iftttwall

European stocks halted two days of declines, with the Stoxx 600 fractionally in the green and Italy’s bonds climbing after Monte Paschi requested a bailout and Italy pledged to provide support for its other ailing lenders. S&P futures were little changed among extremely thin volumes while Chinese stocks dropped amid concerns on higher borrowing costs. Oil slid, while gold advanced; bitcoin soared to multi-year highs, rising above $900.

The biggest financial story, in addition to the expected Deutsche Bank and Credit Suisse settlements, was the nationalization of Italy’s Monte Paschi and the country’s backstop of further bailouts with a new €20 billion fund set aside to fund additional bank rescues.  As a result, Italian 10-year bonds lead gains among major European securities after the government said it will plow as much as 20 billion euros ($21 billion) into the country’s banks and Banca Monte dei Paschi di Siena SpA said it will ask for a “precautionary” capital increase. Deutsche Bank AG also rose after the lender agreed to settle U.S. mortgage probes. “It’ll be a relief to investors,” George Boubouras, the chief investment officer of Melbourne-based Contango Asset Management Ltd., told Bloomberg.

Following last night’s nationalization request, Monte Paschi shares have been suspended from trading.

“Banks run the show today,” analysts at Kepler Chevreux said in a note to clients, adding that the newsflow around Italian lenders was turning positive.

Deutsche Bank’s $7.2 billion settlement with the U.S. Department of Justice over toxic mortgage securities sold in the run-up to the 2008 financial crisis was nearly half of the fine initially levied in September. Deutsche Banks shares rose 2.7 percent and are up 86 percent since September lows. Credit Suisse fell 0.6%, giving up earlier gains, after it agreed to pay $5.3 billion to the DOJ to settle similar charges. Barclays became the latest in a long-list of other lenders under investigation to be sued.

The bank sector news helped the Stoxx Europe 600 Index hold this month’s 5.3% rally that has taken it within 1.6% of wiping out its losses for the year.

In the U.S., a rally that took indexes to a record stalled as the Dow Jones Industrial Average neared 20,000 and as trading wound down before December holidays. In the last day of trading before Christmas in Europe, stock volumes were about 40% lower than the 30-day average. , Japanese markets were closed today for Emperor’s Birthday holiday.

The dollar headed into the Christmas break on Friday just over half a percent off highs hit after this month’s U.S. Federal Reserve policy meeting. The dollar is up more than 7 percent against a basket of currencies since lows hit on U.S. election night in November but has been flat for the past week. The dollar index .DXY, hovering near a 14-year high, was marginally lower at 103.03 but remained within striking distance of the week’s 103.65 peak.

In bonds, Italian 10-year yields declined four basis points to 1.81 percent, while German bund yields slid one basis point to 0.25 percent. Treasuries were little changed after 10-year yield climbed two basis points to 2.55 percent on Thursday.

The UK economy expanded at a 0.6 percent pace in the three months to September, faster than the original estimate of 0.5 percent, suggesting there has been no “Brexit” hit to economic activity so far since the June 23 vote to leave the European Union.

* * *

Market Snapshot

• S&P 500 futures unchanged at 2259
• Stoxx 600 up less than 0.1% to 360
• FTSE 100 down less than 0.1% to 7061
• DAX up 0.1% to 11468
• German 10Yr yield down 1bp to 0.25%
• Italian 10Yr yield down 5bps to 1.8%
• Spanish 10Yr yield down 1bp to 1.39%
• S&P GSCI Index down 0.4% to 390.6
• MSCI Asia Pacific down 0.2% to 135
• Nikkei 225 closed
• Hang Seng down 0.3% to 21575
• Shanghai Composite down 0.9% to 3110
• S&P/ASX 200 down 0.3% to 5628
• US 10-yr yield down less than 1bp to 2.54%
• Dollar Index down 0.11% to 102.98
• WTI Crude futures down 0.6% to $52.64
• Brent Futures down 0.6% to $54.74
• Gold spot up 0.2% to $1,131
• Silver spot up 0.1% to $15.82

