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Will the Fed lift rates this month?
Hedge Funds
<p>Here’s an intriguing thought. Yra Harris, the low-key futures vet who was featured in Steven Drobny’s “Inside the House of Money,” recently opined that he thinks the Fed is going to lift rates this October.</p> <p>Why? Well, apparently San Francisco Fed President John Williams telegraphed the move in his latest speech:<br /> “Why do I think the rate increase is coming? Williams gave three hints in a speech he delivered today, ‘The Economic Outlook:Live Long and Prosper.’</p> <p>1. ‘In addition, an earlier start to raising rates would allow us to ENGINEER a smoother, more gradual process of policy normalization. That would give us space to fine-tune our responses to react to economic conditions. In contrast, raising rates too late would force us into the position of a steeper and more abrupt path of rate hikes, which doesn’t leave much room for maneuver. Not to mention, it could roil financial markets and slow the economy in unintended ways.’</p> <p>2. ‘I am starting to see signs of imbalances emerge  in the form of high asset prices, especially in real estate, and that trips the alert system;’ and</p> <p>3. ‘When unemployment was at its 10 percent peak during the height of the Great Recession, and as it struggled to come down during the recovery, we needed rapid declines to get the economy back on track. NOW THAT WE’RE GETTING CLOSER, THE PACE MUST START SLOWING TO MORE NORMAL LEVELS. LOOKING TO THE FUTURE, WE’RE GOING TO NEED AT MOST 100,000 NEW JOBS EACH MONTH.’ [emphasis all mine]”<br /> The man has a point. Williams’ speech, while littered with Fed speak meant to offset Yellen’s post-decision presser, is absolutely hawkish at its core. And the fact that he’s one of the FOMC’s members should make it something more of note. Timing however was not quite apparent, though Harris does have a compelling reason for October:<br /> “I say October because I believe December is too late as year-end funding issues will cause unwanted volatility in the REPO MARKET.”<br /> It’s still a little too early to call though. Federal fund futures are still giving a 2015 hike the thumbs down, but the FOMC minutes are coming up tonight and that could change the entire ball game. Stay tuned.<br /> Photo: Anne-Lise Heinrichs</p>
PLDT builds SoftBank-style web of influence
<p>&nbsp;</p> <p>The recent decision by PLDT (Philippines Long Distance Telephone Company) to launch its own venture capital unit is the latest in a series of moves by telecoms giant that are reminiscent of its larger Japanese counterpart SoftBank.</p> <p>Just as SoftBank has grown its internet and media empire by drawing on an expanding global web of early stage investments, PLDT is also turning to venture capital to help build its own kingdom.</p> <p>The new investment unit - PLDT Capital - will not be based in the Philippines but instead it will be based in Los Angeles. But its remit will be to try and tap innovative Silicon Valley and Southeast Asia-based startups that can contribute to its own ecosystem. Winston Damarillo, Managing Director of PLDT Capital, had this to say:<br /> “The PLDT Group serves more than 70 million mobile and internet customers in the ASEAN region,”In addition to investments, PLDT Capital aims to become the gateway for the most promising startups to expand their opportunities to the fast growing digital consumers in the ASEAN region.”  <br /> This is by no means its first foray in venture capital. The firm made headlines earlier this year when it bought a 10% stake in Rocket Internet, the German incubator and venture capital investor that is currently driving an e-commerce revolution in Southeast Asia and other emerging markets globally.</p> <p>The firm also recently swallowed up Singapore's Paywhere, the start-up  behind TackThis, an ecommerce platform that operates on a software-as-a-service (SaaS) model, through its digital innovations unit: Voyager Innovations.</p> <p>Corporations using venture capital investments to tap innovation is neither new nor unique. That said, the way PLDT (a telecoms company like SoftBank) is using VC to broaden its global influence and access new verticals - notably e-commerce - shares a few parallels with the Japanese giant.</p> <p>Of course PLDT has nowhere near the size, or the war chest, of a firm like SoftBank. Perhaps PLDT looking for that one big hit in same the way SoftBank had its home run with Chinese e-commerce Alibaba. Setting up shop in Silicon Valley certainly increases their chances of finding it.<br /> Photo: Rod </p>
Equity outlook fourth quarter 2015
