|Bid||219.93 x 1100|
|Ask||219.97 x 1300|
|Day's Range||218.65 - 220.68|
|52 Week Range||151.70 - 224.77|
|Beta (3Y Monthly)||1.36|
|PE Ratio (TTM)||9.83|
|Earnings Date||Jan. 15, 2020|
|Forward Dividend & Yield||5.00 (2.27%)|
|1y Target Est||236.90|
(Bloomberg) -- Saudi Aramco’s bankers are seeing sufficient early demand to pull off the state oil giant’s initial public offering just three days after launching the deal, people with knowledge of the matter said.The IPO arrangers are indicating in private discussions that they already have nearly enough orders to cover the institutional portion of the deal, the people said, asking not to be identified because the information is private. They still have more than two weeks to go, as fund managers can subscribe to the stock until Dec. 4, according to Aramco’s prospectus.Building early momentum is important in large equity offerings, as investors are encouraged to jump in when they see other institutions rushing to buy shares. The precise amount of real demand will only become clear later once underwriters compare the orders they’ve received, the people said.Saudi authorities have been pulling several levers to try and make the deal a success, pressuring the kingdom’s richest families to invest and loosening margin lending rules for banks. They’ve been negotiating commitments from the billionaire Olayan family, who own a major stake in Credit Suisse Group AG, and Saudi Prince Alwaleed Bin Talal, Bloomberg News reported earlier this month.Domestic PitchAramco representatives have also been seeking investments from the Almajdouie family, who distribute Hyundai Motor Co. vehicles in the kingdom, and members of the Al-Turki clan, people with knowledge of the matter have said. Saudi Arabia’s sovereign wealth fund is seeking to sell about a 1.5% stake in Aramco at a valuation of as much as $1.71 trillion, with about a third of the offering set aside for retail investors.A representative for the company, officially known as Saudi Arabian Oil Co., didn’t immediately respond to emailed queries.The Wall Street banks working on the transaction are set to lose out on a highly anticipated fee windfall after the deal was pared back from a record global offering to a mainly domestic affair. The foreign underwriters will be compensated for costs but may not be paid enough to make a meaningful profit from the deal, people with knowledge of the matter said.Goldman Sachs Group Inc. and Morgan Stanley are among the banks that may miss out on the payday. Aramco was initially expected to pay $350 million to $450 million to the more than two dozen advisers on the deal, including banks, lawyers, marketing firms and advertising agencies, Bloomberg News reported in October.After senior bankers delivered pitches that Aramco would be able to the achieve Crown Prince Mohammed bin Salman’s $2 trillion target with a 5% sale, the Saudi government and Aramco management are frustrated Wall Street’s biggest names were unable to deliver on those ambitions.(Updates with details of investor negotiations from fourth paragraph.)To contact the reporters on this story: Matthew Martin in Dubai at email@example.com;Archana Narayanan in Dubai at firstname.lastname@example.org;Dinesh Nair in London at email@example.comTo contact the editors responsible for this story: Ben Scent at firstname.lastname@example.org, ;Stefania Bianchi at email@example.com, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Goldman Sachs Group Inc. agreed to pay $20 million to settle an investor lawsuit accusing traders at the bank, along with 15 other financial institutions, of rigging prices for bonds issued by Fannie Mae and Freddie Mac.As part of the settlement, disclosed Friday in a court filing, Goldman Sachs will cooperate with investors in their case against the other banks. The firm also agreed to make changes to its antitrust-compliance policies related to bond trading. A federal judge in Manhattan must approve the settlement before it can take effect.Investors sued after Bloomberg reported in 2018 that the U.S. Department of Justice was investigating some of the world’s largest banks for conspiring to rig trading in unsecured government bonds.Goldman Sachs has turned over 71,000 pages of potential evidence, including four transcripts of chat-room conversations among its traders and some from Deutsche Bank AG, BNP Paribas SA, Morgan Stanley and Merrill Lynch & Co., according to court papers filed Friday. The bank agreed to provide additional help, including deposition and court testimony, documents and data related to the bond market.Goldman Sachs isn’t the first to resolve the civil claims. In September, Deutsche Bank agreed to settle for $15 million. First Tennessee Bank and FTN Financial Securities Corp. agreed to a $14.5 million settlement later in September.Among the firms remaining as defendants in the case are Credit Suisse AG, Barclays PLC and Citigroup Inc.The case is In re GSE Bonds Antitrust Litigation, 19-01704, U.S. District Court, Southern District of New York (Manhattan).To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at firstname.lastname@example.orgTo contact the editors responsible for this story: David Glovin at email@example.com, Steve StrothFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Sign up to our Brexit Bulletin, follow us @Brexit and subscribe to our podcast.Britain’s Labour party pledged to offer all consumers free fiber broadband within a decade by nationalizing phone carrier BT Group Plc’s Openreach unit at a cost of 20 billion pounds ($26 billion).BT shareholders would get newly-issued government bonds in return for their shares, Labour’s shadow chancellor, John McDonnell, said in a speech in Lancaster, England on Friday. Shares of BT fell as much as 3.7%.It’s the biggest new pledge of the election campaign from Labour, which already has plans to nationalize the postal service, the railways and water and energy utilities. The broadband effort would be financed in part with taxes on multinational companies such as Amazon.com Inc., Facebook Inc. and Alphabet Inc.’s Google. While the proposals may win over some voters, Labour may not be in a position to implement them. It has an average of 29% support in recent polls, trailing the Conservatives at 40%.