Former Texas Congressman Ron Paul weighs in on presumptive Democratic candidate Joe Biden’s vice president pick, the next round of stimulus and how the U.S. has handled the coronavirus crisis.
Former Texas Congressman Ron Paul weighs in on presumptive Democratic candidate Joe Biden’s vice president pick, the next round of stimulus and how the U.S. has handled the coronavirus crisis.
(Bloomberg) -- Huobi Technology Holdings Ltd. has launched four cryptocurrency-related funds targeting $100 million in total assets by September, the latest attempt to ride a stunning rally in digital assets.Huobi Tech is rolling out four funds including ones that will virtually track Bitcoin and Ether prices, allowing investors to bet on the coins without actually holding any currency. It’s the latest so-called crypto tracker after similar funds have launched around the world. The firm already has secured $50 million in commitments across the four funds.The offerings also include an active fund investing in a basket of virtual assets, and a private equity fund dedicated to investment in the crypto mining sector. In March, Huobi Tech obtained a license from the Securities and Futures Commission of Hong Kong to manage and distribute funds invested solely in crypto -- the first such approval after Arrano Capital.“Virtual assets have become established as a strong category in alternative investment, and more players will compete in this arena,” Huobi Tech finance chief Zhang Li said during a Zoom interview from Beijing. “For professional investors who still have concerns about things like security and tax filing, they will opt to buy our funds rather than holding coins themselves.”The new Hong Kong license and funds highlight 38-year-old Huobi founder Leon Li’s endeavor to ensure his crypto empire, whose main exchange unit has drawn scrutiny over the years from Beijing, complies with regulations as it expands into adjacent arenas.The move also come as mainstream financial companies embrace crypto after Bitcoin’s value took off in October. However, some still warn of a bubble, and volatility and regulatory risk around the globe remain concerns for the asset class.Longer term, Zhang said she expects the firm to provide a full suite of crypto-related services including custody, without specifying details.Read more: The Crypto Mogul Who’s Got the Ear of China’s Central BankFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
While it may not make headlines in the same way oil, gas, and renewable energy do, helium is one of the most important commodities on earth and we could soon be facing a major shortage
(Bloomberg) -- The Bank of Canada took the biggest step yet by a major economy to reduce emergency levels of monetary stimulus as it hailed a stronger-than-expected recovery from the pandemic.Policy makers led by Governor Tiff Macklem said Wednesday they would scale back their purchases of government debt by a quarter to C$3 billion ($2.4 billion) and accelerate the timetable for a possible interest-rate increase.The upbeat turn toward plotting a return to more normal policy has been resisted by counterparts elsewhere, including the U.S. Federal Reserve. Investors reacted by driving the Canadian dollar to its biggest gain since June.“This is a fairly hawkish message cast by the Bank of Canada,” Simon Harvey, a senior foreign exchange analyst at Monex Canada, said by email. “They seem quite confident that once the current wave of infections subsides the economic recovery will be robust.”The central bank reiterated its guidance that it won’t raise its benchmark interest rate, currently at 0.25%, until the recovery is complete and inflation is sustainably at 2%. But it changed its projections on when that would happen.New TimelineIn new quarterly economic projections, it revised higher its growth estimate for 2021 by more than two percentage points, to 6.5%, and brought forward its forecasts for when slack would be absorbed.“Based on the Bank’s latest projection, this is now expected to happen some time in the second half of 2022,” the bank said in its latest Monetary Policy Report.At a subsequent press conference, Macklem emphasized that the central bank’s commitment is not to raise interest rates before the economy fully recovers, and that any future hike would reflect economic conditions at the time.The Federal Reserve, by contrast, says it won’t begin scaling back the pace of its $120 billion-a-month bond purchases until it sees “substantial further progress” on employment and inflation. Economists surveyed by Bloomberg ahead of the Fed’s March meeting didn’t expect that to happen until 2022.Macklem’s growth revisions bring policy makers more into line with economist projections. Markets had already been pricing in a rate increase in 2022 before Wednesday’s changes. Investors have also been anticipating that Canada’s central bank would be more aggressive than the Federal Reserve in its normalization path.Swaps trading suggests about a 50% chance of a hike in Canada this time next year. Almost three hikes are fully priced in over