|Bid||129.32 x 800|
|Ask||129.33 x 800|
|Day's range||128.40 - 129.41|
|52-week range||91.11 - 131.29|
|Beta (3Y monthly)||1.20|
|PE ratio (TTM)||12.76|
|Earnings date||14 Jan 2020|
|Forward dividend & yield||3.60 (2.80%)|
|1y target est||123.58|
as former Goldman Sachs chief executive Lloyd Blankfein took aim at the Democratic presidential candidate. last year, was reacting to his appearance in a Warren campaign video released on Wednesday calling for a US wealth tax. The tweet from Mr Blankfein, who says on his Twitter profile he is on a “gap year”, was seen as a reference to the controversy over Ms Warren’s past claims of Native American ancestry, which have included President Donald Trump referring to her as “Pocahontas”.
Private equity is a difficult niche for private investors to access. This style of investing is usually the preserve of very large institutional players, and can have plenty of off-putting features — think highly paid fund managers with highly leveraged assets and business turnround plans that focus on cutting costs (and corners). in this area means it is possible for the adventurous (yet selective) private investor to gain exposure.
(Bloomberg) -- Mark McVeigh, a 24-year-old environmental scientist from Australia, won’t be able to access his retirement savings until 2055. But, concerned about what the world may look like then, he’s taking action now, suing his A$57 billion ($39 billion) pension fund for not adequately disclosing or assessing the impact of climate change on its investments.The Federal Court battle is shaping up to be a unique test case. Are pension funds in breach of their fiduciary duties by failing to mitigate the financial ravages of a warmer planet?Before launching the legal action, McVeigh asked Retail Employees Superannuation Trust, or Rest, how it was ensuring his savings were future proofed against rising world temperatures. Its response didn’t satisfy him and he ended up engaging specialist climate change law firm, Equity Generation Lawyers.“I see climate change as a huge risk that dwarfs a lot of other things -- it’s such a big physical impact on the planet, and the economy,” McVeigh said in a phone interview from Brisbane, where he works as an ecologist for a local government. He said other people had contacted him on learning of the case and also wanted such information from their funds.Rest says climate change is just one of a variety of factors it must consider when investing the savings of its around 2 million members, which include grocery-store clerks and shop keepers, according to court filings.Australia’s pension industry -- home to the world’s fourth-largest retirement-savings pool at A$2.9 trillion -- is watching the case closely, particularly because many funds must also meet legislated minimum return targets. While investing in renewable-energy projects and pressuring miners to be better corporate citizens is all well and good, this requirement makes it more complicated than simply dumping fossil-fuel emitters from a portfolio.Interests of Members“Looking after the best financial interests of our members requires us to be conscious of the risks, but not exclude a whole segment of the economy that’s going to be very meaningful for a period of time,” said Ian Patrick, chief investment officer at Sunsuper Pty, which manages A$70 billion. “Right now, the interests of our members -- the sole purpose of super -- is what wins out.”Australia’s mandatory retirement savings system, known as superannuation, is meant to relieve pressure on the public purse as the nation’s population ages, lives longer and requires a steady income stream to survive. Much of the industry must strive to return 3.5% above inflation over a decade.But returns aside, members like McVeigh want to see their savings last as long as possible in an uncertain environment, with polls showing increasing public concern about climate change.“Investors may not be sufficiently factoring in the impact of climate-change risk on future economic growth,” said Jennifer Wu, global head of sustainable investing at JPMorgan Asset Management.Firms are beginning to act, with a study by State Street Global Advisors released Wednesday finding that fiduciary duty is one of the main ‘push factors’ for financial institutions to adopt environmental, social and governance principles.Sunsuper, AustralianSuper Pty, Construction & Building Unions Superannuation, Health Employees Superannuation Trust Australia and others have employed responsible investment teams to integrate ESG factors into their portfolios. They’ve joined global investor initiatives such as the United Nations-backed Principles for Responsible Investment and they’ve used their sizable holdings in companies like BHP Group Ltd. and Glencore Plc to agitate for change.Conversations around engagement versus divestment are frequent when five or so years ago, they pretty much didn’t exist.Mary Delahunty, who as head of impact at HESTA is responsible for improving the A$50 billion fund’s responsible investment practices, says selling out isn’t always a prudent option.“As soon as you remove capital, they don’t have to have a conversation with you anymore,” she said.Debt is another way pension funds are trying to manage climate risk in their portfolios.Sunsuper has written loans to gas companies in the Permian Basin in the U.S., rather than taking equity stakes and running the risk of being left with a stranded asset. Those loans deliver double-digit returns over periods of up to 10 years while the world shifts to a cleaner energy mix, Patrick said.“It’s why we prefer debt and why we think about the tenor of that debt quite deeply,” Patrick said. “Relative to holding long-term equity in an energy asset, that addresses the risk quite substantially.”While activism is rising and investors and banks are shying away from financing environmentally damaging projects, the Australian government is going the other way. Prime Minister Scott Morrison, a staunch supporter of the coal-mining industry, is considering new laws to prevent activists like environmental lobby group Market Forces from stymieing commercial decisions and threatening economic growth.Will Judges Have the Last Word on Climate Change?: QuickTakeThe McVeigh case, which is back in court Nov. 22 for a preliminary hearing, has also gained international attention, even though climate change litigation isn’t new (oil companies in the U.S., for example, have been sued to recover the cost of rebuilding to protect against rising sea levels).As well as improving its environmental disclosures, Rest recently appointed a responsible investment manager and in June, took control of a wind farm in Western Australia from a UBS Group AG unit.The fund also said it had sought to meet with McVeigh to discuss his concerns. “Specific climate-related issues which we engage with our investment managers on include carbon foot printing, stranded assets, climate-related scenario analysis and exposure to lower carbon assets,” a spokesperson said in an emailed statement.Michael Gerrard, a professor of environmental, climate change and energy law at Columbia University, said that “success in litigation breeds imitation, so if McVeigh wins, people will take a close look.”“People are so desperate at the failure of governments to act adequately on climate change that they’re looking for litigation targets.”