“A Labour government will make broadband free for everybody,” party leader Jeremy Corbyn said at the campaign event at Lancaster University. “This is core infrastructure for the 21st century. It’s too important to be left to the corporations.”McDonnell said the new broadband pledge would be funded by asking “tech giants like Google and Facebook to pay a bit more” in proportion to their activities in the U.K. “So if a multinational has 10% of its sales, workforce, and operations in the U.K., they’re asked to pay tax on 10% of their global profits,” McDonnell said.While Labour puts the cost of the plan at about 20 billion pounds, BT’s Chief Executive Officer Philip Jansen said the proposal would cost almost five times that amount.BT shares were down 1.6% as of 12:29 p.m. in London, suggesting shareholders aren’t too worried about the nationalization risk. That gives the company a market value of about 19 billion pounds.“These are very very ambitious ideas,” Jansen said Friday in an interview on BBC Radio 4. “The Conservative Party have their own ambitious ideas for full fiber for everybody by 2025.”“How we do it is not straightforward, it needs funding,” Jansen said, putting the cost of such a roll-out over eight years at “not short of 100 billion pounds.”Lower Value?BT has been working to speed up its own full-fiber build and Jansen said the company’s shares have fallen on the recognition that “we’re going to be investing very very heavily.” Shareholders “are nursing massive losses on their investment” in BT if they’d bought it a few years ago, he said.Investors could get burned, as Openreach’s business would likely be undervalued in an expropriation, New Street analyst James Ratzer said in an email, adding that nationalization “rarely works well for shareholders.” Analysts at Jefferies put Openreach’s value at 13.5 billion pounds, flagging annual costs for operations and to service its high pension deficit.Labour’s McDonnell said the party has taken advice from lawyers to ensure its broadband plan fits within European Union state aid rules in case the U.K. is still in the bloc when the plans are carried out.Britain LaggingCorbyn’s plan is meant to solve a connectivity gap: Britain lags far behind other European nations when it comes to full-fiber coverage, which allows for gigabit-per-second download speeds. About 8% of the country is connected -- just under 2.5 million properties, according to a September report by communications regulator Ofcom. That compares with 63% for Spain and 86% for Portugal.As policymakers and regulators have been creating conditions to spur more competition with BT, rivals including Liberty Global Plc’s Virgin Media and Goldman Sachs Group Inc.-backed CityFibre have been jumping in to commit billions of pounds to infrastructure plans.“Those plans risk being shelved overnight,” Matthew Howett, an analyst at Assembly, said in an email. “This is a spectacularly bad take by the Labour Party.”The Labour announcement caused TalkTalk Telecom Group Plc to pause talks to sell a fiber project as the industry seeks clarity.Analysts are skeptical the government could roll out fiber more effectively than private industry and Howett pointed to delays and budget overruns from a state-led effort in Australia.It’s not the first time radical ideas have been proposed for BT’s Openreach unit, a national network of copper wire and fiber-optic cable that communication providers including BT, Comcast Corp.’s Sky and Vodafone Group Plc tap into to provide home internet to customers.BT was forced to legally separate the division from the rest of the company in recent years over concerns about competition, and that it wasn’t investing fast enough to roll out fiber, and some investors have suggested the company should fully spin it out into an independent, listed business to unlock value.‘Fantasy’ PlanNicky Morgan, the Conservative cabinet minister with responsibility for digital services, dismissed Corbyn’s plan in a statement as a “fantasy” that “would cost hardworking taxpayers tens of billions” of pounds.The Conservative Party’s own proposal for full-fiber broadband across the U.K. by 2025 -- eight years ahead of a previous government goal -- has raised eyebrows across the telecom industry, as some executives and analysts expressed skepticism about whether it’s doable, whether there’s consumer demand for the ultrafast internet service and how companies would make money.‘A Disaster’TechUK, the industry’s main trade body, called Labour’s plan “a disaster” for the telecom sector. “Renationalization would immediately halt the investment being driven not just by BT but the growing number of new and innovative companies that compete with BT,” said Chief Executive Officer Julian David.The announcement will provide more fodder for the arguments by Prime Minister Boris Johnson’s Conservatives that a Labour government risks plunging the country into an economic crisis. Chancellor of the Exchequer Sajid Javid over the weekend released analysis estimating Labour would raise spending by 1.2 trillion pounds over five years. McDonnell at the time called it “fake news.”McDonnell said Parliament would set the value of Openreach when it’s taken into public ownership and that shareholders would be compensated with government bonds.Under Labour’s plan, the roll-out would begin in areas with the worst broadband access, including rural communities, followed by towns and then by areas that are currently well-served by fast broadband.According to elections expert John Curtice, Corbyn’s chances of forming a majority government are “as close to zero” as it’s possible to get. The election is still hard to predict, and it is possible that Labour could yet win power, either on its own or with the support of smaller parties.