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For the first time in nearly five years, credit card default rates are on the rise.
While still low on a relative basis, the February default rate for bank cards increased nearly a quarter percentage point, from 2.61 percent to 2.84 percent, according to the latest S&P/Experian Consumer Credit Default Rate report. On a year-over-year basis, the rate was up a tick from February 2014's 2.83 percent. ( Tweet This )
Though a small amount, the annualized increase was the first for bank cards since July 2010.
Rather than signal a warning sign of looming credit problems, the number actually could be seen as a positive that people are gaining confidence, said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
A market that just a week ago worried that the Federal Reserve would begin raising rates too soon is now entertaining a very different set of possibilities.
The most extreme among them: Speculation over a chance, however remote, that the Fed may not only tighten later and slower than expected, but may choose to employ a mini-hike as a baby step measure toward taking away the proverbial monetary punch bowl.
Goldman Sachs' chief economist, Jan Hatzius, included the possibility in a note to clients on what to expect from a suddenly ultradovish Open Market Committee.
"For the sake of completeness, there is also a small chance that the Committee could decide to go with a 'mini' first hike, for example an increase in the target range of only (one-eighth) percentage point," Hatzius wrote. While stressing that the Goldman economic team does "not believe this is a likely outcome," he added that "an extremely gradual lift off of zero might be preferred after almost seven years of zero interest rates, in case any unwelcome surprises occur."
The possibility seems less remote given that such a surprise could come in the form of an economy not performing up to expectations.
Venture capital investors would be dopes to pass up this opportunity.
Colorado's burgeoning legalized marijuana trade is smoking hot and now worth more than $1 billion, according to an analysis from the New York-based Convergex brokerage. ( Tweet This )
That's "a number so hard to reach that tech (venture capitalists) call any company worth that much a 'Unicorn,'" stated a note from the firm's Nicholas Colas and Jessica Rabe. The marijuana buzz has entrepreneurs "trying to get ahead of the competition as more states legalize the drug or are finding indirect ways to invest, particularly in the tech community."
Convergex has been tracking the industry since it was legalized in Colorado in 2012. The brokerage found that banks are generally loath to lend to anyone looking to start a pot-related business, though it did find one credit union "that aims to serve the cannabis and hemp industries specifically."
A hedge fund manager who warned about the last financial crisis is seeing parallels of that run-up in the market today.
"I think it is a truly scary time," Andy Redleaf, CEO of $4.2 billion hedge and mutual fund manager Whitebox Advisors, said in an internal memo Sunday night obtained by CNBC.com. (Tweet This)
The Sohn Investment Conference is back on this year for its 20th edition, and the money managers slated to speak are as big as ever.
The May 4 New York charity event, which raises money to cure and treat pediatric cancer, will include investment idea presentations from BillAckman of Pershing Square Capital Management, Leon Cooperman of Omega Advisors, David Einhorn of Greenlight Capital, Larry Robbins of Glenview Capital Management and David Tepper of Appaloosa Management, among others.
"Wall Street's best and brightest investors participate in this unique, 'must attend' event to share their expertise with an audience of more than 3,000 people, comprised of portfolio managers, asset allocators and private investors," event materials explain.
With the Federal Reserve nearing its first rate increase in about 6½ years, bond investors are bracing for the shock.
Fixed income funds in recent weeks have seen their biggest cash outflows since 2013's "taper tantrum," which occurred after then-Fed chairman Ben Bernanke first signaled to the markets that the central bank's massive liquidity program was coming to an end.
Bond exchange-traded funds have coughed up $7.3 billion in March, a pace that if continued would exceed the exodus that began in May 2013, according to market data firm TrimTabs.
The market is bracing itself for the Fed's direction this year as the Open Markets Committee prepares for liftoff from a policy instituted during the dark days of the financial crisis. The FOMC dropped its target funds rate to near zero—0.11 percent as of Friday—and targeted gains in unemployment and inflation before it would raise. On its face, the funds rate dictates how much banks charge each other to borrow money, but at its core it determines lending rates throughout the economy.
On Wednesday, the FOMC is set to conclude its March meeting, with expectations that it will drop the word "patient" from the post-meeting policy statement. That in turn would signal to markets that a rate hike is coming, likely either in June or September.
However, the U.S. economy has slowed considerably, with many economists taking down growth projections for the first quarter from close to 3 percent to less than 2 percent. One indicator, from the Atlanta Fed, has Q1 growth at 0.6 percent.
In an analysis accompanying the flows report, TrimTabs said the recent economic developments, which have seen anemic levels of retail sales, production, producer prices and construction, could point to a longer delay for a Fed rate hike.
"Most of the macroeconomic data we track points to a loss of economic momentum rather than an acceleration in growth; debt levels in the economy are very high, and the U.S. dollar has exploded higher as central banks around the world compete to outdo one another with stimulative policies," the report said.
