Dalio Says Bonds Face Biggest Bear Market in Almost 40 Years

Billionaire hedge-fund manager Ray Dalio said that the bond market has slipped into a bear phase and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years.

“A 1 percent rise in bond yields will produce the largest bear market in bonds that we have seen since 1980 to 1981,” Bridgewater Associates founder Dalio said in a Bloomberg TV interview in Davos on Wednesday. We’re in a bear market, he said.

A Treasury selloff extended following Dalio’s comments, pushing 10-year yields through 2.65 percent, near the highest since mid-2014.

Dalio predicted that the Federal Reserve will tighten monetary policy faster than they have signaled, and said that economic growth is in the late stage of the cycle but could continue to improve for another two years. The current economic environment is good for stocks but bad for bond investors, said Dalio, who’s chairman of Bridgewater, the world’s biggest hedge fund.

“It feels stupid to own cash in this kind of environment. It’s going to be great for earnings and great for stimulation of growth,” he said.

That spurt will last for about 18 months and the central bank will then feel like it has to tighten monetary policy faster than the discounted yield curve, he said. That will be a negative for asset prices, he said.

Demand for bonds will fall as central bankers reduce monetary stimulus, but larger deficits mean that governments will need to sell more of the securities to raise money, Dalio said. That supply-demand imbalance will concern the central bankers, he said.

Bridgewater manages about $160 billion, according to its website.

    Source: http://www.bloomberg.com/

    Brent Joins U.S. Crude in Bear Market Amid Oversupply Anxiety

    Brent crude entered a bear market, plunging below $45 a barrel for the first time since November as skepticism that a supply glut will ease worsens.

    A decline in U.S. stockpiles wasn’t enough to dispel the pessimism that struck the market this month as American supplies remain stubbornly above their seasonal average and production keeps rising. The global benchmark closed more than 20 percent below the year’s peak settlement, meeting the common definition of a bear market. The same happened with West Texas Intermediate on Tuesday.

    "There’s a sea of negativity," said Maxwell Gold, director of investment strategy at ETF Securities LLC. "This is much more a story of sentiment weighing on the markets."

    Oil has returned to levels last seen before the Organization of Petroleum Exporting Countries and allies including Russia decided in November to cut production to drain a global glut. Relentless drilling in U.S. shale fields and renewed output from Libya are putting that effort in jeopardy.

    Brent for August delivery settled $1.20 lower at $44.82, down 22 percent from its January peak. WTI fell 98 cents to close at $42.53 a barrel on the New York Mercantile Exchange, after dipping to the lowest since August.

    American crude stockpiles fell by 2.45 million barrels last week and gasoline supplies slid by 577,999 barrels, according to an Energy Information Administration report Wednesday. Meanwhile, oil production rose to 9.35 million barrels a day, the highest level in almost two years.

    "I don’t think one report by itself is enough to dispel the fears," said Gene McGillian, manager for market research at Tradition Energy in Stamford, Connecticut. "I would be surprised if this is the beginning of a turnaround."

    A joint OPEC, non-OPEC committee concluded on Tuesday that the market won’t rebalance until the second quarter of 2018, beyond the current expiration of the group’s output agreement.

    Potentially bullish factors failed to lift prices, including Tropical Storm Cindy halting service at a major oil terminal in the Gulf of Mexico, a shake-up in the Saudi royal family, and Iran’s Oil Minister Bijan Namdar Zanganeh saying on state radio that OPEC may decide to make deeper cuts.

    “There is no bullish catalyst for oil to be seen at the moment and thus it is drifting lower,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “It will be hard for Saudi and Russia to keep cutting production in the face of a strong rise in U.S. crude production and output in Libya.”

    Oil-market news:

    • Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman replaced his cousin as heir to the throne, a shock announcement that consolidates the 31-year-old leader’s power in the world’s biggest oil exporter. He is expected to continue the kingdom’s current oil policies.
    • Short-term floating storage economics are “close to breakeven, assuming a VLCC hiring cost of $16,500,” JBC Energy said in a research note.
    • Mexico is expected to increase gasoline imports from the U.S. with Pemex’s biggest refinery out of service for at least two weeks.
    • Oil companies risk wasting $2.3 trillion of investments should demand peak in the next decade as the world works toward its goal of limiting global warming, according to a report from Carbon Tracker.

      Source: http://www.bloomberg.com/

      Paramounts Ninja Turtles Opens to Slow Sales Over Weekend

      Teenage Mutant Ninja Turtles: Out of the Shadows opened to disappointing weekend sales in North American theaters, a setback for beleaguered Viacom Inc. and its struggling Paramount Pictures film division.

      The live-action film featuring four masked, crime-fighting turtles produced weekend sales of $35.3 million in U.S. and Canadian cinemas, researcher ComScore Inc. said Sunday in an e-mailed statement. That was less than estimates of as much as $41 million, based on data compiled by Bloomberg.

      The picture is one of three major summer releases from Paramount, including a new Star Trek and a remake of Ben-Hur. Viacom executives have made a turnaround of the money-losing studio one of their priorities and have sought to sell a stake in the film division to finance more production. Thats triggered a fight with Viacoms controlling shareholder, billionaire Sumner Redstone, who opposes such a move.

      Turtles is an important franchise for Viacom. Its a sequel franchise, and they dont have a lot of sequel franchises, Matthew Harrigan, a Wunderlich Securities analyst, said before the weekend results were announced. A lot of people feel that this movie and the next Star Trek are absolutely essential for the studio and even for the management.

      Slow Start

      While the weekends take was enough to lead the box office, its a slow start for a movie that cost $135 million to make and tens of millions more to market. Hollywood studios are leaning heavily on sequels and revivals this year, yet most have come up short. Paramounts 2016 slate features at least five such films, including Turtles.

      Last weekend, Walt Disney Co.s Alice Through the Looking Glass bombed in theaters and 20th Century Foxs X-Men: Apocalypse failed to match the prior picture in the series. Paramounts three biggest movies of the summer are all sequels or revivals.

      Analysts had modest forecasts for Turtles, ranging from $27 million at BoxOfficePro.com to $41 million at the Hollywood Stock Exchange. The film didnt play well with critics, earning 34 percent favorable reviews at RottenTomatoes.com and 41 percent on Metacritic, though it fared better than its predecessor in that regard.

      Studio Forecast

      Paramount was forecasting $35 million to $40 million in weekend sales and will need a long run in domestic theaters, as well as a strong performance overseas, to come close to its predecessor.

      The last few months, a number of sequels have done less than their prior chapters, especially in the U.S.,” Rob Moore, vice chairman of Paramount, said. It reminds us all that the challenge is to take the characters and stories and make sure we keep putting them in unique, fresh and fun situations.

      About 40 percent of the audience was under 18, compared with about 27 percent for the prior film, he said. That may have hurt because the school year hasnt ended yet.

      Paramounts first Turtles feature, released in 2014, opened with weekend sales of $65.6 million, according to Box Office Mojo, and grossed almost $500 million worldwide, including $302 million outside North America. This Turtles grossed $34 million overseas this weekend in 40 markets. The studio expects the film to mirror the performance of its predecessor in most of the world, and perform even better in China, where it will open July 2.

      In the latest version of the series, the four turtles — Michelangelo, Donatello, Leonardo and Raphael — go up against the Shredder and the evil Krang, whos trying to open a space portal for world domination.

      The family film will have only two weekends before it faces stiff competition. Disneys Finding Dory, a sequel to the Pixar hit Finding Nemo, opens on June 17.

      Teenage Mutant Ninja Turtles beat out two other new releases, Me Before You, a Warner Bros. film starring Emilia Clarke from Game of Thrones, and Popstar: Never Stop Never Stopping, a parody of concert films.

      Source: http://www.bloomberg.com/

      Jim Rogers Says Next Bear Market Will Be Worst in His Life

      Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.

      The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now — or making any claim to know when they will — he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.

      “When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.”

      The plunge in equity markets resumed Thursday, as the S&P 500 Index sank 3.8 percent, taking its rout since a Jan. 26 record past 10 percent and meeting the accepted definition of a correction. The Dow Jones Industrial Average plunged more than 1,000 points, while the losses continued in early Asian trading Friday as the Nikkei 225 Stock Average dropped as much as 3.5 percent.

      Rogers has seen severe bear markets before. Even this century, the Dow plunged more than 50 percent during the financial crisis, from a peak in October 2007 through a low in March 2009. It sank 38 percent from its high during the IT bubble in 2000 through a low in 2002.

      Rogers predicts the stock market will experience jitters until the Federal Reserve increases borrowing costs. That, he says, will be the point when stocks go up again. He said he’ll buy an agriculture index today, reiterating his view that prices of such commodities have been depressed for some time.

      “I’m very bad in market timing,” Rogers said. “But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.”

      (A previous version of this story corrected the quote in the last paragraph to say "sloppiness.")

        Source: http://www.bloomberg.com/

        The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market

        On Nov. 12, someone moved almost 25,000 bitcoins, worth about $159 million at the time, to an online exchange. The news soon rippled through online forums, with bitcoin traders arguing about whether it meant the owner was about to sell the digital currency.

        Holders of large amounts of bitcoin are often known as whales. And they’re becoming a worry for investors. They can send prices plummeting by selling even a portion of their holdings. And those sales are more probable now that the cryptocurrency is up nearly twelvefold from the beginning of the year.

        About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.) What’s more, the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.

        “I think there are a few hundred guys,” says Kyle Samani, managing partner at Multicoin Capital. “They all probably can call each other, and they probably have.” One reason to think so: At least some kinds of information sharing are legal, says Gary Ross, a securities lawyer at Ross & Shulga. Because bitcoin is a digital currency and not a security, he says, there’s no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes.

        Bitcoin: What’s Coming in the Year Ahead

        Regulators have been slow to catch up with cryptocurrency trading, so many of the rules are still murky. If traders not only pushed the price up but also went online to spread rumors, that might count as fraud. Bittrex, a digital currency exchange, recently wrote to its users warning that their accounts could be suspended if they banded together into “pump groups” aimed at manipulating prices. The law might also be different for other digital coins. Depending on the details of how they are structured and how investors expect to make money from them, some may count as currencies, according to the U.S. Securities and Exchange Commission.

