It’s starting to look a lot like Christmas, at least in markets. While Federal Reserve officials are singing in chorus that the economy is in good shape, just as they did in December, financial markets are saying otherwise. As U.S. President Donald Trump’s administration keeps throwing wrenches into the works of the economy, the markets may sell off further, forcing the Fed to change course yet again.
Recall that in December, the triple concerns about the trade war, a China slowdown and Fed policy error sent the markets reeling. These days, the trade tension has escalated and the Chinese economy is suffering from a double-dip following a recovery earlier this year. The only saving grace is that the Fed has shifted from tightening to wait-and-see. The risk, however, is that the central bank may react too slowly as the market and economy deteriorate.
Five months ago, legendary investor Stanley Druckenmiller urged the Fed not to raise rates, citing the weakness in cyclically sensitive sectors such as automakers, banks and industrial companies as a signal that something is “not right” in the economy. Today, those sectors are moving in the wrong direction again.
Goldman Sachs’ gauge of financial conditions tightened last month at a rate similar to what it did in December. While the current level is still not severe enough for the Fed to take action right away, the ongoing trade tension means that things may get worse.
Trump’s threat to impose tariffs on Mexican exports because of immigration issues means he is using U.S. imports as a weapon for both trade and political goals. Even if the latest tariffs are called off at the last minute, the threat of them won’t go unnoticed in Beijing. China may stretch the trade war out until after the 2020 elections, hoping to have someone more reasonable to deal with. Already, Beijing is laying the groundwork for counter-attacks, from blacklisting “unreliable” entities to potentially restricting rare earth exports.
It’s difficult for the Fed to cut rates preemptively based on a judgment of what Trump may tweet next. After all, data Friday showed that consumer spending and inflation were recovering before the trade tensions escalated in May.
Without a helping hand from the central bank, risky assets are likely to decline further until they hit the strike price of a Fed Put, or perhaps a Trump put, if there is one.
via ZeroHedge News http://bit.ly/2Xp6mLU Tyler Durden
While the US trade deficit declined only marginally in March, we posited that the unexpectedly large decline in the US-China bilateral trade deficit might be of greater interest to both the Trump Administration and the general investing public because – as both Zero Hedge and Bloomberg argued – it is an unequivocal sign that President Trump is, in at least one respect, “winning” the trade war.
In March (the most recent month for which data are available), the bilateral trade gap shrank to just $20.75 billion, the lowest level since March 2014.
All told, official US data showed that official Chinese exports to the US tumbled by $15.2 billion, or 12%, in the late January-March quarter of 2019 on an annualized basis.
Since these data were collected before President Trump raised tariffs on $200 billion in Chinese goods in the latest round of trade-war escalation, the conventional wisdom would dictate that the bilateral deficit will probably continue to improve, as US companies source their goods from other foreign markets, or – as President Trump would undoubtedly prefer – opt to manufacture them in the US.
And while that may or may not turn out to be true, Nikkei Asia Review raised questions about whether these data accurately reflect the impact of the tariffs on Chinese exporters – and, by extension, the Chinese economy – with an explosive report published Monday describing how Chinese exporters are using intermediaries to get around the tariffs.
In an analysis of data from the US International Trade Commission and the International Trade Center, Nikkei revealed that while exports of machinery, electrical equipment and some other products impacted by tariffs have reflected particularly sharp declines, shipments of these goods from China to the US via Vietnam, Taiwan and Mexico actually rose during this period, a sign that exporters are rejiggering their supply chains to compensate for the US tariffs.
Of course, Chinese companies have other ways of compensating for American tariffs. President Trump railed against China’s “subsidizing” of goods to keep them competitive in American markets. Washington has repeatedly criticized Beijing for unfairly subsidizing state-backed companies, and although the Treasury once again declined to name China a currency manipulator, the weakness in the Chinese yuan has also elicited criticism.
China is subsidizing its product in order that it can continue to be sold in the USA. Many firms are leaving China for other countries, including the United States, in order to avoid paying the Tariffs. No visible increase in costs or inflation, but U.S. is taking Billions!
