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Macy's and other department stores have not been able to find success or inspire much Wall Street confidence. Can it turn things around in Q3?
Retailers' performance over the last 2.5 months is a sign of positive market sentiment reentering the space. This sentiment will be tested next week when a wave of retail results hits the market.
(Bloomberg) -- Goldman Sachs Group Inc. agreed to pay $20 million to settle an investor lawsuit accusing traders at the bank, along with 15 other financial institutions, of rigging prices for bonds issued by Fannie Mae and Freddie Mac.As part of the settlement, disclosed Friday in a court filing, Goldman Sachs will cooperate with investors in their case against the other banks. The firm also agreed to make changes to its antitrust-compliance policies related to bond trading. A federal judge in Manhattan must approve the settlement before it can take effect.Investors sued after Bloomberg reported in 2018 that the U.S. Department of Justice was investigating some of the world’s largest banks for conspiring to rig trading in unsecured government bonds.Goldman Sachs has turned over 71,000 pages of potential evidence, including four transcripts of chat-room conversations among its traders and some from Deutsche Bank AG, BNP Paribas SA, Morgan Stanley and Merrill Lynch & Co., according to court papers filed Friday. The bank agreed to provide additional help, including deposition and court testimony, documents and data related to the bond market.Goldman Sachs isn’t the first to resolve the civil claims. In September, Deutsche Bank agreed to settle for $15 million. First Tennessee Bank and FTN Financial Securities Corp. agreed to a $14.5 million settlement later in September.Among the firms remaining as defendants in the case are Credit Suisse AG, Barclays PLC and Citigroup Inc.The case is In re GSE Bonds Antitrust Litigation, 19-01704, U.S. District Court, Southern District of New York (Manhattan).To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at email@example.comTo contact the editors responsible for this story: David Glovin at firstname.lastname@example.org, Steve StrothFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- When a stock goes into free fall, one hope is that some acquirer out there will catch it. Sometimes, though, suitors come with their own complications. That brings us to EnLink Midstream LLC.EnLink operates gathering and processing pipelines and other oil and gas infrastructure across several onshore U.S. basins. In the summer of 2018, Devon Energy Corp., an exploration and production company, sold its stakes in various EnLink entities to Global Infrastructure Partners for just over $3.1 billion. After a subsequent simplification of EnLink, GIP owns 46% of the common units, now worth $1.2 billion.EnLink has been undone by weaker commodity prices. Earlier this month, Devon announced it had dropped the number of rigs operating in one of Oklahoma’s shale basins to precisely zero (how’s that for a coda to last year’s deal?). This confirmed a trend evident already in permitting and drilling data for the Anadarko basin, where just four companies account for the majority of activity; and, crucially, they have operations in other basins that are more competitive in terms of breakeven costs.The distribution yield on EnLink’s stock now scrapes 20% — on a par with the current yield on long-dated bonds of Chesapeake Energy Corp., which just issued a going-concern notice. There’s being paid to wait, as they say, and then there’s being paid to wait in that trash compactor from Star Wars.EnLink’s cash flow math is tight. Consensus forecasts — which have now had time to digest cost savings pledged on the latest earnings call — put Ebitda at $1.1 billion in 2020. Take off around $500-$550 million for cash interest and (much-reduced) capital expenditure, and that leaves about $550-$600 million versus current distributions of about $550 million. With Ebitda forecast to grow at just 1% a year through 2022, that tight squeeze won’t ease up. Wells Fargo & Co.’s analysts estimated in a recent report that, absent a change in distribution policy, current leverage of 4.2 times adjusted Ebitda could reach almost 6 times by 2025. By any rational measure, the distribution should be cut.The complicating issue is that EnLink’s leverage is compounded by more leverage at the GIP level in the form of a $1 billion term loan. Technically, it is separate from EnLink’s own finances. But as the company acknowledges in its own 10K filing, debt owed by an entity owning almost half the company plus its managing partner, and which is serviced by EnLink’s own distributions, is very much a risk factor. By my calculations, the loan requires roughly $80 million a year of EnLink distributions (GIP didn’t respond to requests for comment)(1). As of now, distributions amount to about $255 million. So, in theory, EnLink could slash its payout by about two-thirds and GIP could still service the loan.In practice, that would be a bitter pill to swallow. As it is, GIP’s common units in EnLink are now worth not much more than the value of the loan and way below the original investment. Cutting distributions would certainly help EnLink’s balance sheet; all else equal, a 67% cut would save enough cash to take leverage below 4 times adjusted Ebitda, in line with long-term targets. But this would almost certainly push the value of GIP’s stake even lower, at least in the near term. As Ethan Bellamy, analyst at Robert W. Baird & Co. Inc., put it to me:Does GIP leverage prevent EnLink from cutting the distribution and right sizing the ship? It wouldn’t be the first time we’ve seen parental leverage from a private equity sponsor lead to sub-optimal outcomes for the subsidiary public entity.On the other hand, if EnLink cuts and its price falls further, then GIP might be tempted to