Feb.04 -- James Lim, senior research analyst at Dalton Investments, discusses the outlook for Asian stocks and the opportunities he sees. He speaks with Juliette Saly and Rishaad Salamat on "Bloomberg Markets: Asia."
Feb.04 -- James Lim, senior research analyst at Dalton Investments, discusses the outlook for Asian stocks and the opportunities he sees. He speaks with Juliette Saly and Rishaad Salamat on "Bloomberg Markets: Asia."
Charlie Munger, vice chairman of Berkshire Hathaway and long-time business partner of Warren Buffett, issued a strong condemnation of the businesses he said enabled the recent frenzy of speculative trading by retail investors.
Oil prices climbed on Wednesday to fresh 13-month highs after U.S. government data showed a drop in crude output after a deep freeze disrupted production last week. U.S. crude oil production dropped last week by more than 10%, or 1 million barrels per day, during the rare winter storm in Texas, equaling the largest weekly fall ever, the Energy Information Administration said.
A medical graduate who had about $440,000 in student debt saw 98% of his loans cancelled by a bankruptcy court in California, according to a recent filing.
Stocks traded lower as a rapid rise in Treasury yields spooked equity investors.
Costco has a leg up on e-commerce behemoth Amazon (AMZN) on at least one measure, according to Charlie Munger, vice chairman of Berkshire Hathaway.
(Bloomberg) -- Bond traders keep probing the limits of central banks’ patience, and nowhere is that clearer than in Australia, where policy makers are struggling to defend their yield target.The Reserve Bank of Australia bought A$5 billion ($4 billion) of bonds Thursday, matching the record last March when it began quantitative easing. That eventually brought the targeted three-year yield down, but only after it hit a two-month high. A selloff that began in New Zealand also widened to Treasuries and Japanese debt, as the world’s sovereign bonds head for their worst month since April 2018.“The Australian bond market is in many ways caught in the crossfire of what’s happening in U.S. Treasuries,” said Chamath De Silva, a portfolio manager at BetaShares Holdings in Sydney and a former fixed-income trader at the central bank. “I don’t see it as the market deliberately testing the RBA so much as global central bank dovishness in general.”A $9 trillion rescue mission by central banks to haul the global economy out of its coronavirus recession is being tested by inflation bets that are threatening their ability to keep borrowing costs down. The intensifying bond rout is forcing a rising tally of money managers to scale back market exposures while Wall Street strategists pare back their bullish playbooks.Read: When Listening to the Central Bank Goes WrongAustralia’s 10-year yield closed at its highest since 2019, having surged more than 75 basis points this year. The benchmark Treasury yield has hit 1.4%, and is headed for the steepest monthly advance since the November 2016 bond rout set off by President Donald Trump’s election win.Yields in every major market have jumped.Policy makers are trying to push back against the rising tide of yields, from Fed speakers stressing they will look through short-term inflation spikes to European Central Bank President Christine Lagarde “closely monitoring” government debt yields. The Bank of Korea warned it’ll intervene in the market if borrowing costs jump and the Reserve Bank of India is deploying a range of tools in the face of a market revolt.That’s not enough to stop the growing challenge from bond traders, who are pushing the limits of central banks’ patience while debt auctions are starting to struggle. Investment firms including BlackRock Inc.’s research arm and Aberdeen Standard Investments are retreating from government bonds.Read: Bond Backlash Spurs Tepid Demand at Five-Year Treasury SaleIn Australia, skepticism has grown that the RBA will maintain its guidance to keep borrowing costs steady into 2024. That’s been highlighted by the unraveling of a popular trade based on selling April 2024 bonds and buying November 2024 notes in anticipation that the central bank’s target will shift to the later maturity debt.Australia’s rapid economic recovery has emboldened traders, as the country suppresses Covid-19 and massive stimulus encourages households to spend and firms to hire. A further boost has come from the price of iron ore, Australia’s largest export, which crashed through $170 a ton and is closing in on a record.What Bloomberg Economics Says...