But Nikkei’s calculations suggest that the tariffs are being offset, at least in part, by exports to Vietnam, Mexico and Taiwan, much of which are then routed to the US.
Five key items which have suffered the biggest declines were analyzed: machinery and parts; electrical equipment and parts; furniture; toys; and automotive equipment and parts.
In the case when China’s exports to the U.S. are classified in accordance with customs codes, the volume of products including machinery and parts, and electrical equipment and parts, slumped conspicuously.
In the first quarter of this year, exports of machinery and parts plunged by $5.77 billion from a year earlier, while exports of electrical equipment and parts plummeted by $4.46 billion year-on-year.
With the exception of toys, four of these five items have become subject to three rounds of punitive import tariffs imposed by the administration of U.S. President Donald Trump.
While exports of the five items from China to the U.S. between January and March declined by 16%, equivalent to a value of $12.2 billion, exports from China to developing countries and from developing countries to the U.S. have generally climbed. Exports via Vietnam, Taiwan and Mexico have increased particularly steeply.
In January-March 2019, exports of the five items from China to Vietnam rose by $1.5 billion, or 20%, while exports of the five items from Vietnam to the U.S. surged by $2.7 billion, or 58%.
In the same three-month period, exports of the five items from China to Taiwan increased by $1.4 billion, or 23%, while such exports from Taiwan to the U.S. expanded by $2.0 billion, or 31%.
Exports from China to the U.S. via Mexico also increased. Mexico’s exports to the U.S. surpassed those of China to become the biggest source in March.
Here’s a breakdown of the chart:
To be sure, the tariffs have also created opportunities for other Southeast Asian nations to export goods to the US that hey hadn’t previously.
Since the U.S. first slapped punitive tariffs on a broad range of imports from China, the six major Southeast Asian nations and Taiwan have started shipping nearly 1,600 new categories of products to the U.S. that they had never exported to America before.
Of these new U.S.-bound exports, about 1,000 items, or over 60% of the total, are on Washington’s blacklist.
These exports amounted to some 30 billion yen ($277 million) during the period from July 2018 through March 2019. The amount is likely to keep growing if the U.S.-China trade spat continues.
With all of this in mind, slumping Chinese factory output would suggest that tariffs are having an impact. But as time passes and supply chains are reorganized, Chinese exporters might bounce back, with most of the impact negated.
When this happens, will the Trump Administration abandon the strategy of hiking tariffs (something markets would probably celebrate) and opt instead for another retaliatory strategy (like, say, ending the student visa program fro Chinese students?).
via ZeroHedge News http://bit.ly/2WmB5N0 Tyler Durden
President Trump confirmed in a Monday afternoon tweet that Russia communicated to the US that it has removed “most of their people” from Venezuela, in reference to military personnel previously servicing contracts with Maduro’s armed forces.
Trump’s tweet followed a Sunday WSJ report detailing that Russian state defense contractor Rostec is quickly pulling out of the Latin American country over concerns the debt-strapped socialist ally won’t be able to pay its bills now or in the future.
Russia has informed us that they have removed most of their people from Venezuela.
The president issued the statement while on a state visit to London in what could signal a broader Russian exit of defense support to the Maduro government.
The Wall Street Journalnotes that it’s a huge blow to Maduro – and though it appears primarily motivated by lack of confidence in Caracas’ ability to pay the bills – this could mark the writing on the wall in terms of the future powerful backing of Maduro’s biggest international supporter. It further comes as the US has vowed to keep up the pressure and after the Kremlin condemned what it called ongoing “US-backed coup attempts”.
Venezuelan-Russian-made Mil Mi-17 helicopters overfly a column of T-72B tanks during a military parade in 2017, via AFP/Getty
Russian state defense contractor Rostec, which has trained Venezuelan troops and advised on securing arms contracts, has cut its staff in Venezuela to just a few dozen, from about 1,000 at the height of cooperation between Moscow and Caracas several years ago, said a person close to the Russian defense ministry.