make an offer for the rest of the company in an effort to salvage things out of the public eye. Needless to say, a takeover premium on an even lower EnLink price would do very little to make up for the losses suffered to date. We are seeing this play out with Blackstone Group Inc.’s offer for another midstream company, Tallgrass Energy LP, although the pain there is compounded by an agreement between the buyer and Tallgrass’s executives that effectively shields the latter from losses (see this).EnLink captures so much of what has gone wrong in America’s pipelines business. There’s the misalignment of interest between ordinary investors and the sponsors steering the company’s destiny. There’s the exposure to commodity markets from which, in theory, midstream companies were supposed to be insulated. Above all, there’s the overcapitalization of this sector, with obligations piled onto assets (largely to fund outsize payouts to controlling sponsors) that ultimately couldn’t generate the profits to service them (largely because too much stuff got built).Almost exactly four years ago, Kinder Morgan Inc. presaged the midstream reckoning to come by slashing its dividend. The stock has been listless for much of the period since then; even with the cut, chipping away at debts in a post-boom environment is a laborious process. As this decade of nominal success for America’s shale boom draws to a close, EnLink’s predicament shows the hangover remains very much a work in progress.(1) This assumes the full $1 billion remains outstanding. Interest is charged at Libor plus 4.25%, equating to 6.15%, or about $62 million. A debt-service covenant ratio of 1.1 times takes this to $68 million. Mandatory annual amortization of 1% of the loan plus assumed G&A costs results in an estimated minimum requirement of about $80 million to service the debt. Details derived from Moody's Corp.'s initial rating report from July 2018.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Kroger (KR) partners with Ocado for the second time to open another CFC in Wisconsin. The move will facilitate faster grocery delivery and enhance omnichannel strategies.
Dillard's (DDS) reports better-than-expected earnings results in third-quarter fiscal 2019 on sequentially improved retail gross margin and comps, with lower inventory level.
(Bloomberg Opinion) -- Democratic senators from states won by President Donald Trump in 2016 have vowed not to end the legislative filibuster, making it unlikely the party will be able to accomplish much even if it wins back the White House and Senate next year. That gives added weight to what California is doing as it continues to pass legislation that can ripple across the nation. Democrats may discover that using California as a vehicle for a their agenda nationwide may be their best hope of getting anything done.Showing how hard it will be to pass progressive legislation in the next Congress isn't difficult. For one, Trump -- at this point -- stands a fair chance of winning re-election. But even if Democrats win the White House, they will have an uphill climb in the Senate. They need to flip three seats to gain control, and that's assuming they don't lose any of their own, including Doug Jones in deep-red Alabama. At best, Democrats could flip seats in Arizona, Colorado, North Carolina and Maine, plus perhaps a surprise hold in Alabama or a flip in challenging states like Iowa, Georgia or Texas. That would bring them to 50 or 51 seats. But Democrats would still be hamstrung by the legislative filibuster, as well as the voting tendencies of senators from West Virginia and Montana who probably would oppose grand agenda items like Medicare for All or the Green New Deal.Once that reality sets in for progressives, they'll be looking for an outlet to channel the energy now focused on the presidential campaigns of Vermont Senator Bernie Sanders and Massachusetts Senator Elizabeth Warren. The California legislature would be a good place to start.California is important not just because Democrats have supermajorities in the state legislature, or because it's a state with a huge economy, but because corporations and businesses are increasingly national or global in scope. If businesses feel compelled to play by progressive rules in California, they may decide to operate their businesses the same way everywhere. A recent example is California's passage of a law allowing college athletes to get paid for the use of their name, image and likeness. If a small state like Delaware had passed such a law, maybe the National Collegiate Athletic Association, which sets rules for student athletes, could strike back or even ignore it. But California is too large a market for that. Fearing that California universities would have a leg up in recruiting student athletes, other states started introducing similar legislation. Under growing pressure, the NCAA is taking steps to address the issue. Essentially, a California law is changing conditions for college athletes nationwide.Higher minimum wages and the corporate response to them are another area with nationwide ripples. In April 2016, California adopted a law that would raise the state's minimum wage to $15 an hour by 2022. Some other states have followed suit. In theory, companies could pick and choose how they operate in different states based on state-specific minimum wage laws. But in response, some large companies have increased their minimum wage levels nationwide. Walmart, for instance, raised its pay floor to $11 an hour in January 2018 -- 10 days after California's minimum wage rose to the same level.Some retailers have responded to California's higher pay scale by stepping up efforts to install self-checkout machines and save on labor costs. But not just in California. For example, in Georgia, where I live, retailers have been installing the machines even though the state hasn't increased its minimum