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  Monday, 7 Jul 2014 | 1:36 PM ET

Ackman leads small group of hedge outperformers

Posted By: Kate Kelly

The S&P 500 may have rallied 6 percent during the first half of the year, but the average hedge fund appears to have trailed that substantially—the exceptions being seasoned stock and bond pickers who managed to outperform their peers with careful research and fortunate timing.

Through the end of May, the average fund was up just 2 percent, according to HFR. The hedge fund researcher won't release its end-of-June data until Tuesday, but anecdotal evidence suggests that while the figure may have improved, it will still fall well shy of the benchmark stock market index.

Some of the larger macro players, like the main funds at Moore and Tudor, that bet on worldwide economic trends through a wide swath of stocks, bonds, and currencies, were underwater during the first half of the year, according to a popular hedge fund performance report issued by the British bank HSBC.

»Read more
  Wednesday, 2 Jul 2014 | 11:57 AM ET

Pimco flagship fund is still bleeding billions

Posted By: Jeff Cox
Paul McCulley and Bill Gross.
CNBC
Paul McCulley and Bill Gross.

Investors in June continued to pull money from Pimco's flagship bond fund, despite the high-profile return of one of the firm's top executives.

The Pimco Total Return fund registered its 14th consecutive month of outflows as investors pulled $4.5 billion, which actually was an increase from May's $4.3 billion, according to Morningstar. Those outflows came despite the return of Paul McCulley, who rejoined Pimco in late May as managing director and chief economist, and as the fund gained 0.34 percent, about double that of its peers.

Assets for the fund contracted to $225 billion, though it remains the largest mutual fund in the world and boasted $292.9 billion in April 2013. Pimco manages just below $2 trillion overall.

Total Return has underperformed its benchmark and its peers in 2014. The fund has returned 3.51 percent, compared to 3.93 percent for the Barclays Aggregate Bond index, and the 4.09 percent of its category. It lost 2.3 percent in 2013, which also was worse than its competitors.

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  Tuesday, 1 Jul 2014 | 1:39 PM ET

Ex-CalPERS head to plead guilty

Posted By: CNBC.com staff
Signage stands outside the offices of the California Public Employees' Retirement System (Calpers) in Sacramento, California.
Ken James | Bloomberg | Getty Images
Signage stands outside the offices of the California Public Employees' Retirement System (Calpers) in Sacramento, California.

The former head of the largest public pension system in the country is set to plead guilty for illegally steering private equity placement fees to a friend.

Federico Buenrostro, previously CEO of the California Public Employees' Retirement System, has agreed to enter a plea to a single count of conspiracy, according to a Los Angeles Times report citing statements by his lawyer, William Portanova.

After years of denial, Buenrostro will now help prosecutors build a criminal case against co-defendant Alfred Villalobos, a former CalPERS board member, according to the report.

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  Tuesday, 1 Jul 2014 | 1:49 PM ET

Only this can save earnings season

Posted By: Jeff Cox
Jin Lee | Bloomberg | Getty Images

Investor expectations are growing for the second half of 2014, with consensus belief that the thus-far weak economy will turn around and the raging bull market is not yet out of steam.

We'll soon find out if those high hopes are justified.

Company earnings reports start up in earnest in another week or so, with Wall Street expecting the S&P 500 to show gains of 6.7 percent in bottom-line profit (down from 10.3 percent in January) and 2.8 percent in revenue, according to S&P Capital IQ.

Once things get going, the Street will be watching not so much the backward-looking profit numbers but rather forward-looking statements. Specifically, the focus should be on three things: whether companies will continue share repurchases; the level of planned investment through capital expenditures; and how confident companies are with future growth.

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  Tuesday, 1 Jul 2014 | 2:19 PM ET

Why cyber-insurance will be the next big thing

Posted By: Mary Thompson
Aetb | iStock | Getty Images

Earlier this year, New York City-based staffing agency Clarity bought cyber-insurance for the first time. This spring it added more coverage.

