Month: September 2016

Discussing the present and future of the embattled hedge fund industry, Tiger Management’s Julian Robertson – one of the most prominent names in the field – said that hedge funds are facing “the most difficult time I’ve ever seen in the business” his investing career (observing that “there are a lot of people squeezing shorts”), and warned that the days of charging hefty fees may be over.

““That type of business hasn’t worked lately, and it’s a tough business,” Robertson, 84, said Tuesday on Bloomberg Surveillance in New York. “It’s tougher to be a hedge fund investor than ever before.”

Incidentally, the current debacle facing the hedge fund space, is something we have been warning about since 2012, when we predicted that as a result of central banks’ having taken over the role of the market’s Chief Risk Officer, there is implicitly no more downside risk, and thus no need to hedge; alternatively once central banks do lose control, no extent of hedges will compensate for the rout that would occur, which coupled with counterparty failure, would mean failure to satisfy obligations made under short trades.

Sevaral years later, Julian Robertson agrees with this assessment, saying that ultra-low interest rates and swollen stock-market valuations are crimping returns for the managers, whose portfolios are designed to outperform during a downturn. The problem: with central banks injecting $2.5 trillion in liquidity each year, there is no downturn. As a result, the $2.9 trillion industry, has underperformed the S&P 500 index every year since 2008.

So what could save hedge funds? The simple answer: an end to the financial repression, bubble blowing and market manipulation that central bankers have unleashed, but it wouldn’t only benefit hedge funds:

“High interest rates are going to encourage savings, and I think we desperately need savings. Take a widow: they don’t know what to do with the money. There is no way they can do anything with it unless they go into stocks. I think forced equity investing creates the bubble.”

When asked who do you blame for this mess, the legendary hedge fund investor had one name: Janet Yellen, who Robertson says “is unwilling to see the American public taking pain at all and because of that I think she is creating a serious bubble where serious pain is going to come.”

What happens then: “If we have that bubble burst, you’re not going to make any money in the stock market unless you’re short and unless you’re in some sort of hedge fund.”

The billionaire also warned young job-seekers to avoid industries that have become overly popular like hedge funds, although he admitted that seeding a newer generation of managers – which he’s done since opening his family office – is still one of his favorite things to do.  “I still think that the good people will do well,” Robertson said.

On a tangent, Robertson had a brief chat about the presidential election, and had kind words for Republican nominee Donald Trump but said he won’t be voting for him. “I know Donald and I like Donald, and I really respect the Wollman Rink, which he’s put back in Central Park,” Robertson said, referring to the New York ice-skating rink Trump renovated in the 1980s. “But I’m out of that race. I’m going to vote for the former governor of New Mexico and the former governor of Massachusetts.”

* * *

Full interview below:

via http://ift.tt/2drFXLi Tyler Durden

Discussing the present and future of the embattled hedge fund industry, Tiger Management’s Julian Robertson – one of the most prominent names in the field – said that hedge funds are facing “the most difficult time I’ve ever seen in the business” his investing career (observing that “there are a lot of people squeezing shorts”), and warned that the days of charging hefty fees may be over.

““That type of business hasn’t worked lately, and it’s a tough business,” Robertson, 84, said Tuesday on Bloomberg Surveillance in New York. “It’s tougher to be a hedge fund investor than ever before.”

Incidentally, the current debacle facing the hedge fund space, is something we have been warning about since 2012, when we predicted that as a result of central banks’ having taken over the role of the market’s Chief Risk Officer, there is implicitly no more downside risk, and thus no need to hedge; alternatively once central banks do lose control, no extent of hedges will compensate for the rout that would occur, which coupled with counterparty failure, would mean failure to satisfy obligations made under short trades.

Sevaral years later, Julian Robertson agrees with this assessment, saying that ultra-low interest rates and swollen stock-market valuations are crimping returns for the managers, whose portfolios are designed to outperform during a downturn. The problem: with central banks injecting $2.5 trillion in liquidity each year, there is no downturn. As a result, the $2.9 trillion industry, has underperformed the S&P 500 index every year since 2008.

