tag:blogger.com,1999:blog-25731357148809767322024-03-13T21:34:26.544-07:00What is next for global economies?A look at what will happen next in the world economiesAivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.comBlogger724125tag:blogger.com,1999:blog-2573135714880976732.post-8244098176857597112021-09-15T11:23:00.001-07:002021-09-15T11:28:01.361-07:00Weak Oversight Plagues Audits of Billions in Private Assets<h4 style="text-align: left;"><span style="font-family: arial;"><i>Having seen the way that companies with debt are calculating EBITDA and cash flow this does not come as a surprise....Aivars Lode</i></span></h4><div style="text-align: left;"><span style="caret-color: rgb(51, 51, 51);"><span style="font-family: arial;">"Research by the government and data from the auditing industry trade group show significant flaws in audits of private organizations, particularly those done by smaller firms.<br /></span></span><div><span style="caret-color: rgb(51, 51, 51);"><span style="font-family: arial;">This self-policing system covers the vast majority of U.S. audits, including more than 5 million private companies, some with billions in revenue, Labor Department data show. It also affects tens of thousands of pension funds, endowments, local governments, charities and billions in government grants, according to the auditing industry trade group. Investors in these companies, pensioners, donors to charities and local taxpayers are among those who could lose if auditors fail to detect problems."<br /></span></span><span style="font-family: HelveticaNeue;">Click to read full article:<span style="font-size: 14px;"> </span></span><a href="https://www.wsj.com/articles/weak-oversight-plagues-audits-of-billions-in-private-assets-11628847000?mod=hp_lead_pos6" style="font-family: HelveticaNeue; font-size: 14px;" target="_blank">Weak Oversight Plagues Audits of Billions in Private Assets</a></div></div><div style="text-align: left;"><span style="font-family: arial;">By Jean Eaglesham and Coulter Jones from Wall Street Journal</span></div>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-57118766140802300592021-03-09T10:19:00.003-08:002021-03-09T10:19:45.493-08:00Two Worlds: So Much Prosperity, So Much Skepticism<div style="text-align: left;"><span style="font-family: arial;"><i> Don’t know what this means for the stock market... Aivars Lode</i></span></div><div style="text-align: left;"><span style="font-family: HelveticaNeue;"><span style="font-size: 14px;"><br /></span></span><span style="font-family: arial;"><span style="caret-color: rgba(22, 22, 22, 0.9); color: rgba(22, 22, 22, 0.9);">The demand for forecasts grows after a surprise. It’s quite an irony. Surprises make you feel like you’re not in control, which is when it feels best to grab the wheel with both hands, listening to those who tell you what happens next despite being blindsided by what just happened.<br /></span></span><span style="font-family: arial;">That’s where we are with Covid and the economy. Ten months after the surprise of our lifetimes, everyone wants a clear map of the future. Who wins? Who loses? When will travel recover? Will work be the same? Have we learned our lesson?<br /></span><span style="font-family: arial;">But the most important economic stories don’t require forecasts; they’ve already happened. And they tend to be the most overlooked, because when everyone’s focused on the future it’s easy to ignore what’s sitting right in front of us.<br /></span><span style="font-family: arial;">I want to tell you two of the biggest economic stories that aren’t getting enough attention.<br /></span><span style="font-family: arial;">One is that household finances might be in the best shape they’ve ever been in. <span style="border: 0px; box-sizing: inherit; font-stretch: inherit; font-style: italic; font-variant-caps: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Ever</span>. That might sound crazy, and it’s easy to overlook because of the second story: Covid has dumped kerosene on wealth inequality in ways we’ve yet to fully grasp.</span></div><div style="text-align: left;"><span style="font-family: arial;">To read this interesting blog by Morgan Housel click below:</span></div><p style="text-align: left;"><a href="https://www.collaborativefund.com/blog/two-worlds/" target="_blank">https://www.collaborativefund.com/blog/two-worlds/</a><br /></p>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com2tag:blogger.com,1999:blog-2573135714880976732.post-55751143204534524942021-01-27T15:50:00.001-08:002021-01-27T15:50:14.294-08:00How Volkswagen’s $50 Billion Plan to Beat Tesla Short-Circuited<p><span style="font-family: arial;"><i>Interesting article and points to why Tesla may end up being like Amazon ... successful and dominant. Aivars Lode</i></span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; text-align: left; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Five years and nearly $50 billion into the auto industry’s biggest bet on electric vehicles, Volkswagen CEO Herbert Diess and his guest, Chancellor Angela Merkel, stood in anticipation as the first ID.3, Germany’s long-awaited answer to Tesla, rolled off the assembly line.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; text-align: left; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The event at the company’s flagship EV plant just over a year ago marked a “systemic shift from the combustion engine to the electric vehicle,” said Thomas Ulbrich, leader of the ID.3 effort.</span></p><div class="paywall" style="border: 0px; caret-color: rgb(51, 51, 51); margin: 0px; padding: 0px; text-align: left; vertical-align: baseline;"><div style="text-align: left;"><span style="font-family: arial;">The car, however, didn’t work as advertised. </span></div><div style="text-align: left;"><span style="font-family: arial;"><br /></span></div></div><div style="text-align: left;"><span style="caret-color: rgb(51, 51, 51);"><span style="font-family: arial;">It could drive, turn corners and stop on a dime. But the fancy technology features VW had promised were either absent or broken. The company’s programmers hadn’t yet figured out how to update the car’s software remotely. Its futuristic head-up display that was supposed to flash speed, directions and other data onto the windshield didn’t function. Early owners began reporting hundreds of other software bugs.</span></span></div><div style="text-align: left;"><span style="caret-color: rgb(51, 51, 51);"><span style="font-family: arial;"><br /></span></span><span style="font-family: arial;">After years of development, Volkswagen decided in June last year to delay the launch and sell the first batch of cars without a full array of software, pending a future update, which is now scheduled for mid-February. Tens of thousands of ID.3 owners will have to bring their cars in for service to have the new software installed.</span></div><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; text-align: left; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“After that the software will be regularly updated over the air,” Mr. Ulbrich said in an interview. </span></p><div style="text-align: left;"><span style="font-family: arial;"><span><a name='more'></a></span>Volkswagen, the world’s largest car maker, has outspent all rivals in a global bid by auto incumbents to beat Tesla. For years, industry leaders and analysts pointed to the German company as evidence that, once unleashed, the old guard’s raw financial power paired with decades of engineering excellence would make short work of Elon Musk’s scrappy startup.</span></div><div class="wsj-immersive-ad-container" style="border: 0px; caret-color: rgb(51, 51, 51); margin: 0px; padding: 0px; position: relative; text-align: left; vertical-align: baseline;"><div class="wsj-immersive-ad-placement" id="imm_ad_1_placement" style="border: 0px; margin: 0px; min-height: 100%; padding: 0px; position: absolute; right: -350px; top: -250px; vertical-align: baseline; width: 300px;"><div class="wsj-responsive-ad-wrap" data-google-query-id="CIf-9sCkve4CFUWApgQdSDkJmw" id="AD_imm_ad_1" style="border: 0px; margin: 0px; min-height: 25px; min-width: 100%; padding: 0px; vertical-align: baseline;"><p><span style="font-family: arial;"><iframe data-google-container-id="1" data-load-complete="true" frameborder="0" height="250" id="google_ads_iframe_/2/interactive.wsj.com/lifestyle_auto_story_0" marginheight="0" marginwidth="0" name="google_ads_iframe_/2/interactive.wsj.com/lifestyle_auto_story_0" scrolling="no" style="border-width: 0px; margin: 0px; padding: 0px; vertical-align: bottom;" title="3rd party ad content" width="300"></iframe></span></p></div></div></div><div style="text-align: left;"><span style="font-family: arial;">What they didn’t consider: Electric vehicles are more about software than hardware. And producing exquisitely engineered gas-powered cars doesn’t translate into coding savvy.</span></div><p style="text-align: left;"><span style="caret-color: rgb(51, 51, 51);"><span style="font-family: arial;">The ID.3 debacle is raising the temperature at Volkswagen. Mr. Diess nearly lost his job last year amid a revolt of Germany’s powerful IG Metall labor union and shareholder anger over the botched launch of the Golf-8, the VW brand’s breadwinner, and the bungled launch of the ID.3. He was stripped of his leadership of the VW brand, VW’s biggest business, but kept on as CEO of the entire company without day-to-day operational responsibility.</span></span></p><div style="text-align: left;"><span style="font-family: arial;">The ID.3 is gaining traction, outselling Tesla’s Model 3 in Europe in December, according to Jato Dynamics, with sales fueled by a price tag that is about $12,000 less than Tesla’s model, and by Germany’s decision last year to increase incentives for EV purchases. The ID.3 has also garnered negative trade-press reviews and is still missing key features.</span></div><div style="text-align: left;"><span style="font-family: arial;"><br /></span></div><div style="text-align: left;"><span style="font-family: arial;">Ever since Tesla launched its first car in 2008 “there was this feeling that the really serious players are going to come,” said Peter Rawlinson, CEO of electric car startup Lucid Technologies and the former chief engineer of Tesla’s Model S. Now, he says, “the Germans have finally come, and they’re not as good as Tesla.”</span></div><p style="text-align: left;"><span style="font-family: arial;"><span style="caret-color: rgb(51, 51, 51);">Other legacy car manufacturers including General Motors, Ford, Renault,</span><span style="caret-color: rgb(51, 51, 51);"> </span>Peugeot<span style="caret-color: rgb(51, 51, 51);"> </span><span style="caret-color: rgb(51, 51, 51);">and Toyota are bringing new electric models to market this year. Failure to keep up could redraw the global auto map, costing German car makers—Volkswagen,</span><span style="caret-color: rgb(51, 51, 51);"> </span>BMW<span style="caret-color: rgb(51, 51, 51);"> </span><span style="caret-color: rgb(51, 51, 51);">and Daimler—their leadership status in high-end products.</span></span></p><p><span style="font-family: arial;"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://lh3.googleusercontent.com/-mUcCOMX9alM/YBH58XgV6uI/AAAAAAAAATU/QsgryjuEmd8fETywrMSRPJ5Kl1RKxFLBACLcBGAsYHQ/Screen%2BShot%2B2021-01-27%2Bat%2B4.40.28%2BPM.png" style="clear: left; float: left; margin-bottom: 1em; margin-left: 1em;"><span style="clear: left; color: black; float: left; font-family: arial; margin-bottom: 1em; margin-right: 1em;"><img data-original-height="844" data-original-width="1474" height="229" src="https://lh3.googleusercontent.com/-mUcCOMX9alM/YBH58XgV6uI/AAAAAAAAATU/QsgryjuEmd8fETywrMSRPJ5Kl1RKxFLBACLcBGAsYHQ/w400-h229/Screen%2BShot%2B2021-01-27%2Bat%2B4.40.28%2BPM.png" width="400" /></span></a></div><span style="font-family: arial;"><br /> </span><p></p><p><span style="font-family: arial;"><br /></span></p><p><span style="font-family: arial;"><br /></span></p><p><span style="font-family: arial;"><br /></span></p><p><span style="font-family: arial;"><br /></span></p><p><span style="font-family: arial;"><br /></span></p><p><span style="font-family: arial;"><br /></span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;"><br /></span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Mr. Diess is drawing lessons from the mistakes on the ID.3 project as he overhauls the company’s software effort to prepare for a successor model, dubbed ID.4, which goes on sale in the U.S. later this year and will be produced at first in Europe and China and next year in Chattanooga, Tenn., as well. VW says the ID.4, its first all-electric car to be sold world-wide, will deliver on its predecessor’s promises.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“In order to be successful in this new world and secure the prosperity of many people…VW must completely change,” Mr. Diess wrote in a recent LinkedIn post.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">When Mr. Diess, then head of the VW brand, launched his first EV effort five years ago, he asked Fredmund Malik, an Austrian economist, to hold a “syntegration workshop” for senior brand executives. The goal, Prof. Malik said, was to persuade managers lulled into complacency by their company’s high profitability that Tesla represented an existential threat.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">A second workshop was held a month later, after VW was exposed for cheating on diesel emissions. Mr. Diess wanted to use the jolt of the crisis to overcome internal opposition to electric vehicles, Prof. Malik said. It was at this meeting that VW decided to build what would become the ID.3, complete with custom software to run the vehicle and in-car apps.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Software has been running in gas-powered cars for years. An average passenger vehicle typically includes about 80 parts fitted with chips that perform discrete tasks. These chips run code that remains static over a car’s lifetime.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">With the shift to electric, computing has become the heart of the vehicle, with a central processor managing the battery, running the electric motors, brakes, lights and other critical systems as well as additional features such as entertainment or heating in the seats. Just like a gas-powered car should be serviced regularly, a modern electric vehicle may receive software updates to improve safety and performance, offer new in-car services, or unlock sources of revenue for the manufacturer.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“The key here is taking this distributed system in the car, dozens if not hundreds of applications, and centralizing everything,” says Danny Shapiro, senior director of automotive at Nvidia Corp., the graphics chip maker that has become a player in self-driving car technology. “This is very complex, especially with a car where the safety level is critical. You can’t just flip a switch and be a software company.”</span></p><div class="wsj-immersive-ad-container" style="border: 0px; caret-color: rgb(51, 51, 51); margin: 0px; padding: 0px; position: relative; vertical-align: baseline;"><div class="wsj-immersive-ad-placement" id="imm_ad_3_placement" style="border: 0px; margin: 0px; min-height: 100%; padding: 0px; position: absolute; right: -350px; top: -250px; vertical-align: baseline; width: 300px;"><div class="wsj-responsive-ad-wrap" data-google-query-id="CKXHyPWkve4CFQUBPwodP58BAQ" id="AD_imm_ad_3" style="border: 0px; margin: 0px; min-height: 25px; min-width: 100%; padding: 0px; vertical-align: baseline;"><div id="google_ads_iframe_/2/interactive.wsj.com/lifestyle_auto_story_2__container__" style="border: 0pt none; display: inline-block; height: 250px; margin: 0px; padding: 0px; vertical-align: baseline; width: 300px;"><span style="font-family: arial;"><iframe data-google-container-id="3" data-is-safeframe="true" data-load-complete="true" frameborder="0" height="250" id="google_ads_iframe_/2/interactive.wsj.com/lifestyle_auto_story_2" marginheight="0" marginwidth="0" name="" sandbox="allow-forms allow-popups allow-popups-to-escape-sandbox allow-same-origin allow-scripts allow-top-navigation-by-user-activation" scrolling="no" src="https://tpc.googlesyndication.com/safeframe/1-0-37/html/container.html" style="border-width: 0px; margin: 0px; padding: 0px; vertical-align: bottom;" title="3rd party ad content" width="300"></iframe></span></div></div></div></div><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">In the early years of the ID.3 effort, the task to code software for the car was scattered across the organization. VW’s appointment of Christian Senger, previously head of digital services and electric mobility products, as leader of VW’s entire software development, came only in 2019, months before the vehicle’s planned launch.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The group’s first task was to create a coherent organization out of the thousands of programmers spread around the group and begin to shift critical development in-house. The first major project was VW.os, an operating system for ICAS1, the car’s central computer that could be updated remotely.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Another source of complexity was that VW picked different vendors to develop different parts of its software ecosystem. To build its industrial cloud for factories, VW teamed up with Amazon Web Services. For the automotive cloud connecting its cars, it joined with Microsoft<span class="company-name-type" style="border: 0px; margin: 0px; padding: 0px; vertical-align: baseline;"> Corp.</span> And to build ICAS1, VW turned to Continental<span class="company-name-type" style="border: 0px; margin: 0px; padding: 0px; vertical-align: baseline;"> AG</span> , the lead partner in a team of 19 suppliers working on developing the system.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Typically, car makers order finished components from suppliers and install them in the vehicle on the assembly line. But the software for a connected car is never finished. Like an iPhone, it is constantly evolving and requires the supplier and customer to work interactively, something that VW and Continental first had to learn as the ICAS project was under way.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">VW and its suppliers had to adopt new ways of working together to build the ICAS and connect the ID.3 to the cloud. They created integrated teams that met in workshops at regular intervals to assess the state of play and plot out the next steps. During these workshops, VW often placed new demands on the group as its requirements of the ID.3 evolved, Mr. Ulbrich said.