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(Bloomberg) -- Walmart Inc. came to dominate retailing through its mastery of logistics—the complicated choreography of getting goods from farm or factory to the consumer. But even the world’s biggest store doesn’t make money selling its wares online in the U.S., largely due to runaway shipping costs. So Walmart is turning to robots.On a drizzly morning earlier this month, Walmart’s U.S. chief Greg Foran led reporters to a curbside package pickup kiosk outside its supercenter in Rogers, Arkansas. Idling there were three Ford delivery vans outfitted with self-driving technology developed by a Gatik, a Silicon Valley startup charged with a trial run aimed at cutting Walmart’s middle-mile shipping costs in half. Going driverless in pursuit of profit is a “no-brainer,” Foran said.As the buzz about human-carting robo-taxis starts to short-circuit, an unheralded segment of the driverless future is taking shape and showing promise: goods-moving robo-vans. Rather than serving up hot pizza pies or deploying headless robots to carry groceries to the doorstep, robo-vans travel on fixed routes from warehouse to warehouse or to a smaller pickup point, transporting packages to get them closer, but not all the way, to consumers.This may be the least glamorous part of the driverless delivery business, but the market for these monotonous “middle miles” could reach $1 trillion and may provide the fastest path to prosperity, analysts say.“This area has the least number of obstacles and the most certain return on invested capital in the near term,” said Mike Ramsey, an analyst with consultant Gartner Inc. “If you’re looking to start a business where you can actually generate revenue, this has fewer barriers than the taxi market.”Driving the demand is the boom in online shopping that has helped cause a severe shortage of truck drivers that tops 60,000 unfilled long-haul positions, according the American Trucking Associations. That has sent costs soaring for a job that is among the most dangerous due to the risk of wrecks and long periods spent on the road.Related: `Smokey and the Bandit' Charm Fades as Trucking Hiring Lags“This middle mile is the most expensive part of the whole supply chain; it’s a huge pain point,” said Gautam Narang, CEO of Gatik, which is attempting to automate Walmart’s “hub and spoke” warehouse system. “This fills a big gap in the market.”From a technological standpoint, business-to-business, or B2B, delivery is the straightforward counterpoint to the complexities of autonomous ride-hailing and driverless delivery directly to consumers, known as B2C or last-mile. Robo-vans like those being put to the test at Walmart follow fixed routes over and over, reducing the chance of mishaps and increasing their time in service generating revenue. Many of these routes are already established using human drivers today, so there’s little need to map new paths and create infrastructure to load and receive the goods.Related: Robot Rides Are Going to Deliver Pizza and Parcels Before PeopleFord Motor Co., testing many forms of driverless delivery, calls these repeatable routes “milk runs,” a throwback term to the days of household dairy delivery.“Anything on driverless delivery that is a milk run is a good application for autonomy,” said Sherif Marakby, chief executive officer of Ford’s autonomous vehicles unit. “B2C is a complex implementation for autonomy that will come with time, but B2B just makes it easier because you get volume and you can be more predictable.”The case for robots ferrying packages before people is becoming more compelling as robo-taxis struggle to gain traction. Consumers have grown wary of giving up the wheel, especially after a pedestrian was killed last year by an autonomous Uber Technologies Inc. test car. Waymo, Alphabet Inc.’s driverless unit, initiated limited automated ride-hailing in suburban Phoenix late last year with human “safety drivers” on board. General Motors Co. no longer says it will debut a similar service this year. Instead, CEO Mary Barra now says the rollout will be “gated by safety.”QuicktakeWhen the Driverless Cars Arrive, Will You Climb In?: QuickTakeDriverless delivery also has another big advantage over robo-taxis: no demanding human passengers. “People have more emotions than boxes,” Ford’s Marakby said.Meanwhile, driverless delivery is already hitting the road. Swedish startup Einride recently began low-speed robo-deliveries on public roads in its home country. It has signed up several Fortune 500 clients, like tire-maker Michelin, plus logistics service provider DB Schenker and German grocer Lidl.Looking like a Star Wars Imperial troop transport on wheels, Einride’s T-Pod trucks are 60% cheaper to build because they lack a passenger compartment. If they get into a jam, they can be remote controlled by humans from a command center. One human monitors the remote controls for 10 trucks. The T-Pods operate in self-driving mode 95% of the time, according to CEO and founder Robert Falck.Stuffed with payload and no human driver, a T-Pod can operate around the clock and cut shipping costs in half. That’s why Falck says his company is already profitable, though he declines to give specifics.