        Asked about whether large holders could move in concert, Roger Ver, a well-known early bitcoin investor, said in an email: “I suspect that is likely true, and people should be able to do whatever they want with their own money. I’ve personally never had time for things like that though.”

        “As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”

        The recent rise in its price is difficult to explain because bitcoin has no intrinsic value. Launched in 2009 with a white paper written under a pseudonym, it’s a form of digital payment maintained by an independent network of computers on the internet‚ using cryptography to verify transactions. Its most fervent believers say it could displace banks and even traditional money, but it’s only worth what someone will trade for it, making it prey to big shifts in sentiment.

        Like most hedge fund managers specializing in cryptocurrencies, Samani constantly tracks trading activity of addresses known to belong to the biggest investors in the coins he holds. (Although bitcoin transactions are designed to be anonymous, each one is associated with a coded address that can be seen by anyone.) When he sees activity, Samani immediately calls the likely sellers and can often get information on motivations behind their sales and their trading plans, he says. Some funds end up buying one another’s holdings directly, without going into the open market, to avoid affecting the currency’s price. “Investors are generally more forthcoming with other investors,” Samani says. “We all kind of know who one another are, and we all help each other out and share notes. We all just want to make money.” Ross says gathering intelligence is legal.

        Ordinary investors, of course, don’t have the cachet required to get a multimillionaire to take their call. While they can track addresses with large holdings online and start heated discussions of market moves on Reddit forums, they’re ultimately in the dark on the whales’ plans and motives. “There’s no transparency to speak of in this market,” says Martin Mushkin, a lawyer who focuses on bitcoin. “In the securities business, everything that’s material has to be disclosed. In the virtual currency world, it’s very difficult to figure out what’s going on.”

        Ordinary investors are at an even greater disadvantage in smaller digital currencies and tokens. Among the coins people invest in, bitcoin has the least concentrated ownership, says Spencer Bogart, managing director and head of research at Blockchain Capital. The top 100 bitcoin addresses control 17.3 percent of all the issued currency, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. With ether, a rival to bitcoin, the top 100 addresses control 40 percent of the supply, and with coins such as Gnosis, Qtum, and Storj, top holders control more than 90 percent. Many large owners are part of the teams running these projects.

        Some argue this is no different than what happens in more established markets. “A good comparison is to early stage equity,” BlockTower’s Paul wrote. “Similar to those equity deals, often the founders and a handful of investors will own the majority of the asset.” Other investors say the whales won’t dump their holdings, because they have faith in the long-term potential of the coins. “I believe that it’s common sense that these whales that own so much bitcoin and bitcoin cash, they don’t want to destroy either one,” says Sebastian Kinsman, who lives in Prague and trades coins. But as prices go through the roof, that calculation might change. 

          BOTTOM LINE – It’s not necessarily illegal for big holders of some cryptocurrencies to discuss trading with one another. That puts small buyers at a disadvantage.

          Source: http://www.bloomberg.com/

          My Smart Beta ETF Premised on Cats Rang Up an 849,751% Return

          I was rich. Right?

          I mean, that’s what my Bloomberg said. I’d just entered in an index built from companies with “cat” in their names — yes, the furry felines — hit a button and watched it back-test to an 849,751 percent return. Forget the internet, I thought. Cats are about to take over smart beta.

          This is the story of the time I designed my own factor fund as a way of learning about one of Wall Street’s hottest trends — and its pitfalls. There are already ETFs that focus on themes, such as "biblically responsible" companies or ones popular with millennials. Quants have hundreds of style tilts, and their exploding popularity has created a gold rush for creators. I wanted in.

          I notified Andrew Ang, head of factor investing strategies at BlackRock Inc. Everything in my program was by the book, I assured him. It was rules-based, equal-weighted and premised on a simple story — that people love cats.

          “I love cats, too, and obviously cats are superior, so this is a great investment strategy,” Ang said, as I began to plot my career as a quant. Then he said, “I’m joking, of course.”

          Alas, though decades of research back up the idea that you can sort stocks by traits like volatility and momentum and beat the market, Ang saw a far less glorious future for my Abyssinian anomaly. Actually, it failed virtually every conceptual test he could think of, a lesson for anyone convinced she’s found the key to riches in statistical engineering.

          “The No. 1 thing is that it lacks an economic foundation,” Ang said.

          Pitfall 1: Economic Intuition

          So how, exactly, did I go about investing in cats? Factor funds rely on formulas, preset criteria that tell you which stocks to include and which to chuck out. It’s the idea behind things like value ETFs, which gather groups of shares that share the common characteristic of cheapness. The idea is that put together, they’ll beat the wider market.

          My model buys any U.S. company with “cat” in it, like CATerpillar, or when “communiCATion” is in the name. It rebalances quarterly to keep trading costs low. That’s important for when Vanguard or BlackRock license it and charge a competitively low fee.

          Full disclosure, I’m a dog person, and believe a company runs better when its spirit animal takes a labradoodle form. But building a dog factor portfolio leaves you with penny stocks like Junkiedog.com Inc., offered at $5 in 2013 and now trading at less than 2 cents.

          It just so happens that when I ran the study with cats, it returned nearly 850,000 percent on a six-year backtest. That led me to ex-post facto assign an economic rationale to the benefit of cat-containing names. And although keyboard cat is an internet star, I’m told by Goldman Sachs Asset Management this isn’t a real economic story that would lead to robust returns over time. 

          "It’s very curious, and I appreciate the effort,” said Nicholas Chan, portfolio manager in the firm’s Quantitative Investment Strategies group. “But you came up with an investment idea that doesn’t have economic intuition. When we come up with an investment hypotheses, we’re economists first and statisticians second.”

          BlackRock and Goldman build strategies around factors like value and low volatility because there’s a clear explanation for why they might work: investors under-price boring stocks, for example. By coming up with a thesis only after the results were known, I’ve data snooped my way into an unreliable factor. Unfortunately for me, there’s little evidence that investors are pulled towards catty stocks.

          Pitfall 2: P-Hacking

          Because of my stubborn desire to produce claw-some returns, I took my thesis and ran with it. Fine, so my first few trials didn’t spit out exactly what I wanted. No biggie, I’ve got the statistical resources of Bloomberg LP at my fingertips — so I tinkered with the data until it did.

          At first, I only invested in companies beginning with C – A – T to capture the essence of my investment thesis. But that backtest spit out this:

          Not great. But expand the data-set a little, CAT anywhere, and the returns look stellar, making my hypothesis look better. In the scientific community, this is called p-hacking, and it got me into trouble with Ang.

          “We’re after broad and consistent sources of returns,” he said. “Since you’ve tweaked it so much, that gives me less confidence that there’s underlying economics in the source.”

          If tweaking one minor parameter causes the model to fail, it likely isn’t robust enough to stand the test of time, Ang said. For example, the value factor works no matter if you use price-to-book or price-to-earnings. By overfitting my cat model, I probably picked up on a random past occurrence that’s unlikely to repeat itself.

          Pitfall 3: Equal weighting

          Smart beta has its roots in the idea that indexes like the S&P 500, weighted by market capitalization, are a dumb idea. To honor its forebears, my portfolio became equal weight. This, as it turns out, gave me a false signal.

          A few penny stocks with scant liquidity but big returns dominated. Ang told me that the source of a factor’s returns should be diversified, but the cat factor’s returns were hijacked by the basically untradeable Catskill Litigation Trust, which gained 79,000 percent this year (to trade at one penny).

          Similarly, researchers from Ohio State and the University of Cincinnati academics found that most anomalies were imaginary, because their discoverers had used too broad a universe of stocks. Trading edges work best when they’re used on large caps, and all but evaporate on microcaps when trading costs come into play, the academics wrote in a recent paper.

          Pitfall 4: The Backtest

          My backtest did not hold up to Goldman’s standards.

          The real sustainability test comes from whether a factor looks good outside of the original time frame it was run on. Before pitching my factor to Chan, I hadn’t set the cats loose on different periods or other markets to confirm the validity of my anomaly.

          “The more you can check off on the list of robustness, the more confidence you can give us. Like time periods, or does it work across large-cap and small-cap stocks, regions and countries,” he said.

          Taking Chan’s advice to heart, I turned to Europe. Picking European stocks that contain “gat” (which I figured captured most European translations like the Spanish "gato" and Italian “gatto”), my model underperforms the Stoxx Europe 600 index by 10 percentage points in the five years through January. Hiss.

          If I change my model to only capture American cat stocks with a market cap larger than $10 million, my edge disappears again. Over the past five years, that strategy would have returned 42 percent, compared to the S&P 500’s total return of 105 percent.

          I presented this evidence to BlackRock’s Ang. His final assessment? “We would pass on the cat factor.” Me-ouch.

          Pitfall 5: Cats

          Like any enterprising quant, I decided to get another opinion. For this, I conferred with Cliff Asness, founder of AQR Capital Management and a pioneer of factor investing.

          “Everything you can sort on can be a factor, but not all factors are interesting. Factors need some economics, theory or intuition even, to be at all interesting to us. Thus the cat factor fails as we have no story for why it should matter at all,” Asness said. “Now, in contrast, we are active traders of the dog and parakeet factors, which are based on hard neo-classical economics married to behavioral finance and machine learning. But the cat factor is just silly.”

          He’s got a point. Seems like the tail risks here might be a little high.

          Source: http://www.bloomberg.com/

          Yen to Climb to 90 as Negative Rates Fizzle for Mad Dog Analyst

          The yen will strengthen almost 20 percent to 90 per dollar by early next year as Bank of Japan Governor Haruhiko Kurodas negative interest rates fail to weaken this years best-performing Group-of-10 currency, says former trader Eishi Wakabayashi.

