GS - The Goldman Sachs Group, Inc.
| Previous Close | 226.05 |
| Open | 226.72 |
| Bid | 226.78 x 800 |
| Ask | 227.12 x 900 |
| Day's Range | 225.10 - 227.99 |
| 52 Week Range | 151.70 - 227.99 |
| Volume | 548,423 |
| Avg. Volume | 2,343,470 |
| Market Cap | 80B |
| Beta (5Y Monthly) | 1.37 |
| PE Ratio (TTM) | 10.11 |
| EPS (TTM) | 22.38 |
| Earnings Date | Jan. 15, 2020 |
| Forward Dividend & Yield | 5.00 (2.26%) |
| Ex-Dividend Date | 2019-11-29 |
| 1y Target Est | 237.68 |
- Bloomberg
Mom and Pop Aren’t the Ones Getting Suckered by FOMO
(Bloomberg Opinion) -- The current bull market is historic. According to Goldman Sachs Group Inc., it’s been 10.7 years since the last 20% correction, the longest such run in more than 120 years. In 2019 alone, the S&P 500 Index has surged more than 25%, with recent gains being attributed in part to investors chasing performance as trade optimism lifted the market. Many on Wall Street use the acronyms FOMO (fear of missing out) and TINA (there is no alternative) to explain it.But if there are buyers who feel compelled to pile in to stocks at this time, they don’t include retail investors. In fact, when it comes to this group — and it’s a big one — the opposite is happening. According to Refinitiv Lipper, individual investors are slated to withdraw more than $135 billion from equity mutual funds and exchange-traded funds this year, the most since they started keeping records in 1992. Meanwhile, bond mutual funds and ETFs should see record inflows of over $250 billion this year. Why aren’t these investors chasing good performance?What we’re witnessing is a transformational shift that has been unfolding for years, one that’s also changing the very job description of the equity portfolio manager. With a good portion of American investors now aging and focused more on capital preservation than appreciation, investment flows are no longer motivated by performance, and the money trail shows it. Driving all this is the single most important influence in investing today, the modern wealth manager.According to Investment Adviser Association, the U.S. has 13,000 registered investment advisory firms, employing more than 436,000 wealth managers and directing more than 43 million accounts with a combined net worth of nearly $84 trillion. In other words, most of the wealth in the U.S. is now being directed, or at least influenced, by a wealth manager.The yearly survey conducted by TD Ameritrade Institutional stated that 88% of wealth managers use ETFs, the most popular investment vehicle in their arsenal. It’s estimated that two-thirds or more of all ETFs are held in accounts directed by wealth managers. It is not an understatement to say the ETF is the tool that created the wealth management industry. Prior to its creation, a wealth manager (stockbroker in days gone by) needed a large bank to back them. The ETF freed the wealth manager from this infrastructure, allowing them efficiently create client portfolios on their own. Today, half of the 13,000 wealth manager firms are one or two employees.Now, who are the 43 million clients of wealth managers? Demographics tell us they are older, as they have the bulk of the money. They have witnessed two 50% corrections in the stock market over the last 20 years, 2001 and 2008. These events colored their outlook, so they worry more about capital preservation over appreciation. This is where the wealth manager comes in, and the overwhelming solution is a variation of the 60/40 portfolio — that is, one weighted 60% in equities and 40% in bonds.This desire for safety is changing the face of active money management. The chart below shows the cumulative cash flows for open-ended mutual funds (the proxy for actively managed funds, in blue), ETFs (the proxy for passively managed funds, in orange) and the combination of the two (black):Investors are running away from active managers and toward passive investment choices, as seen in the surge in ETFs. But it is more than substituting into lower cost-equity vehicles. As the black line shows, they aren’t adding to their overall equity investment holdings at all. The last five years combined has seen virtually no new money flow into the stock market. Which is to say, FOMO and TINA aren’t the way investment money moves and haven’t been for years. Where is the money going, then? The next chart breaks down the cumulative inflows into all long-term ETFs detailed by stock (blue) and fixed income (orange). The bottom panel (red) shows the percentage of money flowing into fixed-income ETFs.Over the last five years, 40% of the flows into ETFs went into bond ETFs, almost perfectly tracking the 60/40 portfolio structure recommended by most wealth managers. My colleague Ben Breitholtz at Arbor Data Science detailed these flows further here.This simple but powerful trend is changing the landscape of investing like no other post-crisis trend. The public is getting what it wants, and it wants wealth managers holding their hand and positioning them for capital preservation via a 60/40 portfolio. They aren’t performance chasers looking for the next star manager to make them rich. Fund-management companies also understand they aren’t getting paid via inflows for stock picking, so they have re-oriented toward marketing objectives to reflect this reality.For strategists who haven’t grasped this concept and continue to look for the public to chase the hot hand, here’s a tip: That era is over.To contact the author of this story: Jim Bianco at jimb@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Jim Bianco is the President and founder of Bianco Research, a provider of data-driven insights into the global economy and financial markets. He may have a stake in the areas he writes about.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
- Bloomberg
Tech Makes Life on the Coasts Tough for Banks