The report describes a “gradual pullout” which has been noticeably ramping up of late, citing sources to say further it’s due to “a lack of new contracts” and crucially “the acceptance that Mr. Maduro’s regime no longer has the cash to continue to pay for other Rostec services associated with past contracts.”
The oil-rich but cash poor socialist country has long been deep in default on payments to international creditors, totaling in the billions owed to Russia and China alone with oil-for-debt swaps no longer able to keep up, given plummeting oil production over the past two decades since Huge Chavez’s rule.
The report describes a “gradual pullout” which has been noticeably ramping up of late, citing sources to say further it’s due to “a lack of new contracts” and crucially “the acceptance that Mr. Maduro’s regime no longer has the cash to continue to pay for other Rostec services associated with past contracts.”
The oil-rich but cash poor socialist country has long been deep in default on payments to international creditors, totaling in the billions owed to Russia and China alone with oil-for-debt swaps no longer able to keep up, given plummeting oil production over the past two decades since Huge Chavez’s rule.
The Russian air force conducted military exercises with Venezuelan troops near Caracas in December, via AFP/Getty.
Among the benefits Russia and China received in their loans-for-oil Venezuela arrangements included having a defense and technology foothold in Latin America (Venezuela is Russia’s biggest Latin American customer).
At the same time, Maduro has recently touted powerful global partners to fend off total global isolation, bolstering his domestic standing with promises that he has the backing to withstand US aggression.
Rostec’s pullout now greatly endangers that prior status quo, per the WSJ:
Rostec’s withdrawal of permanent and temporary employees is a major setback for Maduro, who has frequently touted assistance support from Russia and China as a sign that other global powers are willing to assist him in his bitter standoff against the U.S. Russian military support has been central to Maduro’s pledge to defend Venezuela from any foreign invasion.
Certainly Moscow will continue to give Caracas political and moral support, with even perhaps the occasional long-range bomber deployment like last December, yet such a visible withdrawal of Russian military contractors and technicians will be taken as a sign by Washington planners that Russia and other external backers won’t actually go to bat for Maduro should the end of his regime draw near during the next crisis scenario, or if US military pressure and efforts turn more muscular.
via ZeroHedge News http://bit.ly/2QEUgvF Tyler Durden
Rep. Alexandria Ocasio-Cortez (D-NY) slammed 2020 Democratic presidential candidate John Delaney after he said that “Medicare for All” is “actually not good policy nor is it good politics.”
Presidential candidate John Delaney booed at CA Dem convention for saying: “Medicare for all may sound good but it’s actually not good policy nor is it good politics.” pic.twitter.com/aWwdeHM8nH
AOC – who has championed the far-left policy rolled out in 2016 by Bernie Sanders (I-VT), said in a Sunday night tweet that it’s time for Delaney to “sashay away.”
Since there’s so many people running for President (& not enough for Senate), instead of obsessing over who‘s a “frontrunner,” maybe we can start w some general eliminations.
This awful, untrue line got boo’ed for a full minute.
Delaney polls near the bottom of the list of 2020 Democratic candidates, while several other contenders have shown support for the healthcare legislation.
“We should have universal health care, but it shouldn’t be the kind of health care that kicks 150 million Americans off their health care,” said Delaney to loud booing. “That’s not smart policy. I want everyone to have health care, but it’s got to be a plan that works for every American.”
Delaney wasn’t the only moderate Democrat who was booed at the event, as former Colorado Governor John Hickenlooper (D) – another 2020 candidate – warned against embracing socialism and socialist policies ahead of the 2020 presidential race, suggesting that it could place the entire Democratic party outside of the political mainstream.
Will this ongoing pivot towards Democratic Socialism and socialist ideas alienate moderate Democrats to the point of not voting or even switching sides?
via ZeroHedge News http://bit.ly/2Z40tEi Tyler Durden
Yet another Tesla appears to have caught fire and “melted away” on its own, according to Belgian news website HLN. This time, it was a Model X owned by the wealthy Dutch businessmen Salar and Sasan Azimi. The original report, which appeared in the Belgian HLN, includes video that appears to show the inside dashboard of a Model X that has been fully melted away. It appears “the expensive ‘Model X’ is not completely safe,” the article says.