          Known as mad dog for his aggressive trading style during a 50-year career in foreign-exchange markets, Wakabayashi analyzed long-term charts to predict the yens record high in April 1995, the end of its strength in the start of 2012, and the ascent toward 100 this year when the currency was around 120. Now hes predicting Japans currency will rise to levels unseen since January 2013 from 107.31 per dollar as of 10:08 a.m. in Tokyo Tuesday.

          Currencies arent moving on interest rates — they move in a wave motion, said Wakabayashi, the president of Wakabayashi FX Associates Co., an investment information service firm in Tokyo. How can you explain by the interest rate differentials the move from 121 to 105 yen as Japan decided to adopt negative rates? The yen will advance even with negative rates because it is currently in a rising phase.

          Japans currency has gained about 12 percent this year, posing an obstacle to the BOJs efforts to push inflation to 2 percent with record assets purchases and a negative interest-rate strategy. Policy divergence between the central bank and the Federal Reserve did little to prevent the yen from reaching an 18-month high in May. The currency also attracted demand as a safe haven amid speculation U.S. rates will rise and uncertainty whether the U.K. will stay in the European Union.

          Wakabayashis forecast goes against the trend. According to a Bloomberg survey of analysts, the currency is projected to end this year weaker at 115 per dollar.

          Mad Man

          Theres not much Kuroda can do to change the currencys long-term trend, based on chart analysis, said Wakabayashi, who joined Bank of Tokyo, now Bank of Tokyo-Mitsubishi UFJ Ltd., in 1966.

          The way Kuroda adopted negative rates shows he is totally a mad man, Wakabayashi, 72, said in an interview in Tokyo on June 2. To do something totally for surprise is an impermissible act for a central banker. Markets are telling Kuroda, Dont do anything, we wont listen to you.

          While Kuroda may not have much influence on the yens direction, he may succeed in getting prices to pick up next year as Japans economy improves, Wakabayashi said. He pointed to a recovery in the high-end condominium market and a better job market for university graduates as positive signs.

          Gold Attractive

          After the yen approaches 90, it will revert back to a weakening phase until the middle of 2018, before eventually rebounding to as high as 65 yen by March 2022, said Wakabayashi, who bases his analysis on trends lasting 40 1/2 years. What goes up must come down.

          He foresees an era of global deflation, and recommends investors seek capital gains and buy gold. The metal may climb to $6,000 in the next six years as U.S. stocks collapse and the nation struggles to spur inflation, he said. During the Great Depression, when the price of gold was fixed, mining stocks of the commodity jumped sixfold in the five years from 1930, according to Wakabayashi. Gold is currently at about $1,245 per ounce.

          Under deflation, asset values fall across the board, Wakabayashi said. How do you protect your financial assets? Its easy — Buy gold.

          Source: http://www.bloomberg.com/

          World’s Most Painful Short Just Gets Worse for Evergrande Bears

          China Evergrande Group’s astonishing share rally has resulted in the world’s most painful short trade this year. To add insult to injury, bearish investors are paying higher fees to get crushed.

          Fees to borrow shares of the Hong Kong-listed Chinese developer for shorting have surged by more than five times since January to about 10 percent and have doubled since Evergrande started buying back shares in late March, according to Simon Colvin, a London-based analyst at IHS Markit Ltd. Evergrande shares available for lending have “nearly all been spoken for,” Colvin wrote in an email, resulting in higher borrowing costs.

          Evergrande shares have more than tripled this year, hurting short-sellers and baffling even some of the most bullish stock analysts. Part of the sharp rally can be explained by Evergrande’s plan to raise money from strategic investors ahead of a planned backdoor listing on the mainland and speculation that the developer will benefit from rising home sales in smaller Chinese cities. A buyback spree has also propelled a 123 percent jump since late March — when short interest started climbing from a low point.

          "I wouldn’t recommend investors to short Evergrande because of the strong momentum. It’s too risky," Raymond Cheng, Hong Kong-based analyst at CIMB Securities Ltd., said by phone. “The momentum will remain strong until the backdoor listing is completed and after that there might be some share price correction.”

          Evergrande soared as much as 27 percent to an all-time high on Monday, while peers such as Country Garden Holdings Co. and Sunac China Holdings Ltd. advanced more than 10 percent. The acceleration in gains is raising questions, with JPMorgan Chase & Co. saying in a note received Friday that Evergrande’s business model isn’t sustainable.

          The pressures on short-sellers are mounting as investors are covering their bearish positions, said Citigroup Inc. analyst Oscar Choi, which could be contributing to higher demand for Evergrande shares. In a typical short sale, investors borrow shares and sell them with the expectation that the price will decline. In a successful trade, the investors later buy the shares back at a lower price to return to the lender, or cover the short, so they can pocket the difference.

          After Monday’s rally, Evergrande’s share price increase is the biggest among major short targets worldwide, which include companies with a market value of at least $1 billion and short interest tracked by Markit of at least 10 percent, according to data compiled by Bloomberg. The only other wager that has inflicted pain of a similar magnitude is a bearish trade on Applied Optoelectronics Inc., whose shares advanced 205 percent this year, the data show.

          Still optimistic

          Evergrande trades at a record 36 times reported earnings, more than double the valuations of Country Garden and Sunac, while Monday’s gain alone added $5.3 billion to its market value. Bearish bets accounted for 20.7 percent of its free float on May 25, according to IHS Market data, while its share price is 118 percent higher than consensus analyst estimates for the next 12 months.

          Some analysts are still optimistic. Morgan Stanley analyst John Lam, one of the most bullish analysts on Evergrande with an overweight rating on the shares, has a street high price target of HK$12, according to data compiled by Bloomberg. Lam cited moves by Evergrande’s management to raise its second-round strategic investment target to 30 billion yuan from 15 billion yuan.

          Lam expects Evergrande to lower its net gearing to 237 percent by the end of this year, from 432 percent at the end of 2016, according to a May 23 note. Evergrande’s six-month financial results, which will be released in August, is another potential catalyst for the share price, according to Morgan Stanley.

          Source: http://www.bloomberg.com/

          Dimon Sides With Bears, Says Sovereign Bonds Are Too Pricey

          Jamie Dimon is siding with the bond-market bears.

          “I do think that bond prices are high,” the chief executive officer of JPMorgan Chase & Co. said Tuesday in an interview on CNBC. “I’m not going to call it a bubble, but I wouldn’t personally be buying 10-year sovereign debt anywhere around the world.”

          The remarks echo a chorus of bears in the Treasury market who say an expanding economy will boost yields as the Federal Reserve increases its benchmark rate. Dimon, 61, didn’t go as far as former Fed Chairman Alan Greenspan, who said last month that the bond market is experiencing an actual bubble, warning that real long-term interest rates are too low to be sustainable. Signs of economic expansion in Europe are also feeding concern fixed-income prices in the region could be headed for a fall.

          In the wide-ranging interview Dimon also said he believes his bank has moved beyond the “London Whale” debacle, when JPMorgan traders were accused of hiding more than $6.2 billion in trading losses on wrong-way derivative bets five years ago. Dimon said he doesn’t blame Bruno Iksil, the Frenchman at the center of the case, for the incident. Iksil said last year he wasn’t responsible, and blamed his managers.

          Dimon, a member of President Donald Trump’s Strategic and Policy Forum, also said in the interview that he’s not interested in taking a more formal role in politics. The chief executive has been criticized for his support for the president and he’s said he helps Trump because it’s his obligation as a patriot.

            Source: http://www.bloomberg.com/

            Bomb-Sniffing Dogs, Scanners Pushed to Avoid Airline Laptop Ban

            The U.S. should expand the use of bomb-sniffing dogs and screening technology to avoid a sweeping ban on electronic devices that would pummel business travel, an airline group said.

            Sensing an openness to alternatives, the International Air Transport Association is pushing administration officials to rethink expanding the restrictions beyond 10 Middle East and North Africa airports. The U.S. has held talks with airlines and European officials on keeping the devices out of cabins on trans-Atlantic flights.

            “The U.S. government is in much more of a listening mode than it was when it implemented the first ban,” IATA Chief Executive Officer Alexandre de Juniac said in a call with reporters Thursday morning. “We will see.”

            The U.S. Department of Homeland Security hasn’t decided whether to expand the ban, a spokesman said Thursday, and no new talks with European officials or industry groups are scheduled. Secretary John Kelly has kept his options open, the spokesman said.

            De Juniac said an expanded ban would be “ineffective.” Storing masses of laptop computers in the cargo holds of airplanes would create its own security risk, because of the risk the lithium ion batteries inside could cause a fire, he said in a talk ahead of IATA’s annual general meeting in Cancun, Mexico.

            “It is not a good way to be able to protect passengers and crew against the threat that has been pointed by U.S. and U.K. authorities,” de Juniac said.

            Middle Eastern airlines saw their traffic on routes to the U.S. fall 2.8 percent in March from a year earlier, IATA said Thursday. It was the first annual decline on those routes in at least seven years, the group said.

            Aside from the electronics ban, de Juniac also cautioned against Trump’s campaign pledge to pull out of the landmark climate accord reached in Paris.

            “Any decision to withdraw by the U.S. is not sending a good signal,” the former Air France-KLM CEO said, adding that the move could spill over and threaten a deal to reduce aviation’s carbon footprint.

            Source: http://www.bloomberg.com/

            The Glut Strikes Back as Oil Returns to Brink of Bear Market

            The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs Group Inc. declared the supply glut over is rapidly ebbing away.

            Oil is poised for a drop of 20 percent since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts.

            The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. Its probably going to take a little longer than they expected.

            Oil almost doubled in New York between February and June as big names from Goldman and the International Energy Agency to new Saudi Energy Minister Khalid Al-Falih said declining U.S. oil production and disruptions from Nigeria to Canada were finally ending years of oversupply. Prices are set for their biggest monthly loss in a year amid a growing recognition the surplus will take time to clear.

            For a story on challenges the new OPEC chief may face, click here.

            Theres lots of crude and refined products around, said David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. Demand growth has faltered a bit.

            The stockpiles of crude and refined oil that built up in industrialized nations during the years of oversupply remain formidable, standing at a record of more than 3 billion barrels, according to the Paris-based IEA. Traders struggling to sell cargoes are hoarding the most barrels on board tankers at sea since the end of the 2008-2009 financial crisis, the agency estimates.