(Bloomberg Opinion) -- Why is the nation's financial industry concentrated in just a few very costly cities?The latest actions by the Charles Schwab Corp. suggest there's less reason than there once was amid the squeeze the industry has been feeling since the Great Recession ended. In Schwab's case -- amid slow economic growth, low interest rates and continued pressure on trading commissions -- the discount brokerage firm slashed its fees, said it would buy a main rival and move its headquarters from high-cost San Francisco to more-affordable Dallas. It may not be the last to make such a move.No matter what part of the financial services or banking ecosystems you look at, revenues are harder to come by today than they were 10 or 20 years ago. Trading commissions have fallen, with online brokerages ushering in zero commissions. Bid-ask spreads for market makers have narrowed. Management fees for mutual funds and hedge funds continue to shrink. Mutual funds are losing market share to low-cost exchange-traded funds. Net interest margins for banks have been compressed by both low interest rates and a flatter yield curve. The Volcker rule restricted some of the more lucrative activities banks can do. Higher capital requirements have reduced the profitability of the banks. Loan growth has been anemic since the financial crisis. And increasingly, private companies are looking to do direct listings on stock markets rather than initial public offerings, threatening bank underwriting fees.And at the same time that revenues have been pressured, the costs of operating in coastal urban hubs where the finance industry has traditionally been clustered continue to rise. Although conservatives might snicker and chalk it up to the higher taxes in coastal finance centers, the bigger story has been the concentration of the technology industry and the young, highly paid knowledge workers they hire. In the first decade of the 2000s, when the credit and housing booms were roaring, the tech industry played second fiddle to finance when it came to urban employment. Even San Francisco was relatively tech-free until Twitter set up shop in the latter half of the decade. Rents, although high, were manageable for many workers with good financial industry jobs.That's no longer the case. With tech on a tear, young college-educated workers have, in turn, clustered in a handful of cities to gain access to more job opportunities. This dynamic has driven up rents in New York and San Francisco, posing stiff competition for financial companies looking to hire workers with the same types of skills prized by tech firms. The mediocre post-recession environment in finance has also meant banking and investment firms often find themselves outbid for talent.For the financial industry, that means if you can't beat 'em, retreat to cheaper pastures. That helps explain why Goldman Sachs has expanded in Salt Lake City; AllianceBernstein is planning to move its headquarters from New York to Nashville, Tennessee; and BlackRock is opening an "innovation center" in Atlanta. Perhaps the most significant announcement was made by JPMorgan Chief Executive Officer Jamie Dimon in October, when he said that he expects Texas to eventually overtake New York as the state with more of the bank's employees than any other.As with the shifts in the manufacturing industry, these changes take place over years and decades, but it's likely that the trend of decentralization will continue. Although Schwab is a high-profile financial firm moving its headquarters out of San Francisco, a much bigger one -- Wells Fargo -- remains based there. But for how long? The scandal-plagued bank recently hired a new chief executive, but he plans to remain in New York rather than move to the West Coast. The bank has five times as many job postings on its website in Charlotte, North Carolina, thanks to its acquisition of Wachovia, as it does in San Francisco. It wouldn't be a surprise if -- as part of its long-term repositioning strategy -- a headquarters relocation is part of the mix.It's been a bit more than a decade since the financial crisis, and banks and financial-services firms have had enough time to dust themselves off and adjust to the new environment for the industry. If the 2000s were defined by the bust, and the 2010s were a period of recovery and sluggish growth, then maybe the 2020s will be when the industry consolidates and finally lowers costs by shifting to cheaper cities.To contact the author of this story: Conor Sen at csen9@bloomberg.netTo contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
- Bloomberg
Brazil Cuts Rates and Leaves Options Open for Next Meeting
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Brazil cut its benchmark interest rate by half a percentage point to a record low and said it will exercise caution in its next monetary policy decision, leaving the door open for additional easing.The bank’s board, led by its President Roberto Campos Neto, on Wednesday lowered the Selic rate to 4.5%, as forecast by all 53 economists in a Bloomberg survey. While many analysts expected policy makers to signal this was the end of the monetary easing cycle, the statement accompanying the decision highlighted that inflation remains at comfortable levels and that future decisions will be data dependent.The central bank “judges that the current stage of the business cycle recommends caution” on monetary policy, policy makers wrote. “The Committee emphasizes that its next steps will continue to depend on the evolution of economic activity, the balance of risks, and inflation projections and expectations.”The central bank is ramping up monetary stimulus to jolt an economy that has only recently shown signs of gaining steam, after nearly three years of disappointing performance. They extended a record-breaking monetary easing cycle even after food costs jumped and the real hit a record low, potentially fueling inflation. Despite those shocks, analysts still see consumer prices running below target next year.What Our Economist Says“The central bank could have declared this cut as final. It didn’t though. In other words, the central bank wanted to preserve some degree of freedom to either maintain or cut rates in the next meeting.”