wage of $5.15 an hour in more than 15 years. For large corporations, it makes sense to install them everywhere -- not just in one state -- to streamline operations.Perhaps a preview of the bigger fights to come can be found in California's efforts to set vehicle emissions standards that are tougher than national requirements. Here, a similar logic for companies applies. If automakers want to sell in California -- and most do -- it makes more sense to build vehicles that all comply with state regulations rather than producing lower-emission one for California and higher-emission one for the rest of the country. It's unclear how courts will rule on this and similar fights between California and the federal government, but we should expect more of these standoffs in the years to come, particularly if Trump wins re-election.In a way, progressives would be adopting the same tactics that China used when it put pressure on the National Basketball Association, threatening to limit the league's business opportunities in the country after a Houston Rockets team official made comments supporting Hong Kong's protesters. In a global economy, market size and power tend to dictate cultural and political power. Although progressives are unlikely to get much of what they want in Washington in 2021 or beyond, regardless of the election outcome there's untapped potential for them in California.To contact the author of this story: Conor Sen at email@example.comTo contact the editor responsible for this story: James Greiff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Sign up to our Brexit Bulletin, follow us @Brexit and subscribe to our podcast.Britain’s Labour party pledged to offer all consumers free fiber broadband within a decade by nationalizing phone carrier BT Group Plc’s Openreach unit at a cost of 20 billion pounds ($26 billion).BT shareholders would get newly-issued government bonds in return for their shares, Labour’s shadow chancellor, John McDonnell, said in a speech in Lancaster, England on Friday. Shares of BT fell as much as 3.7%.It’s the biggest new pledge of the election campaign from Labour, which already has plans to nationalize the postal service, the railways and water and energy utilities. The broadband effort would be financed in part with taxes on multinational companies such as Amazon.com Inc., Facebook Inc. and Alphabet Inc.’s Google. While the proposals may win over some voters, Labour may not be in a position to implement them. It has an average of 29% support in recent polls, trailing the Conservatives at 40%.“A Labour government will make broadband free for everybody,” party leader Jeremy Corbyn said at the campaign event at Lancaster University. “This is core infrastructure for the 21st century. It’s too important to be left to the corporations.”McDonnell said the new broadband pledge would be funded by asking “tech giants like Google and Facebook to pay a bit more” in proportion to their activities in the U.K. “So if a multinational has 10% of its sales, workforce, and operations in the U.K., they’re asked to pay tax on 10% of their global profits,” McDonnell said.While Labour puts the cost of the plan at about 20 billion pounds, BT’s Chief Executive Officer Philip Jansen said the proposal would cost almost five times that amount.BT shares were down 1.6% as of 12:29 p.m. in London, suggesting shareholders aren’t too worried about the nationalization risk. That gives the company a market value of about 19 billion pounds.“These are very very ambitious ideas,” Jansen said Friday in an interview on BBC Radio 4. “The Conservative Party have their own ambitious ideas for full fiber for everybody by 2025.”“How we do it is not straightforward, it needs funding,” Jansen said, putting the cost of such a roll-out over eight years at “not short of 100 billion pounds.”Lower Value?BT has been working to speed up its own full-fiber build and Jansen said the company’s shares have fallen on the recognition that “we’re going to be investing very very heavily.” Shareholders “are nursing massive losses on their investment” in BT if they’d bought it a few years ago, he said.Investors could get burned, as Openreach’s business would likely be undervalued in an expropriation, New Street analyst James Ratzer said in an email, adding that nationalization “rarely works well for shareholders.” Analysts at Jefferies put Openreach’s value at 13.5 billion pounds, flagging annual costs for operations and to service its high pension deficit.Labour’s McDonnell said the party has taken advice from lawyers to ensure its broadband plan fits within European Union state aid rules in case the U.K. is still in the bloc when the plans are carried out.Britain LaggingCorbyn’s plan is meant to solve a connectivity gap: Britain lags far behind other European nations when it comes to full-fiber coverage, which allows for gigabit-per-second download speeds. About 8% of the country is connected -- just under 2.5 million properties, according to a September report by communications regulator Ofcom. That compares with 63% for Spain and 86% for Portugal.As policymakers and regulators have been creating conditions to spur more competition with BT, rivals including Liberty Global Plc’s Virgin Media and Goldman Sachs Group Inc.-backed CityFibre have been jumping in to commit billions of pounds to infrastructure plans.“Those plans risk being shelved overnight,” Matthew Howett, an analyst at Assembly, said in an email. “This is a spectacularly bad take by the Labour Party.”The Labour announcement caused TalkTalk Telecom Group Plc to pause talks to sell a fiber project as the industry seeks clarity.Analysts are skeptical the government could roll out fiber more effectively than private industry and Howett pointed to delays and budget overruns from a state-led effort in Australia.It’s not the first time radical ideas have been proposed for BT’s Openreach unit, a national network of copper wire and fiber-optic cable that communication providers including BT, Comcast Corp.’s Sky and Vodafone Group Plc tap into to provide home internet to customers.BT was forced to legally separate the division from the rest of the company in recent years over concerns about competition, and that it wasn’t investing fast enough to roll out fiber, and some investors have suggested the company should fully spin it out into an independent, listed business to unlock value.