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“The iPhone today is not the same product it was in the beginning. It has evolved, it is an evolutionary process. And that is the process that VW is going through now,” Mr. Ulbrich said.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The experience convinced Mr. Diess that he needed to reboot VW’s software business. In April, he brought back Prof. Malik for a three-day workshop with about 40 of his top executives. Prof. Malik said Mr. Diess posed a simple question for the group: What do we have to do to catch up with Tesla by 2024?</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The CEO opened the gathering with a blistering critique of VW’s progress. He showed a slide comparing the ID.3 to the Tesla Model 3, pointing out that while VW’s car excelled in old-world features such as spaciousness and design, Tesla beat VW hands down on such metrics as battery range and advanced computing.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">At the end of the workshop, the management team had the outlines of a reboot. It would produce a new fully electric and largely self-driving car by 2025, shift more resources from the company’s old business to EVs and digitization, expand battery manufacturing, and explore new revenue streams and payment systems.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">As the summer 2020 launch date for the ID.3 approached, VW told Continental to focus on critical functions. By then, Mr. Ulbrich and senior VW executives concluded that the ID.3’s remote updates weren’t yet secure enough to go on the road, Mr. Ulbrich said. The updates not only changed apps and kept the navigation up-to-date, they also made changes to core functions such as the electric powertrain.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“In mid-2020 we had to make the decision that we would have to ask the first 50,000 vehicles to come to the service stations for an update,” Mr. Ulbrich said. “Updating the vehicle’s core software is a complex process and we have to make sure at any time that our vehicles are safe.”</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">VW didn’t make Mr. Senger available for comment. </span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Karsten Michels, the senior Continental engineer working on the project, said the main problem was the teams simply ran out of time. “Maybe we underestimated how much work is involved and how little we could actually rely on existing legacy software,” Mr. Michels said in an interview.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Mr. Diess restructured the software development teams. He tapped Audi CEO Markus Duesmann, poached earlier from BMW, to be VW’s new software czar.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Mr. Diess also reached outside VW for help. He discreetly asked Dirk Hilgenberg, a BMW executive and IT specialist focused on tech turnarounds, if he would replace Mr. Senger as head of the software division.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Mr. Hilgenberg said he had no hesitation. He had spent 28 years at BMW and his track record most recently included turning around production of BMW’s X-series SUV in Spartanburg, SC. In recent years, however, he said he had become frustrated by the Munich-based auto maker’s reluctance to dive headlong into electric cars.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">BMW declined to comment.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“I’d been watching what Diess was doing in terms of turnaround at VW,” he said. “I really liked it because it was decisive, bold, consistent. I’ve seen nothing in the auto industry that even comes close to that.”</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Mr. Hilgenberg’s first day at VW was August 1 and he immediately started work on fixing VW.os. The first version, 1.0, is a blend of open source software and custom code by Continental and VW. To fix the current glitches, VW said it would publish an update of the software, version 1.1, in February. A more advanced version—VW.os 2.0—is targeted for 2024 and will include advanced self-driving car features.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">VW’s goal is to eventually build at least 60% of automotive software in-house.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The biggest challenge, said Mr. Hilgenberg, isn’t the technology, it is the mind-set of the people—their reluctance to embrace radical change until circumstances force them to.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“In the middle of success it’s not easy to understand why you need to change now,” he says.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Another component of the reboot was the Artemis project, a new in-house design team that would take the software developed by Mr. Hilgenberg’s group and integrate it in a new electric, self-driving, and internet-connected vehicle within three years.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“We fairly quickly came to the conclusion that we needed a separate unit and needed to give it the freedom to develop, a bit like a rocket,” said Alexander Hitzinger, a Porsche and Apple veteran who presented the idea to the meeting, dubbing the project “Mission T”—as in beat Tesla. The notion was so outlandish at the time that the executives eventually chose to name the project Artemis, after NASA’s planned manned mission to the moon in 2024.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“Over the past 20 years the auto industry became more integrators than developers,” said Mr. Hitzinger. “Software is written by suppliers. This was good for a while because it drives down costs but you lose control. That’s what the auto industry has to reverse now, bring in deep technical knowledge. That’s the hard part.”</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">To build his leadership team, Mr. Hitzinger is reaching out to tech companies and startups, bringing the automotive and technology worlds together. His catch so far includes executives from Apple, Tesla, Nio, Jaguar Land Rover, and other companies.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The small team, expected to expand to about 250 people this year, moved into their offices in December, and have begun working on preliminary designs for the new vehicle. Scrapping the conventional auto design playbook, which begins from a vehicle platform, Mr. Hitzinger says he’s putting the customer experience inside the car first.</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Change is coming, Mr. Diess wrote on his LinkedIn page, and VW must move faster. “The global transformation of the industry will take roughly 10 years,” he wrote. “With or without Volkswagen.”</span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">By William Boston - Wall Street Journal</span></p>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-78776815562794507402020-10-30T07:04:00.001-07:002020-10-30T07:04:31.127-07:00Bond defaults mean almost total losses in new era of bankruptcies<p><span style="font-family: arial;"><i>Could this be the trigger for the Stockmarket's next crash? Aivars Lode</i></span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">Three cents. Two cents. Even a mere 0.125 cents on the dollar.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">More and more, these are the kinds of scraps that bondholders are fighting over as companies go belly up.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">Bankruptcy filings are surging due to the economic fallout from COVID-19, and many lenders are coming to the realization that their claims are almost completely worthless. Instead of recouping, say, 40 cents for every dollar owed, as has been the norm for years, unsecured creditors now face the unenviable prospect of walking away with just pennies — if that.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">While few could have foreseen the pandemic’s toll on the economy, the depth of investors’ pain from corporate distress was all too predictable. Desperate to generate higher returns during a decade of rock-bottom interest rates, money managers bargained away legal protections, accepted ever-widening loopholes, and turned a blind eye to questionable earnings projections. Corporations, for their part, took full advantage and gorged on astronomical amounts of debt that many now cannot repay or refinance.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">It’s a stark reminder of the long-lasting repercussions of the Federal Reserve’s unprecedented easy money policies. Ultra-low rates helped risky companies sell bonds with fewer safeguards, which creditors seeking higher returns were happy to accept. Now, amid a new bout of economic pain, the effects of those policies are coming to bear.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">Debt issued by the owner of Men’s Wearhouse, which filed for court protection in August, traded this month for less than 2 cents on the dollar. When J.C. Penney Co. went bankrupt, an auction held for holders of default protection found the retailer’s lowest-priced debt was worth just 0.125 cents on the dollar. For Neiman Marcus Group Inc., that figure was 3 cents.</span></p><p class="" style="box-sizing: border-box; font-family: "Helvetica 55 Roman"; font-size: 0.9375rem; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://lh3.googleusercontent.com/-job5aOvK8F4/X5wcoqtIqEI/AAAAAAAAARU/lnHSm9x-fwkXt0QPTWiIMWZkvM2DJITngCLcBGAsYHQ/Distressed-debt-chart_Oct_20.jpeg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="386" data-original-width="640" height="241" src="https://lh3.googleusercontent.com/-job5aOvK8F4/X5wcoqtIqEI/AAAAAAAAARU/lnHSm9x-fwkXt0QPTWiIMWZkvM2DJITngCLcBGAsYHQ/w400-h241/Distressed-debt-chart_Oct_20.jpeg" width="400" /></a></div><br /><p></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">The loose lending terms that investors have agreed to mean that by the time corporations file for bankruptcy now, they’ve often exhausted their options for fixing their debt loads out of court. They’ve swapped their old notes for new ones, often borrowing against even more of their assets in the process. Some have taken brand names, trademarks and even whole businesses out of the reach of existing creditors and borrowed against those too. While creditors always do worse in economic downturns than in better times, in previous downturns, lenders had more power to press companies into bankruptcy sooner, stemming some of their losses.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">The pandemic is upending industries like retail and energy, making it unclear how much assets like stores and oil wells will be worth in the future. The underlying problem for many companies, though, is that they have astronomical levels of debt after borrowing with abandon over the previous decade, then topping up with more to get them through the pandemic.</span></p><div class="x_bodyAdBlock x_advertisement x_advert" style="box-sizing: border-box; text-align: center;"><div class="" id="x_CCI_DFP_INREAD" style="box-sizing: border-box;"><div class="" id="x_google_ads_iframe_/21873781324/ino/news/article_9__container__" style="border: 0pt none; box-sizing: border-box;"></div></div></div><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">For bondholders, the kind of liabilities that companies have added makes the problem worse. Loans have been a particularly cheap form of debt for many companies over the last decade. Those borrowings are usually secured by assets, leaving many corporations with more secured debt than they’ve had historically. That means that unsecured bondholders end up with less when borrowers go broke.</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">“We’ll see companies gradually hitting the wall — it’s just a question of when and how fast,” said Dan Zwirn, founder of Arena Investors, a $1.7 billion investment firm with an emphasis on credit. “There’s just going to be way more downside.”</span></p><p class="" style="box-sizing: border-box; line-height: 1.2; margin-bottom: 1.125rem; margin-top: 0px;"><span style="font-family: arial;">By Bloomberg Investment News</span></p>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-78464757104796806682020-09-30T14:21:00.001-07:002020-09-30T14:21:28.710-07:00JPMorgan Paying $920 Million to Resolve Market Manipulation Probes<p><span style="font-family: arial;"><i>See Chapter 4 of my first book "<a href="https://itcap.net/book" target="_blank">This Time It's Different - Not!</a>" that describes how commodities get manipulated. I wrote about this more than a decade ago... and it's still going on. Aivars Lode</i></span></p><p><span style="font-family: arial;"><i><br /></i></span></p><p><span style="font-family: arial;"><i>JP MORGAN </i><span style="caret-color: rgb(51, 51, 51); color: #333333;">Chase & Co. agreed to pay $920 million and admit misconduct tied to</span><span style="caret-color: rgb(51, 51, 51); color: #333333;"> </span>manipulation of precious-metals<span style="caret-color: rgb(51, 51, 51); color: #333333;"> </span><span style="caret-color: rgb(51, 51, 51); color: #333333;">and Treasury markets, regulators said Tuesday.</span></span></p><p style="border: 0px; caret-color: rgb(51, 51, 51); color: #333333; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The settlement resolves investigations by the Justice Department, Commodity Futures Trading Commission and the Securities and Exchange Commission. The fine is the largest the CFTC has ever imposed for spoofing, a type of market manipulation, the agency said.</span></p><div class="paywall" style="border: 0px; caret-color: rgb(51, 51, 51); color: #333333; margin: 0px; padding: 0px; vertical-align: baseline;"><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“Spoofing is illegal—pure and simple,” CFTC Chairman Heath Tarbert said. “This record-setting enforcement action demonstrates the CFTC’s commitment to being tough on those who intentionally break our rules, no matter who they are.”</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The settlement is just the latest move from prosecutors and regulators that began cracking down on spoofing in 2014. Since then, the Justice Department has charged 20 people with spoofing-related crimes, and banks and other financial institutions have collectively paid more than $1 billion in fines tied to civil and criminal spoofing probes.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The agreement announced Tuesday is particularly notable because it involved claims that traders spoofed to manipulate the price of Treasury securities, one of the largest and most liquid trading markets in the world.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Spoofers enter and quickly cancel large orders in an effort to deceive others about supply and demand. The tactic can move prices in a direction the spoofer favors.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Four former JPMorgan precious-metals traders were charged last year with crimes tied to spoofing, including racketeering, an offense more typically found in cases against organized crime entities. The traders have pleaded not guilty and are fighting the charges. Two other ex-JPMorgan traders pleaded guilty in 2018 and 2019 to crimes tied to spoofing of precious metals futures.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The unlawful trading in gold, silver and other precious metals involved a total of 10 traders, according to Justice Department documents made public Tuesday.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Two traders who formerly worked at Deutsche Bank AG were convicted last week in Chicago federal court of wire fraud tied to spoofing allegations. The traders were acquitted on one count of conspiracy.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Congress outlawed spoofing in the 2010 Dodd-Frank financial overhaul law, making it easier for regulators and prosecutors to punish conduct they believed was manipulative. The Justice Department’s Fraud Section, based in Washington, has been particularly active going after individual traders accused of spoofing. </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“Dodd Frank made it very clear, that this is against the law to do and there are now personal consequences—you can go to jail if you spoof,” said Travis Schwab, chief executive of Eventus Systems Inc., a trading surveillance and risk-management software provider. “That really ratchets up the bar who is involved in these cases—that goes to Justice being involved as opposed to just the regulator—and it ratchets up the consequences.” </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The agencies’ announcements confirm news of the fine that was first reported last week. The claims include allegations that JPMorgan traders manipulated Treasury securities from 2015 to 2016, the SEC said in a settlement order. </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The Justice Department said JPMorgan agreed to a deferred prosecution agreement through which the bank admitted wrongdoing on its precious-metals and Treasuries trading desks. The deal suspends a prosecution of the bank on two counts of wire fraud and requires JPMorgan to cooperate with related investigations and continue improving its compliance and oversight programs.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The SEC’s investigation involved spoofing in the $20 trillion market for Treasury bonds and notes and other securities. The Justice Department’s settlement also covered that conduct. </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm,” said Daniel Pinto, co-President of JPMorgan Chase and CEO of the Corporate & Investment Bank. “We appreciate that the considerable resources we’ve dedicated to internal controls was recognized by the DOJ, including enhancements to compliance policies, surveillance systems and training programs.”</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The spoofing spanned at least eight years and involved hundreds of thousands of misleading orders in precious metals and U.S. Treasury futures contracts, the CFTC said. </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The total fine includes a penalty of $437 million, restitution of $311 million and disgorgement of $172 million, the CFTC said. Disgorgement is the requirement to pay back profits illegally earned.