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julialaroche-blog1 · 8 years

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Janet Yellen plays patient in shocking 'Operation' parody art exhibition

yahoo

Federal Reserve Chair Janet Yellen’s image is featured prominently in a new and provocative art exhibit debuting at the Georges Berges Gallery in New York’s SoHo neighborhood.

CorpCru, a collective of about 10 craftspeople and fine artists, will unveil 50 mixed-media original works in a series entitled “Corporation.”

The centerpiece of the exhibit features a scantily-clad Yellen in an immersive parody of the board game Operation, which the collective changed to “Corporation.”

The larger-than-life image, dressed in a “Target: Inflation” crop-top, stands at 7-feet tall from her head to her stiletto heels. For the game, players draw “debit” and “credit” cards and try to remove aluminum sculptures from inside her.

In this game, a player would draw one of these cards.

Instead of a setting off a buzzer as in the classic game, when the tweezers make contact with the board, an audio mashup of music and speeches blast on a speaker. The words touch on newsy, hot-button socioeconomic and political issues. Yellen’s top also lights up.

Instead of pulling an organ, you might pull out one of these symbols of the modern economy.

The project is the brainchild of former investment banker Jason Meyers and his long-time friend Jason Rodriguez, a silkscreen artist and printer.

In February, Meyers called Rodriguez about creating a parody of Yellen, “not as the person but as the central figure to the monetary system.” Within hours, Rodriguez called back and suggested creating a parody of the board game “Operation.”

“Lightning struck when I brought in the ingredient of a parody of this central figure to the monetary system. As soon as the word ‘corporation’ rolled out of his mouth — ‘Operation,'” he said.

Jason Meyers, Georges Berges, and Jason Rodriguez

“We want them to laugh at a system that is mediocre at best,” Meyers said.

“There’s a lot of messages in this. I mean, it goes very very deep. One, we want you to laugh. Two, we want you to think. And three, you’ll probably arrive at the conclusion that all of this might actually be true.”

He added that most people don’t understand what the Federal Reserve does or what Yellen’s job really entails.

“She actually has the toughest job in the world, not the president of the United States,” Meyers said. “We’re not deifying her or vilifying her. She’s actually a neutral appointed figure. She has power, she has money, and we’ve given her something that she doesn’t really have.”

Cards you might draw when playing the game of “Corporation.”

Meyers said that he hopes Yellen would laugh if she were to see the exhibit.

CorpCru is a collaboration of a number of different artists, including well-known urban artists J “Sen 2” Figueroa and James “Sexer” Rodriguez.

“We’ve known each other forever and have always said we’d do a collaboration,” Rodriquez said.

“We’re very picky about who we paint with,” he continued. “We fell in love with the concept and collaborated for the first time ever on this piece.”

The exhibit opens at George Berges Gallery on West Broadway on Thursday at 6 p.m. EST.

The game of Corporation.

#Monetary Policy #Federal Reserve #Janet Yellen #_uuid:ae70070e-cb9f-3887-9ebd-09b1bdf43fe2 #_wp:174834

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Goldman Sachs' new online lending platform for Main Street has launched

REUTERS/Brendan McDermid

Investment banking giant Goldman Sachs (GS) is now giving loans to Main Street.

On Thursday, Goldman announced the official launch of its new online consumer lending arm called “Marcus.”

Named after one of the bank’s original business partners Marcus Goldman—who started the firm 147 years ago with Samuel Sachs—the new retail platform allows credit-worthy borrowers to apply for fixed-rate, no-fee loans of up to $30,000 for periods of two to six years.

“For many who manage debt payments on high-interest rate credit cards, a straight- forward personal loan is a better solution,” Harit Talwar, head of Marcus by Goldman Sachs, said in a statement.

He added: “Marcus offers an option for consumers who are searching for a simpler alternative to credit card borrowing, where rates can change and multiple fees can be charged.”

Talwar, a former head of Discover Financial Services’ US credit-card business, joined Goldman as a partner last year to help lead the firm’s online lending efforts.

Traditionally, Goldman’s clients have included corporations, financial institutions, governments, and high-net-worth individuals.

During the 2008 financial crisis, Goldman was required to convert from a broker-dealer to a bank holding company to gain access to the discount window at the Federal Reserve. Since that time, there have been internal discussions on how to grow the consumer side of the business.

Earlier this year, Goldman’s GS Bank acquired GE Capital’s online deposit platform and assumed approximately $16 billion in deposits.

Marcus was the other big project. For the endeavor, the team spoke to thousands of consumers to learn about their experiences of managing personal debt.

“This feedback was central to the design of the Marcus personal loan product and the customer experience,” the bank said in its release.

“Consumers are tired of hidden fees. Marcus has no fees. Consumers are stressed by unexpected changes in interest rates on credit cards. Marcus offers fixed rates throughout the term of the loan. Consumers are disgruntled by pre-assigned payment dates and limited payment options. Marcus enables customers to choose their monthly payment date and a payment option designed to fit their budget. Consumers are frustrated with automated machines instead of being able to speak to someone directly when they need assistance. Marcus has U.S.-based, dedicated loan specialists who deliver live, personalized support.”

Goldman’s Marcus will compete with other online-only lending startups such as LendingClub (LC) and Prosper.

— Julia La Roche is a finance reporter at Yahoo Finance.

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#consumer lending #online lending #Marcus #Marcus by Goldman #Goldman Sachs #$lc #$GS #_uuid:efd4e81d-1b34-3f47-ab2a-79ff678fb4c5 #_wp:174598

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Amazon gets a $1,000 price target from a top Wall Street firm

Amazon Prime has been a key driver of growth for the company.

Another investment bank has given Amazon’s stock price a $1,000 target.

Cantor Fitzgerald boosted its price target on Amazon (AMZN) from $835 to $1,000, noting that “e-commerce is reaching a tipping point” and Amazon is the “biggest beneficiary.”

Cantor pointed out that Amazon Prime continues to be a big driver of business for the company.

“Prime’s value proposition continues to increase as a result of expanding same/next-day delivery footprint, improving content (video, music and books) and other add-on benefits. We estimate that the service now has over 60 [million] members worldwide and ~40 [million] in the US. Given the propensity of Prime members to spend 2-3x more annually than non-Prime members, we estimate that the company’s robust pace of growth (28% Y/Y rise in paid units in 2Q16) should continue,” the note said.

According to Cantor, Wal-Mart (WMT), even with its recent acquisition of Jet.com, is “unlikely to make much of an impact” on Amazon in the near term.

“Wal- Mart is looking to spend ~$11B in annual capex in FY17 and FY18, with a sizable allocation for further buildout of its e-commerce/tech operations and add. While it remains to be seen how this effort plays out, we do not expect it to slow Amazon’s current momentum, given the latter’s significant lead online offering and a sizable and growing Prime member base,” the note said.

While this valuation for Amazon “does not look cheap” in the short-term, Cantor maintains its buy rating for the stock, suggesting that investors “take a longer-term view.”

Alliance Bernstein and RBC both issued a $1,000 price target on Amazon’s shares earlier this year.

— Julia La Roche is a finance reporter at Yahoo Finance.

Amazon could be a $1 trillion company, says top VC

#retail #amazon #e-commerce #amazon prime #$AMZN #$WMT #_uuid:7ec63a7c-1799-3f82-8ace-96cedfed791b #_wp:172493

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BOONE PICKENS: I'd like to see the candidates talk more about transportation fuel

T. Boone Pickens, CEO of BP Capital REUTERS/Rick Wilking

Legendary oil tycoon T. Boone Pickens says he was “encouraged” to see energy policy come up during Sunday night’s presidential debate.