\--Adriana Dupita, Latin America economist at Bloomberg EconomicsWednesday’s move was the fourth straight rate cut of 50 basis points, and it came hours after the U.S. Federal Reserve kept its key rate on hold. In their statement, Brazilian policy makers wrote that they see consumer prices below target through 2021 in all outlooks.Annual inflation in November stood at 3.27%, according to the national statistics agency. Policy makers target inflation at 4.25% this year, 4% in 2020 and 3.75% in 2021.“The most important message was that the current stage of the economic recovery requires caution in monetary policy,” said Solange Srour, chief economist at ARX Investimentos. “That means the central bank is leaving the door open to either halt easing or cut by 25 basis points at the next meeting.”Weaker CurrencySince the prior rate-setting meeting in late October, the real has weakened more than 3%, the second-worst drop in emerging markets. Still, Campos Neto has said the Brazilian currency’s depreciation hasn’t translated into worse inflation expectations, and that the country’s risk premium has improved.“Overall, barring major currency depreciation above 4.20, the central bank inflation forecasts for 2020 and 2021 are not inconsistent with additional moderate rate cuts in the first quarter of 2020, at least one 25 basis point rate cut,” said Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc.President Jair Bolsonaro celebrated the central bank’s decision, saying the government will save about 110 billion reais ($27 billion) in interest payments next year with the key rate at this level. In a boost to sentiment, S&P Global Ratings revised Brazil’s outlook to positive from stable less than an hour after the central bank decision, putting Latin America’s largest economy a step closer to its first sovereign credit rating upgrade since 2011. S&P said that lower interest rates and economic reforms should contribute to growth and investments.Swap rates on Thursday may show increased odds of a 25 basis point cut in the February meeting, the first of next year. On Wednesday, traders attributed a 40% chance to such event.(Adds comment from President Bolsonaro in 10th paragraph)\--With assistance from Rafael Mendes, Josue Leonel and Igor Sodre.To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.netTo contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, Matthew Malinowski, Robert JamesonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
Software Analysts See More Volatility in an Uncertain 2020
(Bloomberg) -- High-multiple software stocks have struggled over the past few months as analysts reassess their growth prospects and valuations, and the group could see additional weakness in 2020, creating an environment where more-defensive legacy names are more favored, analysts said on Wednesday.“There is a greater level of concern that the global economy could enter into a recessionary environment next year,” wrote Gregg Moskowitz, an analyst at Mizuho Securities. As a result, “there may be an increased risk of a rotation to value stocks that could cause multiple compression among higher growth companies.”Despite a potential risk to stock multiples, the firm expects software demand to remain robust next year, particularly in the sub-sectors of cybersecurity and cloud computing. It added that “barring a significant recession,” many companies would “navigate these issues very well,” and views both Microsoft Corp. and Salesforce.com Inc. as well positioned.Salesforce was also singled out by Cowen, which named the company as one of its “best ideas” for 2020.Next year “could prove to be a volatile year for higher multiple stocks given trends we’ve seen over the last few months,” Cowen analyst J. Derrick Wood wrote. In contrast, he said, Salesforce looks like “an attractive defensive growth investment,” given its lower valuation and “positioning around high growth/high value segments of software.”A basket of high-multiple software stocks tracked by Goldman Sachs fell as much as 2.6% on Wednesday, and the index was on track for its sixth straight decline, its longest streak of declines since October 2018. Even with the recent decline, the index remains up more than 40% in 2019.Among the names falling on Wednesday was Slack Technologies, down over 6%, Coupa Software, off about 4% and Zscaler, which fell 3.5% despite bullish commentary from BofA. Atlassian Corp. sank 5.7%, while Domo Inc. was off 4.2%. Cornerstone OnDemand and HubSpot each fell more than 3%. Separately, Zendesk fell 1.7%, on pace for a fifth straight decline.UBS analyst Jennifer Swanson Lowe on Wednesday wrote that small- and mid-cap software-as-a-service companies were “working through the bumps,” even as the overall demand environment for software was “healthy” going into the end of the year.The comments followed a UBS conference, where companies like Zendesk, Hubspot and Domo “highlighted strong secular demand trends, but also scaling challenges,” according to a report. Lowe added that software pertaining to security, cloud computing and automation were among the categories with “strong market momentum.”A key catalyst for the software sector will come Thursday afternoon, when Adobe Inc. is scheduled to report its fourth-quarter results. In focus is whether the company is able to maintain revenue growth above 20%; Wall Street is currently expecting growth of 21%, according to data compiled by Bloomberg.“How investors react to Adobe’s earnings and commentary could presage how software companies and their underlying stock prices will behave in 2020,” wrote Richard Davis, an analyst at Canaccord Genuity.He said the 20% growth threshold “has taken on a near mythical importance,” and suggested that if companies fail to maintain this level, investors may start “changing their tune” on whether they are comfortable with growth that doesn’t come with operating leverage.To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.netTo contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Jeremy R. CookeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Zacks
UBS Group's (UBS) Bid Dismissed in U.S. Government Lawsuit
UBS Group's (UBS) plea to dismiss a U.S. government lawsuit accusing the bank for making investors' suffer "catastrophic" losses in residential mortgage-backed securities (RMBS) has been annulled.