            In some countries the glut seems to be getting bigger, with weekly U.S. government data on Wednesday showing a surprise inventory increase in the worlds biggest oil consumer at at time when summer driving demand should deplete stockpiles.

            The latest challenge for the market is a shift in the surplus from crude to products, Jeff Currie, head of commodities research at Goldman Sachs in New York, said in a Bloomberg Television interview Wednesday. Refiners churned out gasoline earlier in the year to take advantage of cheap crude, and stockpiles of the motor fuel are now at the highest for the time of year in at least 20 years, EIA data show.

            The next move lower could come as crude production ramps back up, said Adam Longson, an analyst at Morgan Stanley in New York. Canadian oil-sands producers have restored what was halted in May when wildfires menaced more than 1 million barrels of daily output. Nigeria has partially recovered after militant attacks curbed production to a three-decade low, according to the IEA.

            In the U.S., production declines have leveled off over the past three weeks, EIA data shows. The weekly count of active oil rigs published every Friday by Baker Hughes Inc. has recorded its longest run of increases since August.

            Hidden Surplus

            Did the glut disappear in the first place? asked Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. It was masked for a while by the shortfalls in Nigeria and Canada, but it did not disappear.

            Still, banks from Citigroup Inc. to Barclays Plc and Societe Generale SA are confident the overall re-balancing of the market remains on track, despite the current price retreat, and that markets will recover by the end of year. The latest sell-off reflects the strength of the dollar, which curbs investors appetite for commodities, rather than any worsening of supply-demand fundamentals, according to Goldman Sachs.

            I would call it a bump on the road towards a looming rebalancing, said Miswin Mahesh, an analyst at Barclays in London. The supply side is adjusting sharply and we will see it slow down a lot faster than demand from the fourth quarter onwards. The low price is creating a one-two punch moment for the supply side, taking off both current and future supplies.

            The recovery will take prices up to $50 a barrel by the end of the year, according to Barclays and Commerzbank. In the meantime however, sentiment has soured so much that further losses to $40 are inevitable, Commerzbanks Weinberg said. West Texas Intermediate crude futures lost as much as 1.4 percent to $40.57 a barrel on Friday.

            The oversupply will diminish, Weinberg said. But the market is deaf in one ear right now. Sentiment was too pessimistic at the beginning of the year, extremely bullish in June, and now back again to pessimism.

            Source: http://www.bloomberg.com/

            Paramounts Ninja Turtles Opens to Slow Sales Over Weekend

            Teenage Mutant Ninja Turtles: Out of the Shadows opened to disappointing weekend sales in North American theaters, a setback for beleaguered Viacom Inc. and its struggling Paramount Pictures film division.

            The live-action film featuring four masked, crime-fighting turtles produced weekend sales of $35.3 million in U.S. and Canadian cinemas, researcher ComScore Inc. said Sunday in an e-mailed statement. That was less than estimates of as much as $41 million, based on data compiled by Bloomberg.

            The picture is one of three major summer releases from Paramount, including a new Star Trek and a remake of Ben-Hur. Viacom executives have made a turnaround of the money-losing studio one of their priorities and have sought to sell a stake in the film division to finance more production. Thats triggered a fight with Viacoms controlling shareholder, billionaire Sumner Redstone, who opposes such a move.

            Turtles is an important franchise for Viacom. Its a sequel franchise, and they dont have a lot of sequel franchises, Matthew Harrigan, a Wunderlich Securities analyst, said before the weekend results were announced. A lot of people feel that this movie and the next Star Trek are absolutely essential for the studio and even for the management.

            Slow Start

            While the weekends take was enough to lead the box office, its a slow start for a movie that cost $135 million to make and tens of millions more to market. Hollywood studios are leaning heavily on sequels and revivals this year, yet most have come up short. Paramounts 2016 slate features at least five such films, including Turtles.

            Last weekend, Walt Disney Co.s Alice Through the Looking Glass bombed in theaters and 20th Century Foxs X-Men: Apocalypse failed to match the prior picture in the series. Paramounts three biggest movies of the summer are all sequels or revivals.

            Analysts had modest forecasts for Turtles, ranging from $27 million at BoxOfficePro.com to $41 million at the Hollywood Stock Exchange. The film didnt play well with critics, earning 34 percent favorable reviews at RottenTomatoes.com and 41 percent on Metacritic, though it fared better than its predecessor in that regard.

            Studio Forecast

            Paramount was forecasting $35 million to $40 million in weekend sales and will need a long run in domestic theaters, as well as a strong performance overseas, to come close to its predecessor.

            The last few months, a number of sequels have done less than their prior chapters, especially in the U.S.,” Rob Moore, vice chairman of Paramount, said. It reminds us all that the challenge is to take the characters and stories and make sure we keep putting them in unique, fresh and fun situations.

            About 40 percent of the audience was under 18, compared with about 27 percent for the prior film, he said. That may have hurt because the school year hasnt ended yet.

            Paramounts first Turtles feature, released in 2014, opened with weekend sales of $65.6 million, according to Box Office Mojo, and grossed almost $500 million worldwide, including $302 million outside North America. This Turtles grossed $34 million overseas this weekend in 40 markets. The studio expects the film to mirror the performance of its predecessor in most of the world, and perform even better in China, where it will open July 2.

            In the latest version of the series, the four turtles — Michelangelo, Donatello, Leonardo and Raphael — go up against the Shredder and the evil Krang, whos trying to open a space portal for world domination.

            The family film will have only two weekends before it faces stiff competition. Disneys Finding Dory, a sequel to the Pixar hit Finding Nemo, opens on June 17.

            Teenage Mutant Ninja Turtles beat out two other new releases, Me Before You, a Warner Bros. film starring Emilia Clarke from Game of Thrones, and Popstar: Never Stop Never Stopping, a parody of concert films.

            Source: http://www.bloomberg.com/

            Boeing Delivers First 737 Max to Lion Group

            Boeing Co. delivered the first 737 Max to the jetliner’s largest customer, Lion Mentari Airlines PT, a step toward reaping a cash bounty from the best-selling aircraft in company history.

            The Tuesday hand-off in Seattle to Lion’s Malaysia affiliate, Malindo Airways, was only one day later than first scheduled after the U.S. planemaker quickly recovered from a possible engine manufacturing defect, which had grounded the fledgling Max fleet last week. Before that hiccup, the upgraded 737 had coasted through development and flight-testing months ahead of schedule — a rarity in an industry where delays are common.

            The 737 and Airbus SE’s A320 family are the sturdy workhorses for budget carriers worldwide, built to withstand multiple short flights a day. And thanks to manufacturing scale and processes honed over decades, they are the biggest profit generators for the planemakers, one reason why investors have closely watched the progress of the latest Boeing single-aisle jet so closely.

            The Max “is the most important program at Boeing both now and in the future,” said George Ferguson, senior air transport analyst with Bloomberg Intelligence. “It is the cash generator and they can’t screw it up.”

            Boeing is counting on smooth sailing for the 737 Max, the newest member of the jet family dating back about fifty years. That is essential if the Chicago-based company is to make good on the cash it has promised to return to investors as production slows for the 777, the second-largest source of profit, ahead of a transition to a new model.

            Net Orders

            The Max family had netted 3,714 orders through the end of April, with the bulk of sales coming from the midsize -8. That jet, the first to debut, promises 8 percent lower operating costs than Airbus’s A320neo jets from upgrades that include new fuel-efficient engines and winglets.

            To convert that order backlog to cash, Boeing is speeding output at the Renton, Washington, factory where the jets are manufactured by 12 percent this year to a 47-jet monthly pace. Additional step-ups are planned for 2018 and 2019.

            If all goes to plan, current-generation 737 planes and the Max will generate about $25 billion in revenue this year, about 27 percent of the company total, according to Ferguson. He estimates Boeing will reap about $4 billion in operating profit from the single-aisle jets in 2017, 43 percent of its total.

            “This airline will change the face of the single-aisle market,” Kevin McAllister, chief executive officer of Boeing’s commercial airplanes division, said in a statement Tuesday.

            The manufacturer plans to roll out three other models in addition to the Max 8 headed to Malindo at a pace of about one a year. And the company’s salesforce is working to find customers for a possible stretched model, the Max 10, ahead of a possible debut in Paris next month.

            Malindo, whose name is derived from the country names of Malaysia and Indonesia, will be the first airline to fly the 737 Max commercially. The carrier is owned by Malaysia’s National Aerospace and Defence Industries and Lion Air. Its Indonesia-based parent announced a 201-plane order for the Max in early 2012.

            Southwest Airlines, which placed the initial order for the newest 737 in late 2011, is due to take its first delivery in July, about two months earlier than expected. The Dallas-based carrier plans to start commercial flights with the Max on Oct. 1, after retiring the oldest planes in its fleet.

            Source: http://www.bloomberg.com/

            This Rare Bear Who Called the Crash Warns Housing Is Too Hot Again

            When real estate investors get this confident, money manager James Stack gets nervous.

            U.S. home prices are surging to new records. Homebuilder stocks last year outperformed all other groups. And bears? They’re now an endangered species.

            Stack, 66, who manages $1.3 billion for people with a high net worth, predicted the housing crash in 2005, just before prices reached their peak. Now, from his perch in Whitefish, Montana, he says his “Housing Bubble Bellwether Barometer” of homebuilder and mortgage company stocks, which jumped 80 percent in the past year, once again is flashing red.

            “It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial,” said Stack, whose fireproof files of newspaper articles on bear markets date back to 1929. “People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”

            Bubble? What Bubble?

            As the housing market approaches its key spring selling season, Stack is practically alone in his wariness. While price gains may slow, most analysts see no end in sight for the six-year-old recovery.