“While gasoline prices remain relatively low across the country, there is a clear understanding that the American public still believes OPEC remains a threat to our economy and our national security,” Pickens said in an emailed statement to Yahoo Finance.

“Thanks to America’s oil and gas industry and their technological innovations, we are now a nation with options,” he said. “The key is to get serious competition in transportation. Wind, solar and other renewables are largely power generation fuels that do little to address the OPEC oil threat. I’d like to see the candidates expand their thinking more on how we move toward increasing our transportation fuel options.”

The topic of energy came up for the first time in the debates when undecided voter Ken Bone, who shot to internet stardom wearing his red Izod pullover sweater, asked the candidates the following:

“What steps will your energy policy take to meet our energy needs, while at the same time remaining environmentally friendly and minimizing job loss for fossil power plant workers?”

Republican nominee Donald J. Trump said that Environmental Protection Agency is “absolutely killing our energy business in this country.”

“Now, I’m all for alternative forms of energy, including wind, including solar, et cetera. But we need much more than wind and solar,” he said.

Undecided voter Ken Bone asks the presidential candidates about their energy policies.

He then took a swipe at Hillary Clinton over coal.

“And you look at our miners. Hillary Clinton wants to put all the miners out of business. There is a thing called clean coal. Coal will last for 1,000 years in this country,” he said.

Without getting into specifics, Trump said he’d bring energy jobs back to the US to pay off the national debt.

“Now we have natural gas and so many other things because of technology. We have unbelievable — we have found over the last seven years, we have found tremendous wealth right under our feet. So good. Especially when you have $20 trillion in debt.”

When Clinton answered the question, she said the US is “now for the first time ever energy-independent.”

“We are not dependent upon the Middle East. But the Middle East still controls a lot of the prices. So the price of oil has been way down. And that has had a damaging effect on a lot of the oil companies, right? We are, however, producing a lot of natural gas, which serves as a bridge to more renewable fuels. And I think that’s an important transition.”

She added: “We’ve got to remain energy-independent. It gives us much more power and freedom than to be worried about what goes on in the Middle East. We have enough worries over there without having to worry about that.”

She touted her “comprehensive energy policy” which also includes fighting climate change, which she called a “serious problem.” She also said she wants to move toward clean, renewable energy.

Pickens, who expressed support for Trump back in the spring, has previously called America’s dependence on foreign oil the “greatest threat” to the US. Specifically, Pickens has said that America’s reliance on OPEC-imported oil threatens the country’s economy, environment, and national security.

Last month, Pickens told Yahoo Finance that we’re “a lot better off today” than we were a decade ago. He pointed out that the US had been importing more than 8 million barrels per day from the Mideast. Now, that number is closer to 1.5 million per day because of lower oil prices

Pickens sees no reason for the US to use OPEC oil. Instead, he’s for forming a North American Energy Alliance among the US, Mexico, and Canada. The idea is that the US would be the market for Canada’s and Mexico’s oil.

Eight years ago, he kicked off The Pickens Plan, which aims to get the US to reduce its reliance on foreign oil by using natural gas and other American resources. The crux of the plan is to get heavy-duty trucks to switch to natural gas, which is cheaper and emits less carbon dioxide than oil.

— Julia La Roche is a finance reporter at Yahoo Finance.

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Analyst sounds the alarm on the 'most crowded trade in investing history'

ETFs have become the most crowded trade in history. (Flickr / James Cridland)

Steven Bregman, the co-founder and president of Horizon Kinetics, an independent research firm specializing in inefficient markets, sounded the alarm on the exchange-traded funds (ETF) industry.

Speaking at the Grant’s Interest Rate Observer Fall Conference this week, Bregman warned of an “indexation vortex that’s distorted clearing prices in every type of asset in every corner of the globe.”

According to Bregman, the ETF industry has “created a massive systemic risk to everyone who believes they are well-diversified.”

In a presentation entitled “Indexation: Capitalist Tool (Delivery Agent of The Great Bubble),” Bregman gave just a few of his “endless examples” of how major distortions in the market have been created by passive investing that’s been “blindly leading” trillions of dollars.

“It’s created a bifurcated market like no other, which we like to call the ‘ETF divide,’” he said.

ETFs present the risk

Indexation is a “fine” idea, Bregman said, but there’s a “pesky issue” of supply and demand. For Bregman, index mutual funds aren’t really the issue— it’s the index ETFs.

Since 2007, there’s been an exodus from actively manage funds and a march into passively managed indexed equity funds and ETFs. More than $1.1 trillion moved into indexed equities with approximately $730 billion flowing into index domestic equity ETFs and $425 billion into index domestic equity mutual funds. Meanwhile, around $835 billion moved out of actively managed equity mutual funds, Bregman’s presentation noted.

Passively managed equity ETFs have exploded. Note: Bregman did not use this graphic in his presentation. (Image: BofAML)

Basically, since the crisis, market participants have walked away from sector-specific and company specific risk. Instead of buying the individual equities, they’ve put money into bland ETFs.

In 2005, there were only 204 ETFs. By 2015, that number had increased to 1,594 even as the number of listed stocks declined, Bregman noted.

What if ETF trading dries up?

Another point Bregman made is the tremendous amount of annual share turnover in ETFs. He compared an S&P 500 mutual fund to the ETF, noting that the annual shareholder turnover rate for the Vanguard 500 Index Mutual Fund (VFINX) is about 42%, while the SPDR S&P 500 ETF (SPY) is 3,507%.

“That’s nearly 100% per week. That’s a lot of asset allocation. Feel a little bubble?” he said.

He then posed a question of what happens when there’s net-selling? Is there really enough underlying liquidity? Or would the market collapse?”

“That was kind of the tipping point during the technology bubble,” he said. “Is there really enough underlying liquidity? There was a dress rehearsal, I’d say, last year on August 24th, among the interesting features of the market that day, ETFs set an all-time record for share of New York Stock Exchange trading volume of 37%. And that morning prices of more than a few ETFs departed markedly from their [net asset values], which is not supposed to happen in supposedly liquid investments.”

Many ETFs lack proper diversification

Another problem for ETFs is their top-heaviness, which creates an “idiosyncratic risk” for investors who think they’re buying diversified portfolios, Bregman warned.

He used the iShares US Energy ETF (IYE) as an example, noting that the top four holdings — Exxon Mobil (XOM), Chevron Corp (CVX), Schlumberger (SLB), and Occidental Petroleum (OXY) — make up nearly 50% of the fund. Another example he used was iShares MSCI Spain Index ETF (EWP), pointing out that the top 10 companies have a 64% weight in the fund. What’s more is 6 of those top 10 holdings get 70% or more of their revenues from outside of Spain, he explained.

Sometimes, the same handful of stocks will appear in a variety of ETFs promising different kinds of exposures. For instance, Exxon appears simultaneously in value ETFs, growth ETFs, weak dollar ETFs, momentum tilt ETFs, and low volatility ETFs.

“We would do well to remember that this state of affairs is hardly a new phenomenon. In prior eras, it is known as go-go investing or trend following. Now it takes the guise of index-based asset allocation. I’m not aware of any such phenomena having ended other than unpleasantly,” he said.