the next two years, and five hikes over the next three years.Chair Jerome Powell, for his part, has been careful to avoid putting a date on beginning to taper asset purchases in the U.S., though his No. 2, Vice Chair Richard Clarida, has said he doesn’t expect those thresholds to be met this year.Powell has promised to give investors plenty of warning that officials are beginning to debate the timing of a move. He’s been up front in wanting to avoid surprising markets and re-running the 2013 Taper Tantrum, when unexpected news that the Fed was thinking of paring its purchases sent financial markets into a spasm with harmful economic consequences.Loonie SoarsThe Canadian dollar rose 0.9% to C$1.2495 per dollar at 3:47 p.m. in New York, after gaining as much as 1.2%. The market consensus was for the Bank of Canada to pare back its government bond purchases in line with the bank’s new guidance, without altering expectations for no rate hike before 2023.Even before Wednesday’s statement, investors were anticipating the Bank of Canada to be among the most aggressive advanced economies in unwinding stimulus. One reason may be that Canada’s jobs market has recouped 90% of losses during the pandemic, versus just over 60% in the U.S.Still, policy makers remain cautious despite the more positive tone, saying there’s more uncertainty than usual that might affect its estimates for slack. Officials also highlighted concern about the uneven recovery and the potential for scarring in the labor market.What Bloomberg Economics Says...The “Monetary Policy Report includes discussion of several factors that could soften the need to pull forward a rate hike into 2022, in our view. We continue to think a rate move is likely to be delayed into the first quarter of 2023.”--Andrew Husby, economistFor full report, see hereOn technical grounds alone, the central bank’s purchases of Canadian government bonds need to be pared back as the government’s financing requirements drop. It now owns more than 40% of outstanding bonds and is on pace to go above 50% in a few months as Prime Minister Justin Trudeau’s government reduces its issuance by about C$90 billion this year.It’s actually the second time the Bank of Canada has tapered during the pandemic. Macklem reduced the bank’s minimum weekly purchases in October, which had been C$5 billion initially. But at the time, officials characterized the taper as neutral in terms of stimulus, because they shifted purchases toward long-term bonds concurrently.This time, the central bank acknowledged that its reduction of asset purchases will impact the “incremental” amount of stimulus being added to the economy from quantitative easing.(Updates with Bloomberg Economics comment. A previous version of this story was corrected to remove a reference to the Canadian dollar at highest since January.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- As the global economy rebounds and commodity prices hit multi-year highs, emerging-market investors are seeking refuge in the one area that offers protection from inflation concerns.While this year’s global bond rout and the prospect of accelerating inflation have inflicted pain across markets from Brazil to Russia, debt securities that are linked to the pace of consumer-price gains have weathered the storm better than their nominal counterparts.Surging price pressures have long been a scourge eroding the appeal of developing-market bonds and currencies. Now, data across the world is flashing warning signs again. U.S. inflation for March came in higher than estimates, while CPI also picked up in Peru, Brazil, South Korea and India due to a surge in energy and food costs. On Thursday, inflation in Mexico rose to the fastest pace in over three years. Meanwhile, central banks face pressure to keep rates low to contain the economic fallout from the coronavirus pandemic.“The quickest way for EM policy makers to stimulate the economy is via monetary policy,” said Michael Roche, a strategist at Seaport Global Holdings in New York. “This activity builds inflation expectations, which leads fixed-income investors to seek protection in CPI-linked securities.”Inflation expectations are likely to keep climbing as emerging-market central banks take the lead from the Federal Reserve, Roche said. The Fed has signaled that it will continue with expansionary monetary policy for an extended period. Five-year Treasury breakevens -- a bond-based measure of inflation expectations in the world’s biggest debt market -- have climbed to nearly 2.6%, hovering close to the highest in over a decade.Pace SetterAmong emerging markets, South Africa leads the charge, with five-year breakeven rates to 4.4% on expectations the central bank will fail to contain prices amid rising energy costs. While concern is high, inflation quickened less than forecast in March as underlying pressures remain muted for now. South Africa’s 2033 inflation-linked bonds have gained 6.1% so far this year, handily surpassing the 1.9% loss in equivalent-maturity, nominal bonds.Inflation expectations in Brazil