            There are plenty of reasons to be optimistic. The housing needs of two massive generations — millennials aging into homeownership and baby boomers getting ready for retirement — are expected to fuel demand for years to come if employment remains strong. Sales in master-planned communities, many of which target buyers who are at least 55, reached a record last year, according to John Burns Real Estate Consulting. Last month, a gauge of confidence from the National Association of Home Builders/Wells Fargo rose to the highest level in 18 years, and starts of single-family homes in November were the strongest in a decade.

            “As soon as homes are finished, they’re flying off the shelf,” said Matthew Pointon, Capital Economics Ltd.’s U.S. property economist.

            Homebuilders, which have focused on pricier homes since the market bottomed in 2012, are now getting ready for a wave of first-time buyers left with little to choose from on the existing-home market. Investors are rushing to builders of starter homes, because lower-priced homes in the U.S. are in the shortest supply. Shares of LGI Homes Inc., which targets renters with ads that trumpet monthly payments instead of prices, rose 161 percent last year. D.R. Horton Inc., the biggest builder, powered by its fast-selling Express entry-level brand, gained 87 percent. 

            Overall, the S&P 500’s index of homebuilders increased 75 percent last year, about four times as much as the stock market as a whole. A subset that includes just the three largest builders was the best performer of the 158 S&P groups.

            “Over the past year, we’ve really seen a pickup in the first-time buyer, and that’s what’s driving a lot of the stocks,” said Samantha McLemore, who co-manages Bill Miller’s Miller Opportunity Trust, which has stakes in PulteGroup Inc. and Lennar Corp. “In the long term, we continue to see strong earnings growth for years to come.”

            ‘Rot in the Woodwork’

            Stack has a different perspective. While the market might gradually correct itself, history shows that it’s more likely to “come down hard” with the next recession, he said. He described the pattern as a steep run-up in housing prices spurred by low interest rates. The last downturn came about when economic growth slowed after a series of rate increases, exposing the “rot in the woodwork” and prompting loan defaults, Stack said. 

            He noted that the Fed has projected three rate increases for this year, and said that “raises the risk that today’s highly inflated housing market will again end badly.” He’s watching homebuilder stocks closely because they’re a leading indicator, peaking in 2005, the year he called the crash — and the year before home prices themselves hit a top.

            Stack has been studying median home prices, too, which typically track long-term inflation as measured by the Consumer Price Index. Last summer, they were as high as 32 percent above the measure; in 2006, just before the housing bust, values were about 35 percent higher, according to data from the National Association of Realtors. Half of the 50 largest metropolitan areas were overvalued relative to incomes in November, compared with 36 percent two years earlier, according to an analysis by data provider CoreLogic.

            “If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said. Corp

            A rate rise from 4 to 5 percent for a 30-year loan would drive up monthly mortgage costs by 12 percent. For buyers, that’s on top of the annual median price gain — 7 percent for existing homes in November, according to CoreLogic. By comparison, disposable income, or earnings adjusted for taxes and inflation, increased just 1.9 percent, according to data from the Bureau of Economic Analysis.

            Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around. Unlike in 2005, lenders are acting responsibly and the Wild West of real estate speculation hasn’t returned, he said. There is less to speculate on, too. Compared with the overbuilding that preceded the bust, today’s pace of construction isn’t fast enough, he said.

            “Lending standards are still pretty good,” McBride said, and he doesn’t expect mortgage rates to “take off” in the short term.

            The Tax Twist

            One wild card is the U.S. tax overhaul, which could cut both ways for homebuilders. They got a lower corporate rate, and many of their consumers will benefit from the doubling of the standard deduction. But it also caps the mortgage deduction at $750,000 instead of $1 million and limits deductions of property taxes, which might hurt expensive markets such as New York, New Jersey and California.

            As a result of the tax plan and an expected gradual rise in mortgage rates, existing-home sales will be flat this year and prices will rise only 1 or 2 percent, said Lawrence Yun, the chief economist for the National Association of Realtors, which opposed the tax bill.

            “The housing market has been doing relatively well during the recovery,” Yun said. “But 2018 will be a year where we begin to see some change.”

            Homebuilders have a lot going for them, said Carl Reichardt, an analyst for BTIG LLC. Still, he has a hold rating on most of them, a sell on KB Home and a buy only on Lennar and D.R. Horton. That’s because many of those positives are already baked into the share prices, he said, and home construction can grow only so much, given the tight supply of skilled laborers and finished lots.

            Slow and Steady

            “It’s almost better for the stocks if the general consensus is for moderate growth rather than supercharged growth,” Reichardt said. “It’s the sense that a slow and steady recovery creates more predictability.”

            New-home sales will probably increase 8 to 12 percent this year after rising about 11 percent in 2017, said analyst Alex Barron with the Housing Research Center in El Paso, Texas. At 675,000 to 700,000 sales, that’s still almost 50 percent below peak levels in 2005.

            “Ever since Trump took over, the mood has been incrementally positive,” Barron said. “Now that tax reform went through, people will have more money in their pockets.”

            Bill Smead, whose Smead Capital Management has 11 percent of its $2.4 billion portfolio in NVR Inc. and Lennar, said stocks in general could fall in the short run and that will provide an opening for investors to buy homebuilder shares. 

            “Nobody wants to take their gains now,” Smead said. “There are no sellers.”

              Source: http://www.bloomberg.com/

              One of Wall Street’s Biggest Stock Bears Ratchets Up His Bitcoin Forecast to $6,000

              Thomas J. Lee, one of the most bearish stock strategists on Wall Street, is feeling a lot more optimistic about the prospects for bitcoin.

              The cryptocurrency could reach $6,000 by the middle of 2018, according to a note Friday from Lee, the Fundstrat Global Advisors co-founder and former chief U.S. equity strategist at JPMorgan Chase & Co. He said user accounts are likely to rise 50 percent and usage per account to climb 30 percent.

              • Every 10% increase in user accounts adds $222 to bitcoin’s value, and each 10% rise in activity per account adds $274, Lee said
              • Lee still expects bitcoin to reach about $25,000 by 2022 amid institutional sponsorship, better transaction platforms and increasing public adoption
              • Traders should watch out for "another volatile consolidation period" into the end of August since bitcoin is getting close to resistance levels with short-term momentum becoming overbought; Fundstrat sees $4,500-$4,800 as the next resistance range
              • NOTE: July 7, Biggest S&P 500 Bear Says Bitcoin May Hit $55,000 on Low Supply
              • NOTE: June 23, Tom Lee, Wall Street’s Biggest Bear, Cuts S&P 500 EPS Estimates

                Source: http://www.bloomberg.com/

                My Smart Beta ETF Premised on Cats Rang Up an 849,751% Return

                I was rich. Right?

                I mean, that’s what my Bloomberg said. I’d just entered in an index built from companies with “cat” in their names — yes, the furry felines — hit a button and watched it back-test to an 849,751 percent return. Forget the internet, I thought. Cats are about to take over smart beta.

                This is the story of the time I designed my own factor fund as a way of learning about one of Wall Street’s hottest trends — and its pitfalls. There are already ETFs that focus on themes, such as "biblically responsible" companies or ones popular with millennials. Quants have hundreds of style tilts, and their exploding popularity has created a gold rush for creators. I wanted in.

                I notified Andrew Ang, head of factor investing strategies at BlackRock Inc. Everything in my program was by the book, I assured him. It was rules-based, equal-weighted and premised on a simple story — that people love cats.

                “I love cats, too, and obviously cats are superior, so this is a great investment strategy,” Ang said, as I began to plot my career as a quant. Then he said, “I’m joking, of course.”

                Alas, though decades of research back up the idea that you can sort stocks by traits like volatility and momentum and beat the market, Ang saw a far less glorious future for my Abyssinian anomaly. Actually, it failed virtually every conceptual test he could think of, a lesson for anyone convinced she’s found the key to riches in statistical engineering.

                “The No. 1 thing is that it lacks an economic foundation,” Ang said.

                Pitfall 1: Economic Intuition

                So how, exactly, did I go about investing in cats? Factor funds rely on formulas, preset criteria that tell you which stocks to include and which to chuck out. It’s the idea behind things like value ETFs, which gather groups of shares that share the common characteristic of cheapness. The idea is that put together, they’ll beat the wider market.

                My model buys any U.S. company with “cat” in it, like CATerpillar, or when “communiCATion” is in the name. It rebalances quarterly to keep trading costs low. That’s important for when Vanguard or BlackRock license it and charge a competitively low fee.

                Full disclosure, I’m a dog person, and believe a company runs better when its spirit animal takes a labradoodle form. But building a dog factor portfolio leaves you with penny stocks like Junkiedog.com Inc., offered at $5 in 2013 and now trading at less than 2 cents.

                It just so happens that when I ran the study with cats, it returned nearly 850,000 percent on a six-year backtest. That led me to ex-post facto assign an economic rationale to the benefit of cat-containing names. And although keyboard cat is an internet star, I’m told by Goldman Sachs Asset Management this isn’t a real economic story that would lead to robust returns over time. 

                "It’s very curious, and I appreciate the effort,” said Nicholas Chan, portfolio manager in the firm’s Quantitative Investment Strategies group. “But you came up with an investment idea that doesn’t have economic intuition. When we come up with an investment hypotheses, we’re economists first and statisticians second.”

                BlackRock and Goldman build strategies around factors like value and low volatility because there’s a clear explanation for why they might work: investors under-price boring stocks, for example. By coming up with a thesis only after the results were known, I’ve data snooped my way into an unreliable factor. Unfortunately for me, there’s little evidence that investors are pulled towards catty stocks.

                Pitfall 2: P-Hacking

                Because of my stubborn desire to produce claw-some returns, I took my thesis and ran with it. Fine, so my first few trials didn’t spit out exactly what I wanted. No biggie, I’ve got the statistical resources of Bloomberg LP at my fingertips — so I tinkered with the data until it did.

                At first, I only invested in companies beginning with C – A – T to capture the essence of my investment thesis. But that backtest spit out this:

                Not great. But expand the data-set a little, CAT anywhere, and the returns look stellar, making my hypothesis look better. In the scientific community, this is called p-hacking, and it got me into trouble with Ang.

                “We’re after broad and consistent sources of returns,” he said. “Since you’ve tweaked it so much, that gives me less confidence that there’s underlying economics in the source.”

