Tag: Wall Street

Immigrants and refugees are a net economic benefit to host countries like the United States. Research has consistently shown they help create jobs and add an important dynamism to our economy. This is the case even when there is initial investment on behalf of the state, through education, English classes or welfare. Immigrants pay more into the system than they get out.  For Christina Qi, who started a hedge fund at just 22, the welfare she was on in her early years in Utah after moving from China helped stabilize her youth and pave the way for her to attend MIT. She went on to co-found Domeyard, a quantitative trading firm, in 2013, among the longest running high-frequency trading hedge funds in the world, and was trading up to $7 billion dollars a day. In 2019, she founded Databento, an on-demand data platform for asset managers and quantitative analysts. Being an immigrant, Asian and a woman in the cutthroat, male-dominated world of Wall Street didn’t deter her. Nor did she forget those who helped get her to where she is today. As you’ll soon learn in this week’s JobMakers podcast.

Guest

Jen Ross, a former analyst at an all-short hedge fund and current strategy and business intelligence consultant for the US Space Force space program, primarily focused on program strategy and business intelligence. Jen Ross and Carol Roth break down all the technical terms around trading and short-selling and other related Wall Street concepts that have recently been in the news with the GameStop and Reddit drama. Jen and Carol also talk about the issues around the Fed and the broader Main Street vs. Wall Street sentiment, as well as their respective lists on what could tank the stock market.

Plus, a “Now You Know” on how to make sure nobody sits next to you on a plane.

Tom Wright, an investigative journalist who spent 20 years at The Wall Street Journal and co-author of Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood and the World, joins Carol Roth to break down this fascinating story, which involves the biggest financial heist in history (somewhere between $6 and $7 billion), politicians, Hollywood celebrities like Leonardo DiCaprio and banks like Goldman Sachs. Tom and Carol discuss the background of the book, where the main heist perpetrator- Jho Low- is today, how the scam ironically financed The Wolf of Wall Street movie, an update on 1MDB and Malaysia, recent developments for Goldman Sachs and much more in the utterly fascinating interview about one of the most unreal, and unknown stories of the past few years.

Plus, a “Now You Know” segment on the 4th most populated country on Earth.

Gutting the 401k: The Stupid Party Strikes Again

 

There are days when I think that the mainstream Republicans have a death wish. First, after years of promising to repeal and replace Obamacare, when they get a majority in both Houses and a cooperative President, they do nothing. Nothing in that regard, next to nothing in any other regard. A Supreme Court Justice, yes. A handful of Appeals Court judges. Otherwise, niente. It is as if they are happier in the minority than in the majority.

And when they come to tax reform, what is their big idea? To cut corporate taxes, which would be a boon, and to make up for the revenue losses that this would entail not by cutting expenditures but by gutting the 401k . The fact that their proposal that tax-free contributions to this retirement-savings vehicle be cut to $2400 a year has Wall Street up in arms bothers me not one whit. It is not the task of the US government to feed the greed of a particular industry.

Jim Geraghty of National Review and Greg Corombos of Radio America have good news from Wall Street: stocks are soaring, regardless of the chaos in Washington.  Transcripts of President Trump’s January phone calls to the leaders of Mexico and Australia were leaked to the press this week, and Jim and Greg react both to Trump’s comments and the blatant leaking and publishing of classified information. And they have little sympathy for health insurance companies who are forced to bail on the Obamacare exchanges after losing huge amounts of money, but the vanishing coverage is leaving many Americans in a terrible position while Congress accomplishes nothing.

“Fearless Girl” Is Reaping What She Has Sown

 

In honor of International Women’s Day, Kristen Visbal created a statue called Fearless Girl, an image of a girl, hands on hips, striking a defiant pose. This image was then placed in from of another statue called Charging Bull (the one that represents Wall Street and America’s economic might). Fearless Girl recast Charging Bull as a symbol of misogyny, with the Girl acting as a symbol of “women in leadership.”

About a month ago, I argued that allowing Fearless Girl to permanently alter the meaning of Charging Bull would be wrong. My argument was that the sculptor of Fearless Girl should not be able to high-jack someone else’s art. To illustrate the point, I offered suggestions for additional statues that could be added to the Fearless Girl/Charging Bull scene that would undermine both artists’ intent.

What if…I added a slightly larger-than-life bronze statue called American Soldier next to Fearless Girl, demonstrating, of course, that girls can be fearless in this country only because of burly men who are willing to fight for their rights.

Does Trumponomics Deserve Credit for Rising Optimism?

 

President Donald Trump’s overview of the budget priorities for Fiscal Year 2018 on its release by the Office of Management and Budget (OMB) in Washington, March 16, 2017. REUTERS/Joshua Roberts.

As I have been writing, fears of a stagnationary New Normal seem to have receded, at least for now. Just ask the booming stock market, right? Also ask the suits. “Leaders of the largest US companies are becoming more optimistic about sales growth, hiring and capital investment, causing a measure of chief-executive sentiment to increase by the most in seven years,” the Wall Street Journal reports.