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Five former traders on the bank’s Treasurys desk were involved in spoofing from 2008 to 2016, according to Justice Department documents, which didn’t name the individuals. The traders knowingly entered orders on electronic trading platforms they didn’t intend to fill, hoping the prices would trick other traders into thinking supply or demand was changing.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The traders sometimes entered the misleading orders on one trading venue, hoping to ease the fulfillment of orders on another platform at a better price. Spoofing often tricks computer models that trade using algorithms and may not be able to judge whether orders look genuine or not, regulators say.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">Traders sometimes bragged about spoofing Treasury prices in messages they sent to one another, according to prosecutors.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">“A little razzle-dazzle to juke the algos,” one trader wrote in a message in 2012, according to prosecutors. </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The conduct caused losses of $106 million to others trading Treasury debt and Treasury futures, the Justice Department said. The misconduct in the futures market for precious-metals caused losses of $205 million, prosecutors said. </span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">The SEC said the conduct ended in January 2016, after “certain personnel changes” were made on the desk that traded Treasury securities.</span></p><p style="border: 0px; line-height: 27px; margin: 0px 0px 17px; padding: 0px; vertical-align: baseline; word-wrap: break-word;"><span style="font-family: arial;">By Dave Michaels - Wall Street Journal</span></p></div>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-14243502424019950362020-07-14T09:27:00.005-07:002020-07-14T09:32:19.375-07:00The Nasdaq Is Partying Like It’s 1999. What To Do About It.<font face="arial"><i>All I can say is "Amen"..... Aivars Lode</i><br /></font><div><font face="arial"><br /></font></div><div><p style="text-align: left;"><span style="border: 0px; box-sizing: border-box; margin: 0px; padding: 0px;"><font face="arial" size="3"><b>Are investors ready for another Housequake?</b></font></span></p><font face="arial"><br class="Apple-interchange-newline" /></font></div><div><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Depending on your age, your view of the Nasdaq is different. If you are a baby boomer or older, you remember the time when “Nasdaq” might have been a slang term for Nirvana (the concept or the band, or both).</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">If you are under 50 years old, the Nasdaq is where the big, stable companies sit. Amazon, Microsoft, Apple, Facebook, Google, etc. They are the big, ubiquitous stocks and business that run our lives.</font></p><p style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial" size="3">Let’s Go Crazy!</font></span></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">However, back in 1990s and the first part of this century, the Nasdaq was the Wild West of the stock market. Brazen young upstart businesses took the markets by storm.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">The gains were so amazing, they were considered “one-decision stocks: you buy them and don’t have to sell them.” 1999 was essentially a one-type market. It was all-Nasdaq, all the time.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><span style="border: 0px; box-sizing: border-box; font-style: italic; margin: 0px; padding: 0px;"><font face="arial">Then, in March of the year 2000, the Nasdaq 100 (QQQ) fell by over 79% in just under 3 years. Oh, it fully recovered…by the year 2015! Enough said.</font></span></span></p><p style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial" size="3">Delirious</font></span></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Now, of course nothing like this could ever happen again. OK, of course it could. But you don’t need a garden-variety 80% selloff to see that the same type of “Nasdaq will save us” attitude has quietly crept back into the stock market. Now, much of today’s investor base did not experience 1999, 2000 and the 15 long years that followed for the Nasdaq Index. So, all of this history is lost on them.</font></p><p style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial" size="3">Sign ‘O The Times</font></span></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">The average S&P 500 stock was down over 10% from June 8 – July 7. The Dow was down over 6%. But the Nasdaq 100? It was up 6%.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">One of 2 things is happening here. A new paradigm, or something that will be remembered as the second-coming of the Dot-Com Bubble. Fool me once, shame on you. Fool me twice, shame on me.</font></p><p style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial" size="3">Baby, I’m a Star</font></span></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Better yet, as The Who said, we won’t get fooled again. So don’t. Know what you own and why you own it. And recognize that one of the most powerful axioms in investing is this: if it looks easy, that’s when the risk is highest.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">By Rob Isbitts - Sungarden Investment Management</font></p></div>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com1tag:blogger.com,1999:blog-2573135714880976732.post-28492331638758973352020-06-22T14:24:00.000-07:002020-06-22T14:24:10.051-07:00Legendary investor Jeremy Grantham says the stock market right now is in the 4th 'Real McCoy' bubble of his career<font face="arial"><i>My previous blogs talk about the fact that we are following a course with a similar trajectory to 2001 and 2008. That means that this is a second peak and a long crash is about to come about..... Aivars Lode</i></font><div><font face="arial"><br /></font></div><div><span style="background-color: white; caret-color: rgb(51, 51, 51);"><font face="arial">A stock market legend, Jeremy Grantham, seems certain that the US stock market’s strong recovery from its historic lows in March will end up in pain for investors.</font></span></div><div><span style="background-color: white; caret-color: rgb(51, 51, 51);"><font face="arial"><br /></font></span></div><div><font face="arial">“My confidence is rising quite rapidly that this is, in fact, becoming the fourth real McCoy bubble of my investment career,” he said in a <a href="https://www.cnbc.com/2020/06/17/jeremy-grantham-says-this-may-be-the-4th-major-market-bubble-of-his-career.html" style="box-sizing: border-box; text-decoration: none;"><font color="#000000">CNBC “Closing Bell” interview</font></a> aired on Wednesday.</font></div><p style="box-sizing: border-box; margin: 0px 0px 1em; padding: 0px;"><font face="arial">“The great bubbles can go on a long time and inflict a lot of pain but at least I think we know now that we’re in one.”</font></p><p style="box-sizing: border-box; margin: 0px 0px 1em; padding: 0px;"><font face="arial">Grantham presented an alarming scenario in which uncontrolled day traders who are out of work and into heavy market speculation around bankrupt companies, including car-rental firm <a href="https://markets.businessinsider.com/stocks/htz-stock?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest" style="box-sizing: border-box; text-decoration: none;"><font color="#000000">Hertz</font></a>, may just be the most “crazy” market he’s seen in his career.</font></p><p style="box-sizing: border-box; margin: 0px 0px 1em; padding: 0px;"><font face="arial">“It is a rally without precedence,” he told CNBC’s anchor Wilfred Frost, noting that the market rebound clashes with other harsh economic realities including a low point for health, unemployment numbers, and a rising growth of bankruptcies.</font></p><div class=" trc_related_container trc_spotlight_widget" id="taboola-mid-article-stream-thumbnails" style="box-sizing: border-box; clear: both; margin-bottom: 20px;"><p style="box-sizing: border-box; margin: 0px 0px 1em; padding: 0px;"><font face="arial">US stocks have been rallying in the past week despite investor fears over a second coronavirus wave and rising geopolitical tensions.</font></p><p style="box-sizing: border-box; margin: 0px 0px 1em; padding: 0px;"><font face="arial">But a <a href="https://markets.businessinsider.com/news/stocks/stock-market-news-trump-1-trillion-stimulus-plan-fed-support-2020-6-1029311547" style="box-sizing: border-box; text-decoration: none;"><font color="#000000">steady flow of government stimulus</font></a>, that Grantham called a “favourable environment” for speculative investors, seems to have put a rocket under stocks and kept all major US stock markets climbing, with major US indexes up more than a third from their March lows.</font></p><p style="box-sizing: border-box; caret-color: rgb(51, 51, 51); margin: 0px 0px 1em; padding: 0px;"><font face="arial">On investor exposure to US equities, Grantham said: “I think a good number now is zero and less than zero might not be a bad idea if you can stand that.”</font></p><p style="box-sizing: border-box; caret-color: rgb(51, 51, 51); margin: 0px 0px 1em; padding: 0px;"><font face="arial">Grantham, a co-founder and chief investment strategist of Boston-based asset management firm GMO, is noteworthy for his accurate predictions related to three major prior market bubbles.</font></p><p style="box-sizing: border-box; caret-color: rgb(51, 51, 51); margin: 0px 0px 1em; padding: 0px;"><font face="arial">Grantham called Japan’s asset price bubble in 1989, the dot-com bubble in 2000, and the housing crisis of 2008.</font></p><p style="box-sizing: border-box; caret-color: rgb(51, 51, 51); margin: 0px 0px 1em; padding: 0px;"><font face="arial">In anticipation of those market downturns, he warned that stocks were overvalued both in 2000 and 2007, according to the <font color="#000000"><a href="https://www.wsj.com/articles/jeremy-grantham-predicted-two-previous-bubbles-and-now-1509937980" style="box-sizing: border-box; text-decoration: none;"><font color="#000000">Wall Street Journal</font></a>.</font></font></p><p style="box-sizing: border-box; caret-color: rgb(51, 51, 51); margin: 0px 0px 1em; padding: 0px;"><font face="arial">Back then, he also mentioned how the relationship between home prices and income had become removed from reality, and that at least one large financial institution would fail.</font></p><div><span style="caret-color: rgb(51, 51, 51);"><font face="arial">The subsequent 2008 financial crisis proved his predictions right.</font></span></div><div><span style="caret-color: rgb(51, 51, 51);"><font face="arial"><br /></font></span></div><div><font face="arial"><span style="caret-color: rgb(51, 51, 51);">By </span><span style="background-color: white; caret-color: rgb(51, 51, 51); text-transform: uppercase;">SHALINI NAGARAJAN - Business Insider Australia</span></font></div><div><span style="background-color: white; caret-color: rgb(51, 51, 51); color: #333333; font-family: "LabGrotesque Black", "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 13px; text-transform: uppercase;"><br /></span></div><p style="box-sizing: border-box; margin: 0px 0px 1em; padding: 0px;"><br /></p></div>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com1tag:blogger.com,1999:blog-2573135714880976732.post-62107533080678570742020-06-17T11:23:00.001-07:002020-06-17T11:23:54.582-07:00The Debt-Recession Is Everyone’s Business. How To Deal With It.<font face="arial"><i>I have observed some crazy deals where companies are paying no principal and just interest, showing positive EBITDAs with no cash flow. Eventually that house of cards and the market will turn and refinancing will not be available therefore predatory rescues, buyouts and bankruptcy will follow.... Aivars Lode</i></font><div><span style="font-family: helvetica; font-size: 18px;"><br /></span></div><div><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">2020 will be remembered for a lot of things. First and foremost is the human tragedy, strife and uncertainty that has consumed our daily lives.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">From an investor’s point of view, 2020 has also been a continuation of a pattern that may be little more than a sound bite. But it should be more than that. I am talking about the accelerating pace of growth of corporate debt.</font></p><h4 style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial">Corporate debt bubble – it’s here</font></span></h4><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Some U.S. households may actually be increasing their savings rates and lowering debt during the crisis, if they are not caught up in the forced unemployment that has stricken so many. Corporations, on the other hand, are ramping up their borrowings and have created a debt bubble among those businesses that operate in the public markets.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">This is NOT a new issue. 2020 did not force this upon corporations. It is the latest cycle of corporate indebtedness that has reached a crescendo.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">One way to make this clear is to look at total corporate debt as a percentage of U.S. Gross Domestic Product (GDP) at different points over the past 70 years. Here’s a quick look, based on year-end data from Ycharts.com:</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">In 1951, U.S. Corporate Debt as a percent of U.S. GDP was about 22%. Since that time, it has risen as high as 50, in March of 2008. After the financial crisis of that year, it ducked down below 40 briefly. As of the end of 2019, it stood at 46.6%, near its recent peak for this cycle.</font></p><h4 style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial">High debt levels, in context</font></span></h4><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">What does all of this mean? Well, to put it in context, past peaks in the level of corporate debt versus GDP occurred at these points in time:</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">1974, 1990, 2001, 2008. In other words, corporations raise more and more debt to try to grow (or just survive). Then, they reach a point where the economy can’t handle it, and a recession follows. As you might surmise, being at “peak debt” when the economy rolls over is not the greatest timing. That appears to be where we are now.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;">This is a long-term cycle, and it is a process.</span> And, investors may be able to blow it off as long as the Fed continues to make it look like everything is going to be OK. They do that by essentially standing behind a lot of corporate debt that, if left to its own devices, <span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;">would collapse like a 20th Century Boston Red Sox club in September </span>(sorry, haven’t had my baseball season yet, so a little rusty with the sports analogies).</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); color: #7a7a7a; font-family: questrial, sans-serif; font-size: 18px; margin: 0px 0px 1.6em; padding: 0px;"><img alt="" class="wp-image-10647 jetpack-lazy-image jetpack-lazy-image--handled" data-lazy-loaded="1" height="239" sizes="(max-width: 783px) 100vw, 783px" src="https://sungardeninvestment.com/wp-content/uploads/2020/06/06041.jpg" srcset="https://sungardeninvestment.com/wp-content/uploads/2020/06/06041.jpg 783w, https://sungardeninvestment.com/wp-content/uploads/2020/06/06041-300x179.jpg 300w, https://sungardeninvestment.com/wp-content/uploads/2020/06/06041-768x458.jpg 768w" style="caret-color: rgb(0, 0, 0); color: black;" width="401" /></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">As this chart shows, corporations have been jacking up their balance sheets with debt at a rate far in excess of what the economy is growing at. This is just before the early 2020 recession started.</font></p><h4 style="text-align: left;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial" size="3">So, what’s the big deal?</font></span></h4><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Every investor, if not every citizen, should understand that this is not sustainable. And, it is one of those things that you might just hear in a movie years from now, about how this was going on, but no one cared. I think you should care.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">How does this impact the way you look at your portfolio? Simply put:</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial">Corporate bonds are full of landmines</font></span></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><font face="arial">High yield corporate bonds are even more treacherous</font></span></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Despite this, bond holders outrank stock holders when the bubble bursts, so <span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;">be careful owning stocks that look “cheap” but are just bouncing up from depressed recent lows. Many are cheap for a reason.</span></font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">Know that <span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;">there are ways to profit from the eventual implosion in corporate credit. </span>But it requires a hedged investing mindset, and looking at how you generate investment returns in a very different way than you used to.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">After all, this is “peak cycle” for corporate debt. That should ring the bell for all investors to double-check where the no-so-obvious risks are in their portfolios.</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); margin: 0px 0px 1.6em; padding: 0px;"><font face="arial">By Rob Isbitts - Sungarden Investment Management</font></p><p style="border: 0px; box-sizing: border-box; caret-color: rgb(122, 122, 122); color: #7a7a7a; font-family: questrial, sans-serif; font-size: 18px; margin: 0px 0px 1.6em; padding: 0px;"><br /></p></div>Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-26796232848209968792020-06-08T09:35:00.000-07:002020-06-08T09:35:44.802-07:00CAI Software, LLC Acquires Robocom Corporation and Its Supply Chain and Warehouse Management System Software Suite<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>Farmingdale, New York and Smithfield, Rhode Island (June 8, 2020) </b>– CAI Software, LLC, (“CAI” or “CAI Software”) a leader in the delivery of mission-critical enterprise resource planning (ERP) and manufacturing execution systems (MES) and services, today announced that it has acquired Robocom Corporation (“Robocom”), a leading developer of supply chain and warehouse management system (WMS) software solutions. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The acquisition of Robocom and its next-generation software solutions complement and add significant value to CAI Software’s existing portfolio of products and services, and continues the company’s organic growth plans, through its current vertical markets and product lines, as well as via strategically sound acquisitions. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Brian Rigney, Chief Executive Officer for CAI Software said, “Robocom’s proven business model and strong, loyal customer base offer tremendous opportunity for growth. This acquisition adds to and extends our platform of mission-critical, production-oriented software systems. We’re excited to partner with the entire Robocom team to expand their role in the warehouse and distribution industry and to build on the company’s position as a market innovator.” </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Kristi Kennedy, CEO of Robocom Corporation said, “We are absolutely thrilled to join the CAI Software family and are confident that the partnership will benefit all Robocom stakeholders. CAI Software shares our long-standing commitment to our employees and customers, and we’re excited to play a role in the next phase of the company’s expansion. Importantly, the additional resources that the merger brings to our business will enable us to continue delivering software and solutions that enable our customers to operate efficiently and profitably.” </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">IT Capital invested in Robocom in 2005, originally through Avantce, and made five strategic acquisitions to expand the company’s customer base and product capabilities. Aivars Lode, managing director at IT Capital, said, “Robocom’s management consistently executed all of the strategic and tactical goals we collectively set forth. It has been incredibly satisfying to witness the company realize its full potential and to have the team’s efforts recognized through the success of this transaction.” </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Robocom will operate as a subsidiary of CAI Software and will maintain its sales and development facilities and offices in Farmingdale, New York, and other strategic locations in the U.S. and Canada. All current employees will continue in their roles. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Today’s announcement follows CAI Software’s 2018 acquisitions of Casco Development, LLC, developers of the ShopVue™ manufacturing execution system (MES) software for leading manufacturers globally, as well as IMS Software, LLC, developers of the Food Connex™ ERP software for meat, seafood and poultry distributors and processors, providers of dry goods, provisions, specialty items and produce. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The transaction closed on June 5, 2020. Financial terms of the transaction were not disclosed. </span></div>
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<b><span style="font-family: Arial, Helvetica, sans-serif;">About Robocom Corporation </span></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Robocom Corporation develops, licenses and supports supply chain execution software solutions, including warehouse management system (WMS), third-party logistics (3PL) billing, voice technology and labor management. The company also offers an enterprise resource planning (ERP) system that rounds out the supply chain execution offering. Robocom’s investment in research and development is keenly focused on the needs of the business leaders responsible for the day-to-day results in warehousing, distribution, third-party logistics, transportation and trucking operations. For more information visit <span style="color: blue;">www.robocom.com</span>. </span></div>
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<b><span style="font-family: Arial, Helvetica, sans-serif;">About CAI Software, LLC </span></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">CAI Software, LLC is a leader in the delivery of mission-critical, production-oriented enterprise resource planning (ERP) and manufacturing execution systems (MES) and services to leading companies in select vertical markets, including building materials, food processing, precious metals and discrete manufacturing. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">CAI Software’s ERP solutions automate key production, distribution and financial processes, help meet fluctuating customer requirements, increase productivity and maximize bottom-line profit. Our flagship MES solution — ShopVue — is a modular, operator-friendly system enabling mid-to-enterprise-sized discrete manufacturers to better manage their people, processes, orders, and machines. ShopVue customers achieve measurable improvements in quality, cost and delivery time. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">CAI Software is headquartered in Rhode Island, USA. For more information, please visit <span style="color: blue;">www.caisoft.com</span>. </span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-76068437041295111192020-05-13T14:24:00.001-07:002020-05-13T14:24:02.474-07:00The Investing Con Game<div dir="ltr" style="text-align: left;" trbidi="on">
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<i><span style="font-family: Arial, Helvetica, sans-serif;">I originally posted this article in my blog on 21 July 2019. My comment today is: Y</span><span style="font-family: Arial, Helvetica, sans-serif;">up, as predicted, but we definitely did not know it would be a virus that pushed things over the precipice.... Aivars Lode</span></i></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><a href="https://aivarslode.blogspot.com/2019/07/the-investing-con-game.html" target="_blank">Read THE INVESTING CON GAME</a></span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-52382858601704200562020-05-08T12:33:00.002-07:002020-05-08T12:33:46.427-07:00Uber reimagines bet on scooters, leads $170M investment in Lime<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;"><i>Check out the valuation drop on Lime scooters. Now lets watch for all the other VC funded business valuation declines. This will not be the last revaluation downward.... Aivars Lode</i></span><br />
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<span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="box-sizing: border-box; cursor: pointer;">Lime</span><span style="background-color: white;"> has raised $170 million in a round led by </span><span style="box-sizing: border-box; cursor: pointer;">Uber</span><span style="background-color: white;">, giving the electric scooter startup a much-needed breather to manage pandemic-fueled losses.</span></span><br />
<span style="color: black; font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">As part of the agreement, Lime also acquired the ridehailing giant's bikesharing division, </span><span style="box-sizing: border-box; cursor: pointer;">Jump</span><span style="background-color: white;">, and will continue to integrate its mobile app integration with Uber.</span></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">"This deal enables Uber to reduce operating costs associated with its Jump bikes business, which should help the company navigate the downturn in the near-term," said PitchBook emerging tech analyst Asad Hussain.</span></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">The new funding round would value Lime at $510 million, as first reported by The Information. That would be a 79% drop from the startup's $2.4 billion valuation after a funding round last August, according to PitchBook data. Lime did not disclose its current valuation.</span></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Existing investors including </span><span style="box-sizing: border-box; cursor: pointer;">Alphabet</span><span style="background-color: white;">, </span><span style="box-sizing: border-box; cursor: pointer;">GV</span><span style="background-color: white;"> and </span><span style="box-sizing: border-box; cursor: pointer;">Bain Capital Ventures</span><span style="background-color: white;"> also participated in the funding round</span></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">News of the funding comes a day after Uber announced plans to lay off around 3,700 full-time employees with CEO Dara Khosrowshahi forgoing his base salary for the rest of the year.</span></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">A week ago, Lime laid off 13% of its global workforce, its second round of cuts this year. The company laid off 14% of its employees and ceased operations in 12 cities worldwide in January as it looked to achieve profitability in 2020.</span></span><span style="color: black; font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;"> </span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">"Micromobility will be vital to the new world affected by COVID-19 and we are already seeing this as cities begin to move again," Ting said in the statement announcing the deal. Ting, who was Lime's head of global operations and strategy, served as Khosrowshahi's chief of staff prior to joining Lime in 2018.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">However, VC deals for micromobility companies are likely to record a significant drop in the second quarter of 2020, according to a </span><b style="border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">recent PitchBook report</b><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">. The challenging funding environment will also result in sizable valuation haircuts to some companies, with deal terms increasingly in favor of investors.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">Uber's stock closed up 11% Thursday in the wake of the announcement.</span></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Hussain said the deal also provides Uber with a degree of upside optionality to buy Lime in the future—assuming the San Francisco-based company is able to successfully rebound coming out of this crisis. Lime's new CEO, Wayne Ting (pictured), appears to think it will.</span></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white; caret-color: rgb(255, 255, 255);">By </span><span style="box-sizing: border-box; caret-color: rgb(255, 255, 255); cursor: pointer;">Priyamvada Mathur - Pitchbook</span></span><br />
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-82252639515511363272020-05-07T12:07:00.000-07:002020-05-07T12:10:34.639-07:00KKR still hunting for deals despite $1.3B loss during Q1<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: 18px;"><i>As per my recent comments on private equity (see blog from 5 May on Apollo), here are some more PE firms reporting losses... Aivars Lode</i></span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="box-sizing: border-box; cursor: pointer;">KKR </span><span style="background-color: white;">became the latest publicly traded private equity shop to reveal the negative impact of the coronavirus outbreak on its portfolio Wednesday. But with $58 billion in dry powder, the famed investor known for opportunistic buying doesn't expect to stay sidelined.</span></span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span></span></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">KKR reported a net loss of $1.3 billion in the first quarter, a stark contrast to the $701 million in net income from last year's Q1. Much of that decline was due to markdowns of existing investments because of pandemic-fueled market turmoil. KKR's losses were of a similar scope to those of its publicly traded peers during the first three months of 2020: </span><span style="box-sizing: border-box; cursor: pointer;">Blackstone</span> <span style="background-color: white;">lost roughly $1.1 billion, </span><span style="box-sizing: border-box; cursor: pointer;">Apollo Global Management</span><span style="background-color: white;"> shed $2.3 billion and </span><span style="box-sizing: border-box; cursor: pointer;">The Carlyle Group</span><span style="background-color: white;"> lost $612 million.</span></span></span></span><br />
<a name='more'></a><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">The value of KKR's private equity portfolio declined by 12% in the first quarter. Its energy assets depreciated by 33%, its alternative credit unit by 16% and its leveraged credit unit by 13%. In a bright spot, the value of the firm's second global infrastructure fund grew by 18%, fueled by the sale of fiber optic company </span><span style="box-sizing: border-box; cursor: pointer;">Deutsche Glasfaser</span><span style="background-color: white;"> to </span><span style="box-sizing: border-box; cursor: pointer;">EQT</span> <span style="background-color: white;">and </span><span style="box-sizing: border-box; cursor: pointer;">OMERS</span> <span style="background-color: white;">for €2.8 billion (about $3 billion). The firm now has $207.1 billion in overall assets under management, down from $218.4 billion at the end of 2019. </span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">The drop in KKR's private equity portfolio was less dramatic than at Apollo and Blackstone, both of which saw their PE holdings depreciate by roughly 22% in Q1. The value of Carlyle's private equity unit dropped just 8%.</span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">Despite those losses, KKR posted after-tax distributable earnings of $355.3 million in Q1, up 11% year-over-year. Overall, the firm's two remaining co-founders were pleased with its performance during trying times. </span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">"Since February, we have seen more uncertainty and volatility than at any time since the financial crisis," co-CEOs Henry Kravis and George Roberts said in a statement. "KKR navigated the quarter well and our results bear testament to the strength of our business model."</span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">KKR announced after-tax distributable earnings of $355.3 million, an 11% year-over year bump in the amount of cash available to pay out to shareholders, more or less matching analyst expectations. The firm also announced a dividend of $0.135 per share of Class A common stock. KKR’s shares were up nearly 5% during intraday trading. </span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">During a conference call, CFO Robert Lewin said KKR is currently raising money for its private equity strategy in Asia and its real estate strategy in Europe after receiving $10 billion in total commitments in March and April. But the firm's immediate fundraising future is still unclear. </span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">"In terms of what this means for our fundraising outlet, it's a little too early to say," he said. </span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">KKR was relatively quiet from a dealmaking perspective during Q1 after reports late last year that it was in talks to conduct a massive buyout of </span><span style="box-sizing: border-box; cursor: pointer;">Walgreens Boots Alliance</span><span style="background-color: white;">. The firm has been navigating choppy waters related to its ownership of physician staffing company </span><span style="box-sizing: border-box; cursor: pointer;">Envision Healthcare</span><span style="background-color: white;">, which in recent months has been at the center of debates over </span><b style="border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">PE's involvement in surprise medical billing</b><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">. Reports have also surfaced that Envision has cut pay for doctors amid the coronavirus crisis and that it may be considering bankruptcy, after the frequency of elective surgeries plummeted as hospitals prepared for a flood of COVID-19 patients. KKR took Envision private for nearly $10 billion two years ago. </span></span></span></span><br /><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">Last month, the firm joined several other buyout firms in devoting resources to coronavirus relief, </span><b style="border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">launching a $50 million fund</b><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">.</span></span></span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: 18px;"><span style="background-color: white;"><br /></span></span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: 18px;"><span style="background-color: white;">By Adam Lewis - Pitchbook</span></span></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;"></span></span></span></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;">Those losses in its current portfolio, though, aren't preventing KKR from chasing down new targets amid a chaotic market.</span></span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><span style="background-color: white;"></span></span></span></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;">Co-COO Scott Nuttall said the firm will be aggressive in the coming months in pursuing corporate carveouts, add-ons and other strategies. And while KKR has also focused in part during recent weeks on helping its current portfolio, Nuttall said the firm's resources and experience have also allowed it to be opportunistic in searching for attractive new deals. "There's plenty to do with new investments," he said. </span></span><span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="font-family: "helvetica"; font-size: 18px;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span></span></span><br />