                If tweaking one minor parameter causes the model to fail, it likely isn’t robust enough to stand the test of time, Ang said. For example, the value factor works no matter if you use price-to-book or price-to-earnings. By overfitting my cat model, I probably picked up on a random past occurrence that’s unlikely to repeat itself.

                Pitfall 3: Equal weighting

                Smart beta has its roots in the idea that indexes like the S&P 500, weighted by market capitalization, are a dumb idea. To honor its forebears, my portfolio became equal weight. This, as it turns out, gave me a false signal.

                A few penny stocks with scant liquidity but big returns dominated. Ang told me that the source of a factor’s returns should be diversified, but the cat factor’s returns were hijacked by the basically untradeable Catskill Litigation Trust, which gained 79,000 percent this year (to trade at one penny).

                Similarly, researchers from Ohio State and the University of Cincinnati academics found that most anomalies were imaginary, because their discoverers had used too broad a universe of stocks. Trading edges work best when they’re used on large caps, and all but evaporate on microcaps when trading costs come into play, the academics wrote in a recent paper.

                Pitfall 4: The Backtest

                My backtest did not hold up to Goldman’s standards.

                The real sustainability test comes from whether a factor looks good outside of the original time frame it was run on. Before pitching my factor to Chan, I hadn’t set the cats loose on different periods or other markets to confirm the validity of my anomaly.

                “The more you can check off on the list of robustness, the more confidence you can give us. Like time periods, or does it work across large-cap and small-cap stocks, regions and countries,” he said.

                Taking Chan’s advice to heart, I turned to Europe. Picking European stocks that contain “gat” (which I figured captured most European translations like the Spanish "gato" and Italian “gatto”), my model underperforms the Stoxx Europe 600 index by 10 percentage points in the five years through January. Hiss.

                If I change my model to only capture American cat stocks with a market cap larger than $10 million, my edge disappears again. Over the past five years, that strategy would have returned 42 percent, compared to the S&P 500’s total return of 105 percent.

                I presented this evidence to BlackRock’s Ang. His final assessment? “We would pass on the cat factor.” Me-ouch.

                Pitfall 5: Cats

                Like any enterprising quant, I decided to get another opinion. For this, I conferred with Cliff Asness, founder of AQR Capital Management and a pioneer of factor investing.

                “Everything you can sort on can be a factor, but not all factors are interesting. Factors need some economics, theory or intuition even, to be at all interesting to us. Thus the cat factor fails as we have no story for why it should matter at all,” Asness said. “Now, in contrast, we are active traders of the dog and parakeet factors, which are based on hard neo-classical economics married to behavioral finance and machine learning. But the cat factor is just silly.”

                He’s got a point. Seems like the tail risks here might be a little high.

                Source: http://www.bloomberg.com/

                Brent Joins U.S. Crude in Bear Market Amid Oversupply Anxiety

                Brent crude entered a bear market, plunging below $45 a barrel for the first time since November as skepticism that a supply glut will ease worsens.

                A decline in U.S. stockpiles wasn’t enough to dispel the pessimism that struck the market this month as American supplies remain stubbornly above their seasonal average and production keeps rising. The global benchmark closed more than 20 percent below the year’s peak settlement, meeting the common definition of a bear market. The same happened with West Texas Intermediate on Tuesday.

                "There’s a sea of negativity," said Maxwell Gold, director of investment strategy at ETF Securities LLC. "This is much more a story of sentiment weighing on the markets."

                Oil has returned to levels last seen before the Organization of Petroleum Exporting Countries and allies including Russia decided in November to cut production to drain a global glut. Relentless drilling in U.S. shale fields and renewed output from Libya are putting that effort in jeopardy.

                Brent for August delivery settled $1.20 lower at $44.82, down 22 percent from its January peak. WTI fell 98 cents to close at $42.53 a barrel on the New York Mercantile Exchange, after dipping to the lowest since August.

                American crude stockpiles fell by 2.45 million barrels last week and gasoline supplies slid by 577,999 barrels, according to an Energy Information Administration report Wednesday. Meanwhile, oil production rose to 9.35 million barrels a day, the highest level in almost two years.

                "I don’t think one report by itself is enough to dispel the fears," said Gene McGillian, manager for market research at Tradition Energy in Stamford, Connecticut. "I would be surprised if this is the beginning of a turnaround."

                A joint OPEC, non-OPEC committee concluded on Tuesday that the market won’t rebalance until the second quarter of 2018, beyond the current expiration of the group’s output agreement.

                Potentially bullish factors failed to lift prices, including Tropical Storm Cindy halting service at a major oil terminal in the Gulf of Mexico, a shake-up in the Saudi royal family, and Iran’s Oil Minister Bijan Namdar Zanganeh saying on state radio that OPEC may decide to make deeper cuts.

                “There is no bullish catalyst for oil to be seen at the moment and thus it is drifting lower,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “It will be hard for Saudi and Russia to keep cutting production in the face of a strong rise in U.S. crude production and output in Libya.”

                Oil-market news:

                • Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman replaced his cousin as heir to the throne, a shock announcement that consolidates the 31-year-old leader’s power in the world’s biggest oil exporter. He is expected to continue the kingdom’s current oil policies.
                • Short-term floating storage economics are “close to breakeven, assuming a VLCC hiring cost of $16,500,” JBC Energy said in a research note.
                • Mexico is expected to increase gasoline imports from the U.S. with Pemex’s biggest refinery out of service for at least two weeks.
                • Oil companies risk wasting $2.3 trillion of investments should demand peak in the next decade as the world works toward its goal of limiting global warming, according to a report from Carbon Tracker.

                  Source: http://www.bloomberg.com/

                  Dimon Sides With Bears, Says Sovereign Bonds Are Too Pricey

                  Jamie Dimon is siding with the bond-market bears.

                  “I do think that bond prices are high,” the chief executive officer of JPMorgan Chase & Co. said Tuesday in an interview on CNBC. “I’m not going to call it a bubble, but I wouldn’t personally be buying 10-year sovereign debt anywhere around the world.”

                  The remarks echo a chorus of bears in the Treasury market who say an expanding economy will boost yields as the Federal Reserve increases its benchmark rate. Dimon, 61, didn’t go as far as former Fed Chairman Alan Greenspan, who said last month that the bond market is experiencing an actual bubble, warning that real long-term interest rates are too low to be sustainable. Signs of economic expansion in Europe are also feeding concern fixed-income prices in the region could be headed for a fall.

                  In the wide-ranging interview Dimon also said he believes his bank has moved beyond the “London Whale” debacle, when JPMorgan traders were accused of hiding more than $6.2 billion in trading losses on wrong-way derivative bets five years ago. Dimon said he doesn’t blame Bruno Iksil, the Frenchman at the center of the case, for the incident. Iksil said last year he wasn’t responsible, and blamed his managers.

                  Dimon, a member of President Donald Trump’s Strategic and Policy Forum, also said in the interview that he’s not interested in taking a more formal role in politics. The chief executive has been criticized for his support for the president and he’s said he helps Trump because it’s his obligation as a patriot.

                    Source: http://www.bloomberg.com/

                    Jim Rogers Says Next Bear Market Will Be Worst in His Life

                    Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.

                    The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now — or making any claim to know when they will — he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.

                    “When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.”

                    The plunge in equity markets resumed Thursday, as the S&P 500 Index sank 3.8 percent, taking its rout since a Jan. 26 record past 10 percent and meeting the accepted definition of a correction. The Dow Jones Industrial Average plunged more than 1,000 points, while the losses continued in early Asian trading Friday as the Nikkei 225 Stock Average dropped as much as 3.5 percent.

                    Rogers has seen severe bear markets before. Even this century, the Dow plunged more than 50 percent during the financial crisis, from a peak in October 2007 through a low in March 2009. It sank 38 percent from its high during the IT bubble in 2000 through a low in 2002.

                    Rogers predicts the stock market will experience jitters until the Federal Reserve increases borrowing costs. That, he says, will be the point when stocks go up again. He said he’ll buy an agriculture index today, reiterating his view that prices of such commodities have been depressed for some time.

                    “I’m very bad in market timing,” Rogers said. “But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.”

                    (A previous version of this story corrected the quote in the last paragraph to say "sloppiness.")

                      Source: http://www.bloomberg.com/

                      Boeing Delivers First 737 Max to Lion Group

                      Boeing Co. delivered the first 737 Max to the jetliner’s largest customer, Lion Mentari Airlines PT, a step toward reaping a cash bounty from the best-selling aircraft in company history.

                      The Tuesday hand-off in Seattle to Lion’s Malaysia affiliate, Malindo Airways, was only one day later than first scheduled after the U.S. planemaker quickly recovered from a possible engine manufacturing defect, which had grounded the fledgling Max fleet last week. Before that hiccup, the upgraded 737 had coasted through development and flight-testing months ahead of schedule — a rarity in an industry where delays are common.

                      The 737 and Airbus SE’s A320 family are the sturdy workhorses for budget carriers worldwide, built to withstand multiple short flights a day. And thanks to manufacturing scale and processes honed over decades, they are the biggest profit generators for the planemakers, one reason why investors have closely watched the progress of the latest Boeing single-aisle jet so closely.

                      The Max “is the most important program at Boeing both now and in the future,” said George Ferguson, senior air transport analyst with Bloomberg Intelligence. “It is the cash generator and they can’t screw it up.”

                      Boeing is counting on smooth sailing for the 737 Max, the newest member of the jet family dating back about fifty years. That is essential if the Chicago-based company is to make good on the cash it has promised to return to investors as production slows for the 777, the second-largest source of profit, ahead of a transition to a new model.

                      Net Orders

                      The Max family had netted 3,714 orders through the end of April, with the bulk of sales coming from the midsize -8. That jet, the first to debut, promises 8 percent lower operating costs than Airbus’s A320neo jets from upgrades that include new fuel-efficient engines and winglets.

                      To convert that order backlog to cash, Boeing is speeding output at the Renton, Washington, factory where the jets are manufactured by 12 percent this year to a 47-jet monthly pace. Additional step-ups are planned for 2018 and 2019.