Indeed, despite the bearish fund flows, the benchmark 10-year Treasury traded at 2.08 percent Monday afternoon—about where it started the month, and considerably off the most recent high of 2.24 percent on March 6.
Still, some investors aren't taking any chances amid the volatile gyrations in the market.
A look at flows for individual ETFs shows how much has fled from bond-based funds in March, with one corporate bond offering shedding more than $1.8 billion alone:
A single bad currency bet has caused one of the largest and longest-standing private investors in emerging markets to collapse.
Everest Capital—a 25-year-old hedge fund firm that counted George Soros and Nelson Peltz as early backers and has ties to Condoleezza Rice and Robert Gates—is closing six of its seven remaining hedge funds, according to a private letter sent to investors Feb. 24.
The move comes after its largest fund, Everest Capital Global, suffered crippling losses in January and was shut down.
Everest, which overall managed more than $3 billion at the end of December, had bets on the Swiss franc that backfired when the Swiss National Bank shocked markets in mid-January by removing a cap on the currency's value versus the euro. That caused the Swiss franc to soar more than 30 percent versus the euro, burning many investors in what had seemed like a low-risk trade.
The exact loss for Everest was unclear, but it was likely magnified by borrowed money, according to experts. A large portion of the fund's $830 million assets was wiped out, according to a person familiar with the situation.
"I am saddened that our firm—which over the past 24 years identified and invested in hundreds of exciting investment opportunities in emerging markets—will cease to operate in its current form as a result of the events impacting the Global Fund," founder Marko Dimitrijevic wrote in the letter.
Shadow banking in general has come back to life after getting hammered during the financial crisis, but one segment has been especially rampant.
Peer-to-peer (P2P) lending, in which loans are made privately through individuals who most often connect through a network of relatively new websites, has exploded over the past five years. It is now the fastest-growing sector of non-bank lending, according to an exhaustive Goldman Sachs report on the shadow banking industry.
The P2P industry had just $26 million in loan issuance back in 2009, as the worst of the banking crisis passed; but that figure now stands at a robust $1.7 billion. While that's still a fraction of the total $12 trillion in loans across the U.S., and even pales in comparison to the $4 trillion in total shadow bank loans, it represents a growth of 65 times during the period.
"Personal lending (installment and card) is likely to continue to see disruption as the benefits of a lesser regulatory burden, lower capital requirements and a slimmer cost structure [over time] drive pricing advantages for new players...leading to share moving away from traditional players," Goldman said in its report.
Broadly speaking, shadow banking refers to nonbank lending, with total liabilities in the industry put at $15 trillion. That's a decline from the 2007 peak of $22 trillion.
The name originated from former Pimco executive Paul McCulley, who used it to describe the myriad institutions that helped provide the easy-money financing that led to the subprime mortgage market crash, which in turn triggered the financial crisis.
While the term became a pejorative closely tied to the crisis, the industry has evolved.
As banks find themselves under tighter regulatory scrutiny, customers are turning back to nonbank lenders for financing. The shadow firms don't face the same regulatory burdens as banks, because they don't take deposits and are thus less constrained when making loans.
A year after his "Flash Boys" book rocked Wall Street, Michael Lewis thinks the stock market is still rigged.
Last March, the author ignited a prolonged, heated dedbate about high-frequency trading, which uses sophisticated computer algorithms to execute orders in fractions of a second. Lewis profiled Brad Katsuyama and IEX, which developed a system that seeks to level the playing field for investors.
In an essay for Vanity Fair, Lewis said the market's "invisible scalp" persists, even though regulators have taken action against several Wall Street institutions over the past year due to trading violations.
"The rigging of the stock market cannot be dismissed as a dispute between rich hedge-fund guys and clever techies," Lewis wrote for the magazine's April edition. "It's not even the case that the little guy trading in underpants in his basement is immune to its costs."
The results are in for active managers, and they're pretty terrible.
Fewer than 1 in 4 active managers have outperformed market benchmarks over the past 10 years and only about 4 percent of large-cap growth fund pros did so in 2014, according to a sweeping new study released Thursday by S&P Dow Jones Indices.
At a time when the broader market has been on a tear, posting double-digit percentage increases over each of the last three years and with the S&P 500 up about 210 percent from its lows six years ago, stock pickers have lagged well behind. More than 86 percent of large-cap managers overall lagged basic indexes in 2014, and more than 82 percent fell into the same boat over the past three-, five- and 10-year periods.
No category saw a greater-than-50 percent outperformance rate in 2014, with mid-gap growth coming close as 56.25 percent missed. Over a 10-year period large-cap value managers came closest, with a 58.8 percent underperformance rate.
The report adds more fire to the debate between active and passive management and comes as active managers actually are enjoying a relatively good year. Some 55 percent are beating benchmarks in 2015, owing largely to a growing level of dispersion in performance between the best and worst market sectors that has gone along with periodic levels of high market volatility, according to Thomas J. Lee, founder and lead strategist at Fundstrat Global Advisors.
This table shows the level of underperformance by strategy:
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