Top Headline News

• Paschi Seeks State Aid as Italy Readies $21 Billion for Banks: Monte Paschi recapitalization effort misses bank’s target
• Deutsche Bank, Credit Suisse Settle U.S. Probes as Barclays Sued: Banks pay $12.5b to end probe into sales of toxic debt
• Boeing-Versus-Lockheed Fighter Rivalry Reopened by Trump Tweet: Trump said he wants Boeing to price out F-35 competitor
• Exxon Norway Assets Said to Attract Aker BP, Hitec, Neptune: Offshore oil fields said to be valued at about $1 billion
• Merck’s Ebola Vaccine Found to Protect Against Deadly Virus: Vaccine was studied in trial involving >11,000 people in Guinea
• Fred’s Attracts Activist as Alden Unveils 25% Stake on Deal: Alden also running activist campaign at retailer Pier 1 Imports
• MegaFon to Buy Mail.ru Stake for $740 Million From Usmanov: Wireless carrier gains control of 63.8% of web company’s votes

Looking at Asian markets, stocks traded subdued following the negative lead from the US, where the 20,000 level continued to elude the DJIA, with markets very quiet amid the absence of Japan and ahead of Christmas holidays. 9 out of 11 sectors decline in the MSCI Asia Pacific Index with information technology, materials underperforming and utilities, industrials outperforming “Looking at the last few days, from a technical perspective we’ve seen this move up on lighter volume and it seems like all the buying pressure has been exhausted,” said James Woods, a Sydney-based investment analyst at Rivkin Securities, with regards to the A&P/ASX 200 Index. ASX 200 (-0.3%) was led lower by basic material names after iron prices declined around 4% to a 3-week low, with trade also light ahead of the upcoming 4-day weekend. Shanghai Comp. (-0.9%) and Hang Seng Index (-0.2%) were negative despite the PBoC attempting to ease liquidity concerns by injecting more funds this week, as prospects of tighter regulation on investments by insurers and brokerages dampened risk sentiment. Finally, Japanese markets were shut today for the Emperor’s Birthday holiday. PBoC injected CNY 90bIn 7-day reverse repos, CNY 50bIn in 14-day reverse repos, CNY 5bIn in 28-day reverse repos for a net weekly injection of CNY 375b1n vs. previous injection of CNY 250b1n last week.  PBoC set the mid-point at 6.9463. China is said to regulate alternative investments by brokerages, according to press reports.

Top Asian News:

• Saipan Casino Bond on Hold Risks Future of $7 Billion Resort: Imperial Pacific issuance to fund casino said to be shelved
• World’s Worst Air Has Mongolians Seeing Red, Planning Action: Dec. 26 action set amid smog five times worse than Beijing
• A Goldman You’ve Never Heard of Is Pursuing a Hong Kong IPO: Local electrical subcontractor adopted Goldman name last month

In Europe, the final quiet start before the Christmas break has seen European equities trade higher this morning (Euro Stoxx: +0.2%), with Deutsche Bank (+2.3%) leading the charge after reaching a settlement of USD 7.2bIn with the DoJ (vs. USD 14bIn initially requested). Credit Suisse (-0.6%) also reached an agreement with the DoJ although failed to see quite the same upside, while Barclays (-1.2%) rejected a fine and as such are facing litigation. Today is one of the few days in 2016 where Banca Monte dei Paschi are not leading the way higher/lower across equities…given that they are suspended from trade after failing to raise sufficient funds through their recapitalisation plans and as such will receive state aid. Elsewhere, fixed income markets have continued the subdued trade seen throughout the week. Bunds have traded flat so far today, with Gilt futures seeing modest outperformance, with the move coming in tandem with softness being seen in GBP.

Top European News:

• NN Group to Buy Dutch Rival Delta Lloyd for $2.6 Billion: Delta Lloyd returned to profit in first half after cost cuts
• U.K. Current-Account Deficit Widens; GDP Growth Revised Up: Higher: 3Q trade deficit widnens to 2.8% of GDP, most since 2013
• Brexit Shapes Up to Be ‘Hard’ 6 Months After Vote, Academics Say: EU is playing ‘hardball’ with U.K. in divorce proceedings

In currencies, the euro advanced for a third day against the dollar, adding 0.2 percent to $1.0455. The pound rebounded from the lowest level since Nov. 2 versus the greenback after data showed the U.K. economy expanded more than initially reported in the third quarter. The currency was little changed at $1.2277, after earlier touching $1.2246. Little to note elsewhere as the remnants of the market look to wind down for the Xmas break. The lead EUR/USD and USD/JPY rates are trading in extremely tight ranges, but some very modest USD tiredness to note ahead of the break. Weakness in the commodity currencies also subsides, but little to glean from today’s price action.