In a article translated from HLN, one of the brothers says: “We paid 150,000 euros for that car a year and a half ago. We were then one of the first Dutchmen to drive such a car. It is quite remarkable that our car was not even turned on when it started to smolder. I think this is the first time worldwide that a ‘Model X’ has started to melt on its own.”
He then described the incident: “The general manager of Patro Eisden (the club where Azimi is chairman, ed.) had borrowed the car from me for a moment. When he wanted to drive to me last night, the doors didn’t open. A moment later there was a burning smell. The fire brigade arrived on site and placed the Tesla in a water bath. It is a total loss.”
As we noted just days ago, another Tesla that caught fire while charging in Belgium was also placed into a water bath to prevent it from reigniting after it caught fire. That incident was the latest in a recent spike of Teslas spontaneously and inexplicably combusting.
Despite the incident, the wealthy brothers didn’t seem phased: “Well, we have a Lamborghini Urus, a Lamborghini Avetador, a Ferrari F12 and a few Mercedes in the garage, among other things. Enough cars to move us.”
But hey guys, congrats on being the first Dutchmen to drive a Model X.
via ZeroHedge News http://bit.ly/2wBQbz7 Tyler Durden
You’d think that the more trouble the US causes around the world, the weaker the dollar would trade. Who, after all, wants to own the currency of the country perceived by most to be the source of today’s long list of trade conflicts and dirty wars?
Apparently everyone, in a dynamic that’s been defying logic for some time: When the US has and/or causes problems, the impact is even more severe overseas where a growing list of badly-run countries are either on the brink of financial ruin or heading that way fast.
So trouble of any kind anywhere sends terrified capital pouring into US Treasury bonds, resulting in a strengthening dollar…
A new-to-the-scene observer might see these trends as indicative of a country in good shape, with soaring demand for its paper serving as a global vote of confidence.
But this, like most trends positive involving fiat currencies and rising debt, is both deceptive and temporary, and will, if history is still a reliable guide, reverse suddenly and violently. Here’s one way it could play out:
A rising dollar makes it harder for US companies to sell goods – priced as they are in an appreciating currency – overseas. This lowers corporate profits, which spooks the stock market and produces a reverse wealth effect in which companies scale back capital spending and investors buy fewer cars, houses and luxury vacations. Economic growth, as a result, slows or reverses.
While this is happening, the dollar might actually continue to rise for a while as falling US stocks are seen as a bigger threat overseas than here at home, causing Russians, Chinese, Europeans and Latin Americans to step up their Treasury buying.
But the result is the dreaded “crowded trade” that usually fails once all the greater fools have bought in. Yesterday’s Wall Street Journal notes that the futures markets are pointing towards that outcome.
A persistently strong dollar is underpinning a rally in U.S. government bonds, as rising global trade tensions stoke demand for safer assets.
International investors typically hedge their holdings of foreign bonds using derivatives, which allow them to borrow foreign currency in exchange for their own, and lock in a future interest at which they will reverse the transaction.
[But] Some investors are wading into U.S. Treasurys without paying to protect themselves against fluctuations in the dollar, a bet that continuing U.S. economic strength and comparatively high interest rates will keep the currency grinding higher.
That marks a reversal from late last year, when the high cost of hedging against the dollar’s fluctuations kept some foreign investors out of U.S. debt and yields climbed to multiyear highs.
The strategy has rewarded investors who bet on the dollar recently, as the currency defied the expectations of many Wall Street banks by steadily appreciating to a recent two-year high.
But really They’re All Doomed
Short-term fluctuations in interest rates and currency exchange rates are interesting and maybe profitable for those brave souls willing to bet against crowded trades. But the overriding truth is that all fiat currencies are losing value, most at an accelerating rate. So “strong” currencies are only strong when measured against their weaker cousins. Measured against real things – farmland, oil wells, gold, silver – the long-term trend points to a single destination: fiat’s intrinsic value of zero.
via ZeroHedge News http://bit.ly/2Mqmn3d Tyler Durden
The winner of this year’s “Power Lunch with Warren” charity auction – who paid a record $4.6 million for the privilege of a 45-minute lunch meeting with the Oracle of Omaha – has just outed himself as a crypto enthusiast and ICO founder.
