Fund Architects Commentary
SMOKE ON THE WATER
So, the Swiss National Bank “scrapped the cap” on its franc last week, and within minutes global currency markets were virtually up in smoke. Like firing a flare gun into a rattan ceiling, the SNB’s move ignited things pretty quickly, and by Friday’s close currency brokers around the world were facing hundreds of millions of dollars in foreign-exchange losses. Continue reading »
U.S. equity indices recorded impressive positive results for the fourth quarter 2014 (4Q14) led by smaller capitalization stocks. International equity indices priced in U.S. dollars (USD) were negative for the quarter as many international currencies weakened relative to USD. Long-term bonds maintained surprisingly strong marks as investors continued to favor the relatively attractive yields and safety of U.S. Treasuries. Commodities persisted with another extremely weak quarter of results dragged lower by the energy complex. Continue reading »
CHINESE PUZZLE GAME
O, what a tangled web we weave
When first we practise to deceive!
In case you missed it, yet another oddly named Chinese company has become the world’s most valuable technology startup. At least Alibaba was pronounceable.
This time it’s smartphone maker Xiaomi Corp. True enough, while the rest of the world was maxing out its figurative credit card on the holidays, Xiaomi was collecting enough cash from investors to value the absurdly fast-growing company at more than $45 billion. The funding party was led by an outfit called “All-Stars Investment,” a tech investment fund run by a former Morgan Stanley analyst. Big players in the event included DST Global, a Russian investment firm, GIC, a Singapore sovereign-wealth fund, and, of course, Yunfeng Capital, a private-equity firm affiliated with Alibaba. Nice group. Continue reading »
So, how do you make $2 billion in the hedge fund business? Easy, start with $4 billion! Yeah, it’s an old joke, and it’s not that funny to most folks to begin with. But it’s not laughable at all to investors in Mattias Westman’s Prosperity Capital Management fund. With huge stakes in Russian oil companies, Westman’s fund really was cut in half by the recent crash in oil prices.
"Sweet crude” literally has a mildly sweet taste and pleasant smell
Fact is, oil of all flavor has been tanking since November 27, when OPEC announced its plans to keep the Mideast spigot open full blast. Brent crude, the major benchmark price for oil worldwide, has been sliding ever since, losing nearly 25% of its value in four weeks. While Westman appears to have descended all the way down the well, he was hardly alone for the ride Continue reading »
Baby you can drive my car…
So, how much do you think a five-year-old company with a mobile app that lets people hail a ride with a few clicks and a credit card might be worth? Think 41 billion dollars might be fair?
Yes I'm gonna be a star…
True enough, ride-sharing service Uber Technologies – yet another San Francisco super startup – flagged down a new round of funding last week, and some of the world’s top investors made a hefty round-trip bet that the firm can keep outrunning local taxi companies. Total fare plus tip should enable the still closely-held company firm to expand its workforce, lure drivers, test a delivery service, and subsidize prices in some of the 250 cities around the world where it operates. Continue reading »
A (GOLD) BUG’S STORY
Amazingly, historians have determined that gold was discovered by humans around 5000 B.C. We’ll take their word for it. What’s even more amazing, we think, is that it took humans another seven thousand years to launch the first gold ETF.
Gold has been discovered on every continent on earth
True enough, the first U.S. exchange-traded fund for gold (chemical symbol Au, by the way) was hammered out 10 years ago last Tuesday. Originally launched under State Street Corp.’s now-defunct streetTRACKS brand, what is now known as the SPDR Gold Trust gave investors a stake in gold bars stored in HSBC PLC’s London vaults. GLD quickly became, one might say, the shiniest financial instrument since the Lydians introduced the gold coin in 560 B.C. Continue reading »
Care to guess where Capitol Hill, Wall Street, and the Gulf of Mexico might intersect? (Hint: It’s political crazy season) Why, right over there on the massive pointy end of Sarbanes-Oxley, of course. Just ask fisherman John Yates.
SOX was named for sponsors Senator Paul Sarbanes (D-MD) and Representative Michael Oxley (R-OH), both of whom promptly retired
By way of unpleasant reminder, the bureaucratic kraken now known as “Sarbox” came to life in 2002, an outsized response by lawmakers to spectacular frauds at Enron, WorldCom, and Tyco. Among its many tentacles, the Congressional beast included a provision that made it a crime to knowingly destroy “any record, document, or tangible object” with the intent to obstruct an investigation. Continue reading »
WHEN THE CHIPS ARE DOWN…
For whatever reason, the NYSE sees fit to define “blue chip,” specifically as a “stock in a corporation with a national reputation for ability to operate profitably in good times and bad.” We’re wondering, of course, why the Exchange feels compelled to define the term at all, especially now that the very companies it’s attempting to describe are posting quarter after quarter of woeful results.
The Dow Jones Industrials has been the benchmark for the so-called “blue chips” since 1928
Indeed, a third of the companies in the Dow 30 reported lousy growth numbers over the past year, and nearly a half aren’t even keeping up with the U.S. inflation rate. The list of crumbling chips is remarkable: AT&T, Coca-Cola, IBM, and Wal-Mart have all gone stale. Even GE, the oldest chip of them all, hasn’t topped $30 a share since the financial crisis. Continue reading »
Positive portfolio performance results were lacking in third quarter 2014 (3Q14) as worrisome macro factors overwhelmed investors positioned for rising asset prices. Large capitalization stocks in the U.S. as represented by the S&P 500 were positive but mid and small cap stocks were noticeably lower. International equity indices including developed and emerging markets were considerably inferior as Europe is struggling to remain out of recession, Japan is experiencing difficulty in stoking long-term growth, and developing economies feel the effects of a stronger U.S. dollar and potentially rising U.S. interest rates. Long-term bonds performed positively for the quarter as investors sought safety from many risk assets, while short and intermediate categories were near flat. Commodities, in aggregate, struggled mightily during the period as has been the case for year-to-date and one-year measurements. Continue reading »
PHYSICAL ON 34TH STREET
So, the world’s most prolific e-commerce company is putting up a storefront in the middle of Manhattan. Indeed, Amazon.com Inc., well-known for its good customer service, lightning fast shipping, and selling virtually anything online, plans to unlock the doors on a real brick-and-mortar building where it won’t be doing any of those things. Continue reading »