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  Wednesday, 15 Apr 2015 | 2:59 PM ET

What diamond prices are signaling about inflation

Posted By: Reem Nasr
Diamonds
Mark Evans | Getty Images

The world of diamonds might become more interesting beyond the scope of engagements and weddings.

Diamond prices have tumbled almost 15 percent over the past 12 months and that has Nicholas Colas, chief market strategist at Convergex, eyeing a larger trend. (Tweet this)

Read More100-carat classic emerald-cut diamond heads to auction

"The reason all this intrigues me is not as a prospective shopper, but rather because the price of 'Commodity' diamonds is a very good case study in macroeconomic deflationary pressures," Colas said in a report for clients.

The decline in diamond prices can be attributed to several factors, he said, including reduced consumer demand from China, India and Japan. But companies that turn raw stones into polished gems are also facing financial pressure as banks are less willing to lend. Slower demand, tighter capital requirements and too little inflation "is causing a slow-motion inventory shrink and pushing prices lower," Colas said.

»Read more
  Tuesday, 14 Apr 2015 | 2:31 PM ET

Bye-bye USA: Investors putting money elsewhere

Posted By: Jeff Cox

Much of the U.S. stock market's meteoric rise over the past six years has been predicated on an acronym that Wall Street refers to as TINA—There Is No Alternative.

The subtext is that with the U.S. moving faster than much of its counterparts around the globe, and with its central bank in extreme, unprecedented easing mode, there simply was no place else to grow money except on American shores.

No more.

2015 has seen the light start to dim on the U.S. bull market and shine more brightly in some unlikely corners of the world, like Russia, Israel and Japan. European stocks have staked their claim as new world leaders, and China and Japan equities have ripped higher as well.

Investors have taken notice in a big way, giving TINA some competition by spreading their money around the world.

Funds that focus on global equities have taken in $81.5 billion this year, a pace that, if continued, would break a record for four-month inflows in the category, according to data research firm TrimTabs. Thanks to a record $7.8 billion in European funds, March inflows are at $34.8 billion, also a single-month record, with April already showing a $14.8 billion inflow total. (The totals include mutual and exchange-traded products.)

"U.S. investors continue to follow the printing presses into European and Japanese equities," TrimTabs CEO David Santschi said in a statement that referenced central bank largess in those regions. "A record that has been held for nine years is almost sure to fall."

Flows, as they most often do, have followed performance.

The S&P 500 U.S. large-cap index has been a global laggard, registering just a 1.8 percent gain so far this year. U.S. small-caps have performed much better, with the Russell 2000 registering a 5.1 percent gain, but even that move is well behind many other global indexes.

The Russian stock market, for instance, is up 28.4 percent, the Europe STOX 600 has gained 20.2 percent and France's CAC-40 has surged 22.1 percent. Other indexes have followed suit:

»Read more
  Monday, 13 Apr 2015 | 2:41 PM ET

'Show us $15!' protesters tell hedge fund honchos

Posted By: Lawrence Delevingne

Activist investors became targets themselves Monday when protesters briefly took over a conference focused on how to shake up companies.

About 20 protesters interrupted a lunchtime panel discussion at the 13D Monitor Active-Passive Investor Summit in New York, chanting slogans like "hedge fund billionaires, pay your fair share!"

The agitators walked around the stage with signs and shouted slogans demanding higher wages for workers at restaurants including McDonald's, Burger King and Darden-owned Olive Garden.

They called out well-known activist investors like Bill Ackman of Pershing Square Capital Management and Jeff Smith of Starboard Value, both slated to speak at the event later Monday, urging $15 an hour for low-level workers.

One sign read "Dignitiy at Darden," which Smith's Starboard Value is a major investor in. Ackman's Pershing Square was until recently a major Burger King investor.

"Bill Ackman, Jeff Smith, show us $15!" was briefly chanted.

"This is what democracy looks like!" they added later in the Crowne Plaza Times Square ballroom.

