Manufacturing and corporate profits are both in recession mode, even though the rest of the U.S. economy continues to limp along.» Read More
Al Gore is making money for himself and others by investing in companies that follow what he believes are ethical practices.
In addition to his crusade against global warming, the former vice president these days is a money manager, using the principles he applies to his environmental beliefs to playing the market.
The result, he said, has been positive financially and ecologically, though he didn't specify the precise performance his company, Generation Investment Management, has turned in over the past 11 years or so.
"Everything that goes into our portfolio gets there after a lengthy process. We will have many visits, typically many more conversations and in-depth research. But we apply a sustainability lens — not just environmental sustainability but how does a business treat employees, what is the health, what are their ethics in the executive suite," Gore said Tuesday at the annual DealBook conference. "All of that is relevant."
He voiced concerns he has expressed often since leaving office in 2001 about the dangers that warming poses to the global climate. What he hasn't been as vocal about is how to follow those principles and still make money.
Gore, also a former U.S. senator from Tennessee, refused to be drawn into analyzing the current presidential race.
Instead, he picked up on a central theme of the conference, namely the battle on Wall Street over short- versus long-term investment.
Whereas investors used to hold stocks six to seven years on average, the typical holding term is now barely four weeks, he said. That doesn't give companies enough time to return value or properly develop.
"This high turnover and the short-term horizons that are now so endemic to market investments clash with the organic process by which real businesses build up their value," Gore said. "If you're getting in and out of the market in 29 days, then at some point the clash between what the real process you're investing in and how you're turning over your money leads to mistakes. There's ample research that shows longer-term investors get better returns."
For some large U.S. hedge funds, October may be replacing April as the proverbial cruelest month.
Last month brought an 8.4 percent rally in the S&P, the best performance for that and other major indexes since 2011. Yet while average hedge-fund performance figures haven't yet been tabulated, anecdotal evidence suggests that some major money managers struggled to even come close to those levels.
Through Oct. 27, Pershing Square, the long-short hedge fund managed by Bill Ackman, had fallen 3.8 percent for the month, according to its website, and was down 15.9 percent this year. Through Oct. 26, Glenview Capital, the health care-oriented fund run by Larry Robbins, was down 7.3 percent for the month and 20.25 percent for the year, according to an investor letter, prompting Robbins to show remorse for a period that in which "I've failed to protect your capital, and mine." In an effort to rebuild investor goodwill, Robbins is offering to "work for free to recover the losses I created for you" by initiating a new, fee-free investment product that focuses on more easily-traded stocks.
Wall Street strategists who normally live and breathe data are now pushing a curious new narrative: Don't believe the data.
More specifically, it's become routine practice lately to disparage economic numbers as being not representative of underlying strength that the headlines just don't seem to verify.
The weak third-quarter gross domestic product growth was just an inventory drawdown. A decline in corporate profits turns into growth when you just throw out the numbers (in this case from energy companies) that you don't like. Even undeniably weak manufacturing numbers that are edging ever closer to recession territory are, in the words of one economist, merely "carving out a bottom" that will soon be reversed.
Why all the contradictory views?
One of the big problems is not necessarily intellectual dishonesty but rather of an economy that finds itself at a crossroads: The Federal Reserve last week upgraded its assessment of spending and investment to "solid" while also conceding that employment growth has slowed and that it still isn't time to lift the central bank's key interest rate off near-zero, where it's been for nearly seven years.
Two days after the Federal Reserve released what was allegedly its most hawkish statement in months came a reminder that the path toward a rate hike won't be an easy one.
One of the main economic factors for Fed officials when it comes to assessing the right time to start hiking rates is wage growth, tied with the consumer spending that is supposed to follow. There was bad news on both fronts in economic data released Friday morning.
The big releases of the day were on personal income, which increased just 0.1 percent in September, missing even the meager consensus estimate of 0.2 percent, and the University of Michigan consumer confidence survey, which, at 90, whiffed as well with its second-lowest reading of the year.
Below the Wall Street radar, though, came another report that doesn't garner the headlines but is believed to be one watched closely by Fed Chair Janet Yellen and her fellow monetary policymakers: The employment cost index.
U.S. banks have crossed a significant post-financial crisis milestone, tallying more $200 billion in fines paid out regarding questionable behavior.
Regulators have been out for blood against banks for conduct both before the crisis and since. Public outrage has focused on Wall Street institutions and their collective role in triggering the subprime mortgage meltdown that in turn led to a financial collapse that brought down the global economy.
Many of the most recent cases have shifted to currency market manipulation.
Most recently, a U.S. court slapped British banks Barclays, HSBC and Royal Bank of Scotland with nearly $1 billion in fines related to forex improprieties. Goldman Sachs and BNP Paribas also got hit with combined fines approaching $250 million in related cases. Other huge Wall Street names, including JPMorgan Chase, Bank of America and Citigroup, have faced penalties as well.
Just this week, Goldman took a $50 million hit for charges involving a former employee accused of leaking confidential regulatory materials.