“The RBA is pulling out the stops to counter a rise in bond yields, which have been swept up in a global updraft. In a surprisingly forceful move, it announced its largest purchase of Australian government bonds since it began the program in March.”-- James McIntyre, economistFor the full note, click here.Yet, there is wide disconnect with policy makers expectations.RBA Governor Philip Lowe does not anticipate any rapid recovery in inflation. He noted that before the pandemic, when unemployment had a 4 in front of it, it still failed to generate the sort of wage gains that would be needed to return CPI sustainably to the 2-3% target. Australia’s most recent annual inflation reading was just 0.9% and the jobless rate stands at 6.4%.The central bank is expected to keep policy settings unchanged when it meets on Tuesday.RBNZ MandateNew Zealand bonds kicked off the rout in Asia on Thursday after the government announced it will require the central bank to take account of house prices when it sets interest rates. The losses accelerated as the bid-to-cover ratio at an auction dropped to the lowest since 2012.Money markets are now pricing in a rate increase in New Zealand for mid-2022, suggesting it could be the first major central bank to hike.Yields on the 10-year benchmark surged 18 basis points -- the largest move since April -- to 1.87%. Japanese bonds were also sold, with the benchmark 10-year yield rising to the highest since 2018, while the yield curve steepened.“As yields look set to still rise gradually, this isn’t an environment where investors want to buy even if levels are attractive enough,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities Co.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) -- New Zealand’s government will require the central bank to take account of rampant house prices when it sets interest rates, a change that may restrict its ability to run loose monetary policy.The Reserve Bank’s remit will be amended so that the bank considers “the impact on housing when making monetary and financial policy decisions,” Finance Minister Grant Robertson said in a statement Thursday in Wellington. The New Zealand dollar jumped to its highest since 2017 as investors ramped up bets on higher interest rates.The government is under political pressure to cool an overheating housing market, which has been fueled by record-low borrowing costs after the RBNZ responded to the coronavirus pandemic by slashing its cash rate and embarking on quantitative easing. Governor Adrian Orr pushed back against Robertson’s proposal when it was first made last year, saying that forcing the bank to consider house prices when setting rates could lead to below-target employment and inflation.“The more objectives you’ve got, the more complicated it can be to meet all those objectives,” said Nick Tuffley, chief economist at ASB Bank in Auckland. “Inflation and employment is what they will focus on, but they have to think harder about how their decisions impact on the housing market.”The kiwi dollar jumped about a third of a U.S. cent to 74.55 cents, its highest since August 2017. Bond yields and swap rates also rose on news of the changed remit, which comes into force on March 1. Investors are now pricing a 30% chance of a rate hike in November, even though the RBNZ yesterday sought to damp bets on tighter policy and said it could cut rates further if needed.Robertson ‘In Charge’“The market is saying no more rate cuts, so push the kiwi higher,” said Jason Wong, currency strategist at Bank of New Zealand in Wellington. “The RBNZ has shown its independence by saying ‘we don’t like this measure,’ but they are going to have to live with it because the finance minister’s in charge.”Robertson said today that the RBNZ’s objectives and mandate remain the same, which is to maintain price stability, support full employment and promote a sound and stable financial system.But a change to the Monetary Policy Committee’s remit will force it to “assess the effect of its monetary policy decisions on the government’s policy.” A clause has been added stating that the government’s policy “is to support more sustainable house prices, including by dampening investor demand for existing housing stock, which would improve affordability for first-home buyers.”“The committee retains autonomy over whether and how its decisions take account of potential housing consequences, but it will need to explain regularly how it has sought to assess the impacts on housing outcomes,” Robertson said.Robertson also issued a direction under the Reserve Bank Act requiring the bank to have regard to government policy on housing in relation to its financial policy functions.In a statement Thursday, the RBNZ said it “welcomes the direction it has received today from the Minister of Finance.” It said changes to financial stability policy are “in tune with our recent advice.”The bank acknowledged the change to its monetary policy remit but noted its targets “remain unchanged.”