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Why Public Pension Funds Are Embracing Wall Street; Public pension funds like to portray themselves as battlers for the little guy; hedge funds levy sizable fees that often go into the pockets of rich people

Pension Funds Love Wall Street

Public pension funds have been moving huge amounts of money into alternative investments managed by Wall Street. According to a recent report by Cliffwater LLC, an adviser to institutional investors, from 2006 to 2012 state pension funds more than doubled their allocations to alternative investments, which include private equity, real estate, hedge funds and commodities. Totaling almost $600 billion, these nontraditional investments now constitute 24 percent of public pension fund assets. In contrast, the funds dropped their investments in stocks to 49 percent from 61 percent over the six-year period. Read more of this post

Turkey Adrift: Ankara’s decision to buy a weapons system from a Chinese company signals that Turkey has lost its way on foreign policy

OCTOBER 23, 2013, 8:28 AM

Turkey Adrift

By ANDREW FINKEL

ISTANBUL — Turkey’s announcement last month that it would buy a long-range defense system from a Chinese company is the latest sign that Ankara’s attempts to strike an independent foreign policy have gone wrong. To its credit, Turkey’s Justice and Development Party (A.K.P.) has tried during its decade in power to play a constructive role in the region — as a mediator between its NATO allies and Turkey’s troubled neighbors. The so-called zero problems policy seeks to deal pragmatically with Syria and Iran, to resolve its long-standing dispute with Armenia, and come to terms with problems at home, mainly the demands of its own Kurdish population. In 2008, Turkey even tried to broker a deal between Israel and Hamas in the Gaza strip. Read more of this post

The Dark Side of Fat Profit Margins

The Dark Side of Fat Profit Margins

JUSTIN LAHART

Oct. 23, 2013 11:39 a.m. ET

It’s natural to worry about what might happen if companies’ extraordinarily high profit margins slip. The more troubling thought may be what happens if they don’t. Never before have American companies seen so much of their sales drift down to the bottom line. In 12 months that ended in the second quarter, U.S. after-tax corporate profits as a share of gross domestic product, a measure of profit margins across the entire economy, came to 10.9%, according to the Commerce Department. That was the highest level according to records going back to 1929. Nor are there signs of erosion: S&P Dow Jones Indices estimates profits at companies in the S&P 500 as a share of sales hit a high in the third quarter. Read more of this post

Oman Shuns Hedge Funds as Sovereign Investor Targets Equities

Oman Shuns Hedge Funds as Sovereign Investor Targets Equities

Oman, the largest oil producer in the Arabian Peninsula that’s not a member of OPEC, said it’s shunning hedge funds and alternative assets to invest directly in emerging market equities and real estate in stable countries. Oman Investment Fund, the sovereign wealth fund, manages almost all its assets internally and would only consider external managers because it could be “resource-intensive” to follow hundreds of stocks on a daily basis, Chief Executive Officer Hassan Al Nabhani said in an e-mailed response to questions, his first such interview in at least seven years. Read more of this post

Manhattan’s Vanishing Gas Stations; Perhaps there is no clearer sign that Manhattan space has reached a high premium than the continuing disappearance of gasoline stations at main intersections.

October 22, 2013

Manhattan’s Vanishing Gas Stations

By C. J. HUGHES

Perhaps there is no clearer sign that Manhattan space has reached a high premium than the continuing disappearance of gasoline stations at main intersections. Spurred by the recession and now the recovery’s development clamor, service stations popular among New York cabbies and motorists are literally losing their ground to apartments, stores and offices. Rezoning of these sites for residential use has also spurred development. Read more of this post

How ‘smart beta’ ETFs turned closet indexing into a winner

How ‘smart beta’ ETFs turned closet indexing into a winner

Some active managers are making small bets and beating the benchmark

By Jason Kephart   |  October 23, 2013 – 9:53 am EST

Actively managed equity mutual funds that don’t make big bets versus their benchmarks have been shunned by investors, but a handful of funds that rely on factors, or “smart beta,” have proved that you don’t need to make big bets to outperform. The common refrain among researchers and pundits these days is that the only actively managed funds worth investing in are the ones with a high active share, which is a measure of how much a fund differs from its benchmark. Read more of this post

Housing Bubbles Upend Central Bankers’ Rate Plans: Nordic Credit

Housing Bubbles Upend Central Bankers’ Rate Plans: Nordic Credit

Central bankers in Sweden and Norway are finding their efforts to steer inflation are being disrupted by a persistent threat of housing bubbles. While policy makers in both countries will keep interest rates unchanged tomorrow, according to economists surveyed by Bloomberg, distortions in the two nations’ property markets are adding a layer of uncertainty to outlooks. Read more of this post