So what could save hedge funds? The simple answer: an end to the financial repression, bubble blowing and market manipulation that central bankers have unleashed, but it wouldn’t only benefit hedge funds:

“High interest rates are going to encourage savings, and I think we desperately need savings. Take a widow: they don’t know what to do with the money. There is no way they can do anything with it unless they go into stocks. I think forced equity investing creates the bubble.”

When asked who do you blame for this mess, the legendary hedge fund investor had one name: Janet Yellen, who Robertson says “is unwilling to see the American public taking pain at all and because of that I think she is creating a serious bubble where serious pain is going to come.”

What happens then: “If we have that bubble burst, you’re not going to make any money in the stock market unless you’re short and unless you’re in some sort of hedge fund.”

The billionaire also warned young job-seekers to avoid industries that have become overly popular like hedge funds, although he admitted that seeding a newer generation of managers – which he’s done since opening his family office – is still one of his favorite things to do.  “I still think that the good people will do well,” Robertson said.

On a tangent, Robertson had a brief chat about the presidential election, and had kind words for Republican nominee Donald Trump but said he won’t be voting for him. “I know Donald and I like Donald, and I really respect the Wollman Rink, which he’s put back in Central Park,” Robertson said, referring to the New York ice-skating rink Trump renovated in the 1980s. “But I’m out of that race. I’m going to vote for the former governor of New Mexico and the former governor of Massachusetts.”

* * *

Full interview below:

via http://ift.tt/2drFXLi Tyler Durden

The first hint we had coming into today’s auction that it would be weaker than some recent issuance for this maturity, was thanks to the repo rate for 7Y paper, which earlier this morning was quoted at 0.6%, suggesting that unlike this week’s 2 and 5Y paper, there would be few shorts looking to cover into the 1pm deadline.

And sure enough, when the results for the sale of $28bn in 7 paper printed, the result was a modest tail, with a high yield of 1.389% tailing the 1.385% When Issued. As a reminder, last month’s 7Y auction had an even bigger tail but that was due to concerns of a potential rate hike by the Fed in September; this time there was no such concern.

The internals were modest: the Bid to Cover of 2.474 was slightly higher than last month’s 2.383, if below the 12 month average of 2.50. Direct Bidders took down 10.46%, the highest allotment since May, leaving Indirects with 59.4%, higher than August but lower than any preceding month since March, while Dealers were left holding 30.2%.

Overall, a forgettable auction, and like in the aftermath of yesterday’s 5Y issuance, the 2s30s curve has seen another modest flattening, something Kuroda will not be delighted by.

via http://ift.tt/2dfmz0R Tyler Durden

European banks are in a “very fragile situation” and are “not really investable as a sector" according to Credit Suisse chief executive Tidjane Thiam. Speaking at a conference in London this morning, The FT reports, the CEO of Europe's 'other Deutsche Bank' said "only a fool would try to make a five-year prediction in a world that is so random," wishing John Cryan (DB CEO) well, "I hope that they come out of their current predicament."

"The next nine months are going to be difficult," Thiam began, adding that "risk is everywhere, risk is everything. I trained in maths and physics and all that teaches you is that basically the world is a big random experiment," and Brexit was "like Russian Roulette." Asked specifically about Deutsche Bank, he wished them luck…

“You get extreme movements on the basis of relatively minor piece of news because there’s a lot of uncertainty,” he said, citing “regulatory uncertainty” about future capital requirements and concerns about “potential fines like you’ve seen on Deutsche Bank this week”.

 

“I think there is also a lot of doubt, a fundamental doubt, is there a viable business model that covers its cost of equity?” Mr Thiam added.

 

“That’s the big big big question,” he said, describing it as something that “makes banks not really investable as a sector”.

 

“Deutsche Bank is an old institution, a great institution and I really wish them well, I hope that they come out of their current predicament”. 