He continued: “The index universe has simply become a big momentum trade and it’s the most crowded trade, we think, in the history of investing. And crowded trades eventually attract short-sellers. They just need a starting gun.”

The golden age of active management may be coming

Bregman raised an unexpected question: “Are active managers the anomaly, or is the market?

A number of well-known active managers like Mario Gabelli, Bruce Berkowitz, Bill Ackman and Carl Icahn have under-performed in the last couple of years, Bregman’s presentation showed.

“Were they the anomaly? Did they all lose their touch simultaneously? Or was it the S&P 500 that was the anomaly? For some people, that sounds like an outrageous statement?

He said in the beginning of the presentation that when the bubble phase is over he thinks it will “create a golden age for the active value manager.”

There are opportunities out there, but mainstream investments can’t be that place because their prices reflect their utility as liquid trading instruments.

“The beauty of the markets—the market flows in one direction, it has to drain from somewhere else,” he said, noting that there are “idiosyncratic securities” on the other side of the ETF divide that are “relatively invisible.”

These securities are ready for individual inspection and purchase. Investors just have to be willing to take a “touch of illiquidity risk,” which will allow for their freedom and optionality to expand enormously.

— Julia La Roche is a finance reporter at Yahoo Finance.

Leon Cooperman had an epiphany about the hedge fund industry after hearing a futurist speak

Why bonds should no longer be the ‘sleepy part’ of your portfolio

#ETFs #indexation #Steven Bregman #Horizon Kinetics #markets #exchange-traded funds #$IYE #$OXY #$EWP #$CVX #$XOM #$SPY #$SLB #$VFINX #_uuid:04779a1d-a988-3e86-af37-45ce0890f7f1 #_wp:163740

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Wendy's has the fastest drive-thru in America

Behold: the legendary Wendy’s drive thru. (Image: Wikimedia Commons)

Hamburger fast-food chain Wendy’s is the fastest drive-thru in America, according to new study by trade publication QSR Magazine.

Wendy’s (WEN) customers can expect an average drive-thru wait of only 169.1 seconds. The next fastest time was at Dunkin’ Donuts (DNKN), posting an average service time of 181.03 seconds.

Customers at burger-chain rival McDonald’s (MCD) can expect to wait 208.16 seconds, while the average time to pick up an order at Burger King’s drive-thru (QSR) is 201.18 seconds.

Coffee-chain Starbucks (SBUX) finished in last place, with an average wait time of 299.8 seconds.

Wendy’s VP Michael Gist tells QSR “the fast service is the result of the company tirelessly tracking line times and optimizing the layout of the kitchens.”

Speed isn’t everything, though. Wendy’s is below average when it comes to getting the orders correct, scoring an 86.9% accuracy rate. The average accuracy rate among the 15 fast-food chains in the study is 90%.

Carl’s Jr. dominated the accuracy category with a 96.7% accuracy rate, followed by Chick-Fil-A in second place with a 94.5% rate. Panera Bread (PNRA) finished the category in last place, with an 82.6% accuracy rate.

Graphiq

QSR’s study included 1,948 restaurant visits, including 168 visits to Wendy’s.

It’s been a year of mixed performance among the fast-food stocks. Wendy’s shares have fallen 1.5% year-to-date, while McDonald’s shares are off about 3.8%. Burger King’s parent company Restaurant Brands International has climbed more than 11% since January. Starbucks has slipped more than 11%, while Dunkin’ Donuts has jumped more than 19%.

— Julia La Roche is a finance reporter at Yahoo Finance.

Leon Cooperman’s epiphany about the hedge fund business

#quick service restaurants #burger chains #Dunkin' Donuts #mcdonalds #fast food #wendys #starbucks #$SBUX #$mcd #$PNRA #$qsr #$wen #_uuid:0cb76b75-7fd7-3bb3-8d0b-32c225eaba27 #_wp:161976

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Leon Cooperman had an epiphany about the hedge fund business after hearing a futurist speak

Leon G. Cooperman Chairman, Omega Advisors. REUTERS/Rick Wilking

During a Q&A session at Grant’s Interest Rate Observer Conference this week, hedge fund billionaire Leon Cooperman took the microphone and shared an observation about the investment business with the room.

“Not much of a question but really I want to share something with you,” Cooperman, 73, prefaced. “About eight months ago I went to a seminar that had nothing to do with he stock market. The seminar was entitled ‘Closing the Gap,'” .

He continued: “It had all to do with income disparity and how to deal with it. And there was a futurist who spoke at the conference.”

According to Cooperman, the futurist was “very provocative” and said the biggest problem the economy faces in the next decade is automation.

“He said the biggest problem in his opinion the economy was facing in the next decade was 45% of all jobs being performed in the economy will be replaced by automation. And there’s no alternative employment for displaced workers.”

Cooperman pondered what the futurist said, and he identified a parallel between the impact of automation on jobs and passive investing on the hedge fund industry.

“When I went home that night I reflected on it and I thought maybe the automation impact on our business is really indexation,” he said. “At the end of the day, hedge funds exist —and I’m one of them — because you’re supposed to outperform. You can’t get a premium fee unless you outperform, right? If you don’t outperform you’ll basically lose your assets.”

The hedge fund industry has been under intense scrutiny for a variety of reasons. For investors, the biggest issue has been underperformance relative to low cost alternatives like index investing.

Cooperman believes indexation will have two big consequences for Wall Street. First, liquidity in the market will diminish because there’s less trading and there will be fewer commission dollars to support broker-dealers that provide that liquidity.

“Passive [investments] average about 3% [turnover] a year and active turnover averages about 30% a year,” he said. “So there’s an enormous reduction in commission pool available to suppliers, the brokers, and reduced liquidity in the market.”

The second consequence will be on the money management side in the form of tremendous downward pressure on fees. Typically, hedge fund managers who use active strategies are paid through a compensation structure commonly known as the “2 and 20,” which means they charge investors 2% of total assets under management and 20% of any profits.

Meanwhile, fund managers employing passive, index-type strategies will charge just a fraction of 1%.

“You can probably get an index fund for I guess what? 20 basis points, something like that? And if you’re basically a large pension fund, you get an index return of 5 basis points. So there’s going to be an enormous reduction in the fees in the industry.”

He concluded: “As I thought about it, the only thing that’s really going to change it is we’ll need a bear market.”

Cooperman, who has been running Omega for 25 years, was civilly charged with insider trading by the Securities and Exchange Commission late last month. In a letter to investors, Cooperman denied the agency’s allegations and maintained they have done nothing improper.

— Julia La Roche is a finance reporter at Yahoo Finance.

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#Leon Cooperman #Omega Advisors #automation #futurists #economy #Hedge Funds #_uuid:1e5d32a8-8a61-338f-bafb-7de2721b9a78 #_wp:161651

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RAY DALIO: There is a 'big squeeze' coming

Ray Dalio, Chairman and Chief Investment Officer, Bridgewater Associates (REUTERS/Ruben Sprich)

Hedge fund billionaire Ray Dalio, the founder of $160 billion hedge-fund behemoth Bridgewater Associates, warned of a coming “big squeeze” in a speech delivered at the Federal Reserve Bank of New York’s 40th Annual Central Banking Seminar on Wednesday.

Dalio, 67, says that the long-term debt cycle, which typically lasts 50 to 75 years, is approaching its limits. This is also the “most important” force at play in the economy.

“The biggest issue is that there is only so much one can squeeze out of a debt cycle and most countries are approaching those limits,” Dalio said.