In commodities, gold edged higher in London trading, adding 0.3 percent to $1,131.74 an ounce. It’s still set for a seventh week of declines. West Texas Intermediate crude for February delivery in New York fell 0.6 percent to $52.66 a barrel.

US Event Calendar

• 10am: New Home Sales, Nov., est. 575k (prior 563k)
• 10am: U. of Mich. Sentiment, Dec. F, est. 98.0 (prior 98.0)
• 1pm: Baker Hughes rig count

via http://ift.tt/2in3SJa Tyler Durden

Shortly after last night’s news that Deutsche Bank had settled with the DOJ for $7.2 billion, of which it would pay $3.1 billion in a civil penalty, far lower than the $14 billion number initially speculated (the stock popped as much as 4% before settling just over 2% higher currently), Credit Suisse likewise closed the books on its pre-crisis RMBS fraud when the largest Swiss bank agreed to pay $5.28 billion to resolve a U.S. investigation into its business in mortgage-backed securities. Credit Suisse will pay a $2.48 billion civil penalty and $2.8 billion in relief for homeowners and communities hit by the collapse in home prices, it said in a statement Friday. Credit Suisse will take a pretax charge of about $2 billion in addition to its existing reserves during the fourth quarter.

The two settlements follow a surprise announcement by the DOJ which said on Thursday it sued Barclays Plc for fraud over its sale of mortgage bonds after the bank balked at paying the amount the government sought in negotiations. The lawsuit announced on Thursday is rare for big banks, which typically settle with the government rather than risk drawn-out litigation and a possible trial.

“With this settlement, the largest remaining major uncertainty is now eliminated” for Credit Suisse, Peter Casanova, an analyst at Kepler Cheuvreux told Bloomberg. “This is good news.”

The Obama administration is pressing to wrap up investigations of Wall Street firms for creating and selling the subprime mortgage bonds that fueled the 2008 financial crisis. Before the two deals on Friday, authorities had already extracted more than $46 billion in fines from six U.S. financial institutions over their dealings in mortgage-backed securities. Bank of America Corp., which had the largest such settlement, agreed to pay $16.7 billion over bonds that were worth four times those of Deutsche Bank. Meanwhile, Deutsche Bank said that the fine will cut its pretax profit by $1.2 billion this quarter as the firm taps existing legal reserves to blunt much of that cost.

Credit Suisse said it would pay the consumer relief over five years following the settlement. The bank had set aside about 2.1 billion francs ($2.1 billion) in general litigation provisions by the end of the third quarter.

Chief Executive Officer Tidjane Thiam tapped shareholders for 6 billion Swiss francs in late 2015 while shifting the company’s focus away from capital-heavy investment banking toward wealth management. Thiam has updated investors twice on his plan, which includes a partial initial public offering of its Swiss unit in late 2017. In December, the former insurance executive pledged more cost cuts and lowered targets for the international wealth management and its Asian unit.

As Bloomberg adds, the Swiss bank remains under Justice Department scrutiny over its handling of U.S. clients in Israel. The department fined Credit Suisse $2.6 billion in 2014 for helping Americans dodge taxes in Switzerland. The bank is also a target of several antitrust cases in the U.S., including class actions related to foreign-exchange rates and interest-rate swaps.

At least three other European banks remain under investigation over the role of their mortgage-backed securities business: UBS, HSBC and Royal Bank of Scotland. In addition to Bank of America, U.S. banks that have settled include Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley. Wells Fargo & Co. and Moody’s Corp. have disclosed U.S. investigations into their mortgage-backed securities dealings and have said they’re cooperating.

via http://ift.tt/2hPd8c2 Tyler Durden

Anis Amri, the man believed to be behind the Christmas market in Berlin was killed in a shootout in Milan, Italy’s Interior Minister Marco Minniti said at a press conference in Rome.