(Updates with Corbyn remarks in fourth paragraph, McDonnell in fifth.)\--With assistance from Jennifer Ryan and Kit Rees.To contact the reporters on this story: Alex Morales in London at firstname.lastname@example.org;Thomas Seal in London at email@example.comTo contact the editors responsible for this story: Rebecca Penty at firstname.lastname@example.org, ;Tim Ross at email@example.com, Frank ConnellyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Egypt cut its main interest rates by a full percentage point as the lowest inflation in almost a decade allowed the central bank’s third consecutive reduction to spur investment without dimming the allure of the world’s best carry trade.The Monetary Policy Committee reduced the deposit rate to 12.25% and the lending rate to 13.25%, the bank said in a statement on Thursday. All but one of 14 analysts surveyed by Bloomberg had predicted a decrease. Goldman Sachs Group Inc. now sees a pause in December, followed by a total of 150 basis points of easing next year.The Arab world’s most populous nation has been on a mission to bring inflation under control after prices were sent rocketing by a currency devaluation and subsidy cuts enacted to seal a $12 billion International Monetary Fund loan. The future of the central bank’s easing cycle is now less clear, since inflation probably hit bottom for the year in October, reaching an annual 3.1%, a 10th of its level just two years ago.“Given the continued strengthening of the Egyptian pound and barring any material changes to inflation expectations -- on account of unforeseen food price volatility -- in the remainder of the year, our base case remains that the central bank will be on hold in December and resume its easing cycle in 2020,” Goldman Sachs economists led by Farouk Soussa said in a report. “With this decision Egypt’s central bank may be revealing a more data-driven easing path than we had previously anticipated,” they said.A sharp deceleration in food costs helped fuel the slowdown, but so too did the statistical effect of a high base last year. That’s set to fade in coming months but will likely remain within the central bank’s target range of 9%, plus or minus 3 percentage points, by the fourth quarter of 2020.“Incoming data continued to confirm the moderation of underlying inflationary pressures, notwithstanding the expected impact of unfavorable base effects on near-term inflation rates,” the central bank said. Egypt’s fourth rate cut for 2019 is unlikely to dent the attractiveness of its carry trade, in which investors borrow in currencies where rates are low and invest in the local assets of countries where they’re high.The country’s real borrowing costs -- the difference between its inflation and policy rates -- are among the highest of more than 50 economies tracked by Bloomberg. With a global move toward easing, Egypt has leeway to cut while keeping its debt yields attractive.“Since the real yield continues to be significantly high, we expect foreign investments in fixed income not to be affected by the decision,” said Radwa El-Swaify, head of research at Cairo-based Pharos Holding.The reduction could also help the Middle East’s fastest-growing economy with its goals of boosting private investment and slashing debt-servicing. The government said this week it targets 6.4% growth in the 2020-2021 fiscal year. Finance Minister Mohamed Maait has said he’d like the private sector’s share of gross domestic product to rise to 70% in the next five to seven years.Recent cuts “provide appropriate support to economic activity,” the central bank said.“It almost brings the rates back to pre-IMF program levels, which should provide support for a gradual recovery in private investments,” said Mohamed Abu Basha, head of research at Cairo-based investment bank EFG Hermes.\--With assistance from Harumi Ichikura.To contact the reporters on this story: Mirette Magdy in Cairo at firstname.lastname@example.org;Tarek El-Tablawy in Cairo at email@example.comTo contact the editors responsible for this story: Alaa Shahine at firstname.lastname@example.org, Michael Gunn, Paul AbelskyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Institutional investors see opportunities in real estate in mid-size U.S. cities away from the coasts.Goldman Sachs Group Inc. is eyeing markets including Denver, Austin and Nashville, Jeffrey Fine, a managing director at the firm’s merchant-banking division, said Thursday at a conference hosted by the NYU School of Professional Studies.“Companies are moving there, young people are moving there, there’s an affordability component to it,” Fine said. “We’re looking at places in Texas where taxes are having a big, big, big impact.”Goldman’s merchant bank -- which makes both debt and equity bets -- is not a large investor in New York or Washington because of slower job growth and an unattractive supply-demand dynamic, he said.Growth markets are also a focus of the Baupost Group, according to Nick Azrack, a managing director at the firm. There’s still money to be made, he said, even though markets like Nashville have already attracted significant investment.“How tall can that tree grow, we don’t know, but we’ll keep trying to climb it, because why wouldn’t you?” he said. “If you can find a way to cushion your fall, that’s a great what to capitalize on those sorts of opportunities.”Some investors are still putting money into coastal markets. Those areas have historically been better at preserving value during economic slowdowns, according to Cia Buckley Marakovits, chief investment officer of Dune Real Estate Partners. She said her firm is taking a “cherry-picking” approach on the coasts, while also investing in hospitality and health-care real estate.