German Pilots Grounded as $92,000 Tuition Can’t Buy Cockpit Seat

German Pilots Grounded as $92,000 Tuition Can’t Buy Cockpit Seat

Oct. 23 (Bloomberg)– Christopher Siem is spending 70,000 euros ($92,000) out of his own pocket to train as a pilot, a job where the unemployment rate is twice the German average. Siem, 24, is among Germany’s aspiring pilots whose dreams of a career in the cockpit have been dented as the country’s airlines slash their fleets. Deutsche Lufthansa AG (LHA), which has about 5,500 pilots, will limit its fleet to 400 planes and cut 3,500 jobs, while Air Berlin Plc (AB1) is also curbing crew numbers as it pares the aircraft roster by 27 over two years. Read more of this post

Fidelity late but not too late with new ETFs

Fidelity late but not too late with new ETFs

Pricing strategy called ‘punch in the face’ to Vanguard

By Megan Durisin   |  October 23, 2013 – 12:39 pm EST

Fidelity Investments is making its first big leap into the exchange-traded fund arena Thursday with the launch of 10 sector ETFs, but the question remains: Is it too little, too late? Several analysts are saying, “No.” “ETFs still have a long way to go before they catch up to mutual funds, and there’s still room for entrants,” said Mike Rawson, an analyst at Morningstar Inc. “I think we should wait a few years to see what else Fidelity is able to do.” Ten years ago, Fidelity launched its first and only ETF: the $262 million Fidelity Nasdaq Composite Tracking ETF (ONEQ). It hasn’t launched another since and has largely missed out on the ETF boom. Read more of this post

Euro’s Best-Rated Nation Loses Jobs as Finnish Firms Suffer

Euro’s Best-Rated Nation Loses Jobs as Finnish Firms Suffer

Finland’s efforts to protect its stable AAA rating and keep borrowing costs down aren’t helping its businesses, which say they need to cut jobs even as the rest of Europe surfaces from its crisis. While the government in Helsinki is pegging its recovery hopes to fiscal restraint, Finland’s biggest hurdle is its failure to adequately diversify its industries, according to Tiina Helenius, chief economist at Svenska Handelsbanken AB in Helsinki. Read more of this post

Alcoa and Rusal, Two of the world’s largest aluminum makers, reaped an estimated $1.4 billion in revenues from higher fees amid a logjam at London Metal Exchange warehouses

Alcoa and Rusal Are Beneficiaries of Warehouse Logjam

Alcoa and Rusal Have Objected to Proposal Aimed at Easing Bottleneck

MATT DAY

Updated Oct. 23, 2013 9:06 p.m. ET

Two of the world’s largest aluminum makers reaped an estimated $1.4 billion in revenues from higher fees amid a logjam at London Metal Exchange warehouses, according to an analysis by The Wall Street Journal. The two companies, Alcoa Inc. AA -0.96% and United Co. Rusal, 0486.HK +1.68% have emerged as some of the most vocal opponents of an LME proposal aimed at easing bottlenecks at warehouses. Read more of this post

Caterpillar’s Stock Drops, and 2 Big Deals in HK ERA and Bucyrus May Be to Blame; Caterpillar: Predictably Unpredictable; The Street’s Difficulty Forecasting Caterpillar Has a Lot to Do With China

OCTOBER 23, 2013, 1:17 PM

Caterpillar’s Stock Drops, and 2 Big Deals May Be to Blame

By MICHAEL J. DE LA MERCED

Two of Caterpillar‘s biggest-ever deals may have played a role in the $3 billion of market value that the company’s stock shed on Wednesday morning. The maker of heavy equipment disclosed that its third-quarter profit tumbled 44 percent from the same time last year, while revenue fell more than 18 percent for the same period. The company said quarterly profit dropped to $946 million, as revenue fell to $13.4 billion. With the company cutting its full-year earnings forecast yet again, investors sold off shares, leading to a 6 percent drop in the stock’s price as of midday Wednesday, to $83.87. Read more of this post

As Populism Grows in Israel, Big Business Lands in the Crosshairs

As Populism Grows in Israel, Big Business Lands in the Crosshairs

Oct 17, 2013 Israel Middle East & Africa

Over the summer, Israel’s regulatory agencies unveiled a number of new directives on their charges, telling them what to do, and, especially, what not to do. The policies, which target the financial sector and others, have emerged at a time when the population is becoming increasingly restive and critical of the scions of Israel’s big business community. Now, observers are debating who will be the winners and losers in this new environment. Read more of this post