are almost as high, with one-year breakeven rates climbing to 5.1%, the upper bound of the central bank’s target range for 2022, amid increased government spending. As a result, Brazilian inflation-linked bonds maturing in 2030 have weakened just 6.8%, even as their fixed-rate counterparts cratered 9.6%.In Turkey, rising oil prices and a weak currency are set to fuel a surge in consumer costs, even as President Recep Tayyip Erdogan -- who fired the last central bank chief -- pushes for interest rate cuts. Inflation accelerated to 16.2% in March from 14.6% at the start of the year. Turkish inflation-linked bonds maturing in 2028 have lost 2.1% this year, while the nominal benchmark bonds plunged nearly 21%.In Asia, South Korea’s inflation-adjusted bond yield curve flattened across all tenors, as demand picked up to take into account the potential return of higher consumer prices. Inflation in the North Asian nation returned to its pre-pandemic level in March amid higher oil prices and as consumer demand started to recover.Philippine bonds lost 4.2% this year in nominal terms as inflation breached 4%, the upper end of the central bank’s target, for three straight months on the back of higher food prices.The RisksThere are risks to the strategy. Edwin Gutierrez, a portfolio manager at Aberdeen Asset Management in London, says that while the trade may hold up for another month or so, food and fuel prices seem to have peaked.“You switch out of fixed-rate paper into linkers and you lock in some big losses,” Guttierez said. “It’s a bit late for the trade.”Gennadiy Goldberg, a rates strategist at TD Securities in New York, also stresses the need to be watchful.If inflation doesn’t materialize, “we could see some investors taking profit on their inflation hedge and that could lead the move to reverse” later this year, he said.For the moment though, with inflation fears on the rise across the world, investors may still look for a hedge.“We’ll continue to see some strength in the near-term” in inflation-linked bonds, Goldberg said. “Markets are betting loose central bank policy, pent-up demand, and accelerating growth expectations will create a perfect storm for inflation.”(Updates to include Mexican inflation figures in third paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The Bank of Japan has done everything it can to normalize policy under Governor Haruhiko Kuroda’s watch and is now set to ride out the rest of his term without any major changes, according to a former senior central bank official.“The BOJ has reached the end of the line on normalization for now,” said Hideo Hayakawa, referring to a series of tweaks to the central bank’s stimulus framework in March that enabled it to cut back its asset buying.“Unless the current leadership suddenly says it’s gotten policy wrong all this time, it’s pretty much done all it can,” the former executive director said in an interview, adding that the pandemic has underlined the importance of fiscal policy in helping the economy rather than a monetary approach.Hayakawa’s comments suggest that the BOJ will remain in a holding pattern on policy until at least April 2023 when Kuroda is scheduled to leave. They also tally with the view of some economists that the central bank’s adjustments were intended to make it easier to dial back stimulus.BOJ Seen Tweaking Economic Forecasts, Standing Pat: SurveyThe BOJ says the fine-tuning was aimed at making its stimulus more sustainable over the longer term after its biggest policy review since 2016. Around half of economists agree that the tweaks shored up the stimulus framework, but about 40% see them as a step toward policy normalization, according to a Bloomberg survey.A key point of the adjustments was making the buying of exchange-traded funds more flexible, Hayakawa said. The BOJ had already made its bond buying more flexible by changing its focus to interest rates in 2016 and by removing a purchase guideline last year, he said.The ETF buying had attracted increasing criticism that the bank was helping prop up stock prices already at three-decade highs.The bank demonstrated its new flexibility on Tuesday when it didn’t buy ETFs for the first time since at least 2016 even after the Topix stock index fell more than 1% in the morning session. On Wednesday the bank did buy ETFs, but only after stocks dropped 2.2% in the morning.“It’s not worth making problems bigger and bigger through massive bond or ETF buying,” said Hayakawa, who left the bank in 2013 and has generally taken a skeptical view of Kuroda’s efforts to reflate the economy. “Those purchases aren’t bringing the bank any closer to its inflation target.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Wall Street's main indexes were set to open flat on Thursday as investors assessed earnings from U.S. airlines and AT&T, while data showed fewer Americans filed fresh claims for unemployment benefits last week. Shares of American Airlines Group Inc and Southwest Airlines Co rose more than 2% each after the two airlines reported a smaller-than-expected quarterly loss.