"We were actually hearing about it from our clients," said Elizabeth Wade, Clarity's operations manager. "They were asking us about it and in order to prevent being behind the eight ball we felt like we really wanted to be proactive and get the insurance 'cause we knew it was something that was important to our clients, and then it was important to us as well."

With a staff of 30, Clarity was looking to protect the information it takes from the clients it places, like their Social Security numbers and dates of birth. The initial coverage it bought from insurer CNA covered any legal costs and the costs of lost business that would come with a breach. This spring it added coverage for credit monitoring if its client data are hacked.

Clarity is one of a growing number of small businesses buying cyber-insurance, and one of the reasons sales of this product are skyrocketing.

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  Monday, 30 Jun 2014 | 11:16 AM ET

Fed chief moves in; there goes the neighborhood

Posted By: CNBC.com staff
Janet Yellen, chair of the U.S. Federal Reserve.
Getty Images
Janet Yellen, chair of the U.S. Federal Reserve.

Federal Reserve Chair Janet Yellen and former FBI Director Robert Mueller both live in the same, uppity Washington, D.C., neighborhood. Guess whose security detail is causing more trouble for neighbors?

That's right, it's the central bank chief and her guards with "doughnut bellies," as one neighbor described the entourage that's upsetting fellow Hillandale residents, according to a report Monday in The Wall Street Journal. Neighbors complain that Yellen's detail has unsettled the gated development. Their security trucks and offensive blue uniforms also have upset what had been a relatively calm setting, in a city used to excessive accommodations for VIPs.

Former FBI lead "Bob Mueller, who you would think would have a much more dangerous job dealing with terrorists all over the world, had people who were businesslike, didn't socialize, and waited for him outside the gate," one unidentified resident told the newspaper. "Now we have this group, overweight, wearing the most ridiculous blue uniforms with the most ridiculous blue caps, and they have guns that are visible."

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  Tuesday, 1 Jul 2014 | 7:05 AM ET

Best and worst predictions of the past 25 years

Posted By: Jeff Cox

Nassim Taleb would have to be on anyone's list of the top market prognosticators over the past 25 years, but the honor drips with irony.

Taleb, after all, is best known for making something akin to a prediction in a book that railed against predicting.

In his book "The Black Swan: The Impact of the Highly Improbable," the author and New York University professor warned against the inability to foresee unusual events that have severe consequences. The book was published in 2007, just as the financial industry was beginning to crumble under the weight of toxic bets on home loans to low-quality borrowers.

After its release, Taleb was hailed as a visionary for seeing that the financial system was dangerously interconnected and that giant institutions posed grave dangers.

But he warned repeatedly against investors relying on market and economic soothsayers whose proclamations usually emanated from severe cases of collective thinking and confirmation bias.

"Our predictors may be good at predicting the ordinary, but not the irregular, and this is where they ultimately fail. ... What matters is not how often you are right but how large your cumulative errors are," Taleb wrote.

"And these cumulative errors depend largely on the big surprises, the big opportunities. Not only do economic, financial and political predictors miss them, but they are quite ashamed to say anything outlandish to their clients—and yet events, it turns out, are almost always outlandish. Furthermore …economic forecasters tend to fall closer to one another than to the resulting outcome. Nobody wants to be off the wall."

Yet the financial markets are littered with forecasters, most with either an outwardly bullish (optimistic) or bearish (pessimistic) bias. Most of them missed the financial crisis when it hit by being too bullish, and some have been too bearish since, worrying that another systemic collapse is around the corner when in fact equity markets, at least, continue to zoom to new highs.

Indeed, there have been some great calls and some awful ones over the past 25 years. Here is a look at some of them, in no particular order:

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  Monday, 30 Jun 2014 | 7:00 AM ET

2039: An investment space odyssey

Posted By: Lawrence Delevingne
Still of Hal 9000 from the motion picture 2001: A Space Odyssey
Source: Metro-Goldwyn-Mayer | YouTube
Still of Hal 9000 from the motion picture 2001: A Space Odyssey

Investing was far different in 1989.