“There are solid economics behind this and that’s also what the customer realizes,” Falck said. “If you break down the numbers, it’s the best business case out there.”TuSimple, a San Diego startup valued at $1.1 billion, leads a pack of tech outfits seeking to automate long-haul trucking. The company has a fleet of 50 robot Peterbilt and Navistar trucks that have been transporting commercial loads in Arizona for a year. And while it isn’t profitable yet, it expects to book revenue of more than $1 million a month in the second half of the year.“If you break down the numbers, it’s the best business case out there.”In the final two weeks of May, its self-driving big rigs—equipped with cameras that can see more than a half-mile down the road—completed 10 test runs for the U.S. Postal Service of an arduous 1,000-mile stretch from Phoenix to Dallas. Over Memorial Day weekend, the trucks faced howling crosswinds and “mud rain,” a blinding combination of dust, wind and rain. And yet the robo-rigs consistently beat human-driven trucks to the mail depot by as much as two hours. “We were approaching the edge of our operational design domain,” said Chuck Price, TuSimple’s chief product officer. “But we were able to demonstrate that we can do it much faster, with high consistency and high reliability. So bottom line, it’s more efficient.”By next year, TuSimple says it will pull the safety driver and engineer it currently has babysitting its rigs and go fully driverless—something no robo-taxi has committed to yet. By 2023 or 2024, the company plans to have “commercially ready” robo-rigs rolling out of a factory of a major truck maker.That kind of confidence is hard to come by these days among the purveyors of robo-taxis, still struggling to figure out how to navigate the pedestrians, cyclists and unpredictable traffic of chaotic urban environments. Increasingly, the call of the open road and the mundane middle miles between warehouses is proving to be the clearest path to the autonomous future. That’s why big players like Waymo and Tesla Inc.—still working on driverless people haulers—are also developing robo-rigs.“There’s absolutely a market for this sort of thing,” said Sam Abuelsamid, an analyst with Navigant Research. “People don’t really care much about what goes on behind the scenes to get them the products they want. But the value of all the goods being moved is far more than ride-hailing applications.”To contact the authors of this story: Keith Naughton in Southfield at firstname.lastname@example.orgMatthew Boyle in New York at email@example.comTo contact the editor responsible for this story: Anne Riley Moffat at firstname.lastname@example.org, Chester DawsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Biohaven Pharmaceutical Holding Co. has rapidly transformed from one of biotech’s darlings into a cautionary tale of overheated M&A hype. Shares of the developer of migraine treatments surged in April after Bloomberg News reported that the company was considering a sale; the stock then took another leg up earlier this month when Biohaven canceled plans to attend a Goldman Sachs health-care conference, fueling speculation a takeover was imminent. All those gains evaporated this week when the company instead announced that it was selling more shares, something that wouldn’t happen if a deal was in sight. As of midday Tuesday, the stock was down 35 percent from its highs: Biohaven’s ongoing single status shouldn’t have come as so much of a shock. The company has arguably never been as compelling an M&A target as some investors and analysts seem to think, and faces significant risks if it has to go it alone. Deal hype isn’t a self-fulfilling prophecy in biotech; in fact, it can sometimes backfire and result in the exact opposite. In the case of Biohaven, the company’s lead drug in development is a migraine pill that takes the same approach as a group of three recently approved injectable medicines that can help prevent the debilitating headaches. Biohaven's drug is a fast-acting alternative, but it will have to compete for a subset of the market with cheaper generic options and a direct rival from Allergan PLC.The drug’s tough path forward is one of the reasons Biohaven was likely open to a buyout; this launch will be even harder and slower without the financial resources and commercial expertise of a larger company. But that same dynamic is also potentially what’s keeping potential suitors away. Biohaven just isn’t the sort of company that pharma has been buying. The sweet spot of M&A in the industry has centered around cancer drugs and rare-disease treatments that command very high prices, partly by sidestepping the pricing and reimbursement problems that dog larger and more competitive markets such as the one for migraine remedies. Most recent biopharma acquisitions