings from Aa1 to Aa2, and changed its outlook on Eurozone’s second-largest economy from “stable” to “negative.” Moody’s</p> <p>The NYSE had some glitches again. It did get resolved within 19 minutes though: “NYSE Arca experienced an issue routing Tape A, B &amp; C symbols. The issue began at 15:15:12 ET and was resolved as of 15:34:01 ET.” MarketWatch</p> <p>The Italian economy is slowly regaining its bella figura. At least that’s what Prime Minister Matteo Renzi’s government says. His crew just upgraded the nation’s economic forecasts for 2015 and 2016, while Pier Carlo Padoan, Italy's finance minister, said he expected the region's debt to GDP ratio to start shrinking next year, a first since 2007. Financial Times (paywall)</p> <p>Russia moves first fighter jets to Syria. At least four tactical fighter jets are at the growing airfield on the Syrian coast. Russia has already sent housing for up to 2,000 people, attack helicopters, choppers for troop transportation, and artillery. It’s not yet clear what Russia’s full intent is. Wall Street Journal (paywall)</p> <p>Burkina Faso president freed. President Michel Kafando has been freed after being seized by the military coup Thursday. Prime Minister Isaac Zida is still under house arrest. BBC</p> <p>Japan dumps dovish approach. The upper chamber of Parliament approved the controversial bills allowing the military to engage in overseas combat, a major shift since the island nation’s post-WWII pacifism. The bill will allow overseas combat for the Self-Defense Force in very limited circumstances. They were previously limited to humanitarian roles. CNN<br /> You won’t believe this:<br /> Selfies take another life. A Japanese tourist died fro</p>
People Moves: Old Mutual snags investment director from Schroders; State Street names new sector sales chief
<p>OMGI appoints new Investment Director. Oliver Lee, a 15-year veteran of the asset management industry, has been appointed Investment Director for Asian Equities by Old Mutual Global Investors in Hong Kong. Josh Crabb, the firm’s head of Asian equities, had this to say regarding their new hire:<br /> “Oliver will be a valuable addition to our Hong Kong based team. He has extensive experience in Asian equities, spanning both long and long/short strategies. I look forward to working with him as we continue to enhance our Asian equities offering.”<br /> Lee joins OMGI from Schroders, where he held a post within the firm’s alternative strategies group. Prior to that, he worked at Sloane Robinson after spending two years in Goldman Sachs’ equities division. He began his career however in UBS, taking on roles in both its London and Zurich offices. He will be based in Hong Kong and work alongside Josh Crabb, Diamond Lee, Kris Whitlock and Dmitry Lapidus. Old Mutual Global Investors</p> <p>State Street names new head of sector sales. Mark England, an old hand in the asset management sales arena, has been named Senior Vice President and head of Asset Manager Sector Sales for Asia by the State Street Corporation. Kevin Wong, head of the firm’s Sector Solutions for Asia Pacific, seemed delighted by their new hire:<br /> “We are delighted to welcome Mark to the State Street team. Mark will identify and develop integrated product and service solutions for our asset management clients in Asia, a core market for us.”<br /> England brings over 17 years of experience to State Street, with his most recent feather being head of Asset Manager Sales for the Investor Services Group in Citibank. He will be filling in the void left by Paul Khoury, who was appointed head of State Street Global Services for Australia and New Zealand earlier this year. Asia Asset Management</p> <p>For Capital Markets moves, click here.<br /> Photo: Luke Ma</p>
People Moves: JPM bags new China investment banking chief; Macquarie names new Asia ECM bosses
<p>Goldmanite named JP Morgan head of global IB. Houston Huang, a man with over two decades of deal making experience under his belt, has been named head of Global Investment Banking, China by JP Morgan. David Li, the firm’s Chairman and CEO for China, seemed pretty stoked by the investment banking giant’s new hire:<br /> “We are delighted that Houston will be joining J.P. Morgan. He brings with him strong experience and unique insight to the firm having worked on landmark transactions across multiple sectors. He is an exceptional addition to our investment banking team in the region.”