As Developing Economies Grow, Global Value Chains Reach a Turning Point

As Developing Economies Grow, Global Value Chains Reach a Turning Point

Oct 21, 2013 Operations Management Strategic Management Asia-Pacific China Middle East & Africa

In the “flying geese paradigm,” Japanese economist Kaname Akamatsu explains that companies restructure to find the cheapest labor costs by moving low-value activities to nearby less-developed countries. Today that story rings truer than ever before as global value chains (GVCs) reach a critical turning point. Simply put, GVCs take a broader look at supply chains coordinated by multinational companies, but also encompass economic analyses of the countries involved with the activities. Read more of this post

Junk Bonds to Lose 1.5 Percentage-Point QE Cushion, Fridson Says

Junk Bonds to Lose 1.5 Percentage-Point QE Cushion, Fridson Says

Investors in junk bonds will lose a yield cushion of more than 1.5 percentage points as the Federal Reserve winds down its unprecedented quantitative easing program that’s bolstered credit markets for five years, according to Martin Fridson. “Tapering has been delayed, but high-yield investors should nevertheless assume that the end of quantitative easing will eventually hurt their returns,” Fridson, chief executive officer of New York-based FridsonVision LLC, a research firm specializing in speculative-grade debt, wrote in a report yesterday. Read more of this post

Tan Sri Andrew Sheng: Financial system too short term; Some 83% of the financial system’s assets are based on short-term liabilities, financing longer-termed assets; “We are trying to solve a debt overhang, excessive leverage with more debt. Where is the asset?”

Updated: Wednesday October 23, 2013 MYT 11:51:26 AM

Sheng: Financial system too short term

KUALA LUMPUR: One of the issues that needed to be fixed in the financial system was that it was being “too short-termed”, according to Fung Global Institute Hong Kong president Tan Sri Andrew Sheng. Some 83% of the financial system’s assets are based on short-term liabilities, financing longer-termed assets, he added. “We are trying to solve a debt overhang, excessive leverage with more debt. Where is the asset?” “The answer is that this has been a wonderful opportunity for an asset shift. It’s a structural and systemic issue that we need to think about,” he said during the afternoon session at the World Capital Markets Symposium held yesterday. Meanwhile, Sheng said that the global financial crisis that happened in the United States five years ago was not because of the failure to regulate markets but rather a failure of enforcement. “You realise that regulation does not solve all problems. It is not going to be easy moving forward as the rules require us to have more and more rules and frankly speaking I have personally lost the plot,” he said. He noted that the job of a regulator today was becoming “extremely complex” in the global financial system and that there was a need to understand it further.

China money rates shoot up as tightening worries rise

China money rates shoot up as tightening worries rise

1:52am EDT

* 7-day repo contract rise more than 1 percentage point

* Beijing is concerned with inflation, property prices

* Intervention to hold back yuan adding liquidity

* Traders will watch c.bank ops on Thurs for more signals

By Pete Sweeney

SHANGHAI, Oct 23 (Reuters) – China’s primary short-term money rates rose on Wednesday in a delayed reaction to signals from regulators they are considering tightening liquidity to tamp rising inflationary pressure. A policy adviser to the People’s Bank of China (PBOC) told Reuters on Tuesday that the authority may tighten cash conditions in the financial system to address inflation risks. Read more of this post

Panic grips Union govt as onion price hits Rs 100 a kg

Panic grips Union govt as onion price hits Rs 100 a kg

Dipak Kumar Dash & Tushar Pawar, TNN | Oct 23, 2013, 04.50 AM IST

NEW DELHI/NASHIK: With onion prices continuing to be on fire in the run-up to crucial state polls, an embattled government scrambled to stem the surge but appeared to lack a coherent plan. As onion prices, defying the sharp dip in the rates in the country’s biggest wholesale market at Lasalgaon in Nashik, continued to spiral and touched the Rs 100 per kg mark in the city and elsewhere, panic in the government was obvious. Food minister K V Thomas rushed to Maharashtra as the Congress-ruled state accounts for 28% of the total onion production and can help tame prices by cracking down on hoarders. Read more of this post

The disease that killed a million piglets in China has spread to the US, and no one knows why

The disease that killed a million piglets in China has spread to the US, and no one knows why

By Heather Timmons 12 hours ago

America’s pork industry has been gripped by an outbreak of porcine diarrhea since mid-May, the first appearance of the condition in North America. US farmers havereported 768 cases of the disease, known as porcine epidemic diarrhea virus (PEDV), through the first week of October, which implies that many more thousands of animals could be affected. Although the disease is not transferable to humans, it has been devastating for the US pork industry. It causes severe “watery diarrhea and vomiting in nursing pigs,” according to information from the US’s National Pork Board. Almost all the piglets who get the disease die because of it, and farmers are reportedly filling “wheelbarrows of dead piglets.” Read more of this post