Since the financial crisis, central banks around the world loosened monetary policy aggressively, keeping interest rates low and encouraging more lending activity. But the incremental benefits of all of this has been diminishing. This is troubling when balance sheets are becoming increasingly debt-laden and vulnerable.

“In other words, they are simultaneously approaching both their debt limits and central banks’ ‘pushing on a string’ limits,” he said. “Central banks are approaching their ‘pushing on a string’ limits both because interest rates are approaching their maximum lows, and because the effectiveness of [quantitative easing] is approaching its limits as the risk premiums and spreads are compressing. Also, the wealth gap and numerous other factors make lending to spenders more challenging.”

Critically, this is not an isolated problem.

“This is a global problem,” he said. “Japan is closest to its limits, Europe is a step behind it, the US is a step or two behind Europe, and China is a few steps behind the United States.”

The coming squeeze will happen as the baby boomer generation leaves the workforce and begins collecting retirement and healthcare benefits like Social Security and Medicare. According to Dalio, many of these promises can’t be kept. The problem is the expected low returns on assets won’t be enough to fund those government liabilities.

For now, any sense of financial security among individuals can be characterized as a false sense of security.

“Holders of debt believe that they are holding an asset that they can sell for money to use to buy things, so they believe that they will have that spending power without having to work,” he said. “Similarly, retirees expect that they will get the retirement and health care benefits that they were promised without working. So, all of these people expect to get a huge amount of spending power without producing anything. At the same time, workers expect to get spending power that is equal in value to what they are giving. They all can’t be satisfied.”

It’s an all-around gloomy situation that could force policymakers into desperate positions before the whole thing ends in tears.

“As a result of this confluence of conditions, we are now seeing most central bankers pushing interest rates down to make them extremely unattractive for savers and we are seeing them monetizing debt and buying riskier assets to make debt and other liabilities less burdensome and to stimulate their economies,” he said. “Rarely do we investors get a market that we know is over-valued and that approaches such clearly defined limits as the bond market now.”

These low or negative interest rates translate to low or negative returns on bonds. This incentivizes investors and savers to avoid bonds and put their money into 1) safe-haven stores of wealth like gold, or 2) riskier assets like stocks that promise higher returns. Dalio argues that these alternatives are not necessarily cheap relative to their risks, but they certainly look cheap relative to bonds.

“[H]olding non-financial storeholds of wealth like gold could become more attractive than holding long duration fiat currency flows with negative yields (which is what bonds are), especially if currency volatility picks up.”

Read the full speech here.

— Julia La Roche is a finance reporter at Yahoo Finance.

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#central banks monetary policy #Gold #Debt #Hedge Funds #bonds #Ray Dalio #Bridgewater Associates #debt cycle #$GLD #$TNX #_uuid:7524a693-8730-3909-9de4-9388a475401c #_wp:160370

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Julian Robertson: 'There’s too much talent in the same game'

Julian Robertson

Billionaire hedge fund legend Julian Robertson, the founder of Tiger Management, highlighted a number of key challenges for the hedge fund business, including the limited number of attractive investment opportunities and the ever increasing pool of players in the business.

Speaking at Grant’s Interest Rate Observer Fall Conference in New York on Tuesday, Robertson said: “I think almost everything that is particularly attractive is a little bit unusual. I mean, there’s certain stocks that are for some reason selling at three and four-times earnings — Air Canada, for instance. But you can’t just build a portfolio on those. I think if you look for things that are undervalued whether a currency or a stock and you can find out the reason for the undervaluation, I think there you can buy.”

However, Robertson doesn’t recommend just investing long. He recommends hedging in the classical sense: by offsetting much of that risk with short positions.

“In spite of the fact that we have all been beaten around for the last several years, the hedge fund is a great way to run money,” he said. “I think it suffers now because there’s too much talent in the same game. And shorting, which when I got into the business was almost a license to steal, is now a license for bankruptcy.”

He added that he doesn’t think this will always be the case.

Robertson joins a chorus of big-name hedge fund managers, including Steve Cohen of Point72 Asset Management, who’ve said there’s just too many players in the businsess. It’s estimated that there are more than 10,000 hedge funds. Some estimates have put the number at 15,000.

Right now, investment management and hedge funds seem to be an extremely popular occupation, which is concerning.

“I think it’s certainly not a good omen,” Robertson said.

Robertson, who was one of the original fund managers and has seeded many fund managers, thinks the industry will be fine in the long run. He still believes in the model established by Alfred Winslow Jones, who is known as the first hedge fund manager.

“I think it’s still a sound model. Basically it says, in essence…as a money manager you pick the 50 stocks you think are the greatest and apply them against the 50 that are the worst. In the long run you’ll come out fine. If you don’t, there’s probably another business,” he said, “It’s been a long time since I thought I was in the right business.”

Hedge funds lately have been criticized for their lackluster returns and the fees that they charge investors. In the long run, Robertson expects hedge funds to prevail.

“We’ll get through this in one of two ways— probably because something is going to blow up in these markets and hedge funds during that period have always done better than the other investment mediums. I fully expect that to happen this time.”

— Julia La Roche is a finance reporter at Yahoo Finance.

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#Hedge Funds #Julian Robertson #_uuid:eb7bd207-c05b-3002-9454-eaab26c7e007 #_wp:157184

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Why Farmville, Virginia — the location of the VP debate — matters

The TV media platform for the U.S. vice-presidential debate at Longwood University in Farmville, Virginia October 2, 2016. REUTERS/Rick Wilking

All eyes will be on the small town of Farmville, Virginia, on Tuesday evening as Tim Kaine, a Democratic senator from Virginia, and Mike Pence, the Republican governor of Indiana, face off in the first and only vice presidential debate this election season at Longwood University.

Located in Prince Edward County, Farmville is often referred to as the “Heart of Virginia” because of its central geographic location. With a population of just over 8,000, Farmville is probably best-known for furniture shopping at Green Front Furniture where customers can peruse stacks of Oriental rugs and unique furnishings from all over the world in old tobacco warehouses and former factories.

A two-college town, Farmville is home to Longwood University, the state’s third-oldest public institution founded in 1839, and nearby Hampden-Sydney College, one of just a few all-male colleges left in the US.

Part of the reason Longwood landed its first-ever debate has to do with the area’s significant role in American history.

The final episodes of the Civil War unfolded in and around Farmville. General Robert E. Lee and the Army of Northern Virginia surrendered to General Ulysses S. Grant at nearby Appomattox Courthouse on April 9, 1865.

And it’s only a few steps south of Longwood’s campus that a big part of the Civil Rights Movement was born. In 1951, students at an all-black school in Farmville walked out amid deplorable conditions — paving the way for the Supreme Court to outlaw school segregation.

But the public schools in the county shut down rather than educate black students.

This event and the healing process that ensued can teach the rest of the nation a lesson as racial tensions remain high across the US this election season.

“I would think that the message Farmville could send to the nation is, ‘Look at where we are now. Look at where we have come from. We are in a much better place now. And we are continuing to get better,” said Robert Hamlin, a 73-year-old who was denied an education when the public schools in Prince Edward County closed for five years because the all-white leaders refused to desegregate them.

“I really think that much like American democracy, racial reconciliation is a practice, something we have to work at — all of us on a continual basis,” said Dr. Larissa Fergeson, a professor of African-American history at Longwood.

She added: “I think Farmville now works on that project in an intentional way.”