(Adds JPMorgan Asset Management comment in 10th paragraph. An earlier version corrected the spelling of Columbia University in penultimate paragraph.)To contact the reporter on this story: Matthew Burgess in Melbourne at firstname.lastname@example.orgTo contact the editors responsible for this story: Edward Johnson at email@example.com, Katrina NicholasFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- It’s still all about the central banks. If you care about allocating money between global assets, everything else remains ancillary, and all 2019’s biggest trends — from negative interest rates in Germany through the inverted U.S. yield curve to the impressive global rebound in share prices — can be explained by the actions of central bankers.Many will find this rather depressing. Approaching the end of an exciting year for world markets, it is tempting to rely on a narrative of geopolitical intrigue and trade wars. But it is far simpler and more accurate to explain 2019’s events in terms of the liquidity that the developed world’s central banks have unleashed — while China and the bigger emerging markets have prominently refused to follow the same. CrossBorder Capital, a London-based investment group, maintains indexes of global liquidity, covering central banks, international financial flows and domestic private-sector liquidity. Numbers above 50 show expansion, and a rising number shows acceleration. They show a dramatic shift in 2019.The year started with the developed world’s central banks trying to dry up liquidity and return to normality after the crisis years, while their counterparts in the emerging world pumped money into their economies. Since then, there has been a 180-degree turn:Jerome Powell, chairman of the Federal Reserve, protests that nobody should put the label “QE” on the U.S. central bank’s decision to expand its balance sheet in the last two months to address disruptions in the repo market for short-term bank funding. But the financial markets don’t recognize this distinction. In conjunction with asset purchases from the European Central Bank (which does describe what it is doing as QE) and the Bank of Japan, provision of liquidity has accelerated faster in the past few months than at any time since the first desperate days after the 2008 Lehman Brothers bankruptcy. The story in the emerging markets, which these days are dominated by China, is the polar opposite. At the beginning of the year, liquidity was expanding, and the People’s Bank of China appeared to be trying to repeat its trick from 2016, when a big expansion in credit averted a slowdown. Since then, however, emerging-market central bank liquidity has dried up, and is now as tight as it has been since the series started in 2005. Contrary to the hopes of a year ago, it appears that the PBoC has been engaged in cleaning up balance sheets and helping local governments to cut back their debts in the Chinese shadow banking system, rather than making any concerted attempt to stimulate the macro economy. This dynamic helps to explain the anomalous poor performance of emerging-market currencies. Normally, EM foreign exchange is regarded as a “risk-on” asset. If investors are feeling confident, as is typically the case when the Fed is making money plentiful, that tends to mean flows into emerging markets. But JPMorgan Chase & Co.’s emerging-markets foreign exchange index is close to its post-crisis low.Weak emerging-market currencies open the risk of debt crises as their dollar-denominated debt grows harder to service. The emerging world remains under pressure. This isn’t just from the U.S.-China trade conflict but also, as the liquidity figures make clear, from China’s efforts to avert a financial crisis at home. The fresh flow of money from the developed world’s central banks has allowed U.S. stock markets to set fresh highs, and spurred optimism. The greatest risk remains, as it has been for years, that China succeeds in averting a Lehman-style credit crisis at home, but at the cost of an economic slowdown that would affect the rest of the world. To contact the author of this story: John Authers at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.John Authers is a senior editor for markets. Before Bloomberg, he spent 29 years with the Financial Times, where he was head of the Lex Column and chief markets commentator. He is the author of “The Fearful Rise of Markets” and other books.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Democratic presidential candidate Elizabeth Warren sought to reassure business leaders and investors they have nothing to worry about if she is elected -- as long as they obey the law.“I believe in markets. Markets with rules that are consistently enforced,” she said in an interview in Concord, New Hampshire. “If someone has built a business on cheating people, then they should be very worried about a Warren administration, but if that’s not the case, then there’s no reason for them to worry.”Warren’s progressive proposals for reducing inequality, including a wealth tax, breaking up big technology and agriculture companies, as well as her $21 trillion plan to replace private health insurance with a government-run system, have raised concerns on Wall Street that her policies would be ruinous and push the U.S. too far to the left.As she has gained in the polls, she’s come in for criticism from Wall Street executives and billionaires, including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, hedge fund billionaire Leon Cooperman and Microsoft Corp. founder Bill Gates.She attacked Cooperman in a new campaign commercial, and on Wednesday he fired back in a profanity-laced tirade on CNBC.The Massachusetts senator, who has pledged not to take big-donor money to fuel her campaign, said the criticism reminded her of the opposition she faced when she proposed establishing the Consumer Financial Protection Bureau.“A lot of financial institutions were saying in effect, ‘if there’s a cop on the beat, that’s going to destroy my business,’” Warren said. “My answer was: ‘Really? What are you doing that a cop is going to catch you out and make you shut down? Do you not have a business model that works and the cop could glance over your shoulder once in a while and say yeah, that’s fine.’”Warren is gaining on Democratic front-runner Joe Biden in polls with a campaign message that corporate and government wrongdoing have broken American democracy. She’s presented plans to tackle corruption, including increasing oversight of lobbying and imposing restrictions and large fines on some of the largest U.S. corporations.“If you’re running a straight-up honest business, you want a cop on the beat, because you don’t want to have to compete against the cheaters,” Warren said. “That’s what a Warren administration will be all about.”She has vowed to make the richest Americans bear the cost of her plans through higher taxes, including levies on wealth and financial transactions. In a research note this month, Goldman Sachs Group Inc. said her plan to return the corporate tax rate to 26% from 18% would drive down earnings for S&P 500 companies.“This country is broken and the way we will repair it is together,” she said. “Not by depending on the billionaires, not by depending on corporate PACs, but by building a movement across this nation.”On the campaign trail, Warren tells potential voters that while she doesn’t have a “beef with billionaires,” she wants to ensure that they pay their fair share.(Adds new quote in eleventh paragraph.)To contact the reporter on this story: Misyrlena Egkolfopoulou in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Joe Sobczyk at email@example.com, Gregory MottFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Continuing with strategic moves, Apollo Global (APO) signs deal to acquire Tech Data (TECD), with the aim to boost the latter's position in the market.
