Posts Tagged ‘Goldman Sachs’

Blankfein closing in on deal to take over Apple’s credit business

May 11, 2018

 The chief executive’s Goldman Sachs is closing in on a deal to take over Apple’s credit card business, according to a report on Thursday.

The chief executive’s Goldman Sachs is closing in on a deal to take over Apple’s credit card business, according to a report on Thursday.

The new brand of card, a joint venture between the bank and the tech titan, according to the report, will carry the Apple Pay brand and further cement Goldman’s foray into the world of consumer finance.

The new card will also push Apple into the mobile payments business and allow the Cupertino, Calif., company to tap into a steadier stream of fee income.

Terms of the potential deal are still being hashed out, but Apple is likely to start offering the cards next year, according to the report in The Wall Street Journal.

The potential deal pushes Goldman into a space that’s been occupied by Barclays since about 2005, when the British bank started offering Apple customers no-interest financing on certain purchases.

Goldman’s possible partnership isn’t expected to end Barclays’ relationship with the iPhone maker. The British bank plans to continue offering some financing for Apple products, according to a person familiar with the plans.

Representatives for the companies didn’t return calls for comment.

Wall Street was moderately positive on the news, sending Goldman shares up $1.71, to $243.44. Apple shares gained $2.68, to $190.04 — leaving the company with an all-time-high market cap of $934 billion.

Goldman has been expanding into consumer banking since 2016, when it first offered consumer banking services under its Marcus brand.

The bank, which has struggled to make profits in its bond and commodity trading units in recent years, has been looking to expand its deposit base — and has started offering interest rates for savings that dwarf most rivals.

The partnership with Apple is an aggressive move to expand that, analysts said.

“In the case of Goldman specifically, it appears to be the latest in a series of step-out strategies to expand its consumer lending activities while utilizing its growing deposit base and in-house technology resources,” Nathan Flanders, global head of non-bank financial institutions at Fitch Ratings, said in a statement.

“This isn’t just about short-term profits for Goldman Sachs,” Matt Schulz, senior analyst at CreditCards.com, said in a statement. “It’s about tying their brand with Apple’s hugely powerful brand …”

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JPMorgan applies to re-enter China securities market

May 11, 2018

US bank looks for controlling stake in JV after exiting market in 2016

Image may contain: outdoor

Don Weinland in Hong Kong

JPMorgan Chase has applied to re-enter China’s securities market with a controlling stake in a joint venture after exiting two years ago.

The US bank has submitted an application to China’s securities regulator to acquire a 51 per cent stake in a Chinese securities company, according to a statement on the website of the China Securities Regulatory Commission.

The news comes after JPMorgan chief executive Jamie Dimon visited Beijing this week. The bank has not named the domestic Chinese company with which it intends to partner.

Image result for Jamie Dimon, in China, photos

China issued rules in late April that allowed foreign banks to apply to take controlling stakes in securities companies in the country, although some details on the process were still unclear.

JPMorgan is the first US bank to apply to take a controlling stake in a Chinese securities business. Goldman Sachs and Morgan Stanley, which have existing JVs, have both expressed interest in increasing their stakes. The CSRC said last week that UBS and Nomura applied to take majority stakes in securities businesses.

In 2016, JPMorgan exited its joint venture with First Capital Securities, marking one of few pullbacks by a foreign bank from the Chinese securities market. At the time Mr Dimon said the bank remained committed to the Chinese market and would re-enter with the right domestic partner.

The opening of China’s securities market to foreign banks has been a long and slow process. Morgan Stanley entered the first joint venture investment bank in China with the 1995 establishment of CICC. In 2004 Goldman Sachs launched a China JV in which the global bank controlled the operation for the first time despite holding a minority stake. UBS struck a similar deal in 2006 when it bailed out Beijing Securities.

Several other foreign banks have entered similar arrangements but until now have been limited to a 49 per cent stake.

Only HSBC has been granted permission to take a 51 per cent stake in a national-level securities joint venture. It opened that Shenzhen-based business last year, taking advantage of special rules that apply only to Hong Kong-funded institutions.

The businesses of foreign securities JVs remain small compared with their purely domestic rivals that dominate the market.

The Asia Securities Industry & Financial Markets Association, a trade body that represents banks and asset managers, recently expressed concerns over rules proposed in March requiring companies buying into securities groups to have net asset value of at least Rmb100bn ($15.9bn).

https://www.ft.com/content/1835404e-54c2-11e8-b3ee-41e0209208ec

Rudy Giuliani and Elon Musk Walk Into a Bear Trap

May 4, 2018

It’s almost enough to make you appreciate decent spin.

 Updated on 
You said what?

Photographer: Drew Angerer/Getty Images

Congratulations – you’re reading Bloomberg Opinion Today, a new newsletter from the new Bloomberg Opinion. Key words here are “new” and “opinions,” which you’ll get every afternoon in your inbox, sprinkled with charts, analysis and other garnish. Former subscribers to Share the View, Fly Charts and the Daily Prophet will hopefully feel at home. New subscribers are welcome and can sign up here.

Stocks had kind of a wild day. Jay-Z is in hot water with the SEC. And Bloomberg has a snazzy new website, complete with a new paywall.