The students walk out

On April 23, 1951, a bold 16-year-old student named Barbara R. Johns at Robert Russa Moton High School called for a secret meeting in the school’s auditorium. There, she organized and led a student walk-out to protest the vastly inferior conditions at the all-black public school.

The exterior of Moton High School (Source: National Archives)

Moton High School, a single-story brick building constructed in 1939, was originally intended to hold 180 students. By 1951, 477 students had to endure overcrowded conditions. Instead of a new building, the county school board built tar paper shacks with no indoor plumbing, leaky roofs, and the only heat coming from a potbelly stove. Moton High School also didn’t have a cafeteria or a gymnasium. There wasn’t a proper science lab, either. Instead, students shared one microscope. The students were also given hand-me-down books with missing pages.

Rev. J. Samuel Williams, Jr., now 82, was in 11th grade when the strike happened. Williams, a former football player and track runner, remembers Barbara Johns as a “very serious” student and an “incredibly brave” person.

“We were after a new school,” Rev. Williams said. “We were determined not to return to school until the Board of Supervisors had met our demands. That was our demand.”

The students went on strike for two weeks. While their mission was to get a new school, they ultimately ended up igniting an even larger movement.

The auditorium at Moton High School (Source: National Archives)

“Barbara Johns, at age 16, stood up when most children were being told to ‘sit down and shut up.’ And particularly being black in this part of the country during that time, that was a very dangerous thing to do… and very brave. She decided it was important enough to take a stance. I’m sure she didn’t have a sense of what that moment really meant. She just knew she had to do it,” said Hamlin, who was 9 years old and attending elementary school out in the county at the time.

To stay informed, the students and their families would meet at First Baptist Church where they were led by Rev. L Francis Griffin who was also the local chapter president of the NAACP.

“Griffin was different. He was not the traditional preacher who conducted service in a regular contemporary church. He stepped outside of the church and dealt with people in the street,” Rev. Williams said. “Griffin was a motivator. He was a Christian socialist, that’s what he was. And he was our leader. He gave us a new understanding of Jesus as a radical revolutionary personality, that’s who he is. He taught us that. He was a great teacher and a great preacher, a fighting preacher.”

A month after the student strike, two lawyers from the NAACP — Oliver Hill and Spottswood Robinson — filed a lawsuit on behalf of the students and their parents that would ultimately end segregation in US public schools. The case — Dorothy Davis et. al v. School Board of Prince Edward County — was eventually bundled with four other cases as part of the landmark Brown v. Board of Education Supreme Court case. That case resulted in the end of “separate but equal.”

School’s closed

Following the 1954 Brown decision, Sen. Harry Byrd (D-Va.) pushed for a policy of “massive resistance” against racial desegregation.

By 1959, the white leaders for Prince Edward County’s Board of Supervisors closed the public schools for the next five years rather than desegregate. An all-white private school was opened. Poor white children couldn’t afford the tuition. There wasn’t an all-black private school.

Rev. Griffin would eventually file a lawsuit against the Prince Edward County School Board. The US Supreme Court would rule in May 1964 that the decision to close the public schools was unconstitutional.

Hamlin, who was 16 in 1959, was a rising senior when he learned the schools wouldn’t open. A faithful student, Hamlin never missed a day of school. Hamlin, an only child, was also on track to be the first to graduate from high school. His mom and dad had to leave school in the 6th and 7th grades to start working.

“I think that my most memorable moment was probably the last day of school when schools closed for the summer. The likelihood we would not be returning to school in the fall — that, to me, was devastating. I worried about it all summer because I had no idea what was going to happen,” he said.

That summer, family members in Baltimore and Philadelphia tried to convince Hamlin’s parents to let him live with them. He didn’t want to leave his home in Rice, a small community outside Farmville in Prince Edward County.

“So we just placed faith in God that something would happen, something would show up,” he said.

Labor Day came and went. The schools still didn’t open.

“That’s when it really hit home for me that we were at a loss,” Hamlin said.

Students head to Kittrell in North Carolina

One Saturday morning, a friend of Hamlin’s informed him and his parents that Kittrell Junior College in North Carolina had opened its doors to the students in Farmville. The college had reached an agreement with the county board to offer a high school curriculum on its campus. The next day, his parents sent him 125 miles south. Fifty-eight students from Farmville continued their education at Kittrell.

“I felt very lonely the moment I saw my dad and mom pull away from the parking lot,” Hamlin recalled. “I thought to myself, ‘How am I going to make it?’”

Hamlin, who had been raised a Muslim, soon learned he couldn’t always eat in the cafeteria because it frequently served pork, a staple in the North Carolina diet. “There were quite a number of days I went hungry because I couldn’t eat what they had prepared,” he said.

His mom eventually bought him a little oil burner stove, similar to a hotplate, to prepare meals in his dormitory.

He graduated from high school in the spring of 1960. He stayed on to earn his associate’s degree at the junior college. His sophomore year he met his wife. They celebrated their 50th anniversary this year.

From college to the Air Force

After Kittrell, he spent a semester at North Carolina College in Durham. He then moved to Richmond, Virginia to work for the Medical College of Virginia.

During that time, the Vietnam War draft began. Hamlin signed up for the Air Force where he spent the next 20 years traveling across the US and all over the world, including Taiwan and Germany.

Early on in his military career, Hamlin got the “shock” of his life that began to change his perspective. While based in Savannah, Georgia, he had been assigned to the nursing unit. His boss was a white man from Georgia.

“He treated me with so much respect,” Hamlin recalled.

That sergeant needed to leave for a period of time and asked Hamlin to take charge of the 19-person nursing unit.

“Here’s a man who is willing to place his trust in me, giving me his reasons why he felt like I was the person to get the job done. That began to change my perspective about what had happened to me in the past,” Hamlin said. Later, he added, “And so I have to start thinking about people being people and an individual as an individual and not categorizing everyone into one lump piece. That helped me get to a different place.”

Coming full-circle

Hamlin retired from the military in 1984. He went back to school at Indiana University to finish his bachelor’s degree. He spent the next 20 years working in employment training services.

“It made me feel really wonderful because the one ingredient I could transition from the military and even before the military all the way through my entire life is the desire to help people, to help somebody get to a better station in life,” he said.

In 1999, Hamlin returned to Virginia to work for Telamon Corp, a nonprofit organization that helps the needy, as its deputy state director.

“It was kind of like coming full circle. I was now back working in a region, providing employment training and education services where I had been denied educational opportunities. And that was in so many ways so gratifying,” Hamlin said.

The long-term economic impact

It’s hard to measure the exact impact the school closings had on Farmville’s economy, but it certainly had one.

“What we recognize is people left the county who would have stayed who could have contributed economically,” said Fergeson, the African-American history professor. “People didn’t come to the county because the schools were closed.”

She noted that the two colleges — Longwood and Hampden-Sydney — had trouble recruiting faculty during that time because there wasn’t a public school system.

“I think it had a major impact on Farmville,” Hamin said. “The black population began to dwindle. At the time, it was probably 50-50. As families had to try and find other things to maintain their livelihood, some families did actually have to leave. Many families couldn’t leave because of their commitment to white farm owners.”

He added: “With no public schools. the economic development of Farmville really fell off. Companies wouldn’t look at Farmville as a place to expand or bring their organization. No public education, that just became a big issue.”

Moton today

Today, the Moton High School operates as a museum. Its alumni have been incredibly active in the community, especially speaking to today’s generation of students.