<p>The Committee upgraded our view on U.S. large cap equities following the recent correction, and maintained a slightly overweight view on European equities. Our view on MLPs has also improved following a challenging year.</p> <p>U.S. Large Cap Equities<br /> We upgraded our view of U.S. large cap equities to slightly overweight for the next twelve months. The S&amp;P 500 registered its first correction since 2011, declining more than 10% from its high in May. The key question for investors today is whether the pullback represents a momentary pause in the current economic cycle, as in 2011, or anticipates something more serious, such as a global recession. In our view, the latter prospect is unlikely, given the resiliency of the U.S. economy and, importantly, broad policy commitment to cushion economic shocks. The Federal Reserve, in particular, is likely to be cautious in light of recent events and the absence of inflationary pressures as it assesses the timing and pace of any rate hikes.</p> <p>Still, it bears noting that the past seven years have seen extraordinary gains in U.S. equities with a near absence of major (10%-15%) corrections. The recent swoon may be overdue, and actually healthy, as it creates more attractive valuations.<br /> U.S. Equities: Corrections of 10% or More<br /> Shading Indicates Bear Markets of 20% or More</p> <p>Source: FactSet, Goldman Sachs. As of August 31, 2015.<br /> Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.</p> <p>Developed Market Non-U.S. Equities<br /> Europe: The Committee as a whole remained at a slight overweight for Europe. Although growth and inflation forecasts for the region are subdued, the European Central Bank (ECB) stands ready to increase and/or lengthen its quantitative easing program as needed in support of its objectives. We anticipate that ECB stimulus will support European equities and maintain that there is more catch-up potential for the region from an economic recovery and earnings perspective.</p> <p>Japan: Our view on Japanese equities moderated slightly from the third quarter. Japanese stocks are benefiting from a weak yen and reallocation of pension fund assets, but are threatened by a slowing Chinese economy. While we continue to believe that Japanese equities have upside potential, a contraction in second quarter GDP gives us concern about growth and the efficacy of Abenomics.<br /> Emerging Markets Equities<br /> China volatility, commodity weakness and dollar strength persist, creating headwinds for emerging markets equities, while corporate profitability remains under pressure. Against this backdrop we are maintaining our neutral view of emerging markets equities and believe selectivity from a regional/country and sector/company perspective remains paramount in today’s environment.</p> <p>Brazil: With the country mired in recession, we have downgraded our view on Brazilian equities and further believe that the country may encounter meaningful risks with respect to its debt.</p> <p>Russia: Russia has held up reasonably well in recent months compared to other emerging markets but Committee members remain cautious on the long-term outlook for the country’s equities due to a weak growth forecast, sizeable exposure to energy prices and the potential for ongoing geopolitical risk.</p> <p>India: Thanks to some respectable policymaking and a solid fiscal position, India is hanging on to its position as a relative bright spot within our emergi</p>
Deutsche Bank expects $7 billion losses after charges for the third quarter
<p>Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) is expecting to report a net loss of €6.2 billion (approximately $7 billion) after charges for the third quarter of this year.</p> <p>Deutsche Bank estimated an IBIT loss of approximately €3.3 billion and a net loss of €4.8 billion year-to-date through the third quarter.</p> <p>Excluding the impact of the impairment of goodwill and intangibles, its IBIT loss would be approximately €200 million and the net loss would be around €400 million.</p> <p>Deutsche Bank expects to remain profitable year-to-date until the third quarter with IBIT of approximately €2.5 billion and net income of approximately €900 million.</p> <p>The global investment bank also disclosed that its management board will recommend a reduction or possible elimination of the common share dividend for the fiscal year 2015. Deutsche Bank said the move was part of the planning for the implementation of its Strategy 2020.</p> <p>The stock price of Deutsche Bank declined more than 4% to $27.50 per share during the extended hours, around 4:55 in the afternoon in New York.<br /> Deutsche Bank huge write-down<br /> Deutsch Bank said its third quarter financial performance will be affected by a huge write down including a €5.8 billion of goodwill and certain intangibles related to its Securities (CB&amp;S) and Private &amp; Business Clients (PBC) divisions.</p> <p>The global investment bank also incurred a €600 million impairment of the carrying value of its 19.99% stake in Hua Xia Bank Co. Ltd. Deutsche Bank said its holding was no longer strategic.</p> <p>Additionally, Deutsche Bank said its litigation provisions are worth approximately €1.2 billion. The bank expected that majority of the amount are not tax deductible. It is also anticipating that its final litigation provisions in the quarter will be affected by further events prior to the release of its final results for the third quarter.<br /> Deutsche Bank regulatory capital ratios<br /> According to Deutsche Bank, the impairment of goodwill and intangibles as well as its Hua Xua investment has no material impact on its regulatory capital ratios.</p> <p>It is currently expecting to report a fully-loaded CRR/CRD4 Common Equity Tier 1 ratio of around 11% for the third quarter. The expected regulatory capital ratio included the impact of European Banking Authority Regulatory Technical Standards (Prudential Valuation) adopted during the period.</p> <p>This story first appeared in ValueWalk.<br /> Photo: </p>
