Fund Architects Commentary
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 »
I FEEL THE NEED…THE NEED FOR SPEED
U.S. Treasuries represent one of largest markets in the in the world. Most in the investment rank know that. Some might even know that the $12.8 trillion space is still governed by rules adopted during the age of intercoms and rotary telephones. But how many folks know that trading today is overwhelmingly dominated now by a handful of technology-driven firms with names like Jump Trading and Virtu Financial? If you didn’t, that’s all right…neither did the Treasury department.
Talk to me Goose… Continue reading »
BETTING THEIR HEDGES
If you didn’t know, the world’s biggest stock hedge fund is run by a quiet little Boston firm called Adage Capital Management – and by little we mean $28 billion under management. The firm was launched in 2001 by a pair of Harvard University endowment executives who got sick of blowhard professors whining about the non-academics’ hefty paydays. The two traders – Robert Atchinson and Phillip Gross – took with them an 18-person team and a $1.8 billion day-one investment from Harvard in exchange for an agreement to commit a portion of their firm’s future earnings to the blowhards. Continue reading »
HALT AND CATCH FIRE
NYSE spokesman: “We have a unique market model that ensures stocks open smoothly and at the right price by combining human judgment with technology.”
The market: “Your unique model is toast.”
So, it’s 9:30 Monday morning at 11th and Wall. Chinese stocks have cratered overnight and U.S. stock-index futures are tanking faster than you can say “exchange traded fund.” No problem, NYSE officials say – we have a circuit-breaker system! The IT guys told us this “limit-up limit-down” thing’ll keep things in check! Continue reading »
Global equity markets have experienced a sharp sell-off over the last week perhaps causing unusual emotional pain to those investors tracking every tick. Many spellbinding headlines are likely contributing to investor fear but the one pundits are calling “Made in China” is likely the largest culprit elevating anxiety. So what is going on?
China’s economy is now expanding at a slower rate compared to the last couple of decades when the country primarily focused on exporting goods. The size of China’s economy has grown exorbitantly and simply cannot maintain the same growth rate as years past. Lots of economic data suggests China may be experiencing a slowdown greater than what is commonly forecast, though few are calling for a “hard-landing.” Additionally, China took measures to devalue their currency last week, which spooked investors, never mind the huge appreciation experienced over the last six to seven years. Some reckon this was a tactic to help boost exports while many true experts believe it was a move in a process to eventually gain world currency reserve status. Despite the varying schools of thought, the action added to nervousness in markets. Continue reading »
Far and away the biggest news on the global economic front last week was China’s surprise devaluation of its currency. The move to weaken the yuan (which believe it or not is pronounced just like it’s spelled, at least according to an analyst named Wang Xiu Ying who calls himself Bob), allegedly reflects the country’s desire to allow market forces greater play in setting its currency’s exchange rate.
Meanwhile, some guy whose name sounds like Snuffleupagus was paying his Greek mechanic with a handful of olive pits and two Chris Demetral baseball cards. Continue reading »
THE WOLF(S) OF WALL STREET
Mark Hanna: “The name of the game, moving the money from the client's pocket to your pocket.”
Jordan Belfort: “But if you can make your clients money at the same time it's advantageous to everyone, correct?”
Mark Hanna: “No.”
Ever heard of “total-return swaps”? We hadn’t either, but, like boiler rooms, cold calling, and other forms of unkindness, they’ve been around for years. Essentially, these gentle-sounding derivatives mimic the effects of owning a stock without actually taking possession of a real asset. A fund using swaps strikes an agreement with a bank to receive any gains or losses over a pre-determined period – if the stock goes up, the fund gets paid; if it goes down, the fund owes money to the bank. Continue reading »