And though he agreed to pay a record sum for the privilege, we imagine Buffett is wondering right now if there’s any sum that could justify the epic session of crypto mansplaining the billionaire investor is about to endure.
Justin Sun, best known for founding the cryptocurrency Tron, which had a brief stint as the altcoin-of-the-moment, revealed in a tweet on Tuesday that he was the winning bidder. The 29-year-old Chinese national is also CEO of BitTorrent (remember BitTorrent?).
Sun said that he will be inviting friends from the crypto industry to try and “talk to [Buffett] about the promise of blockchain” (the terms of the deal allow Sun to invite up to seven friends).
“I’m excited to talk to Warren Buffett about the promise of blockchain and to get valuable tips and insights from him about entrepreneurship and making bold bets on the future,” Sun said in a statement, per WSJ.
An avowed crypto skeptic, Buffett has derided bitcoin and ICOs as a scam. Meanwhile, Sun’s Tron project raised $17 billion via an ICO that is now worth roughly 1/10th that.
The revelation just so happened to coincide with a brutal day for tech stocks that drove the Nasdaq into correction territory. Since Buffett announced Berkshire’s stake in Amazon – a stake that the Oracle of Omaha was careful to specify wasn’t his idea – the e-commerce giant’s shares have fallen 15%.
While Buffett has dismissed bitcoin and other cryptocurrencies as a scam, “rat poison squared” and boasted that, if he could, he would buy a five-year put on every cryptocurrency, the 88-year-old investor has said he believes blockchain technology may hold some promise.
So maybe Buffett and the 8 crypto diehards with whom he will be sharing a meal can find a happy medium.
via ZeroHedge News http://bit.ly/317UoII Tyler Durden
“Here’s one conclusion — the Illinois Legislature either has no real grasp of the financial situation in this state or simply doesn’t care. It is our suspicion that too many legislators simply don’t understand the financial reality the state and city face.”
When Governor Pritzker announced a $41.5 billion capital spending plan a couple weeks ago we thought it was surely just a pie-in-the-sky first offer – that economic realities and unpopular tax hikes needed to fund so massive a plan would chop it down to something reasonable.
Silly us. The plan has now increased to $45 billion.
To get a sense of the enormity of that number, consider that it’s over twice the state’s combined annual revenue from personal and corporate income taxes. It dwarfs all recent capital spending programs. The Illinois Jobs Now capital plan under Governor Pat Quinn was for $18.0 billion in new projects and $11 billion of reappropriations from previous years. Governor George Ryan’s Illinois FIRST was for $12 billion. The Build Illinois program under Governor Jim Thompson was $2.3 billion.
We understand the case for a capital program of some kind, but this is madness. A spending binge so massive, prepared by proven incompetents and dumped on the General Assembly along with thousands of pages of other budget and spending matters inevitably will be loaded with pork and waste.
Even on sensible projects, spending will be excessive thanks to the absurd “prevailing wage” rules that govern all of it. They drive costs far beyond what the private sector pays, which we’ve documented often. The average, total, full-time-equivalent compensation under our prevailing wage laws, including benefits, for all job categories over all counties is $119,000. Public unions effectively set those numbers. Their power is unchallenged in Springfield, which largely accounts for this capital bill.
How will Illinois pay for this? That’s not entirely clear since nobody has had a chance to fully digest the legislation and disclosures so far have been horrible – cherry-picked numbers given to reporters. The only good news is that the federal government apparently will reimburse Illinois for about $10 billion of the $45 billion (though Illinoisans pay part of that, too).