For now CS is outperforming…

But looking forward, Thiam was anything but the usual unequivopcally bullish bank CEO Americans are so used to…

"I cannot remember, in my lifetime, so many elections. Politics are going to play a big role. I think you will have spikes in volatility. And then you also have the drift towards populism in the political discourse, which will scare markets. The next six to nine months are going to get choppy."

 

"I know I don't know. Only a fool would try to make a five-year prediction in a world that is so random. You cannot see the future, that is a futile activity. What you can do is think through how you're going to cope with a range of futures and then you define a risk appetite – which is what probably of death are you comfortable with."

 

"In life you should only worry about the bad outcomes. If you raise capital and you're wrong, it's ok. If you don't raise capital and you're wrong, you die,"

via http://ift.tt/2drUvX1 Tyler Durden

European banks are in a “very fragile situation” and are “not really investable as a sector" according to Credit Suisse chief executive Tidjane Thiam. Speaking at a conference in London this morning, The FT reports, the CEO of Europe's 'other Deutsche Bank' said "only a fool would try to make a five-year prediction in a world that is so random," wishing John Cryan (DB CEO) well, "I hope that they come out of their current predicament."

"The next nine months are going to be difficult," Thiam began, adding that "risk is everywhere, risk is everything. I trained in maths and physics and all that teaches you is that basically the world is a big random experiment," and Brexit was "like Russian Roulette." Asked specifically about Deutsche Bank, he wished them luck…

“You get extreme movements on the basis of relatively minor piece of news because there’s a lot of uncertainty,” he said, citing “regulatory uncertainty” about future capital requirements and concerns about “potential fines like you’ve seen on Deutsche Bank this week”.

 

“I think there is also a lot of doubt, a fundamental doubt, is there a viable business model that covers its cost of equity?” Mr Thiam added.

 

“That’s the big big big question,” he said, describing it as something that “makes banks not really investable as a sector”.

 

“Deutsche Bank is an old institution, a great institution and I really wish them well, I hope that they come out of their current predicament”. 

For now CS is outperforming…

But looking forward, Thiam was anything but the usual unequivopcally bullish bank CEO Americans are so used to…

"I cannot remember, in my lifetime, so many elections. Politics are going to play a big role. I think you will have spikes in volatility. And then you also have the drift towards populism in the political discourse, which will scare markets. The next six to nine months are going to get choppy."

 

"I know I don't know. Only a fool would try to make a five-year prediction in a world that is so random. You cannot see the future, that is a futile activity. What you can do is think through how you're going to cope with a range of futures and then you define a risk appetite – which is what probably of death are you comfortable with."

 

"In life you should only worry about the bad outcomes. If you raise capital and you're wrong, it's ok. If you don't raise capital and you're wrong, you die,"

via http://ift.tt/2drUvX1 Tyler Durden

Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the “Sept 11” bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House.

Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama’s veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama’s veto pen.

Democratic Leader Harry Reid was the sole NO vote.

As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position.

Obama has never had a veto overridden by Congress.

Lawmakers don’t want to be seen as soft on punishing terrorist sponsors a few weeks before the election, at a time when voters are increasingly worried about radical Islamic terrorism in the wake of recent attacks in Manhattan, Minnesota and Orlando, Fla. Oddly enough, Obama had no problem with those particular optics.

The House will take up the matter later on Wednesday, and Speaker Paul Ryan told reporters last week that he expects there be to enough votes for an override.

As a reminder, the legislation, sponsored by Senate Republican Whip John Cornyn (Texas) and Sen. Chuck Schumer (D-N.Y.), the third-ranking member of the Democratic leadership, would create an exception in the Foreign Sovereign Immunities Act to allow the victims of terrorism to sue foreign sponsors of attacks on U.S. soil.

It was crafted primarily at the urging of the families of victims of the Sept. 11, 2001, attacks who want to sue Saudi Arabian officials found to have links with the hijackers who flew planes into the World Trade Center and Pentagon. It passed the Senate and House unanimously in May and September, respectively, but without roll-call votes.