Albeit the market sentiment is bullish on Walgreens Boots' (WBA) potential acquisition deal, many analysts are in doubt about the company's effective approach to get privatized.
(Bloomberg) -- Alibaba Group Holding Ltd. started taking investor orders for its Hong Kong share sale, which could raise more than $11 billion in the city’s largest equity offering since 2010.The New York-listed tech giant is offering 500 million new shares, according to terms for the deal obtained by Bloomberg on Wednesday. The base offering could raise about $11.7 billion based on Alibaba’s Tuesday close in New York, though it’s possible the stock will be priced at a discount. Alibaba’s American depositary shares, which represent 8 ordinary shares of the internet company, closed at $186.97 in U.S. trading Tuesday. The shares fell 2.4% on Wednesday.Asia’s largest corporation is proceeding with what could be one of this year’s biggest stock offering globally despite violent pro-democracy protests gripping the city. Alibaba aims to price the offering before U.S. market open on Nov. 20 and start trading in Hong Kong on Nov. 26, the terms show.Alibaba plans to use the offering proceeds to drive user engagement, improve operational efficiency and fund continued innovation, according to the terms. Deal underwriters have a so-called greenshoe option to sell an additional 75 million shares. Alibaba said in a regulatory filing that New York will continue to be its primary listing venue.China International Capital Corp. and Credit Suisse Group AG are joint sponsors of the offering, while Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley are joint global coordinators. HSBC Holdings Plc and ICBC International Holdings Ltd. are also helping arrange the sale, the terms show.Alibaba’s share sale marks a triumph for the Hong Kong stock exchange, which lost many of China’s brightest technology stars to U.S. rivals. The city’s bourse has introduced new rules that allow dual-class shares after resisting such a change for a decade. Efforts to lure Alibaba went all the way to the top of Hong Kong’s government, with Chief Executive Carrie Lam exhorting billionaire Jack Ma to consider a listing in the city.Alibaba has considered a Hong Kong listing for a long time, even as far back as five years ago when it was scouting for its initial public offering, said Michael Yao, head of corporate finance at Alibaba, on a call with investors. “We viewed Hong Kong as strategically important to us. It’s one of the most important financial centers. And this listing will allow more of our users and stakeholders in the Alibaba digital economy across Asia the ability to invest in and participate in the fruits of our growth,” Yao said.The New York-listed Chinese giant had aimed to list over the summer before pro-democracy protests rocked the financial hub, while trade tensions between Washington and Beijing clouded the market’s outlook. It’s unclear if the violence will affect the listing process, given growing resentment toward mainland Chinese influence as well as the country’s most visible corporate symbols.Yao said the deal size hasn’t changed as a result of the protests. “This has always been our deal size,” he said, adding that the company wants to ensure there is ample liquidity in the market.Listing closer to home has been a long-time dream of Ma’s-- a move that curries favor with Beijing and hedges against trade war risks. A successful Hong Kong share sale could also help finance a costly war of subsidies with Meituan Dianping in food delivery and travel, and divert investor cash from rivals like Meituan and WeChat operator Tencent Holdings Ltd.A successful Hong Kong debut will be another feather in the cap for Daniel Zhang, who took over as chairman from Ma in September. The former accountant is now spearheading the company’s expansion beyond Asia but also into adjacent markets from cloud computing to entertainment, logistics and physical retail.(Updates Alibaba’s share price to close in second paragraph.)\--With assistance from Manuel Baigorri, Crystal Tse and Julia Fioretti.To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.org;Kiuyan Wong in Hong Kong at email@example.com;Carol Zhong in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, ;Fion Li at firstname.lastname@example.org, Ben ScentFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The bond market isn’t ready to concede that the economy is on a sustained upturn that will allow it to skirt a severe slowdown or even a recession. U.S. Treasuries followed most of the rest of the global government debt market higher Wednesday, providing a welcome respite from a sell-off that’s looking more like an adjustment of overextended positions than a referendum on faster growth.Sure, some of the gains in the bond market may be related to doubts about the U.S. and China actually agreeing to the first phase of a trade deal after some downbeat comments by President Donald Trump on Tuesday and subsequent reports of a “snag” on Wednesday. But what hasn’t been discussed as much is evidence that the recent slump in bonds had much to do with the reversal of positions by general investors who bought government debt in August, September and early October as recession speculation peaked. That was borne out in the latest monthly survey of global fund managers by Bank of America released on Tuesday. It showed being long Treasuries is no longer the world’s “most crowded trade,” with 21% of respondents saying so, down from a massive 41% in October. The new “most crowded trade” is long U.S. technology and growth stocks at 39%. And with yields on benchmark 10-year Treasuries having risen from 1.43% in early September to 1.87% on Wednesday, there’s reason to believe that bonds are more fairly valued. In fact, the latest yield is higher than the 1.71% that economists expect it to be at the end of the year and the 1.78% they estimate at the end of the first quarter 2020, according to data compiled by Bloomberg.Although the data show that the economy both in the U.S and globally may not be getting any worse, that’s far different from showing it’s getting much better and causing central banks to turn hawkish again. “We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook,” Federal Reserve Chair Jerome Powell told the Congressional Joint Economic Committee on Wednesday in Washington. “However, noteworthy risks to this outlook remain.”STOCKS HIT A TRADE SNAGThanks in part to Powell’s dovish comments, everything was going swimmingly in the stock market until the Wall Street Journal reported that trade talks between the U.S. and China had hit a snag, briefly causing equities to erase their gains. Citing people familiar with the matter, the paper said China is leery of putting a numerical commitment on agriculture purchases in the text of a potential agreement. The development seems to explain why Trump only a day earlier sounded unusually