Fund Architects Commentary
“CANNOT PREDICT NOW”
Believe it or not, fortune telling is a class B misdemeanor in the state of New York. Occasionally, that’s a problem for Madame Ruth and her gold-capped tooth. But predicting the future is hardly a legal issue for Wall Street analysts, especially those of the oil kind. To wit: “We assume that with less of a supply overhang in H2-2015, prices can recover further,” said the energy soothsayers at Credit Suisse in late 2014. “We see an average price of $79 a barrel in that period.” Magic 8-Ball says “Are you kidding?” Continue reading »
RISE OF THE MACHINES
There was a war…
We’ve been hearing that there’s a storm coming. It’s here. Oil prices are tanking. Global equities are evaporating. U.S. economic data seem to be moving backwards in time. The Dow and the S&P 500 look like they’re a couple cans short of a six-pack, surrendering 8% since 2016 arrived, while the faint-hearted NASDAQ has given up more than 10%. What’s wrong with this picture? Continue reading »
U.S. equity indices prices exhibited volatile trading in fourth quarter 2015 (4Q15) as measured by S&P indexes but managed to post positive results largely because of strong returns in October. International stocks and emerging market equities gauged by MSCI EAFE and MSCI Emerging Markets also finished positively for the quarter even though the latter index was up only slightly. Domestic and international bond returns as calculated by Barclays U.S. Aggregate Bond and Barclays Global Aggregate Bond ex U.S. were lower for the quarter as credit spreads widened and the U.S. Fed increased the target of the Fed Funds rate. Commodities continued to struggle mightily partly because of slowing Chinese demand and absent inflation. Intra-day volatility increased as the quarter wore on and left indices mixed as the year drew to a close. Continue reading »
A DERIVATIVE BY ANY OTHER NAME…
It’s no secret that taxpayers have borne the bulk of mortgage credit risk since Fannie Mae and Freddie Mac flamed out seven years ago. Well, guess what…the two government-controlled housing giants have come up with a “plan” to get us all off the hook if/when the next mortgage crisis arrives. What a SYNTHETIC notion! Continue reading »
THIRD AVENUE FREEZE-OUT
Tear drops on the city, Bad Scooter searching for his groove.
Everybody’s heard by now that Marty Whitman’s Third Avenue Management pulled the plug on its six-year-old, $789 million Focused Credit Fund. And by pulling the plug we mean suspending shareholders’ right to ask for their money back from a ’40-Act fund. Song goes the manager will jam up shareholders’ money for several months as it tries to liquidate its assets. Continue reading »
STOCK(S) IN TRADE
“On Wall Street he and a few others — how many? — three hundred, four hundred, five hundred? — had become precisely that...Masters of the Universe. There was...no limit whatsoever!”
― Tom Wolfe, The Bonfire of the Vanities
Story’s going around that Morgan Stanley cut loose about a quarter of its fixed-income group. The decision, they say, reflects the big banker’s fading hopes that the debt markets will spring to life anytime soon. The move will leave about 400 highly-paid employees looking for jobs by early next year. Continue reading »
RATCHETING IT ALL DOWN
Poor Jack Dorsey. Seems the founder of tech startup Square Inc. (and current CEO of Twitter Inc.) had to make a tough IPO call last week: Either crank it up with Square’s lead underwriters, Goldman Sachs and J.P. Morgan Chase, or crank it down for his company’s employees.
Guess who got the shaft? Continue reading »
THE GOOD, THE BAD, AND THE UGLY
The Good is a professional gunslinger who’s out trying to earn a few dollars. The Bad is a hit man who always commits to a task and sees it through. The Ugly is just trying to take care of his own hide. Now, The Good, The Bad and The Ugly are battling it out to get their hands on the gold.
You may remember Valeant Pharmaceuticals, the north of the border drug firm whose shares were gunned down earlier this year. Seems the company had strung up the prices of two cardiac-care drugs by 525% and 212% just a few weeks after acquiring their rights. Valeant CEO Michael Pearson, in one of the worst shots in Wall Street history, claimed the older drugs were “dramatically underpriced relative to their clinical value.” Continue reading »
HORN OF A DILEMMA
We’re told there are more than 140 private companies grazing the corporate woodlands these days with valuations of a billion dollars or more. Some are real beasts, like Uber and AirBnB. Others, like Kabbage and Fanduel, have a more mythical quality. But they’re all called “unicorns” and legend has it the herd’s cumulative value is somewhere north of a half trillion dollars. These ten-figure startups are, indeed, the thing of imagination. Just like their numbers.
At $51 billion, Uber would be bigger than the value of the entire global taxi market it’s trying to replace. Continue reading »
A “KING’S” RANSOM
So, the worst kept secret on the Street is out: The old bond-trading business model will never make much money again. On Thursday, Deutsche Bank said it will write off $6.5 billion, essentially admitting that the onslaught of regulatory changes has cut fixed income profitability and good will. Not to be outdone, the self-described “Bond King” publicly announced that day he was unhappy that Pimco figuratively forgot his birthday.
The Geek: …that's just so my friends won't think, you know, I'm a jerk. Continue reading »