Aswath Damodarn – The Promise and Perils of “Big Data”!

Each year, for the last 25 years, I have spent the first week playing Moneyball, with financial data. I gather accounting and market data on all publicly traded companies, listed globally, and then try to extract whatever lessons that I can from the data, to use in investing, corporate finance and valuation for the rest of the year. I report the data, classified by industry group and by country, on my website, in the hope that others might find it useful. While, like last year, I will be summarizing what I see in the data in a series of posts over the rest of January, I decided to use this one to both provide some perspective and cautionary notes not only on my data but on numbers, in general.

 

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Banking union, securitization rules priority of EU Council

As Malta assumes presidency of the Council of the EU for the next six months, its officials said the most important financial-services priorities are pressing ahead with the creation of a Europe-wide banking union and resolving disagreement among EU states over rules for securitization. Other major initiatives include revised banking rules and policies on tax avoidance.

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Why the leverage ratio distorts market-making

Big increases in the capital requirements of bank-affiliated dealers have drained liquidity from over-the-counter markets, especially for products that occupy a lot of space on dealer balance sheets, such as bonds, swaps, repos and foreign exchange contracts.

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Research: Securitized loans less risky despite asymmetry

Research by the Bank for International Settlements finds evidence for asymmetric information in the securitization market, but not to levels that compromise credit standards. Securitized loans overall show higher quality than non-securitized loans.

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Who’s Afraid of the Fed? Not Investors in Junk Bond ETFs

Inflows into junk-bond exchange-traded funds surged last month, outpacing investment-grade for the first time in 2016. The flip occurred as the Federal Reserve voted to raise interest rates, threatening the value of the underlying debt. Investors’ sudden fondness for high-yield securities likely stems from the market’s increased tolerance for risk since the election of Donald Trump, said Eric Balchunas, an ETF analyst for Bloomberg Intelligence. “There’s a new variable in town and it’s massive.”

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China starts to put brakes on credit creation

China’s central government and the People’s Bank of China are showing a change in attitude and a slowdown on their policy of encouraging credit growth, which has been in place for years, according to several market analysts. A move toward tighter regulation, a squeeze on liquidity and rising inflationary pressure are said to be the main factors behind the shift.

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S&P Webcast : Asia-Pacific Sovereigns Rating Trends: 16 January 2017, 11AM SGT

Title: Asia-Pacific Sovereigns Rating Trends: January 2017

Please join us for a webcast and Q&A on 16 January 2017 on APAC  Sovereign Rating Trend.

Date and Time: 16th Jan, 2017 , 11:00 a.m. Hong Kong/ Singapore Time

 Key Discussion Points:

  • The number of Asia-Pacific sovereign ratings with negative outlooks remains at a level not seen since mid-2010, when the region was coming out of the global financial crisis.
  • 2017 economic prospects for much of the region are unlikely to be more supportive than in the past few years.
  • Political developments in the advanced economies add further uncertainties.
  • The implications of these and other developments for sovereign ratings in Asia-Pacific.

Speakers:

  • Kim Eng Tan , Senior Director, Sovereign Ratings
  • Craig Michaels, Director, Sovereign Ratings
  • YeeFarn Phua, Director, Sovereign Ratings


Register now.
 

You will receive the replay as long as you register, even if you end up missing it.

Important Note:You will need computer speakers or headphones to listen to the webcast. You may submit your questions for the speakers in real time via the web interface. Please test your system here at least 15 minutes before the scheduled start time.

ECB’s Monte Paschi Capital Bar Would Trip Up 10 Other EU Banks

Deutsche Bank AG, UniCredit SpA and eight other European Union banks would fall short of the European Central Bank’s capital demands on Banca Monte dei Paschi di Siena SpA based on stress-test results, highlighting potential objections to the plan.

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Singapore Defaults Seen as Bellwether for 2017 Asia Distress

Singapore’s commodities-related defaults could turn out to be the canary in the mine.

Despite a modest rebound in resource prices, restructuring specialists including KPMG and Hogan Lovells Lee & Lee see more Asia-Pacific commodities and shipping companies being pushed into delinquency. Law firm DLA Piper said there could be choppy waters ahead on rising interest rates and President-elect Donald Trump’s overhaul of trade with China. Regional non-bank borrowers face $76.4 billion of dollar bonds maturing in 2017, 24 percent more than this year, Bloomberg-compiled data show. Read more

EBA says EU banks won’t be stress tested in 2017

EBA says EU banks won’t be stress tested in 2017

EU banks won’t be put through another round of stress testing next year, the European Banking Authority said. The regulator will carry out its annual transparency reviews next year but it won’t conduct full stress testing until 2018

Goldman settles rate-manipulation case

Goldman Sachs Group has agreed to pay $120 million to settle allegations by the Commodity Futures Trading Commission that the bank tried to manipulate the US Dollar International Swaps and Derivatives Association Fix benchmark between January 2007 and March 2012. Barclays and Citigroup have also settled similar cases with the CFTC.

Family offices lighten hedge funds’ regulatory load

Some hedge fund managers are converting to a family office, expelling third-party investors to reduce their regulatory burden and costs. “There are also some doubts about the ability of hedge funds to generate alpha going forward, even with the benefit of volatility,” according to the Global Family Office Report 2016

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Banks race to protect blockchain IP

In the headlong rush to revolutionize modern finance, blockchain enthusiasts are overlooking one potentially costly problem: their applications, built on open-source code, may actually belong to someone else.

Bank of America is among financial institutions that have patented blockchain technology. Sought or obtained patents have doubled this year, according to Reed Smith

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Wishing you the gifts of the season — Peace, Joy, Hope

A World of Good Wishes. One of the real joys this holiday season is the opportunity to say thank you for your lovely support and encouragement during 2016 and wish you the very best for the new year

The next blog would be published on Jan 2, 2017.

MSCI: North American companies have largest pension funding problem

The level of underfunding in corporate pension funds is at its worst in North America, shows analysis by MSCI ESG Research.  The firm looked at the funded status of almost 5,300 companies that disclose details of their defined benefit funds, across North America, Western Europe, Asia-Pacific and Japan. It analyzed the ratio of underfunded liabilities to annual revenues of the company.

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Global Guide to Responsible Investment Regulation

The PRI’s Global Guide to Responsible Investment Regulation is the first global study of the impact of responsible investment regulation.

The report looks at almost 300 pieces of regulation covering pension fund rules, stewardship codes and corporate disclosure rules. It also includes interviews with policymakers, investors and stock exchanges in Europe, Asia, Africa and the Americas to find out if these initiatives change the way investors think about ESG, and ultimately the signals they send to their investee companies.

The Green-Eyed [Bond] Monster

Green bonds are bonds created to fund projects with positive outcomes that are directly related to the environment.

They include the following.

  • “Use of proceeds” bonds and revenue bonds, which are designated for green projects.
  • Green project bonds, the proceeds of which are earmarked for specific projects with positive environmental outcomes.
  • Green securitized bonds, which are designated for green projects (specific or otherwise). Read more