“We’re just looking more holistically at what will outperform in a slowdown,” she said.To contact the reporter on this story: Gillian Tan in New York at email@example.comTo contact the editors responsible for this story: Alan Goldstein at firstname.lastname@example.org, Craig Giammona, Steven CrabillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- David Witzke, a former money manager at Citadel, started his health-care focused hedge fund Avidity Partners Management with about $750 million in commitments, according to people familiar with the matter.The Dallas-based firm, which was co-founded by former Highland Capital Management money manager Michael Gregory, began trading Nov. 1, said one of the people. Gregory, who oversees research at Avidity, led health care at Highland, and Witzke, the chief investment officer, ran one of the largest health-care portfolios at Citadel stock unit Surveyor Capital.The startup comes in a difficult fundraising environment for hedge funds as investors bail out from the industry after years of mediocre returns and high fees. Some money managers with a proven track record have convinced investors to back their funds. The biggest startup of 2019 has been the $2 billion health-care and technology-focused Woodline Partners, which is run by former Citadel traders.Avidity is also tapping the demand for specialists. Investor interest in health-care funds is trumping other industries, according to a July study by Goldman Sachs Group Inc. Investors are lured partly by performance: The health-care managers among Goldman’s clients posted average annualized returns of about 45%, without leverage, since the start of 2016.Hedge Fund Clients Seek Masters of a Corner of the UniverseVolatility in health-care stocks has also put a premium on experts who can navigate the market. President Donald Trump has taken aim at drugmakers over costly medications while Congress deliberates pricing proposals. And “Medicare for all” reforms to health insurance have gained traction as Democrats gear up for the 2020 presidential election.“Investors are definitely looking at health care and the view is they’re going to be better served in a long-short strategy due to the typical volatility you get in the space in an election year,” said Mark Doherty, head of research at hedge fund consultant PivotalPath. “There have also been a lot of companies that have come to the market in the last couple of years, and typically that gives you a lot of opportunities for short ideas.”Health-care traders also benefit from the event-driven nature of the industry. It makes it harder for quants to flood the space and sap gains from fundamental stock-pickers, Doherty said.Witzke has a Ph.D. in chemical engineering and spent more than a decade as a biotechnology analyst, first on the sell-side and later at hedge funds Ridgeback Capital Management and Citadel. He began managing money at Ken Griffin’s $32 billion firm in 2011, according to an investor presentation seen by Bloomberg.During his eight years at Highland, Gregory held several management roles, including CIO of the firm’s alternative investment platform. He previously ran his own fund for four years, which was absorbed into Highland in 2010. Gregory has an MBA from a joint program among Yale University’s medical, management and public health schools.The duo tapped several industry specialists to help come up with trade ideas, including former Citadel analyst Jay Cecil to focus on biotechnology and Highland money manager Andrew Hilgenbrink to focus on therapeutics, according to the presentation. The firm also hired another Citadel analyst, Jeff Knightly, to specialize in medical technology, tools and services.Witzke and Gregory declined to comment.To contact the reporters on this story: Katia Porzecanski in New York at email@example.com;Riley Griffin in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Sam Mamudi at email@example.com, Vincent Bielski, Melissa KarshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- I’ve always thought someone should write a book titled “All I Really Need to Know About Stock Investing I Learned in the First Year of B-School” or something like it. The gist would be that investors should look for companies that:Make money or have a realistic chance of making money soon. Have sensible policies that align the interests of management and shareholders. Sell for a reasonable price.Granted, that could just as easily be scribbled on a cocktail napkin, but the point of the book wouldn’t be to catalog the nuances of equity investing — investors already have Benjamin Graham and David Dodd’s terrific tome “Security Analysis” for that — but to have a handy reminder on the bookshelf of how to get the crucial parts right. I’d like to think such a book would have saved Masayoshi Son, the chief executive officer of SoftBank Group Corp., some heartache. SoftBank reported a staggering $6.5 billion quarterly loss last week, resulting from Son’s sour investments in WeWork, Uber Technologies Inc. and other once-highflying startups. In comments accompanying SoftBank’s results, Son acknowledged that, “There was a problem with my own judgment, that’s something I have to reflect on.”One problem, according to Son, is he overlooked that startups need solid governance and a path to profits. The book would have covered that, and neither WeWork nor Uber would have credibly checked those boxes. And don’t forget about price. It’s not easy to make money when paying a fortune for companies, as Son routinely does, no matter how good their governance or path to profits.None of that mattered in recent years because investors eagerly paid ever-higher prices for startups. The frenzy has no doubt contributed to Son’s confidence, on display again last week, that he has a knack for venture investing. It’s true that SoftBank’s stock outpaced the Cambridge Associates U.S. Venture Capital Index by 3.1 percentage points a year through March, including dividends, since SoftBank embarked on its recent spree of