Words Fail

Talking is hard, even if you do it for a living.

Rudy Giuliani, recently hired to lawyer for President Donald Trump, appeared on Sean Hannity’s Old-Timey Propaganda Hour last night and promptly talked his client into a fresh morass of legal and political jeopardy.

On the plus side, he generated billable hours for his fellow lawyers, who crafted CYAtweets for Trump this morning. But even those tweets raise troubling legal questions, warns Noah Feldman. He digs into the theories they and Giuliani espouse and finds “All this makes no sense, in law or in economic logic.”

Hours before Giuliani’s bombshell, Tesla Inc. CEO Elon Musk did some freestyling of his own. On a conference call about his company’s quarterly results, he grew weary of Wall Street analysts’ “boring, bonehead” questions about such trivia as “cash flow” and “why can’t you make enough Teslas.” He cut them off, at one point suggesting you shouldn’t even buy Tesla stock if you worry about such foolishness. This promptly drove the electric-car maker into a fresh morass of financial jeopardy; its stock price dropped and its borrowing costs jumped.

Both men had one job – use words to make life easier for their client/company – and both failed. It’s almost enough to make you appreciate good spin.

Giuliani’s words were arguably more impactful, at best dinging the president’s already shaky credibility.

As for Tesla, it’s burning cash and will need to ask investors for moreLiam Denning argues. Musk made that harder, or at least more expensive. Musk, though, seems increasingly convinced that all those people calling him the real-world Tony Stark are onto something. You almost can’t blame him; as Liam  notes in a follow-up, Tesla calls typically are useless celebrations of Musk’s genius.

But to paraphrase another guy who used words to spin his way through stuff like invading Iraq: No matter how big you are, even in the Donald Trump era, it still helps to be careful what you say.

The Bloomberg View

The Fed stood pat yesterday but needs to watch out for signs of nascent inflation, Bloomberg’s editors say.

Money Quote: “Next month, as well as delivering the expected rise in interest rates, the Fed should acknowledge more plainly that conditions are changing.”

How Do You Do, Fellow Kids?

Kanye West’s fashion sense helped make Adidas relevant. But now that West seems to be losing his common sense, if not his fashion sense (I mean, have you seen his dad style?), Adidas doesn’t need him to be cool anymore, Andrea Felsted writes.

Love Vs. Money at Facebook

Facebook’s new focus on people and connections and butterflies and whatnot soundsgreat, until you realize it has nothing to do with how Facebook actually, you know, makes money, points out Shira Ovide. (From the Bloomberg Technology newsletter; sign up here.)

The Squid and the Blockchain

Goldman Sachs is getting into Bitcoin trading. It’s the kind of bonkers thing that could make banking at Goldman fun again, writes former employee Matt Levine. (Matt has his own newsletter, Money Stuffsign up here.)

Cracks in Credit 

Credit markets seem mostly fine and certainly are nowhere near as bananas as in the financial crisis. But there are early signs of trouble brewing, points out Robert Burgess.

Chart Attack

Blue Apron Holdings Inc. had a good quarter, but is it sustainableSarah Halzack is just asking.

Express Scripts Holding Co. is trying to play the good guy on drug prices. Max Nisen isn’t buying it.

Speed Round

Kicker

Meet the guy who used an algorithm to make nearly $1 billion betting on horses.

Note: This newsletter is a work in progress, so please send hate mail, suggestions and kicker ideas to me at mgongloff1@bloomberg.net.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gongloff at mgongloff1@bloomberg.net

To contact the editor responsible for this story:
Brooke Sample at bsample1@bloomberg.net

https://www.bloomberg.com/view/articles/2018-05-03/rudy-giuliani-and-elon-musk-walk-into-a-bear-trap-jgqzkl37

Amazon Surges After Stunning Wall Street With Its Near-Perfect Quarter

April 27, 2018

Image may contain: 1 person, suit and closeup

Amazon.com Inc. shares jumped to a record high Friday, up as much as 7.9 percent, with analysts applauding the company’s biggest expansion in profit margins in about two years.

Jefferies sees every major segment of the business contributing to the better-than-expected results, as well as big tailwinds coming behind the Amazon Web Services unit, Prime and the emerging advertising business. Analysts across the board were impressed with the financial results and Morgan Stanley sees Amazon’s e-commerce behavior modification and profit levers in the “on” position after announcing a $20 price increase for U.S. Prime subscribers.

The shares climbed 6.6 percent to $1,617.77 at 9:37 a.m. in New York. The previous intraday high was $1,617.54 on March 13.

Amazon's Fulfillment Center BFI3. - Amazon - DuPont, WA

 

Goldman Sachs, Heath Terry

“We are in the sweet spot between Amazon investment cycles where new fulfillment/data centers are driving accelerating revenue growth while incremental capacity utilization is driving margin expansion.”

“Higher level, we still remain in the early stages of the shift of compute to the cloud and the transition of traditional retail online and, in our opinion, the market is underestimating the long-term financial benefit of both to Amazon.”