above $1.5 billion have been for companies working in these areas or for drugs that already generate sales. It’s possible that a drugmaker could decide to do something different, but it would need a compelling reason, and the hype-driven ascent of BioHaven’s valuation doesn’t help.This is pretty clearly a situation where takeover excitement got well ahead of reality, which isn’t uncommon in biotech. But context matters, and any investment thesis that depends on big pharma expensively bucking an M&A trend to get itself into a possible price war deserves some extra skepticism.To contact the author of this story: Max Nisen at email@example.comTo contact the editor responsible for this story: Beth Williams at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The opportunity zones created by the Tax Cuts and Jobs Act of 2017 have all been set up, and the money has started to flow. When will we know if they’re working as promised to bring new growth and prosperity to distressed communities all over the U.S.? Well, maybe never — the opportunity zone is the latest refinement of a development approach previously known in the U.S. as the enterprise zone and the empowerment zone, and attempts to suss out the economic impacts of those have delivered notoriously muddled results.Still, we can at the very least say that the opportunity zones — 8,762 economically disadvantaged census tracts where investors receive favored capital gains tax treatment — are getting some investment. Real Capital Analytics, which tracks commercial real estate transactions, just released data comparing activity in opportunity zones and in census tracts that met the criteria for inclusion but weren’t chosen by their states’ governments:Transaction volume hasn’t just been rising faster lately in opportunity zones than in also-ran tracts; it’s been rising faster there (at least until the first quarter of this year) than in the rest of the country, too.Then again, as is apparent from the above charts, the opportunity zone census tracts were already outperforming everyplace else before they were designated, too. A recent report from Reonomy, another commercial real estate data provider, indicates that they were laggards for most of the past two decades, which is perhaps a sign that the states have mostly picked places that were just starting to rebound. Disentangling cause and effect here is hard, as it has been throughout the history of enterprise/empowerment/opportunity zones, although the design of the opportunity zone program may lend itself better to measurement than some of its predecessors.The concept is usually credited to Peter Hall, a British geography professor who after a visit to East Asia in 1977 proposed in a speech that the U.K. establish, as he paraphrased it a few years later, “a genuine mini Hong Kong in some derelict corner of the London or Liverpool docklands, representing an experimental alternative to the mainstream British economy.” Hall, who died in 2014, was a Labour Party-supporting expert on urban planning,(1) but his idea quickly caught on with planning-averse conservative/libertarian politicians in the U.K. and U.S. “Enterprise zones, it seems,” Hall noted with bemusement in 1982, “have become the standard urban policy package of radical right wing administrations in English-speaking countries.” In the U.K., the newly elected government of Prime Minister Margaret Thatcher put in place a program of urban enterprise zones featuring reduced regulation and taxes in 1980. In the U.S., President Ronald Reagan tried but never succeeded in creating an enterprise zone program on the national level, but 40 states started their own and, in 1993, President Bill Clinton succeeded in getting Congress to approve the Empowerment Zones and Enterprise Communities Act.This bipartisan appeal was a trademark of enterprise zones and their ilk. They united concern for the poor with a belief in free enterprise in a package that pretty much summed up the era of neoliberalism, which saw markets as the best tools for attacking social problems. The zones also, it must be said, had little demonstrable positive economic effect:Unfortunately, research into the effects of these enterprise zone programs in the U.S. has found at best mixed results, with little consensus in the literature as to whether they are beneficial.That verdict comes, interestingly enough, from the document that helped launch the opportunity zone movement: a 2015 paper, “Unlocking Private Capital to Facilitate Economic Growth in Distressed Areas,” by Jared Bernstein, former chief economic adviser to Vice President Joe Biden, and Kevin Hassett, the current chairman of President Donald Trump’s Council of Economic Advisers. The paper was commissioned by the Economic Innovation Group, a Washington think tank that had just been launched by Sean Parker, the billionaire co-founder of Napster and early backer and then-president of Facebook Inc.Parker is perhaps most identified with the words uttered not by him but by the actor who portrayed