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Money managers under the microscope
from Global Investing:
EM growth is passport out of West’s mess but has a price, says “Mr BRIC”
Anyone worried about Greece and the potential impact of the euro debt crisis on the world economy should have a chat with Jim O'Neill. O'Neill, the head of Goldman Sachs Asset Management ten years ago coined the BRIC acronym to describe the four biggest emerging economies and perhaps understandably, he is not too perturbed by the outcome of the Greek crisis. Speaking at a recent conference, the man who is often called Mr BRIC, pointed out that China's economy is growing by $1 trillion a year and that means it is adding the equivalent of a Greece every 4 months. And what if the market turns its guns on Italy, a far larger economy than Greece? Italy's economy was surpassed in size last year by Brazil, another of the BRICs, O'Neill counters, adding:
"How Italy plays out will be important but people should not exaggerate its global importance. In the next 12 months the four BRICs will create the equivalent of another Italy."
Emerging economies are cooling now after years of turbo-charged growth. But according to O'Neill, even then they are growing enough to allow the global economy to expand at 4-4.5 percent, a faster clip than much of the past 30 years. Trade data for last year will soon show that Germany for the first time exported more goods to the four BRICs than to neighbouring France, he said.
"Post-crisis, these countries will be our passport out of this mess."
But there has to be a payoff for this kind of increased financial clout, he warns. Developing countries are increasingly disgruntled about the the richer world's strangehold on global policies via the International Monetary Fund and the World Bank and most have responded coolly to the call for additional funds for the IMF which is fighting to stem the euro zone malaise. An attempt last year to install a representative of the developing world at the helm of the IMF for the first time ever fell apart, with Europe retaining the position. But emerging countries could make a bid for the World Bank chief's position this year, a position traditionally held by a U.S. citizen. O'Neill said the West had to bow to the new reality:
"You can't have it both ways...This game of 'You have the IMF and I have the World Bank' has to stop or these institutions are going to lose their relevance."
He is also dismissive of fears China is headed for a so-called hard landing, a sharp slowdown of growth, potentially leading to unemployment, a property crash and social unrest in the world's No. 2 economy. "A lot of people (in the West) want China to have a hard landing, " he said. "And that's because it isnt us."
Morning Line-Up: Goldman, clearing houses, Hargreaves
News and views on the asset management industry from Reuters and elsewhere:
Goldman and Clive Capital to launch commods index - FT
Clearing houses target direct links with fund managers – Financial News
Hargreaves resists revealing fund commission – ThisisMoney
Paulson’s Goldman defense
As stock bets go it is no way the biggest and not particularly dramatic.
But the decision by Paulson & Co. to pick-up some 1 million shares of Goldman Sachs Group in the second-quarter may be some of the most fitting piece of Wall Street poetry to come out of this latest round of 13-F filings.
Of course Paulson’s fund will forever be linked with Goldman because it was the hedge fund at the heart of the Securities and Exchange Commission’s civil fraud case against the Wall Street bank. The SEC, in April, charged Goldman with failing to disclose that Paulson’s hedge fund had a hand in picking securities for a complex mortgage-related deal that the hedge fund was betting against.
And although regulators didn’t charge Paulson’s hedge fund with any wrongdoing, the manager’s name and his widely profitable bet shorting the U.S. housing market in 2007 did get a bit tarnished in the process. Goldman, on July 15, reached a settlement with the SEC over the civil suit, in which the Wall Street firm agreed to pay a $550 million penalty. The settlement came after the close of the second quarter, so Paulson took his stake in Goldman before the deal was done.
In the wake of the SEC lawsuit, Goldman shares traded as low as $131. Today, the stock closed at $147.67.
Morning line-up: Legg Mason, Goldman and the BT Trustees
News and views on the fund industry from Reuters and elsewhere:
Hard road for Legg Mason’s Fetting – Reuters
Bank teams rush to set up new funds – FT
BT Trustees in court over state guarantee – Reuters
IMA recombines UK income sectors - Hargreaves Lansdown
Goldman: Conflict of interest latest – Bloomberg
Morning Line-Up: Pru’s shareholders, Greek crisis, Goldman faces Senate
News and views on the funds sector from Reuters and elsewhere:
Pru faces shareholder revolt over Asian deal - Reuters
Greek crisis spills over to Europe - WSJ
Goldman Sachs traders face U.S. Senate - Telegraph
from MediaFile:
Anyway you look at it, it’s still “shitty”
"Shitty" is such an under-used word on TV and in the stately halls of Capitol Hill, except today as senators – especially Carl Levin -- grilled Goldman Sachs executives on their role in the sub-prime mortgage meltdown. "Shitty" and its second cousin "crappy" are flying all over the place thanks to an e-mail in which Goldman Sachs employees used the phrase “shitty deal.”
This presented a dilemma for news organizations, many of which have been live blogging the hearing. Let’s check in and see how shitty goes down in the various style guides. (It goes without saying, shitty is acceptable over here.)
At The Washington Post, Frank Ahrens refrains from using the word straight out and instead goes with the demure “s****y deal.” But, way down in the tags, someone thinks the style is stuffy and manages to sneak in the full monty.
The New York Times doesn’t even bother with **** and trips all over itself to describe the situation as only the Times can do in this Caucus blog post about the very word: “Not once, not twice, but about eight times did Senator Carl Levin use a vulgar term during a Senate hearing today with Goldman Sachs executives — a term we can’t even partially spell out here, because of The Times’s strict rules on proper language.”
Fetch my smelling salts.
You think The Wall Street Journal, under News Corp's ownership, would throw the style book to the wind? No such luck. They opt for the dashes, “sh – y.”
Heh. The FT, on the other hand, has no problem.
Morning line up: Obama on Wall Street, Goldman’s Tourre, Australia’s lure
News and views on the fund industry from Reuters and elsewhere:
Obama calls for new rules for Wall Street - Reuters
German bank cuts links with Goldman - Reuters
Morning line-up: Calpers/Goldman, bank bail-out taxes, Tourre’s City licence
News and views on the fund industry from Reuters and elsewhere:
US top pension fund scrutinises Goldman’s business practices - Daily Telegraph
Goldman’s Tourre stripped of City licence - Guardian
Lansdowne builds up Lloyds stake - Reuters
Banks face new taxes to future bail-outs - Reuters
Morning Line-Up
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Galleon paid banks millions for ‘edge’- FT
KI hedgie said to be linked to FBI money – laundering sting – Bloomberg
Asian team at hedgie Stark quit to launch Orchard – Reuters
Griffin rebounding from loss builds bank to rival Goldman – Bloomberg