According to a Chicago Sun-Times summary, Illinoisans will see the state’s tax on gasoline doubled; higher vehicle registration fees; an increase in video gaming terminal taxes; charges on sports wagering revenue; license fees from casino and sports betting; a tax on parking garages and lots; removal of the sales tax exemption on traded-in property valued above $10,000; and an increase on the cigarette tax by $1 per pack. Cook County municipalities would be allowed to add a 3-cent tax on top of the state-issued motor fuel tax. However, the latest version of the bill apparently eliminated a real-estate transfer tax increase, a $1-a-ride fee for ride-sharing services and a tax on cable and streaming video services, which were in the initial proposal.
Much of it will also come out of the state’s general fund, putting more pressure the already desperate situation there. And, no, that won’t be fixed by a new progressive income tax. Revenue from that has already been spoken for elsewhere several times over.
One way or another, though the tax increases may not yet be clear, the bill will have to be paid.
Where will the money be spent? According to a Capitol Illinois News summary, the plan would allocate $33.2 billion for transportation projects including roads and bridges, $3.5 billion for education infrastructure projects, $4.3 billion for state facilities, $1.2 billion for environmental conservation projects, and $420 million for broadband expansion and $465 million for health care and human services facilities.
We will have much more to say on this, the budget and the rest of this legislative session as facts become available. It will take time for much of what was done to be exposed.
via ZeroHedge News http://bit.ly/2XuuMDW Tyler Durden
In a moment of financial serendipity, earlier today we tweeted that as a result of the sudden collapse in the market’s most crowded positions (which as we noted over the weekend, now face the biggest risk of a wipe out), “hedge fund redemption requests re-emerge.”
And just like that, hedge fund redemption requests re-emerge
It turns out we were very much spot on, because just a few hours later, the Financial Times reported that Neil Woodford, the UK’s equivalent of David Tepper, has blocked redemptions from his £3.7bn equity income fund after serial underperformance led to an investor exodus, “inflicting a serious blow to the reputation of the UK’s highest-profile fund manager.”
The freeze on redemptions, exactly five years after Woodford opened his eponymous fund management group, underlines his increasingly precarious position. It follows a steady stream of investor outflows, which have occurred each month for two years, with the fund shrinking by two-thirds to £3.7bn since a peak of £10.2bn in May 2017.
The severity of this latest hit to the hedge fund industry can not be underscored enough. The FT quoted a veteran fund manager who has known Woodford for more than 20 years, who said that “this is one of the bigger events for the UK asset management industry of the last decade. A bonfire of reputation and a terrible moment for investor confidence.”
Neil Woodford blocks redemptions after a string of investor outflows.
The freeze, also known as a redemption gate, which usually is implemented during times of market turmoil to avoid a catastrophic liquidation of assets as investors panic, was introduced after Kent County Council, a longstanding backer of Woodford since his days as a star fund manager at Invesco Perpetual, asked for the return of approximately £250 million. While the freeze prevents the withdrawal of capital over the short term, it also stops new investors from putting money into the fund.
In a statement, Woodford Investment Management said it had “come to the conclusion it is in the best interests of all investors in the fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the fund”. It also said it was taking the step to “protect the investors in the fund” by giving Woodford time to sell unlisted and illiquid stocks and buy more liquid investments that could be sold to meet redemptions.
The massive redemption request capped a four week period in which “Woodford had struggled to keep up with an average of £10 million flowing out of the fund every business day.” Adding insult to injury, the shares of construction group Kier, one of the fund’s main holdings, plunged 40% after a profit warning on Monday.
What it really meant is that it was on the verge of collapse and any further redemptions would merely accelerate the fund’s liquidation, resulting in a potentially systemic collapse.
The gating of the fund is reminiscent of the action taken by UK property funds in the wake of the UK’s Brexit vote, when funds – including Standard Life – froze redemptions to stem the exodus of money.
According to the FT, Link, Woodford’s authorized fund manager, must review the fund’s suspension every 28 days and inform the Financial Conduct Authority of the results of the review. In reality, discussions with the FCA are likely to take place more frequently, especially as investors in other funds once again freak out wondering just what is going on.
Speaking of the UK’s top financial regulator, the FCA said it was “aware of this situation and in contact with the firms involved to ensure that actions undertaken are in the best interests of all the fund’s investors”.