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com1tag:blogger.com,1999:blog-2573135714880976732.post-10356924157103735892020-05-05T13:26:00.000-07:002020-05-05T13:26:35.217-07:00Apollo loses $2.3B, but credit unit provides hope<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;"><i>For the Private Equity guys this will not be the last fund that does not provide the expected returns. This is consistent with my commentary over the last 2 years. Also let's not sing their credit unit's praises just yet. Let's look at that in six months time.... Aivars Lode</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="box-sizing: border-box; cursor: pointer;">Apollo Global Management</span><span style="background-color: white;"> offered more proof Friday that not even private equity is safe from the pandemic's economic assault, reporting a $2.3 billion net loss that makes it the worst hit of any publicly traded PE firm to post first-quarter earnings so far.</span></span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Apollo recorded unrealized mark-to-market losses of about $1.3 billion on its investment in </span><span style="box-sizing: border-box; cursor: pointer;">Athene Holding</span><span style="background-color: white;">, the Bermuda-based insurance conglomerate it helped create in 2009, while the firm's robust credit business helped buoy revenue numbers. Of the $5.2 billion in capital that Apollo deployed in the first quarter of 2020, some $3.4 billion was out of its credit arm. On an investor call, co-founder Josh Harris said he expects distressed opportunities to increase in the next two years</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Additionally, total capital deployment accelerated at about double the pace of normal quarters, reaching about $40 billion in the first quarter, with an additional $10 billion in April. The firm is currently investing out of its ninth flagship fund, a $24.6 billion vehicle that has shifted from traditional private equity investments to a nearly all distressed-for-control credit strategy.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;"></span></span><br />
<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;">Apollo's seventh fund was invested two-thirds in distressed credit, while its eighth vehicle was only 5%, underlining the firm's rapid pivot in response to the current climate.</span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">That leaves Apollo well positioned to take advantage of the current credit market, with bountiful distressed opportunities, according to PitchBook analyst Wylie Fernyhough.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">"You're seeing a lot of companies either fall into distress because of existing debt loads or look to loans rather than selling equity to make it through the crisis. This benefits Apollo because they are an expert in credit," Fernyhough said. "Plus, you're seeing a ton of selling on the credit market across everything when spreads blow out, and that gives firms with solid fundamental research teams an advantage to find interesting opportunities."</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Harris was also candid about his belief that the current economic meltdown likely won't end anytime soon.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">"In this particular crisis, with the appropriate actions of the federal reserve and the government, there's a lot of liquidity in the marketplace," he said. "But the economic destruction that's occurring because of the unfortunate virus is likely to lead to a longer economic cycle."</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Apollo's $2.3 billion loss for the first quarter came after the firm logged a $315.6 million profit in the first quarter of 2019. For comparison, </span><span style="box-sizing: border-box; cursor: pointer;">Blackstone</span> <b style="border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">reported a first-quarter net loss</b><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"> of $1.07 billion, and </span><span style="box-sizing: border-box; cursor: pointer;">The Carlyle Group</span><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"> announced a $612 million net loss. Other publicly traded rivals </span><span style="box-sizing: border-box; cursor: pointer;">KKR</span> <span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;">and </span><span style="box-sizing: border-box; cursor: pointer;">Ares Management</span><span style="background-color: white; border: 0px; box-sizing: border-box; cursor: pointer; margin: 0px; outline: 0px; padding: 0px; text-decoration: none; vertical-align: baseline;"> are scheduled to publish their earnings May 6.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Apollo's private equity portfolio depreciated by 21.6% in the first quarter, the exact same figure Blackstone announced for the quarter. Still, Apollo deployed $40 billion for the quarter and another $10 billion in April, an accelerated rate compared with previous years. The firm now claims $40.5 billion in dry powder and $315.5 billion in assets under management, with that latter figure down from $331.1 billion in AUM at the end of 2019.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Apollo also announced structural and governance changes that should position it for inclusion in Russell indexes in the coming months. Gaining access to indexes was one of the primary motivations of the industry-wide shift from partnerships toward C-Corps that the public PE industry undertook in recent years.</span></span><span style="font-family: Arial, Helvetica, sans-serif;"><br style="border: 0px; box-sizing: border-box; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;" /></span><span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">Apollo's stock closed Friday trading down more than 2%.</span></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;">By </span><span style="background-color: white;">By </span><span style="box-sizing: border-box; cursor: pointer;">Eliza Haverstock</span> - Pitchbook</span></div>
Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-33938201902219017792020-05-05T11:16:00.002-07:002020-05-05T11:16:49.974-07:00Rally Over? The Point Is ‘Smoot’. Why The 1930s Continues To Be A Bear Track To Follow.<div dir="ltr" style="text-align: left;" trbidi="on">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Worth a read and to reflect where the market is likely to go. The comparison with today and the Depression is eerily </span></i><span style="font-family: Arial, Helvetica, sans-serif;"><i>similar.... Aivars Lode</i></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">The Dow’s movement is still mimicking 1931 very closely. Tariff talk doesn’t help</span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">You have probably heard that “history doesn’t repeat, but it often rhymes.” Well, the further we travel through 2020 (even if we can’t travel much the way we are accustomed to), history is turning into quite a poet.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Recently I brought to your attention some economic similarities that occurred a long time ago, but which I truly believe have relevance today. Because at it’s core, human behavior doesn’t change radically. We are wired a certain way. And, since markets move based on decisions made by humans (and increasingly by human-inspired algorithms), we simply can’t ignore parallels to past periods in economic and market history.</span></div>
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<span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><span style="font-family: Arial, Helvetica, sans-serif;">Markets and Tariffs and Bears, oh my!</span></span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">The table below simply says this: there is a remarkable similarity between how 1931 (2 years after the “Crash of 1929”) played out and the way this version of a recession/depression-era economy is developing. In fact, one thing I left out of my recent piece on the subject was a mention of the Smoot-Hawley Tariff Act, in which the United States slapped tariffs on about 20,000 imported goods. This occurred in 1930, one year before the market went from tenuous to, well, not so good. Sound familiar?</span></div>
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<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;">I have set this up so that we can come back to it as the year moves along, just in case we have to consider this serious threat to retirement wealth any more than we already do. The first 3 rows are “in the books” already. As the right half of the chart shows, the Dow peaked this year on February 12. It fell from that high level by 37%, then rallied back by over 32%.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Quite an 11-week period there! That left the Dow at 24,634 when it topped out last Wednesday, April 29. That’s about 17% below where it peaked in February.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Now, look at the left side of the table. I tracked the movement of the Dow back in 1931, and applied a “multiplier” to 1931’s high, to equate it to 2020’s high price. That’s a fancy way of saying I divided 29,551 by 194.36, and then applied that factor across the rest of 1931’s debacle of a market. That gave me projected values of the Dow in 2020 at each major top and bottom along the way.</span></div>
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<span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">Worst-case scenario?</span></span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">If you play out the left side of the chart from 1931, and then project it to the right side of the chart for 2020, you see where the Dow’s price could go if the similarities continued. To summarize, <span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;">we’d see the worst of it in the coming months, with the Dow dropping to the 13,000 area. That’s a Dow level not seen since early 2013.</span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">As is typical of bear markets, the Dow would then rally hard (again) to well over 17,000. Then, just when we thought it was safe to go back in the equity market water, the year’s final push downward would bring the Dow to around 11,000.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">I know that you are looking at this saying “that can’t happen, can it?” I am not a wizard, and no crystal ball lines my desk. However, I am a realist. And since the last 2 bear markets (2007-2009, and 2000-2003) each saw the Dow drop in the 50%+ range, is this a possibility to include when setting your portfolio strategy for the rest of the year? I think you know the answer.</span></div>
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<span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">For risk-managers only</span></span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">You might be wondering, if this is playing out so much like 1931, where are we now, and what would a “Back to the Future” chart of the Dow look like? Answer: take the value of your S&P 500 or similar U.S. equity index fund, cut its value in half, and there you go. See the chart below, measured from where the first Dow “bounce” ended after the first Dow “crash” in 1931.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">As you might imagine, I have done a lot of this work over the years. It is part of my overall process of marrying technical, quantitative and fundamental investment market analysis. After all, without history, you are doing a lot more guessing than you should.</span></div>
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<span style="border: 0px; box-sizing: border-box; font-weight: 900; margin: 0px; padding: 0px;"><span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">This is only a drill?</span></span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">This is one of the stronger developing trends I have seen. It could go nowhere. However, if an investor chooses to ignore the potential for “worst-case” outcomes, that over-confidence can ruin a retirement plan. There are many possibilities in every stock market climate. The key is to efficiently evaluate several, and determine a prudent allocation of your assets based on the probability of different scenarios actually occurring. That gives you a big leg up in years like 2020….and 1931.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">By Rob Isbitts - Sungarden Investment Management</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-42653678939022694182020-04-30T10:33:00.000-07:002020-04-30T10:33:42.891-07:00WeWork Troubles Take Deeper Bite Out of SoftBank<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><i>I know it seems like I am beating up on We Work, however it is they who are beating themselves up. Why do I highlight them? They are the canary in the coalmine the way that Enron was in 2001 and Lehman brothers was in 2008. Many stocks are still overvalued on a PE basis and we have not seen the full effect of the corona virus on earnings.... Aivars Lode</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">SoftBank Group<span class="company-name-type" style="border: 0px; margin: 0px; padding: 0px; vertical-align: baseline;"> Corp.</span> said steeper-than-expected losses on office-share firm WeWork pushed its expected net loss for the latest fiscal year to around ¥900 billion ($8.4 billion)—$1.4 billion more than it announced just two weeks ago.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The Japanese tech conglomerate, best known for its $100 billion Vision Fund, revised the estimate as it scrambles to calculate the hit to its bottom line from souring investments before it releases earnings on May 18 for the year ended March 31. The deeper loss comes from SoftBank’s multibillion-dollar rescue of We Co., the parent of WeWork, whose value cratered last year after investors turned wary of the company’s highflying chief executive and heavy-spending business model. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Part of that rescue involved credit support by SoftBank for a bank commitment to lend as much as $1.75 billion to WeWork as well as up to $2.2 billion in unsecured notes to be issued by WeWork. The value of that loan commitment and guarantee has fallen, forcing SoftBank to book further write-downs, the company said Thursday. </span></div>
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<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;">SoftBank earlier this month canceled another part of that bailout—an offer to buy up to $3 billion of WeWork shares from early investors and employees including the company’s former chief executive, Adam Neumann—saying the company hadn’t met conditions needed for the sale. That also left WeWork without a further $1.1 billion in debt financing that was contingent upon the share sale.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">The added loss from the WeWork rescue is pushing the total loss from investments on SoftBank’s books to more than $9.4 billion during the year ended March 31, versus the $7.5 billion SoftBank had announced earlier this month, the company said. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">That loss is on top of a previously announced fiscal-year investment loss of $16.6 billion at the Vision Fund—the world’s biggest tech-investment vehicle—as the economic downturn sparked by the coronavirus pandemic pummels money-losing startups that were already under pressure to bolster results. SoftBank is both operator of the Vision Fund and a major investor in it. The fund has also poured money into WeWork and been forced to write down billions of dollars as a result. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Backing WeWork, which leases office space and then rents it to smaller companies and workers, has been one of the biggest missteps by the Japanese tech giant and its charismatic founder, Masayoshi Son. At Mr. Son’s urging, SoftBank poured billions into WeWork at increasingly high valuations—continuing to fund the company even after the Vision Fund, whose other investors were increasingly worried about the startup, called a halt to further investments.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">SoftBank also decided to bail out WeWork last year, a move that some analysts worried could end up throwing good money after bad. Mr. Son has said WeWork’s business model is fundamentally solid.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">WeWork could be particularly vulnerable to an economic downturn like the current one, since it holds long-term leases for office space while its contracts with rental customers tend to be shorter-term. That means WeWork could be on the hook for lease payments even as revenue dries up.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Mr. Son has said SoftBank won’t bail out any more portfolio companies. Despite the continuing drumbeat of investment-loss announcements, SoftBank’s stock price has been rising since the end of March, when it said it would sell billions of dollars of assets to fund as much as $22.5 billion in share buybacks. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">SoftBank’s shares rose 2.5% in Tokyo trading Thursday morning to ¥4,724, in line with the overall market.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">By Phred Dvorak - Wall Street Journal</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-21616423717243794102020-04-27T08:43:00.001-07:002020-04-27T08:43:52.461-07:00Icahn Says Stocks Are Overvalued, Virus May Cause ‘Downdrafts’<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-weight: normal;"><span style="font-family: Arial, Helvetica, sans-serif;"><i>I have been blogging this for over a year and Covid-19 just made it real ...Aivars Lode</i></span></span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">Carl Icahn isn’t buying stocks right now. He’s hoarding cash, shorting commercial real estate and preparing for the coronavirus to wreak more havoc.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">This is a time to be “extremely careful,” Icahn said in an interview Friday on Bloomberg Television.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">From his home on Miami’s Biscayne Bay, the billionaire investor has surveyed the damage to stock prices -- and to his portfolio -- and reached out to medical experts for information and opinions on the Covid-19 pandemic. To Icahn, who at 84 has traded through all the stock-market crashes since the Great Depression, the future is just too unpredictable for the S&P 500 to be trading at 17 times 2021 earnings estimates.</span></div>
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<span style="background-color: white;"><span style="font-family: Arial, Helvetica, sans-serif;">“You cannot really justify that multiple,” Icahn said. “Short-term, you may have some big downdrafts.”</span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The market disagrees. Since the Federal Reserve on March 23 unveiled a series of unprecedented measures to support the U.S. economy, followed by even more in subsequent weeks, stocks have roared back 30% from their intraday low.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><a name='more'></a>Keeping Cash</span></h4>