1. L’aggressore di Milano fermato da volante del commissariato Sesto San Giovanni durante un normale servizio di controllo del territorio http://pic.twitter.com/GmdIK0M9WS

— Polizia di Stato (@poliziadistato) December 23, 2016

Interior Minister Marco Minniti said during a press conference that Anis Amri, was stopped on foot by police patrols at around 3 a.m. during a routine check in the Sesto San Giovanni neighborhood. When the officers asked Mr. Amri for identification, he pulled out a 22 caliber gun from his backpack and began to shoot. The police returned fire, killing him.

“Without any doubt the person killed is Anis Amri, the man suspected in the Berlin terrorist attack,” Minniti said at a press conference.

“There is absolutely no doubt that the person who was killed is Anis Amri” – Italy’s interior minister Marco Minniti https://t.co/bArceiTFUI http://pic.twitter.com/MMsSh5H5rm

— BBC Breaking News (@BBCBreaking) December 23, 2016

One police officer was injured, but his injuries are not life-threatening, according to tweets from the police.

Earlier on Friday, Italian authorities said Amri was killed in a shootout with police in Milan on Thursday night. A short video posted on the website of Italian magazine Panorama suggested the shooting happened before dawn, with police gathered around a cordoned-off area in the dark.

EIL: Anis Amri nach Attentat auf #Breitscheidplatz Dienstag früh in Moabit gesichtet. @rbbabendschau liegen Überwachungsaufnahmen vor. http://pic.twitter.com/SPmdidRiPM

— rbb|24 (@rbb24) December 22, 2016

Conflicting news reports previously suggested the opposite. The German Police claimed that the suspect was hiding in Berlin. On Thursday, RBB released CCTV footage showing him at a local mosque one day after the attack. The police said Amri was injured, and therefore would not risk travelling too far.

German federal police had issued a rare international wanted notice for Mr. Amri—who arrived in Germany last year after time in an Italian prison—and offered a €100,000 ($104,000) reward, warning that he could be armed and dangerous. German authorities have come under criticism over accusations they failed to stop Mr. Amri, a 24-year-old asylum seeker, despite being aware of his radicalization.

As the WSJ adds, since the Monday attack, German security and judicial officials have said they had known about the potential risks he posed for about a year, had put him under surveillance and even detained him briefly, but failed to deport him and later lost track of him. The extent of authorities’ prior knowledge and growing concern about the danger Mr. Amri posed was made even more apparent on Thursday when a senior U.S. official said Germany had notified the U.S. about him. U.S. authorities then added his name to a terrorism watch list.

German officials in November provided more information and U.S. officials decided to put Mr. Amri’s name on a no-fly list, an indication that they believed he posed a more significant threat than they previously thought, the official said.

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Submitted by Brian Cloughley via Strategic-Culture.org,

The Nazi propagandist Josef Goebbels is generally thought to have said that «If you tell a lie big enough and keep repeating it, people will eventually come to believe it». In fact, he didn’t state that, exactly, but based his propaganda largely on the premise that «credibility alone must determine whether propaganda output should be true or false». What he did say, however, was «the English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous».

Not much has changed on the propaganda front in seventy-five years, and the evil Goebbels would feel at ease with modern developments as regards the Western Establishment’s campaign against President Putin and soon-to-be President Trump.

On December 16 the newspaper USA Today reported that «President-elect Donald Trump’s controversial soft spot for Russia is based on decades of courting wealthy Russians to buy condos in his luxury high-rises and invest in his other real estate ventures». This line of attack is intriguing because the high-circulation USA Today is owned by the Gannett Company, which «in 2010 increased executive salaries and bonuses… Bob Dickey, Gannett’s US newspapers division president, was paid $3.4 million in 2010, up from $1.9 million the previous year. The next year, the company laid off 700 U.S. employees to cut costs». No luxury high-rises for Gannett employees, then, unless they are in the top echelon.

In Britain the Guardian, usually an even-handed and objective source of news and comment, went with the flow of anti-Russia overkill and produced a report that began «Alarm over the rise of Donald Trump reached a new pitch early this week as officials in Washington worried that the United States has elected a leader who may be uniquely blind to threats posed by Russia». It did not mention what the threats might be, but did have the honesty to end with the words of President Putin that «as I have repeatedly said, it’s not our fault that Russian-American relations are in such a poor state. But Russia wants and is ready to restore fully fledged relations with the United States».