- Zacks
The Zacks Analyst Blog Highlights: Toyota, CVS, 3M, Gilead and Goldman
The Zacks Analyst Blog Highlights: Toyota, CVS, 3M, Gilead and Goldman
- Bloomberg
BofA Sees Risk of Fed’s Dot Plot Signaling Surprise Hike in 2020
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.While many expect the Federal Reserve’s Wednesday decision on rates to be a snooze for markets, strategists at Bank of America Corp. are nonetheless mulling surprises that could stir up bond prices.They see an outside chance that the Federal Open Market Committee’s updated dot plot will signal a 2020 rate increase, an outcome that would flatten the U.S. yield curve and boost the dollar, according to a report from BofA’s Mark Cabana, Michelle Meyer, Ben Randol and Joe Song. To be sure, that’s not what they view as most probable; they think the dot plot will show the Fed on hold next year.Last week’s surprisingly strong U.S. job data eased worries that a recession will arrive soon, prompting traders to pull back from fully pricing in a quarter-point Fed rate cut in 2020. Before that report Friday, strategists and economists said the central bank might avoid signaling another rate hike for years as it keeps the fed funds rate target unchanged at 1.5% to 1.75%.“We expect the broader U.S. rates market to have a limited response to the Fed meeting,” given that the median 2020 dot -- or where policy makers believe the appropriate level for rates will be next year -- is likely to be 1.625%, reflecting no move.If that’s not the case and the median dot increases Wednesday as the Fed reassesses the balance of risks, that “would likely cause some of the easing priced in 2020 to be pared back and for the curve to flatten, in line with the three prior FOMC meetings,” the BofA team wrote. Regarding the U.S. currency, “we think the hurdle for a significant USD reaction on Wednesday is fairly high,” though the risks seem somewhat “skewed toward a hawkish market reaction.”Along with BofA, Goldman Sachs Group Inc.’s base case is for the FOMC’s updated dot plot to show policy on hold next year, and the post-meeting statement to indicate the Fed’s current policy stance is likely to remain appropriate.Goldman goes further, however, and says there could be surprises in either a dovish or hawkish direction: One would be if more FOMC participants project one rate hike in 2020 or two hikes in 2022. The other might be if the median long-run dot declines from September’s 2.5% level or policy makers see higher inflation as a prerequisite for the next rate hike.“Beyond the December meeting, we see a high bar for policy moves in either direction,” according to a note by Goldman Sachs economists Jan Hatzius, Alec Phillips, David Mericle and others. They see only moderate changes to the FOMC’s statement and economic projections, and say “the most important question is probably how the refreshed dots will look following the third cut in October.”(Adds Goldman Sachs’ views in last three paragraphs)To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.netTo contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker, Mark TannenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Yahoo Finance
Why Wells Fargo’s Mike Mayo is ‘banking on tech’
When it comes to investing in bank stocks, a flattening yield curve, Fed rate cuts and illiquid capital markets are typically considered red flags that send investors running for the hills.
- Zacks
Texas Capital & Independent Bank to Merge, Assets to be $48B
Texas Capital's (TCBI) recent all-stock merger of equals with Independent Bank Group (IBTX) reflects the companies' strategic efforts for business expansion with diversified products in Texas.
- Zacks
Morgan Stanley Slashes 2% Jobs Amid Tough Operating Backdrop
Morgan Stanley (MS) is reducing workforce to control expenses as its top line is likely to be under pressure in the coming days.
- Bloomberg
Even ‘Nice’ Activist Hedge Funds Aren't Miracle Workers
(Bloomberg Opinion) -- Say what you like about outspoken activist hedge fund investors such as Carl Icahn, Bill Ackman, Paul Singer or Dan Loeb but at least you know where they stand. Nowadays it’s more fashionable for activist funds to refrain from public criticism and work constructively behind the scenes to help managers turn around a business.This is fine, but it becomes a problem when one of the “kindly” investor types resigns abruptly from a board seat they’d pushed to obtain, without providing much explanation. Shares in Rolls-Royce Holdings Plc tumbled as much as 5% on Tuesday when Bradley Singer, a representative of Jeffrey Ubben’s ValueAct Capital, said he has stepped down as a director. ValueAct is the British aircraft engine maker’s largest shareholder.After serving almost four years on the board, Singer said the company was now on a “solid path forward.” His praise rang a little hollow, however, because Rolls-Royce’s shares are close to three-year lows. ValueAct didn’t help matters by failing to clarify whether it plans to keep its stake of about 9%.Singer’s departure may in fact signal that there are limits to what activist investors can achieve, even the ones who ask politely.In fairness, Rolls-Royce is a different company to the one ValueAct bought into. Under chief executive Warren East, it has cut costs, slashed jobs and overhauled a famously bureaucratic culture. The company has ramped up production and reduced upfront losses on engine sales (engine makers typically make money in servicing, not selling the equipment). Its struggling commercial marine business has been sold. Mission accomplished? Hardly. Because of engineering problems involving the Trent engines it supplies for Boeing Co.’s 787 Dreamliner, Rolls-Royce is a long way from being “fixed.” The company will have spent 2.4 billion pounds ($3.2 billion) between 2017 and 2023 dealing with the early deterioration of engine blades, a cash outflow the debt-laden manufacturer can ill afford. Standard & Poors cut its long-term credit rating last month to BBB-, one notch above junk.Fixing the Trent engines is partly a logistics issue — making sure customers are inconvenienced as little as possible while their planes are grounded for repairs. But it’s also an engineering challenge: Rolls-Royce designed a new high-pressure turbine blade for the Trent 1000 TEN engine variant only to discover that it didn’t provide the necessary durability.Getting this right is something Singer, a former Goldman Sachs Group Inc. banker and finance director of Discovery Communications Inc., would have had relatively little influence over. Yet after attending scores of board meetings, he should at least have been well-versed in what is ailing Rolls-Royce. His decision to step away isn’t reassuring.To contact the author of this story: Chris Bryant at cbryant32@bloomberg.netTo contact the editor responsible for this story: James Boxell at jboxell@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
- Reuters
Exclusive: Malaysia's Mahathir hopeful of 1MDB settlement with Goldman soon
Malaysian Prime Minister Mahathir Mohamad is hopeful of reaching an out-of-court settlement with Goldman Sachs over the 1MDB scandal soon, but he said compensation of "one point something billion" dollars offered by the bank was too small. The Southeast Asian nation has charged Goldman and 17 current and former directors of its units for allegedly misleading investors over bond sales totalling $6.5 billion that the U.S. bank helped raise for sovereign wealth fund 1Malaysia Development Bhd (1MDB). Mahathir said they have demanded $7.5 billion (£5.85 billion) from Goldman and negotiations were ongoing.
