Tag Archives: Markets coverage
by Chris Roush
David Faber has now spent 20 years as co-anchor of CNBC‘s “Squawk on the Street.” He is also an anchor and co-producer of CNBC’s acclaimed original documentaries and long-form programming.
During the day, Faber breaks news and provides in-depth analysis on a range of business topics during the “Faber Report.” In his 20 years with CNBC, Faber has broken many big financial stories including the massive fraud at WorldCom, the bailout of the hedge fund Long Term Capital Management and Rupert Murdoch’s unsolicited bid for Dow Jones.
On Friday, CNBC ran a montage of his most famous stories from “Squawk.”
by Chris Roush
Felix Salmon and Susie Poppick write for the latest edition of Money magazine about Dave Ramsey, the personal finance author who has his own radio show and once had a personal finance show on Fox Business Network.
Their conclusion: Don’t follow his investment advice.
Salmon and Poppick write, “Ramsey seems to be so dismissive of bonds because he’s bullish on stocks. How bullish? He often speaks of earning 12% a year — a number that’s been a lightning rod for his critics. Ramsey has sometimes hedged this, but visit his website and you’ll find blog posts with headlines like ‘Yes, You Can Make 12% With Your Mutual Funds’ and ‘The 12% Reality.’
“In fact, this is unhinged from the reality of the investing world. ‘I don’t see how anybody can count on 12% annual returns,’ says William N. Goetzmann, professor of finance at Yale. Part of the issue is a wonky-sounding math point. Correctly calculated, the long-term return on stocks since 1926 is closer to 10% — before taking out mutual fund fees and front-end sales costs.
“And if you follow Ramsey, you’re likely to pay sales charges: Outside a 401(k), he recommends A-share “load” funds sold via advisers. That’s because, he says, people need a pro to help them stick to their plan and not jump out when an investment underperforms.
“The other problem with 12% is obvious: the experience of the past 13 wild years. While some periods, like the 1980s and ’90s, do deliver double-digit returns, investors know they can also see long stretches — perhaps in their peak saving or retirement years — earning a lot less.
“Ramsey recently debated that subject on his radio show with Brian Stoffel, a columnist for The Motley Fool, who wrote about that 12% number in the wake of the Twitter fight. Stoffel said 12% was unrealistic; Ramsey said that it wasn’t, and that if his listeners had taken his advice and followed it for the past 20 years, ‘they would have had a pretty strong rate of return.’ He challenged Stoffel ‘to analyze that and figure that out,’ which Stoffel obviously couldn’t do on a live radio show.”
Read more here.
by Chris Roush
The Edge,” a 30-minute program that aims looks at the long-term investment opportunities created by today’s technological innovations.
The show will explore the limitless potential of innovation. from how new products and ideas will shape our lives to the long-term investment opportunity that will bring investors high-yield returns.
“The Edge” will use CNBC’s global network, tapping into its anchors and reporters from around the world, including Ross Westgate, Martin Song, Karen Tso and Carolin Roth. The first episode explores the driverless car, looking at the vehicles and the tech behind them, but also examining the innumerable and far-reaching implications of the invention.
“When people think about investing and the markets the focus is often on the short or medium-term,” said John Casey, senior vice president of news and programming for CNBC International, in a statement. “However ‘The Edge; is about the ‘next big thing’ and is designed for those looking to get in early for a long-term investment. From science to technology the world is changing and The Edge is designed to keep you ahead of the pack.’
The Edge premieres Wednesday and will air monthly across CNBC’s networks in Europe, the Middle East and Africa and Asia-Pacific and in the United States. The program will be produced and edited from CNBC’s London regional headquarters and will be complemented by special reports on CNBC.com.
Read more here.
by Liz Hester
Talking about high-speed trading may be complicated, meaning that much of the coverage is done by larger news outlets and not picked up in local business news. But it’s important for investors and day traders looking to make quick money to understand how the markets work and when they might be at a disadvantage.