cautious about a trade agreement, saying only that it “could happen soon” and adding that if it didn’t, then he would just increase tariffs on Chinese goods. This is no small matter for the stock market, which has rallied to new highs largely on the notion that a “phase one” deal would be reached, eliminating a significant drag on the global economy. “A couple of weeks ago, it looked like that phase one deal looked all but certain. I think the market started to price in a really positive outcome on the trade side,” Jeff Mills, chief investment officer at Bryn Mawr Trust, told Bloomberg News. “Although I do think that progress is moving in a positive direction, I think it would be foolish for us to assume that we’re going to move completely in a positive direction in trade without any type of intermittent setbacks.” Although equities recovered in late trading, buying stocks in the hopes of a trade deal is proving to be a perilous strategy.DEFICITS (SOMETIMES) DON’T MATTERThe Bloomberg Dollar Spot Index rose for the seventh time in eight days on Wednesday to its highest in a month even though the U.S. government said its budget deficit widened in October, the first month of the fiscal year, as government spending increased and receipts declined. The shortfall grew about $34 billion, or almost 34%, from the same month last year, to $134.5 billion. This comes after the budget deficit for fiscal 2019 clocked in at just shy of $1 trillion at $984.4 billion. One benefit to having the world’s primary reserve currency is that such deficits don’t exactly matter as much as they would in a place such as Greece. Still, an out-of-control deficit and borrowing could reduce demand for the greenback and U.S. debt at the margins. The upshot is it looks as if the U.S. may not borrow as much as previously estimated to finance the deficit, thanks to recent moves by the Fed to buy Treasury bills to ensure reserves remain abundant. As a result, the strategists at JPMorgan Chase wrote in a report this week that net debt issuance to the public by the U.S. Treasury will be just $720 billion, down from a projected $1.27 trillion in fiscal 2019. That should provide some support to the dollar and, by extension, the U.S. government.ITALY GETS BYPASSEDOne place where the bond rally failed to make an appearance was Italy. Demand slumped to the lowest in 14 months at an auction Wednesday of seven-year notes, even with yields near the highest in three months. That suggests investors prefer countries with slimmer returns but lower credit risk and comes after a recent rise in yields in markets such as Germany and France, weakening Italy’s relative appeal, according to Bloomberg News’s James Hirai. Investors have been cooling toward Italy after political uncertainty and a recent revival in the fortunes of euro-skeptic politician Matteo Salvini. “Peripheral spreads become more vulnerable the higher core yields go as investors switch demand to safer core, semi-core bonds,” Peter Chatwell, head of European rates strategy at Mizuho International, told Bloomberg News. “Higher yields, without a broad based and structural rise in nominal growth, will pose a sustainability risk to Italy’s debt.” With $2.26 trillion of government debt, Italy has more bonds outstanding than all but the U.S., China and Japan, data compiled by Bloomberg show. Italy also has one of the highest debt-to-gross domestic product ratios at 131.5%, compared with 82.3% in the U.S. So when Italy has a poor debt auction, it’s worth paying attention.HOT COCOAChocolate lovers may soon have to dig a little deeper in their pockets to afford their favorite indulgence. Cocoa prices have staged an impressive rally in recent months, approaching an almost 18-month high in New York on Wednesday. The gains come amid speculation that near-term supplies are getting tighter, according to Bloomberg News’s Agnieszka de Sousa. The clearest sign that traders expect tighter supplies can be seen in the prices of so-called nearby contracts, which have moved into a premium compared with later deliveries in a market structure known as backwardation and a sign of tightening supplies. “Traders are blaming the upsurge on concerns about a shortage in the short-term availability of cocoa beans,” Carsten Fritsch, an analyst at Commerzbank AG, said in a note. Still, it’s not clear why short-term supplies should be so tight as shipments in top grower Ivory Coast are still in full swing and higher than a year earlier, he said. There are also some concerns that a new $400-a-ton premium for supplies from West Africa, the world’s top producing region, may affect the way cocoa is traded on the exchanges. The new pricing system could mean that fewer supplies end up getting delivered to warehouses monitored by ICE Futures U.S., driving a rally in the market, according to NickJen Capital Management.TEA LEAVESThere is a good chance that talk of a global recession could heat up again as soon as Thursday. That’s when Germany — Europe’s largest economy — reports on GDP for the third quarter. The median estimate of economists surveyed by Bloomberg is for a contraction of 0.1%, which would mark a technical recession because the economy shrank by the same amount in the second quarter. But as Bloomberg Economics points out, whether the German economy records the shallowest of recessions or escapes one by the narrowest of margins isn’t important; what’s important is how long the dip will persist.DON’T MISS FOMO Doesn’t Cut It as a Buy Signal for Stocks: John Authers The World Is Being Inundated With Financial Capital: Noah Smith Jamie Dimon Is Wrong About Negative Rates: Ferdinando Giugliano The IEA’s New Energy Outlook Comforts No One: Liam Denning Trump’s Economy Complicates Democrats’ Message: Karl W. SmithTo contact the author of this story: Robert Burgess at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- JPMorgan Chase & Co. may be leading the next trend for banks seeking to shift risk away from their mortgage portfolios -- if regulators give Wall Street the green light.The deal last month mimics the credit-risk transfer operations of Fannie Mae and Freddie Mac, using the form of a credit-linked note with payments dependent on those from mortgage loans held on the bank’s balance sheet. It offloaded a portion of the credit risk on about $750 million worth of mortgages and could “prove to be the next little big thing” if regulators allow such deals to continue, according to Amherst Pierpont Managing Director Chris Helwig.The Fannie and Freddie credit risk transfers began in 2013 to reduce taxpayer exposure to their operations. By the end of June they had such transactions on $3.1 trillion worth of mortgages, according to a recent Federal Housing Finance Agency report.Each transaction was structured into multiple amortizing, sequential-paying, floating-rate securities indexed to 1-month Libor, according to Mark Fontanilla, whose eponymous company