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<span style="font-family: Arial, Helvetica, sans-serif;">Icahn, meantime, hasn’t spent the cash he says he always keeps for “a stormy day.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">One of the dividing lines between bulls and bears is the expected speed of the economic recovery. Icahn, who gave <span class="" data-original="$200 million" data-symbol="$" data-value="200000000" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; font-variant-position: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">$200 million</span> to the medical school at <a href="https://www.bloomberg.com/quote/79114MF:US" itemprop="StoryLink" itemscope="itemscope" style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: dotted; border-width: 0px 0px 1px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; font-variant-position: inherit; line-height: inherit; margin: 0px; overflow-wrap: break-word; padding: 0px; text-decoration-skip: objects; text-decoration: none; vertical-align: baseline; word-wrap: break-word;" title="Company Overview">Mount Sinai Hospital</a> in New York, said he’s been talking to “some of the smartest guys in this area” and formed an opinion of the virus that doesn’t leave him optimistic. He’s concerned about recurrences of infection and believes the economy will reopen in “spurts.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“It’s not like turning on a spigot,” he said.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Icahn rose to fame and notoriety in the 1980s as a corporate raider. He’s since restyled himself as a shareholder activist, a role in which he’s battled fellow billionaires such as Michael Dell and Bill Ackman. Icahn also supported Donald Trump and in 2017 served as a special adviser to the president.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Many of Icahn’s larger stock holdings are in industrials such as oil refiner <a href="https://www.bloomberg.com/quote/CVI:US" itemprop="StoryLink" itemscope="itemscope" style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: dotted; border-width: 0px 0px 1px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; font-variant-position: inherit; line-height: inherit; margin: 0px; overflow-wrap: break-word; padding: 0px; text-decoration-skip: objects; text-decoration: none; vertical-align: baseline; word-wrap: break-word;" title="Company Overview">CVR Energy Inc.</a> and <a href="https://www.bloomberg.com/quote/TEN:US" itemprop="StoryLink" itemscope="itemscope" style="border-bottom-color: rgb(0, 0, 0); border-bottom-style: dotted; border-width: 0px 0px 1px; color: black; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; font-variant-position: inherit; line-height: inherit; margin: 0px; overflow-wrap: break-word; padding: 0px; text-decoration-skip: objects; text-decoration: none; vertical-align: baseline; word-wrap: break-word;" title="Company Overview">Tenneco Inc.</a>, the auto-parts maker. They’ve been battered by the pandemic.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“We keep it pretty well hedged, but even the hedges couldn’t stop us from losing some money,” he said.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">A wily trader, Icahn spotted a once-in-a-lifetime opportunity amid the market gyrations. On April 20, when it seemed the whole world was selling oil and crude futures fell to an unheard-of minus <span class="" data-original="$40" data-symbol="$" data-value="40" style="border: 0px; font-stretch: inherit; font-variant-alternates: inherit; font-variant-caps: inherit; font-variant-east-asian: inherit; font-variant-ligatures: inherit; font-variant-numeric: inherit; font-variant-position: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">$40</span> a barrel, he was buying.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Because CVR constantly needs oil to supply its two refineries, Icahn realized he could use it to profit from the frenzy. He said he instructed the Sugar Land, Texas-based company to make space in its storage tanks and put in orders for 1 million to 2 million barrels at negative prices he doesn’t expect ever to see again.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Icahn’s biggest position is a multibillion bet he initiated in mid-2019 against the CMBX 6, an index of commercial real estate mortgage-backed securities.</span></div>
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<span style="background-color: white;"><span style="font-family: Arial, Helvetica, sans-serif;">It’s frequently called the “mall short” because many of the underlying loans are to retail centers. The more the pandemic slows economic activity and drives consumers to shop online, the greater the chances that some of those loans will default.</span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Since early March, one tranche, or slice, of the CMBX 6 is down almost 30%. Another riskier tranche has fallen more than 40%.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“It’s ‘08 all over again,” Icahn said, likening the trade to wagers that paid off massively when subprime mortgage debt collapsed more than a decade ago.</span></div>
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<span style="background-color: white;"><span style="font-family: Arial, Helvetica, sans-serif;">By </span></span><span style="font-family: Arial, Helvetica, sans-serif;">Erik Schatzker </span><span style="font-family: Arial, Helvetica, sans-serif;">- Bloomberg </span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-33591501605372207692020-04-24T12:03:00.000-07:002020-04-24T12:03:11.613-07:00Pandemic Could End Shareholder Value Supremacy For Good<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><i>Now for some good news. Here are a couple of great stories of corporations giving back to the community and employees. It also begs the question: What should be the focus of corporations post Virus? ...Aivars Lode</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Looking around for more it could do, Xerox began to focus on ventilators. It found a small company in California, Vortran Medical Technology, which makes a $120 ventilator that’s meant to be used by patients who don’t need a full-blown $20,000 intensive care ventilator. (Most Covid-19 patients fall into that category.)</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Xerox and Vortran struck up a partnership. Xerox has since put together a supply chain, obtained the equipment it needs to create a small ventilator plant and is devoting a portion of its factory floor near Rochester to the venture. The floor is being configured so that the workers will be 6 feet apart, and other social-distancing measures are being taken. The hope is that Vortran and Xerox will be able to produce 150,000 to 200,000 of these disposable ventilators a month.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Nobody asked Xerox to do this, which is part of the point. It saw a need — one that had nothing to do with its core business, and will never make much money — and decided to try to fill it. Hundreds of Xerox employees have been volunteering to join the project, which is another important aspect: Employees and management are aligned, something that hasn’t often been true in corporate America these past few decades.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">My second example is Bank of America. As my Bloomberg Opinion colleague Brian Chappatta noted in a column on Wednesday, the bank’s first-quarter profits were down 45%. But CEO Brian Moynihan seemed unperturbed.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“Just as important as our financial results this quarter is what we are doing to take care of our teammates and to help our clients and our communities impacted by the virus,” he said at the opening of the bank’s quarterly conference call. Curious, I asked a bank spokeswoman for some more details. A half-hour later, she sent me a long list.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It was impressive. For employees, the list included no layoffs in 2020 because of the coronavirus crisis; expanded benefits including no-cost coronavirus testing and $100 a day for backup child care; and a $20 an hour minimum pay rate. For customers, the bank has stopped foreclosures and allowed them to request payment deferrals on everything from auto loans to credit card late fees. There was more, including $100 million for communities to buy medical supplies and help for small businesses.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">When was the last time you heard a CEO tell a group of Wall Street analysts that its treatment of employees was as important as its financial results? Maybe never. How often have companies used their core resources to tackle societal challenges that will never accrue to the bottom line?</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">That this is taking place across corporate America gives me hope. There is something about disease — and the prospect of death — that causes people to think hard about what truly matters. This may turn out to be naïve, but I believe that is happening in the executive suites of America’s big companies.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Shareholder value has been an insidious force inside U.S. businesses, creating incentives that have led to selfish and callous behavior. If this crisis brings about a new set of C-suite values — or, more accurately, a return to an old set of values — then at least one good thing will have come of it.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">By Joe Nocera - Bloomberg Opinion Columnist</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-28780459772590784702020-04-23T11:18:00.001-07:002020-04-23T11:18:14.886-07:00Why a ‘return to normal’ could mean disaster for the stock market<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;"><i>I agree with this premise and I have described <span class="" style="color: #2e2e2e; font-weight: normal;">Rodrigue’s chart verbally through my own observations in my books. Caveat: I</span> have not validated the current chart however I do agree wholeheartedly with the direction.... Aivars Lode</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It’s hard to deny, although some do, that the stock market, pre-coronavirus, was pushing the limits of what it means to be in a bubble. Of course, bubbles come and go, but as Hofstra University’s Jean-Paul Rodrigue suggests, this one had a particularly fierce tailwind.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“Although manias and bubbles have taken place many times before in history...” he once wrote, “central banks appear to make matters worse by providing too much credit and being unable or unwilling to stop the process with things are getting out of control.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Rodrigue explained that bubbles unfold in stages, an observation backed by 500 years of economic history. “Each mania is obviously different,” he said. “But there are always similarities.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">His concept of the bubble has been passed around finance circles for years. Most recently, John Hussman of Hussman Investment Trust used Rodrigue’s chart to warn investors of what’s to come:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Hussman, who’s been <span style="background-repeat: no-repeat no-repeat; background-size: 30px 30px; border-bottom-color: rgb(54, 119, 168); border-bottom-style: solid; border-bottom-width: 2px; box-sizing: inherit; color: inherit; font-stretch: inherit; font-style: inherit; font-variant-caps: inherit; line-height: inherit;">very vocal about getting burned by his bearish misfires in recent years</span> — “Did it take too long for me to abandon my belief in a ‘limit’ to the stupidity of Wall Street? Yes it did” — said the current position of this market is reminiscent of Rodrigue’s “return to normal” stage. If that’s the case, “fear” and “capitulation,” followed by “despair,” are still to come. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">For comparison, here’s where we stand now:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“Having cleared the oversold condition that emerged on a few occasions in March,” Hussman <span style="background-repeat: no-repeat no-repeat; background-size: 30px 30px; border-bottom-color: rgb(54, 119, 168); border-bottom-style: solid; border-bottom-width: 2px; box-sizing: inherit; color: inherit; font-stretch: inherit; font-style: inherit; font-variant-caps: inherit; line-height: inherit;">wrote in a recent note</span>, “we now observe the fairly unusual combination of overbought conditions, renewed valuation extremes, and still unfavorable market internals.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">He pointed to May 2001, December 2007 and May 2008 as similar points in other recent bubbles. “All three, in hindsight, had unfortunate consequences,” Hussman said.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">No such unfortunate consequences as of yet in Wednesday’s trading session, with the Dow Jones Industrial Average up almost 500 points. The S&P 500 and tech-heavy Nasdaq Composite were also nicely higher. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">By <span style="caret-color: rgb(106, 106, 106);">Shawn Langlois - MarketWatch</span></span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-14827581609902301052020-04-21T11:19:00.002-07:002020-04-21T11:20:01.557-07:00Investors discover some weaknesses with private credit<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "arial" , "helvetica" , sans-serif;">I have previously commented on crazy debt financing that I have personally observed. Here are two others who have observed the same... </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Doug Cruikshank, New York-based head of fund financing at Hark Capital, a business of Aberdeen Standard Investments, said: <i>Loans based on so-called EBITDA add-ons, which is when actual EBITDA numbers are increased based on possible future earnings, and loans with few covenants to protect lenders will have a greater impact on credit returns than in the last recession.</i></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span class="">Mark Attanasio, Los Angeles-based co-founder and managing partner of credit manager Crescent Capital Group LP, said: <i>The reason is that in the years leading up to the current crisis there were a lot more loans issued by private credit managers with fewer covenants and earnings based on potential future cash flows. As a result, the damage to investors' portfolios is likely to be "worse this time.</i></span><span class=""><i>”</i></span><span class=""> </span></span></div>
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It was sold as a defensive strategy, but coronavirus could capsize performance</h4>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Private credit investments were sold as lower risk than equity strategies, with some types of credit such as distressed debt considered defensive, but the COVID-19 crisis makes those performance expectations an open question, industry sources said.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Credit managers today are having to deal with investments predicated on the good times continuing in a growing economy awash in cash. Such firms had competed for deals by requiring fewer — if any — covenants, offering looser fund terms and lowering their own return expectations. Now, for the first time, they are talking with borrowers, many of which are private equity firms' portfolio companies, about forbearances, restructuring loans and covenant waivers, and making other accommodations to lessen the likelihood of defaults.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span class=""><a href="https://www.pionline.com/alternatives/investors-discover-some-weaknesses-private-credit?utm_source=p-i-issue-alert&utm_medium=email&utm_campaign=20200418&utm_content=hero-readmore&CSAuthResp=1587383419497:0:219413:0:24:success:D44AA14109D8689B0DAC7C1C52817AD4" target="_blank">Read the full article by Arleen Jacobius from Pensions & Investments here</a></span></span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-35102648809875267292020-04-17T11:29:00.002-07:002020-04-17T11:29:56.232-07:00BlackRock’s Profit, Assets Under Management Fall<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><i>If you look back at my posts about pension funds over the last year or so you will see that I predicted that they will not be able to honor their commitments. I have been watching private equity firms overpaying for assets, which will result in a fall of value, and then pension funds will have to sell liquid assets like stocks. Well lets watch this over the next year as we have not seen the bottom of the stock market, not even close ...Aivars Lode</i></span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><br /></span><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: small;">Plummeting markets from coronavirus pandemic dragged assets under management below $7 trillion</span></h4>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Money management giant BlackRock<span class="company-name-type" style="border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"> Inc.’s</span> profits fell by 23% in the first quarter, as a <span style="background-repeat: no-repeat no-repeat; background-size: 30px 30px;">global pandemic</span> and waves of selling gripped the investment world. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Investors added a net $35 billion in new money to the firm’s coffers, down by about half from the prior-year period. Most of the money coming into the firm went to cash, a sign heightened investor caution is driving money into less profitable businesses for the investment industry.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Flows into other investment products were negative for the quarter, an aberration for the firm. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Asset managers are confronting the most acute pressures the industry has faced since 2008. Many customers—which include pensions, endowments and individuals—have turned to forced selling in a rush for cash as more businesses close and jobless claims rise. Money managers also had to grapple with <span style="background-repeat: no-repeat no-repeat; background-size: 30px 30px;">seizing bond markets that had ripple-effects</span> across fixed-income mutual funds and ETFs.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Measures of BlackRock performance, such as adjusted earnings, beat analyst expectations in a quarter expected to be more painful for smaller rivals. BlackRock’s shares rose 3.6%.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">“The world is facing a challenge that is truly unprecedented in our lifetimes,” said BlackRock Chief Executive Laurence Fink in a call with Wall Street analysts.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Mr. Fink said the firm has had record calls and outreach to clients in recent weeks. He added that tough times give the firm a chance to differentiate itself.</span></div>