acquisitions in 2010, and by 2.7 percentage points a year since it launched the Vision Fund in 2017, which houses its stakes in WeWork, Uber and roughly 70 other startups.If SoftBank got a boost from Son’s venture bets, it’s almost certainly not alone. Consider that the net internal rate of return of the bottom quartile of the Venture Capital Index was negative every year from 1997 to 2006, with an average IRR of negative 4.8% during the period. The following decade was just the opposite. The bottom quartile posted a positive IRR every year from 2007 to 2016, with an average of 6.5%. In other words, venture investors have been paid for just showing up in recent years.Investors’ loose standards have also spilled into public markets, as I recently pointed out. Glamour stocks, or companies with big expectations and pricey shares, but little or no profit, outpaced shares of the cheapest and most profitable companies by 12.5 percentage points a year over the last five years through September, according to numbers compiled by Dartmouth professor Ken French. The appeal is obvious. Investors love to think they can spot the next big thing, never mind profits, governance or price. Amazon.com Inc. is cited frequently as an example. It generated little or no profit during its first two decades. It’s been tightly controlled by founder Jeff Bezos, a king in all but name. Its price-to-earnings ratio has averaged — wait for it — 227 times since 2002, based on monthly observations. And yet a $10,000 investment in the company when it went public in 1997 would now be worth roughly $11.8 million.But Amazon is the vast exception, of course. As University of Chicago professor Eugene Fama told my Bloomberg Opinion colleague Barry Ritholtz in an interview last week, if you have 100,000 people picking stocks, “one of them will look extraordinary purely on a chance basis.” The same can be said for stocks themselves.There are signs investors are ready to give the dice a rest. Son’s newfound appreciation for profits appears to be more widely shared. Goldman Sachs Group Inc. CEO David Solomon told Bloomberg TV recently that, “there’s got to be a clear and articulated path to profitability” and that he thinks “there’s a little more market discipline coming into play.”Seeing red tends to sober up investors. Glamour stocks are down 9.1% over the last year through September, even as the S&P 500 has returned 4.3%. And that bottom quartile of venture funds posted a negative IRR of 9.2% in 2017, the most recent year for which numbers are available.At some point, the growth-at-all-cost fad will end, if it hasn’t already. But it never disappears, which is why everyone could use a reminder that profits, governance and price never go out of style.To contact the author of this story: Nir Kaissar at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young. For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Investing.com - U.S. futures fell on Thursday, after reports that trade talks with China have hit a snag on Chinese purchases of U.S. farm products, amid other concerns.
(Bloomberg Opinion) -- When times are good, focus on the top line and the bottom line will look after itself. When times are bad, you should do the reverse.That looks a lot like the strategy the world’s biggest miner, BHP Group, has followed over the years in appointing its chief executive officers. The question the resources sector should ask in looking at Thursday’s appointment of Mike Henry to succeed Andrew Mackenzie is whether his focus is the top line, or the bottom.Henry has spent the last three years as the operations chief for BHP’s Australian assets, where he’s focused on improving efficiency and bringing down costs — resolutely bottom-line work. The bulk of his experience, however, is in the top-line marketing side of the business — finding ways to get the best possible prices for the minerals BHP digs and pumps. That resume harks back to Mackenzie’s predecessor.With an upswing in prices for its key commodities of iron ore, coal and oil under way in 2007, BHP appointed Marius Kloppers, a South African veteran of its manganese business, to the chief executive role. Kloppers pushed hard to shift the pricing of first manganese, and then iron ore and coal, toward spot markets that more closely track supply and demand.That helped BHP and its competitors extract additional revenues from their customers as spot prices surged in the years before and after the 2008 financial crisis — but when the market started to turn six years later, the emphasis started to look misplaced. After the demand growth that had supported the capital spending boom of the Kloppers era started to ebb, BHP's operations looked bloated and wasteful.Mackenzie, with a background running petrochemicals for BP Plc and mines for Rio Tinto Group and BHP, was brought in as an operational wizard to fix the rot. He slimmed down the business, spun off the less attractive assets as South32 Ltd., and reduced expenditure to a level that could survive in the new, leaner environment.At first blush, Henry looks like a swing of the pendulum from Mackenzie’s operations focus back to Kloppers’ marketing background.He sold first coal, then energy and freight and petroleum for BHP before being appointed as Kloppers’ marketing president and then chief marketing officer in 2010. Only after Mackenzie took over the top job and Henry was entering the frame as a potential eventual successor was he shifted over to round out his experience on the operations side.There’s reason to think that a more bullish focus is finally due. The resources sector has never really climbed out of the slump it entered around 2014, but the S&P 500 breaks new records on a daily basis. Forecasters could be underestimating the potential of a strong economic rebound in 2020, according to Goldman Sachs Group Inc. Bloomberg’s indexes of energy and industrial metals are still at subdued levels, but the run-up in iron