                      If all goes to plan, current-generation 737 planes and the Max will generate about $25 billion in revenue this year, about 27 percent of the company total, according to Ferguson. He estimates Boeing will reap about $4 billion in operating profit from the single-aisle jets in 2017, 43 percent of its total.

                      “This airline will change the face of the single-aisle market,” Kevin McAllister, chief executive officer of Boeing’s commercial airplanes division, said in a statement Tuesday.

                      The manufacturer plans to roll out three other models in addition to the Max 8 headed to Malindo at a pace of about one a year. And the company’s salesforce is working to find customers for a possible stretched model, the Max 10, ahead of a possible debut in Paris next month.

                      Malindo, whose name is derived from the country names of Malaysia and Indonesia, will be the first airline to fly the 737 Max commercially. The carrier is owned by Malaysia’s National Aerospace and Defence Industries and Lion Air. Its Indonesia-based parent announced a 201-plane order for the Max in early 2012.

                      Southwest Airlines, which placed the initial order for the newest 737 in late 2011, is due to take its first delivery in July, about two months earlier than expected. The Dallas-based carrier plans to start commercial flights with the Max on Oct. 1, after retiring the oldest planes in its fleet.

                      Source: http://www.bloomberg.com/

                      Bomb-Sniffing Dogs, Scanners Pushed to Avoid Airline Laptop Ban

                      The U.S. should expand the use of bomb-sniffing dogs and screening technology to avoid a sweeping ban on electronic devices that would pummel business travel, an airline group said.

                      Sensing an openness to alternatives, the International Air Transport Association is pushing administration officials to rethink expanding the restrictions beyond 10 Middle East and North Africa airports. The U.S. has held talks with airlines and European officials on keeping the devices out of cabins on trans-Atlantic flights.

                      “The U.S. government is in much more of a listening mode than it was when it implemented the first ban,” IATA Chief Executive Officer Alexandre de Juniac said in a call with reporters Thursday morning. “We will see.”

                      The U.S. Department of Homeland Security hasn’t decided whether to expand the ban, a spokesman said Thursday, and no new talks with European officials or industry groups are scheduled. Secretary John Kelly has kept his options open, the spokesman said.

                      De Juniac said an expanded ban would be “ineffective.” Storing masses of laptop computers in the cargo holds of airplanes would create its own security risk, because of the risk the lithium ion batteries inside could cause a fire, he said in a talk ahead of IATA’s annual general meeting in Cancun, Mexico.

                      “It is not a good way to be able to protect passengers and crew against the threat that has been pointed by U.S. and U.K. authorities,” de Juniac said.

                      Middle Eastern airlines saw their traffic on routes to the U.S. fall 2.8 percent in March from a year earlier, IATA said Thursday. It was the first annual decline on those routes in at least seven years, the group said.

                      Aside from the electronics ban, de Juniac also cautioned against Trump’s campaign pledge to pull out of the landmark climate accord reached in Paris.

                      “Any decision to withdraw by the U.S. is not sending a good signal,” the former Air France-KLM CEO said, adding that the move could spill over and threaten a deal to reduce aviation’s carbon footprint.

                      Source: http://www.bloomberg.com/

                      My Smart Beta ETF Premised on Cats Rang Up an 849,751% Return

                      I was rich. Right?

                      I mean, that’s what my Bloomberg said. I’d just entered in an index built from companies with “cat” in their names — yes, the furry felines — hit a button and watched it back-test to an 849,751 percent return. Forget the internet, I thought. Cats are about to take over smart beta.

                      This is the story of the time I designed my own factor fund as a way of learning about one of Wall Street’s hottest trends — and its pitfalls. There are already ETFs that focus on themes, such as "biblically responsible" companies or ones popular with millennials. Quants have hundreds of style tilts, and their exploding popularity has created a gold rush for creators. I wanted in.

                      I notified Andrew Ang, head of factor investing strategies at BlackRock Inc. Everything in my program was by the book, I assured him. It was rules-based, equal-weighted and premised on a simple story — that people love cats.

                      “I love cats, too, and obviously cats are superior, so this is a great investment strategy,” Ang said, as I began to plot my career as a quant. Then he said, “I’m joking, of course.”

                      Alas, though decades of research back up the idea that you can sort stocks by traits like volatility and momentum and beat the market, Ang saw a far less glorious future for my Abyssinian anomaly. Actually, it failed virtually every conceptual test he could think of, a lesson for anyone convinced she’s found the key to riches in statistical engineering.

                      “The No. 1 thing is that it lacks an economic foundation,” Ang said.

                      Pitfall 1: Economic Intuition

                      So how, exactly, did I go about investing in cats? Factor funds rely on formulas, preset criteria that tell you which stocks to include and which to chuck out. It’s the idea behind things like value ETFs, which gather groups of shares that share the common characteristic of cheapness. The idea is that put together, they’ll beat the wider market.

                      My model buys any U.S. company with “cat” in it, like CATerpillar, or when “communiCATion” is in the name. It rebalances quarterly to keep trading costs low. That’s important for when Vanguard or BlackRock license it and charge a competitively low fee.

                      Full disclosure, I’m a dog person, and believe a company runs better when its spirit animal takes a labradoodle form. But building a dog factor portfolio leaves you with penny stocks like Junkiedog.com Inc., offered at $5 in 2013 and now trading at less than 2 cents.

                      It just so happens that when I ran the study with cats, it returned nearly 850,000 percent on a six-year backtest. That led me to ex-post facto assign an economic rationale to the benefit of cat-containing names. And although keyboard cat is an internet star, I’m told by Goldman Sachs Asset Management this isn’t a real economic story that would lead to robust returns over time. 

                      "It’s very curious, and I appreciate the effort,” said Nicholas Chan, portfolio manager in the firm’s Quantitative Investment Strategies group. “But you came up with an investment idea that doesn’t have economic intuition. When we come up with an investment hypotheses, we’re economists first and statisticians second.”

                      BlackRock and Goldman build strategies around factors like value and low volatility because there’s a clear explanation for why they might work: investors under-price boring stocks, for example. By coming up with a thesis only after the results were known, I’ve data snooped my way into an unreliable factor. Unfortunately for me, there’s little evidence that investors are pulled towards catty stocks.

                      Pitfall 2: P-Hacking

                      Because of my stubborn desire to produce claw-some returns, I took my thesis and ran with it. Fine, so my first few trials didn’t spit out exactly what I wanted. No biggie, I’ve got the statistical resources of Bloomberg LP at my fingertips — so I tinkered with the data until it did.

                      At first, I only invested in companies beginning with C – A – T to capture the essence of my investment thesis. But that backtest spit out this:

                      Not great. But expand the data-set a little, CAT anywhere, and the returns look stellar, making my hypothesis look better. In the scientific community, this is called p-hacking, and it got me into trouble with Ang.

                      “We’re after broad and consistent sources of returns,” he said. “Since you’ve tweaked it so much, that gives me less confidence that there’s underlying economics in the source.”

                      If tweaking one minor parameter causes the model to fail, it likely isn’t robust enough to stand the test of time, Ang said. For example, the value factor works no matter if you use price-to-book or price-to-earnings. By overfitting my cat model, I probably picked up on a random past occurrence that’s unlikely to repeat itself.

                      Pitfall 3: Equal weighting

                      Smart beta has its roots in the idea that indexes like the S&P 500, weighted by market capitalization, are a dumb idea. To honor its forebears, my portfolio became equal weight. This, as it turns out, gave me a false signal.

                      A few penny stocks with scant liquidity but big returns dominated. Ang told me that the source of a factor’s returns should be diversified, but the cat factor’s returns were hijacked by the basically untradeable Catskill Litigation Trust, which gained 79,000 percent this year (to trade at one penny).

                      Similarly, researchers from Ohio State and the University of Cincinnati academics found that most anomalies were imaginary, because their discoverers had used too broad a universe of stocks. Trading edges work best when they’re used on large caps, and all but evaporate on microcaps when trading costs come into play, the academics wrote in a recent paper.

                      Pitfall 4: The Backtest

                      My backtest did not hold up to Goldman’s standards.

                      The real sustainability test comes from whether a factor looks good outside of the original time frame it was run on. Before pitching my factor to Chan, I hadn’t set the cats loose on different periods or other markets to confirm the validity of my anomaly.

                      “The more you can check off on the list of robustness, the more confidence you can give us. Like time periods, or does it work across large-cap and small-cap stocks, regions and countries,” he said.

                      Taking Chan’s advice to heart, I turned to Europe. Picking European stocks that contain “gat” (which I figured captured most European translations like the Spanish "gato" and Italian “gatto”), my model underperforms the Stoxx Europe 600 index by 10 percentage points in the five years through January. Hiss.

                      If I change my model to only capture American cat stocks with a market cap larger than $10 million, my edge disappears again. Over the past five years, that strategy would have returned 42 percent, compared to the S&P 500’s total return of 105 percent.

                      I presented this evidence to BlackRock’s Ang. His final assessment? “We would pass on the cat factor.” Me-ouch.

                      Pitfall 5: Cats

                      Like any enterprising quant, I decided to get another opinion. For this, I conferred with Cliff Asness, founder of AQR Capital Management and a pioneer of factor investing.

                      “Everything you can sort on can be a factor, but not all factors are interesting. Factors need some economics, theory or intuition even, to be at all interesting to us. Thus the cat factor fails as we have no story for why it should matter at all,” Asness said. “Now, in contrast, we are active traders of the dog and parakeet factors, which are based on hard neo-classical economics married to behavioral finance and machine learning. But the cat factor is just silly.”

                      He’s got a point. Seems like the tail risks here might be a little high.

                      Source: http://www.bloomberg.com/

                      One of Wall Street’s Biggest Stock Bears Ratchets Up His Bitcoin Forecast to $6,000

                      Thomas J. Lee, one of the most bearish stock strategists on Wall Street, is feeling a lot more optimistic about the prospects for bitcoin.