Investigative reporter detained after writing more than a dozen stories criticizing the finances of a major Chinese state-owned construction equipment maker

Free our reporter, begs newspaper as China cracks down on journalists

6:25am EDT

By Megha Rajagopalan

BEIJING (Reuters) – A Chinese newspaper pleaded with police on Wednesday to release an investigative reporter accused of defamation in an unusual public rebuke amid a wider government crackdown on freedom of expression. The state-run New Express tabloid printed a front-page commentary begging police in the south-central city of Changsha to set reporter Chen Yongzhou free under the headline: “Please release him.” Chen was detained after writing more than a dozen stories criticizing the finances of a major state-owned construction equipment maker. Read more of this post

Chinese Acquisition Appetites Shift From Resources

Chinese Acquisition Appetites Shift From Resources

CYNTHIA KOONS

Oct. 23, 2013 8:42 a.m. ET

When it comes to global mergers and acquisitions, China has long been seen as a buyer of natural resources but not much else. But bankers increasingly expect to see companies in industries like technology, real estate and food buying assets overseas, spurred by government policies and readily available financing. The increasing shift in appetite for hard assets or technologies has been noticeable in recent weeks, with Chinese personal-computer maker Lenovo Group Ltd. 0992.HK -0.48%considering a bid for struggling Canadian smartphone maker BlackBerry Ltd. BB.T -0.12%, which The Wall Street Journal reported last week. Should Lenovo pull the deal off, it would be one of the highest-profile deals done by a Chinese player on the global stage. Read more of this post

Glaxo’s China Sales Plunge 61% After Corruption Probe

Glaxo’s China Sales Plunge 61% After Corruption Probe

By Makiko Kitamura – Oct 23, 2013

GlaxoSmithKline Plc (GSK)’s third-quarter sales of pharmaceuticals and vaccines in China fell 61 percent after an anti-corruption probe began there in July, and the drugmaker gave no outlook on how long the downturn would last. Sales of consumer health-care products in China fell 29 percent, the London-based company said today in a statement. Total revenue rose 1 percent to 6.51 billion pounds ($10.5 billion), compared with analysts’ average estimate of 6.64 billion pounds. Read more of this post

ECB says stress tests of 124 eurozone banks begin next month

ECB says stress tests of 124 eurozone banks begin next month

POSTED: 23 Oct 2013 19:45
The European Central Bank said on Wednesday it will start next month to “stress-test” and examine the balance sheets of 124 eurozone banks in advance of assuming its supervisory role.

FRANKFURT: The European Central Bank said on Wednesday it will start next month to “stress-test” and examine the balance sheets of 124 eurozone banks in advance of assuming its supervisory role. “The assessment will commence in November 2013 and will take 12 months to complete,” the ECB said in a statement. It will be carried out together with national authorities and supported by an external consulting firm, it said. The “comprehensive assessment” will look at “key risks”, review the quality of bank assets and include “a stress test to examine the resilience of banks’ balance sheets to stress scenarios”. Aside from building transparency and taking any necessary corrective actions, the exercise aims at “confidence building” and “to assure all stakeholders that banks are fundamentally sound and trustworthy”. “A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85 percent of the euro area banking system, is an important step forward for Europe and for the future of the euro area economy,” ECB president Mario Draghi said in a statement. “Transparency will be its primary objective. We expect that this assessment will strengthen private sector confidence in the soundness of euro area banks and in the quality of their balance sheets.” This outcome will be published before the ECB assumes its supervisory role of eurozone banks in November 2014.

How sick are Europe’s banks? Wait and see

By Mark Thompson  @MarkThompsonCNN October 23, 2013: 10:01 AM ET Read more of this post

The struggle to tame Africa’s beast of a megacity

The struggle to tame Africa’s beast of a megacity

2:00am EDT

By Tim Cocks

LAGOS (Reuters) – A walk along the two kilometers of light rail that Lagos authorities have managed to build in three years gives a sense of how hard it is to impose order on one of Africa’s most chaotic cities. From either side of the concrete structure – no track has yet been laid – the crowded slums and highways of Nigeria’s lagoon-side commercial hub teem with activity. Its trademark yellow buses overtake, undertake and force their way down impossibly narrow side streets, where women stir pots next to canals clogged with rubbish. With between 15 million and 21 million people – the upper estimate is the official one, though no one really knows – and generating a third of GDP for Africa’s second biggest economy, Lagos has become almost as alluring to yield-hungry investors as it is to the 4,000 or so economic migrants who turn up each day. Read more of this post