‘Fantasy’ PlanNicky Morgan, the Conservative cabinet minister with responsibility for digital services, dismissed Corbyn’s plan in a statement as a “fantasy” that “would cost hardworking taxpayers tens of billions” of pounds.The Conservative Party’s own proposal for full-fiber broadband across the U.K. by 2025 -- eight years ahead of a previous government goal -- has raised eyebrows across the telecom industry, as some executives and analysts expressed skepticism about whether it’s doable, whether there’s consumer demand for the ultrafast internet service and how companies would make money.‘A Disaster’TechUK, the industry’s main trade body, called Labour’s plan “a disaster” for the telecom sector. “Renationalization would immediately halt the investment being driven not just by BT but the growing number of new and innovative companies that compete with BT,” said Chief Executive Officer Julian David.The announcement will provide more fodder for the arguments by Prime Minister Boris Johnson’s Conservatives that a Labour government risks plunging the country into an economic crisis. Chancellor of the Exchequer Sajid Javid over the weekend released analysis estimating Labour would raise spending by 1.2 trillion pounds over five years. McDonnell at the time called it “fake news.”McDonnell said Parliament would set the value of Openreach when it’s taken into public ownership and that shareholders would be compensated with government bonds.Under Labour’s plan, the roll-out would begin in areas with the worst broadband access, including rural communities, followed by towns and then by areas that are currently well-served by fast broadband.According to elections expert John Curtice, Corbyn’s chances of forming a majority government are “as close to zero” as it’s possible to get. The election is still hard to predict, and it is possible that Labour could yet win power, either on its own or with the support of smaller parties.(Updates with Corbyn remarks in fourth paragraph, McDonnell in fifth.)\--With assistance from Jennifer Ryan and Kit Rees.To contact the reporters on this story: Alex Morales in London at email@example.com;Thomas Seal in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Rebecca Penty at email@example.com, ;Tim Ross at firstname.lastname@example.org, Frank ConnellyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- It was the best house on a bad block, the saying in financial circles went, an oasis in a region deemed too tumultuous for most investors. Now the house is on fire, the neighborhood is going downhill and those investors are struggling to comprehend what an unparalleled wave of violence and protest mean for Chile’s economic and financial future.It’s barely been a month since the government set off the chaos with a move to raise subway fares by four cents. That little tweak ended up triggering a social explosion that sent the currency careening to a record low, hammered stocks and cost Chile its title as Latin America’s safest borrower, as measured by the cost to insure against a default.Protesters are now calling for bigger pensions, better health care, less economic inequality and a new constitution. All of these things, of course, could ultimately prove beneficial for everyday Chileans and help the nation in its advancement toward developed-economy status, but investors worry they will compromise the decades-long commitment to fiscal and financial prudence that always set the country apart from its peers. President Sebastian Pinera has already shocked the business community by trying to appease protesters with pledges to alter the constitution and boost spending.“Chile’s been the oasis, the calm sea in what’s normally a stormy region,” said Edwin Gutierrez, the head of emerging-market sovereign debt at Aberdeen Asset Management in London. “But now it’s the focus, the trigger-point of the Tsunami.”In the early hours of this morning the leaders of almost all the parties in Congress agreed to call a plebiscite on whether, and how, to write a new basic charter. That will go a long way toward meeting protesters’ demands. The peso rallied 2.7% to 781.82 per dollar as of 9:10 a.m. New York time, though it’s still down 4.4% this week for the world’s worst performance.Chile cemented its outsider status in Latin America in the late 1970s and 1980s during the dictatorship of Augusto Pinochet when a cadre of economists, many trained at the University of Chicago, implemented a series of free-market reforms. They slashed government spending, cut tariffs and privatized utilities, water rights and the pension system. The overhauls eventually put an end to years of instability marked by hyperinflation and unemployment, problems that persisted through the first years of the dictatorship.By the time the country returned to democracy in 1990, reforms ushered in an economic boom that saw average annual growth of 6% over the next decade. In the 2000s, the country started a sovereign wealth fund -- a rarity for a developing nation.Chile has since boasted one of the best credit ratings among emerging markets. But now, investors’ perception of the risk has skyrocketed. While for years the cost to insure sovereign bonds was the lowest in the region, the price is now just a hair above Panama’s. Though Brazilian stocks are close to a record high, Chile’s benchmark is near a two-year low. And investors don’t expect the pain to go away anytime