<br /> Prior to joining the vaunted firm, Huang spent four years at Goldman Sachs, where his most recent role was Managing Director and head of its China Industrials Group. Before that, Huang worked at the behemoth China International Capital Corporation, serving the bank in various key roles and advising on several mammoth deals. He reports to David Li. China Money Network</p> <p>Macquarie appoints new co-chiefs of Asia ECM. Arthur Van Dijk and Jack Yee, two heavies in the ECM scene, have been appointed co-heads of equity capital markets in Asia by the Australian firm, Macquarie.</p> <p>Van Dijk was most recently Managing Director of Macquarie’s ECM team, joining the bank back in 2012 after cutting his teeth at Morgan Stanley straight out of college. Yee meanwhile joins the firm from Barclays, where his most recent role was Managing Director and head of the British bank’s Asia equity syndicate. He jumped to Barclays from Nomura, after spending over 10 years of his career at Lehman Brothers. Van Dijk is set to run deal origination while Yee will be taking care of the syndicating side. They are both filling the shoes of Jeremy Weinert, who was promoted last year to regional head of Macquarie Capital. Finance Asia</p> <p>For Asset Management moves, click here.<br /> Photo: Wendy</p>
Welcome to the jungle: Morgan Stanley trader runs Amazonian ‘ultra-marathon’
<p>Sergey Ionov, 27, is an exotic equity derivatives trader at Morgan Stanley and often clocks in 12-hour days. So how does he kick back and relax? By running several hundred kilometers mutli-day races in the Amazon and Alps, known as ‘ultra-marathons’.<br /> Perhaps inspired by his position at Morgan Stanley, Sergey’s taste for the ‘exotic’ permeates his running style. These are not your common run-of-the-mill city marathons. Ultra-marathons can take place in the jungles of the Amazon or at 3,000 metres altitude in the Alps. He started training about four years ago and took part in his first marathon three months later.</p> <p>Faced with a busy office schedule and the resulting difficulties in finding time to train, Sergey said he chose running over other physical activities because it is in every aspect the most practical choice. You don’t need a gym, equipment, or a particular schedule. And you can easily convince your friends to join.</p> <p>“During the week I just run to the office: I have two routes – a short one is about 6 km and a long one is about 12 km. I work in Canary Wharf so I can just cross Tower Bridge and go from there, or else run to Greenwich and take the tunnel.”</p> <p>He believes running reduces the stress accumulated at the office: “I normally work 12 hours in a row and get very tired. It helps you to relax and even find better solutions to work-related problems.” Running has also become a big part of his social life. When planning holidays, Sergey and his jogging mates always try to find a place where they can take part in a race.</p> <p>Just a few weeks ago, Sergey took 1st place in the London to Cambridge 100 km marathon.</p> <p>“I don’t really focus too much on winning. It is nice though. It improves the attitude of people towards you. They know you have achieved something great in spheres of life other than finance and at the same time you are able to fulfil your daily duties professionally,” he said.<br /> Jungle run<br /> It all started as a personal challenge, the most difficult challenge Sergey has ever attempted in his life. It took Sergey about 6 months to prepare: every morning he ran to his office with a 12 kg backpack and soaking wet sneakers. “It is quite important to get used to this before. Otherwise, you can have a whole leg turning into one huge blister,” he said.</p> <p>However, as Ionov went through the hardships of the difficult training, he became more and more motivated by the fundraising opportunities the Jungle Ultra Marathon offered him. He chose to use his participation to support Gift of Life, a charity that offers help and care to children with cancer and other life-threatening illnesses in Russia.</p> <p>The competition took place near Santarem in Para, Brazil. Sergey had to complete a distance of more than 250km in 6 days, running along pre-existing paths, trails and tracks through the thick jungle, overcoming natural obstacles such as streams and shallow rivers, and the occasional encounter with local fauna.</p> <p>“When you concentrate on the route you won’t face any danger. Snakes, caimans, they don’t go on the road. They are more afraid of you than you are of them. The bigger nuisance is posed by smaller creatures – all sorts of mosquitoes and ants. At the end of the day you go to the medical check-point and have the swarms of ticks you’ve c</p>