him in the movie “The Social Network,” Justin Timberlake: “A million dollars isn’t cool. You know what’s cool? A billion dollars.” That, to some extent, was Bernstein and Hassett’s reasoning in their paper. Previous enterprise zone efforts in the U.S. had been too limited, scattershot and complicated to attract large-scale investment:Previous programs left many potential sources of investment untapped. There was no structure in place to encourage investors to exit existing investments, for example, and bring their realized gains into enterprise zones. There also was not a structured way to involve intermediary groups, such as banks, private equity, and venture funds, in investing in enterprise zones, although these groups generally can bring large resources to projects and have the potential to invest in companies that may thrive within an area. The emphasis on individual businesses instead of larger structures and institutions may indeed be part of the reason for the tepid results of enterprise zone programs.What was needed, they concluded, was “a simpler, targeted approach” to lure institutional investment into economically depressed communities. A little more than two years later, that approach was law. Steve Bertoni described how it happened in an entertaining Forbes cover story a year ago: Parker enlisted Republican U.S. Senator Tim Scott of South Carolina and Democrat Cory Booker of New Jersey as leaders of the effort on Capitol Hill, and he stalked the halls of Congress to buttonhole lawmakers himself. Scott and Booker introduced the plan as a stand-alone bill in 2016, with another bipartisan pair doing the same in the House. Then they, as Bertoni put it, “decided it was best to wait for some fast-moving legislation to hitch it to.”That legislation turned out to be the 2017 tax bill. The House version didn’t include opportunity zones but the Senate one did, thanks in large part to Scott’s presence on the Finance Committee, and it survived in conference committee, too. One big mark in its favor was that, in a bill that the Joint Committee on Taxation estimated would reduce tax revenue by $1.4 trillion over the next 10 years, its projected cost was a mere $1.6 billion.(2)To qualify for opportunity zone status, a census tract generally (there are a couple of other ways for some tracts that don’t quite meet these criteria to qualify) has to have a poverty rate of 20% or more, or a median family income that’s 80% or less of the state or metropolitan-area median. Investors can defer capital gains from past investments and be exempted from some or all taxes on new capital gains by putting the money into “qualified opportunity funds” that invest in commercial and industrial real estate, housing, infrastructure or businesses in the zones.More than half of all U.S. census tracts qualified for inclusion, but governors of states and territories, and the mayor of Washington, were charged with winnowing that list down. That task was completed by the middle of last year, and the chosen zones — which constitute 12% of the nation’s census tracts and can be perused most easily via the Economic Innovation Group website — are a mix of areas that I think everyone can agree are quite disadvantaged and others that happen to have met the criteria but are right next to prosperous areas and might have attracted investment in any case.Overall the selections tilt in the former direction: According to an Urban Institute analysis, the median 2012-2016 household income in the opportunity zones was $33,345, compared with $44,446 in the eligible-but-not-chosen tracts and $58,810 in the country as a whole. Mayors and other local officials have been deeply involved in picking opportunity zones in some states, following a template for investment devised in part by urban thinker and former Barack Obama administration policy maker Bruce Katz that aims to “spur growth that is inclusive, sustainable and truly transformative for each city’s economy.”Still, as Noah Buhayar, Caleb Melby and Lauren Leatherby of Bloomberg News have been reporting, some of the opportunity zones that have investors and developers most excited are in places like far-from-struggling downtown Portland, Oregon; an already-under-development “live, work, play paradise” just north of Miami; and the booming neighborhood in the New York City borough of Queens where Amazon.com Inc. was going to locate a new headquarters before backing out in the face of local opposition. Real Capital Analytics predicted late last year that “the NYC Boroughs, Los Angeles and Phoenix may prove to be the most active markets for opportunity zone funds given their larger market size and their relatively high proportion of opportunity zones.”There is of course a balance that must be struck between investment viability and giving help to areas that truly need it. There’s also a risk that investments in poor neighborhoods will drive current residents out rather than enriching them, not to mention the risk that opportunity zones will turn out to be more