Maintains buy rating and raises price target to $2,000 from $1,825

Jefferies, Brent Thill

“Amazon delivered impressive 1Q results — total revenue 2 percent above consensus and the best operating margin we’ve seen since 2Q16 – with 2Q guidance also ahead of expectations.”

“We see strong tailwinds across AWS, Prime and the emerging ad business helping fuel sustained outperformance for this runaway freight train.”

Maintains buy, raises price target to $1,950 from $1,850

Loup Ventures, Gene Munster

Amazon’s results were highlighted by profitability that was twice the Street estimates.

“Recall that from time-to-time Amazon will flex its gross margins to remind investors of the model’s leverage potential. Going forward we expect margins to dip lower as the company continues its aggressive investment pace into fulfillment, lower AWS pricing and content.”

“The company also announced a 25 percent increase in the price of a Prime membership. This should yield about $2 billion per year in incremental revenue that will most likely be reinvested in the business, and occasionally allow the company to flex its profit margin muscle once again”

Piper Jaffray, Michael Olson

“Early margin expansion surprise points to a large efficiency year.”

“Management announced an increase in U.S. Prime subscription cost from $99 to $119 effective June 16, which we believe will drive $1.2 billion of incremental revenue.”

“We continue to believe Amazon has substantial ‘hidden’ margin created by its heavy investments in un-monetized efforts.”

Maintains overweight, raises price target to $1,850 from $1,650

Morgan Stanley, Brian Nowak

“Amazon’s results showcased its strong top-line momentum as 1Q revenue was roughly in line with us and the top-end of 2Q revenue guide was ~2 percent ($1 billion) higher than us.”

“Amazon seems to be executing at an even higher level than they expect to as 1Q GAAP operating profit beat the high end of its guidance by $927 million, the biggest beat in over 7 years.”

Maintains overweight, raises price target to $1,700 from $1,550

Bank of America, Justin Post

“While certain 1Q revenues and margins clearly benefited from some accounting changes, the quarter was a nice reminder of the inherent margin power of the business.”

“Other revenue (largely advertising) grew 139 percent y/y in 1Q, above our 96 percent estimate, and is a key positive given the likely high margin contribution.”

Reiterates buy, raise price target to $1,840 from $1,650

Susquehanna, Shyam Patil

“We continue to remain positive on Amazon as we see the company as a long-term secular grower with leadership positions in three large growth markets — e-commerce, cloud and advertising… and expect numbers to move higher over time.”

“Catalysts include intra-quarter e-commerce data, company specific events (such as the AWS summits), AWS product announcements, pricing decisions and quarterly results.”

Maintains positive, raises price target to $2,000 from $1,850

Loop Capital, Anthony Chukumba

“We are quite frankly flabbergasted” by Amazon’s results.

“Particularly impressed by Amazon’s performance given the fact 1Q is typically a seasonally weak profitability quarter for the company.”

Reiterate buy and raises price target to $1,800 from $1,700

Baird, Colin Sebastian

“The significant acceleration in other revenues suggests Amazon’s advertising ambitions continue to ramp quickly, and is now large enough to drive upside in Amazon’s margin profile.”

North American margin expansion was “a key positive, while international losses moderated despite significant investments in India.”

“Amazon’s best-in-class large-cap growth story remains unchanged.”

Maintains outperform, raises price target to $1,800 from $1,600

GBH Insights, Daniel Ives

“North America retail strength across the channel was the clear star of the show for Amazon as we believe the company is on pace to comprise roughly 50 percent of U.S. e-commerce spending by 2019.”

“While near-term there is a major focus on significant investments around fulfillment, Prime, Echo/Alexa, AWS and integrating the Whole Foods acquisition into the fold, which could depress margins over the next few quarters, we believe this is ‘near term pain for long-term gain.’”

“Overall, this was a Picasso-like quarter for Amazon with no blemishes.”

https://www.bloomberg.com/news/articles/2018-04-27/amazon-surges-as-wall-street-is-stunned-by-near-perfect-quarter

Investors’ New Headache: It’s Getting Harder to Buy or Sell When They Want

April 23, 2018

Worsening liquidity comes as banks have reduced inventory of riskier assets and investors more closely track bond indexes

In the options market, liquidity has deteriorated as new exchanges and more products have diluted trading.
In the options market, liquidity has deteriorated as new exchanges and more products have diluted trading. PHOTO: KIICHIRO SATO/ASSOCIATED PRESS

.

Investors are having a tougher time trading in a number of financial markets, a development that is weakening their ability to raise cash or to protect against big stock declines.

The capacity to get in or out of an investment, known as liquidity, was rarely tested during the long stretch when stocks and bonds rallied with little volatility. Now as inflation concerns, trade anxiety and tension in Syria roil markets, investors notice it is getting harder to trade as easily.

Chris Retzler, who manages the Needham Small Cap Growth Fund, tried to buy a small-cap tech stock in February, only to find that trading was thin and prices unattractive. Rather than paying up, he decided to wait for a couple of weeks until he found someone offering the stock at a reasonable price.

“There is very little you can do at that point other than be patient and not overpay,” Mr. Retzler said.

The liquidity problem has been worsening for years. Investors say it began nearly a decade ago, when post-financial-crisis regulation prevented banks from trading for themselves, and forced them to hold larger amounts of capital—thereby shrinking their inventory of riskier assets. This, in turn, reduced banks’ ability to serve as intermediaries between buyers and sellers.