On Tuesday, the New York Attorney General raised the issue at a Bloomberg conference, making headlines around the financial world.
Here’s the Bloomberg story:
Elite investors with high-speed trading systems who gain early access to sensitive information are a growing threat to the integrity of U.S. financial markets, New York Attorney General Eric Schneiderman said.
Schneiderman said today at the Bloomberg Markets 50 Summit in New York that his office is looking into combating the advantages won by securing early access to market-moving data. Calling the issue “Insider Trading 2.0,” Schneiderman said the combination of high-speed trading and early data access unfairly sets up a small group of investors to reap enormous profits.
“A new generation of market manipulators has emerged,” Schneiderman said. Average investors aren’t “going to invest if they think the markets are rigged,” he said.
Faster technology and regulatory changes aimed at spurring competition among exchanges have allowed for rapid increases in the speeds at which stocks change hands. Trades now can occur within a fraction of a second of when market-moving information is available.
Securities and Exchange Commission Chairman Mary Jo White said the “jury is still out” on whether high-frequency trading, which now accounts for more than half of U.S. volume, is helpful or harmful to the market.
The Wall Street Journal led with Schneiderman’s call for regulators to look into and put a stop to early access to information:
New York Attorney General Eric Schneiderman called on officials in Washington to take action to prevent high-speed traders from making investments based on early peeks at market-moving data and analyst reports in what he called “Insider Trading 2.0.”
Mr. Schneiderman said that when high-frequency traders have access to soon-to-be-released information, it creates something “far more insidious than traditional insider trading.”
“Comprehensive action is required,” Mr. Schneiderman said in prepared remarks for delivery Tuesday at the Bloomberg Markets 50 Summit. “This new form of market manipulation ultimately requires action from Washington.”
Mr. Schneiderman criticized an arrangement between Thomson Reuters Corp. and the University of Michigan that allowed paying customers to get the results of the university’s consumer confidence survey before it was released to the public.
Under the arrangement, which was the subject of a front-page article in The Wall Street Journal in June, Thomson Reuters paid the university about $1 million a year to get early access to the data. Thomson Reuters would then give the survey results to a top tier of paying customers five minutes before the university released the monthly survey on its website.
An even more elite group of high-frequency traders paid a higher fee to get the survey results two seconds earlier than the first group, according to a contract between the university and Thomson Reuters that was reviewed by the Journal.
Spokesmen for the University of Michigan and Thomson Reuters didn’t immediately respond to requests for comment.
The New York Times reported that the inquiry was ongoing and that Schneiderman was trying to restore trust in the markets:
At Tuesday’s conference – which was sponsored by a main rival of Thomson Reuters – Mr. Schneiderman emphasized that his inquiry into this matter was continuing. He cited concerns about the practice by investment banks of releasing analyst research to select clients.
The point of this inquiry, Mr. Schneiderman said, was to create a level playing field and restore public trust in the markets. “When blinding speed is coupled with early access to data, it gives people the power to suck value out of the markets before it even hits the Street,” he said.
Speaking to an audience of financial professionals, Mr. Schneiderman encouraged Wall Street to call his office hot line with any leads.
“I see little being done from the industry to address this clear and present danger,” he said. “I would urge you to get this on the agenda of any trade association group or at your own firm.”
While market credibility doesn’t seem to be hurt right now, reports that the Federal Reserve is looking at ways to make sure traders don’t get information early point out that it is quickly becoming a more widespread problem. As stock trading becomes more of a commodity, looking for an edge is natural. Let’s just hope that traders don’t drive retail investors away in the quest for nanosecond advantages.
by Liz Hester
In the biggest non-story of the month is that the stock markets aren’t moving. Normally this would warrant no coverage at all expect for the fact that it’s before the Federal Reserve Board is expected to announce the end of its stimulus actions.