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<a name='more'></a><span style="font-family: "arial" , "helvetica" , sans-serif;">BlackRock’s scale and dominant position in exchange-traded funds made it the envy of the investment world. Its vast investment reach spans everything from ETFs to funds managed by stock pickers to private equity. The firm sells financial software to Wall Street and runs an advisory arm that assists governments and central banks with how they manage their balance sheets.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The firm and its chief executive, Mr. Fink, are emerging central players in the U.S. government’s effort to shore up the U.S. economy after the coronavirus shock to businesses and markets. BlackRock was tapped to <span style="background-repeat: no-repeat no-repeat; background-size: 30px 30px;">steer as much as hundreds of billions of dollars</span> in bond purchases for the U.S. central bank in March.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">But the company felt the hit when markets started sharply swinging from the impact of coronavirus. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Plummeting markets dragged the world’s largest money manager’s assets under management below $7 trillion at the end of the quarter. BlackRock ran $6.5 trillion for all kinds of investors on March 31. That was down from $7.43 trillion at the end of 2019. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">BlackRock’s exchange-traded funds unit known as iShares added roughly $14 billion in overall net flows, the worst quarter since 2018. In a sign of the competition BlackRock faces, the world’s second-largest money manager, Vanguard Group, took in roughly three times BlackRock’s haul of ETF net flows. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">At BlackRock’s iShares unit, a crown jewel for the firm, trading of its ETFs ratcheted up in past weeks. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Salim Ramji, BlackRock’s iShares head, said ETFs weathered the market stress on Thursday’s analyst call. He also said that model portfolios—ready-made investment mixes for wealth managers and other investors—fueled growth for the firm’s ETFs.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">BlackRock also sells software, including a suite of tools called Aladdin used to evaluate financial risks, to banks and other institutions. The software sales helped increase quarterly technology services revenue by 34%. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Rob Goldstein, BlackRock chief operating officer and the head of its BlackRock Solutions business that includes Aladdin, said the firm was working to make Aladdin a bigger piece of the plumbing connecting parts of Wall Street. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The appearances of Mr. Goldstein, alongside Mr. Ramji, signal that BlackRock has become more willing to stretch and showcase a new generation of leaders in new roles. Mr. Fink, and top lieutenants BlackRock president Rob Kapito and finance chief Gary Shedlin typically run the calls. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">“I hope you got a sense of the depth of the leadership team at BlackRock beyond Rob Kapito and myself,” said Mr. Fink. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Overall for the quarter, BlackRock posted a first-quarter profit of $806 million, or $5.15 a share, down from the year-prior period of $1.05 billion, or $6.61 a share. Those earnings included one-time items such as a donation by the firm to expand its own charitable arm. The firm’s adjusted profits fell less, by 2%. </span></div>
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<span style="background-color: transparent; font-family: "arial" , "helvetica" , sans-serif;">BlackRock took in roughly $75 billion in new money in the first seven weeks of the year, but subsequently posted outflows across indexed products, ETFs, as well as products run by managers who pick and choose investments. Inflows into cash saved the day. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">BlackRock’s weaker flows foreshadow pain for rivals. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">“This is a quarter where a lot of money moved out of risky assets into the sidelines,” said Craig Siegenthaler, an analyst with Credit Suisse. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">BlackRock and other asset managers will have less severe profit declines this quarter compared with a swath of banks that had to book severe losses to their balance sheets to account for defaults of loans, some predict. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">“Banks are being punished much more this quarter for what will happen in the future,” said Kyle Sanders, an analyst with Edward Jones, “The worst pain may be yet to come for asset managers.” </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Roughly $35 billion in net flows left BlackRock fixed-income products in the first quarter. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">In a different business, BlackRock took in roughly $7 billion in net flows and investor pledges for illiquid alternatives to stocks and bonds, a priority for the firm. </span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">The firm’s first quarter revenue rose 11%. The biggest piece of revenue, which comes from investment advisory, administration fees and security lending, rose by roughly 9%.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">By </span>Dawn Lim - Wall Street Journal</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-440545221844480152020-04-15T11:36:00.001-07:002020-04-15T11:36:44.300-07:00Pandemic shows investment fund vulnerabilities, G20 watchdog says<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><i>For a while now I have been talking about the risk that pension funds faced from deals that they and other investment funds had been making that financially did not make sense. Now it appears these same funds are making excuses and looking for a bail out.... Aivars Lode</i></span></div>
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<span style="background-color: white; caret-color: rgb(49, 49, 50); color: #313132;"><span style="font-family: Arial, Helvetica, sans-serif;">LONDON (Reuters) - Non-bank financial firms such as investment funds have exhibited vulnerabilities during the coronavirus crisis that may need fixing to help economies recover, a global regulatory watchdog said on Tuesday.</span></span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">The Financial Stability Board (FSB), which coordinates financial rules for the Group of 20 (G20) economies, said that although an initial wave of volatility has ebbed, markets remain under great strain and in some cases illiquid. </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">FSB Chair Randal Quarles said the impact of the coronavirus pandemic on credit markets and investment funds has highlighted potential vulnerabilities and the need to understand the risks and resulting policy implications.</span><span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">“It is more important than ever to ensure that we can reap the benefits of this dynamic part of the financial system without risking financial stability,” Quarles said in a letter to G20 finance ministers and central banks, who are holding a virtual meeting this week.</span><span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<a name='more'></a>The FSB said it has set up a group to fine tune work on investment funds and credit markets, which have been a source of conflict between market regulators and central banks in the past over how stringently they should be regulated.<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span><br />
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">“Shadow banking”, which also includes money market funds, hedge funds and private equity, has grown significantly since the financial crisis a decade ago, moving into bank-like activities such as credit as traditional lenders became more risk averse.</span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">Quarles, who is also Federal Reserve vice chair for banking supervision, said FSB members have been involved in intensive, daily information exchanges to coordinate national responses. </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">Regulators have come under heavy pressure from banks to loosen capital buffers and ease provisioning requirements for bad loans as businesses struggle to stay afloat during lockdowns.</span><span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">Quarles said the FSB was guiding G20 members on using existing flexibility in global rules, while also preserving collective support for the standards.</span><span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">“It will become increasingly important to assess the impact of measures taken and to ensure that these policies are effective in the near term, and, eventually, to give a strong basis for deciding on when, and how, to return to more normal operations in the financial sector,” Quarles said.</span><span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">Fallout from the coronavirus crisis has led to speculation that regulators will have to push back an end of 2021 deadline for ending the use of the Libor interest rate benchmark that banks were fined billions of dollars for trying to rig.</span><span style="color: #313132; font-family: Arial, Helvetica, sans-serif;"> </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">The rate is used in contracts like home loans and credit cards worth around $400 trillion globally, and ending its use is one of the biggest challenges faced by markets in decades.</span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">“The financial stability risks that would be associated with an unsuccessful transition away from Libor are as relevant in the current environment as they were before,” Quarles said. </span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">The FSB will set out for G20 finance ministers in July the remaining challenges to shifting away from Libor and explore ways to address them, Quarles said.</span></div>
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<span style="color: #313132; font-family: Arial, Helvetica, sans-serif;">By Huw Jones - Reuters</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-36192838856083675182020-04-14T10:13:00.001-07:002020-04-14T10:13:49.339-07:00SoftBank expects $24 billion in losses from Vision Fund, WeWork and OneWeb investments<div dir="ltr" style="text-align: left;" trbidi="on">
<i><span style="font-family: Arial, Helvetica, sans-serif;">Boy oh boy, every day more bad news. "Rooster to feather duster" comes into mind.... Aivars Lode</span></i><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">The Japanese technology conglomerate <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">SoftBank Group</span> <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">said it would lose a staggering $24 billion on investments</span> made through its Vision Fund and bets on the co-working real estate company <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">WeWork</span> and satellite telecommunications company <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">OneWeb</span>.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Ultimately, the company expects the losses to help generate a $7 billion total loss for the technology giant for the year as its ambitious bets on early-stage companies come up short.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Over the past two years SoftBank and its founder <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; font-weight: 700; text-decoration-skip: objects; touch-action: manipulation; transition: color 0.1s;">Masayoshi Son</span></span><span style="font-family: Arial, Helvetica, sans-serif;"> have staked billions of (other people’s) dollars and its own fortunes on a vision that investments in machine learning technologies, robotics and next-generation telecommunications would reap hundreds of billions in financial rewards.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">While that was the vision that Son and his team sold, the reality was multiple billions of dollars invested into real estate investment plays like <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; font-weight: 700; text-decoration-skip: objects; touch-action: manipulation; transition: color 0.1s;">WeWork,</span> OpenDoor and Compass, and companies with direct-to-consumer merchandising plays like Brandless, pet supply businesses like Wag and the food delivery business DoorDash. Add the hotel chain Oyo to the mix and the investment selection from the Vision Fund looks even less visionary.</span></div>
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<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;">Over the past year, several of its investments ran aground. Though none of them imploded as spectacularly as WeWork — whose valuation was slashed from more than $40 billion to around $8 billion — many have struggled.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Brandless <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">went bust earlier this year</span>, and real estate <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">investments in Compass</span> along with investments in travel and tourism-related businesses like Oyo have suffered in the wake of the COVID-19 outbreak, which has shuttered economies around the world.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">While many SoftBank and <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; font-weight: 700; text-decoration-skip: objects; touch-action: manipulation; transition: color 0.1s;">SoftBank Vision Fund</span> <span class="crunchbase-tooltip-indicator" style="background-color: #aaaaaa; border-bottom-left-radius: 0.5em; border-bottom-right-radius: 0.5em; border-top-left-radius: 0.5em; border-top-right-radius: 0.5em; box-sizing: inherit; display: inline-block; height: 1em; line-height: 16px; margin-left: -1px; text-align: center; transition: background 0.1s; vertical-align: baseline; width: 1em;"></span> bets were made into companies that have failed, seem to be on that path or perhaps may struggle in the economic downturn, not every wager is a clunker. The Vision Fund put lots of capital into Slack before it went public, and the company has caught a huge tailwind in the remote-work boom that we’re currently seeing in light of COVID-19.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Perhaps the most visionary of the SoftBank investments (and one not included in the Vision Fund), <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; font-weight: 700; text-decoration-skip: objects; touch-action: manipulation; transition: color 0.1s;">OneWeb,</span> <span class="crunchbase-tooltip-indicator" style="background-color: #aaaaaa; border-bottom-left-radius: 0.5em; border-bottom-right-radius: 0.5em; border-top-left-radius: 0.5em; border-top-right-radius: 0.5em; box-sizing: inherit; display: inline-block; height: 1em; line-height: 16px; margin-left: -1px; text-align: center; transition: background 0.1s; vertical-align: baseline; width: 1em;"></span> too, collapsed under the weight of its own capital-intensive vision for a network of satellites providing high-speed global telecommunications services. Zume, SoftBank’s robotic pizza delivery business, also folded.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The only reason all of these gambles haven’t completely destroyed SoftBank is that the company still has a cash cow in its Alibaba stake and a relatively strong core business in telecommunications and semiconductor holdings.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“The difference in income before income tax is, in addition to the above, mainly due to the expected recording of non-operating loss totaling approximately JPY 800 billion for fiscal 2019 on investments held outside of SoftBank Vision Fund, including The We Company (WeWork) and WorldVu Satellites Limited (OneWeb),” the company said in a statement. “This will be partially offset by the gain relating to the settlement of variable prepaid forward contract using Alibaba shares recorded in the first quarter of fiscal 2019 and the dilution gain from changes in equity interest in Alibaba recorded in the third quarter of fiscal 2019, as well as an expected year-on-year increase in income on equity method investments related to Alibaba.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Ultimately, it seems that Son was too enamored of the mythology he’d created around himself as a maverick and a visionary. To the detriment of his company’s outside shareholders and investors.</span></div>
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As <span style="background-repeat: no-repeat no-repeat; border-bottom-color: rgb(241, 241, 241); border-bottom-style: solid; border-bottom-width: 1px; box-sizing: inherit; text-decoration-skip: objects; touch-action: manipulation; transition: color, border-color 0.2s linear;">Bloomberg noted in an op-ed</span> earlier today:</div>
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Son’s insistence that startups grow faster than their founders planned, and strong-arm them into taking more money than they might have wanted, has turned into a burden. And that’s become a huge liability to investors in the Vision Fund and SoftBank, too.</div>