“It’s like going into a grocery store and there’s nothing on the shelves,” said Jeffrey Cleveland, who said liquidity is a hot topic among the traders he confers with regularly as chief economist at Los Angeles money manager Payden & Rygel.

There is good reason to worry about how well liquidity will be provided during episodes of market duress.

—Goldman Sachs economist Charles Himmelberg

In the U.S. stock market, half of the more than 8,500 listed companies trade less than 100,000 shares a day—a tiny sliver of what big stocks trade, according to an April 10 report from the Securities and Exchange Commission. The SEC is weighing changes to create more liquidity in small-caps, such as potentially concentrating trading in such stocks to a single exchange.

“Thinly traded securities and their investors deserve a market structure that fits their particular needs,” Brett Redfearn, head of the SEC’s Division of Trading and Markets, said at a conference in New York last week.

Even in the world’s deepest bond market, U.S. government debt, liquidity has worsened as trading activity can’t keep up with booming supply. The Federal Reserve’s network of primary dealers, which are required to bid at government bond auctions, reported $455 billion of daily Treasury debt trades for the seven days ended April 11. That figure has declined since 2007—even though since that time, tradable Treasury debt has more than tripled.

DownsizingThe average size behind buy and sell quotesfor U.S. listed options has shrunk dramaticallythis year amid heightened market volatility.Source: ORATSNote: Data are for options with monthly expirationdates.
.contracts2015’16’17’180100200300400

The recent spike in market volatility “suggests there is good reason to worry about how well liquidity will be provided during episodes of market duress,” Charles Himmelberg, a Goldman Sachs Group Inc. economist wrote in a recent report. “This could contribute to price declines and possibly prolonged periods of financial instability.”

With less confidence that they can raise cash to make new purchases or meet client redemptions, some investors have sold more than they initially intended for fear that they might not be able to sell at a future time.

“You might as well sell when the liquidity is there” because it might not be there another day, said Marc Bushallow, managing director of fixed income at Manning & Napier.

This year’s volatility has even hampered liquidity in the popular E-mini S&P 500 futures on the Chicago Mercantile Exchange, a derivative product widely used for betting on the stock market’s direction or hedging against market swings. In the most active E-mini contract, the average number of contracts available to be bought or sold at the best price slumped from more than 500 in October to just 96 in March, according to MayStreet LLC, a data-analytics company.

DownfallThe average number of contracts backing buyand sell options quotes for the SPDR S&P 500ETF has dwindled.Source: S3Note: Includes all expiration dates.
.contractsJan. ’17JulyJan. ’1802004006008001,0001,200

In the options market, liquidity has deteriorated as new exchanges and more products have diluted trading, analysts say. Liquidity for options in February was worse than in August 2015, when China’s unexpected devaluation of the yuan sent markets reeling, according to Option Research and Technology Services.

In March, Rohan Gupte, who trades at home, looked to add options on Amazon.com Inc. But when he noticed buy and sell prices further apart than usual, he decided not to pull the trigger. Wider spreads have become more commonplace among big tech stocks and indexes, causing him to back away from the market at times.

“I just avoid doing that,” Mr. Gupte said.

Even one of the most popular contracts has experienced much thinner trading. The number of contracts backing buy and sell options quotes on the SPDR S&P 500 Exchange-Traded Fund Trust, which tracks the S&P 500 index, dropped off dramatically in February and March, falling by more than 30% from last year’s average, data from S3 show.

In the corporate bond market, investors say they sometimes have to break up orders into smaller pieces in order to complete larger purchases. But since a series of smaller trades takes more time, investors say the market can move against them while they are trying to buy.

Futures in RetreatIn E-mini S&P 500 futures on the ChicagoMercantile Exchange, the number of contractsthat can be bought or sold at the best pricethinned out as volatility picked up this year.Source: MayStreet LLCNote: Chart shows time-weighted average of numberof contracts available at the bid and the ask for themost actively traded E-mini S&P 500 futures expiry.
.contractsOct. ’17Dec.Feb. ’18April0100200300400500600700

“We like certain bonds at a given price, but we’re not even done building our position and they’re five points higher,” said Matt Freund, co-chief investment officer at Calamos Investments.

Some traders believe liquidity issues may not last. With the Trump administration rolling back bank regulation, they hope trading could improve if banks are allowed to hold more assets that the current rules define as risky.

Traders say smaller bond transactions haven’t been much affected. In corporate bonds, bid-ask spreads have been tighter than where they were before the financial crisis. During recent bursts of market volatility—from the 2013 spike in Treasury yields when the Fed started talking about tapering its bond purchases to the February surge in the Cboe Volatility Index—those spreads barely budged.

Another reason for less liquidity: many investors are more closely tracking bond indexes, creating large demand for newly issued bonds but little appetite for older ones.