“The adjustments increase the focus on understanding and communicating the impact of the bank’s decisions on house price sustainability,” Orr said in the statement. “We have a long-standing commitment to transparency about our policy actions and approaches, and this will continue.”Soaring house prices have raised concerns that first-time buyers are being locked out of the market. Much of the surge has been attributed to investors taking advantage of low interest rates.The RBNZ, which predicts prices will rise 22% in the year through June, is reinstating mortgage lending restrictions and will tighten them further for investors from May 1.Orr in December recommended that the bank be required to address the issue of rapid house-price inflation via financial policy, and requested it be allowed to add debt-to-income ratios to its macro-prudential toolkit.Robertson said today he has asked the RBNZ to provide advice on interest-only mortgages and debt-to-income ratios. He would want the latter to apply only to investors, he said.“Today’s announcement is just the first step as the government considers broader advice about how to cool the housing market,” Robertson said. “We know the rapid increases we have seen in recent months are not sustainable, which has meant many first-home buyers are struggling to access the market. We’ll be making further announcements in the coming weeks on other policy responses.”(Includes chart)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 largest U.S. oil producer is reeling from the sharp decline in oil demand and a series of bad bets on projects when prices were much higher. Exxon's reserves are at their lowest since the merger between Exxon and Mobil in 1999 and were "a result of very low prices during 2020 and the effects of reductions in capital expenditures," the company said in a filing. Total reserves for all products fell to 15.2 billion barrels of oil and gas at the end of 2020 from 22.4 billion the year before, mostly driven by oil sands in Canada and U.S. shale gas properties, according to the filing.
(Bloomberg) -- Alibaba Group Holding Ltd, once the most valuable company in China, is turning from a global hedge fund favorite to something less than desirable.Investors from hedge fund titans such as Point72 Asset Management and Moore Capital Management to Canadian and U.S. pension funds dumped 101 million of Alibaba’s American depositary receipts in the fourth quarter, cutting the market value of their holdings by $89 billion, according to filing data. It was the biggest investment reduction among U.S. traded companies, more than three times the second-most sold stock, Salesforce.com Inc..Once a symbol of China’s New Economy, the e-commerce giant founded by Jack Ma now finds itself at the forefront of the government’s campaign to rein in the sprawling power of tech giants. Alibaba’s shares, which are traded on the New York Stock Exchange, have slumped about 18% since November, when regulators in Beijing halted the $35 billion initial public offering of Alibaba’s affiliate Ant Group at the last minute. Government watchdogs have also ordered Ant to overhaul its business and began an antitrust investigation of Alibaba.Meanwhile, Alibaba, which has invested in a wide range of sectors from online grocery to ride-hailing and artificial intelligence, will face restraints on future expansion. Chinese antitrust watchdogs used to pay little attention to investment led by internet companies, but have begun strengthening enforcement amid Beijing’s push to root out monopoly power. In December, China’s antitrust watchdog fined Alibaba and two other companies over years-old acquisitions. Regulators said the e-commerce heavyweight should have sought government approval before increasing its stake in a department store chain in 2017.If someone were to make an example of how to take down a monopoly in China, they’ve got nothing better than Alibaba, said Rajiv Jain, who oversees $73 billion in assets as chairman of GQG Partners LLC in Fort Lauderdale, Florida. “The long-term growth trajectory is now different from what we thought.”GQG liquidated all of its 9.6 million ADRs in the fourth quarter, valued at $2.8 billion, according to filing data. Jain said he had owned Alibaba shares since the company’s initial