After a partial recovery on Wednesday, the markets will shift attention to the ECB today. Economic data from the Eurozone and the U.S will also be in focus.
(Bloomberg) -- Saudi Aramco is conducting a strategic review of its upstream business, in a move that could potentially see the state-owned firm bring in external investors to some of its oil and gas assets, people with knowledge of the matter said.The world’s biggest energy company is in preliminary discussions with advisers to evaluate its options, the people said, asking not to be identified as the matter is private. Aramco may study possibilities including selling stakes in the operations at certain fields or entering joint ventures with other large energy producers, the people said.It could also form partnerships to develop new gas resources, according to the people. Any deal could raise billions of dollars for Aramco, which is at the center of Saudi Arabia’s economic transformation plan, the people said.Aramco is unlikely to open up its most important oil assets, though it could bring in investors to less sensitive operations, the people said. Deliberations are at an early stage, and the structure of any potential deal hasn’t been decided, the people said. The company, which is formally known as Saudi Arabian Oil Co., declined to comment, as did the energy ministry.Downstream PartnershipsSince Aramco was fully nationalized in 1980, most foreign investment in Saudi Arabia’s energy industry has been restricted to downstream assets such as refineries and petrochemical plants. In the past, the company struck joint venture agreements with firms including Royal Dutch Shell Plc and Total SE for the exploration and drilling of natural gas in the kingdom.Even before Aramco attracted foreign partners to drill for natural gas in 2003-2004, it held detailed talks with Big Oil companies in the late 1990s to develop its reserves. The talks failed as most companies balked at the the terms that Riyadh was prepared to offer.A few years earlier, Aramco also held discussions with foreign companies to develop the vast Shaybah oil field, but ultimately it decided to bring the asset into production on its own. Saudi Arabia’s hydrocarbons reserves are owned by the state and exploited by Aramco through a multi-decade concession agreement.Profit CenterAramco Chairman Yasir Al-Rumayyan has started selling stakes in non-core assets to help maintain the company’s $75 billion dividend, most of which goes to the Saudi government. The first deal was sealed earlier this month, when Aramco said it will raise more than $12 billion selling leasing rights over its oil pipelines to investors including EIG Global Energy Partners.The company reshuffled its senior management last year and created a division focused on “portfolio optimization,” which will “assess existing assets” and boost access to growth markets. It is headed by Abdulaziz Al Gudaimi, who reports to Chief Executive Officer Amin Nasser.Crown Prince Mohammed bin Salman, the kingdom’s de facto leader, told business executives last month that Aramco and the energy ministry are working on an “ambitious program in upstream and downstream” that’s bigger than previously-announced plans. The push could involve additional spending of 500 billion riyals to 1 trillion riyals ($133 billion to $266 billion) over the next ten years, he said.Most of Aramco’s profit comes from its upstream business. Last year, the business posted a 40% decline in earnings before interest, tax and zakat -- a local charitable contribution -- to about $110 billion. It pumped about 9.2 million barrels a day of crude in 2020.Record IPOAramco has been expanding its search for gas to meet rapidly rising local demand. Currently, Saudi Arabia burns huge quantities of crude directly in power stations during the summer to meet a surge in electricity demand for air conditioning. It also wants to use gas for the production of petrochemicals, a high-priority industry for the government in its strategy to diversify the economy.Saudi Arabia plans to invest about $110 billion to develop unconventional gas reserves in the eastern Jafurah field, the official Saudi Press Agency reported last year. The field is expected to start production in 2024.Aramco traces its roots back to concessions granted to U.S. oil companies nearly 90 years ago. The Saudi government first bought a stake in the company in 1973.More recently, Aramco started a process of opening up that culminated in a record-breaking initial public offering on the Saudi stock exchange in 2019. That deal, which saw Aramco sell less than a 2% stake to outside investors, raised about $29.4 billion. Ahead of the listing, Aramco courted some of the world’s largest oil companies to act as cornerstone investors, though it ultimately didn’t reach an agreement for them to buy stock in the offering.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
President Joe Biden will propose nearly doubling the capital gains tax rate for wealthy Americans to 39.6%, Bloomberg News reported Thursday. Combined with an existing surtax on investment income, Bloomberg said, that means federal tax rates for investors could be as high as 43.4%. Bloomberg cited people familiar with the proposal. The president is expected to release the proposal next week as part of the tax increases to fund social spending in the forthcoming "American Families Plan," Bloomberg said. U.S. stocks turned lower on the news.