The Wall Street Journal had this story:
If investors are concerned about the imminent end to the Federal Reserve’s monetary stimulus, the markets haven’t noticed.
Despite widespread expectations that the Fed will announce a trimming of a bond-buying program aimed at pushing down interest rates and propping up the economic recovery, fund managers have been in a buying mood lately.
The blue-chip Dow Jones Industrial Average on Tuesday advanced for the 11th time in 14 trading sessions, and U.S. Treasury prices rose for the fifth straight day.
Many investors expect the Fed to decide to cut its $85 billion monthly purchases of bonds by about $10 billion to $15 billion. Markets were roiled in May and June after Fed chief Ben Bernanke said the U.S. central bank would consider reducing purchases in a process dubbed “tapering.”
Some investors dismiss the prospect of much turbulence this time. They say players in stock, bond and commodity markets have had time to prepare for potential Fed action, assuming the Fed acts largely within market expectations, and that a selloff in bonds since Mr. Bernanke’s comments means there is less potential for a large price decline now.
The bond market, however, showed some signs of paying attention, according to a Bloomberg story:
Federal Reserve Chairman Ben S. Bernanke sent bond yields a percentage point higher just by talking about adding stimulus at a slower pace. The rout serves as a warning to monetary policy makers that their exit from record accommodation won’t be easy to control.
The jump in yields has pushed up the cost of mortgages for millions of Americans, curbed demand for homes and prompted thousands of job cuts at Bank of America Corp. and Wells Fargo & Co., all at a time when the Fed’s policies are aimed at creating jobs and supporting housing.
Bernanke has stressed that any reduction in the amount of money the central bank pumps into the financial system each month doesn’t mean policy is getting any more restrictive. That message hasn’t been heeded by bond investors, demonstrating how hard it will be for the Fed to control long-term interest rates as it moves toward tightening, according to Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
“Getting out of ultra-low interest-rate policy was never going to be easy, and this is a perfect illustration of why,” Crandall said. “It is possible that this will make it even harder because the market will be even more primed to view inflection points as messy and destructive, and therefore a reason to sell early.”
Fed policy makers meeting today and tomorrow will probably lower the monthly pace of bond purchases by $10 billion, to $75 billion, according to the median response of 34 economists in a Bloomberg News survey on Sept. 6. That’s down from expectations of a $20 billion reduction in a July survey.
Reuters added this commentary about analysts’ expectations around what the Fed might do and how the markets might react:
For the Fed, consensus has congealed around a reduction of $10-$15 billion a month with all purchases ending by the middle of next year. Yet even that cautious timetable would be contingent on the economy performing as well as expected.
The bigger reaction would likely come if the Fed pulled back more aggressively, as that would lead market to price in an earlier start to rate rises as well.
That would be especially painful for emerging market countries that rely on foreign capital to fund current account deficits, with India and Indonesia among the most vulnerable.
Still, dealers warned against a hasty reaction as there were so many moving parts in play.
As well as the tapering, the Fed may chose to alter its threshold for tightening, perhaps by lowering the trigger level on unemployment from the current 6.5 percent.
It will also publish its first economic forecasts for 2016 and the stronger the picture the harder it will be to convince markets that any future rise in interest rates will only be slow and measured.
Indeed, the Fed has already had trouble convincing the market that it intends to keep rates near zero out to 2015 no matter how much the economy improves.
After all the ups and downs this year as the markets tried to determine when the Federal Reserve would act, investors seem to have priced in the potential move already. So as this story goes, it’s really a non-story, but the media is required to write something, no matter if the markets are reacting or not.
by Chris Roush
David Reilly and Liam Denning, co-deputy editors of The Wall Street Journal “Heard on the Street” feature, sent out the following staff promotions on Wednesday:
We are happy to announce some important moves in Heard on the Street’s European team.
