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  Tuesday, 8 Jul 2014 | 11:53 AM ET

Goldman already preparing for CEO of the future

Posted By: CNBC.com staff
Lloyd C Blankfein, CEO of The Goldman Sachs Group, Inc.
Getty Images
Lloyd C Blankfein, CEO of The Goldman Sachs Group, Inc.

WANTED: Chief executive to run major Wall Street firm with reputation for extreme competitiveness and risk. Position may not be available for many years. Apply from within only, please.

Such might read the ad for a new CEO at Goldman Sachs, where top managers at the firm have been meeting with younger executives in hopes of finding a replacement for current chief Lloyd Blankfein—someday. Senior management for the past year or so has been holding regular dinner meetings with potential future leaders, according to a Wall Street Journal report Tuesday.

But for those hoping to get to the top rung, patience will be key. Blankfein, the CEO since 2006, has indicated he's in no hurry to step down, and Goldman President Gary Cohn is the heir apparent to take over should Blankfein make an early exit.

»Read more
  Tuesday, 8 Jul 2014 | 10:17 AM ET

Why investors can still count on the Fed: El-Erian

Federal Reserve Chair Janet Yellen's willingness to risk to financial instability down the road by continuing easy monetary policies for immediate economic gains is an "all-in bet," former Pimco Co-CEO Mohamed El-Erian told CNBC on Tuesday.

"It's a race between financial instability caused by too much money being pushed into the wrong places versus the economy healing," El-Erian said in a "Squawk Box" interview. "For now, the market is very comforted by what Yellen is saying which is: 'I'm willing to take the trade off.'"

Yellen was pretty clear on this during a discussion with International Monetary Fund Managing Director Christine Lagarde last week, El-Erian said.

Read MoreYellen sees little threat to financial stability

"Congress is too dysfunctional right now" to execute on the policies needed to spur economic growth, El-Erian said. "So the Fed keeps the game going, hoping you get enough healing. And that's the big bet right now, that markets are 'all-in' as well."

The big question is whether investor resolve is starting to crack. Stocks were lower again in early trading Tuesday, continuing Monday's retreat from record highs, which saw the Dow Jones Industrial Average close above 17,000 Thursday for the first time. But concerns the Fed may increase interest rates sooner than expected following last week's strong jobs report are starting to creep into the market.

Read MoreBoom! Job growth accelerates, rate falls to 6.1%

El-Erian said it's too early to get really worried because the Fed is still "very hesitant and doesn't want to move on monetary policy until its convinced that the economy has reached liftoff."

»Read more
  Monday, 7 Jul 2014 | 11:54 AM ET

Why this bullish pro sees big market drop soon

Posted By: Jeff Cox

The summer of 2014 is starting to look a lot like the summer of 2011, according to one Wall Street strategist who sees a sharp stock market slump lurking over the next couple of weeks.

Though he is otherwise strongly bullish, Jeffrey Saut, chief market strategist at Raymond James, believes a run higher that has been virtually unabated for the past two years now faces a major challenge.

In 2011, as now, the major averages hovered around psychological barriers. In 2011, it was a sort of gravitational pull lower for the S&P 500, which peaked at 1,356 then began an aggressive slide to 1,100, a level it would crack in early October before making a bottom shortly thereafter.

In this case, the S&P 500 is flirting on the upside with 2,000, the Nasdaq has held above 4,000 since April and the Dow industrials index has eclipsed 17,000. Citing corroborating opinions from Marketfield Asset Management and Thackray's Seasonal Investment Guide, Saut sees the market heading into a summertime swoon that has been replicated before.

»Read more
  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.

»Read more
  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.

»Read more
  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.

»Read more
  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.

»Read more
  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:

»Read more
  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'!"

»Read more

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 CNBC's 5pm ET show "Fast Money."

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