created the CRTx Credit Risk Transfer Return Tracking Index. The credit ratings for each security vary depending upon its position within the structure.Payments and losses are based on the performance of a reference pool of mortgage loans. All classes accrue and pay interest monthly, with principal payments allocated first to the highest priority class (usually designated “M1”) and credit losses are applied first to the lowest priority class (typically designated with a “B” prefix).JPMorgan’s private CRT transaction has a similar structure, yet it has a few nuances that make it more “a hybrid of both mortgages and unsecured corporate credit risk,” according to Helwig. Both principal and interest payments are unsecured general obligations of the bank itself, opening up investors to counterparty risk. Investors also need to be compensated for liquidity risk because the deal that may turn out to be “little more than a thought experiment” if it fails to get regulatory blessing, he added.Moreover, JPMorgan is transferring the first 8% of losses, about twice the average seen in Fannie and Freddie CRT deals. The bank is playing it safe in terms of the underlying collateral, so while they are not “qualified mortgages” they are arguably by any measure high-quality loans, with an average size of $775,000, high credit scores, low loan-to-values ratios and about four years of seasoning. Fitch’s base case expected pool loss is 0.20%.Most importantly, the bank reserves the right to collapse the deal if regulatory approval from the Office of the Comptroller of the Currency fails to materialize.“Depending on how it is structured, banks may find a private CRT attractive for capital relief, better return on capital and improved capital velocity,” said Fontanilla. In other words, this could be a way for a bank to sell the credit risk (or at least a portion of it) from a pool of loans, thereby lowering any capital buffer required to be held against it.So market participants are watching to see whether this deal floats past the regulators or they sink it. Should it pass muster, it could open the door to a new era in mortgage investing.“For a small deal, it’s garnered a lot of attention,” said Helwig.To contact the reporter on this story: Christopher Maloney in New York at email@example.comTo contact the editors responsible for this story: Nikolaj Gammeltoft at firstname.lastname@example.org, William Selway, Christopher DeRezaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Brookfield Property Partners LP has boosted its bet on malls, adding exposure to a corner of the real estate market that some of the firm’s investment rivals are avoiding.Brookfield recently bought JPMorgan Chase & Co.’s holdings in four U.S. shopping centers in which the firms were co-invested, said people familiar with the matter. New York State Teachers’ Retirement System also had a stake in two of the malls, one of the people said. In a simultaneous deal, JPMorgan and NYSTRS bought Brookfield’s stake in a fifth mall, the Bridgewater Commons in New Jersey.The transaction valued the five malls at $3.2 billion, including debt, said the people, who asked not to be identified because the transaction is private.Representatives for Brookfield, JPMorgan and NYSTRS declined to comment.Top malls remain a draw for shoppers and are receiving interest from institutional investors at a time when weaker properties have struggled, hurt by the rise of e-commerce and store closures.The deal fits with Brookfield’s strategy of acquiring top-tier malls where the surrounding land can be redeveloped with hotels, residences, and offices, one of the people said.Brookfield acquired JPMorgan’s stakes in the Perimeter Mall in Atlanta, Park Meadows in Denver, Towson Town Center in Maryland and the Shops at Merrick Park in Coral Gables, Florida. NYSTRS was an investor in the shopping centers in Colorado and Maryland.\--With assistance from Michelle F. Davis.To contact the reporters on this story: Gillian Tan in New York at email@example.com;Scott Deveau in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Alan Goldstein at email@example.com, Craig Giammona, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- At the Eugene Baby store in Hong Kong’s central business district, the usual flood of customers who shop for toys, pacifiers and strollers on their lunch breaks has turned into a trickle.On Wednesday, the aisles were mostly empty as a saleswoman spelled out the damage: Business was down 80% this week. Soon after she spoke, protesters began gathering a few blocks away -- at one point surrounding the city’s stock exchange as they geared up for a night of violent clashes with police.As Hong Kong endures one of its most turbulent weeks since anti-government demonstrations began five months ago, the city’s companies and employees are finding it increasingly difficult to work around the chaos.While past protests were mostly limited to weekends, the last three days have been marked by widespread transport shutdowns during morning rush hours, tear gas outside major office buildings and growing concern within multinational banks and other companies about worker safety. Some businesses are urging employees to cancel non-critical meetings and work from home. Many retailers, shopping malls and restaurants are closing early.Of course, lots of Hong Kong workers are backers of the demonstrations. Some even lined the streets of the city center in office attire this week to show support for black-clad protesters.But with few signs of an end to the political crisis, the worry is that continued disruptions to Hong Kong Inc. will drive up unemployment and plunge the economy deeper into recession.Without a long-term solution, the city risks losing its role as one of the world’s most important financial and commercial hubs. Some workers based overseas are already avoiding non-essential travel to the former British colony, in certain cases holding meetings across the border in Shenzhen.