Monthly Archives: December 2015

Goldman’s BRIC Era Ends as Fund Folds After Years of Losses

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“The bank’s asset-management unit folded its money-losing BRIC fund, which invests in Brazil, Russia, India and China, and merged it last month with a broader emerging-market fund. Goldman Sachs pulled the plug on the nine-year-old product because it doesn’t expect ‘significant asset growth in the foreseeable future,’ according to a filing to the U.S. Securities and Exchange Commission.  The downfall of the BRIC fund, which had lost 88 percent of its assets since a 2010 peak, also underscores how the strategy of bundling disparate countries into a single investment theme is losing its appeal among investors.”

http://www.bloomberg.com/news/articles/2015-11-08/goldman-s-bric-era-ends-as-fund-closes-after-years-of-losses

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Japan Urges Its Companies to Help Stimulate Economy

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“Japan’s central bank governor and other officials are stepping up appeals to corporations to do more to help the country’s faltering economic recovery, [coinciding] with a push by Prime Minister Shinzo Abe to attack broader trends that slow Japan’s growth: shrinking and aging of the population and a corporate culture heavy on overwork.  Katsunobu Kato, an Abe ally who recently was appointed to head his campaign to counter the falling birthrate, voiced a similar appeal.  ‘There is a limit to what government can do. We are expecting the private sector to help,’ said Mr. Kato, who is assigned to ensure that the country’s population, now at 126 million, does not fall below 100 million.”

http://www.nytimes.com/2015/12/01/business/international/japan-companies-stimulus-economy.html

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World’s Biggest Pension Fund Loses $64 Billion Amid Equity Rout

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“The world’s biggest pension fund posted its worst quarterly loss since at least 2008 after a global stock rout in August and September wiped $64 billion off the Japanese asset manager’s investments.  The 135.1 trillion yen ($1.1 trillion) Government Pension Investment Fund lost 5.6 percent last quarter as the value of its holdings declined by 7.9 trillion yen, according to documents released Monday in Tokyo. That’s the biggest percentage drop in comparable data starting from April 2008.  Fund executives have argued that holding more shares and foreign assets is a better approach as Prime Minister Shinzo Abe seeks to spur inflation that would erode bonds.”

http://www.bloomberg.com/news/articles/2015-11-30/world-s-biggest-pension-fund-loses-64-billion-amid-equity-rout

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Do Stock Buybacks Kill Corporate Innovation, Profits?

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“Since buybacks reduce the number of shares outstanding, they have the effect of boosting stock prices, at least in the short-term.  At the same time, buybacks also boost earnings per share even if the underlying business isn’t growing much, if at all, because the same amount of profit gets spread over fewer shares in the hands of investors.  In practice, Corporate America has spent billions of dollars on buybacks over the past 10 to 15 years, and not always at the best time, when stock prices are cheap, but instead as steady, recurring way to manufacture earnings per share growth out of thin air.  In fact, many S&P 500 companies have taken this practice to excessive levels.”

http://www.moneyandmarkets.com/ado-stock-buybacks-kill-corporate-innovation-profits-74548

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Bill Gross: Central bank ‘casinos’ to run out of luck

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“Investors should cut risk heading into 2016 as central banks trying to pump up their respective economies make losing bets, bond guru Bill Gross says.  Institutions like the Federal Reserve and the European Central Bank are like ‘casinos’ that create money instead of chips ‘they’ll never have to redeem,’ said Gross, founder of bond giant Pimco who now runs the $1.4 billion Janus Global Unconstrained Fund.  Furthering the gambling analogy, he said central bankers are using a familiar ploy — doubling down on losing bets until they break even.  ‘How long can this keep going on? Well, theoretically as long as there are financial assets (including stocks) to buy,’ Gross said.”

http://www.cnbc.com/2015/12/03/bill-gross-central-bank-casinos-to-run-out-of-luck.html

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Blackstone’s James Says U.S. May Enter Recession in 2017

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“Tony James, who leads New York-based Blackstone, said most of the industrial sector, excluding aerospace and automotive companies, is already in recession, and he expects no growth in earnings in the Standard & Poor’s 500 index of large U.S. companies this year. He also cited factors such as financial strain on consumers, while saying wage growth is one positive sign.  A rise in interest rates won’t have a major impact on the economy or on markets, said James. Rates, which have been ‘too low for too long,’ have ceased to spur growth, he said, and may even have hurt employment because they can encourage companies to invest more in operations than in labor.”

http://www.bloomberg.com/news/articles/2015-11-18/blackstone-president-james-sees-potential-u-s-recession-in-2017

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Corporate America’s buyback binge feeds investors, starves innovation

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“The phenomenon is the result of several converging forces: pressure from activist shareholders; executive compensation programs that tie pay to per-share earnings and share prices that buybacks can boost; increased global competition; and fear of making long-term bets on products and services that may not pay off.  Companies say buybacks are warranted when demand for their products and services isn’t enough to justify spending on R&D, or when they deem their shares to be undervalued, and therefore a better investment than new projects.  But if those buybacks come at the expense of innovation, short-term gains in shareholder wealth could harm long-term competitiveness.”

http://www.reuters.com/investigates/special-report/usa-buybacks-cannibalized/

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Senate Republicans Push $3 Billion Puerto Rico Bailout

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“Hatch and two other Senate committee heads last week introduced legislation to direct as much as $3 billion to Puerto Rico through a newly-created authority that would help oversee the island’s budget. Governor Alejandro Garcia Padilla says the island of 3.5 million residents can’t afford to repay debt built up from years of borrowing to paper over budget shortfalls brought on by its faltering economy. With his government rapidly draining its cash, Garcia Padilla told senators this month that he’s running out of ways to avert a major default. His administration has started diverting revenue earmarked for some securities to ensure that the island doesn’t skip payments on its general-obligation bonds.”

http://www.bloomberg.com/news/articles/2015-12-15/top-senate-republican-pushing-for-short-term-aid-for-puerto-rico

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Banks’ ‘Uber moment’: 100,000 bankers fired in 2015

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“The analysis comes just weeks after Antony Jenkins, who until July was CEO of Barclays, warned in a speech that as much as half of banking jobs could be replaced by apps and algorithms over the next 10 years.  Jenkins’ argument rests on the rise of fintech — financial technology — startups that do things like payments, lending, and investments in a smarter, cheaper, and often faster way. Jenkins believes fintech startups will ‘disrupt’ financial services in the same way Uber has disrupted the taxi industry. That will squeeze profit margins, forcing banks to cut staff, and also force them to compete on technology, another change that will reduce headcount.”

http://www.businessinsider.com/banks-uber-moment-100000-bankers-fired-in-2015-2015-12

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Chicago struggles to auction off taxi medallions

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“Amid the rise of ride-booking services such as Uber, the city’s cab regulator has been unable to close out a sale of taxi medallions more than two years after first taking bids on them.  Back then, the city insisted on minimum bids of $360,000 per medallion, creating the possibility of a windfall worth at least $18 million for the cash-strapped city.  The failure to finish up the auction is another example of how ride-booking firms have upset assumptions about taxi medallions, which permit drivers to operate a licensed cab in the city. As consumers have shifted to Uber and Lyft, pricing for medallions has fallen and lenders that previously made loans into the market have fled it.”

http://www.chicagobusiness.com/article/20151124/NEWS10/151129923/chicago-struggles-to-auction-off-taxi-medallions

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