- Reuters
Explainer: Malaysia's mega 1MDB scandal that has scalded Goldman Sachs
Malaysian Prime Minister Mahathir Mohamad has vowed to bring back billions of dollars allegedly stolen from state fund 1Malaysia Development Bhd (1MDB), co-founded by his predecessor Najib Razak. The scandal has also embroiled U.S. bank Goldman Sachs , which Malaysia has accused of misleading investors over three bond sales totalling $6.5 billion that the bank helped raise for 1MDB. Malaysian authorities say they are seeking $7.5 billion in compensation from Goldman.
- Bloomberg
China’s CPI Inflation Fastest Since 2012 With Peak in Sight
(Bloomberg) -- China’s consumer inflation accelerated to a seven-year high in November while producer prices extended their run of declines, complicating the central bank’s efforts to support the economy.The consumer price index rose 4.5% last month from a year earlier, following a 3.8% gain in October, the National Bureau of Statistics data showed Tuesday. The median forecast was for a 4.3% increase. Factory prices fell 1.4% on year, slower than the 1.6% drop in October while extending the run of negative readings to five.Pork prices, a key element in the country’s CPI basket, drove the gain, surging 110% from a year earlier as a deadly hog virus cut supply. This pushed up the CPI by about 2.64 percentage points. Core inflation, which removes the more volatile food and energy prices, remained subdued at 1.4%, suggesting domestic demand remains sluggish and the central bank can look through the supply shock.The month-on-month rise in pork prices moderated, suggesting a peak in CPI inflation lies ahead, according to economists. Pork prices rose 3.8% in November from the previous month when it rose 20.1%. Some of the reasons of the moderation include higher pork imports alleviating supply shortage and a decrease in news reports of African swine fever, according to ING Bank’s report.“We shouldn’t focus too much on the headline inflation figure. If we look at non-food inflation or core inflation, you’ll find the divergence between CPI and PPI is narrowing,” said Ning Zhang, an economist at UBS AG. “We are not faced with inflation pressure now, but deflation pressure, or pressure from weak inflation.” Zhang expects the CPI to peak at around January next year.What Bloomberg’s Economists SayWith a recent reversal in pork prices -- the main driver of this year’s pickup in consumer prices -- we expect headline inflation to peak in January or February 2020.\-- David Qu, Bloomberg EconomicsClick here to read the full notePeople’s Bank of China Governor Yi Gang this month signaled a continuation of moderate, limited stimulus. Top Communist Party officials are expected to meet this month to set economic goals for 2020. Goldman Sachs Group Inc. economists said China will probably lower its growth goal to “around 6%,” which gives policy makers some leeway to respond to slower growth while still keeping the goal of doubling income this decade within reach.“Factory deflation is a more concerning problem than the higher-than-expected CPI,” said Betty Wang, senior economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “There are no signs the manufacturing sector is recovering and the sluggishness is expected to stay for a while.”(Updates with outlook for pork prices, CPI.)\--With assistance from Tomoko Sato and Miao Han.To contact Bloomberg News staff for this story: Lin Zhu in Beijing at lzhu243@bloomberg.netTo contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Malcolm Scott, Jiyeun LeeFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
How Much Would You Pay to Work Less?
(Bloomberg Opinion) -- Companies from Goldman Sachs Group Inc. to Monsanto Co. have gotten serious about making work more flexible. Thanks to apps and gadgets, you can easily tap away from a living-room couch, the bleachers at your son’s soccer game or huddled over a coconut on your Christmas vacation. There’s a hidden cost to all this for women, though – and it isn’t just the prospect of being available around the clock.A recent working paper from the International Monetary Fund measured how much salary Japanese employees would be willing to forgo to enjoy a healthier work-life balance. It found that earners making 3 million yen ($27,600) a year would give up nearly half of their income to avoid putting in 45 hours or more of overtime per month. That outcome was roughly consistent with higher-wage workers, too.The most obvious takeaway would be that companies should do everything they can to keep hours reasonable. It doesn’t take an MBA to see that lower salaries would improve the bottom line, with the added upside of happier and possibly more productive workers. There’s an important caveat, however: Women are much more eager than men to give up money for time. That mostly comes down to deeper feelings of guilt, according to the paper, not just for child-rearing but also general household responsibilities such as cooking and caring for aging parents.While this conclusion isn’t revolutionary, the policy implications are stark. For every woman who is willing to accept less money for more flexibility, there’s someone out there inclined to put in that 14-hour day at a desk. This suggests that companies eager to give women more choice by offering a four-day week or shorter hours, may wind up inadvertently deepening gender pay gaps. The better way to protect work-life balance, then, is to make sure all employees – male, female, young, old, parents and the childless – are spending fewer, more productive hours on the clock. There’s ample research to show that working more doesn’t necessarily produce better results. In fact, productivity drops off when employees work more than 50 hours a week, according to a Stanford University study. Whether you work 70 hours or 56 hours, output is roughly the same.Despite Japan’s reputation for burning the midnight oil, Americans work even more: 1,786 hours per year compared with 1,680, according to the Organization for Economic Cooperation and Development. Germany works the fewest at 1,363. Yet Germany is the most productive of the three, as measured by gross domestic product per hour, followed by Japan, then the U.S.The good news is that employers are starting to respond. In August, Microsoft Corp. tested out a four-day work week in its Japan locations. Productivity rose 40% from a year earlier. One local-government office in downtown Tokyo resorted to shutting off the lights at 7 p.m. to force people to go home. And in Europe, financial industry groups are pressing the London Stock Exchange to cut its trading day by 90 minutes.All this awareness is a good thing; employers and policymakers just need to recognize the pitfalls. The most troubling element of the IMF paper may have been women’s willingness to make less in a country where the pay gap is already so wide. The median income for Japanese men is 24.5% higher than for men and women. That compares with an average of 13.5% in the OECD and 18.2% in the U.S. Flexible working can mean a lot of things: telecommuting, shorter work weeks, or even the ability to set a fluid schedule, so long as you hit a certain number of