Of course, Russia wants to have good relations with other countries. Such a sensible approach results in commercial benefit and social harmony rather than disharmony and confrontation. But in the period when Russia was trying to rebuild from the dire days of Soviet ideology the West expanded the US-NATO military alliance to 28 countries from 16, and recently deployed US-NATO forward tactical headquarters, thousands of troops, and flights of combat and intelligence-gathering aircraft to countries on Russia’s borders. As I noted a couple of weeks ago, «In Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia the Alliance has established ‘NATO Force Integration Units’ which are advanced military headquarters whose Mission is ‘to improve cooperation and coordination between NATO and national forces, and prepare and support exercises and any deployments needed’».

Then some nations became agitated when Russia deployed defensive weapons within its own territory in order to counter the US-NATO movement of armed forces up to is borders.

As reported by Britain’s ultra-right Daily Telegraph, owned by the creepy twin Barclay brothers who own London’s Ritz Hotel and many luxury high-rises (and hate the European Union, while living in the haven of tax-relaxed Monaco), NATO «described Moscow’s decision to send state-of-the-art Bastion missile-launchers to Kaliningrad, which borders Nato members Poland and Lithuania, as ‘aggressive military posturing’». There was no mention made of President Putin’s explanation that Russia considered it important to take countermeasures against NATO’s expansion and «aim our missile systems at those facilities which we think pose a threat to us».

As observed by Goebbels, the English propagandists «keep up their lies, even at the risk of looking ridiculous».

Consistent with the Goebbels line of sticking to skewed presentation, Britain’s defence minister, Michael Fallon, a public figure of mixed repute (he is known for alcoholic capers and was found guilty of drunken driving as well as having swindled the Parliamentary expenses system out of thousands of pounds over many years), was reported by Reuters as declaring that the West had «to be strong against Russian aggression towards NATO… Russia is a strategic competitor to us in the West and we have to understand that».

Fortunately, there are sounder and better informed people than the drunken fiddler Fallon, and one of these is the specialist Peter Duncan of University College London whose more sober opinion is that «there is no reason for Russia to want to threaten the sovereignty of the Baltic states in the sense of trying to force them to leave NATO or still less to invade them… the Russian economy depends on a prosperous Western European economy».

The Far-Right Western media ignored Professor Duncan’s balanced summation, just as it disregarded President Putin’s own assurance, given in a little-reported interview with Italy’s Il Corriere della Sera, that «I think that only an insane person and only in a dream can imagine that Russia would suddenly attack NATO».

But it’s lies that matter when false dogma is being spread. The US-NATO military alliance doesn’t really believe that Russia is preparing to attack the Baltic States and on December 16 President Obama even informed the world media that in his opinion Russia is «a small country, they're a weak country» which tends to contradict the propaganda line that Russia is a large country, a «strategic competitor» straining at the leash to invade the Baltic States and create mayhem around the world.

The fact that the US spends 596 billion dollars annually on armaments against Russia’s 66 billion is rarely mentioned (NATO as a whole spends 860 billion) except in reputable journals such as The Economist which on December 17, however, chose to pronounce that Mr Trump’s choice of Rex Tillerson to be Secretary of State «is disconcerting» because Mr Tillerson actually displayed «opposition to the sanctions imposed on Russia».

The Western propaganda line is that everything Russia does is reprehensible to the point of evil, and that any westerner attempting to propose dialogue rather than confrontation is «disconcerting» at best, and in the eyes of the tabloid papers a raving traitor to the values of the plutocrats who own them.

The policies and aspirations of President Putin are being presented by the US-NATO military alliance as contrary to the interests of the Western powers, but no attention has been paid to such as Bill Clinton’s deputy secretary of state, the Russia specialist, Strobe Talbott, who stated the obvious when he observed that President Putin «basically wants to make Russia great again». And he won’t do that by invading the Baltic States or any other country, as he and the West well know. It’s about time the Big Lies were laid to rest.

via http://ift.tt/2hOPc8q Tyler Durden

As a new Trump administration prepares to enter the White House, after months of promises to crack down on illegal border crossings, new data emerges that seemingly confirms that the citizens in Mexico and Central America have taken him at his word.  As data from the PewResearchCenter confirms, there has been a surge in illegal border crossings in October and November with the apprehension of people traveling as a family unit up 130% YoY. 