soon. Chile’s currency options market shows investors are preparing for a long period of instability as implied volatility soars.Of course the social turmoil in Chile isn’t happening in isolation. Populist governments have been elected in Mexico, Brazil and Argentina. Venezuela is basically a failed state. Peru’s president recently dissolved Congress after his predecessor was ousted amid corruption allegations. And in Bolivia, enraged supporters of former President Evo Morales are clashing with police as his replacement tries to establish order.In Chile, there’s broad popular support for reform -- almost three-fourths of those surveyed late last month said protests should continue. What worries analysts isn’t a few quarters of slow growth as the country cleans up the debris from the riots. The real concern is that the economic and social model that has supported 30 years of outperformance may be scrapped.“It’s true that growth is low,” said Alberto Ramos, the chief Latin American economist at Goldman Sachs Group Inc. “It’s true that income isn’t high enough, that this is an unequal region, that there’s corruption and impunity, that people feel disenfranchised and unrepresented and with no economic progress.“But if you go for a short-cut or a populist response you may make a bad situation worse,” he said.The Chile of the future will likely have a higher tax burden, higher fiscal spending and possibly more debt. An additional threat, given the lack of support for traditional political parties in Chile, is that a new constitution may end up empowering politicians of both the extreme left and right.“This is not a situation where the government can restore stability by making a few concessions and leaving the framework untouched,” said Patrick Esteruelas, the head of research at Emso Asset Management in New York. “The net result of which is probably a new and permanent risk premium, and a reduction in incentives for corporate investment which should result in structurally lower growth.”All that said, Chile is well positioned to shift toward higher taxes and increased spending. After racking up huge budget surpluses during the commodities boom, the nation can afford to spend a few more points of gross domestic product on health and pensions. The government spends about 25% of GDP, compared to 38% in Brazil and Argentina.Inequality is severe. Chile’s top 1% have earned 20%-25% of national income almost every year since 1990, according to a 2018 study published by the World Inequality Database. A 2014 working paper by the International Center for Tax and Development found that Chile’s super rich may have been taking a higher share of wealth than any country in the world.“If there’s one economy that can afford to have a bit more social spending and fiscal slippage, it’s Chile,” said Aberdeen’s Gutierrez, who helps manage $16 billion of assets. “The years of saving have stood it in good stead. Redistribution is necessary too.”He’s considering adding more Chilean securities to his portfolio, taking advantage of the recent sell-off to lock in low prices. Until now, Chilean debt just hasn’t paid enough to be attractive.As an example of how the country has changed, on Nov. 13 the political committee of Pinera’s National Renovation, a center-right party founded by supporters of Pinochet to promote private property and free enterprise, put out a statement urging the government to “spend whatever it takes” to fund health care and student loans while boosting pensions and the minimum wage.“The dogma of the free market cannot continue to stand in the way of a fairer society, and economic growth and job creation should go hand in hand with social policy,” it said. A month ago such a statement would have been almost unthinkable.(Adds deal on new constitution in fifth paragraph.)To contact the reporter on this story: Sebastian Boyd in Santiago at email@example.comTo contact the editors responsible for this story: Eric J. Weiner at firstname.lastname@example.org, ;David Papadopoulos at email@example.com, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Target jumped over 2% Thursday after rival Walmart impressed Wall Street once again with its comps and e-commerce growth. So is it time to buy TGT stock heading into earnings?
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Egypt cut its main interest rates by a full percentage point as the lowest inflation in almost a decade allowed the central bank’s third consecutive reduction to spur investment without dimming the allure of the world’s best carry trade.The Monetary Policy Committee reduced the deposit rate to 12.25% and the lending rate to 13.25%, the bank said in a statement on Thursday. All but one of 14 analysts surveyed by Bloomberg had predicted a decrease. Goldman Sachs Group Inc. now sees a pause in December, followed by a total of 150 basis points of easing next year.The Arab world’s most populous nation has been on a mission to bring inflation under control after prices were sent rocketing by a currency devaluation and subsidy cuts enacted to seal a $12 billion International Monetary Fund loan. The future of the central bank’s easing cycle is now less clear, since inflation probably hit bottom for the year in October, reaching an annual 3.1%, a 10th of its level just two years ago.“Given the continued strengthening of the Egyptian pound and barring any material changes to inflation expectations -- on account of unforeseen food price volatility -- in the remainder of the year, our base case remains that the central bank will be on hold in December and resume its easing cycle in 2020,” Goldman Sachs economists led by Farouk Soussa said in a report. “With this decision Egypt’s central bank may be revealing a more data-driven easing path than we had previously anticipated,” they said.A sharp deceleration in food costs helped fuel the slowdown, but so too did the statistical effect of a high base last year. That’s set to fade in coming months but will likely remain within the central bank’s target range of 9%, plus or minus 3 percentage points, by the fourth quarter of 2020.