The problem with investors managing against an index is that “everyone is chasing the same stuff,” Payden & Rygel’s Mr. Cleveland said.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com and Sam Goldfarb at sam.goldfarb@wsj.com

Appeared in the April 23, 2018, print edition as ‘Investors Find It Harder To Both Buy and Sell.’

https://www.wsj.com/articles/investors-new-headache-its-getting-harder-to-buy-or-sell-when-they-want-1524435467

Asian markets rise as Wall St, N.Korea provide positive lead

April 18, 2018

AFP

© AFP | Fresh news on US-North Korea talks and strong US earnings have provided some much-needed good news to equity traders

HONG KONG (AFP) – Asian markets climbed Wednesday following a rally on Wall Street as easing trade and Syria concerns allowed investors to concentrate on earnings and upbeat data, while fresh news on US-North Korea talks also provided support.New York provided a strong lead, with all three main indexes posting healthy gains on the back of better-than-expected reports from heavyweights including Netflix, Goldman Sachs and Johnson & Johnson.

Adding to the upbeat sentiment was China’s announcement of a timetable to open up its car market as well as news the country’s central bank had eased depositary requirements for most lenders to boost liquidity for businesses.

Hong Kong rose 0.6 percent, Shanghai added 0.2 percent, Sydney advanced 0.3 percent and by the break Tokyo was 1.3 percent higher.

Singapore gained 0.9 percent, while Wellington, Taipei, Manila and Jakarta all climbed, though Shanghai was unable to maintain its early momentum and dipped 0.3 percent

Seoul surged more than one percent and the won was also up as it emerged the US and North Korea had held “talks at the highest levels” as part of efforts to line up a summit between Donald Trump and Kim Jong Un in coming weeks.

The Washington Post also reported that CIA chief Mike Pompeo, Trump’s pick to be secretary of state, made a secret visit to Pyongyang over the first weekend of April and met Kim.

The developments have provided a much-needed shot in the arm for traders after the recent upheaval caused by the simmering China-US trade spat and tensions in Syria following a US-led strike on the country.

Stephen Innes, head of Asia-Pacific trade at OANDA, said the markets were enjoying “a breath of fresh air as traders turn focus to data and corporate profits” though he warned they “remain cautious knowing stock markets are only one presidential tweet away from upsetting the apple cart”.

China’s announcement Tuesday of a timeline for opening up its auto sector hit mainland car companies, with BAIC hammered more than 10 percent, Dongfeng losing five percent and Brilliance China was off 7.5 percent.

The move meets a longtime demand of the US and other countries seeking better access for their companies in the world’s biggest car market and one of the largest markets for air travel.

Authorities said they will remove all limits on shareholding in local firms by 2022, when China will also abolish restrictions limiting foreign automakers to two joint-venture partners.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP percent at 22,130.25 (break)

Hong Kong – Hang Seng: UP 0.6 percent at 30,243.60

Shanghai – Composite: UP 0.2 percent at 3,072.04

Euro/dollar: DOWN at $1.2368 from $1.2375 at 2100 GMT

Dollar/yen: UP at 107.20 yen from 107.03

Pound/dollar: UP at $1.4294 from $1.4291

Oil – West Texas Intermediate: UP 27 cents at $66.79 per barrel

Oil – Brent North Sea: UP 30 cents at $71.88 per barrel

New York – Dow: UP 0.9 percent at 24,786.63 (close)

London – FTSE 100: UP 0.4 percent at 7,226.05 (close)

‘Epic’ market bubble is ready to burst and stocks could plunge, strategist warns

April 5, 2018

April 5, 2018

  • Looking at the S&P 500, from the trough of March 2008 until now, the index has risen by around 287 percent.
  • “This is quite a dangerous situation and it is creating a bubble, and that bubble has just got bigger and bigger and bigger.”

A trader (c) on the New York Stock Exchange looks at stock rates 19 October 1987 as stocks were devastated during one of the most frantic days in the exchange's history.

Maria Bastone | AFP | Getty Images
A trader (c) on the New York Stock Exchange looks at stock rates 19 October 1987 as stocks were devastated during one of the most frantic days in the exchange’s history.

Stock markets could see sharp falls before the end of year as valuations have hit disproportionate levels, one strategist told CNBC’s “Squawk Box Europe” Thursday.

In the wake of the 2008 financial crisis, central banks around the world have pumped trillions of dollars into the global economy to boost lending and encourage growth. However, this massive market intervention has led to a sharp increase in stock prices — taking them to “epic bubble levels,” according to Paul Gambles, the managing director at Thailand-based advisory firm MBMG Group.

“We had a policy response to the global financial crisis (and) at that point stocks were cheap and they had an enormous tailwind behind them in terms of fiscal support,” he said. “This is quite a dangerous situation and it is creating a bubble, and that bubble has just got bigger and bigger and bigger … There isn’t any doubt now (that) in valuation terms we’re in epic bubble proportions, probably the biggest bubble of all time.”

Gambles added that markets could be experiencing a moment similar to 2007, just before the historic market crash. “We now think that there are conditions out there that are prime for that bubble to actually be pricked,” he added.

These conditions include unsynchronized global growth, tighter monetary policy and “chaos” surrounding U.S. politics with the administration’s tougher stance on global trade, according to Gambles.

However, Gambles noted that there were a range of outcomes for markets that were “probably wider than it’s ever been at any time in history.” “We could have a good stock market year, we could have a 20, 30, 40 percent plus correction,” he added.