»Read more
  Monday, 6 Apr 2015 | 12:46 PM ET

What's the hot trade for 2015? ETF investors know

Posted By: Jeff Cox

Exchange-traded funds have surged in popularity in 2015, but it's not U.S. equities that are leading the charge.

Investors poured $97.2 billion into various ETFs and other similar products in the first quarter, marking the $2.9 trillion industry's biggest start ever despite a wobbly U.S. stock market and a testy geopolitical climate, according to data from BlackRock, the world's largest provider of such funds. (U.S.-based ETFs have about $2.1 trillion in assets.)

There essentially have been three major investment themes this year, and players in the exchange-traded market have made each work: A quest for investment themes outside the U.S.; the offshoot of that, which has seen domestic attention turn away from large caps and toward mid- and small-sized companies, and capitalizing on the big moves in currency markets, particularly an appreciation of the U.S. dollar and the decline of its global competitors. The greenback has gained 7 percent so far against a trade-weighted basket of other leading currencies.

Some $59 billion has found its way into products that focus on currency hedging, according to ETF.com, which said the group represented four or the top 10 funds for investor flows during the first three months of the year.

Other big developments in March saw investors clamoring for developed international markets, with $14.8 billion flowing to European funds and $8.3 billion to Japanese equities. U.S.-focused funds trailed, with $6.2 billion in inflows, according to BlackRock.

In total, the month saw $32.6 billion go to non-U.S. developed markets, a total that matched the previous two months combined and was especially remarkable considering that 2014 closed with a huge run toward U.S. equities. The fourth quarter saw total inflows to all exchange-traded products at a record $138 billion, with the largest focus toward domestic large-cap.

»Read more
  Monday, 13 Apr 2015 | 12:24 PM ET

Maybe the Fed needs a dose of its own medicine?

Posted By: Jeff Cox
Federal Reserve Building
Getty Images

Every year, the Federal Reserve takes it upon itself to conduct stress tests of the nation's biggest banks, measuring them for how well they would hold up under the weight of another crisis the likes of which engulfed the financial system in 2008 and 2009.

The results purport to give a clear picture of the financial system's health.

What's less clear, though, is how the Fed itself would hold up under similar circumstances. Rather than subject the Fed to a closet-cleaning audit, as is the desire of Rand Paul, the Republican senator and presidential candidate, a more instructive move could be a stress test of whether the central bank could meet its responsibilities in the event of another crisis. (Tweet this)

The Fed, of course, would be highly unlikely to fail a bank-type stress test per se. However, it could come up considerably short in terms of the ammunition it would need to help the financial system deal with another major crisis caused by an unforeseen event. With interest rates already at zero and the central bank's balance sheet bloated, through quantitative easing, to $4.5 trillion, the Fed's cupboard is currently pretty bare as far as easing ingredients go.

The stress test parameters, of course, would be different for a Fed stress test: The central bank doesn't take customer deposits or make loans to anyone other than its member institutions. And there is one other major difference between it and a commercial bank: The Fed can simply print money whenever it wants, so it doesn't ever have to worry about being illiquid.

This institution does, though, serve a vital role both for the banking industry and the economy as a whole. It uses the policies within its purview to help steady financial conditions in times of crisis, in addition to meeting its dual mandate of price stability and full employment.

Over the past 6 ½ years, the Fed's two weapons of choice have been printing money, or more precisely, creating it digitally, to buy up various securities including U.S. Treasurys and mortgage-backed securities; and keeping its short-term target funds rate near zero.

»Read more
  Monday, 13 Apr 2015 | 5:09 PM ET

Trian slams Dupont ahead of key vote

Posted By: Lawrence Delevingne

Activist investor Trian Fund Management is turning up the heat on DuPont ahead of a key vote for the more than 200-year old company.