“Incoming data continued to confirm the moderation of underlying inflationary pressures, notwithstanding the expected impact of unfavorable base effects on near-term inflation rates,” the central bank said. Egypt’s fourth rate cut for 2019 is unlikely to dent the attractiveness of its carry trade, in which investors borrow in currencies where rates are low and invest in the local assets of countries where they’re high.The country’s real borrowing costs -- the difference between its inflation and policy rates -- are among the highest of more than 50 economies tracked by Bloomberg. With a global move toward easing, Egypt has leeway to cut while keeping its debt yields attractive.“Since the real yield continues to be significantly high, we expect foreign investments in fixed income not to be affected by the decision,” said Radwa El-Swaify, head of research at Cairo-based Pharos Holding.The reduction could also help the Middle East’s fastest-growing economy with its goals of boosting private investment and slashing debt-servicing. The government said this week it targets 6.4% growth in the 2020-2021 fiscal year. Finance Minister Mohamed Maait has said he’d like the private sector’s share of gross domestic product to rise to 70% in the next five to seven years.Recent cuts “provide appropriate support to economic activity,” the central bank said.“It almost brings the rates back to pre-IMF program levels, which should provide support for a gradual recovery in private investments,” said Mohamed Abu Basha, head of research at Cairo-based investment bank EFG Hermes.\--With assistance from Harumi Ichikura.To contact the reporters on this story: Mirette Magdy in Cairo at firstname.lastname@example.org;Tarek El-Tablawy in Cairo at email@example.comTo contact the editors responsible for this story: Alaa Shahine at firstname.lastname@example.org, Michael Gunn, Paul AbelskyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The tweet referred to an application for the new Apple Card -- which is issued and developed by Goldman Sachs -- by Hansson’s wife, who was offered one-twentieth of the credit limit he had been offered. It does kinda feel like we live in a time of some considerable lunacy when a regulator makes a decision that it’s time to investigate something based on the fact that it’s gone viral on the internet, rather than on the basis of some convincing evidence of actual wrongdoing.
(Bloomberg) -- Executives at Cadre eagerly watched SoftBank’s Vision Fund dole out billions of dollars to companies like Uber, WeWork and Slack Technologies. Then they got their chance.After presenting Cadre’s real estate platform and its budding technology to the fund’s representatives in New York, CEO Ryan Williams flew to Tokyo in early 2018 at the invitation of Masayoshi Son, who oversees the $100 billion fund. The talks were promising.But there was a hitch: Cadre co-founder Jared Kushner.SoftBank wanted him to divest his ownership stake in the company, according to two people familiar with the matter. The request, not previously reported, was meant to head off any possible conflicts of interest or any suggestions that people doing business with Cadre were trying to curry political favor. That’s because Kushner has become a top adviser to his father in law, President Donald Trump, overseeing a broad foreign policy portfolio.The SoftBank talks fizzled. Like Trump, Kushner declined to shed all of his business interests upon joining the White House. Asked about his Cadre holdings and possible conflicts, a spokesman for Kushner said he “took himself out of all decisions and operations and became only a passive shareholder in Cadre” when he moved to Washington.Cadre and SoftBank declined to comment about the matter or whether Kushner ever entertained selling his stake.SoftBank’s decision to take a pass was a missed opportunity for Cadre that frustrated some top executives. Founded five years ago by Williams with a Harvard classmate, Josh Kushner, and his brother Jared, the company has grown into a midsize real estate manager with more than $800 million invested through its web marketplace.Despite that growth, its biggest ambition hasn’t been realized. Williams’ vision was to make real estate investments easy for the masses, sort of an Amazon for the real-estate obsessed who want to buy and sell shares of commercial properties. Only accredited, high net worth individuals can participate under current regulations, however. Similarly, Cadre’s plans to use artificial intelligence to uncover hidden investment opportunities have run up against the limits of property data, which is scattered and disorganized.Along with those obstacles, Cadre has had to weave a path around the Kushners' rising political profile, executive departures and some inflated business claims, according to company documents reviewed by Bloomberg News and interviews with more than a dozen investors, current and former employees, and others with knowledge of its inner workings. Forceful PitchCadre's engagement with SoftBank exemplified those problems. When Vision Fund representatives traveled to Cadre’s offices in the Kushners’ historic Puck Building in downtown New York early last year, Williams’ executives made a forceful pitch.The Cadre executives said they were already making “data-enhanced” decisions. In a demo, executives typed in a street address to get all sorts of data that might interest an investor: net operating income, occupancy rate, lease terms. But Cadre hadn’t been using the tool; instead, Cadre had built it in the weeks ahead of the presentation, expressly to impress SoftBank, two people familiar with the matter said.After this article was published, a person close to Cadre disputed