“We try to stress how important [education] is. You can’t just sit back and say somebody else will do it. ‘I hate school because I don’t like reading or I don’t like whatever.’ But if you don’t do it, you’re dooming yourself. And if enough people aren’t doing it, they’re dooming themselves to have to repeat the times of the past,” Hamlin said.

Today the Moton High School serves as a museum. (Photo Credit: William T. Ziglar, Jr.)

Taikein Cooper, 28, the current chair of the local Democratic party, grew up hearing many of the stories about the school closures.

In high school, he spent the summer working as an assistant manager at an apartment complex where he witnessed firsthand the hardships experienced by people in the community who were denied an education when they couldn’t fill out or read a rental application.

“That’s something that resonated with me,” Cooper said, “and it’s something I definitely paid attention to.”

Nowadays, Cooper said, there’s been more civil discourse in the community than ever before.

“I think we’ve had a lot more civil discourse here than we once had,” Cooper said. “And, I think we are more accepting of people that may not think or feel the same way we think or feel. You feel more tolerant of diversity.”

The Moton Museum has played an integral role in these conversations and has become a place of healing for the community.

“The administration from the Moton Museum has done a remarkable job at making it a community museum and being a part of the community — having these conversations, the power of forgiveness, planning sessions for improving our public schools, having these conversations and community meetings about enhancing relationships between law enforcement officers and communities of color in light of things transpiring around the country. We are being proactive about being on the right side of history this time.”

In 2008, the Prince Edward County County Board of Supervisors apologized for its actions in 1959. They installed a “light of reconciliation” in the bell tower of the county courthouse. It doesn’t mend the ills of the past, but it’s a step forward.

Today, the Prince Edward County Board of Supervisors is made up of eight members, four of whom are African-American. The board also has two women. As for the constitutional officers in the county — the Sheriff, Commonwealth’s Attorney, Commissioner of Revenue, the Treasurer, and Clerk of the Courts — three of the five are African-American. Four of the five constitutional officers are women.

“I’d agree we’re on the right side of history this time — there’s still a ways to go but there’s movement forward,” Hamlin said.

The author was raised in Farmville, Virginia.

— Julia La Roche is a finance reporter at Yahoo Finance.

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#civil rights #Farmville #vice presidential debate #Longwood University #history #mike pence #virginia #Tim Kaine #_uuid:a07d751f-9e17-3b7b-92b8-28d5fbc81ccc #_wp:157380

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Investment bank CEO delivers striking letter about inequality to clients

Jefferies CEO Rich Handler (Credit: Rob Kim/ Stringer/ Getty Images Entertainment)

In the wake of recent Congressional hearings involving high-profile CEOs, Richard Handler, the CEO of investment bank Jefferies and its parent company Leucadia National (LUK), sent out a strong reminder to his firm that it has a responsibility to hard-working, every day people.

In this environment, Handler pointed out in a new letter to clients, the divide between the “haves” and the “have nots” has only widened. This has made it especially difficult for middle-class families. Many people are justifiably upset and angry, Handler noted.

“The massive infusion of bailout money, low interest rates, and resulting stock market and real estate advances have helped those with the most assets, but have done little to directly improve the lives of the hard-working every day middle class families who are the bedrock of society,” Handler wrote.

“These people are not going to give the ‘benefit of the doubt’ to large corporations or the people that run them, or spend time to truly understand the ‘nuance’ of what really happened in a complicated and messy situation. They want and deserve ‘accountability’ and they want to know ‘where the buck truly stops.'”

Handler continued: “This is whom our political leaders represent, and these hard-working every day real heroes in our world demand and deserve a system that is honest and is fair.”

In recent weeks, high-profile CEOs have had to testify before angry members of Congress and the Senate. Wells Fargo’s (WFC) CEO John Stumpf has been grilled on Capitol Hill over fraudulent accounts employees opened to meet sales targets, while pharmaceutical giant Mylan’s (MYL) CEO Heather Bresch has testified over the EpiPen’s massive price hike.

However, Handler indicated he wasn’t calling out Stumpf and Bresch specifically.

“We are not judging any company that is currently in the news concerning congressional hearings. We are talking about every business and are reminding each of their leaders and employees that ‘there but for the grace of G-d, go every single one of us.’ The only way we know of maximizing the odds of not having to raise your right hand is to have a culture of integrity, transparency and accountability,” Handler wrote.

He added that his own firm won’t tolerate bad behavior.

“Bad behavior has no place in our firm and, when identified and factually proven, we have no choice but to deal swiftly and with regard only for our other thousands of employee-partners, shareholders, bondholders and clients that depend on us every day to do the right thing. Words alone are not sufficient. Action must be taken, so integrity can thrive. At the end of the day, if you are leading a business of any size, you are the one ultimately accountable and the buck stops with you.”

Below is the full letter:

To Our Clients:

Accountability and Where the Buck Truly Stops

We are grateful that we can only imagine the pain, embarrassment, sadness and anger that must accompany a CEO when he or she is called before Congress to address a real or perceived misdeed by an individual or a group of people at his or her company. It does not matter if the situation is due to fraudulent behavior by a group of employees, the near collapse of the financial industry, cover-ups in the tobacco industry, bailouts in the auto industry or pricing in the health care industry. No rational human being wants to be in the position of being publicly accountable to the political leaders of our great country and to personally defend bad behavior under their leadership. Imagine for just a moment it is you, alone at the long conference table, adjusting your microphone, raising your right arm and swearing, “to tell the truth, the whole truth, and nothing but the truth, so help you G-d.”

Like most of you, all of us at Jefferies are very proud of our enviable track record of having an ethical culture that stresses the importance of the very best in personal behavior and compliance with all rules. That said, people are people and very few things in life are black and white, especially when the human condition is involved. We have certainly had (and will continue to have) our share of painful and embarrassing situations and even the occasional truly bad actor(s) that threatens to tarnish all of us. Ironically, the more successful a business becomes, headcount and geographic expansion ensues and the odds of an unfortunate surprise increase significantly. The only way we know to keep the odds of having a problem as low as humanly possible is to have the strongest possible cultural foundation based on true accountability at every level of the organization, including of course at the very top.

Many people are upset in the world today. Perhaps we can see it most clearly in the current U.S. presidential political contest. There is a legitimate reason for this anger and polarization. The dividing line between the “haves” and the “have nots” has never been greater. Honest hard-working people are having a very hard time affording health care for their families. Educating their children requires massive personal loans and an uncertain payback. Wage growth has been non-existent, while taxes remain high. Quality jobs are scarce and the cost of living has never been higher. Companies have downsized to rationalize costs and the new jobs that are emerging often require an entirely different set of skills. The massive infusion of bailout money, low interest rates, and resulting stock market and real estate advances have helped those with the most assets, but have done little to directly improve the lives of the hard-working every day middle class families who are the bedrock of society. These people are not going to give the “benefit of the doubt” to large corporations or the people that run them, or spend time to truly understand the “nuance” of what really happened in a complicated and messy situation. They want and deserve “accountability” and they want to know “where the buck truly stops.” This is whom our political leaders represent, and these hard-working every day real heroes in our world demand and deserve a system that is honest, has integrity and is fair.