"While the number of financial crisis-era settlements and investigations diminish with time, there appears to be no shortage of new issues into which financial regulators and law enforcement are looking and finding potential problems," analysts at financial services firm Keefe, Bruyette & Woods said in a research note detailing the fines.
In all, the fines and settlements amount to $204 billion paid out through 175 settlements since 2009. The actual number is probably higher, though, as KBW only tracks settlements exceeding $100 million. Since March, the total has grown from $187 billion and the case total expanded from 140.
Expect the final number to grow, as well; there are still 288 outstanding investigations or cases pending. One case that could lead to additional fines is the Department of Justice's look into banks' dealing with soccer's international governing body, FIFA.
A look at the 10 banks hit hardest by settlements:
A lot has changed since the Federal Reserve decided in September once again to take a pass at raising interest rates and normalizing monetary policy. For hawks, not much of it has been particularly good.
When choosing not to move last month, the Federal Open Market Committee referred to some vague "international developments" it was monitoring to decide when it would enact its first rate hike since 2006.
For Wall Street, the message was clear: Fed officials worried that the slowdown in China would spread to other areas of the global economy, dampening prospects at home and making it the wrong time to lift off from the zero-bound range where it has been for seven years.
Since then, the news from China has gotten marginally better, with the government reporting that gross domestic product gained 6.9 percent in the most recent period.
The news from home, though, has improved little. Expectations for U.S. third-quarter GDP have tumbled in recent weeks, with the consensus now at just a 1.7 percent gain, according to FactSet, down from 3.9 percent in the inventory-inflated second quarter and well off hopes for 2.5 percent or better. CNBC's Rapid Update tracker has the estimate down to 1.4 percent.
In a candid letter to investors, hedge fund manager Larry Robbins apologized for a year-to-date loss in his flagship fund of more than 20 percent through Monday's close, writing that "I've failed to protect your capital, and mine…despite a flat market."
Robbins, who is known for his at-times wildly successful calls in the health-care sector at Glenview Capital Management, wrote that he continues to believe his company's health-care investments are lower risk and of higher potential than the broad market.
Still, he said, the gyrations of August, which he regarded as "rotational" rather than "systemic," and his misperception that Glenview's health-care stocks at the time were "a rock-bed of strength," look arrogant in retrospect. Going into the period, both Robbins' Glenview fund and a sister investment vehicle were betting on managed care, hospitals and pharmaceutical stocks, with smaller exposures in veterinary and other health care-related stocks.
Traders have been using junk to bet against the possibility that the Federal Reserve will raise interest rates anytime soon.
Exchange-traded funds that track high-yield bond indexes have been the beneficiaries of a cash surge in recent weeks as market participants figure the central bank probably won't raise rates in 2015, and it could be well into 2016 before anything happens.
In just the past week alone, three bond-related ETFs pulled in $2.4 billion. Two are focused on high-yield, or junk, bonds, according to ETF.com, despite repeated warnings on Wall Street that the segment of the market is headed for the rocks.
During October, the group has pulled in $6.6 billion, with the two junk funds attracting about $4.3 billion of the total.
October's stock market treats could be December's tricks, at least if end-of-the-year historical trends hold up.
After a brutally volatile year, equities have soared this month, with the S&P 500 up nearly 8 percent as of Monday trading. That has brought the broad stock market gauge just into positive numbers for 2015 and more than 11 percent off its low back in August.
Such violent rallies often come with a price, though: In this case, it's a tendency to follow such big shows with lackluster second acts.
Sam Stovall, U.S. equity strategist at S&P Capital IQ, said market participants should get ready for some Christmastime coal after Halloween candy.
By now, investors should know the routine when it comes to earnings: Wall Street analysts start off expecting big things then gradually cut their views. Companies eclipse what can be a dramatically lowered bar, giving everyone encouragement that profits are still healthy.
The third quarter of 2015, though, is presenting a somewhat different scenario.
Expected to decline about 5 percent heading into the season, corporate earnings are struggling to get over even those low estimates. Sales are falling, dollar strength is weighing even more heavily than expected, and the look ahead to the fourth quarter is getting progressively worse.
Sure, some 68 percent of the 148 S&P 500 companies that have reported so far topped estimates.
But the beats have been small in many instances. With some of the biggest companies across the finish line, the quarter is still tracking at a 4.4 percent decline, according to S&P Capital IQ, dimming hopes that the index will beat estimates by the usual 3 or 4 percentage points. Quarterly revenue also has fallen, by 1.6 percent.
Companies representing 29 percent of the index's $17.8 trillion total market cap have reported through Thursday morning.
Markets seem to be be moving higher and shirking off bad news no matter what, strategist Michael Farr says.
Barclays was hit by a $108.5 million fine on Thursday as it allegedly worked with super-rich clients in a way that could have facilitated financial crime.
A class action lawsuit accuses banks of conspiring to limit competition in the $320 trillion market for interest rate swaps.