April 26, 2013
Using the keyword "debt"... the strategy netted a whopping cyber-profit of 326pc over seven years
Google searches can predict stock markets, study finds - Telegraph
Researchers led by Tobias Preis at Warwick Business School analysed data from Google Trends from 2004 to 2011.
They looked at the volume of searches for 98 terms, such as "metals", "stock", "finance", "forex", "house", "unemployment" and "health" as well as non-specific or neutral words, such as "ring", "train", kitchen" and "fun".
They then constructed a virtual portfolio of investment in the Dow Jones Industrial Average (DJIA), with a strategy based on search volumes that occurred on Sundays.
If the search volume that day was high compared with a week earlier, the DJIA investment was systematically sold at the closing price the following day, and then repurchased at the end of the first day of trading in the week after.
Conversely, if the search volume on Sunday was low compared with the previous week, the researchers "bought" the following day.
Using the keyword "debt" - the term that saw the most fluctuation during the study period - the strategy netted a whopping cyber-profit of 326pc over seven years.
By comparison, a strategy of buy-and-hold - purchasing in 2004 and selling in 2011 - would have yielded only 16pc profit, equal to the rise in the DJIA during this time.
A third strategy, of buying or selling on the basis of movements in the Dow itself, would have netted a gain of 33pc.
The paper, published in the journal Scientific Reports, suggests that search requests are a potential indicator of intent about investment decisions.
When a mass of people seek information about a particular subject on a Sunday, this is a sign of worry and boosts the likelihood that they will ditch stock when the market opens on the Monday, it argues.
"Notable drops in the financial market are preceded by periods of investor concern," according to the research.
"In such periods, investors may search for more information about the market, before eventually deciding to buy or sell.
"Our results suggest that, following this logic, during the period 2004 to 2011, Google Trends search query volumes for certain terms could have been used in the construction of profitable trading strategies."
In a phone interview with AFP, Mr Preis said that the online world was a goldmine of data for behavioural experts.
"All these new data resources from online activities, which are an essential part of our everyday life these days - we are tweeting on Twitter, we are using Wikipedia, we are using search engines like Google and upload photos to Flickr and share information on Facebook - all of this leaves indicators of behaviour," he said.
"From a scientific point of view, our interest is to link this to behaviour in the real world... it's extremely exciting."
(Edited by Andrew Trotman)
Google searches can predict stock markets, study finds - Telegraph
April 15, 2013
Not a bad year at some of the most notable Hedge Fund Titans: Pay Stretches to 10 Figures - NYTimes.com
Not a bad year at some of the most notable hedge funds...
Hedge Fund Titans’ Pay Stretches to 10 Figures - NYTimes.com
April 9, 2013
Russian investment banks controlled by the government of President Vladimir Putin are squeezing out foreign competitors
Putin Squeezing Out UBS to Deutsche Bank Using Oligarchs - Bloomberg
With credit lines abroad frozen after the 2008 collapse of Lehman Brothers Holdings Inc., Russia’s state-run banks stepped in as Putin pledged $200 billion in loans and tax relief to bail out allies who owned strategic businesses. Among companies that received loans were aluminum producer United Co. Rusal (RUALR), controlled by billionaire Oleg Deripaska, and Evraz Plc (EVR), a steelmaker part-owned by Roman Abramovich. Sberbank and VTB then used their position to leverage follow-up business.
“Russian clients have realized that Sberbank stood firm and we are benefiting from that continuity now as many of the international banks continue to struggle,” Todd Berman, head of investment banking at Moscow-based Sberbank, said in an interview. “Real relationships are truly tested in difficult times and it’s clear that many international banks here and elsewhere were found wanting during the economic crisis.”
Shrinking ShareRussian banks won 38 percent of fees in 2012, up from 7 percent in 2005, after doubling lending since the crisis and expanding into higher-margin businesses such as mergers and acquisitions and derivatives, according to Freeman. The share of European lenders shrank to 32 percent from 61 percent over the same period, while U.S. banks fell to 20 percent from 27 percent, the data show. Firms based in Japan and other regions and undisclosed advisers accounted for the rest.
Companies that received help during the financial crisis were obliged to include Sberbank and VTB on rosters for loans, bonds and initial public offerings, according to three bankers with knowledge of the arrangements who asked not to be identified because the details of the deals are confidential.
Foreign investment banks, some facing regulatory demands to boost capital at home, are quitting or scaling back in Russia two years after Barclays Plc (BARC), HSBC Holdings Plc (HSBA) and Banco Santander SA closed consumer-banking operations there. Stiffer competition from state banks forced those firms to pull out, three people with knowledge of the decisions said.
ING, UniCreditING Groep NV (INGA), the biggest Dutch bank, said in October it will close its Russian equities unit. Italy’s largest lender, UniCredit SpA (UCG), said in June it will shut its Russian securities operation. Credit Suisse Group AG (CSGN) moved part of its investment banking business to London from Moscow to cut costs, according to people with knowledge of the matter.