ore prices this year put Australia & New Zealand Banking Group Ltd.’s index of bulk materials such as iron and coal at its highest level since 2013. That should be good news for BHP, since its share price tends to track that benchmark closely.At the same time, it seems to have been as much Henry’s recent experience managing mines that’s recommended him for the top job. He’s been responsible for rolling out autonomous trucks at the Jimblebar iron ore mine in northwest Australia and for setting up operations centers in Perth and Brisbane to run the company’s iron and coal mines remotely. Costs of late have been sharply lower in both divisions, although those for Queensland coal are creeping back up.If anything, it’s a sign of how things have changed for the mining industry that even scions of the marketing business like Henry have turned into born-again operations experts. BHP still has Elliott Management Corp. hanging around as a major shareholder. While its activist campaign will have been quiet for almost two years by the time Henry assumes the top job in January, it remains a constraint on any chief executive in a bullish mood.More to the point, a stronger outlook for the U.S. economy isn’t the medicine that can revive BHP’s boom years. China still consumes about half of almost every major mined commodity and accounted for about 55% of BHP’s revenue last year — and all the evidence is that the economy there is slowing. BHP’s key commodities could be heading for an even rougher patch if China’s car market continues to crater and its still-buoyant conditions in real estate fall to more normal levels.Should that be the case, the pendulum won’t be swinging back from the bean-counters to the marketers. If anything, it will have further to go in the other direction.To contact the author of this story: David Fickling at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Having gained encouragement and some success during the rule of Prime Minister Shinzo Abe, foreign activist investors may be about to find Japan turning less hospitable. The government should be wary of alienating an ally that has aided its campaign to improve shareholder returns at the nation’s companies.Overseas investors will have to report when they buy 1% of a company related to national security, down from 10% now, under rules scheduled to be passed by the Diet by Dec. 9. While the Ministry of Finance has announced a list of exemptions following opposition from market participants, hedge funds and private-equity investors remain perturbed amid a lack of clarity over how the law will be applied.Dan Loeb, with tilts at Sony Corp. and Seven & i Holdings Co., and Paul Singer’s Elliott Management Corp. are among activist investors that have ventured into Japan since Abe unleashed the “third arrow” of his so-called Abenomics program: corporate governance reform. The premier was addressing a key problem of Japan Inc. Companies had long been awash with cash and stingy with buybacks or dividends, while minority investors often took a back seat.The push has shown progress, as my colleague Shuli Ren has noted. Buybacks in Japan almost doubled to 4.7 trillion yen ($43 billion) in the six months through September from a year earlier. Takeover battles such as the tussle for developer Unizo Holdings Co., are a sign of how things have changed. A bidding war involving foreign private-equity firms including Elliott, Blackstone Group and Fortress Investment Group would have been almost unthinkable before Abe.Stealth is a key weapon for activist investors, which buy large numbers of a company’s shares and then seek board seats to push for changes that will unlock value. Being forced to disclose when they have accumulated only 1% may tip off other investors to their interest, driving up the price and potentially making such strategies unprofitable.Japan’s Ministry of Finance has clarified that foreign asset managers will be exempt from a pre-notification requirement only when there is “no intention to influence management,” Goldman Sachs Group Inc. strategists led by Kathy Matsui wrote in an Oct. 20 note. “This issue continues to be difficult to reconcile in the context of the government’s mission to promote greater levels of engagement between investors and corporate managements, as well as to protect the interests of minority shareholders.”The list of sectors covered by the regulations is also broad. They include traditionally sensitive areas such as defense, agriculture, telecom, railways, nuclear power and utilities — but also categories such as information processing equipment, software and internet services, which typically rely on venture-capital funding. Deals such as Bain Capital’s buyout of Toshiba Corp’s memory-chip business last year are among those that might have been affected had the law been in place then. New York-based hedge fund Fir Tree Partners Inc. has invested in Kyushu Railway Co.Geopolitics appears to be the motivation for what looks like a counter-productive move for Japan. China is the obvious target of the tightened regulations. Japan is a key U.S. ally, and Washington has been growing increasingly wary of Chinese investment amid rising trade tensions. The U.S. is drawing up a “white list” of foreign states that would be subject to lighter scrutiny of acquisitions made in America. Passing a stricter national security law gives Japan a better chance of being included in that list, according to Bloomberg Law analyst Grace Maral Burnett.Abe’s government must tread carefully. Japan’s opening to overseas investors has benefited the stock market, with foreigners accounting for about 70% of Tokyo Stock Exchange turnover and 30% of market ownership, according to Goldman Sachs. Anything that forces the activists to pack up and go home would be a self-inflicted wound. To contact the author of this story: Nisha Gopalan at firstname.lastname@example.orgTo contact the editor responsible for this story: Matthew Brooker at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The titans of finance have a new foe, and it’s not Jeremy Corbyn or Elizabeth Warren. Wall Street’s elite is attacking Europe’s central banks over their reliance on negative interest rates, saying they’re hurting the economy.Monetary authorities do need to be mindful of the side effects of unconventional measures. But there’s little evidence that negative rates are proving harmful. Indeed, they might be more effective still if bankers passed them onto consumers more.Europe’s central banks have used negative rates since the start of the decade. They charge lenders for the money they park in a central bank’s deposit facility above a certain threshold, in the hope that this will force commercial banks to lend more. In September, the European Central Bank cut its deposit rate further to -0.5% (while introducing some exemptions for banks through a system called “tiering”).Bankers are scathing about the overall policy. Last month James Gorman and Jamie Dimon, the chief executive officers of Morgan Stanley and JPMorgan Chase & Co., delivered a double-whammy: “What Europe is experiencing with negative rates is obviously very bad,” Gorman said, “not just for banks but for the economy.” “God, I hope it never comes here [to the U.S.],” said Dimon. David Solomon, the boss of Goldman Sachs Group Inc., says negative rates are a “failed experiment.”Such protests are obviously self-serving, though they’re understandable too. A negative deposit rate forces banks to take a hit on profits, especially when they decide not to pass these charges onto consumers. This pressures lenders that are already squeezed by the tight spreads between their deposit and their lending rates. However, Dimon and Co. are on shakier ground when they claim to be speaking for the common good.There are three arguments against negative rates. The first is that they encourage irresponsible lending, fueling bubbles and creating the conditions for a financial crash. The second is that they’ll prompt savers to take too much money out of the banking system, to avoid paying for the privilege of depositing cash. The third, associated with the work of Markus Brunnermeier and Yann Koby at Princeton University, is that there’s a “reversal rate” below which a central bank prompts lenders to cut back on their lending instead of increasing it. This boundary creeps up over time, curtailing how long the monetary authorities can keep interest rates low.Fears about financial stability are the most compelling case against negative rates. They’re also the least specific. Other policies — including low rates, asset purchases and generous loans to banks — are vulnerable to the same accusations. Central bankers are having to use these unorthodox measures to try to bring inflation back on target and to stimulate growth, which is their mandate.There will always be a trade off between stimulating an economy and encouraging excessive risk-taking, which supervisors address through other policy levers such as higher capital requirements. Raising rates at this stage would simply lead to a sharp slowdown in the economy, causing a wave of defaults. Hardly a recipe for financial stability.Meanwhile, the risk of people stashing their money under the mattress is difficult to imagine with modestly negative rates. Few banks have passed negative rates on to their customers, generally doing this only to large corporate clients and wealthy savers. It’s possible theoretically that extending this to smaller depositors could prompt a bank run. Yet there are costs to storing and insuring cash.Moreover, we know businesses and consumers are prepared to pay for holding cash in more convenient ways. For example, merchants and users pay fees for using credit cards.Finally, there’s little evidence that negative rates have held back lending. A recent ECB working paper shows deposits with commercial lenders have increased since the central bank introduced negative deposit rates. At the same time, companies with large cash holdings have cut their deposits and invested more. That’s exactly the goal of this policy.In fact, banks that pass on negative rates to customers appear to provide more credit than other lenders. This suggests that, contrary to what those Wall Street titans say, the problem with negative rates is that not enough banks inflict them on their clients.It’s certainly possible that monetary policy becomes less effective as central banks cut interest rates deeper into negative territory. Gauti Eggertsson of Brown University and Larry Summers of Harvard have looked at Sweden, a pioneer in cutting rates below zero. They concluded that while its first two negative moves reduced lending rates, this wasn’t repeated after two later cuts.However, similar diminishing returns are seen in other unorthodox measures, including asset purchases. The authors also acknowledge that the rate cuts might have boosted Sweden’s economy via other channels, for example by depreciating the krona, allowing the government to borrow more and boosting asset prices.So far negative rates have been confined largely to Japan and Europe. For all the enthusiasm of President Donald Trump, Jerome Powell, chairman of the Federal Reserve, doesn’t think the U.S. will be copying the policy. Wall Street should feel safe then. That doesn’t mean it is right.To contact the author of this story: Ferdinando Giugliano at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Alibaba Rakes In 38 Billion Singles It’s the 11th year for the single biggest 11-11 singles day singled out to take place in a single day, though no discrimination against non singles intended. Alibaba (NYSE:BABA) has surpassed the $38 billion mark in sales during its iconic Singles Day, which may not be as impressive as […]The post Market Morning: Alibaba's Billions, Boeing's Reprieve, Colorado Cannabis Records, Hong Kong Bleeds appeared first on Market Exclusive.