successful in reducing the taxes of real estate investors — who already got big breaks from other provisions of the Tax Cuts and Jobs Act — than in stimulating productive investment. With Treasury Secretary Steven Mnuchin, a former hedge fund manager and Goldman Sachs partner, in charge of setting the rules for opportunity zone investment, critics such as Samantha Jacoby of the Center on Budget and Policy Priorities have charged that they’ve tilted way too far in the direction of making life easy for investors rather than ensuring that investments improve the lives of zone residents. Even the Economic Innovation Group is now pushing for stronger data collection rules so that “the success of the Opportunity Zones policy can be properly evaluated.” Opportunity-zone idea man Bernstein, a senior fellow at that very same Center on Budget and Policy Priorities, told me this week that, while he too has mixed feelings about the effort, “I think I'm less ambivalent than a lot of my fellow progressives.” He said he’s been mostly encouraged by the states’ opportunity zone choices, and by the level of investor interest so far. Still, as he put it in a Washington Post op-ed early this year:If OZs turn out to largely subsidize gentrification, if their funds just go to places where investments would have flowed even without the tax break, or if their benefits fail to reach struggling families and workers in the zones, they will be a failure.Bernstein also wrote that, in fighting poverty, he preferred “direct hits” such as government-financed infrastructure investment and guaranteed health care and housing to market-dependent “bank shots” such as opportunity zones. This is true of left-leaning thinkers in Washington more generally these days — the summer issue of Democracy Journal, a past source of such Democratic Party policy ideas as the Consumer Financial Protection Bureau, features a multi-author symposium titled “Beyond Neoliberalism.” Voices within the Republican Party, including President Trump on trade matters in particular, have been departing from the markets-know-best policy as well. We may not see anything else like opportunity zones come along for quite a while. Unless, that is, they turn out to be so successful that the evidence isn’t inconclusive this time around.(1) Highly recommended: his book "Cities of Tomorrow: An Intellectual History of Urban Planning and Design Since 1880."(2) These are the static revenue estimates. The JCT's macroeconomic analysis of the bill's effects cut the overall 10-year cost to about $1.1 trillion but did not break things down to the level of including a revised estimate of the cost of opportunity zones.To contact the author of this story: Justin Fox at email@example.comTo contact the editor responsible for this story: Brooke Sample at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Citigroup's (C) restructuring and streamlining efforts, along with its strategic investments in core business, should bode well for the long term.
Investing.com – The S&P; 500 made a subdued start the week Monday, as bank stocks stumbled on falling Treasury yields amid growing expectations that the Fed will cut rates.
Interest rates could fall by more than three-quarters of a point over the next year. That would have wide-ranging consequences for stocks, bonds, and savings vehicles like money-market funds.
(Bloomberg) -- Sentiment among U.S. homebuilders unexpectedly posted the first decline this year, suggesting lower mortgage rates are failing to give the housing market a sustained boost amid property prices that remain out of reach for many buyers.The National Association of Home Builders/Wells Fargo Housing Market Index fell two points to 64 in June, according to a report Monday that was below all estimates in a Bloomberg survey predicting a gain. All three components declined, with sales expectations hitting a four-month low. Readings above 50 indicate more builders view conditions as good than poor.Key InsightsHomebuilders cited rising costs for development and construction, along with concern over trade issues and labor shortages, according to the report. The figures contrast with some signs that the housing market is picking up, as a gauge of mortgage applications jumped earlier this month by the most in four years, while new-home construction advanced in March and April.The report follows a record decline Monday in the New York Fed’s Empire State factory index, suggesting some parts of the economy are heading to a weak finish in the second quarter. Reports out Friday showed solid retail sales and manufacturing output in May, indicating growth is uneven as Federal Reserve policy makers prepare to discuss interest rates at a meeting this week. Investors expect the central bank to lower borrowing costs in July.Official’s View“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” NAHB Chief Economist Robert Dietz said in a statement. “Builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”Get MoreThe index declined in the Northeast and West while rising in the Midwest to the highest since October. It was unchanged in the South.Economists in a Bloomberg survey had projected the main housing sentiment index would rise from 66 to 67.The Washington-based trade association represents more than 140,000 members in areas ranging from building and remodeling to housing finance.