“We need to take a look at the realities of the situation in Russia,” Steven Hellman, Credit Suisse country chief executive officer, said in an interview in Moscow. “The two large state banks will play a key role in much of the investment-banking advisory business in Russia going forward, transacting the sort of business where international banks simply don’t add much value.”
Vnesheconombank, the state development bank known as VEB, provided almost $25 billion to help Russian companies refinance loans obtained prior to Lehman’s collapse, Chairman Vladimir Dmitriev said in a March 26 interview in Durban, South Africa. About $11 billion was repaid, he said. He declined to comment on whether any conditions were placed on the lending in terms of follow-up business for VEB or other state-run banks. Dmitry Peskov, a spokesman for Putin, didn’t immediately return calls to his mobile phone.
‘Never Imposed’Clients’ choice of bank “is never imposed” because of conditions attached to loans, Yuri Soloviev, VTB’s first deputy president, said in an e-mail.
“We have gained all the positions we currently have only due to our competitive advantages over rivals,” Soloviev wrote. “These include the bigger balance sheet and capital allocation toward the Russian corporate clients than foreign banks can offer at the moment.”
Russian banks, including Gazprombank, part-owned by gas company OAO Gazprom (GAZP), arranged 62 percent of domestic bond sales last year, up from 32 percent five years ago, according to data compiled by Bloomberg. Their share of equity sales surged to 43 percent from 2 percent in 2007, the data show.
Rusal borrowed $4.5 billion from VEB in November 2008 to repay foreign lenders that helped it finance the purchase of 25 percent of OAO Norilsk Nickel (GMKN), the world’s largest producer of the metal, according to Rusal’s website. The company said it repaid VEB in full by drawing on a $4.58 billion loan from Sberbank in September 2010.
Deripaska FortuneSberbank and VTB’s investment-banking unit, VTB Capital, were among joint book runners for Rusal’s $2.2 billion IPO in January 2010, while VEB was one of four “cornerstone investors.” Rusal is 48 percent owned by En+ Group, whose president, Deripaska, has an estimated net worth of $8.5 billion, according to the Bloomberg Billionaires Index. A spokesman for Rusal in Moscow declined to comment.
Evraz received a 10 billion-ruble ($320 million) loan from Moscow-based VTB in November 2008 to finance tax payments, the steelmaker said at the time. A year later, VTB Capital and Troika Dialog arranged a 20 billion-ruble bond sale for the company. VTB Capital, OAO Svyaz Bank and Troika Dialog also arranged a $500 million three-year bond for Evraz in March 2010.
Abramovich, the world’s 70th-richest person with a net worth of about $13.1 billion, according to the Bloomberg Billionaires Index, is Evraz’s largest shareholder. His son is an intern at VTB Capital in London, a spokesman for the bank said. Oleg Kuzmin, a spokesman for Evraz, declined to comment.
Metalloinvest StakeVTB bought 20 percent of Metalloinvest (METIN), the Russian iron- ore producer co-owned by billionaire Vasily Anisimov, in December 2011 for $2.5 billion, according to a press release issued by law firm Dewey & LeBoeuf LLP, which said it advised on the deal. VTB received the stake as repayment of a $1.5 billion loan from the bank to Anisimov’s Coalco Metals Co. in 2008, the law firm said. Half of Anisimov’s stake was pledged for the loan. Last year VTB sold its shares back to Metalloinvest.
In July 2011, VTB helped arrange a $750 million five-year Eurobond for Metalloinvest. Later that year, VTB CEO Andrey Kostin told reporters in Moscow that he expected Metalloinvest to undertake an IPO in the next two to three years. VTB Capital will be chosen as an adviser on the offering, according to two people with knowledge of the matter. A Metalloinvest spokesman declined to comment.
Troika DialogSberbank and VTB are expanding in IPOs and M&A, said Olga Naydenova, an analyst at Moscow-based brokerage BCS Financial Group who has tracked Russian lenders for seven years at Otkritie Capital and OAO Alfa Bank.
Both Sberbank and VTB hired deal makers in 2012, helping the banks increase their share of the M&A market to 13 percent from zero five years ago, data compiled by Bloomberg show. VTB, the world’s 12th-biggest arranger of M&A deals this year, advised OAO Rosneft (ROSN), Russia’s largest oil company, on its $55 billion purchase of TNK-BP Holding and Onexim Group on its sale of 38 percent of London-listed gold miner Polyus Gold International Ltd. (PGIL) for $3.6 billion.
Adding ValueSberbank acquired Troika Dialog, Moscow’s oldest brokerage, in January 2012 to help leverage corporate lending into investment-banking revenue. It bought the 64 percent held by Chairman and CEO Ruben Vardanian and his partners and 36 percent held by Johannesburg-based lender Standard Bank Group Ltd. With the acquisition, Sberbank is showing it can provide clients with more than traditional corporate-banking services, said Dirk Werner, head of M&A execution at Sberbank’s corporate and investment-banking arm.
“We are winning market share not just because of Sberbank’s balance sheet, but because we are able to prove that we can add value,” Werner said in an interview.
