Davidson Kempner continues to make money by focusing on beat up loans—despite the general perception that bonds have little to offer investors.» Read More
Happy Wednesday. We now return to our regularly scheduled program of spring.
Changes to census questions will make it impossible to gauge the effects of Obamacare accurately, which you might imagine has some folks pretty steamed. (New York Post)
Bill Ackman wants the world to have a better understanding of why people act the way they do.
Harvard University announced Monday that The Pershing Square Foundation, founded by hedge fund manager Ackman and his wife, Karen, who are both alums, awarded the school $17 million to establish three endowed professorships and establish a $5 million research venture fund for Harvard faculty and students, according to a university press release.
The Ackmans' funding will go toward Harvard's Foundations of Human Behavior Initiative. Its goal is to "drive transformative insights about the psychological, social, economic, and biological mechanisms that influence human behavior, and then help translate that new knowledge into mechanisms for improving human well-being across the world," according a statement by the school.
Major market averages may not have much further to fall before indicating that something considerably worse is in store.
Technical analysis is putting key stock indicators near what Walter Zimmerman, chief market technician at United-ICAP, calls the "must-hold" levels—areas that have not been violated since the March 2009 lows that kicked off the heretofore powerful bull market run.
For the S&P 500, that line in the sand happens at the 1,785 level—just about 2 percent from trading levels at midday Tuesday.
For the Nasdaq, which is receiving more attention since it has suffered the steeper declines and is near a correction drop of 10 percent, the level is around 3,830—about 3.5 percent from the current mark.
Break those points, and Zimmerman warns that a highly uncomfortable time lies ahead for bullish investors.
Here's a scary retirement prediction: 85 percent of public pensions could fail in 30 years.
That's according to the largest hedge fund firm in the world, Bridgewater Associates, which runs $150 billion for pensions and other institutions like endowments and foundations.
Public pensions have just $3 trillion in assets to cover liabilities that will balloon to $10 trillion in future decades, Bridgewater said in a client note last week obtained by USA Today.
To make up the difference, the firm said pensions will need to earn about 9 percent per year on their investments. But Bridgewater estimates pension funds are more likely to make 4 percent. If that's true, the vast majority—85 percent—of retirement systems will run out of money because they will continue to pay out more than they take in.
The report comes as pensions wrestle with what rates of return to assume given their implications on future financial health.
The city of Detroit, for example, has reportedly agreed to increase its pensions' projected return to 6.75 percent on its pension funds, up from 6.25 percent and 6.5 percent, according to a separate USA Today report. The change is part of ongoing pension cut negotiations for the city to exit bankruptcy.
Happy Tuesday. We interrupt our regularly scheduled springtime to bring you ... snow?
Fear not: Even if there are flurries forecast for parts of the Northeast, economists are getting optimistic that the real winter chill has begun to fade. (HeraldNet)
Even in liberal California, most residents there are saying that taxes are just way too high. (Breitbart)
Balestra Capital, the hedge fund firm founded by James Melcher in 1979, is set to lose two senior leaders.
Norman Cerk and Matthew Luckett have decided to resign from the firm on June 30, according to an investor letter obtained by CNBC.com Monday evening.
Cerk and Luckett are co-portfolio managers of Balestra's flagship hedge fund. Cerk joined Balestra in 1997 and is head trader. Luckett joined in 2004 and is responsible for portfolio strategy, research and risk, according to the firm's website.
"Over the last few months, it became increasingly clear that we need a single voice and vision regarding the future of the Firm and the portfolio management of Balestra Capital Partners," the letter said. Melcher will resume serving as the sole portfolio manager for the fund. Balestra managed $1.64 billion as of Jan. 1, according to a regulatory filing.
A spokeswoman for Balestra did not immediately respond to a request for comment.
A senior investment banker at Barclays is set to leave following a combined 17 years at the bank and the one it acquired, Lehman Brothers.