We are not judging any company that is currently in the news concerning congressional hearings. We are talking about every business and are reminding each of their leaders and employees that “there but for the grace of G-d, go every single one of us.” The only way we know of maximizing the odds of not having to raise your right hand is to have a culture of integrity, transparency and accountability. It is our belief that every person that works at Jefferies must take personal accountability for their actions, and the buck stops with each and every one of us. Our people must be responsible for their choices and behavior every single day. We at Jefferies demand integrity and insist on immediate escalation the moment anyone in our firm suspects he, she or someone else has a potential issue. We will always stand tall and defend our people with the presumption that they are good, just, right and innocent. That said, they all know that they are truly accountable and must take responsibility for their actions. At the end of the day, so too must we as the ones fortunate enough to be allowed to be called their “leaders.” Bad behavior has no place in our firm and, when identified and factually proven, we have no choice but to deal swiftly and with regard only for our other thousands of employee-partners, shareholders, bondholders and clients that depend on us every day to do the right thing. Words alone are not sufficient. Action must be taken, so integrity can thrive. At the end of the day, if you are leading a business of any size, you are the one ultimately accountable and the buck stops with you.

Thank you for your trust and confidence,

Sincerely,

Rich and Brian

@HandlerRich

— Julia La Roche is a finance reporter at Yahoo Finance.

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#$wfc #$LUK #$myl #_culture #_finance #_investment banks #_Jefferies #_Rich Handler #_uuid:2b108b4f-66ce-305a-ba2b-72a5f7cde611 #_wp:150958

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Billionaire Howard Marks: Clinton isn't 'the candidate of change' but at least she's 'sane and competent'

Democratic presidential nominee Hillary Clinton reacts to her newly unveiled campaign plane before boarding for the first time at the Westchester County Airport in White Plains, N.Y. , on September 5, 2016. (REUTERS/Brian Snyder)

Billionaire distressed-debt investor Howard Marks, the founder of Oaktree Capital Management, is backing Hillary Clinton for president because she’s “sane and competent.”

At the Bloomberg Markets Most Influential Summit on Wednesday, Marks wasn’t exactly enthused when he was asked if Clinton could tackle some of the key economic issues he had raised.

“I haven’t heard much that convinces me, but I believe that she’s, well, what did your boss [Mike Bloomberg] say? ‘Sane and competent’? And, I believe she will surround herself with good advisors. And I believe she understands the need for good advisors. And she will work tirelessly and long hours of study to come up with plans. She is not the candidate of change, and we need change.”

Without mentioning Donald Trump’s name, he continued: “And I think the idea of change is a good one. I’m not crazy about the current messenger of change. That’s the problem. And, if there were another candidate at another time who had a message of change and the competence that Mike Bloomberg is talking about, I think I’d be all for it.”

Marks has previously made it clear that he’s not a fan of Trump. Just last month, Marks skewered Trump’s economic plan in a 16-page letter to investors. Marks, who donated $2,700 to Clinton in January, didn’t sing the Democratic presidential nominee’s praises, either.

“As for my picking on Trump here: I’m quick to point out that Clinton has her own shortcomings as a candidate and potential president. Her use of a private email server while Secretary of State is just one prime example. And she has embraced positions, such as opposition to the Trans-Pacific Partnership and her promise of free public college at certain income levels, that seem intended simply to help her compete against Bernie Sanders in the primaries and win over his supporters in the general election. But I think it’s fair to say that she hasn’t been anywhere near as guilty as Trump of defying economic reality on the campaign trail,” he wrote in the letter.

According to Marks, one of the biggest economic issues the US faces is the impact of automation, which he called a “much stronger force than the job losses we hear about in this election season.”

“I despair about where the Americans who worked in agriculture a hundred years ago in the South and then moved to Midwest to makes cars and appliances 50 years ago — I wonder, I worry about where they are going to find jobs. And this is a question that is not easily solved,” Marks said at the Bloomberg event.

Going forward, Marks expects the US to grow more slowly than in the past.

“I do think that we will grow more slowly in the future than we have in the past. And I believe that … will make it harder for government to do things,” he said, asking “Why did we live so well 60 years ago?… Why can’t you do that today? Why can’t you build infrastructure in this country?”

He cited declining growth rate and globalization as reasons for the nation’s setbacks. That said, the US is in a much better situation than other parts of the world, according to Marks.

“I travel a lot and it’s clear that the US economy is the envy of the world. And so the things I’m saying are not only relevant to the US. We’re in better shape than I believe Europe or Japan, for example,” he said. “But everything is slowing down, complicated by globalization and automation.”

Julia La Roche is a finance reporter at Yahoo Finance.

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#donald trump #billionaires #automation #Howard Marks #economy #campaign #hillary clinton #election #_uuid:28c5ebbb-b0ff-3a2d-bc1d-70ba8304cbf3 #_wp:148780

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Billionaire Tony Ressler: There's 'no doubt' a Trump win would trigger market volatility

Donald Trump speaks during a campaign rally at Crown Arena in Fayetteville, N.C. in August. (Photo: Evan Vucci/AP)

Billionaire Tony Ressler, the co-founder and CEO of Ares Management (ARES), a publicly traded asset management firm with $100 billion in assets, says there’s “no doubt” volatility in the market will increase if Donald Trump wins the presidential election.

“I personally think, not betting on who’s going to win … but I do think Donald Trump as president would add meaningfully to the volatility in the marketplace. I believe that to my core because he makes statements that the president of the United States I think should be very, very hesitant to make. And I think those are going to have really really significant impacts on volatility in the marketplace,” Ressler said at the Bloomberg Markets Most Influential Summit in New York on Wednesday.

He explained that uncertainty would lead to increased levels of volatility — and increased levels of volatility make all sorts of businesses nervous.

The 54-year-old private equity veteran added that Trump’s suggestion of lowering the corporate tax rate would help more companies “be more comfortable” staying in the US.

“I would like to suggest that some of the things he says make sense,” Ressler said. “There’s no doubt in my mind volatility will increase even more so than some expect.”

Earlier at the summit, investment banker Ken Moelis, the CEO of Moelis & Co. (MC) said although either candidate can “blow it,” he’s predicting a Trump win.

Julia La Roche is a finance reporter at Yahoo Finance.

Ford CEO: Autonomous cars could influence society as much as Henry Ford’s assembly line

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#donald trump #$ARES #$MC #_uuid:6f1bfe18-912d-3155-aa79-6bd21a02a471 #_wp:148044

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Ford CEO: Autonomous cars could influence society as much as Henry Ford's assembly line

Ford Motor Company CEO Mark Fields

The self-driving car could influence society as Henry Ford’s invention of the moving assembly line in 1913, according to Ford Motor Company (F) President and CEO Mark Fields.

“Our view is the next decade is really going to be defined by the automation of the vehicle. And our view is automated vehicles—autonomous vehicles—could have as just as much an impact on society as Henry Ford’s assembly line,” Fields said at the Bloomberg Markets Most Influential Summit in New York on Wednesday.

He continued: “When you think about autonomous vehicles, it’s not just a product. When you think of the societal, the safety, the environmental, the economic benefits, it’s huge.”

For example, the technology could let more people drive again.

“Think about elderly folks who the kids had to take their keys away, their parents, right? That’s their freedom. All the sudden you give them their freedom back,” Fields said. “Or disabled folks, you now give them an opportunity to go where they want to go. It has huge societal benefits.”

Another key benefit is safety.

“Here in the US, at any given year, I think there were over 30,000 traffic deaths and 90% of them was due to human error,” he said. “Imagine if you can just put a small dent in that.”

That said, he thinks the traditional vehicle will “still matter.”