The Economy’s Animal Spirits Are Growing Restless

 

I know for sure I’m not smart enough to invest based on the ebb and flow of “animal spirits,” nor predict the direction of the economy based on sudden changes in sentiment. But many people have been pointing to “animal spirits” as reason to be bullish, both on stocks and the US economy. Recall hedge fund manager Ray Dalio in mid-December:

Regarding economics, if you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset. This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power. The shift from the past administration to this administration will probably be even more significant than the 1979-82 shift from the socialists to the capitalists in the UK, US, and Germany when Margaret Thatcher, Ronald Reagan, and Helmut Kohl came to power. To understand that ideological shift you also might read Thatcher’s “The Downing Street Years.” Or, you might reflect on China’s political/economic shift as marked by moving from “protecting the iron rice bowl” to believing that “it’s glorious to be rich.”

This particular shift by the Trump administration could have a much bigger impact on the US economy than one would calculate on the basis of changes in tax and spending policies alone because it could ignite animal spirits and attract productive capital. Regarding igniting animal spirits, if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge. Regarding attracting capital, Trump’s policies can also have a big impact because businessmen and investors move very quickly away from inhospitable environments to hospitable environments. Remember how quickly money left and came back to places like Spain and Argentina? A pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money. These policies will also have shocking negative impacts on certain sectors.

Intellectual Myopia on Insider Trading

 

wall_street_stock_exchangeThis past week, the United States Supreme Court heard oral argument in Salman v. United States, an important case concerning federal securities law. At issue are the limitations placed on insiders who trade in the shares of companies on the basis of material, nonpublic information. The parties covered are not only those who obtain the information themselves, but the persons to whom they (as “tippers”) pass on that information, commonly called tippees.

The prohibition on insider trading is said to derive from Section 10(b) of the Securities Exchange Act of 1934, which makes it unlawful for any person to “employ any device, scheme, or artifice, to defraud,” as implemented under SEC Rule 10b-5.  The purpose of this prohibition on insider trading is to restore overall investor confidence in the exchange markets, by denying to certain insiders the ability to reap undue benefit because of the informational advantage from undisclosed information that they gain against their actual or potential trading partners.

The extension of Rule 10b-5 to insider trading only took place in 1962 in the critical SEC decision In Re Cady, Roberts, & Co., and it has been long surrounded by controversy. Salman concerns whether, under Rule 10b-5, the tipper of the inside information had to receive some tangible benefit from the tippee, or whether some more diffuse social benefit sufficed to trigger criminal liability.

Member Post

 

Who is more arrogant and annoying, Donald Trump or Paul Krugman? A Hobbesian choice to be sure, but I’d say Krugman every time. Of course, the media would uniformly disagree, as can be seen in the reaction to Trump’s economic ideas, The bizarre optimism in Donald Trump’s theory of the economy.  Like Krugman, much of what Trump talks […]

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What Happens if Investors Think Trump Will Win the White House?

 

TrumpDonald Trump won a whole lot of voters, states, and delegates on SEC Super Tuesday, a big step toward securing the GOP presidential nomination. (Quick contrarian take: The “whisper estimate” was for an 11-state Trump sweep, including Texas. Instead he lost four states, almost lost three more, got over 40% of the vote in just two states, secured just 42% of the delegates, and just 35% of the vote. As FiveThirtyEight’s Harry Enten tweeted: “Yes, folks it’s clear this is over. Oh wait.”)

If you’re an investor, certainly time to begin thinking about how markets would react to a Trump-Clinton WH race, not to mention begin positioning a portfolio for a possible Trump presidency. Here is one take on that, from Brian Gardner of Keefe, Bruyette & Woods:

For now, we do not think markets have priced in a possible Trump presidency. A CNN poll yesterday showed Clinton beating Trump 52-44 and we think investors believe the poll and expect Clinton will win. … If Trump’s chances of winning the presidency start to improve, we expect the markets will react negatively and a risk-off trade would ensue. His views on trade pose a risk to the global economic system and the protectionist policies he espouses could disrupt the global supply chain. Most Trump proposals lack detail and he is highly unpredictable so we think investors will react negatively if he gains traction in the general election. The lack of specificity in Trump’s proposals make forecasting winners and losers difficult but we see the following. Winners from a Trump win: defense, U.S. Treasuries, exchanges (volatility play), energy (coal). Losers: retail and consumer.

Message Matters: Trump Succeeded, Yellen Failed

 

yellen-trumpMost political reporters are fixated on the presidential horserace rather than the message candidates are sending to voters. Message wins all the time. Message moves polls. Message raises money. Message determines elections.

Most of all, a clear message tells voters what a candidate believes and where he or she wants to take the country.

Ronald Reagan was the master of the message. Campaigning on a few key points, he told America how he was going to rejuvenate the economy and defeat Soviet communism. He didn’t spend much time on detail. But over and over he repeated his strategic message. It worked.