Helen Thomas becomes Heard’s new Europe editor, based in London. She joined in March as deputy editor. In her new role, Helen directs the Heard’s European coverage as part of the column’s global expansion, especially in the digital realm. She will also continue to write columns on the pharmaceuticals, energy and mining sectors. Helen joined the Journal from the FT, where she had previously covered mining, M&A, banks and been a writer for the Lex column as well as having been part of the team that started up the FT Alphaville blog. While now back in her native London, she has done previous stints in New York and Hong Kong. Helen started her career in investment banking at J.P. Morgan Chase and is a graduate of Corpus Christi College, Oxford.
Andew Peaple, meanwhile, becomes deputy editor of the Heard’s Europe team. Andrew is a Heard and Dow Jones veteran, having started with the column in Beijing when it was re-launched in 2008, before moving back to London. He will play a key role working with Helen and the London team to further develop the Heard’s coverage of European and global companies. Andrew has been covering energy, mining, autos and defense but will now take on responsibility for the European banking sector. Andrew turned to journalism after the glamour of a career in accountancy proved too much – he qualified as a chartered accountant with PwC, working with that firm in London and Tokyo. He speaks Japanese and Mandarin, and graduated from Oxford University.
Please join us in congratulating Helen and Andrew in their new roles.
by Chris Roush
Two prominent financial journalists left the Wall Street Journal/Dow Jones Newswires operations in London on Friday.
Nicholas Hastings was a senior correspondent for Dow Jones Newswires, as well as a host of “News Hub GMT,” a a 20-minute video show on WSJ.com. He has written about foreign exchange for more than 25 years.
Martin Essex was a managing editor at Dow Jones Newswires in London, with responsibility for financial markets coverage in Europe, the Middle East and Africa. He is a regular contributor to The Wall Street Journal and wsj.com.
Both say that they are leaving full-time journalism for a while.
“Am taking a break and then going to look at options, see what comes along,” said Hastings in an email to Talking Biz News on Friday.
Essex, who is the co-author of a book on the bond markets, said, “I haven’t decided yet: maybe freelance, downsize, go traveling or maybe all three. Might even take another job if something sufficiently interesting comes along.”
Essex, pictured, also previously worked for the BBC and for Reuters.
by Liz Hester
It’s been five years since the crisis, and the two leading weekly magazines (or the only two left) have vastly different takes on Wall Street and the coverage.
Let’s take a look, starting with the covers.
Time’s cover was of the Wall Street bull on a white background wearing a party hat complete with confetti. The headline reads “How Wall Street Won: Five Years After the Crash, It Could Happen All Over Again.”
By contrast, Bloomberg Businessweek had a dark portrait of Hank Paulson, former Treasury Secretary, and ran the headline “Five Years From the Brink.” Decidedly darker tone and imagery than the Time cover.
The Time cover story began like this:
Five years on from the financial crisis, the disaster that was Lehman Brothers and its brutal, economy-shredding aftermath can seem a distant memory. We’re out of the Great Recession, and growth is finally back. America’s biggest banks are making record profits. The government is even earning money from its bailouts of institutions like AIG, Fannie Mae and Freddie Mac. The Obama Administration, which is pushing hard to complete the new financial rules mandated by the Dodd-Frank reform act deserves credit for making our financial system safe—or that’s the line being tossed around by current and past members of the crisis team.
But amid all the backslapping, a larger truth is being lost. The financialization of the American economy, a process by which we’ve become inexorably embedded in Wall Street, just keeps rolling on. The biggest banks in the country are larger and more powerful than they were before the crisis, and finance is a greater percentage of our economy than ever. For a measure of this, look no further than the Dow Jones industrial average, which just ditched Alcoa, Hewlett-Packard and retail lender Bank of America in favor of the most high-flying investment bank of all, Goldman Sachs.