\--With assistance from Jordan Yadoo.To contact the reporter on this story: Ryan Haar in Washington at email@example.comTo contact the editors responsible for this story: Scott Lanman at firstname.lastname@example.org, Jeff KearnsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Goldman Sachs Group Inc. is finally embracing its status as a private equity giant.The firm’s top executives in recent months have laid out plans to raise more client funds for private investing and rely less on its own balance sheet. As part of that effort, the bank will consolidate the investing activities of multiple units across the firm to add more heft to its merchant banking division, the firm said Monday in a memo to staff.Goldman’s special situations group, a trading unit which made investments in everything from equity stakes in private companies to middle-market loans and illiquid debt, will combine with the merchant banking division. They’ll be joined by a pair of real estate units and principal strategic investment group, which makes fintech wagers, according to the memo. Julian Salisbury, head of SSG, will join Andrew Wolff and Sumit Rajpal as co-head of merchant banking.“There actually is a very, very significant alternatives asset manager inside Goldman Sachs,” which has operated from a number of different units in the past, Chief Executive Officer David Solomon told Bloomberg Television in April, when asked whether he aimed to create something akin to Blackstone Group LP. “We see opportunities to expand what we’re doing for clients in that business and be a little more focused on growing our client franchise around those activities.”Under Solomon, who rose to CEO in October, the firm has been honing its strategy for the private investing business, looking to make it operate more efficiently and profitably, while relying more on fees than investment gains. Rich Friedman, who led the merchant banking unit for 21 years, handed off leadership in April to Wolff and Rajpal. The shakeup also gave Salisbury, head of the special situations group, oversight of real estate across the firm.Goldman Sachs has long been unique among Wall Street banks in the size of investments it makes with its own funds -- the firm had $20 billion in private equity investments at the end of 2018. While the company’s status as a major investor has raised conflicts for its investment bankers, it’s also been hugely profitable. Investing and lending, the reporting segment that includes the merchant bank division, contributed higher pretax profit than the firm’s trading or investment banking businesses last year.John Waldron, the firm’s president, said at an industry conference last month that the bank will look to court institutional investors with its ability to offer private equity deals and public market strategies.“This is going to be a long-term journey,” he said at the Bernstein Strategic Decisions Conference. “We’re not going to turn this battleship from balance sheet investing to fee income overnight.”Goldman shares have fallen 18% in the past year, compared with the 1.3% decline in the Standard and Poor’s 500 Financials Index. The broader S&P 500 Index climbed 3.8%.(Adds company memo starting in second paragraph.)\--With assistance from Zoya Khan, Gillian Tan and David Scheer.To contact the reporter on this story: Sridhar Natarajan in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
India has retaliated against the Section 232 tariffs that President Donald Trump imposed last year. India announced retaliatory tariffs last year but postponed them multiple times, apparently to resolve the trade issues through discussion.
(Bloomberg) -- This year’s global stock rally has flown in the face of billions of dollars of outflows, mounting fears for economic growth, and most recently a bombardment of geopolitical shocks.But it might not be as defiant -- or as crazy -- as it seems.As a gauge of global shares looks to extend two weeks of gains, there’s mounting evidence that beneath the surface equity investors have been getting smart. Far from ignoring brewing risks, they’re increasingly positioned for bad news, bidding up defensive and quality companies at the expense of those more exposed to the economic cycle.It all challenges the narrative that the stock markets have paid no heed to the warnings screamed by global bonds, or that they are simply counting on accommodative central bankers to juice asset prices.