“This is pretty much close to a miraculous occurrence because Democrats and Republicans, senators [and] House members have all agreed [on] the Justice Against Sponsors of Terrorism Act (JASTA), which give the victims of a terrorist attack on our won soil an opportunity to seek the justice they deserve,” Cornyn said on the Senate floor before the vote.

President Obama warned in a veto message to the Senate last week that the bill would improperly give legal plaintiffs and the courts authority over complex and sensitive questions of state-sponsored terrorism. He also cautioned that it would undermine protections for U.S. military, intelligence and foreign service personnel serving overseas, as well as possibly subject U.S. government assets to seizure.

Obama sent a letter to Senate leaders reiterating his threats concerns that the measure could put U.S. troops and interests at risk.:

“The consequences of JASTA could be devastating to the Department of Defense and its service members — and there is no doubt that the consequences could be equally significant for our foreign affairs and intelligence communities,” he wrote in the letter, which was later circulated by a public affairs company working for the embassy of Saudi Arabia.

For once, using threat as a negotiating tactic, especially when on behalf of a foreign sponsor of terorrism and one of the Clinton foundation’s biggest donors, failed to work.

Now we wait to see if the Veto is likewise overriden in the House, in what is set to be a historic humiliation for the outgoing Saudi American president.

As for the implications for capital markets should the House follow the Senate in overriding Obama’s veto, they could be dramatic: as noted earlier, the threat of the 9/11 bill passing has put on hold Saudi plans to issue its megabond, effectively putting even more pressure on the kingdom’s finances; alternatively as Saudi Arabia has threatened before, should the bill pass, it would (and may have no other choice considering its liquidity crisis) have to sell US reserves, among which billions in Treasurys and an unknown amount of US equities.

via http://ift.tt/2cLfwxy Tyler Durden

Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the “Sept 11” bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House.

Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama’s veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama’s veto pen.

Democratic Leader Harry Reid was the sole NO vote.

As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position.

Obama has never had a veto overridden by Congress.

Lawmakers don’t want to be seen as soft on punishing terrorist sponsors a few weeks before the election, at a time when voters are increasingly worried about radical Islamic terrorism in the wake of recent attacks in Manhattan, Minnesota and Orlando, Fla. Oddly enough, Obama had no problem with those particular optics.

The House will take up the matter later on Wednesday, and Speaker Paul Ryan told reporters last week that he expects there be to enough votes for an override.

As a reminder, the legislation, sponsored by Senate Republican Whip John Cornyn (Texas) and Sen. Chuck Schumer (D-N.Y.), the third-ranking member of the Democratic leadership, would create an exception in the Foreign Sovereign Immunities Act to allow the victims of terrorism to sue foreign sponsors of attacks on U.S. soil.

It was crafted primarily at the urging of the families of victims of the Sept. 11, 2001, attacks who want to sue Saudi Arabian officials found to have links with the hijackers who flew planes into the World Trade Center and Pentagon. It passed the Senate and House unanimously in May and September, respectively, but without roll-call votes.

“This is pretty much close to a miraculous occurrence because Democrats and Republicans, senators [and] House members have all agreed [on] the Justice Against Sponsors of Terrorism Act (JASTA), which give the victims of a terrorist attack on our won soil an opportunity to seek the justice they deserve,” Cornyn said on the Senate floor before the vote.

President Obama warned in a veto message to the Senate last week that the bill would improperly give legal plaintiffs and the courts authority over complex and sensitive questions of state-sponsored terrorism. He also cautioned that it would undermine protections for U.S. military, intelligence and foreign service personnel serving overseas, as well as possibly subject U.S. government assets to seizure.

Obama sent a letter to Senate leaders reiterating his threats concerns that the measure could put U.S. troops and interests at risk.:

“The consequences of JASTA could be devastating to the Department of Defense and its service members — and there is no doubt that the consequences could be equally significant for our foreign affairs and intelligence communities,” he wrote in the letter, which was later circulated by a public affairs company working for the embassy of Saudi Arabia.