Daily Scan: Shanghai up 3%; rest of Asia tanks
<p>Updated throughout the day</p> <p>October 8</p> <p>Good evening everyone. A-shares did a mighty fine job of playing catch-up Thursday with the Shanghai Composite finishing the session up 3% at 3,143.35 – above the psychologically important 3,100 level.  The Shenzhen Composite rallied  4% tO 1,785.39. Hong Kong shares slids on what traders are calling profit-taking, while over in Japan, a slump in machinery orders continued to weigh on the region’s stocks. Here’s how they fared today:</p> <p> Hang Seng Index: -0.7%<br /> Hang Seng China Enterprises Index: -1%<br /> Nikkei 225: -1%<br /> Topix: -0.8%<br /> Straits Times Index: -0.4%</p> <p>Over in Europe, things aren’t looking so hot either. The U.K.’s FTSE 100 is down over 0.4% ahead of the Bank of England’s rate decision, while Germany’s DAX – spanked by a mixed bag of data – fluctuated throughout the day. Its currently up 0.2%.</p> <p>Here’s what else you need to know:</p> <p>Uber China is toast. Didi Kuaidi, Uber’s Beijing-based rival, scored a massive win against its San Francisco-based nemesis after it secured a license to operate private cars in Shanghai. This is a huge blow to Uber, not only because Shanghai is a major market, but also because other Chinese cities typically follow suit. Wall Street Journal (paywall)</p> <p>Glass one-quarter full: Greek unemployment…is better than expected. In the latest of Greece’s mounting good reports, the embattled nation’s unemployment rate was revised to 25% from 25.2%, beating analysts’ estimates of a 25.4% reading. That’s 2.75 million unemployed people. Financial Times (paywall)</p> <p>Sony to sell stake in world’s largest music publisher. Sony, the embattled Japanese electronics giant, is selling its stake in Sony/ATV Music Publishing – which it co-owns with the estate of Michael Jackson. Sony/ATV owns the copyrights to songs from the Beatles, Marvin Gaye, and Taylor Swift, and is currently pegged by music vets at $2 billion. Wall Street Journal (paywall)</p> <p>Largest Chinese private merger in the works. Meituan.com and Dianping Holdings, two of China’s largest online consumer service companies, are reportedly close to sealing the deal on the country’s largest private merger. The deal – valued at $20 billion – will create a combined entity that will dominate China’s online services market from movie tickets to food deliveries. Financial Times (paywall)</p> <p>President Obama apologizes for the Kunduz airstrike. Obama called and directly apologized to Dr. Joanne Liu, president of Doctors Without Borders, for the airstrike in Afghanistan that left 12 medical staff members and at least 10 patients dead. Doctors Without Borders has called the airstrike a war crime, and an "attack on the Geneva Conventions." CNN</p> <p>Deutsche Bank expects big losses. The German bank says it foresees a 6.2 billion euro loss when it reports its third-quarter earnings results on October 29. The board will recommend "a reduction or possible elimination" of its common-share dividend for 2015. </p>
Daily Scan: Stocks keep climbing up; Hillary reverses course and opposes TPP deal
<p>&nbsp;</p> <p>Updated throughout the day</p> <p>October 7</p> <p>Good evening, U.S. stocks continued to rally Wednesday as healthcare companies rebounded. The Dow gained 0.7%. The S&amp;P 500 was up 0.8%, and the Nasdaq grew 0.9%. Rising oil and low interest are the magic ingredients for the upbeat mood. Oil got desperately close to breaking $50/barrel, but ended just below $48/barrel. We'll see how that lasts as the quarterly earning seasons ramps up. Meanwhile, home mortgage applications surged 25% for the week ended October 2 ahead of regulatory changes; nonetheless home buyer applications are surprisingly low, experts say.</p> <p>Here is what else you need to know:</p> <p>Hillary Clinton does turnabout and opposes TPP. Clinton had supported the deal while in the Obama Administration but now says the agreement doesn't "meet the high bar [she] has set." The reversal also puts her at odds with Vice President Joe Biden, who may still be mulling a run for the Democratic nomination. Labor unions, as well as other Democratic presidential candidates, have opposed the deal. Politico</p> <p>President Obama apologizes for the Kunduz airstrike. Obama called and directly apologized to Dr. Joanne Liu, president of Doctors Without Borders, for the airstrike in Afghanistan that left 12 medical staff members and at least 10 patients dead. Doctors Without Borders has called the airstrike a war crime, and an "attack on the Geneva Conventions." CNN</p> <p>Deutsche Bank expects big losses. The German bank says it foresees a 6.2 billion euro loss when it reports its third-quarter earnings results on October 29. The board will recommend "a reduction or possible elimination" of its common-share dividend for 2015. Wall Street Journal</p> <p>Central banks shed $123 billion in U.S. Treasurys, the most since 1978. The sales are a further sign of distress in emerging markets which once used trade surplus cash to purchase the debt. China sold an estimated $120 billion to $130 billion in August to prevent the yuan from tumbling further than it wanted. Traders suggest that the yield on the 10-year note has remained historically low because China was such a major buyer. Nonetheless, analysts say Treasury yields are unlikely to back up as domestic buyers are plentiful.  