“People are bracing for a bear market,” said Brian Jacobsen, a senior investment strategist of multi-asset solutions at Wells Fargo Asset Management, which oversees $476 billion. “Not predicting it. Just trying to be prepared.”As traders favor firms that can weather a potential downturn, the valuation discount of value to growth stocks has surged to the widest since 2001. The Goldman Sachs Group Inc. gauge of high quality shares is outperforming the S&P 500 Index this month. And the Russell 2000 Index of small caps is trading near the biggest discount versus the Russell 3000 Index since at least 2006.The extremity of this push into safer equities has seen the likes of Morgan Stanley warn about a “big unwind’’ if their performance stumbles. Riskier shares attempted a comeback last month, with weak balance sheet stocks in the U.S. outperforming peers with strong balance sheets.But the trend didn’t last. In June, investors are once again rewarding companies flush with cash and low debt, lifting their premium over those with less attractive financial profiles to near a record high.“Valuations don’t matter too much until they get to eye-watering extremes,” said Jacobsen. “I don’t think that they’re at eye-watering extremes” for defensive shares, he said.Momentum stocks have been another winner from the search for a place to hide, with the investing style outperforming value shares by a near-record 17% in May. They have continued beating cheaper stocks this month due to a strong overlap with quality and low-volatility equities, according to Morgan Stanley.At essence, stock investors appear to be trying to hedge their bets between two major outcomes. On the one hand, they’re staying invested on the prospect of an extension of the business and economic cycle, perhaps prolonged by a trade war breakthrough or central bank largess. On the other, they’re opting for safe shares in case the U.S.-China protectionist battle drags out or escalates, derailing global growth.“The correct positioning is not obvious and it’s a tough call,” said Edward J. Perkin, chief equity investment officer at Eaton Vance Management. “With the equity market near all-time highs, do you take economic risk by owning cyclicals, or valuation and interest rate risk by buying defensive sectors at high prices?”Perkin favors a middle ground: He likes companies with solid financials, though he’s focused on economically sensitive sectors that can outperform if growth remains strong. And he cautions that not all defensive sectors are attractive, warning against expensive yield-sensitive sectors and consumer staples due to their financial leverage and muted revenue growth.Meanwhile major asset managers like Wells Fargo Asset Management and Legal & General Investment Management say they now prefer a neutral stance, allowing them to easily maneuver depending on whether the U.S. strikes a trade deal with China or global growth falters.One thing the money managers all agree on: Despite seeing a need for caution, they’re not yet ready to call the end of this bull market.“It still may be too early to call the peak,” said Nick Alonso, director of the multi-asset group at PanAgora Asset Management. “I believe that, especially in uncertain times like these, focusing on portfolio construction as a means of achieving diversification through proper risk balancing can be a very powerful tool.”\--With assistance from Justina Lee.To contact the reporter on this story: Ksenia Galouchko in London at email@example.comTo contact the editors responsible for this story: Blaise Robinson at firstname.lastname@example.org, Samuel Potter, Jeremy HerronFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- What does Wall Street do before disappearing for a few months of golf, tennis and beach-side soirees?Binge on benefits, of course. Because there’s no better way to earn some rest and relaxation than by enduring lukewarm entrees, too-long speeches and too many air kisses, all while raising money for nonprofits.Not to be jaded or anything. As Robert Steel said of his recent binge, attending an event for Hospital for Special Surgery, which he serves as a co-chairman with Thomas Lister of Permira, “They’re like my children, I love them all.”One advantage of New York this time of year is that some of the benefits are outdoors. The Public Theater convened with roller skaters at the Delacorte Theater where it presents Shakespeare. Palm trees swayed in light Bronx breezes as the New York Botanical Garden raised almost $2.2 million and honored Chairwoman emerita Maureen Chilton.The Wildlife Conservation Society, which runs the Bronx Zoo, went south to the Central Park Zoo, where the sea lions squealed and fed on fish.That wasn’t wild enough for Paul Tudor Jones.“One day -- it’s on my bucket list -- I want to go up to the Arctic and see a polar bear,” Jones said. “I have a huge spot for them in my heart because they’re always hungry looking for something to eat. I want them to find a washed-up whale and eat forever.”Julian Robertson said he’d gone eye-to-eye with his dog Bear earlier in the evening, while Averell Harriman Mortimer reminisced about the flying squirrels he kept as a kid in his Manhattan apartment.“Running Goldman Sachs equipped me for dealing with all species and manners of wildlife,” Lloyd Blankfein said.