“What we are witnessing is very worrisome,” said Yiu Si-wing, a Hong Kong lawmaker who’s closely aligned with the city’s tourism industry. He said sales at Hong Kong hotels plunged about 50% in October and are on track to tumble at an even faster rate this month.The city’s latest bout of unrest follows the death on Nov. 8 of a 22-year-old student, who fell off the edge of a parking garage as police were clearing protesters with tear gas nearby. Hundreds of protesters seized on the incident to engage in battles with police that resulted in one person being shot on Monday, further inflaming tensions.Parts of the city have been paralyzed as protesters set up roadblocks and forced the closure of subway stations.Kimmy, who has a back-office job at a listed company in central Hong Kong, worked just four hours on Monday after disruptions to public transport turned her 40-minute commute into a three-hour slog. Half of her colleagues in the company’s trading department didn’t even come into the office.Hao Hong, head of research at Bocom International, said he canceled meetings and struggled to get some tasks done as the protests left members of his team stuck in traffic or unable to come into work. “For us to perform effectively, we have to be together,” Hong said. “But of course, safety first.”That sentiment was echoed by BNP Paribas SA in a memo to employees on Wednesday: “Where meetings are already planned, managers should not hesitate to cancel and reschedule depending on the evolution of the situation.”At JPMorgan Chase & Co.’s main Hong Kong offices, where some of this week’s worst clashes between protesters and police have taken place steps away, employees were reminded to make arrangements “in circumstances that require flexibility (e.g. family needs, school closures, transport issues.)”Some in the finance industry have carried on despite the protests. About 1,100 people attended a private equity and dealmaking conference at the Hong Kong Four Seasons this week, close to the same amount as last year, even as protesters and police in full riot gear battled each other nearby.Trading of stocks in Hong Kong’s benchmark Hang Seng Index was about 23% higher than the 30-day average on Wednesday. What’s more, the Hong Kong exchange approved Alibaba Group Holding Ltd.’s plans for a blockbuster share sale that could take place before year-end.“Protests haven’t disrupted the workflow too much,” Jim McCafferty, the joint head of equity research for Asia ex-Japan at Nomura Holdings Inc., said by phone on Tuesday. Employees who need to work from home have been able to do so, he said. “It’s absolutely possible to be geographically agnostic and work from anywhere.”Still, it’s far from business as usual in Hong Kong. While equity turnover in the city was buoyant on Wednesday, the action was dominated by sellers. The MSCI Hong Kong Index sank 2.4%, one of its biggest single-day losses since the protests began.And despite a relatively healthy market for initial and secondary stock offerings, M&A transactions have dried up. The pace of Hong Kong takeovers by Chinese companies has plunged 80% since June, according to data compiled by Bloomberg.Airy Lau, an investment director at Fair Capital Management Ltd., said he exited all his positions in Hong Kong stocks over the past few months because of the protests, shifting the money into mainland China. “There is just too much uncertainty,” he said.\--With assistance from Ina Zhou, Manuel Baigorri, Kari Lindberg, Kiuyan Wong and Hannah Dormido.To contact the reporters on this story: Jinshan Hong in Hong Kong at firstname.lastname@example.org;Elena Popina in Hong Kong at email@example.com;Alfred Liu in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael Patterson at email@example.com, ;Rachel Chang at firstname.lastname@example.org, David ScheerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Spreading social and political unrest is taking a toll on Latin American assets.The region’s dollar bonds have lost 3.5% since early August, when Alberto Fernandez’s surprise victory in Argentina’s primary vote put the leftist on course for the presidency. That’s the worst performance among emerging markets, according to JPMorgan Chase & Co.’s indexes.The slump has been exacerbated over the past month by violent demonstrations that led Chile to declare a state of emergency and protests in Ecuador that forced the government out of the capital. Bolivia’s Eurobonds tumbled on Tuesday after President Evo Morales resigned and fled to Mexico in the wake of a disputed election that triggered weeks of unrest.Video: The Idiosyncrasies of LatAm Unrest Of the 10 emerging markets with the worst-performing dollar debt in November, six are from Latin America.There’s little to suggest the strife will end soon. Fernandez hasn’t convinced investors he can fix Argentina’s finances once he’s sworn in next week. BNP Paribas Asset Management said Bolivia’s political transition will be rocky and doubts bond prices have fallen far enough to make them worth the risk. Bank of America Corp. lowered its economic-growth forecasts for Chile on Tuesday and said the opposition may try to force the government into deeper fiscal concessions than those it’s made so far.Regional currencies have begun to feel the heat. Chile’s peso has sunk more than 9% since Oct. 18, when rioters torched subway stations. The Colombian peso strengthened last month, but weakened more than 2% on Tuesday, when Mexico’s peso, Peru’s sol and Brazil’s real also fell.(Updates second paragraph with returns.)\--With assistance from George Lei.To contact the reporter on this story: Paul Wallace in Dubai at email@example.comTo contact the editors responsible for this story: Alex Nicholson at firstname.lastname@example.org, Alec D.B. McCabe, Carolina WilsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The titans of finance have a new foe, and it’s not Jeremy Corbyn or Elizabeth Warren. Wall Street’s elite is attacking Europe’s central banks over their reliance on negative interest rates, saying they’re hurting the economy.Monetary authorities do need to be mindful of the side effects of unconventional measures. But there’s little evidence that negative rates are proving harmful. Indeed, they might be more effective still if bankers passed them onto consumers more.Europe’s central banks have used negative rates since the start of the decade. They charge lenders for the money they park in a central bank’s deposit facility above a certain threshold, in the hope that this will force commercial banks to lend more. In September, the European Central Bank cut its deposit rate further to -0.5% (while introducing some exemptions for banks through a system called “tiering”).Bankers are scathing about the overall policy. Last month James Gorman and Jamie Dimon, the chief executive officers of Morgan Stanley and JPMorgan Chase & Co., delivered a double-whammy: “What Europe is experiencing with negative rates is obviously very bad,” Gorman said, “not just for banks but for the economy.” “God, I hope it never comes here [to the U.S.],” said Dimon. David Solomon, the boss of Goldman Sachs Group Inc., says negative rates are a “failed experiment.”Such protests are obviously self-serving, though they’re understandable too. A negative deposit rate forces banks to take a hit on profits, especially when they decide not to pass these charges onto consumers. This pressures lenders that are already squeezed by the tight spreads between their deposit and their lending rates. However, Dimon and Co. are on shakier ground when they claim to be speaking for the common good.There are three arguments against negative rates. The first is that they encourage irresponsible lending, fueling bubbles and creating the conditions for a financial crash. The second is that they’ll prompt savers to take too much money out of the banking