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By throwing cash around, dozens of startups became addicted to spending instead of building fiscal discipline into their business models. For years, it seemed like a sound strategy. By having more money than rivals, SoftBank-backed companies could win market share by offering bigger incentives, taking out more ads and luring the best talent.</div>
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Today, SoftBank has a major stake in sector leaders like Uber Technologies Inc., WeWork, Grab Holdings Inc. and Oyo. But climbing to number one doesn’t mean being profitable.</div>
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By <span style="background-repeat: no-repeat no-repeat; box-sizing: inherit; caret-color: rgb(51, 51, 51); color: #333333; font-family: aktiv-grotesk, sans-serif; font-size: 13px; font-weight: bold;"><a aria-label="Posts by Jonathan Shieber" href="https://techcrunch.com/author/jonathan-shieber/" style="background-repeat: no-repeat no-repeat; box-sizing: inherit; color: inherit; text-decoration-skip: objects; text-decoration: none; touch-action: manipulation;">Jonathan Shieber</a>, </span><span style="background-repeat: no-repeat no-repeat; box-sizing: inherit; caret-color: rgb(51, 51, 51); color: #333333; font-family: aktiv-grotesk, sans-serif; font-size: 13px; font-weight: bold;"><a aria-label="Posts by Alex Wilhelm" href="https://techcrunch.com/author/alex-wilhelm/" style="background-repeat: no-repeat no-repeat; box-sizing: inherit; color: inherit; text-decoration-skip: objects; text-decoration: none; touch-action: manipulation;">Alex Wilhelm</a> - Tech Crunch</span> </div>
Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-90516834149318661422020-04-14T08:44:00.000-07:002020-04-14T08:44:45.543-07:00JPMorgan warns of ‘fairly severe recession,’ increases credit reserves by $6.8 billion<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><i>I have been asking the question for a while now: What should JP Morgans share price actually be? They took in fees from WeWork (at minimum 250m) and others so what will their real revenue and earnings be? If their revenue and earning would be at 2016 levels this would mean that there is still nearly 50% of their value to be lost. That begs the next question: If the revenue is lower than 2016 then how <span style="caret-color: rgb(38, 40, 42); color: #26282a;">fa</span><span style="caret-color: rgb(38, 40, 42); color: #26282a;">r will the valuation fall? ....Aivars Lode</span></i></span></div>
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<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="JPMorgan Chase (<a href="https://finance.yahoo.com/quote/JPM/" class="link rapid-noclick-resp">JPM</a>), the largest U.S. bank by assets, kicked off earnings season for the big banks on Tuesday by announcing that it set aside billions in anticipation of loan losses." data-reactid="16" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">JPMorgan Chase, the largest U.S. bank by assets, kicked off earnings season for the big banks on Tuesday by announcing that it set aside billions in anticipation of loan losses.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="“In the first quarter, the underlying results of the company were extremely good, however given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter,” CEO Jamie Dimon said in his commentary." data-reactid="17" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">“In the first quarter, the underlying results of the company were extremely good, however given the likelihood of a fairly severe recession, it was necessary to build credit reserves of $6.8B, resulting in total credit costs of $8.3B for the quarter,” CEO Jamie Dimon said in his commentary.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Here were the key figures versus the expectations for the first quarter, according to analysts polled by Bloomberg." data-reactid="18" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">Here were the key figures versus the expectations for the first quarter, according to analysts polled by Bloomberg.</span></div>
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<li data-reactid="20"><span style="font-family: Arial, Helvetica, sans-serif;">Revenue (adjusted): $29.07 billion vs $29.52 billion expected</span></li>
<li data-reactid="21"><span style="font-family: Arial, Helvetica, sans-serif;">Earnings per share (adjusted): $0.78 vs $2.14 per share expected</span></li>
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<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="The market isn’t putting much weight into how the actual results performed against analysts’ expectations as the impact of coronavirus pandemic has been extremely difficult to measure. To be sure, a key reason EPS was much lower than a year ago is because of the bank building its credit reserves." data-reactid="22" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">The market isn’t putting much weight into how the actual results performed against analysts’ expectations as the impact of coronavirus pandemic has been extremely difficult to measure. To be sure, a key reason EPS was much lower than a year ago is because of the bank building its credit reserves.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="The $6.8 billion in reserve builds “reflect deterioration in the macro-economic environment as a result of the impact of COVID-19 and continued pressure on oil prices,” the bank said in its release. Breaking that down further, the consumer reserve build was $4.4 billion, while the wholesale reserve build was $2.4 billion across multiple sectors, especially in oil and gas, real estate, and consumer and retail." data-reactid="23" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">The $6.8 billion in reserve builds “reflect deterioration in the macro-economic environment as a result of the impact of COVID-19 and continued pressure on oil prices,” the bank said in its release. Breaking that down further, the consumer reserve build was $4.4 billion, while the wholesale reserve build was $2.4 billion across multiple sectors, especially in oil and gas, real estate, and consumer and retail.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="In its outlook, JPMorgan said to expect net reserve builds in the second quarter." data-reactid="24" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">In its outlook, JPMorgan said to expect net reserve builds in the second quarter.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="JPMorgan said the $6.8 billion in reserve builds resulted in a $1.66 decrease in EPS, while credit adjustments and other items in the corporate and investment bank, mostly losses related to funding spread widening on derivatives, deducted 23 cents from EPS and firmwide bridge book markdowns led took 22 cents off EPS." data-reactid="25" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
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<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;">JPMorgan said the $6.8 billion in reserve builds resulted in a $1.66 decrease in EPS, while credit adjustments and other items in the corporate and investment bank, mostly losses related to funding spread widening on derivatives, deducted 23 cents from EPS and firmwide bridge book markdowns led took 22 cents off EPS.</span><br />
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Shares of JPMorgan were up 1.8% in the pre-market last trading near $99.97, but are now flat." data-reactid="26" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">Shares of JPMorgan were up 1.8% in the pre-market last trading near $99.97, but are now flat.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="In an annual letter released earlier this month, Dimon told shareholders to expect earnings to be “down meaningfully in 2020” as the COVID-19 pandemic has wreaked havoc on the economy." data-reactid="27" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">In an annual letter released earlier this month, Dimon told shareholders to expect earnings to be “down meaningfully in 2020” as the COVID-19 pandemic has wreaked havoc on the economy.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Like the broader financial services sector, JPMorgan entered the crisis from “a position of strength,” having posted record results in nine of the last 10 years, Dimon pointed out." data-reactid="28" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">Like the broader financial services sector, JPMorgan entered the crisis from “a position of strength,” having posted record results in nine of the last 10 years, Dimon pointed out.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="“[We] remain well capitalized and highly liquid - with a CET1 ratio of 11.5% and total liquidity resources of over $1 trillion. And JPMorgan Chase performed well in what was a very tough and unique operating environment - growing deposits in every line of business and providing loans as we extended credit and served as a port in the storm for our clients and customers,” he said in the release." data-reactid="29" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">“[We] remain well capitalized and highly liquid - with a CET1 ratio of 11.5% and total liquidity resources of over $1 trillion. And JPMorgan Chase performed well in what was a very tough and unique operating environment - growing deposits in every line of business and providing loans as we extended credit and served as a port in the storm for our clients and customers,” he said in the release.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Dimon went on to note that the bank opened half a million new credit card accounts in March. The bank has actively extended credit in home lending, auto, and small businesses." data-reactid="30" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">Dimon went on to note that the bank opened half a million new credit card accounts in March. The bank has actively extended credit in home lending, auto, and small businesses.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Digging further into the results, trading revenues were quite robust, with markets revenue coming in at $7.2 billion, up 32% from a year ago. Revenue from fixed income jumped 34% to $5 billion, “driven by strong client activity,” while equity trading revenue rose 28% to $2.2 billion." data-reactid="31" style="caret-color: rgb(38, 40, 42); color: #26282a; margin-bottom: 1em; text-align: left;" type="text">
<span style="font-family: Arial, Helvetica, sans-serif;">Digging further into the results, trading revenues were quite robust, with markets revenue coming in at $7.2 billion, up 32% from a year ago. Revenue from fixed income jumped 34% to $5 billion, “driven by strong client activity,” while equity trading revenue rose 28% to $2.2 billion.</span></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Digging further into the results, trading revenues were quite robust, with markets revenue coming in at $7.2 billion, up 32% from a year ago. Revenue from fixed income jumped 34% to $5 billion, “driven by strong client activity,” while equity trading revenue rose 28% to $2.2 billion." data-reactid="31" style="caret-color: rgb(38, 40, 42); color: #26282a; font-family: "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 15px; margin-bottom: 1em;" type="text">
<a href="http://1.bp.blogspot.com/-A5k0zkFyWpU/XpXY5L0ZeKI/AAAAAAAAAOc/IWhXibp5cMwKcUaGbZQvMz94wrAL-BYRwCK4BGAYYCw/s1600/ccace420-7e44-11ea-bffe-84bcede4ff06.png" imageanchor="1"><img border="0" height="305" src="https://1.bp.blogspot.com/-A5k0zkFyWpU/XpXY5L0ZeKI/AAAAAAAAAOc/IWhXibp5cMwKcUaGbZQvMz94wrAL-BYRwCK4BGAYYCw/s400/ccace420-7e44-11ea-bffe-84bcede4ff06.png" width="400" /></a></div>
<div class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" content="Digging further into the results, trading revenues were quite robust, with markets revenue coming in at $7.2 billion, up 32% from a year ago. Revenue from fixed income jumped 34% to $5 billion, “driven by strong client activity,” while equity trading revenue rose 28% to $2.2 billion." data-reactid="31" style="caret-color: rgb(38, 40, 42); color: #26282a; font-family: "Helvetica Neue", Helvetica, Arial, sans-serif; font-size: 15px; margin-bottom: 1em;" type="text">
By Julia La Roche - Yahoo Finance</div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-19603624480244871392020-04-13T05:13:00.000-07:002020-04-13T05:13:18.065-07:00WeWork Skips Some Rent Payments as Coronavirus Undermines Revenue<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><i> The slow drawn out death of something we knew would happen years ago... Aivars Lode</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">WeWork has stopped paying rent at some U.S. locations, in the latest sign that the co-working company is aggressively trying to cut costs as the economic downturn eats into its revenue.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">People briefed on the matter said WeWork has yet to mail in its April rent check at numerous properties while it tries to renegotiate leases.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The New York-based company recently hired brokerage firms JLL and Newmark Knight Frank<span style="letter-spacing: 0.800000011920929px; white-space: nowrap;"> </span>to negotiate rent relief or convert lease deals into profit-sharing agreements in a bid to drive down its fixed monthly expenses.</span></div>
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<a name='more'></a><span style="font-family: Arial, Helvetica, sans-serif;">WeWork is among a growing number of U.S. businesses that are skipping out on rent payments as companies look to preserve cash ahead of what could be a long economic downturn brought on by the pandemic.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">WeWork’s push to lower its rent costs and switch leases to management agreements started long before the coronavirus outbreak. The shared-office provider came close to running out of money after a failed attempt at an initial public offering in the fall, in part because of its massive real-estate expenses. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Following a bailout by <span>SoftBank Group</span><span class="company-name-type" style="border: 0px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"> Corp.,</span> WeWork had $4.4 billion in cash and cash commitments at the end of 2019. While its U.S. locations are still open, many are mostly empty as large parts of the economy remain shut down. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The company’s bonds traded at 37 cents on the dollar as of Wednesday, down from 90 cents in late February. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">WeWork isn’t treating all landlords the same: While some say they have been paid, others say they are still waiting for their checks. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">“WeWork believes in the long-term prospects of our locations and our relationships with landlords across the world,” a WeWork spokeswoman said in a statement. “Rather than implementing a companywide policy on rent payments, we are individually reaching out to our more than 600 global landlord partners to work in good faith towards finding asset-specific solutions that benefit all parties involved.”</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">By Konrad Putzier - Wall Street Journal</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0tag:blogger.com,1999:blog-2573135714880976732.post-5674746034260031352020-04-08T12:07:00.001-07:002020-04-08T12:07:48.432-07:00SoftBank's Masayoshi Son predicts 15 of the companies in its $100 billion Vision Fund will go bankrupt<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;"><i>No surprise to many of us as stated in my previous posts... Aivars Lode</i></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">SoftBank founder Masayoshi Son's $100 billion Vision Fund is becoming less generous with cash handouts to the companies in its portfolio — and Son now predicts that 15 of those companies will go bankrupt.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Son said in a new interview with <span style="box-sizing: border-box;">Forbes</span> that, in the wake of <span style="box-sizing: border-box;">WeWork's failed IPO</span> last Fall and a <span style="box-sizing: border-box;">plummeting market value amid coronavirus</span>, the SoftBank Vision Fund will withhold cash infusions to save its foundering bets and instead focus on companies that seem likely to break out.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">"I would say 15 of them will go bankrupt," Son predicted, adding that he expects at least another 15 of the company's 88 bets to succeed.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It's part of Son's plan for SoftBank to return $150 billion in order to pay back its limited partners while remaining profitable. Its Vision Fund has a reputation for making huge investments in companies with high growth and high spending, like WeWork, Uber, and Doordash, but its market value has <span style="box-sizing: border-box;">slid in the past month</span> as coronavirus makes profitability seem increasingly out of reach for many startups.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">SoftBank already <span style="box-sizing: border-box;">backed away</span> from its plan to buy $3 billion worth of WeWork shares last week, alleging that WeWork failed to meet its conditions as it faces civil and criminal investigations into the company. Almost $1 billion of that deal would have gone to WeWork ex-CEO Adam Neumann.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Son, who <span style="box-sizing: border-box;">lost billions</span> when the dot-com bubble popped 20 years ago, is now working to convince SoftBank's investors that the fund can weather a potential recession spurred by the coronavirus epidemic.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">"In the beginning of the internet, I was criticized the same way," he told Forbes. "Tactically, I've made regrets ... but strategically, I am unchanged. Vision-wise? Unchanged."</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Read Son's full interview with Forbes <span style="box-sizing: border-box;"><a href="https://www.forbes.com/sites/alexkonrad/2020/04/05/exclusive-interview-masayoshi-son-talks-wework-vision-fund-softbank/#1e90123f7f41" target="_blank">here</a></span>.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">By Aaron Holmes - Business Insider</span></div>
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Aivars Lodehttp://www.blogger.com/profile/05925530773556832103noreply@blogger.com0