"The reason the company can't hit its numbers is because of a very bloated, expensive, bureaucratic holding company that is choking the underlying businesses," Ed Garden, CIO and a founding partner of hedge fund firm Trian, said Monday at the 13D Monitor Active-Passive Investor Summit in New York.

The comments came ahead of DuPont's annual meeting on May 13, when shareholders will vote to decide if four directors proposed by Trian will join the board.

»Read more
  Monday, 13 Apr 2015 | 12:57 PM ET

Activist investor says this bank stock to surge

Posted By: Lawrence Delevingne
Cliff Robbins, founder Blue Harbor Group.
Adam Jeffery | CNBC
Cliff Robbins, founder Blue Harbor Group.

Activist investor Clifton Robbins thinks buying stock in Investors Bancorp is a near-sure way to make money.

"This is one of the best risk return investments I've seen," the CEO of hedge fund Blue Harbour Group said Monday at the 13D Monitor Active-Passive Investor Summit in New York.

Blue Harbour is a $3.7 billion hedge fund firm that focuses on friendly collaboration with the companies it invests in, unlike some of its more confrontational activist peers.

»Read more
  Thursday, 9 Apr 2015 | 12:05 AM ET

Why this new trend is bad for bonds

Posted By: Jeff Cox
Bill Ackman appears on CNBC's "Squawk Box" in New York.
Adam Jeffery | CNBC
Bill Ackman appears on CNBC's "Squawk Box" in New York.

If 2014 was the year of the activist, then corporate boards had better really watch out for the rest of 2015.

After two record-setting years in a row, activists—think Carl Icahn, Bill Ackman and Dan Loeb—are back at it again only in even bigger numbers this year, according to a report Thursday from Moody's Investors Service.

There have been 54 cases that fall into the category so far, compared with 43 during the same period in 2014. The full-year total for 2014 was 222 cases in nonfinancial companies, a record that just narrowly beat out the 220 notched in 2013.

While the activists themselves defend their moves as taken to improve corporate governance and maximize return to shareholders, authors of the Moody's report say the collective actions too often focus on short-term gain rather than long-term company health.

The results be good for those with equity stakes but bad for bondholders.

»Read more
  Thursday, 2 Apr 2015 | 2:27 PM ET

'Corrupted' bond market giving investors headache

Posted By: Jeff Cox

Things were supposed to be a whole lot different this year when it came to the bond market.

With economic recovery taking flight and inflation accelerating, the Federal Reserve would start to raise interest rates, government bond yields, naturally, would start drifting higher and the 10-year benchmark note would end the year somewhere north of 3 percent.

That, though, was pure theory, which has had a rather uncomfortable clash with reality.

Instead, the U.S. economy hobbled through the first quarter, inflation is still well short of the Fed's target, short-term rates are anchored near zero, and the 10-year has started the second quarter nestled comfortably below 2 percent, with the next 100 basis points seemingly miles away.

Oh, the Fed still is likely to do some type of pro forma rate hike before the year closes. But the climate in the bond market looks nothing like the picture Wall Street experts painted just a few months ago.

»Read more
  Thursday, 2 Apr 2015 | 10:29 AM ET

Let's not make a deal? Private equity cools

Posted By: Lawrence Delevingne
Kraft and Heinz products are shown in Chicago, March 25, 2015.
Getty Images
Kraft and Heinz products are shown in Chicago, March 25, 2015.

Private equity investments have finally slowed, but it's not necessarily permanent.

Despite high profile, multibillion dollar plays like Cerberus Capital Management buying Safeway or BC Partners taking over PetSmart, there were just 668 PE fund investments made in the last quarter in North America, the lowest total since the third quarter of 2011, according to data tracker PitchBook. Those deals totaled $122.2 billion, the lowest amount since the second quarter of 2013.

The story was similar for all PE deals. Global investments hit $207.8 billion in the first quarter, the lowest total since the first quarter of 2013. The number of investments, 1,124, was also the lowest monthly tally since the third quarter of 2010, according to PitchBook.

»Read more

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