Fake sector learing the economy

Tech a ‘fragile, almost fake, sector that’s actually leading the economy’: MBMG Group  

Continued support from central banks has made investors more confident on the performance of stock markets over recent years. Looking at the S&P 500, from the trough of March 2008 until now, the index has risen by around 287 percent. In Europe, the benchmark Stoxx 600 has risen 134 percent in the same period.

Speaking to CNBC Wednesday, Jeffrey Gundlach, founder of DoubleLine Capital who is also known as a “bond king,” said that stocks will end the year in negative territory. He cited rising bond yields and a plunge in cryptocurrencies as evidence that equities will move lower.

The yield on the 10-year Treasury yield has been carefully watched by investors. The spike in the yield earlier this year led to a market correction on fears that inflation would be kicking in at a faster pace than markets were expecting. However, such concerns have eased in the last couple of weeks, as central banks confirmed a gradual increase in interest rates. Higher inflation and a faster pace of interest rate increases are usually harmful to stocks, as they impact companies’ earnings.

But such negative views on stock prices are not shared by every analyst. A strategist at Goldman Sachs told CNBC Wednesday that it’s unlikely that stocks will enter an interrupted period of falling prices.

“Without interest rates and inflation expectations really rising very much, it is difficult to see the triggers for a recession anytime soon,” Peter Oppenheimer, chief global equity strategist and head of macro research at Goldman Sachs International, said.

https://www.cnbc.com/2018/04/05/market-bubble-ready-to-burst-and-stocks-could-plunge-strategist-warns.html

Former Merrill Lynch CEO John Thain Slated to Join Deutsche Bank Supervisory Board

March 30, 2018

Ex-UBS, ex-Morgan Stanley executives are also nominated to German lender’s board

John Thain, chief executive officer of CIT Group, speaks during a Bloomberg interview in New York in 2015.
John Thain, chief executive officer of CIT Group, speaks during a Bloomberg interview in New York in 2015. PHOTO: CHRIS GOODNEY/BLOOMBERG NEWS

John Thain, former chief executive of the New York Stock Exchange and crisis-era leader of Merrill Lynch & Co., is expected to join Deutsche Bank AG’s supervisory board in May, according to a person familiar with the board’s plans.

Mr. Thain, a former longtime Goldman Sachs Group Inc. executive and more recently CEO of midsize lender CIT Group Inc., is one of four nominees who have been invited by the German lender’s supervisory board to fill seats coming open this year, the person said.

The 20-member board plans to submit the nominees to shareholders for election at the bank’s annual meeting May 24.

Mr. Thain, 62 years old, would be a high-profile addition to Deutsche Bank’s supervisory board at a trying time for the lender. John Cryan, its CEO since summer 2015, and the board are being tested by three consecutive full-year losses and missed cost-cutting targets, as well as high-level tensions over strategy and performance.

The Wall Street Journal and other media reported this week that Deutsche Bank’s chairman, Paul Achleitner, has reached out externally to potential candidates to replace Mr. Cryan, citing people briefed on the discussions. The outreach raises the possibility that Mr. Cryan could leave before his contract ends in 2020,

Mr. Achleitner didn’t respond to requests for comment. Mr. Cryan didn’t address the reports directly, but a day later told employees in a memo the bank made public that he is “absolutely committed” to serving the lender and carrying out its turnaround strategy.

A logo sits illuminated on a new Deutsche Bank office building in Frankfurt.
A logo sits illuminated on a new Deutsche Bank office building in Frankfurt. PHOTO: KRISZTIAN BOCSI/BLOOMBERG NEWS

Other nominees to the supervisory board are Michele Trogni, former executive at data and analytics firm IHS Markit Ltd. and UBS Group AG, and Mayree Clark, a former longtimeMorgan Stanley wealth-management executive, according to the person familiar with the board’s plans.

The fourth nominee is already known: Deutsche Bank previously announced that Norbert Winkeljohann, a European executive of PricewaterhouseCoopers LLP, would be nominated to the supervisory board this year.

Mr. Thain didn’t immediately respond to a request for comment. The other nominees weren’t immediately reached. Mr. Thain’s nomination was earlier reported by Germany’s WirtschaftsWoche.

Deutsche Bank, like other German companies, has a dual-board structure. The CEO-led management board is directly responsible for strategy and operations; the supervisory board appoints, oversees and dismisses management-board members.

Mr. Thain would bring a long history of experience in financial services, some of it tumultuous.

Early in his career, he spent more than two decades at Goldman Sachs, working his way up the ranks to chief financial officer and president. In 2004, he became head of the New York Stock Exchange. He then became chief executive of Merrill Lynch in late 2007, when the investment bank was grappling with debilitating mortgage-related losses.

He helped orchestrate Merrill’s sale to Bank of America Corp. at the height of the 2008 financial crisis, then lost his job and was lambasted by investors, regulators and politicians for big bonuses paid to Merrill employees. He later told the Journal that he regretted taking the job and having to sell Merrill to Bank of America.