As the chart below highlights, the total number of illegal migrants apprehended at the U.S.-Mexico border in October and November 2016, including those traveling alone, was nearly 40% higher than any other year out of the past 5.

 

As Pew points out, apprehensions typically spike in the spring and summer months before dipping in the late summer, fall and winter months but 2016 bucked that trend as people rushed to beat the Trump inauguration. 

In the 2016 fiscal year (Oct. 1, 2015 to Sept. 30, 2016), there were 408,870 total apprehensions at the Southwest border, up from 331,333 apprehensions in fiscal 2015. Historically, the number of apprehensions has spiked in the spring and early summer months, before dipping in the late summer, fall and winter months. But in fiscal 2016, apprehensions rose in August and September, with monthly totals that approached the highs of April and May.

Pew also notes that the apprehension of Central Americans exceeded that of Mexicans for just the second time in history.  Meanwhile, the Los Angeles Times also reported that 15,000 non-Latin American migrants, primarily Haitians, Africans and Asians, passed through the Mexican state of Baja California in 2016, a fivefold increase from 2015.

Also in fiscal 2016, apprehensions of Central Americans exceeded that of Mexicans for just the second time. This first occurred in 2014, when there was a record surge in apprehensions of unaccompanied children and families, mostly from El Salvador, Honduras and Guatemala. Apprehensions dropped in 2015 due in part to increased immigration enforcement by the Mexican government at its southern border and internally, which made it more difficult for Central Americans to travel through Mexico to reach the U.S.

Of course, as we noted yesterday (see “Mexican Ambassador To U.S. Urges Illegals To Apply For Citizenship Before Trump Takes Office“), for those who are successful in crossing the border illegally, the Mexican Ambassador to the U.S. has a great plan for how you can avoid deportation.  In fact, Ambassador Carlos Sada Solana has even expanded the hours of Mexican consulates in the United States to “better provide information and assistance” to concerned migrants ahead of Trump taking office on January 20th.  Something tells us that this Ambassador isn’t going to be a great fit for the Trump administration.

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Submitted by Jake Anderson via TheAntiMedia.org,

There’s not a day that passes that we don’t have a new reason to suspect humanity is dying off. Scientists have warned of the ‘sixth extinction‘ for decades, but now there is at least one man who believes an ostensibly beneficial innovation — sex robots — could lead to the human race getting screwed.

This is not a Terminator scenario. If humans begin spending the majority of their intimate hours with sex androids, they will reduce both the energy and biological resources needed to perpetuate the human race. At the Second International Congress on Love and Sex with Robots, Swiss researcher Oliver Bendel issued the following, fairly simple, warning:

“If the machine over-exerts the human, it reduces the possibility of human sex.”

At first glance, this seems to be almost a tongue-in-cheek reference to loving your new toy just a little too much. However, there is actually some meat to the theory. If robots satisfy all of our sexual demands, we will be less reliant on physical intimacy with other humans.

Consider also the coming virtual reality sex market, which will allow us to spend countless hours in fictional worlds that rival or supersede our wildest fantasies. Add this to a reduced need for the physical contact critical for most biological reproduction, and it’s easy to conclude that population rates may dramatically decrease in the coming decades.

Perhaps, some would say, this is a good thing. However, if, correspondingly, humans are incubating themselves alone in their homes with androids and occupying commercial virtual environments in perpetuity, we could see the fabric of human interaction and civilization further weaken. At the very least, exponential change to our biological social safety nets — in terms of reproduction — appear imminent.

Perhaps, some would say, this is a good thing.

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

Nearly a decade ago, Warren Buffett bet Protege Partners, a fund of hedge funds, that over the course of 10 years the S&P would outperform Protege’s returns net of all fees, costs and expenses.  To make it real, the loser agreed to pay $1 million to the charity of the winner’s choice.

 

At this past year’s annual meeting, Warren Buffett provided an update on the now 8-year-old bet and, sure enough, the S&P has obliterated Protege’s net returns by over 40%, on a cumulative basis. 

 

Buffett referred to the bet as the “most important investment lesson in the world.” 

“I believe this is the most important investment lesson in the world.”