that account. “The only software Cadre showed during the SoftBank meeting was the standard platform demo that includes Cadre's primary marketplace and investing experience that thousands of customers have used. Anyone who suggests otherwise is completely misinformed or not telling the truth," the person said.There’s no indication that SoftBank questioned the viability of the software. Start-up companies seeking financing often present an aspirational version of their product, even if it’s not yet ready for commercial use. Vision Fund executives were impressed enough by the meeting to push Cadre up the chain to SoftBank’s Son, several people familiar with the matter said.Tech ProgressCadre declined to comment on the contents of its SoftBank pitch. The company has made progress with its technology, Williams told Bloomberg News in a September interview at the company’s offices. For example, he said, Cadre has enhanced its marketplace to allow investors to trade property stakes. In theory, if that secondary sales platform grew large enough to meet regulatory requirements for a liquid market, ordinary investors might be allowed to trade on the Cadre platform.The company has also started a project called Keystone to organize data in the way the company pitched to SoftBank. Williams said he believes Cadre will eventually be able to expand into other alternative asset classes, including infrastructure and energy.“You learn, you pivot, you make quick decisions about what’s working and what’s not working,” Williams said. “We’re not here promising we’re building crazy machine-learning models or predictive analytics that are going to replace the need for humans.”Cadre has good reason to position itself as a cutting-edge technology provider rather than a more pedestrian buyer of real estate. Investors eager to bet on a disruptive force have valued property technology firms like Cadre and the brokerage Compass at multiples of their revenue. Cadre’s last funding round, in 2017, valued it at $800 million, even though it had bought stakes in only a handful of properties worth far less. Traditional real estate firms are generally valued at a small fraction of the assets they oversee. Newfangled real estate firms have lost some of their shine lately. WeWork’s valuation has collapsed to about $8 billion, down from $47 billion just months ago, after a canceled initial public offering and a $9.5 billion rescue package from SoftBank. Compass, another firm backed by SoftBank that promises to pair technology with residential real estate brokers, has faced questions about whether its technology is game-changing.From Cadre, SoftBank wanted a significant stake that would have doubled the company’s valuation to $2 billion or more, according to people familiar with the matter.Small InvestorsWilliams says the idea for Cadre came after he realized that small investors had limited options for buying real estate: They could either plow money into their own residence or buy shares in broad-based real estate investment trusts. Why couldn’t investors instead buy slivers of several properties the way they could buy shares in companies? He wanted to “democratize” access to the asset class.Since then, Cadre has teamed up with developers and landlords to buy stakes in properties across the U.S. — more than two dozen multifamily, hotel and office properties from Maryland to Texas to California. The aim is to be highly selective about deals, using metrics including rent growth and rent affordability, to generate outsize returns for clients.In September, Cadre said it sold stakes in suburban apartment complexes outside Chicago and Atlanta for an internalized rate of return exceeding 20 percent. “It has been exciting to see the concept we envisioned proved out,” Williams said, “and to show our investors that we honor the trust they are placing in us.'”Cadre’s aspiration to offer sophisticated real estate investments to the masses is limited, for now, by regulations concerning investments sold privately. As a result, Cadre’s customer base is made up of institutions and high-net-worth individuals. Many of those wealthy clients are overseas.About 20 percent of Cadre’s funds come from outside the U.S., the company says. The company’s international clientele is mostly wealthy individuals and family offices, as opposed to institutions, according to Williams.“We haven’t done a ton of international marketing,” he said. “It’s a testament to the brand awareness.”Foreign-Policy RoleAs the SoftBank courtship made clear, Cadre’s interactions with foreign investors could make for particularly messy optics because of Jared Kushner’s hefty foreign-policy portfolio in the White House.Almost half of the Vision Fund’s money comes from the government of Saudi Arabia, where Kushner has developed deep diplomatic ties. Kushner’s Saudi forays included an all-night desert meeting in October 2017 with the crown prince, Mohammed bin Salman, about a year before the journalist Jamal Khashoggi was murdered at a Saudi consulate in Istanbul.Critics saw any SoftBank infusion in Cadre as a possible way for Saudi Arabia to curry favor with the Trump administration by enriching Kushner.Kushner’s lawyers have long said he follows all ethics rules.As he joined the White House, Kushner transferred stakes in dozens of other assets to close family. Cadre was an exception, two friends explained, because Kushner sees it as a once-in-a-lifetime opportunity, with great potential for gains. Kushner’s stake was recently valued at as much as $50 million, according to a federal financial disclosure.Cadre executives including Mike Fascitelli, the former CEO of Vornado Real Estate who oversees Cadre’s investment committee, were disappointed that Kushner’s involvement in the company had caused the missed opportunity, according to a person familiar with the deal talks.Williams’ exasperation over the Kushner scrutiny