Wall Street Journal (paywall)</p> <p>AB InBev makes $104 billion bid for rival brewer in biggest deal of the year. SABMiller still isn't satisfied with the offer.Anheuser-Busch InBev, the world’s largest brewer, launched an improved offer for SABMiller on Wednesday, offering 42.15 pounds/share, up from its September offer of 38 pounds, for its largest rival to extend its reach into Africa and other markets. CNN Money</p> <p>Dollar falls to upper 119 yen zone after BOJ stands pat. Some market players had expected the central bank to decide on additional easing that could weaken the yen. Nikkei</p> <p>Trio wins Nobel Prize in chemistry.</p>
Bill Gates, Li Ka-shing take a second helping of fake burger maker
<p>Impossibe Foods, the startup famous for creating a vegan cheeseburger that actually "bleeds", has whet the appetites of two of the world's wealthiest men - Microsoft co-founder Bill Gates and Hong Kong tycoon Li Ka-shing - and raised a fresh $108 million Series D round of funding.</p> <p>The round was led by UBS and also included Viking Global Ventures, the firm said. Exisiting investors Gates and Li - who got involved via  his VC firm Horizon Ventures - also re-upped for the round alongside Khosla Ventures.</p> <p>Impossible makes plant-based foods that look and taste like their meat or dairy equivalents but take fewer resources to produce. It is a part of cluster of food start-ups that have emmerged in recent years looking to disrupt unethical meat and diary alternatives.</p> <p>This isn't Li's first foray into hi-tech food. His Horizon Ventures also backed Modern Meadow, a start-up that experiments with bioengineering animal cells to make cruelty-free leather and meat products.</p> <p>The firm also backed Just Mayo maker Hampton Creek, as did Khosla Ventures.  Hampton is looking provide a range of dairy-free alternnatives to egg-based products. Samir Kaul, partner at Khosla,said:<br /> "To achieve a sustainable future, we need to further invest in companies like Impossible Foods that minimize the environmental impact of our food system through innovation without compromising taste,"<br /> Photo: stu_spivack<br /> &nbsp;</p> <p>&nbsp;</p>
US to put $11m of seized SilkRoad bitcoin under the hammer
FinTech
<p>Next month U.S. Marshals will auction off just over 44,000 bitcoins - worth $10.7 millon - seized after the arrest of SilkRoad founder Ross Ulbricht (AKA Dread Pirate Roberts) in 2013.</p> <p>SilkRoad was the darknet marketplace that gave bitcoin so much of its early notoriety. Bitcoin was used by SilkRoad visitors to trade in various contraband items, mostly drugs. The site generated $1.2 billion in revenue in just two years of operation.</p> <p>The sale, announced on U.S. Marshals site, will be in November, between 8 am and 2pm EST. The bitcoins will be sold in 21 blocks of 2000, plus an additional block of 2,341. Potential bidders are able register using a form available on the site. Bidders need to register by November 2 and winners are notified on November 6.</p> <p>In total, more than 144,000 bitcoins (then worth $122 million) were seizen from Ulbricht. The other 100,000 have been liquidated by the agency in two other public auctions.</p> <p>Photo: Antana</p> <p>&nbsp;</p>
The case for gold to protect clients’ wealth shorting the Federal Reserve
<p>“I’ve never let my guard down by saying, I do not need to be hedged” - Paul Singer</p> <p>Preservation of clients’ wealth is the most important fiduciary duty guiding investment managers. This obligation is under-appreciated in the midst of financial asset bubbles when recency bias blunts the need to sacrifice potential gains in exchange for protection against losses. Inevitably, this is made painfully clear when a bubble pops and those once-popular assets lose value and the manager’s clientele suffer. As valuations are stretched on the back of reckless Federal Reserve monetary policy and poor economic fundamentals, caution is paramount.</p> <p>This article presents the case for an asset that will help managers protect their clients and uphold their fiduciary duty owed to them. I’ll explain why gold is a powerful hedge that will protect your clients’ wealth, but first I’ll look at the history of trade and currencies and how gold evolved to become a global store of wealth.