(Bloomberg) -- President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%. The new marginal 39.6% rate would be an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public.A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than rates on some wage and salary income, they said.Stocks slid the most in more than a month on the news, with the S&P 500 Index down 0.9% at the close. Ten-year Treasury yields fell to 1.54% from an intraday high of 1.59% before Bloomberg’s report.The proposal could reverse a long-standing provision of the tax code that taxes returns on investment lower than on labor. Biden campaigned on equalizing the capital gains and income tax rates for wealthy individuals, saying it’s unfair that many of them pay lower rates than middle-class workers.QuickTake: How Capital Gains Are Taxed and What Biden Might DoWhite House Press Secretary Jen Psaki, asked about the capital-gains plan at a press briefing Thursday, said, “we’re still finalizing what the pay-fors look like.” Biden is expected to release the proposal next week as part of the tax increases to fund social spending in the forthcoming “American Families Plan.”Other measures that the administration has discussed in recent weeks include enhancing the estate tax for the wealthy. Biden has warned that those earning over $400,000 can expect to pay more in taxes. The White House has already rolled out plans for corporate tax hikes, which go to fund the $2.25 trillion infrastructure-focused “American Jobs Plan.”Republicans have insisted on retaining the 2017 tax cuts implemented by former President Donald Trump, and argued that the current capital-gains framework encourages saving and promotes future economic growth.“It’s going to cut down on investment and cause unemployment,” Chuck Grassley of Iowa, a top Republican on the Senate Finance Committee and former chair of that panel, said of the Biden capital-gains plan. He lauded the result of the 2017 tax cuts, and said, “If it ain’t broke, don’t fix it.”GOP lawmakers on Thursday called for repurposing previously appropriated, unused pandemic-relief funds to help pay for their counteroffer infrastructure plan. The group underlined opposition to tax hikes, other than a potential revamp of the levies that go toward highway funding in a way that would cover electric vehicles.Earlier: GOP Counters Biden With $568 Billion Infrastructure PlanBiden will detail the American Families Plan in a joint address to Congress on April 28. It is set to include a wave of new spending on children and education, including a temporary extension of an expanded child tax credit that would give parents up to $300 a month for young children or $250 for those six and older.Biden’s proposal to equalize the tax rates for wage and capital gains income for high earners would greatly curb the favorable tax treatment on so-called carried interest, which is the cut of profits on investments taken by private equity and hedge fund managers.The plan would effectively end carried interest benefits for fund managers making more than $1 million, because they wouldn’t be able to pay lower capital gains rates on their earnings. Those earning less than $1 million may be able to still claim the tax break, unless Biden repeals the tax provision entirely.The capital gains increase would raise $370 billion over a decade, according to an estimate from the Urban-Brookings Tax Policy Center based on Biden’s campaign platform.For $1 million earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.Democrats have said current capital gains rates largely help top earners who get their income through investments rather than in the form of wages, resulting in lower tax rates for wealthy people than those they employ.Capital gains taxes are paid when an asset is sold, and are applied to the amount of appreciation on the asset from when it was bought to when it is sold.Congressional Democrats have separately proposed a series of changes to capital-gains taxation, including imposing the levies annually instead of when they are sold.“There ought to be equal treatment for wages and wealth,” Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat who’s the chamber’s top tax-writer, told reporters in a phone briefing Thursday. “On the Finance Committee we will be ready to raise whatever sums the Senate Democratic caucus thinks are necessary.”(Updates with market close in fourth paragraph, carried interest background in 12th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
The digital asset manager added large numbers of altcoins to its holdings including horizen and livepeer.
‘It seems this person is entitled to nothing, but as he was a co-signer of the loan, my friend is in a tough spot.’
For such a long time, I would scan my portfolio for something to get rid of -- this is something I do regularly in good times and in bad. I never like to hang on to stocks that don't perform for very long.