hours. These options benefit men and women alike. I can’t think of a single parent who doesn’t appreciate the ability to stay on top of emails while sitting in the waiting room at the pediatrician.But what if all that multitasking only adds hours and stress? At a previous job, when my son was a baby, I was able to leave the office early to put him to bed. Yet I recall many nights spent staring into the white halo of my iPhone, crafting emails with one finger, and nursing him in the crook of my spare arm. I probably would have been willing to give up a fair chunk of salary to guiltlessly complete that work in the morning – and could have finished it quicker, to boot. Many women are wary of flexible schedules for this precise reason: They know they’ll end up working for free. Even companies with the best intentions will have difficulty accounting for an evolving definition of what constitutes time spent on the job.That’s why flexible HR policies are meaningless if culture doesn’t evolve more quickly. Japanese employees get some of the most generous family-leave packages in the world, yet few fathers take advantage of them, as my colleague Anjani Trivedi has noted. People there are literally working themselves to death with 100-hour weeks.Konosuke Matsushita, the founder of Panasonic Corp. and business-management guru, said you should think of your career as a “three-day chore” — that is, approach simple tasks with the sincerity of a lifelong occupation. It’s about time we bring as much commitment to protecting our well-being. To contact the author of this story: Rachel Rosenthal at rrosenthal21@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Rachel Rosenthal is an editor with Bloomberg Opinion. Previously, she was a markets reporter and editor at the Wall Street Journal in Hong Kong. For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
- Bloomberg
Oil Holds Steady As Investors Watch for Trade War Developments
(Bloomberg) -- Oil settled near the highest close since September as investors shifted their focus to the ongoing U.S.-China trade talks ahead of the looming tariff deadline.Futures in New York fell 0.3% on Monday after rising 7.3% last week. Saudi Arabia voluntarily pledged to pump 400,000 barrels a day less than mandated by OPEC and its allies, translating to total overall curbs for the group of 2.1 million barrels a day. However, gloomy demand data capped that bullish impact, with an unexpected decline in Chinese exports last month as a consequence of the U.S.-China trade war.The market will now be watching for developments in U.S.-China trade talks in the run-up to Sunday, when new and higher tariffs begin, said John Kilduff, a founding partner at hedge fund Again Capital LLC in New York.“If the tariffs go ahead this Sunday, it would harm global demand outlook,” he said. “But if a deal is struck this week, we could see prices punch through the resistance just above the $59 level in WTI.”Goldman Sachs Group Inc. raised its 2020 Brent forecast after the OPEC+ deal, saying the group is aiming to tackle the market’s short-term imbalances. Still, the prolonged trade war continues to hang over the market as traders await news on whether Washington will go ahead with a planned hike on Chinese imports later this month. Chinese exports to the U.S. fell 23% last month from a year earlier, the most since February. Meanwhile, the U.S. government reported that no U.S. crude was exported to the Asian nation in October for the first time in 9 months.See also: Saudi Prince’s First OPEC Outing Brings Last-Minute Oil SurpriseWest Texas Intermediate for January delivery settled 18 cents lower to $59.02 a barrel on the New York Mercantile Exchange. The contract closed at $59.20 on Friday, the highest since Sept. 17.Brent for February settlement dropped 14 cents to $64.25 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $5.33 premium to WTI for the same month.To contact the reporter on this story: Sheela Tobben in New York at vtobben@bloomberg.netTo contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Catherine TraywickFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
Goldman Jumps Into WeWork Cleanup With Debt-Financing Plan
(Bloomberg) -- SoftBank Group Corp. tapped Goldman Sachs Group Inc. for new financing to help revive one of its biggest bets -- an investment in office-sharing company WeWork.Goldman is arranging a $1.75 billion line of credit, the first step in SoftBank’s pledge to put together $5 billion in debt financing for WeWork as part of its bailout package, according to people with knowledge of the matter. In a twist aimed at making the financing more palatable to other lenders, SoftBank will be listed as the borrower and WeWork will be a co-borrower, the people said, asking not to be identified because the information isn’t public.The Wall Street firm has reached out to other banks to gauge their interest in participating in the facility, structured as letters of credit, with the goal of putting it in place before the end of the year, the people said. The new credit line will replace existing facilities that total about $1.1 billion, and is designed to free up cash that’s being used as collateral in the existing letters of credit.Representatives for SoftBank, Goldman and WeWork, a unit of the We Co., declined to comment on the financing plan.Bonds that WeWork issued last year to help fund its expansion rose 4 cents to 80.75 cents on the dollar on Monday, according to Trace bond pricing data.Once the facility is in place, a $3.3 billion debt package will be arranged to complete the SoftBank plan, one of the people said. It’s not yet clear which banks will lead the second part of the debt financing. SoftBank has previously said the $3.3 billion will include $1.1 billion of senior secured notes and $2.2 billion in unsecured notes.Rescue PackageWeWork secured a $9.5 billion rescue package from SoftBank in October, a deal that will hand 80% of the company to the Japanese conglomerate after a tumultuous few months that saw WeWork turn from one of the most valuable startups to a cautionary tale.The deal with SoftBank included an acceleration of a $1.5 billion existing commitment from Masayoshi Son’s firm and a plan to buy as much as $3 billion from existing shareholders in a tender offer, which is under way.WeWork has previously leaned on JPMorgan Chase & Co. for the bulk of its advice. The Jamie Dimon-led bank had been tapped to lead the company’s initial public offering and had previously arranged a $6 billion credit facility that was contingent on the listing. The IPO was ultimately canned, and SoftBank stepped in with its rescue deal.(Updates bond price in fifth paragraph.)\--With assistance from Davide Scigliuzzo.To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Sridhar Natarajan in New York at snatarajan15@bloomberg.netTo contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, Michael J. Moore, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Investing.com
Stocks - Wall Street Drops Ahead of Fed, Tariff Deadline
Investing.com - Stocks moved lower on Monday ahead of a Federal Reserve meeting this week and on worries about U.S.-China trade talks.