</p> <p>Gold - ?g?ld AU #79 - A heavy yellow elemental metal of great value</p> <p>Gold is neither a claim on the promise of future earnings like a stock, nor a liability owed by a public institution or a private party like a bond. It also lacks the full faith and credit of most governments that a currency has. Gold serves little industrial purpose, unlike all other commodities, and is most commonly revered as a shiny metal used in ornamental display or jewelry.</p> <p>But it is precisely these failings that make gold a unique and valuable asset and one that can play an important role in portfolio construction.</p> <p>Gold is one of the few stores of value that is limited in supply, transportable, globally appreciated and not contingent upon the faith and credit of any entity. It cannot be manufactured or debased. Gold is the only time-honored currency, or in the words of John Pierpont Morgan (J.P. Morgan), “Gold is money; everything else is credit.”</p> <p>History </p> <p>Thousands of years ago trade began through a system of barter. This method of payment was effective but very limiting. Trade could not occur unless both parties had the goods or services demanded by the other. If a metalsmith, for example, did not need wheat, a farmer seeking a new sickle would have to find alternative goods or services to offer the metalsmith.<br /> These stark limitations and the growing desire to conduct trade with parties over greater distances required a more robust system. Accordingly, trade graduated from the barter system to that of a common currency. Aristotle stated the rationale for a common currency eloquently: “When the inhabitants of one country became more dependent on those of another, and they imported what they needed, and exported what they had too much of, money necessarily came into use.”</p> <p>At first, in almost all cases, the currency was a commodity. While eliminating some of the problems associated with barter, this system presented new ones. Carrying gold or other commodities such as silver, grain, shells or livestock can be cumbersome and difficult to properly measure for weight and purity. Dividing most commodities into fractions for ease of exchange produced additional difficulties. Paying for an acre of land with a quarter of a cow m</p>
Daily Scan: Asia ends on a high, oil prices boost global stocks
<p>Updated throughout the day</p> <p>October 7</p> <p>Good Evening. Asia finished on a high today as climbing oil prices bolstered energy stocks. Hong Kong's Hang Seng Index  got a 2.3% boost after China revealed that foreign-exchange reserves fell at a slower pace in September. Japan's Nikkei Stock Average meanwhile held out, gaining 0.8%, even after stocks struggled earlier in the day following the Bank of Japan's decision to keep its policy unchanged. There are still hopes that easing measures will be brought in at the end of the month.</p> <p>European markets have also been encouraged by rising oil prices, the Stoxx Europe 600 rose 0.3% in early trade while energy shares soared 1.5.%. The brent crude was up nearly 1% to $52.95 a barrel, on expected production cuts in the US and global markets.</p> <p>Here is what else you need to know:</p> <p>US orders Bank of China to hand over counterfeit ring data. A New York judge has ordered the Bank of China to hand over detailed information about Chinese bank accounts used by a counterfeiting ring that allegedly sold millions of dollars of fake Gucci handbags and wallets in the United States. South China Morning Post (paywall)<br /> AB InBev makes $104 billion bid for rival brewer. Anheuser-Busch InBev, the world’s largest brewer, launched an improved offer for SABMiller on Wednesday, offering just over 68 billion pounds ($104 billion) for its largest rival to extend its reach into Africa and other markets. South China Morning Post (paywall)<br /> Dollar falls to upper 119 yen zone after BOJ stands pat. Some market players had expected the central bank to decide on additional easing that could weaken the yen. Nikkei<br /> Samsung flags nearly 80% jump in Q3 operating profit. Samsung Electronics Wednesday flagged a nearly 80% jump in its third-quarter operating profit, which analysts put down to a weaker Korean currency and improved sales of televisions and semiconductors. Asia One</p> <p>IMF warns on worst global growth since financial crisis. The world economy will this year grow at its slowest pace since the global financial crisis, the International Monetary Fund said on Tuesday, with a deep slowdown in China and other emerging economies masking a strengthening recovery in rich countries. The Financial Times (paywall)<br /> Hong Kong panda Ying Ying suffers miscarriage. Giant panda Ying Ying was due to give birth to Hong Kong's first giant panda cub. Doctors at the Ocean Park amusement park said they are very disappointed as they have been trying for four years to get Ying Ying pregnant. BBC<br /> Thailand to push for Asean-level efforts to rein in haze. Thailand has said it will push for Asean-level efforts to rein in the haze that comes from smoke-belching fires in neighbouring countries. Straits Times<br /> MSF demands Afghan war crimes probe. </p>