public offering in 2014, when he was the chief investment officer at Vontobel Asset Management.An Alibaba spokesperson declined to comment on investors selling the stock.Investors are questioning whether Alibaba can sustain its meteoritic rise amid the regulatory scrutiny. It now could face penalties of as much as 10% of its revenue if it’s found to have violated antitrust rules. Those rules are against practices such as forced exclusive arrangements with merchants, known as “Pick One of Two,” predatory pricing and algorithms favoring new users. Tightening government oversight also threatens to curb Ant’s dominance in online payments and scale back its expansion into consumer lending and wealth management.Alibaba has said that it’s working with regulators on complying with their requirements as the antitrust investigations continue. Share prices have recovered somewhat since Ma resurfaced in late January after vanishing from the public sight following the government’s crackdown on his businesses. The shares fell about 1% to $250.34 in New York Wednesday. Alibaba sellers are Who’s Who of hedge fund stars. Steve Cohen’s Point72 dumped all its $413 million in holdings last quarter fourth quarter. Louis Bacon’s Moore Capital slashed its holdings by 99%, while Dan Loeb’s Third Point cut its stake by 45%.Other prominent investors cashing out include Hillhouse Capital Advisors, which sold its $1.2 billion holdings. Canada Pension Plan Investment Board reduced its stake by 31%, or $2.1 billion.Izzy Englander’s Millennium Management LLC was among a minority group of investors who scooped up Alibaba, counting it as its sixth-largest holdings.Representatives at these firms either declined to comment or didn’t reply to emails or calls.Rather than pulling out, some investors may have swapped their ADRs with shares traded in Hong Kong to avoid the risk of being caught in the political tension between the U.S. and China, said Brendan Ahern, chief investment officer at Krane Funds Advisors LLC, which runs several China-focused exchange-traded funds in the U.S.Former U.S. President Donald Trump signed legislation in December that could kick Chinese companies off of U.S. exchanges unless American regulators can review their financial audits. The administration had also considered banning U.S. investments in Chinese companies, including Alibaba and Tencent, before deciding against it.“Alibaba is a very well-managed company,” said Ahern. “We are a big believer in the company and management.”Analysts share Ahern’s upbeat sentiment. All but three of 61 analysts rate the company as a buy.For GQG’s Jain, the regulatory uncertainties mean the risk-reward calculation is stacking against Alibaba. For instance, it’s becoming much more difficult for the company to grow its business by acquiring smaller players.“There’s more downside than upside,” said Jain, whose Goldman Sachs GQG Partners International Opportunities Fund beat 83% of its peers over the past three years. “The regulatory risk is usually underappreciated until it’s too late. In other words, you cannot handicap that.”(Update with Ailbaba’s share price in ninth 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.
Nvidia Corp forecast better-than-expected fiscal first-quarter revenue on Wednesday, with its flagship gaming chips expected to remain in tight supply for the next several months. While Nvidia was long known for its gaming graphic chips, its aggressive push into artificial intelligence chips that handle tasks such as speech and image recognition in data centers has helped it become the most valuable semiconductor maker by market capitalization.
(Bloomberg) -- Yields on U.S. government debt blew past another set of closely watched levels, with a key part of the Treasury curve surging past an inflection point that’s seen as potentially squelching global speculative euphoria.Yields took off with startling speed on Thursday, with the rate on 10-year Treasuries at one point reaching 1.61%, the highest in a year. In a telltale warning sign for some strategists, the 5-year Treasury yield soared convincingly above 0.75%, a crucial level that was expected to exacerbate selling, as traders pulled forward bets on when the Federal Reserve will start lifting policy rates. The 10-year U.S. real yield -- which strips out inflation and is seen as a pure read on growth prospects -- climbed as much as 25 basis points to a level last seen in June.The latest leg in this frenetic fixed-income tumble came on a sudden wave of selling after demand cratered at the Treasury’s 7-year note auction Thursday. Yields globally are now