system, to avoid paying for the privilege of depositing cash. The third, associated with the work of Markus Brunnermeier and Yann Koby at Princeton University, is that there’s a “reversal rate” below which a central bank prompts lenders to cut back on their lending instead of increasing it. This boundary creeps up over time, curtailing how long the monetary authorities can keep interest rates low.Fears about financial stability are the most compelling case against negative rates. They’re also the least specific. Other policies — including low rates, asset purchases and generous loans to banks — are vulnerable to the same accusations. Central bankers are having to use these unorthodox measures to try to bring inflation back on target and to stimulate growth, which is their mandate.There will always be a trade off between stimulating an economy and encouraging excessive risk-taking, which supervisors address through other policy levers such as higher capital requirements. Raising rates at this stage would simply lead to a sharp slowdown in the economy, causing a wave of defaults. Hardly a recipe for financial stability.Meanwhile, the risk of people stashing their money under the mattress is difficult to imagine with modestly negative rates. Few banks have passed negative rates on to their customers, generally doing this only to large corporate clients and wealthy savers. It’s possible theoretically that extending this to smaller depositors could prompt a bank run. Yet there are costs to storing and insuring cash.Moreover, we know businesses and consumers are prepared to pay for holding cash in more convenient ways. For example, merchants and users pay fees for using credit cards.Finally, there’s little evidence that negative rates have held back lending. A recent ECB working paper shows deposits with commercial lenders have increased since the central bank introduced negative deposit rates. At the same time, companies with large cash holdings have cut their deposits and invested more. That’s exactly the goal of this policy.In fact, banks that pass on negative rates to customers appear to provide more credit than other lenders. This suggests that, contrary to what those Wall Street titans say, the problem with negative rates is that not enough banks inflict them on their clients.It’s certainly possible that monetary policy becomes less effective as central banks cut interest rates deeper into negative territory. Gauti Eggertsson of Brown University and Larry Summers of Harvard have looked at Sweden, a pioneer in cutting rates below zero. They concluded that while its first two negative moves reduced lending rates, this wasn’t repeated after two later cuts.However, similar diminishing returns are seen in other unorthodox measures, including asset purchases. The authors also acknowledge that the rate cuts might have boosted Sweden’s economy via other channels, for example by depreciating the krona, allowing the government to borrow more and boosting asset prices.So far negative rates have been confined largely to Japan and Europe. For all the enthusiasm of President Donald Trump, Jerome Powell, chairman of the Federal Reserve, doesn’t think the U.S. will be copying the policy. Wall Street should feel safe then. That doesn’t mean it is right.To contact the author of this story: Ferdinando Giugliano at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
of the trade war with China, saying US tariffs on Chinese goods would be “raised very substantially” if no truce was reached with officials in Beijing. The comments by the president, in a speech at the Economic Club of New York, highlight the trouble the US administration is having in its efforts to strike an interim deal with China that would bring a halt to the commercial conflict afflicting the world’s two largest economies. Mr Trump said a “significant phase one deal with China” remained “close” and “could happen soon”, as Beijing was “dying to make a deal”.
(Bloomberg Opinion) -- Markets were widely anticipating that President Donald Trump would use his speech to the Economic Club of New York on Tuesday to trumpet progress on reaching the first phase of a trade deal with China. Instead, all he said was that an agreement “could happen soon.” That’s not exactly the language markets wanted to hear, which helps explain why equity markets spent much of the rest of the day erasing the bulk of their gains.The S&P 500 Index is now up 23.3% for the year, and whether the rally extends or not is largely dependent on the U.S. and China showing progress in trade talks. But astute market watchers such as Medley Global Macro Managing Director Ben Emons note that Trump’s language toward the talks has become more cautious of late. He’s gone from describing them as “going very well” to saying they are “moving along” to Tuesday’s “could happen soon.” As linguists know, “could” is one of the weaker verbs in the English language because theoretically anything “could” happen. It’s certainly no match for “may.” Emons pointed out in a research note that there was also a softening in Trump’s tone toward the trade talks in April, when the trade hawks gained his ear. The S&P 500 tumbled 6.58% the next month. Some would say this is just semantics, but the ebb and flow of the trade war is the primary driver of markets. The latest monthly survey of global fund managers by Bank of America released on Tuesday showed that 39% of respondents said it’s the biggest risk facing markets, followed by 16% who fear a bond bubble, 12% who cite monetary policy impotence and 11% who said a slowdown in China is the biggest worry.So, does Trump’s language suggest there will a repeat of the May episode for stocks? It’s impossible to know, but the stakes are higher. The Bank of America survey shows that allocations to global equities are higher and average cash holdings are lower, falling to the lowest since June 2013 at 4.2% of assets.NEGATIVE RATES? NO THANKSTrump also took a shot at the Federal Reserve, saying it was hurting the U.S. by not copying other central banks in deploying negative interest rates. On the face of it, getting paid to borrow seems appealing. But that ignores the fact that countries with negative rates have deep economic problems, and many central bankers are finding that they do more harm than good. One of those countries is Japan. Its central bank is actively trying to steepen its yield curve, pushing yields on long-term government bonds back above zero. But instead of worrying what this might do to Japan’s economy, the country’s stock market has been on a tear. The benchmark Topix index is up 15.7% since late August, outperforming the MSCI All-Country World Index, which is up just 8.06% in the same period. The biggest beneficiary of positive rates is the banking system, which is why the Topix bank index has done better, surging 19%. More economists say negative rates don’t really increase borrowing and