 

“[Losing by 40 points] may sound like a terrible result for the hedge funds, but it’s not a terrible result for the hedge fund managers.  If you have a couple percentage points sliced off every year, that is a lot of money … It’s a compensation scheme that is unbelievable to me and that’s one reason I made this bet.”

 

“It’s so obvious and yet all the commercial push is telling you you ought to do something different today than you did yesterday.  You don’t have to do that. You just have to sit back and let American industry go to shop for you.”

 

“No consultant in the world is going to tell you just buy an S&P index fund and sit for the next 50 years.  You don’t get to be a consultant that way and you certainly don’t get an annual fee that way.”

Perhaps this simple example helps explain why many of the largest pension funds and endowments are pulling back on investments in hedge funds and seeking fees cuts from managers that they choose to keep in their portfolio.  As the Financial Times points out, the days of the “2 & 20” hedge fund fee structure seem to be coming to an end. 

“There’s a lot of creativity going on and an effort to find fee structures that work for both the manager and the investor,” says Ermanno Dal Pont, global head of strategic consulting at Barclays. “The days where everyone was on 2 and 20 and quarterly liquidity are surely over.”

 

Managers are offering discounts by using a scale of fees based on assets under management or time spent invested, so when assets rise or a certain amount of time passes, the early investors pay less, according to Barclays’ prime services group.

 

There are also longer performance fee crystallisation periods for funds with longer investment time horizons, and hurdles that place a threshold on incentive fees.

 

Some are also charging different levels of performance fees based on how big a return they made; granting discounts where existing investors can add more capital to a strategy during a down period at a reduced rate, and offering reduced fees if investors agree to lock up their capital for longer or invest a larger chunk of money.

According to a hedge fund fee study conducted by Barclays, management fees these days are closer to 1.0% – 1.5%.

 

Performance fees have also been trending down with small and mid-sized funds getting 12% – 18% compared to the traditional 20%.

 

Meanwhile, the head of Aberdeen Asset Management points out that the “2 and 20 has been dead for longer than people think” with Barclays estimating that only 30% of hedge funds are actually able to charge those rates.

Andrew Beer, chief executive of Beachhead Capital, which markets products that rival hedge fund offerings, says the average fee is now about 1.65 per cent in management fees and 18 per cent in incentive fees. For new fund launches, it is now 1.49 per cent and 17.5 per cent, according to Hedge Fund Research.

 

“The 2 and 20 has been dead for longer than people think,” says Russell Barlow, head of hedge funds at Aberdeen Asset Management.

 

“Funds who can charge that or greater are a rare exception. 2016 saw a number of groups who felt they could defend their legacy fee structures capitulate — even the mighty need to concede.”

 

We would venture to guess that no one in history has ever earned so much money for providing so little value as has the modern day hedge fund manager…but we suspect that could all be changing.

via http://ift.tt/2hZ2M77 Tyler Durden

Via GEFIRA,

In 1992, at the end of the Cold War, an American political scientist infamously proclaimed "the end of history:" liberal democracy and the capitalist system has won, the rest of the world will eventually embrace western ideas as superior to theirs because only they are able to provide peace and prosperity.

This line of reasoning has since become the West’s dogma in international relations, and so under the pretext of spreading human rights and parliamentary democracy all over the world the West perceives itself to be on a mission. For a while, it worked. Most of Eastern Europe readily embraced Western democracy and capitalism and even Russia seemed to follow.

Some intellectuals brought it to a new level: the rest of the world will have to embrace capitalism and liberal democracy voluntarily or else they will be forced to. It was the birth of neoconservatism in the United States and it would spread across the Atlantic. The Neocon vision had other implications, listed in the likewise infamous “Wolfowitz Doctrine”, and these are:

• American supremacy, which translates into active prevention of the formation and rise of any power that could challenge it;
• unilateral intervention;
•  pre-emptive action;
• undermining Russia, by taking out from its sphere of influence the former Soviet countries which had not embraced western values yet, like Ukraine;
• forcing the Muslim world to accept the Israeli state on the latter’s conditions.