Larry Wieseneck, now head of global distribution and structuring at Barclays, will depart in June to "pursue other interests," according to an internal memo sent to employees today that was obtained by CNBC.com.
Private equity investors have long looked to four large emerging markets for big returns: Brazil, Russia, India, and China. But the BRICs today don't quite fit the fast-growth that Goldman Sachs strategist Jim O'Neill described in the 2001 paper that coined the widely used acronym.
With each BRIC economy in some sort of trouble, private equity firms are increasingly putting their investment dollars to work in other less-developed markets—especially Southeast Asia and Sub-Saharan Africa—in hopes of better returns.
Money invested in non-BRIC emerging markets increased 18 percent in 2013, reaching a five-year high of $11 billion and representing 44 percent of total capital invested in emerging markets, according to a recent study by the Emerging Markets Private Equity Association. At the same time, total capital invested in the BRICs declined 20 percent between 2012 and 2013 and was 38 percent lower than in 2011.
"Investors are certainly looking beyond the BRICs, acknowledging that consumer driven growth is accelerating most in these new markets," said Aly Jeddy, partner at The Abraaj Group, a global private equity firm that runs $7.5 billion across more than 20 sector and country-specific funds. "Investors are increasingly as wary of BRICs hype as they are weary of the unattractive returns many of the funds in these markets have delivered."
To be sure, the BRICs are still a force. China, India and Brazil alone still accounted for more than 50 percent of total capital invested in emerging markets and more than 30 percent of all funds raised, according to the same EMPEA report. But the recent pullback in all funds raised from investors for emerging markets—from $45 billion in 2012 to $36 billion in 2013—was largely a result of fewer funds raised targeting China, India and Brazil.
No region has gotten more money outside the BRICs than Southeast Asia.
In 2013, fund managers invested a five-year high of $2.2 billion and raised $2.9 billion for the region, a six-year high. In 2011, so-called emerging Asia countries like Indonesia, Malaysia, the Philippines, Thailand and Vietnam received just 7 percent of emerging market private equity investment. That increased to 17 percent in 2012, and 23 percent in 2013.
The first-quarter earnings season looks to offer something the market hasn't seen in years. Subsequent quarters likely will have to keep up or it could be an ugly year for corporate America.
Total sales could top bottom-line profits, a turnaround that comes after corporations had spent quarter after quarter slashing costs through layoffs and other forms of austerity. At the same time, revenue lagged amid weak demand and a general lack of confidence.
So in some respects this could be what the market has been waiting for since the financial crisis and the accompanying recession—that point where consumers are willing to take the handoff and generate growth.
"At the end of the day this is what the market needs to move forward," said Quincy Krosby, chief market strategist at Prudential Annuities. "It shows us the demand. Where is the demand coming from and how much is it? Which sectors is the demand coming from? It's a multifaceted picture of demand. That is what the market is demanding right now."
First-quarter earnings looked very different for two of Wall Street's biggest banks.
For Wells Fargo, the news was good: Credit losses, which had been a drag on profits, eased. Consumer and commercial loans were up, and there was even good news in what had been an otherwise terrible quarter for mortgages: A renewed effort in subprime loans—now euphemistically called "another chance mortgages"—could reverse slowing mortgage activity as Wells drops FICO credit score requirements from 640 to 600.
Across the way, at JPMorgan Chase, the news was nowhere near as positive: Trading fell, loan growth painted, at best, a mixed picture and the mortgage business all but collapsed with little hope on the horizon.
Investors reacted in kind. Shares of Wells, the third-ranked U.S. bank by deposits, rose 1.1 percent, and JPMorgan, the No. 1-ranked bank, fell 3 percent.
Hedge funds have seen the worst start to the year since the financial crisis, as returns in January and March were both in the red.
The Fed indicated to Citi that it would get more time to fix "stress test" planning problems before rejecting its capital plan.
Goldman Sachs reported quarterly earnings and revenue that topped analysts' expectations on Thursday.