Here's how the wealthiest people may manage their fortunes in 25 years.» Read More
In the world of finance, the landscape is likely to be a lot different in 25 years than it is today. Here's a look at how things might shape up, and who the big players in banking will be, in order of importance.
Tie: Google, Facebook
Both Google and Facebook have made their intentions in the financial services space known and could use their technological prowess to upend traditional banking. Google's nascent effort is leveraging a debit-type card; Facebook will likely leverage its vast network when it secures a banking license in Europe next month.
Bank of America has the country's largest retail customer base, serving 49 million consumers and small businesses. Facebook has 1.28 billion monthly active users, and Google's numbers could be even higher:
Til Schuermann, partner at Oliver Wyman and former Federal Reserve official, said clients are more worried about Google than rival banks.
"Google is unencumbered by the old way of doing things, cognizant of new opportunities," he said.
Maybe it was the martini that helped Carl Icahn publicly support longtime nemesis Bill Ackman.
"I never thought I'd be defending him, but I don't think there's anything wrong with that," Icahn said of the Pershing Square Capital Management founder's bid for Allergan with Valeant during a CNBC interview Tuesday night at the IMN Active-Passive Investor Summit in New York.
"We have our differences, but I never said he's not a smart guy. I think the concept of this is good. I hope it works out better for him than Herbalife did, and I think it will," Icahn added shortly after taking sips from a martini passed to him while on camera. "There's nothing wrong with making a bid for a company and using someone else's funds."
Icahn added he would consider teaming up with a company to make a hostile bid for another, like Ackman. "Any activism is good as long as it's legal," the billionaire chairman of Icahn Enterprises said.
The Einhorn effect appears to be alive and well.
Shares of SunEdison and Conn's jumped Tuesday on news that David Einhorn's Greenlight Capital had opened new positions in them, continuing the tradition of traders acting in agreement with the hedge fund manager.
SunEdison rose from $18.79 a share just before news broke to close at just above $20, up 11.8 percent for the day. Conn's was trading at $43.82 until shortly before 2 p.m.; that shot up to about $48 before settling at $46.98 at market close, up 7.65 percent on the day. Sun rose marginally in Wednesday trading, while Conn's gave back some of its gains.
Those moves echoed the sharp movements Einhorn has caused in the past. In May 2012, for example, shares of Herbalife fell about 20 percent after Einhorn asked questions during a company call. In December 2010, Einhorn said on CNBC that he had bought a stake in Sprint Nextel; shares jumped more than 6 percent that day.
Happy Wednesday and welcome to the Morning Six-Pack, where we're always trying to beat analyst estimates and surprise to the upside.
What's French for "junk"? Apparently it doesn't matter, with the largest high-yield bond sale in history about to commence. (Forbes)
Hedge fund managers are still bullish on Japan despite a painful start to the year.
After large gains in 2013, the Nikkei 225 stock index is down nearly 11 percent this year. The Japanese yen, which many investors were betting against, has also appreciated almost 3 percent versus the U.S. dollar.
Those broad moves have cost investors: The average Japanese stock-focused hedge fund fell an estimated 5.75 percent over the first quarter, according to data from Simplify, which tracks performance.
Hedge funds appear to be unfazed by the bad news.
The Supreme Court is hearing an important case regarding TV streaming rights, but apparently its members haven't much of a clue as to how technology works these days.
From Chief Justice John Roberts not knowing the difference between email and a pager to Justice Stephen Breyer admitting he didn't understand the movie "The Social Network" that chronicled the birth of Facebook, the Supremes showed that while they may know the law, they don't know the 'Net, according to an account from New York magazine.
The case involves TV networks trying to stop Aereo from streaming their content over its website to paying customers.
There were at least eight fairly significant technology flubs by the justices, as chronicled by nymag.com in a post you can see here.
Count David Einhorn on team Michael Lewis.
"Michael Lewis's new book 'Flash Boys,' like all his books, is a fun read and is based on a true story. It brings attention to some areas of the market that can improve further, and a few areas of possible abuse," Greenlight Capital, which Einhorn heads, said in an investor letter Tuesday.
"There are many legitimate and even beneficial aspects to computerized trading, including market making and statistical arbitrage, yet there are also some areas that are ripe for reform. Most glaring is the latency arbitrage that is used to identify the presence of large institutional orders for the sole purposed of legally front-running them."
David Einhorn has a clear warning for technology investors: we're in a bubble.
"Now there is a clear consensus that we are witnessing our second tech bubble in 15 years," Greenlight Capital said in an investor letter Tuesday. "What is uncertain is how much further the bubble can expand, and what might pop it."
The firm said there were several indications of the over-exuberance, including the rejection of conventional valuation methods; short sellers forced to cover their positions because of losses; and "huge" first-day stock appreciations after their initial public offerings.
"The current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm," the letter said. The firm said it was shorting a group of undisclosed "high-flying momentum stocks."
One of the hottest topics of market conversation Tuesday was Bill Ackman's move to join Valeant in a takeover bid for Allergan. But there also was another huge move in pharma overnight that didn't garner near the attention.
One astute trader picked up $250,000 overnight by buying options in Furiex Pharmaceuticals, which develops drugs used in compound development and collaboration and saw its shares spike, according to an analysis by Andrew Keene of KeeneOnTheMarket.com.
Read how the trade broke down here.
This arrangement, in which Ackman bought a 9.7 percent stake in the Botox maker at the behest of Valeant, was not front-running and not insider trading, Ackman said in a "Squawk Box" interview.
He said his lawyer—Robert Khuzami, former director of enforcement at the SEC—vetted the Valeant partnership and deemed it legal.
"The way the rules work is you're actually permitted to trade on inside information ... as long as you didn't receive the information from someone who breached … fiduciary duty or duty of confidentiality, et cetera," Ackman said.
"Valeant basically came to us and said, 'Look, if you can help us buy Allergan we can work with you.' We said, 'Great,' and we formed a partnership," he said. "The partnership has various terms. It gives us the right and permission from the company to go buy a stake in Allergan."
The founder of the Pershing Square Capital Management hedge fund—with $13 billion in assets under management—said he was not in the market buying Allergan stock before that.
Ian Harnett, a European analyst at Absolute Strategy Research, believes stocks will rally another 20 percent in 2014.
Facebook and Apple initially cheered markets, but the bounce didn't last long.
Michael Yoshikami is no Apple fanboy but he thinks the company's innovation pipeline did not die with Steve Jobs and it's ridiculous to say otherwise.