By the 2000s, Neocons had taken over the Republican Party in the US and the Labour Party in the UK and could count on allies in Italy (Berlusconi) and Spain (Aznar). In the following decade, Neocon ideology spread virulently, substituting for the failed experiment of military intervention to overthrow non-cooperating governments with covert operations funding and/or arming local groups in Libya, Syria,Tunisia Egypt, Georgia, and Ukraine.
Neocon adherents took over the US state department, and their grip on it was strengthened by the appointment of Barack Obama as assistant to Victoria Nuland, Secretary of State for European affairs, wife of Robert Kagan, who is in turn a top Neocon ideologist alongside Paul Wolfowitz. They also created the narrative spread and reinforced by the mainstream media, which expose the alleged crimes of non-cooperating regimes in Syria, Russia and Libya, while ignoring the anti “democratic” behavior by friendly dictatorships such as Saudi Arabia’s kings.

The mission however never changed. What changed is the mood of Western citizens about the government changes and state-building projects of the Western leadership; as the economic and human cost grew endlessly, the Western public opinion has become fed up with interventionism around the world.

The British Labour party was the first to face the malcontents: Blairites are being ousted in favour of anti-NATO, sworn pacifist Jeremy Corbyn.

Then Donald Trump won the US election with his “America First” i.e. a policy of “non-interventionism and protectionism”, defeating Hillary’s hawkish one, publicly endorsed by Kagan and Wolfowitz; Sarkozy and Juppè were defeated in the primaries in France by Fillon, who is advocating the end of the trade war against big bad Neocon target Russia. The Neocon-backing Western establishment is facing political upheaval all over Europe and the US. These revolutions are not mere popular movements. Trump’s election is the handing over of power from one influential group to another because a part of the establishment has become fully aware of the problems Europe and the US are facing.

After a fourteen-year war on terror in Afghanistan and Iraq the bloodshed spilled over into the streets of Paris and Berlin. The killing of civilians in the streets in Europe was not supposed to happen after the eradication of Al Qaeda and the alleged elimination of its leader Osama Bin Laden. Or should we rather say European insanity is spilling over, as the European establishment is simultaneously bombing a country and importing the country’s inhabitants? What do the Western leadership expect to have on their hands? Meanwhile Russia is reemerging as a more successful international actor.

China has become a production hub, building its own financial institutions and will become more and more independent of the US and European financial systems. In 2015 China launched its alternative CIPS for the SWIFT system, which had been for more than 30 years the center of international financial transactions.

The rapid and dramatic demographic changes cannot continue unnoticed by the establishment. The white population in the United States has decreased from 79.6 percent in 1980 to 61.9 percent in 2014. The percentage of Latino Americans has risen from 6.4 percent to 17.3 percent over the same period, while both the African American and Asian American populations have gone up. Europe is facing a multicultural quagmire and downward spiral of violence. The African and Muslim communities are hostile to Western societies and openly threatening to kill Westerners in endlessly numerous music videos posted on the internet.

The German establishment is in a complete state of denial, and the French Republican Party leaders believe they can regain control with some harsh words directed at the Muslim community on the one hand and unprecedented austerity measures dished out to the French population on the other.

In the US there are people like Richard Haas, president of the Council on Foreign Relations, who are strongly advocating a change in the Middle East policy. Haas would like to see America using its diplomatic and military power for gaining influence in South East Asia and deal with nations rather than tribes in Syria; he would also rather the US restored order at home than resolve the problems in Mosul and Fallujah in Iraq or Sirte in Libya.

The Neocon world peaked and is now crumbling at record speed. And what is the Neocons’ reaction? A failure to topple governments may have been taken into account, but the electoral defeats in the West were unexpected. In a bid that looks like a mix of anger and desperation the Neocon machine is using the US State Department and the mainstream media to mount a gigantic offensive putting the blame for its own failures on the battered Russia: so without having much evidence, neocons created a narrative that Russia has helped Donald Trump win the elections.

But of course, why stop there? Thus Neocon Blairite remnants in the UK are joining the crowd and claim that “Russian hackers caused Brexit’’.

What else? Gustav Gressel of the European Council on Foreign Relations claims that Russian secret services (rather than European open borders refugee policy) are behind the epidemic of sexual assaults committed by migrants in Germany⁷⁾ attempting to weaken Merkel’s credibility for the next year election. Whenever something doesn’t go according to plan for the Western establishment, it’s Russia’s fault. Expect to see more.

via http://ift.tt/2i86gEh Tyler Durden