“Some of whom are endangered,” added Goldman Sachs lead director and private equity investor Adebayo Ogunlesi.In the Summer Garden & Bar at Rockefeller Center, Leon Black and his wife, Debra, joined Mike Milken and more than a thousand leveraged-finance professionals at a benefit for the Melanoma Research Alliance, which the Blacks founded. Then he presided at the Museum of Modern Art’s Party in the Garden to honor Alice Tisch and others. A day later, Black was at the Central Park Conservancy’s Taste of Summer, where Italian bistro Sistina served ravioli.The most important stat on his gala scorecard?“We’re up more than 20%,” Black said at the melanoma event, crediting Jeff Rowbottom of PSP Investments and Brendan Dillon of UBS for helping raise $2.4 million. The alliance’s funding has played a role in 12 drugs that received government approval.Andrew Tsai of Chalkstream Capital Group (named for the rivers in England where he learned fly fishing) said breakthroughs in treating skin cancers are leading to therapies for other types of the disease. He’s working to make that happen as co-chairman of the Cancer Research Institute, which has focused on immunotherapy for more than 50 years.“I want to make sure we do not stop until every single cancer type has been addressed in a significant way,” Tsai said at the institute’s Through the Kitchen benefit, where guests served themselves from buffets set up in the kitchen of the Pool & the Grill, then dined at comic strip-themed tables (Ken Langone sat with a cardboard cutout of Betty Boop).During dinner at the French consulate for the Pershing Square Sohn Cancer Research Alliance, Bill Ackman committed $4.2 million to seven investigators, including Yael David, who studies how cancer cells react to sugar.As for those speeches, some managed to cut through the chatter.For an audience including David Einhorn and Marc Spilker, outgoing New 42nd Street President Cora Cahan described how the rigor of her modern dance career guided her in bringing a theater for families -- the New Victory -- to a seedy block.“Every day you dared not be satisfied,” she said. “And the next day you tried to do it all a little bit better, a little bit deeper, and a little bit higher.”The transformation of the New York Public Library, a few blocks east on 42nd Street, was also celebrated when Carnegie Hall presented its Medal of Excellence to Vartan Gregorian, head of the Carnegie Corporation.Author Robert Caro recalled what it was like to write “The Power Broker” at the library in the early ’70s, when hours were being cut, plywood covered marble and soot hid the beauty of the facade. He said things changed in the ’80s when Gregorian became the library’s president, which Caro discovered when he pulled up to the library with his wife to attend a gala.“There were three guys standing there in red English hunting coats, holding French horns,” Caro said. “As Ina and I got out of the car, they blew a fanfare.”Singer Lizzo blew out a speaker while performing at a UJA-Federation of New York benefit and she was even better without it at the event honoring IHeartRadio executives.Ethan Hawke, who appeared at a benefit for the Brooklyn Academy of Music, cut to the chase. “If a place like BAM doesn’t exist, then the mental health of all of NYC is deteriorating,” Hawke said.He could have been speaking at any number of fundraisers around town: the one for Prep for Prep that raised $3.8 million honoring Paul Taubman, the Moth Ball supporting the therapeutic process of storytelling where guests included Adam Dell and Scott Lawin, the 92nd Street Y benefit with seven dinners highlighting a different way the institution serves the community (from summer camps to jewelry classes; Thomas Kaplan hosted one on foreign affairs).Robert Smith emphasized the power of live music to level the playing field. The Apollo Theater’s stage is a meritocracy because “regardless of who you are or where you came from, by the end of the set, you know exactly how good you are,” he said in a video that played at a benefit for the Harlem venue.On another night, Smith joked he and guests had finally made it by getting to have dinner on the stage of Carnegie Hall. But then he clarified. “For us, making it isn’t just dining on the stage,” he said. “It’s taking this hall to thousands of people every single year through the artistic and educational programming that we’ve been able to build, support and sustain.”\--With assistance from Sophie Alexander.To contact the reporter on this story: Amanda Gordon in New York at email@example.comTo contact the editors responsible for this story: Pierre Paulden at firstname.lastname@example.org, Steven CrabillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Various sales-boosting initiatives, coupled with aggressive cost-cutting measures, position Darden (DRI) for impressive earnings in fourth-quarter fiscal 2019.
Goldman (GS) continues to make efforts to simplify and streamline its business areas that have scope of growth, with a view to boost its stock price.