A Quick Note on the Odds of a US Recession

 

StocksAs of Friday, the US stock market is down again, losing about 6% for the new year in total. And the most current economic reports are pretty lousy, nudging big banks to lower their GDP forecasts. Here is JPMorgan:

We are lowering our tracking of real annualized GDP growth in Q4 from 1.0% to 0.1%. Two reports out today contributed to this downgraded assessment. First, retail sales in December came in rather shockingly weak, which was accompanied by modest downward revisions to October and November retail sales. Second, the business inventories report for November suggest a fairly aggressive push by business to reduce the pace of stockbuilding last quarter. We now see inventories subtracting 1.2%-points from growth last quarter, offset by a disappointing but not disastrous 1.3% increase in real final sales.

We are also lowering some our outlook for Q1 GDP growth from 2.25% to 2.0%. While the inventory situation should turn to being roughly neutral for growth, the quarterly arithmetic on consumer spending got a little more challenging after this morning’s retail sales figure, which implies flat real consumer spending in December. We now see real consumer spending in Q1 at 2.5%, versus 3.0% previously. We are leaving unrevised our outlook for 2.25% growth over the remaining three quarters of the year. We will discuss in a separate email the policy outlook, which in any event is currently being swayed more by the inflation data than the growth data.

Grassroots Conservatives Stage GOP Intervention

 

Screen Shot 2015-12-23 at 4.42.24 PM

Hey, GOP, what’s happening? I assume you’re wondering what we’re doing at your place. I understand you’ve been fearful that this Trump fellow will end up running a third-party campaign. But let’s talk turkey: Given that you’ve lost the popular vote in five of the last six national elections, it’s safe to say that Trump’s running a third-party campaign right now. So let me just cut to the chase: we’re worried about you and are staging an intervention.

Let’s face facts: you have been favoring your holy trinity of DC elites, Wall Street and the Chamber of Commerce at the expense of your principled-conservative base for too long. Somebody has to go and if it’s not going to be politically-connected elites then it’s going to be someone who can’t do without: working-class families. In other words, us.

Now the Robots Are Coming After Wall Street Jobs

 

shutterstock_189611477_bullsSome interesting commentary about what’s behind jobs cuts in the financial industry, via the FT:

Big banks in Europe and the US announced almost 100,000 new job cuts this year, and thousands more are expected from BNP Paribas and Barclays early next year, as the wave of lay-offs that began in 2007 shows no sign of abating.

The 2015 cuts — which exclude the impact of major asset sales — amount to more than 10 per cent of the total workforce across the 11 large European and US banks that announced fresh lay-offs, according to analysis by the Financial Times. Analysts believe 2016’s misery could be more widespread than just those two banks. New regulations mean all banks must hold more equity, and that means they have to earn higher profits to keep return on equity at the levels investors demand.

Defending the “Hedge Fund Guys” from Donald Trump

 

shutterstock_85839379Donald Trump has made financial elites one of his latest targets, recently declaring on Face the Nation that, “I have hedge fund guys that are making a lot of money that aren’t paying anything [in taxes]. They’re paying nothing and it’s ridiculous. I want to save the middle class. The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.” As I note in my new column for Defining Ideas, that considerably misstates the case:

The reality is the opposite of what Trump claims. When these hedge fund guys trade, they are not just haphazardly shifting paper around. They are shifting paper as a means to transfer wealth and reallocate risk. Nor do they do it in a self-contained universe. They have paying clients who need accurate information and reliable execution to enter into transactions essential to their business survival.

In countless ways, the financial system—and the bankers and hedge funders that are participating in it—supports the so-called real economy. Start with the simple notion of liquidity. People need to have access to cash and cash equivalents all the time to pay bills and to make investments and gifts. It is those hedge funders who organize complex payment systems—credit, debit, electronic funds transfers, and more—that allow for literally billions of small and large financial transactions to take place every second of every day.

Is Rhetoric Wrecking Our Economy?

 

Sen. Bernie SandersSticks and stones may break our bones, but there’s good reason to believe words are destroying economic growth.

The usual vital signs we look at to judge economic health are all over the place and don’t exactly paint a positive picture. The unemployment rate is down, but a lot, if not the majority, of that is being caused by a shrinking labor force participation rate. The economy is technically growing, but the growth rates are abysmal. The stock market is way up, at record levels, but much of that is likely being caused by the near-zero interest rates spurred on by the Fed. In effect, we’re not witnessing a surging stock market; we’re just looking at the inflation we expected from easy money policies manifesting itself on Wall Street instead of Main Street. Forget the formal indicators though. The American people are telling us, in survey after survey, that things haven’t improved much, if at all, from the “Great Recession” of 2007-2008. All in all, we’re far from out of the woods. What gives?

There have been all sorts of attempts at explanations. There are the usual partisan objections to specific policies. Then there are the concerns about specific sectors of the economy. Then there are downright weak excuses for sluggish economic growth such as “this winter was pretty cold.” Seriously. There may be a nugget of truth, or a grain for that last one, to all of these things, but most of these discussions seem to ignore the fundamental fact that our economy is incomprehensibly enormous and contains trillions of moving parts. The fact is that little tweaks here and there, plus milder weather, aren’t going to help much. But that hasn’t stopped our politicians, especially our current president, from trying. And what we may be overlooking as we try to identify and solve the relatively minute issues is the biggest problem altogether: Our politicians’ mouths.