certainly don’t promote lending. The International Monetary Fund forecast last month that Japan’s economy will expand just 0.9% this year, compared with 2.4% for the U.S. This change in sentiment toward negative rates by central banks is one reason the global government bond market has softened, with yields as measured by the Bloomberg Barclays Global Aggregate Treasuries Index having risen from a three-year low of 1.17% on average in early September to 1.48% as of Monday.COMPLACENCY IS IN THE EYE OF THE BEHOLDERAnother revelation from the Bank of America survey is that fears of a looming global recession have largely vanished. A net 6% of those polled expect a strong economy next year, an increase of 43 percentage points from the October survey and the biggest monthly jump on record. Combine that with the largest allocations toward equities in a year and the declining cash balances, and it’s logical to ask whether investors have become too complacent. The CBOE Volatility Index, commonly known as the VIX, is back down to some of its lowest levels of the year, which is to say it’s not far from its record lows. Nicknamed “the fear gauge,” the measure tracks implied volatility in the stock market. The lower it goes, the less “fear” there is perceived to be among investors. But those who say this is a sure sign of complacency fail to acknowledge the expanded role of central banks in markets. It’s no coincidence that the rally in equities that gathered steam in October came as the collective balance-sheet assets of the Fed, European Central Bank, Bank of Japan and Bank of England rose by 0.6 percentage point to 35.7% of their countries’ total gross domestic product in October, according to data compiled by Bloomberg. The increase from September was the most for any month since March 2017. At the same time, a custom index measuring M2 figures for 12 major economies including the U.S., China, euro zone and Japan shows their aggregate money supply surged by $846.1 billion in October, the most since June. Central banks clearly have put a floor under markets, which should reduce volatility. LATIN AMERICA IS DOWNLatin America is quickly turning into the sick man of emerging markets. The economic problems in Venezuela and Argentina were already well known when protests swept Chile last month. Now there’s strife in Bolivia, resulting in violence, military intervention and the resignation of President Evo Morales, who was granted asylum in Mexico. But that move has caused friction between the U.S. and Mexico, which reversed a pledge not to intervene in affairs of other countries. That may have been a big reason Mexico’s peso sank the most in three months Tuesday, along with a Fox Business report that the U.S. may impose tariffs on autos and auto parts from Mexico. The Bloomberg JPMorgan Latin America Currency Index is down 2.84% since Nov. 1, sliding much further than the 0.43% drop in the MSCI EM Currency Index. On top of that, dollar-denominated bonds issued by borrowers in Latin America have lost 3.25% of their value since early August, according to Bloomberg News’s Paul Wallace. That’s the worst performance among emerging markets, according to JPMorgan Chase & Co.’s indexes. Of 10 emerging markets with the worst-performing dollar debt in November, half are from Latin America. The IMF last month said it expected the region’s economy to rebound next year, expanding by 1.8% compared with 0.2% this year, but the latest developments rightly have investors questioning whether those forecasts need to be downgraded significantly.TOO LITTLE TOO LATEThe optimism in recent weeks that perhaps the U.S. and China were on the cusp of some trade detente has provided some support to the long-suffering agriculture market. One raw material that has done especially well is milk. Class III futures, which represent milk used to make cheddar cheese, are up about 45% in 2019 and heading for the best year since 2007. Prices are already the highest since 2014. Alas, the rally wasn’t enough to save top U.S. milk processor Dean Foods Co., which has filed for Chapter 11 bankruptcy protection. Dean says it’s the largest U.S. processor of fresh fluid milk and other dairy products, but the company has been squeezed by fierce competition and shrinking profit margins, according to Bloomberg News’s Lydia Mulvany and Katherine Doherty. This is potentially significant from a political standpoint. Dairy is especially important to Wisconsin, where Dean Foods has operations. It’s a state Trump narrowly won in the last election and one many political scientists say he needs to hold on to if he hopes to win a second term in 2020. But the struggles of such a high-profile agriculture company could have a large number of those voters questioning whether Trump’s trade strategy is the right one for their industry.TEA LEAVESNow on to Jerome Powell. The Federal Reserve chair begins two days of Congressional testimony on Wednesday, providing lawmakers with an update on where the central bank sees the economy going. It won’t be an easy discussion. Although the U.S. stock market continues to set records, the Federal Reserve Bank of Atlanta’s widely followed GDPNow index, which aims to track the economy in real time, suggests growth of just 1% this quarter. The markets and the economy have clearly diverged. And while there is always the chance for a surprise, Powell will most likely repeat what he said on Oct. 30 after the Fed cut interest rates for the third time since July, which is that monetary policy and the economy are in a good place and that it would require a “material reassessment” of the outlook to justify additional monetary easing.DON’T MISS Even the Fed's Own Research Shows Rates Are Too High: Tim Duy Low Returns Stoke Investor Appetite for Risk: Barry Ritholtz Nobel Winners Offer an Antidote to Donald Trump: Mark Whitehouse Millennials on Cusp of Middle Age Missed Their Boom: Noah Smith Matt Levine’s Money Stuff: If You Own Everything, Why Merge?To contact the author of this story: Robert Burgess at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
A former trader at hedge fund Edoma Partners is launching a new fund focusing on responsible investments, the latest sign that a sector known for its single-minded focus on making money is turning its attention to the world of ethical investing. Quentin Dumortier, who previously served as a captain in the French special forces before switching careers to become a hedge fund manager, has launched hedge fund firm Atlas Global Investors in London. Mr Dumortier plans to filter stocks based on strong or weak performance in categories such as water conservation, clean mobility and financial inclusion.
JPMorgan Chase CEO Jamie Dimon told "60 Minutes" on Sunday that income inequality is a “huge problem” but evaded a question about his $31 million salary and warned that his high-profile critics “shouldn’t vilify people who worked hard.”