bubbled over in a February cover story in Forbes magazine. “Jared is a passive investor who has no operational control,” he told the magazine, adding that “I can’t force anybody, really, to sell their equity.”Kushner Cos.Without the Kushners, there would be no Cadre. The young firm tapped capital from the Kushner family and executives of Kushner Cos. (The overall size of those investments hasn’t been disclosed.)Cadre is housed in the 19th-century Puck Building, among the Kushners’ prized assets. Two floors up are the offices of Thrive Capital, the venture capital firm of Josh Kushner, who continues to advise Cadre. Cadre’s first two investments came as part of Kushner Cos. deals for apartments in Queens and suburban New Jersey, giving the start-up early viability.Now, Williams is trying to create distance between Cadre and Kushner Cos., people familiar with the matter say. Earlier this year, the Kushners bought a $1 billion portfolio of apartments in Maryland and Virginia, their biggest purchase in a decade. As with most of their acquisitions, they needed outside investors to complete the deal.Executives from Kushner Cos. approached Cadre about the prospect, putting Williams and other executives in the awkward position of having to decline, according to a person familiar with the talks. The size of the deal and the Kushner connection were both factors, the person said.The person close to Cadre said it was never approached with those investments.Kushner Cos. didn’t respond to a request for comment. A spokesman for Williams declined to comment on the Kushner Cos. decision.Although SoftBank took a pass, several name-brand investors have shown confidence in Cadre. George Soros and Andrew Farkas have backed the firm, along with major Silicon Valley firms including Khosla Ventures and Andreessen Horowitz. Goldman Sachs Group Inc. has invested its clients' money using the Cadre platform.Blackstone HistoryWilliams, a 31-year-old fitness devotee, had a short resume with similar blue-chip names when he began the company. After a stint at Goldman Sachs, he moved to the Blackstone Group as an analyst in its real estate division.There’s been some friction between Williams and Blackstone since his departure in 2014. Several of his former colleagues say he has at times overstated his role and accomplishments at the firm.Williams has said, for example, that he played a central role in the launch of a single-family home-rental business at Blackstone. A Cadre press statement also credited him with acquiring a $550 million hotel while at Blackstone, despite his relatively junior role.After he poached about a half dozen Blackstone employees to join him at Cadre, Williams was summoned to a meeting at Blackstone’s Park Avenue offices with Jon Gray, the billionaire heir apparent to the Blackstone CEO job who was then leading its real estate arm.When asked about the April 2016 meeting, a Blackstone spokesman, Matthew Anderson, said that the firm wouldn’t discuss private talks but that it “was an entirely cordial and pleasant conversation.”A video from a Google conference last year in which Williams talked about his decision to start Cadre caught the attention of a Blackstone-aligned person.“When I told Blackstone what I was doing,” Williams says in the video, “I’d just been promoted, they gave me this quick, accelerated path to partner and told me they’d let me go to Europe and help with the debt business out there.”Two people familiar with his role said Williams hadn’t been told he'd be promoted to partner. Through a spokesman, Williams declined to comment on those assertions.More: Kushners’ Blackstone Connection Put on Display in Saudi Arabia Team ‘Tagma’Cadre has also been hobbled by departures from its senior executive ranks. The team, known internally as “Tagma,” a Greek term used to describe an infantry battalion, recently lost several top staff including investment leaders and the head of human resources. The company has been searching for a chief investment officer for over a year.Just before the Tagma team pitched the Vision Fund, its chief technology officer, Jean Sini, left the company. Several people said Cadre’s lack of technology progress frustrated Sini, an alumnus of Intuit Inc. and Oracle Corp. Sini declined to comment.Got a tip?Click for a secure and anonymous link to Bloomberg reporters.The company’s technology efforts are now focused on automation and analysis of data about its own properties, with the hope that this could yield investing insights in the future.The big question for investors and potential partners is whether Cadre is merely a tech-enabled real estate company or a game-changer.“You can hire as many developers as you want,” said David Friedman, CEO of a property tech start-up known as Knox Financial that doesn’t compete directly with Cadre. He declined to speak specifically about Cadre. “But if your tech doesn’t deliver a new way of doing business that’s measurably more profitable, then you’re not a tech company.”Cadre's website alternates between describing what it can do now and where it hopes to go. “We acquire and aggregate data, create algorithms that use machine learning and statistics to derive insights, and visualize findings,” one page reads.It has also posted jobs for engineers who can help the company crunch data the way it wants. The ideal candidate? Someone who’s “driven to solve hard problems in novel, elegant ways.” (Updates to reflect post-publication comments from a person close to Cadre.)\--With assistance from Stephanie Baker and David Ingold.To contact the authors of this story: Caleb Melby in New York at email@example.comGillian Tan in New York at firstname.lastname@example.orgDavid Kocieniewski in New York at email@example.comTo contact the editor responsible for this story: Winnie O'Kelley at firstname.lastname@example.org, David S JoachimFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.