It seems that all year I’ve been warning about valuations being out of whack with reality, especially in small-cap tech, which includes most SPACs. SPACs are being slammed as former “diamond hands” turn into weak-handed sellers who are (rightly, in most cases) trying to stop losses that are piling up in their portfolios. Speaking of SPACs, the markets are still suffering from SPAChaustion and a Coinbase Overhype Top, as I’ve also been saying for a few weeks now.
The numbers: Existing-home sales declined for the second straight month, reflecting the challenges buyers continue to face in the competitive real-estate market. Existing home-sales fell 3.7% to a seasonally-adjusted, annual rate of 6.01 million in March, the National Association of Realtors reported. “The sales for March would have been measurably higher, had there been more inventory,” Lawrence Yun, chief economist for the National Association of Realtors, said in the report.
When you’re planning (and managing) your retirement finances, arguably your most important goal should be to avoid running out of money. If you can meet your needs taking out 3%, you’re in very little danger of running out of money.
(Bloomberg) -- The implosion of Archegos is giving thousands of secretive family offices the greatest challenge to their privacy in a decade. They won’t give it up without a fight.Some lawmakers, regulators and consumer advocates are pushing to expose the inner workings of family offices, which are closely held and lightly regulated yet manage an estimated $6 trillion for the ultra-rich globally.The changes the reform advocates seek would require U.S. family offices to register as investment advisers and publicly report holdings on a quarterly basis, as most other types of investment firms must.Such data could alert regulators, investors and other Wall Street players to hidden risks, yet it could also reveal proprietary information to rivals.Those advocating greater regulation are optimistic that new Securities and Exchange Commission Chair Gary Gensler, who has a tough-on-Wall-Street reputation, will see things their way. “The rationale for the exemption of family offices is clearly indefensible now, and we think the SEC will change this quickly,” said Dennis Kelleher, CEO of advocacy group Better Markets.The SEC already is in the midst of a separate review to potentially increase what all investment firms, including family offices, must disclose about their holdings, Bloomberg has reported. The new disclosures could include firms’ derivatives positions and which stocks they are shorting.Family office representatives are pushing back. They say they’re preparing for their biggest lobbying effort since they successfully avoided inclusion in tough new regulations following the 2008 financial crisis. Their strategy: Insist that Archegos’s family-office setup was irrelevant to its implosion.“What Archegos did and the fact they got themselves in trouble had nothing to do with the family-office structure,” said Brian Reardon, a lobbyist for the Private Investor Coalition, which advocates for family offices in Washington.The late March meltdown of Archegos Capital Management LP, helmed by former hedge-fund manager Bill Hwang, touched off the lobbying skirmish. After being barred from the hedge fund industry for insider trading, Hwang started a family office in 2013 and eventually parlayed $200 million into about $20 billion in assets, using a highly leveraged portfolio concentrated in a handful of stocks.Earlier: God and Man Collide in Bill Hwang’s Dueling Lives on Wall StreetThe subsequent blowup revealed that neither regulators nor brokers had any idea how large Archegos’s positions had become.“The losses are bad,” said Andrew Park, senior policy analyst for Americans for Financial Reform. “But the biggest stunner is these losses all came from a firm that nobody was aware of until a few weeks ago.” His group has called on the SEC to examine whether the family office registration exemption is creating “regulatory blindspots.”The large-bank brokerages that had to unwind the Archegos positions, including Morgan Stanley, Nomura Holdings Inc. and Credit Suisse Group AG, lost billions of dollars, leading some bank executives to also call for increased scrutiny.“Frankly, the transparency and lack of disclosure relating to those institutions is just different from the hedge fund institutions. And that’s something I’m sure the SEC is going to be looking at,” said Morgan Stanley Chief Executive Officer James Gorman in an April 16 earnings call. “Better information is always good in rooting out where potential problems can be.”Reardon of the Private Investor Coalition said his group plans to speak with the SEC, the Commodity Futures Trading Commission and lawmakers to argue why some of the disclosures advocates have called for aren’t needed.Angelo Robles, founder of the Family Office Association, is also preparing for action. He said he plans to contact law firms and U.S. senators if regulators take an aggressive stance on family offices. “The fallout will likely be more regulation on