Given all this, is your money really any safer over the long haul than it was five years ago? And have we restructured our financial industry in a way that will truly limit the chances of another crisis? The answer is still not an unequivocal yes, because banking is as complex and globally intertwined as ever. U.S. financial institutions remain free to gamble billions on risky derivatives around the world. A crisis in Europe, for instance, could still potentially devastate a U.S. institution that made a bad bet—and send shock waves through other key sectors, like the $2.7 trillion held in U.S. money-market funds, much of which is owned by Main Street investors who believe these funds are just as safe as cash.
Although this scenario isn’t necessarily probable—many U.S. banks have reduced risk and increased capital—it is possible. We’re relying on the banks’ good intentions and self-interest, a strategy that didn’t work out so well before. The truth is, Washington did a great job saving the banking system in ’08 and ’09 with swift bailouts that averted even worse damage to the economy. But swayed too much by aggressive bank lobbying, it has done a terrible job of reregulating the financial industry and reconnecting it to the real economy. Here are five things that are still badly needed to reduce the risks for everyone.
It goes on to list the five issues. The first is fixing too-big-too-fail, in part by finally enacting the Volcker Rule. The story also says that the system should limit the leverage for banks, bring derivatives under better scrutiny and regulation, regulate the so-called “shadow banking system,” and change the culture of the financial industry.
My biggest issue with the cover story was the assumptions it made. It assumes that readers know exactly what happened when during the crisis and that they even completely understand what is meant by the term “shadow banking.” I was in the newsroom in 2008 and I’m not totally sure what Time means by the term.
By contrast, Bloomberg Businessweek’s web site had a great interactive timeline outlining the major events of the collapse. The cover story, which was first person by former Treasury Secretary Paulson, started with an anecdote about Dick Fuld, former head of Lehman Brothers:
People weren’t taking Dick Fuld’s calls the weekend before Sept. 15, because Dick had been in denial for a long time. As the CEO of Lehman Brothers, he had asked the New York Fed and the Treasury weeks earlier to put capital into a pool of nonperforming illiquid mortgages that he wanted to put in a subsidiary he called SpinCo and spin off. We had explained that we had no authority to do that. He thought somehow there was something the government could do to help. How could it be that no one would want to buy his company? He just couldn’t believe it.
I was one of the few people speaking with him, and I told him what was happening: We couldn’t find a buyer, and without one, the government was powerless to save Lehman. He was devastated. You would have to be a CEO to really understand what he was going through. He obviously loved the firm—viewed it as his firm—and to have it go down when you’re at the helm, there can’t be much that’s more devastating than that professionally. But the Lehman Brothers bankruptcy on Sept. 15 was hardly the end of the crisis. It wasn’t the beginning, either. My goal had never been to go to Washington. My first year at Harvard Business School, 1969, I stopped studying. I was a good enough student that I could get by, so I spent most of my time at Wellesley College with Wendy Judge and persuaded her to marry me before the second year. Wendy got a job teaching swimming in Quantico, Virginia, so I got a job at the Pentagon. The only time I had ever worn a suit was to go to church. The only management experience I had was at a summer camp in Colorado. But, remarkably, I worked on my first bailout in those days.
The comparison is hardly fair. But to trump all of that, Businessweek even made a documentary with an Oscar-nominated filmmaker and a Netflix release featuring Paulson. The time, effort and planning is apparent. Businessweek gets Paulson. Businessweek gets a movie premiere.
Time, well, they’re not even adding information to the debate over the legacy. The win on this one clearly goes to Businessweek for comprehensive, complete and interesting stories with important newsmakers.
by Chris Roush
As the editor of the NetNet blog and the journalist who covers Wall Street and finance at CNBC, John Carney relies on social media to find out the latest on the street; who’s making what deals, who’s making news before they’re making news, who’s out, who’s in and of course the wayward ways of those so-called “Masters of the Universe.”
Here is his discussion on how he uses social media:
by Liz Hester
To fund its gigantic $130 billion purchase of Vodafone’s stake, Verizon Communications held the largest bond sale in history, raising $49 billion from the markets.