Mr. Thain then earned credit for shepherding a turnaround at CIT Group. He left CIT in 2016.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

https://www.wsj.com/articles/former-merrill-lynch-ceo-john-thain-slated-to-join-deutsche-bank-supervisory-board-1522404222

China’s Xi Starts New Term, With Trusted Deputy to Deal With Trump

March 17, 2018

BEIJING — Xi Jinping started his second term as China’s president on Saturday, flanked by a new vice president, Wang Qishan, who even without any other titles to his name is shaping up as a potent deputy to Mr. Xi, with a potentially powerful say in grappling with the Trump administration over trade disputes.

Mr. Xi and Mr. Wang shook hands after the National People’s Congress, the Communist Party-controlled legislature, endorsed them for the posts in a closely controlled ritual ballot. Mr. Xi won all of the 2,970 votes cast for president, and all but one legislator voted for Mr. Wang, admired and feared for his previous role as the party’s chief anticorruption enforcer, for vice president.

“We all support Wang Qishan to be vice president,” Fang Jianqiao, a delegate from Zhejiang Province in eastern China, said before the vote. “His partnership with President Xi Jinping can promote better contacts abroad,” he said. “It will also help to better fight corruption and promote clean government.”

In China, the vice presidency is not an inherently powerful job. The previous incumbent, Li Yuanchao, faded from view, clouded by corruption scandals involving former subordinates and a widespread impression that Mr. Xi disdained him. But Mr. Wang appears poised to break that pattern and serve as an influential adviser and political guardian for Mr. Xi.

On Sunday, Mr. Xi secured a constitutional change from the congress that ended a two-term limit on the president and vice president, allowing him and, in theory, Mr. Wang to stay in power for at least another decade. Mr. Xi is also Communist Party leader and military chairman.

“Wang Qishan is one of the most important figures in Xi’s inner circle, and this position allows him to retain a formal position,” said Wu Qiang, a former lecturer in political science at Tsinghua University in Beijing who now works as an independent researcher.

“Even in the United States, the vice president is usually ceremonial, there just as backup,” Mr. Wu said. “But Wang Qishan will add substance to the role of vice president. The amendment of the Constitution has raised the status of the presidency, and the vice presidency will also benefit from that.”

Party insiders and experts have said Mr. Xi wants Mr. Wang to act as a counselor, possibly helping to watch economic policy and anticorruption efforts and manage ties with the West, especially with the United States. President Trump has considered placing stiff trade sanctions and investment restrictions on China.

Mr. Wang appears likely to “play a leading role in overseeing U.S.-China relations,” said Ryan Hass, a former director for China at the National Security Council who is now a fellow at the Brookings Institution. Mr. Wang will work alongside Yang Jiechi, the former Chinese Foreign Ministry official who last year was promoted to the Politburo, a council of 25 senior party members, Mr. Hass said.

“Wang will operate at a more strategic level, in theory to help keep the relationship from going off of the rails,” Mr. Hass said.

But Mr. Wang could face a potent rival within the Chinese government for influence over trade policy toward the United States: Liu He, a longtime economic adviser to Mr. Xi who is expected to be named on Monday by the National People’s Congress as one of the country’s four vice premiers.

Mr. Wang will bring longstanding bonds with American politicians and business leaders to the task. His ties to Wall Street executives include John L. Thornton, a former president of Goldman Sachs, who last year helped arrange a meeting between Mr. Wang and Stephen K. Bannon, Mr. Trump’s former chief strategist. Mr. Wang also helped to steer trade and investment talks with Washington.

“He is the man China’s leaders look to for an understanding of the markets and the global economy,” Henry M. Paulson Jr., who was Treasury secretary under President George W. Bush and knew Mr. Wang well, wrote in 2009. “He is a Chinese patriot, but he understands the U.S.”

But Chinese officials have felt frustrated in their attempts to negotiate with Mr. Trump’s White House. There is no sure evidence that Mr. Wang can succeed, especially if Vice President Mike Pence does not emerge as his counterpart to manage tensions, Mr. Hass said.

“Trump really values being the person in the cockpit steering U.S.-China relations,” Mr. Hass said. “So I think Wang Qishan’s impact on the relationship remains an open question.”

While many National People’s Congress delegates welcomed Mr. Wang’s elevation, his election was also a sign of how Mr. Xi has recast political conventions so that he can consolidate power and surround himself with trusted supporters. For five years, from late 2012, Mr. Wang was in charge of the party’s discipline commission, from which he pursued Mr. Xi’s withering drive against corruption and political laxity.

Party sources said last year that Mr. Xi had raised the idea of keeping Mr. Wang in the formal party leadership, which would have bent an unspoken rule that top officials step down if they have reached age 68 when the congress meets to appoint new leadership. Instead, Mr. Wang, now 69, left his party positions at that congress and largely disappeared from public view in the following months.

Read the rest:

NYT:https://www.nytimes.com/2018/03/16/world/asia/china-wang-qishan-vice-president.html

Gary Cohn Out At White House — a big blow to Washington Republicans and business leaders seeking to prevent the president from igniting a global trade war

March 7, 2018

Image may contain: 2 people, people standing and suit

Departure deals blow to Republicans trying to rein in president on tariffs

By Shawn Donnan and Sam Fleming in Washington
Financial Times (FT)

Gary Cohn, Donald Trump’s top economic adviser, has resigned after losing a heated White House battle over tariffs, dealing a big blow to Washington Republicans and business leaders seeking to prevent the president from igniting a global trade war.