Shares of Ford have slumped 30% since Fields took the helm as CEO of the 113-year-old automaker. The stock has dropped 16% in 2016 alone.

One of the concerns of investors is that the auto industry might be plateauing, albeit at a high level. Fields noted that investors might be “under-appreciating” the work that they’re doing on autonomous vehicles, which opens up a whole new area of growth.

— Julia La Roche is a finance reporter at Yahoo Finance.

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#Mark Fields #self driving cars #Ford #Autonomous Cars #$F #_uuid:46251497-1edc-3f5f-a8bf-0c04c302e0ee #_wp:147543

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RAOUL PAL: 'It's not a big storm yet, but the clouds are everywhere'

A rising full moon is seen over the distinctive twin towers of Germany’s Deutsche Bank headquarters in Frankfurt. REUTERS/Kai Pfaffenbach

Shares of Deutsche Bank have been clobbered over concerns the German lender needs to raise capital to pay a $14 billion fine from the US Department of Justice to settle probes over toxic mortgages it packaged leading up to the financial crisis.

But this is just a “canary in a coal mine” signalling a much bigger problem in the European banking system, according to former macro hedge fund manager Raoul Pal.

“Deutsche Bank was just one of the warning signs out there for the banks. It just looks the worst based on the shear size,” Pal told Yahoo Finance in an interview. “It’s one of the canaries in the coal mine telling something really bad is going on in the European banks overall.”

Pal, who previously co-managed GLG’s Global Macro Fund, is the publisher of The Global Macro Investor, a research letter read by top hedge fund managers. He’s also the co-founder of Real Vision Television, an online subscription investing video service.

In a presentation he gave on Real Vision in February, Pal said the European banks were “the black swan nobody was looking at,” referring to a hard-to-predict event. It’s something he’s been writing about in The Global Macro Investor for almost two years.

Across the board, European bank stocks have gotten slaughtered this year. Deutsche Bank (DB) has collapsed more than 50% this year. Credit Suisse (CS) has plummeted more than 40%, while UBS (UBS) has fallen 31%. Royal Bank of Scotland (RBS) has fallen 48% and Barclays (BCS) has slumped more than 33%. Shares of Spanish banks Banco Popular and Bankia have also been pummeled.

In an interview with Yahoo Finance, Pal highlighted five key issues that are creating storm clouds in the banking system.

1. The banks are still a mess. The European Central Bank has been trying to tackle the issue of non-performing loans (NPLs). The ECB has taken a massive amount of low quality collateral off the banks’ balance sheets, especially from banks in Greece and Cyprus. The banking system is still not functioning properly. There are still a ton of bad loans. There’s also concern that the banks don’t have enough capital.

2. Meanwhile, the yield curve has been getting flatter and yields have been turning negative. This is bad for the banking business since banks borrow at the short end and lend at the long end. When the yield curve is steep they can make money from the difference in the spread. Right now, spreads are very little and banks can’t make money.

3. Regulations have been getting tighter. In addition to massive new collateral needs driven by the Basel III agreement, the European Union established rules designed to prevent taxpayer bailouts. Germany can’t bail out Deutsche Bank. If it did, the fear is that Greece, Italy or Cyprus might insist that their bank bail-ins were inappropriate if those rules didn’t apply to Germany. This sets the EU up for huge legal issues or even some countries wanting out of the EU altogether.

4. LIBOR (the London interbank offered rate) has become a worrying story for the banking system. Libor, a measure of banks’ borrowing costs, has continued to climb higher, making it more difficult to manage all that borrowing.

5. A lot of foreign companies and banks have, since the crisis, been borrowing in US dollars to invest in projects outside of the US. The BIS suggests these borrowings amount to $10 trillion. Dollars were seen as cheap and stable. As the US dollar moves higher this situation could get really ugly as it becomes more challenging to pay back those loans. The rise in Libor makes it even more concerning.

“It’s not yet a big storm, but the clouds are everywhere,” Pal said.

Pal isn’t alone in his concern.

For months, Pal and other guests on Real Vision Television have sounded the alarm on Deutsche Bank and other European banks. Hedge fund manager Edward Misrahi, the founder and CIO of RONIT Capital, recently said on Real Vision that the “best tail-risk insurance” for any portfolio is buying puts on Deutsche Bank. Top fund managers like Mark Hart of Corriente Advisors, Bernd Ondruch of Astellon Capital Partners, and Lee Robinson of Altana Wealth have also raised concerns.

vimeo

— Julia La Roche is a finance reporter at Yahoo Finance.

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#Raoul Pal #Deutsche Bank #European banks #bank stocks #ECB #European Central Bank #hedge fund managers #macro #economy #$RBS #$DB #$bcs #$CS #$UBS #_uuid:2a8a1c44-c361-33f3-a588-6b70a25c85d6 #_wp:145925

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julialaroche-blog1 · 8 years

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Hedge fund CIO explains why returns aren't what they used to be

yahoo

Generally speaking, it’s been challenging for hedge funds to beat the market for the last couple of years.

Ryan Tolkin, the chief investment officer of Schonfeld Strategic Advisors, pointed out one critical change in the hedge fund landscape that’s affected performance.

“I think when people speak about hedge fund performance, they’re talking about a broad universe of hedge funds. I think there has been pockets of out-performance and pockets of under-performance across the hedge fund space,” Tolkin told Yahoo Finance in an interview.

The hedge-fund industry consists of 10,000-15,000 funds, according to various estimates, and they manage just a little under $3 trillion in total assets.

He continued: “I think one of the things that’s happened to hedge funds over the last few years is the amount of assets that has flown into them has caused targeted IRRs, the intended rate of returns of hedge funds, to go down due to the types of investors that are currently invested.

“In the past it was large family offices and private wealth clients who were the main investors in hedge funds. Today, that’s changed to endowments, sovereign wealth funds, pension plans. What their intended returns for hedge funds are very, very different than the past.”

Schonfeld is a multi-strategy fund that manages in excess of $12.5 billion in gross market value. The fund—which has quant, fundamental equity, and tactical strategies—takes a market neutral view, meaning it’s indifferent to whether the market goes up or down.

Tolkin noted that quantitative hedge fund strategies have been a bright spot in the last few years, but even they vary as a group.

“I think quant strategies in general can mean several different things—there are quant strategies that fall in the risk parity bucket, there’s quant strategies that fall within the volatility targeting bucket, then there’s the more traditional statistical arbitrage strategies which is more similar to the types of things that we run,” he said.

He sees both a secular and cyclical trend in the space — the secular being the improvements in technology and the secular being the pockets of out-performance that have attracted investors.

“In terms of out-performance, I would say quant strategies overall have done rather well over the last several years which obviously has led people to chase returns as kind of a normal human behavior. I would say that phenomenon is not terribly surprising. But the other thing is like many other industries as technology continues to improve and as computers are doing more and more things — the fact that trading is more automated and more quantitative in its fashion is not terribly surprising. I think you have kind of a secular and cyclical trend going on.”

This of course has changed the profile of the hedge fund analyst compared to five or 10 years ago. Tolkin noted the analyst today would need “strong mathematical skills, programming skills, very good pattern recognition, the ability to have a passion and love not only for the markets but research, and discipline in that research to develop a repeatable process.”

— Julia La Roche is a finance reporter at Yahoo Finance.

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#quants #Investing #Hedge Funds #_uuid:36b67d8d-81f6-3814-8070-ad6b27572436 #_wp:139284

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