swaps,” said Robles, whose Greenwich, Connecticut-based group has more than 200 members worldwide, referring to the type of derivative Archegos often used.The banks have said they can absorb the losses, but the shock that a little-known family office could have such an effect is serving as a rallying cry for Wall Street reform advocates.Kelleher of Better Markets said he’s already pressed his case with SEC staff, in part arguing that more public disclosure of family office sizes and positions could help prevent them from becoming a risk to the financial system.Lawmakers have also shown interest. Ohio Democrat Sherrod Brown, who leads the Senate Banking Committee, has asked Archegos’s brokers to disclose information about their family office dealings.Family offices serving a single family and with no outside clients generally don’t need to register with the SEC as investment advisers. The rationale for the exemption is that they only serve one wealthy client who doesn’t need the protections afforded to investors in other funds.In addition, offices with less than $100 million in assets or that manage funds only for one person can avoid regularly disclosing their holdings to the SEC.Offices that serve more family members must file their holdings with the SEC, but can ask for, and often receive, an exemption allowing them to keep the filing confidential.Even those reports, like those of hedge funds and mutual funds, usually only include direct ownership of stocks and not derivatives positions, like the total return swaps that led to Archegos’s downfall.Large banks brokered the stock swaps for Archegos for a fee. Such swaps allowed the firm to spend relatively small amounts -- it essentially used borrowed money to build a huge portfolio -- while keeping its ownership of individual stocks hidden.If the SEC moves to require all investment firms, including family offices, to disclose derivatives and short positions, that wouldn’t necessarily dent the privacy of family offices if they’re still able to file holdings confidentially with the SEC.The lack of disclosure has allowed some family offices to adopt similarly complex strategies without drawing scrutiny. Complying with fewer regulations, meantime, has helped lead a number of hedge fund managers to convert their firms into family offices.BlueCrest Capital Management, for example, returned money to investors in 2016 to focus on managing the wealth of its billionaire co-founder Michael Platt, his partners and employees. John Paulson said last year he’s converting his Paulson & Co. hedge fund into a family office, following a similar move by Leon Cooperman’s Omega Advisors.Family offices have proliferated this century, partly due to the boom in tech billionaires. More than 10,000 family offices globally manage the wealth of a single family, with at least half having started this century, according to EY.A 2019 estimate by researcher Campden Wealth valued family office assets at almost $6 trillion globally, larger than the entire hedge fund industry. Because most families tightly guard the extent of their wealth and very few public records are available to track their assets, the exact figure could be higher or lower.It’s rare for family offices to take on as much risk as Archegos. But hedge funds that convert to family offices are more likely to keep their trading strategies, which often employ leveraged bets that can have a broader market effect.Some family offices lately have also launched so-called blank-check firms -- shell companies whose purpose is to raise money from investors and eventually to acquire other companies.Part of the Private Investor Coalition’s plan is to tell regulators that they already have the tools they need to pinpoint threats to the financial system, Reardon said. The SEC is in the process of implementing a long-delayed rule that would require all funds, including family offices, to privately disclose some of their derivatives positions to the agency. In theory, that would have made it possible for the SEC to see what Archegos was doing.But requiring Archegos to register as an investment adviser wouldn’t have prevented the blow-up, said Reardon, whose coalition formed in 2009 to ensure the offices would be exempt from such registration.If regulators do crack down on family offices in the U.S., some might simply decide to leave the country.“In reality, the typical single family office is a small team of highly mobile individuals,” said Keith Johnston, chief executive officer of SFO Alliance, a London-based investment club for single-family offices. “There is the danger that if they consider themselves over-regulated they will simply move staff or headquarters to those jurisdictions where they are not.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Just what can you invest in with a Roth IRA? And what constitutes a prohibited transaction? Here's what you need to know.
LAWRENCE A. CUNNINGHAM'S QUALITY INVESTING As the old joke goes, St. Peter had some bad news for an oil prospector who appeared at the pearly gates of heaven: “You’re qualified for admission,” said St.