at levels last seen before the coronavirus spread worldwide. Central banks have attempted to soothe markets, with European Central Bank chief economist Philip Lane saying the institution can buy bonds flexibly and Fed Chair Jerome Powell calling the recent run-up in yields “a statement of confidence” in the economic outlook. While higher real rates signal growth is gaining traction, investors are becoming uneasy over the sustainability of the recovery as borrowing costs hurtle upwards.The 5-year note leading the rout “is a warning signal that the rates selloff is going beyond a repricing towards a convexity move,” said Peter Chatwell, a Mizuho International Plc strategist. “This is something which we think is inconsistent with Fed dovish rhetoric on rates.”Convexity FuelAdding to the bond slump are forced sellers in the $7 trillion mortgage-backed bond market, who are likely unloading the long-maturity Treasury bonds they hold or adjusting derivatives positions to compensate for the unexpected jump in duration on their mortgage portfolios. It’s a phenomenon known as convexity hedging, and the extra selling has a history of exacerbating upward moves in Treasury yields -- including during major “convexity events” in 1994 and 2003.Convexity Hedging Haunts Markets Already Reeling From Bond RoutThe 5-year note is of particular interest to many in the $21 trillion Treasuries market. Earlier this week, tepid demand in an auction of five-year notes brought into focus this key part of the curve, which also reflects medium-term expectations for Fed policy. Then on Thursday, a measure of demand for a $62 billion auction of 7-year Treasury notes came in at a record low.The rout comes as investors continue to reprice expectations for Fed hikes as the vaccine rollout and the prospect of additional stimulus foster a rosier outlook for the economy. Yields on 2- and 5-year yields are more influenced by the starting point and speed of normalization, said Bank of America Corp. rates strategist Ralph Axel.“Everything that we see keeps pushing us into sooner, faster, more in terms of removing accommodation,” Axel said.With five-year yields taking flight, some investors appeared to get squeezed out of bets on a steeper yield curve, which has been a winner for weeks amid the global reflation trade. The spread between 5- and 30-year rates collapsed by roughly 15 basis points, the most since March.The surge in yields is hurting riskier assets. Emerging-market currencies such as the South African rand and Mexican peso sold off sharply against the dollar, and the S&P 500 Index dropped 2.5%.In Europe, peripheral countries have led a bond sell-off, with Italy’s 10-year yield spread over Germany climbing back above 100 basis points. Core debt wasn’t spared, with yields on France’s benchmark debt turning positive for the first time since June.Officials’ DisquietEconomic leaders are making clear their disquiet. Apart from ECB’s Lane, Executive Board Member Isabel Schnabel weighed in, saying in an interview published Thursday that the central bank has a close eye on financial markets because a sudden rise in real rates could pull the rug out from under the economic recovery.Elsewhere, the Bank of Korea warned it will intervene in the market if borrowing costs jump, while Australia’s central bank resumed buying bonds to enforce its yield target. The Reserve Bank of New Zealand on Wednesday promised a prolonged period of stimulus even as the economic outlook there brightens.“You have to look at real yields,” Christian Nolting, chief investment officer at Deutsche Bank Wealth Management, said in a Bloomberg Radio interview. “If real yields are really rising and rising fast, that in the past has always been an issue for stocks.”(Updates levels throughout.)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.
Munger says the argument for diversification should be called 'diworsification.'
Berkshire Hathaway vice chairman Charlie Munger unloaded on bitcoin, showing that his views haven't changed since Warren Buffett and Munger last opined on the digital asset.
A question that has long bedeviled bitcoin observers is how to value it. Lately the answer to its worth has been whatever influential people like Elon Musk and star stock picker Cathie Wood say it is. The original crypto asset bounced around this month as influencers weighed in.
Essentially, Powell appeared to be trying to sound supportive for economic growth while downplaying the potential impact of higher inflation.
Stocks opened lower on Wednesday to pick up declines from the past week, with tech shares still under pressure.