In a statement, Woodford Investment Management said it had “come to the conclusion it is in the best interests of all investors in the fund to suspend the issue, cancellation, sale, redemption and transfer of shares in the fund”.
It said it was taking the step to “protect the investors in the fund” by giving Woodford time to sell unlisted and illiquid stocks and buy more liquid investments that could be sold to meet redemptions.
Woodfore’s fund said it would write to investors when dealing was to be resumed and keep them informed “about the suspension, including its likely duration”.
Last week, the Financial Times revealed that Woodford’s flagship equity income fund shrank by £560 million in less than four weeks.
The company has also undertaken a series of complex deals in order to reduce the balance of illiquid, unquoted holdings in his open-ended funds, which have proved contentious as investors have tried to exit the vehicle.
The decision to gate investors would immediately have far-reaching consequences on the UK asset management ecosystem: Hargreaves Lansdown, the UK’s largest “fund supermarket” and a huge supporter of Woodford, said it would be removing both Woodford Equity Income as well as Woodford Income Focus from its best-buy Wealth 50 list in a blow to the manager which assures further redemptions when the fund resumes trading, putting its survival into question.
The decision also reveals signs of contagion with Woodford’s other funds. His £500m Income Focus fund, designed to deliver high income, has not stopped trading but lost almost 20% in the past 12 months in total return terms.
Worse, with investors now barred from pulling their money from one of the largest funds, they will now scramble to redeem whatever they still have access to, creating a toxic spiral which likely culminate with the fund’s termination.
Indicatively, Hargreaves accounts for £2 billion of Woodford’s total £10 billion in assets under management (a number which will shortly be far smaller) and promotes his flagship fund on its Wealth 50 list, which is used as a resource for customers choosing which funds to buy.
The company is also in talks with the UK financial regulator, Mr Woodford and the fund administrator. The administrator will now set a price for the suspended fund which appears in six of Hargreaves’ own portfolios and which will continue trading during the suspension.
Mark Dampier, head of research at Hargreaves said: “It can’t stay on the Wealth 50 if it’s no longer trading.”
Putting it mildly, Emma Wall, head of investment analysis at Hargreaves Lansdown said: “We are advocates of long-term investing and think Woodford’s multi-decade track record remains compelling — but we don’t underestimate the disappointment investors must feel with Woodford’s recent performance.”
But what is most bizarre about this latest hedge fund fiasco is that the gating takes place with global markets still just shy of all time highs. One can only imagine what will happen to the rest of the sector if the current swoon accelerates and drops another 5%, 10% or more, sending other hedge funds scrambling to liquidate their own holdings of the most crowded stocks. Those who succeed to sell first, they just may survive to fight another day.
But the bigger concern is whether this gating by one of the UK’s most iconic hedge funds sparks a redemption frenzy, first in England, and then, across the globe in what may soon become a rerun of the redemption panic that struck in December, resulting in the first S&P bear market since the financial crisis. Only this time, we doubt the market will recover just minutes after triggering the infamous -20% threshold.
via ZeroHedge News http://bit.ly/2KlVMBL Tyler Durden
After a bloodbath in tech stocks today, driven by FTC/DoJ investigation headlines, the House Judiciary Committee has just piled on, announcing a bipartisan probe into whether large tech companies are suppressing competition.
Judiciary Chairman Jerrold Nadler (D-N.Y.) said in a statement:
“The open internet has delivered enormous benefits to Americans, including a surge of economic opportunity, massive investment, and new pathways for education online, but there is growing evidence that a handful of gatekeepers have come to capture control over key arteries of online commerce, content, and communications.”
“The Committee has a rich tradition of conducting studies and investigations to assess the threat of monopoly power in the U.S. economy.”
“Given the growing tide of concentration and consolidation across our economy, it is vital that we investigate the current state of competition in digital markets and the health of the antitrust laws.
Well those hearings should be yet another circus, especially coming just after Google Cloud’s outage crushing online commerce for hours yesterday.
via ZeroHedge News http://bit.ly/2WrzqGl Tyler Durden