The Wall Street Journal story called the sale a “frenzy” of demand:
Verizon Communications Inc.’s $49 billion bond offering sparked a frenzy across Wall Street on Wednesday as investors clamored to buy a piece of the largest corporate debt sale in history.
Lured by what many saw as a bargain price, buyers placed orders for about $100 billion of the new bonds, and trading in the market afterward was frenetic. Verizon bonds were the most-traded for the day, with billions of dollars’ worth changing hands, according to MarketAxess.
Verizon executives called prospective investors throughout Tuesday, continuing into the evening even after they knew they had more than enough demand to sell all the debt they wanted, said people familiar with the matter. In the end, more than 1,000 investors submitted orders for the bonds.
Some investors put in orders so large that underwriters called them back to be sure they had the cash to cover the sums they asked for, said people involved in the sale. Some had their orders fully filled and even turned a quick profit selling debt later Wednesday. Other investors who weren’t able to buy bonds directly jumped in to buy the debt in the secondary market.
The Bloomberg story said that Verizon is paying a premium to get investors interested in the deal:
Verizon Communications Inc. (VZ) is poised to pay investors a premium on an unprecedented $49 billion of bonds, a cost Apple Inc. (AAPL) escaped during its then-record $17 billion offering four months ago.
The telephone company may sell $11 billion of 10-year bonds today at a yield that’s 225 basis points more than Treasuries, according to a person with knowledge of the issue. The yield is 47 basis points more than investors demand to own bonds with similar maturities and BBB ratings, according to data compiled by Bloomberg. Apple issued $5.5 billion of 10-year bonds on April 30 at less than the market rate.
While Apple had $145 billion of cash and no debt when it tapped credit markets for the first time in more than a decade, New York-based Verizon will add to its $49 billion of bonds already outstanding to bolster a cash position that accounts for less than 2 percent of the $130 billion it needs to obtain full control of Verizon Wireless from Vodafone Group Plc.
Verizon is marketing eight portions of dollar-denominated bonds, said the person, who asked not to be identified, citing lack of authorization to speak publicly. It’s also postponed investor meetings in Europe linked to the deal that were scheduled to begin tomorrow.
The Associated Press story said Verizon paid up in order to get the deal done quickly:
Verizon probably decided to pay higher interest rates because it needed to wrap up its $130-billion buyout quickly, bond investors said.
The buyout “is a big strategic deal for them, and they needed the money,” said Michael Collins, senior investment officer of Prudential Fixed Income, who bought Verizon bonds during Wednesday’s sale.
Verizon’s massive bond sale comes at a crucial time for bond investors. In June, Federal Reserve Chairman Ben S. Bernanke said the central bank was considering pulling back on its bond-buying program, which has kept interest rates at historical lows in an effort to stimulate the economy.
As a result, the yield on the 10-year Treasury note, the benchmark for all bonds public and private, is at 2.96%, almost double the 1.63% yield from early May.
MarketWatch pointed out that the secondary market has been struggling with liquidity issues, but Verizon demand was strong:
Liquidity in the corporate bond secondary market has been declining in recent years, as highlighted in a Financial Times story Wednesday. Nonetheless, secondary trading on Verizon bonds was strong as investors gobbled up the new debt.
Verizon was by far the most actively traded issuer in the high-grade corporate debt market on bond-trading platform MarketAxess on Wednesday. On the platform, $575.3 billion of Verizon debt had traded as of 11:20 a.m. Eastern, roughly 13% of the $4.38 billion of high-grade corporate debt that had been traded on MarketAxess.
It’s a huge win for Verizon and for the banks that handled the sale. While the fees on bonds are lower, by sheer volume this one should help those banks make their targets for the quarter. Only time will tell if there is real investor demand for paper – especially bonds that pay such a premium – or if this was a one-off deal for a well-known company. I’m sure there are many other corporations considering deals and how to pay for them, and looking to learn a trick or two from Verizon.