- Baystreet
Stocks Vault Despite Heavy Job Losses
Equity markets in Canada’s largest market enjoyed triple-digit gains to cap off a volatile week, despite ...
- Bloomberg
Goldman Sees Alibaba Jumping 31% in Hong Kong in Next Year
(Bloomberg) -- Goldman Sachs Group Inc. was among the many Wall Street banks that missed out on underwriting Alibaba Group Holding Ltd.’s Hong Kong share sale. Now, its analysts are showering China’s largest company with compliments.Goldman stock analysts just initiated coverage of the shares with a buy rating, predicting they can rally another 31% in the city over the next year. Reasons include its “experienced senior” management team and reach in China’s digital economy.Alibaba can capture nearly a third of China’s retail payments this year, analysts led by Piyush Mubayi wrote in the report. It also has the potential to surpass core growth, Goldman added.Shares of the Chinese technology firm rose 2.7% to HK$197.50 on Friday, extending the advance since their Nov. 26 debut to 12%. The company raised about HK$88 billion ($11.2 billion) in its share sale, the biggest equity offering in the financial hub since 2010.Alibaba may see about $5 billion of mainland inflows over the next three years if it’s included in the trading links with Shanghai and Shenzhen, the bank added.Some investors have cautioned against unrealistic expectations on the stock, saying certain restrictions may curtail trading in the Hong Kong shares.Still, Goldman says that around 8% to 10% of Alibaba’s stock should eventually trade in Hong Kong as U.S. investors should be able to convert their American shares into Hong Kong ones and vice versa. The stock could have a free-float market capitalization in the city of about $48 billion.Analysts at Jefferies Group LLC initiated the stock with a buy rating.(Updates prices in fourth paragraph)To contact Bloomberg News staff for this story: Livia Yap in Shanghai at lyap14@bloomberg.netTo contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Philip Glamann, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Thomson Reuters StreetEvents
Edited Transcript of GS earnings conference call or presentation 15-Oct-19 3:00pm GMT
Q3 2019 Goldman Sachs Group Inc Earnings Call
- Bloomberg
Saudi Aramco Raises $25.6 Billion in World’s Biggest IPO
(Bloomberg) -- Saudi Aramco raised $25.6 billion from the world’s biggest initial public offering, closing a deal that became synonymous with the kingdom’s controversial crown prince and his plans to reshape the nation.The state-owned oil giant set the final price of its shares at 32 riyals ($8.53), valuing the world’s most profitable company at $1.7 trillion. It received total bids of $119 billion.For Crown Prince Mohammed Bin Salman, pulling off the sale could help get his ambitious plan to overhaul the economy back on track. It’s been derailed by problems at home, including the backlash against his purge of the elite, and abroad by the outrage over the murder of Washington Post columnist Jamal Khashoggi and the war in Yemen.But the deal ended up being very different from what the prince had envisaged when he first floated the idea in 2016 with an ambition to raise as much as $100 billion. Aramco offered just 1.5% of its shares and opted for a local listing after global investors balked at its hopes of valuing the company at $2 trillion.Instead, Aramco relied heavily on local investors and funds from neighboring Gulf Arab monarchies. In the offering for individuals, almost 5 million people applied for shares. The institutional tranche closed on Wednesday and attracted bids totaling 397 billion riyals.The kingdom’s richest families, some of whom had members detained in Riyadh’s Ritz-Carlton hotel during a so-called corruption crackdown in 2017, are expected to have made significant contributions. Global banks working on the deal were sidelined after Saudi Arabia decided to focus on selling the shares to local and regional investors.Still, Aramco will become the world’s most valuable publicly traded company once it starts trading, overtaking Microsoft Corp. and Apple Inc. The pricing was at the top of the marketed range of 30 to 32 riyals. The mean valuation estimate from institutional investors surveyed by Sanford C. Bernstein & Co. was for $1.26 trillion, it said in a note Thursday.The deal opens up one of the world’s most secretive companies, whose profits helped bankroll the kingdom and its ruling family for decades, to investors and Saudi individuals. Until this year, Aramco had never published financial statements or borrowed in international debt markets.It will also mean the company now has shareholders other than the Saudi government for the first time since it was nationalized in the late 1970s.Saudi Arabia had been pulling out all the stops to ensure the IPO is a success. It cut the tax rate for Aramco three times, promised the world’s largest dividend and offered bonus shares for retail investors who keep hold of the stock.Goldman Sachs Group Inc., acting as share stabilizing manager, has the right to exercise a so-called greenshoe option of 450 million shares. The purchase option can be executed in whole or in part at any time on or before 30 calendar days after the trading debut. It could raise the IPO proceeds to $29.4 billion.Funds from the sale will be transferred to the Public Investment Fund, which has been making a number of bold investments, plowing $45 billion into SoftBank Corp.’s Vision Fund, taking a $3.5 billion stake in Uber Technologies Inc. and planning a $500 billion futuristic city.The sale is the first major disposal of state assets since Prince Mohammed launched a much-touted plan to reduce the economy’s addiction to oil revenue in 2016.The last major government privatization, the 2014 IPO of National Commercial Bank, received $83 billion in subscriptions from investors.(Updates with pricing range in seventh paragraph)\--With assistance from Nour Al Ali, Claudia Maedler, Bruce Stanley and Archana Narayanan.To contact the reporter on this story: Matthew Martin in Dubai at mmartin128@bloomberg.netTo contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Alaa Shahine, Shaji MathewFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