For once, using threat as a negotiating tactic, especially when on behalf of a foreign sponsor of terorrism and one of the Clinton foundation’s biggest donors, failed to work.

Now we wait to see if the Veto is likewise overriden in the House, in what is set to be a historic humiliation for the outgoing Saudi American president.

As for the implications for capital markets should the House follow the Senate in overriding Obama’s veto, they could be dramatic: as noted earlier, the threat of the 9/11 bill passing has put on hold Saudi plans to issue its megabond, effectively putting even more pressure on the kingdom’s finances; alternatively as Saudi Arabia has threatened before, should the bill pass, it would (and may have no other choice considering its liquidity crisis) have to sell US reserves, among which billions in Treasurys and an unknown amount of US equities.

via http://ift.tt/2cLfwxy Tyler Durden

Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the “Sept 11” bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House.

Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama’s veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama’s veto pen.

Democratic Leader Harry Reid was the sole NO vote.

As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position.

Obama has never had a veto overridden by Congress.

Lawmakers don’t want to be seen as soft on punishing terrorist sponsors a few weeks before the election, at a time when voters are increasingly worried about radical Islamic terrorism in the wake of recent attacks in Manhattan, Minnesota and Orlando, Fla. Oddly enough, Obama had no problem with those particular optics.

The House will take up the matter later on Wednesday, and Speaker Paul Ryan told reporters last week that he expects there be to enough votes for an override.

As a reminder, the legislation, sponsored by Senate Republican Whip John Cornyn (Texas) and Sen. Chuck Schumer (D-N.Y.), the third-ranking member of the Democratic leadership, would create an exception in the Foreign Sovereign Immunities Act to allow the victims of terrorism to sue foreign sponsors of attacks on U.S. soil.

It was crafted primarily at the urging of the families of victims of the Sept. 11, 2001, attacks who want to sue Saudi Arabian officials found to have links with the hijackers who flew planes into the World Trade Center and Pentagon. It passed the Senate and House unanimously in May and September, respectively, but without roll-call votes.

“This is pretty much close to a miraculous occurrence because Democrats and Republicans, senators [and] House members have all agreed [on] the Justice Against Sponsors of Terrorism Act (JASTA), which give the victims of a terrorist attack on our won soil an opportunity to seek the justice they deserve,” Cornyn said on the Senate floor before the vote.

President Obama warned in a veto message to the Senate last week that the bill would improperly give legal plaintiffs and the courts authority over complex and sensitive questions of state-sponsored terrorism. He also cautioned that it would undermine protections for U.S. military, intelligence and foreign service personnel serving overseas, as well as possibly subject U.S. government assets to seizure.

Obama sent a letter to Senate leaders reiterating his threats concerns that the measure could put U.S. troops and interests at risk.:

“The consequences of JASTA could be devastating to the Department of Defense and its service members — and there is no doubt that the consequences could be equally significant for our foreign affairs and intelligence communities,” he wrote in the letter, which was later circulated by a public affairs company working for the embassy of Saudi Arabia.

For once, using threat as a negotiating tactic, especially when on behalf of a foreign sponsor of terorrism and one of the Clinton foundation’s biggest donors, failed to work.

Now we wait to see if the Veto is likewise overriden in the House, in what is set to be a historic humiliation for the outgoing Saudi American president.

As for the implications for capital markets should the House follow the Senate in overriding Obama’s veto, they could be dramatic: as noted earlier, the threat of the 9/11 bill passing has put on hold Saudi plans to issue its megabond, effectively putting even more pressure on the kingdom’s finances; alternatively as Saudi Arabia has threatened before, should the bill pass, it would (and may have no other choice considering its liquidity crisis) have to sell US reserves, among which billions in Treasurys and an unknown amount of US equities.

via http://ift.tt/2cLfwxy Tyler Durden