(Bloomberg) -- Apple Inc. pitches its new card as a model of simplicity and transparency, upending everything consumers think about credit cards.But for the card’s overseers at Goldman Sachs Group Inc., it’s creating the same headaches that have bedeviled an industry the companies had hoped to disrupt.Social media postings in recent days by a tech entrepreneur and Apple co-founder Steve Wozniak complaining about unequal treatment of their wives ignited a firestorm that’s engulfed the two giants of Silicon Valley and Wall Street, casting a pall over what the companies had claimed was the most successful launch of a credit card ever.Goldman has said it’s done nothing wrong. There’s been no evidence that the bank, which decides who gets an Apple Card and how much they can borrow, intentionally discriminated against women. But that may be the point, according to critics. The complex models that guide its lending decisions may inadvertently produce results that disadvantage certain groups.The problem -- in Washington it’s referred to as “disparate impact” -- is one the financial industry has spent years trying to address. The increasing use of algorithms in lending decisions has sharpened the years-long debate, as consumer advocates, armed with what they claim is supporting research, are pushing regulators and companies to rethink whether models are only entrenching discrimination that algorithm-driven lending is meant to stamp out.“Because machines can treat similarly-situated people and objects differently, research is starting to reveal some troubling examples in which the reality of algorithmic decision-making falls short of our expectations, or is simply wrong,” Nicol Turner Lee, a fellow at the Center for Technology Innovation at the Brookings Institution, recently told Congress.Wozniak and David Heinemeier Hansson said on Twitter that their wives were given significantly lower limits on their Apple Cards, despite sharing finances and filing joint tax returns. Wozniak said he and his wife report the same income and have a joint bank account, which should mean that lenders view them as equals.One reason Goldman has become a poster child for the issue is that the Apple Card, unlike much of the industry, doesn’t let households share accounts. That could lead to family members getting significantly different credit limits. Goldman says it’s considering offering the option.The bank said in a tweet it would also re-evaluate credit decisions if the borrowing limit is lower than the customer expected.“We have not and never will make decisions based on factors like gender,” the company said. “In fact, we do not know your gender or marital status during the Apple Card application process.”With this month’s snafu, Goldman has found itself in the middle of one of the thorniest laws in finance: the Equal Credit Opportunity Act. The 1974 law prohibits lenders from considering sex or marital status and was later expanded to prohibit discrimination based on other factors including race, color, religion, national origin and whether a borrower receives public assistance.The issue gained national prominence in the 1970s when Jorie Lueloff Friedman, a prominent Chicago television anchor, began reporting on her own experience with losing access to some of her credit card accounts at local retailers after she married her husband, who was unemployed at the time. She ultimately testified before Congress, saying “in the eyes of a credit department, it seems, women cease to exist and become non-persons when they get married.”FTC WarningA 2016 study by credit reporting agency Experian found that women had higher credit scores, less debt, and a lower rate of late mortgage payments than men. Still, the Federal Trade Commission has warned that women may continue to face difficulties in getting credit.Freddy Kelly, chief executive officer of Credit Kudos, a London-based credit scoring startup, pointed to the gender pay gap, where women are typically paid less than men for performing the same job, as one reason lenders may be stingy with how much they let women borrow.Using complex algorithms that take into account hundreds of variables should lead to more just outcomes than relying on error-prone loan officers who may harbor biases against certain groups, proponents say.“It’s hard for humans to manually identify these characteristics that would make someone more creditworthy,” said Paul Gu, co-founder of Upstart Network Inc., a tech firm that uses artificial intelligence to help banks make loans.Upstart uses borrowers’ educational backgrounds to make lending decisions, which could run afoul of federal law. In 2017, the Consumer Financial Protection Bureau told the company it wouldn’t be penalized as part of an ongoing push to understand how lenders use non-traditional data for credit decisions.AI PushConsumer advocates reckon that outsourcing decision-making to computers could ultimately result in unfair lending practices, according to a June memorandum prepared by Democratic congressional aides working for the House Financial Services Committee. The memo cited studies that suggest algorithmic underwriting can result in discrimination, such as one that found black and Latino borrowers were charged more for home mortgages.Linda Lacewell, the superintendent of the New York Department of Financial Services, which launched an investigation into Goldman’s credit card practices, described algorithms in a Bloomberg Television interview as a “black box.” Wozniak and Hansson said they struggled to get someone on the phone to explain the decision.“Algorithms are not only nonpublic, they are actually treated as proprietary trade secrets by many companies,” Rohit Chopra, an FTC commissioner, said last month. “To make matters worse, machine learning means that algorithms can evolve in real time with no paper trail on the data, inputs, or equations used to develop a prediction.“Victims of discriminatory algorithms seldom if ever know they have been victimized,” Chopra said.(Updates with Goldman comments in ninth and 10th paragraphs.)To contact the reporters on this story: Shahien Nasiripour in New York at firstname.lastname@example.org;Jenny Surane in New York at email@example.com;Sridhar Natarajan in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, Steve Dickson, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Presidential candidate Elizabeth Warren slamming Goldman's response to allegations of bias in how it evaluates applicants for Apple's credit card, according to reports. Yahoo Finance's Dan Howley joins Akiko Fujita to discuss.
U.S. Senator Elizabeth Warren slammed Goldman Sachs over its response to claims that the Apple Card is bias against women applying for it. Goldman - which oversees the card - and Apple have been embroiled in controversy after an entrepreneur complained about the evaluation process on Twitter, saying it gave him 20 times the credit limit it gave his wife. Answering to those accusations, Goldman said customers should request a second look at their credit limits. But that answer wasn't sufficient for Warren who said to Bloomberg on Wednesday: "Yeah, great. So let's just tell every woman in America, 'You might have been discriminated against, on an unknown algorithm, it's on you to telephone Goldman Sachs and tell them to straighten it out." The 2020 Democratic candidate added that it's the company's responsibility to come forward about how the algorithm was designed. And, if they can't explain it, they "need to pull it down."