(Bloomberg) -- The unprecedented $9 trillion rescue mission by central banks to haul the world economy from its coronavirus recession is being tested as rising bond yields and inflation bets threaten their ability to keep borrowing costs down.While Federal Reserve Chairman Jerome Powell this week called the recent run-up in bond yields “a statement of confidence” in the economic outlook, other counterparts are sounding less sanguine as their recoveries lag that of the U.S..European Central Bank President Christine Lagarde said Monday that she and colleagues are “closely monitoring” government debt yields. The Bank of Korea warned it’ll intervene in the market if borrowing costs jump, Australia’s central bank has been forced to resume buying bonds to enforce its yield target and the Reserve Bank of New Zealand Wednesday promised a prolonged period of stimulus even as the economic outlook there brightens.The bond market isn’t listening, tumbling again on Wednesday. U.S. 30-year Treasury yields surged as much as 11 basis points to 2.29%, their highest level since before the coronavirus-induced meltdown in March. The rate on similar-dated U.K. bonds also soared, with Germany’s following suit.Because government borrowing costs are used as the benchmark for pricing loans to businesses and consumers, any increase in yields trickles through to the real economy. That counters the campaign by central banks to drive recoveries with cheap money, potentially forcing them to deliver even more stimulus at some point.“It’s the U.S. bond market pulling up global bond yields, and in some cases in ways that are moving faster than they’d like,” said Ethan Harris, Bank of America Corp.’s head of global economic research. “If you’re in countries outside the U.S., you’re looking at this as kind of an unwelcome import.”In the U.S., 10-year Treasury yields have risen more than 50 basis points since the end of December as its economy shows signs of improving, vaccinations roll out and lawmakers ready even more fiscal stimulus. Economists at JPMorgan Chase & Co. now see growth of 6.2% this year, up from 4.2% at the start of the year.More broadly, the yield on the Bloomberg Barclays Global Aggregate Index, which includes investment-grade sovereign and corporate debt, has risen 20 basis points this year to above 1%. That follows a 62-basis-point decline in 2020.The jump in U.S. yields threatens to drag up other markets, challenging the policies of the ECB, Bank of Japan and Bank of England, Krishna Guha and Ernie Tedeschi of Evercore ISI told clients in a report this week. That’s a worry for those policy makers whose focus remains more on stoking growth than containing any nascent inflation pressures.The ECB could be in a particularly uncomfortable spot as it has pledged to keep financing conditions “favorable” through the crisis and is already facing a weaker recovery than counterparts.Yields on 10-year German government bonds have climbed above -0.3% this month from -0.6% in November while equivalent French yields are now barely below zero, compared with -0.3% three months ago.One option for the ECB is to accelerate bond buying via its pandemic emergency purchase program. Another is to strengthen its message on how long it intends to keep interest rates low.“The ECB has a number of potentially powerful options in its toolbox to anchor bond yields,” said Nick Kounis, head of financial markets research at ABN Amro Holding NV.In Japan, where investors are nervously awaiting the outcome of the central bank’s policy review, yields for 10-year bonds rose to 0.12%, the highest level since Nov. 2018. That’s still within officials’ comfort range of 20 basis points on either side of its target, but some market participants forecast the range to be expanded with the BOJ announcement on March 19.Higher Treasury yields are also a threat for emerging economies, where historically they sparked currency volatility and choppy capital flows, especially for countries that rely on external funding. That then slows expansions, as happened in 2013 when concern the Fed was pulling back triggered a ripple effect.Bloomberg Economics predicts the central banks of Argentina, Brazil and Nigeria will all turn more hawkish this year.“The Fed remains in a more comfortable position compared to many of its peers in emerging markets,” said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc. “Inflation in the U.S. is far better anchored than in small, open economies.”Some economists say the yield moves and the bets on an inflation revival may mark something of a turning point for the global economy.“Central banks are now throwing the kitchen sink at beating deflation and disinflation just as they threw it at high inflation in the 1980s and early 1990s,” said Shane Oliver, chief economist at AMP Capital Investors Ltd. in Sydney. “There is a strong case to be made that the disinflation seen since the 1970s is coming to an end and that the long-term trend in inflation is at or close to bottoming.”Still, others point out that disinflation forces will linger, especially as labor markets remain weaker than before the pandemic and full economic recoveries hinge on successfully controlling the virus and delivering vaccines.“I am still not so sure whether the recovery-related steepening of the curve will be long lasting,” said Alicia Garcia Herrero, Asia Pacific chief economist with Natixis SA. “There are a number of risks that might bring us back to a less upbeat scenario.”(Updates with Wednesday’s market moves in fourth 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.
Prices are the highest since the pre-pandemic days, and they're still climbing.
Shares on Wall Street ended higher on Wednesday, as a selloff in technology-related stocks eased and a rotation into cyclical shares continued after Federal Reserve Chair Jerome Powell's comments calmed inflation worries. The Nasdaq index, which traded as much as 1.3% lower earlier in the session, regained its footing by early afternoon and closed up. The Dow hit a record high earlier in the session.
The direction of the NZD/USD on Wednesday is being controlled by .7344.