(Bloomberg) -- A slide in the rupee is exacerbating a slump in Indian corporate dollar notes that are now among the worst performers in Asia, just as concerns mount that companies are hedging less.The securities have lost about 0.1% in April, worse than a 0.4% gain for a broader Asian dollar bond gauge, according to a Bloomberg Barclays indexes. All the other countries in Asia have posted positive returns, except China which lost about 0.4% after the stumble by China Huarong Asset Management Co.The weaker rupee pushes up servicing costs on foreign debt. The currency has plunged about 2.4% against the dollar this month, making it Asia’s worst-performer. Spiking Covid-19 cases threaten to worsen the selloffAbout 5 out of 10 Indian firms hedge their foreign borrowings in India as compared to about 8 several years ago before the RBI eased rules on hedging, said Samir Lodha, chief executive officer at QuantArt Market Solutions, a Mumbai-based advisory firm. “The drop in the rupee this month may prompt more local companies with foreign borrowings to consider at least some low-cost hedging.”Primary Market -- Foreign Borrowings SlowThe weaker rupee is also making borrowers hesitate to tap what would otherwise be some of the lowest borrowing costs ever in the dollar bond market. Just one Indian company has settled a note this month: a $585 million deal from ReNew Power. That leaves issuance set for the lowest in six monthsLocal firms have also shunned foreign-currency loans in April after borrowings of $7.2 billion in the previous quarter“Most corporates will definitely pause their plans to issue fresh foreign-currency debt as they wait for the rupee to stabilize,” said Abhishek Goenka, founder of IFA Global, a Mumbai-based advisory firm. “Pandemic-induced currency volatility is making it difficult for borrowers to assess their foreign debt costs.”Firms may be turning more to the local credit market, even though there have been fresh obstacles there tooThey sold 47.6 billion rupees of bonds this week and still plan as much as 80.5 billion rupees more. If all those sales go through, that would be higher than in the previous two weeks combinedStill, offerings have fallen to 139.9 billion rupees ($1.9 billion) this month, the slowest start to a financial year since 2014. That’s due in part to rules that took effect April 1 strengthening the role of trustees for secured bonds backed by assetsSecondary Market -- Sovereign Rating ConcernsThe latest wave of coronavirus infections is also bad for India’s sovereign rating. The country has the lowest investment-grade score with a negative outlook at Moody’s Investors Service and Fitch Ratings“We expect a repeat of 2020’s sudden crash in economic activity in the coming months,” said Timothy Wee Lee Tan and Jason Lee, Bloomberg Intelligence analysts. “With a downgraded GDP growth outlook for FY22, India’s debt burden will be higher than the current IMF forecast, implying an elevated risk of ratings falling into speculative grade.”Any official gross domestic product downgrade may lead to pre-emptive widening of the option-adjusted spread for Indian dollar credits, with an actual offshore sovereign rating downgrade likely to push premiums up to 90 basis points wider to trade closer to Brazil and South Africa, according to Bloomberg IntelligenceDistressed Debt - ARC Rules Under ReviewReserve Bank of India formed a six-member panel Monday to review rules for Asset Reconstruction Companies or ARCs, which help India’s banking system deal with one of the world’s worst bad loan ratios among major economiesARCs have been in the spotlight in recent weeks:Mar. 18: India’s Ministry of Corporate Affairs is investigating allegations of financial irregularities at the asset reconstruction arm of Edelweiss Financial Services Ltd., according to people with direct knowledge of the matter. Edelweiss said it hasn’t received any intimation of any inspection by the ministryMar. 14: India’s central bank has rejected Yes Bank Ltd.’s proposal to set up an ARC for acquiring bad loans on conflict of interest concerns, Mint reported citing people it didn’t identifyMeanwhile, Infrastructure Leasing & Financial Services, whose default in 2018 triggered a prolonged credit crisis in the country, plans to resolve 500 billion rupees ($6.6 billion) of its debt by the end of September, Chairman Uday Kotak said last week. Investors are closely watching the debt resolution as a test case for group insolvencyKotak, who is heading the IL&FS board after government seized control of the shadow lender in 2018, expects to resolve about 62% of its 1 trillion rupees of debtAnother group facing challenges in servicing its debt is Future Group. The Indian supermarket-operator Future Retail Ltd. approved a debt resolution plan that eases some immediate concerns as a legal battle with partner Amazon.com Inc. threatens to delay an asset sale to Reliance Industries Ltd. India’s top court scheduled a final hearing in the matter to May 4Best and Worst Performing Corporate Dollar Bonds Last 12 MonthsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.