The exit is the latest in a series of high-level White House departures and is likely to fuel concerns about an administration in chaos. It will also raise questions about the direction of US economic policy now that Mr Cohn — a pro-trade, pro-market former Wall Street banker — is no longer heading the National Economic Council.

Stock prices and the dollar remained lower as markets considered the implications, with the S&P 500 off 1.2 per cent in after-hours trading in New York. Bond prices also strengthened, a signal of demand for safe assets, while equities also fell in Asia and Europe.

In a statement, the White House said Mr Cohn, the 57-year-old former number two at Goldman Sachs who was once considered by Mr Trump as a candidate to lead the Federal Reserve, would be leaving in the coming weeks.

“It has been an honour to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform,” Mr Cohn said. “I am grateful to the president for giving me this opportunity and wish him and the administration great success in the future.”

This is a very jarring moment. Folks have a sense of there being no brakes left on the vehicle and the steering wheel having come off

Mr Trump tweeted that he would be “making a decision soon on the appointment of new Chief Economic Advisor. Many people wanting the job — will choose wisely!”

In a statement, the president said Mr Cohn had done “a superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again”. He added: “He is a rare talent, and I thank him for his dedicated service to the American people.”

A pragmatic, focused leader who was popular among White House staffers, Mr Cohn is understood to have resisted to the end Mr Trump’s plans to roll out steel and aluminium tariffs in the name of US national security. He has been joined in opposition to the plan by cabinet members including Steven Mnuchin, Treasury secretary; Rex Tillerson, secretary of state; and Jim Mattis, defence secretary.

Earlier in the day, the president dismissed reports of chaos within his administration, saying his White House had “tremendous energy”. But the president conceded: “I like conflict . . . I like watching it, I like seeing it, and I think it’s the best way to go. I like different points of view.”

Mr Cohn’s resignation comes in the immediate aftermath of the departures of Hope Hicks, former White House communications director, and Rob Porter, who was the staff secretary. It coincides with concerns that the policymaking process has become disorderly despite the presence of John Kelly, who replaced Reince Priebus as chief of staff last year.

Mr Cohn is leaving after Mr Trump ignored his advice and made an ad hoc announcement last week that he planned to impose tariffs of 25 per cent on steel and 10 per cent on aluminium on imports from all countries.

Mr Trump is expected to sign those tariffs into law in the coming days. The EU, Canada and other countries have vowed to retaliate.

Mr Cohn was seen as the most effective voice among centrist pro-trade and pro-business Trump advisers. In the short term, the result is likely to be a powershift toward economic nationalists such as Peter Navarro, a trade adviser, and Wilbur Ross, commerce secretary, both advocates of high tariffs on steel and aluminium.

One Republican policy expert said party leaders, almost all of whom oppose Mr Trump’s tariffs plan, considered Mr Cohn a “guarantor of stability on economic issues”.

“This is a very jarring moment,” the expert said. “Folks have a sense of there being no brakes left on the vehicle and the steering wheel having come off.”

Steve Moore, a Heritage Foundation economist who advised the Trump campaign, said he believed that Larry Kudlow, a CNBC commentator and former Reagan administration official, would be a contender to replace Mr Cohn. “Larry is a great communicator — he can communicate the message on tax cuts, growth and deregulation, the energy policies that Donald Trump has been promoting,” he said.

Mr Kudlow, however, has also been an outspoken critic of Mr Trump’s tariffs plan. “We are imposing sanctions on our own country,” he wrote in a CNBC column. “If ever there were a crisis of logic, this is it.”

Some senior Republicans in Congress openly bemoaned Mr Cohn’s departure. “Gary Cohn has been a strong voice for free markets and one that will be missed,” said Jeb Hensarling, chairman of the House Financial Services Committee.

“The administration will look very different without him. It will look more populist,” said Michael Strain of the American Enterprise Institute. “Gary Cohn was a leader of the camp in the White House that supported free trade and a traditional — in my view correct — understanding of global commerce. Having him leave is a blow in that important policy area.”

Lloyd Blankfein, Mr Cohn’s former boss at Goldman Sachs, tweeted: “Gary Cohn deserves credit for serving his country in a first class way. I’m sure I join many others who are disappointed to see him leave.”

Mr Cohn’s standing with the president suffered a big blow in August after he broke with Mr Trump over violent protests by neo-Nazis and white supremacists in Charlottesville, Virginia, that left one woman dead.

Mr Cohn told the Financial Times after that episode that he had felt “enormous pressure” to quit following the uproar over the president’s comments blaming “both sides” for the violence and suggesting there were “very fine people” among white supremacist groups.

Mr Cohn went on to play an important role in the main legislative achievement of the Trump administration — the tax reform package passed by Congress late year. But speculation over his potential exit never went away.

Additional reporting by Nicole Bullock in New York

https://www.ft.com/content/56e349a2-2192-11e8-a895-1ba1f72c2c11