‘Fake Ebitda’ to Worsen Next Slump, $33 Billion Debt Maven Warns
(Bloomberg) -- Alan Waxman was just 31 when he made partner on a Goldman Sachs team that bet the firm’s own cash for wild profits. He later co-founded TPG Sixth Street Partners and helped build it into a $33 billion force in credit markets.Now he’s raising alarms about those same markets.In a private conference earlier this week, Waxman, 45, warned investors there’s an epidemic of fake earnings projections that will be exposed in the next economic slump and may even exacerbate it. Too many companies are addicted to making creative accounting adjustments that bump up operating profits known as Ebitda -- and investors are turning a blind eye, he said, according to a person with knowledge of his comments.“It’s not normal, as a lender, to lend money against fake Ebitda and fake collateral,” he said in the presentation.In theory, lenders focus on Ebitda -- an acronym for earnings before interest, taxes, depreciation and amortization -- to get a clear sense of a company’s financial health before it pays down its debts. Yet suspicions have mounted in recent years that some executives are padding their projections for Ebitda. In 2017, one Moody’s analyst coined a new definition for Ebitda: Eventually busted, interesting theory, deeply aspirational.Much of the consternation focuses on adjustments known as “add-backs,” in which companies exclude certain expenses from future earnings. A traditional add-back, for example, could account for the expected savings from a cost-cutting program. But some companies have resorted to creative or aggressive items with descriptions that can be difficult to understand. Last year, a Federal Reserve official called out the use of add-backs as an area of mounting concern.Inflating Ebitda distorts the loan-to-value ratio that guides the $2.9 trillion market for junk bonds and loans in the U.S. and Europe, he said. Part of the problem, Waxman said in his presentation, is that investors have tolerated so much deviant behavior that it has become normalized.Some companies and their private-equity owners are goosing projections and presenting assumptions about returns that are more aggressive than their own internal models, he said. One alarming stat he points to: More than half the companies that were part of a leveraged buyout in 2016 missed their earnings projections by more than 25% last year. And that’s in a growing economy.The result is that in many cases creditors actually have a smaller cushion between the last dollar of risk they take and the real value of the company to which they lend, he said. There’s also a risk investors are committing capital based on an available pool of collateral that could disappear because of the lack of restrictive covenants that have historically protected lenders -- “fake collateral”, as Waxman put it.“The sacred lending principle of loan-to-value integrity is the single most important thing in credit investing,” he said. “When it is severely compromised, as it is now, credit stops being credit. It’s just cheap capital.”Waxman helped start his firm in 2009, a year after leaving Goldman Sachs Group Inc., with $2 billion from buyout fund TPG and much of his old team from Goldman. At the time, it was called TPG Opportunities Partners. Now often referred to as TSSP, the firm has returned 20% annualized, before fees, over the last decade.One prominent example of a company whose figures have confounded investors in recent times was office-sharing firm WeWork, which became known for its reliance on an unconventional accounting metric known as “community-adjusted Ebitda.” The company said it captured the profitability of WeWork locations, excluding general and administrative expenses. But the benchmark was questioned by analysts after it first came up in financial documents tied to a 2018 bond sale. It surfaced again in early drafts of the company’s S-1 filing for a public stock debut, only to be omitted from the final version.“The party will go on in the leverage finance markets until we have a catalyst,” Waxman told investors.The catalyst will most likely come from the BBB-rated credit market, where 43% of debt is levered over 4 times, according to Waxman. About 70% of that universe is at risk of losing its investment grade status, he said. Once that happens, the quantity of debt will overwhelm the high-yield market and create substantial dislocations, he said.A $1 Trillion Powder Keg Threatens the Corporate Bond Market\--With assistance from Davide Scigliuzzo.To contact the reporters on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net;Katia Porzecanski in New York at kporzecansk1@bloomberg.netTo contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, ;Sam Mamudi at smamudi@bloomberg.net, David Scheer, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