Werner said Sberbank is partnering with foreign banks in cross-border deals where it doesn’t have a presence. For example, Rothchild and Frankfurt-based Deutsche Bank helped advise on parent Sberbank’s $3.6 billion acquisition of Denizbank AS (DENIZ) in Turkey in June, he said.
Deutsche Bank and UBS had both seen their share of fees spike after acquiring local brokers UFG and Brunswick, respectively, in 2004, only to have revenue shrink again as senior bankers jumped to other brokers when contracts expired.
The German bank’s share of fees slumped to 6 percent last year from a peak of 17.5 percent in 2006, according to Freeman. Zurich-based UBS slipped to 2.1 percent in 2012 from 6.7 percent in 2007. Nick Jordan, UBS Russia chief, left on March 20 to join Goldman Sachs Group Inc. (GS) in Moscow, according to two people with knowledge of the move.
Renaissance CapitalTotal investment-banking fees in Russia fell to $792 million last year from a record $1.6 billion in 2007 and $1.2 billion in 2011, the Freeman data show. Spokesmen for UBS, RBS and Deutsche Bank declined to comment.
Renaissance Capital, owned by billionaire Mikhail Prokhorov, saw its share of fees slide to 2.4 percent last year from as much as 9.2 percent in 2007, according to Freeman. VTB offered co-founder Stephen Jennings about $2.5 billion for the Moscow-based investment bank in 2007, according to CEO Kostin. Jennings was ousted as RenCap’s biggest shareholder in November after Prokhorov rebuffed his requests seeking more cash for the money-losing firm, two people with knowledge of the talks said.
‘Quality Execution’“Unlike VTB and Sberbank, we can’t insist on getting investment-banking business from corporate clients in exchange for lending,” RenCap President Alexander Merzlenko said in an interview. “What we can do is deliver quality execution, come up with smart, sometimes unconventional ideas and give genuine and honest advice. There is room for cooperation with VTB and Sberbank as well.”
Goldman Sachs (G) is seeking to expand its business in Russia by increasing cooperation with local banks, treating them more as partners than competitors, said Sergei Arsenyev, managing director at its investment bank in Moscow.
“This is not a uniquely Russian discussion,” Arsenyev said in an interview. The same thing happened in Germany 20 years ago, when foreign banks took a number of years before they were able to compete and make inroads against Deutsche Bank and Commerzbank.
State ControlVTB also stepped up its cooperation with foreign peers, helping it become the biggest organizer of Russian debt sales last year, said Andrey Solovyev, global head of debt capital markets at VTB Capital.
“Foreign investors are now more comfortable with Russian risk and dealing with Russian investment banks,” Solovyev said in a phone interview. The gains VTB made led to Credit Suisse and Barclays “losing their position,” he said.
Jon Laycock, a spokesman for Barclays in London, declined to comment, as did Adam Bradbury at Credit Suisse.
While Putin has promised to combat corruption and improve corporate governance through a 1 trillion-ruble privatization program, state control over the economy has increased, according to BNP Paribas SA. State-owned companies now account for about half of Russia’s economic output, up from 42 percent in 2008 and 38 percent in 2006, the lender said in October.
That doesn’t include the purchase by state-run Rosneft of TNK-BP (TNBP), BP Plc’s venture with a group of Russian billionaires, and VTB’s acquisition on March 28 of Stockholm-based Tele2’s Russian unit for $2.4 billion in cash and $1.15 billion in debt.
‘Gradually Diminish’Russia’s economy is expanding at the slowest pace since a 2009 contraction. Gross domestic product increased 3.4 percent in 2012, down from 4.3 percent a year earlier, as investment sagged and the country recorded $56.8 billion in net capital outflows. Consumer prices rose 7.3 percent from a year earlier in February, the fastest in 18 months.
The Russian Micex Financials Index (MICEXFNL) has slid 6.1 percent this year compared with a decline of 1.8 percent for the European Stoxx 600 Banks (SX7P) index.
Sberbank and VTB will never be dominant in all areas of investment banking, leaving plenty of room for foreign rivals, said Gergely Voros, co-CEO of Morgan Stanley (MS) in Russia.
“This market is going to get very similar to France, where you have two large home-grown banks that are strong in some areas of investment banking and not so strong in other areas, and strong with some clients and not with others,” Voros said in an interview in Moscow.
Even the hold foreign banks have over bigger deals may eventually disappear, Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said in a phone interview.
“In high-profile IPOs, corporates still want the expertise of Goldman Sachs and JPMorgan, but this dependence will gradually diminish as Sberbank and VTB expand their investment- banking reach,” Rimmer said.
To contact the reporter on this story: Jason Corcoran in Moscow at email@example.com
To contact the editor responsible for this story: Frank Connelly at firstname.lastname@example.org
Putin Squeezing Out UBS to Deutsche Bank Using Oligarchs - Bloomberg
April 3, 2013
Excellent piece on how to work within the new Dodd-Frank regulation.
Goldman's Big New Thing for Wall Street
Goldman Sachs is looking to raise up to $600 million for a publicly-traded credit fund that will provide loans to mid-sized companies. It a genius work of regulatory compliance, finding a way for its old credit traders to stay in business while following the letter and spirit of the Volcker Rule.