American mutual funds managed just $980 billion, about one-fifteenth of their assets today. Index and exchange-traded products didn't exist. Alternatives like hedge, private equity and venture capital funds were relatively secretive, niche vehicles for a privileged group of wealthy individuals and big institutions. Financial advisors charged hefty fees to put clients in a mix of stocks and bonds and mail them monthly progress reports.

In short, a lot has changed.

The next 25 years are likely to prove just as revolutionary, according to leading investment industry experts. Actively managed mutual funds could be a relic thanks to instantaneous access to computer-driven index funds. Algorithms may replace many financial advisors. Once exotic, exclusive "alternative" funds seem poised to go mainstream, often available with the click of a mouse. Call it the robot era of investing.

"In 2039, it will be common for investors to have their portfolios managed by algorithms rather than by humans," said Andrew Lo, a professor of finance and the director of the Laboratory for Financial Engineering at the MIT Sloan School of Management. "The algorithms will incorporate individual or institutional preferences, constraints and lifetime goals in a seamless and optimal fashion to maximize the chances of achieving those goals."

Lo believes that investors will stop choosing between mutual funds that allocate to small- or large-cap stocks, for example, and instead send comprehensive personal data to an online financial management portal. That software will analyze both short- and long-term financial needs and design the most efficient investment plan to meet them. The program robot will then execute the plan automatically, providing updates to the investor and adjustments to the portfolio as needed.

In other words, investors will be offered tools that provide holistic, automated solutions, not do-it-yourself products. Or as Lo puts it, "Meet the financial equivalent of HAL in '2001: A Space Odyssey'!"

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  Thursday, 26 Jun 2014 | 2:40 PM ET

Don't worry! The market only looks boring

Posted By: Jeff Cox
Trader on the floor of the New York Stock Exchange, May 21, 2014.
Getty Images
Trader on the floor of the New York Stock Exchange, May 21, 2014.

Investor wariness of stock market volatility may only appear to be low.

Traditional measures of market complacency show it at levels rarely seen since before the financial crisis—and headed toward historic troughs. Most notably, the CBOE Volatility Index has been on a consistent downtrend throughout 2014, despite an unexpectedly weak economy in the first part of the year and almost daily geopolitical disruptions.

Forget standard volatility though, for a minute.

Looking at implied volatility rather than historic volatility gives a different picture of market expectations. (Historical volatility measures daily price movements while implied volatility looks at expected price changes.)

Options traders are expecting implied volatility to rise on many of the stocks in the blue-chip Dow Jones Industrial Average.

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  Friday, 27 Jun 2014 | 2:21 PM ET

Dark pools in crosshairs after Barclays charges

Posted By: Jeff Cox
Chris Ratcliffe | Bloomberg | Getty Images

Efforts to reform dark pool stock trading likely got a lift from accusations this week leveled against Barclays.

While industry insiders don't see an existential threat to dark pools, many think the high-profile case against the British bank will act as a clarion call for change.

"This Barclays thing is probably the spark that will start to clean things up," said Joe Saluzzi, co-founder of Themis Trading and an aggressive advocate in reforming the current trading climate. "Dark pools got out of control."

In a complaint filed by New York Attorney General Eric Schneiderman, Barclays stands accused of using its private trading system to benefit high-speed traders at the expense of other investors. The civil fraud case also alleges that the bank used marketing materials to falsely portray its system as set up to protect investors from predatory trading behavior.

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About NetNet

  • NetNet is where you'll find the low-down and the high jinks of Wall Street. It's the place for insider stories, trader gossip, and tales of the foibles of the moneyed crowd and the culture of finance.Wall Street news and commentary served fresh all day long.

 

  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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