                      The cryptocurrency could reach $6,000 by the middle of 2018, according to a note Friday from Lee, the Fundstrat Global Advisors co-founder and former chief U.S. equity strategist at JPMorgan Chase & Co. He said user accounts are likely to rise 50 percent and usage per account to climb 30 percent.

                      • Every 10% increase in user accounts adds $222 to bitcoin’s value, and each 10% rise in activity per account adds $274, Lee said
                      • Lee still expects bitcoin to reach about $25,000 by 2022 amid institutional sponsorship, better transaction platforms and increasing public adoption
                      • Traders should watch out for "another volatile consolidation period" into the end of August since bitcoin is getting close to resistance levels with short-term momentum becoming overbought; Fundstrat sees $4,500-$4,800 as the next resistance range
                      • NOTE: July 7, Biggest S&P 500 Bear Says Bitcoin May Hit $55,000 on Low Supply
                      • NOTE: June 23, Tom Lee, Wall Street’s Biggest Bear, Cuts S&P 500 EPS Estimates

                        Source: http://www.bloomberg.com/

                        The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market

                        On Nov. 12, someone moved almost 25,000 bitcoins, worth about $159 million at the time, to an online exchange. The news soon rippled through online forums, with bitcoin traders arguing about whether it meant the owner was about to sell the digital currency.

                        Holders of large amounts of bitcoin are often known as whales. And they’re becoming a worry for investors. They can send prices plummeting by selling even a portion of their holdings. And those sales are more probable now that the cryptocurrency is up nearly twelvefold from the beginning of the year.

                        About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.) What’s more, the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.

                        “I think there are a few hundred guys,” says Kyle Samani, managing partner at Multicoin Capital. “They all probably can call each other, and they probably have.” One reason to think so: At least some kinds of information sharing are legal, says Gary Ross, a securities lawyer at Ross & Shulga. Because bitcoin is a digital currency and not a security, he says, there’s no prohibition against a trade in which a group agrees to buy enough to push the price up and then cashes out in minutes.

                        Bitcoin: What’s Coming in the Year Ahead

                        Regulators have been slow to catch up with cryptocurrency trading, so many of the rules are still murky. If traders not only pushed the price up but also went online to spread rumors, that might count as fraud. Bittrex, a digital currency exchange, recently wrote to its users warning that their accounts could be suspended if they banded together into “pump groups” aimed at manipulating prices. The law might also be different for other digital coins. Depending on the details of how they are structured and how investors expect to make money from them, some may count as currencies, according to the U.S. Securities and Exchange Commission.

                        Asked about whether large holders could move in concert, Roger Ver, a well-known early bitcoin investor, said in an email: “I suspect that is likely true, and people should be able to do whatever they want with their own money. I’ve personally never had time for things like that though.”

                        “As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”

                        The recent rise in its price is difficult to explain because bitcoin has no intrinsic value. Launched in 2009 with a white paper written under a pseudonym, it’s a form of digital payment maintained by an independent network of computers on the internet‚ using cryptography to verify transactions. Its most fervent believers say it could displace banks and even traditional money, but it’s only worth what someone will trade for it, making it prey to big shifts in sentiment.

                        Like most hedge fund managers specializing in cryptocurrencies, Samani constantly tracks trading activity of addresses known to belong to the biggest investors in the coins he holds. (Although bitcoin transactions are designed to be anonymous, each one is associated with a coded address that can be seen by anyone.) When he sees activity, Samani immediately calls the likely sellers and can often get information on motivations behind their sales and their trading plans, he says. Some funds end up buying one another’s holdings directly, without going into the open market, to avoid affecting the currency’s price. “Investors are generally more forthcoming with other investors,” Samani says. “We all kind of know who one another are, and we all help each other out and share notes. We all just want to make money.” Ross says gathering intelligence is legal.

                        Ordinary investors, of course, don’t have the cachet required to get a multimillionaire to take their call. While they can track addresses with large holdings online and start heated discussions of market moves on Reddit forums, they’re ultimately in the dark on the whales’ plans and motives. “There’s no transparency to speak of in this market,” says Martin Mushkin, a lawyer who focuses on bitcoin. “In the securities business, everything that’s material has to be disclosed. In the virtual currency world, it’s very difficult to figure out what’s going on.”

                        Ordinary investors are at an even greater disadvantage in smaller digital currencies and tokens. Among the coins people invest in, bitcoin has the least concentrated ownership, says Spencer Bogart, managing director and head of research at Blockchain Capital. The top 100 bitcoin addresses control 17.3 percent of all the issued currency, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. With ether, a rival to bitcoin, the top 100 addresses control 40 percent of the supply, and with coins such as Gnosis, Qtum, and Storj, top holders control more than 90 percent. Many large owners are part of the teams running these projects.

                        Some argue this is no different than what happens in more established markets. “A good comparison is to early stage equity,” BlockTower’s Paul wrote. “Similar to those equity deals, often the founders and a handful of investors will own the majority of the asset.” Other investors say the whales won’t dump their holdings, because they have faith in the long-term potential of the coins. “I believe that it’s common sense that these whales that own so much bitcoin and bitcoin cash, they don’t want to destroy either one,” says Sebastian Kinsman, who lives in Prague and trades coins. But as prices go through the roof, that calculation might change. 

                          BOTTOM LINE – It’s not necessarily illegal for big holders of some cryptocurrencies to discuss trading with one another. That puts small buyers at a disadvantage.

                          Source: http://www.bloomberg.com/

                          Brent Joins U.S. Crude in Bear Market Amid Oversupply Anxiety

                          Brent crude entered a bear market, plunging below $45 a barrel for the first time since November as skepticism that a supply glut will ease worsens.

                          A decline in U.S. stockpiles wasn’t enough to dispel the pessimism that struck the market this month as American supplies remain stubbornly above their seasonal average and production keeps rising. The global benchmark closed more than 20 percent below the year’s peak settlement, meeting the common definition of a bear market. The same happened with West Texas Intermediate on Tuesday.

                          "There’s a sea of negativity," said Maxwell Gold, director of investment strategy at ETF Securities LLC. "This is much more a story of sentiment weighing on the markets."

                          Oil has returned to levels last seen before the Organization of Petroleum Exporting Countries and allies including Russia decided in November to cut production to drain a global glut. Relentless drilling in U.S. shale fields and renewed output from Libya are putting that effort in jeopardy.

                          Brent for August delivery settled $1.20 lower at $44.82, down 22 percent from its January peak. WTI fell 98 cents to close at $42.53 a barrel on the New York Mercantile Exchange, after dipping to the lowest since August.

                          American crude stockpiles fell by 2.45 million barrels last week and gasoline supplies slid by 577,999 barrels, according to an Energy Information Administration report Wednesday. Meanwhile, oil production rose to 9.35 million barrels a day, the highest level in almost two years.

                          "I don’t think one report by itself is enough to dispel the fears," said Gene McGillian, manager for market research at Tradition Energy in Stamford, Connecticut. "I would be surprised if this is the beginning of a turnaround."

                          A joint OPEC, non-OPEC committee concluded on Tuesday that the market won’t rebalance until the second quarter of 2018, beyond the current expiration of the group’s output agreement.

                          Potentially bullish factors failed to lift prices, including Tropical Storm Cindy halting service at a major oil terminal in the Gulf of Mexico, a shake-up in the Saudi royal family, and Iran’s Oil Minister Bijan Namdar Zanganeh saying on state radio that OPEC may decide to make deeper cuts.

                          “There is no bullish catalyst for oil to be seen at the moment and thus it is drifting lower,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “It will be hard for Saudi and Russia to keep cutting production in the face of a strong rise in U.S. crude production and output in Libya.”

                          Oil-market news:

                          • Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman replaced his cousin as heir to the throne, a shock announcement that consolidates the 31-year-old leader’s power in the world’s biggest oil exporter. He is expected to continue the kingdom’s current oil policies.
                          • Short-term floating storage economics are “close to breakeven, assuming a VLCC hiring cost of $16,500,” JBC Energy said in a research note.
                          • Mexico is expected to increase gasoline imports from the U.S. with Pemex’s biggest refinery out of service for at least two weeks.
                          • Oil companies risk wasting $2.3 trillion of investments should demand peak in the next decade as the world works toward its goal of limiting global warming, according to a report from Carbon Tracker.

                            Source: http://www.bloomberg.com/

                            Paramounts Ninja Turtles Opens to Slow Sales Over Weekend

                            Teenage Mutant Ninja Turtles: Out of the Shadows opened to disappointing weekend sales in North American theaters, a setback for beleaguered Viacom Inc. and its struggling Paramount Pictures film division.

                            The live-action film featuring four masked, crime-fighting turtles produced weekend sales of $35.3 million in U.S. and Canadian cinemas, researcher ComScore Inc. said Sunday in an e-mailed statement. That was less than estimates of as much as $41 million, based on data compiled by Bloomberg.

                            The picture is one of three major summer releases from Paramount, including a new Star Trek and a remake of Ben-Hur. Viacom executives have made a turnaround of the money-losing studio one of their priorities and have sought to sell a stake in the film division to finance more production. Thats triggered a fight with Viacoms controlling shareholder, billionaire Sumner Redstone, who opposes such a move.

                            Turtles is an important franchise for Viacom. Its a sequel franchise, and they dont have a lot of sequel franchises, Matthew Harrigan, a Wunderlich Securities analyst, said before the weekend results were announced. A lot of people feel that this movie and the next Star Trek are absolutely essential for the studio and even for the management.

                            Slow Start

                            While the weekends take was enough to lead the box office, its a slow start for a movie that cost $135 million to make and tens of millions more to market. Hollywood studios are leaning heavily on sequels and revivals this year, yet most have come up short. Paramounts 2016 slate features at least five such films, including Turtles.

                            Last weekend, Walt Disney Co.s Alice Through the Looking Glass bombed in theaters and 20th Century Foxs X-Men: Apocalypse failed to match the prior picture in the series. Paramounts three biggest movies of the summer are all sequels or revivals.

                            Analysts had modest forecasts for Turtles, ranging from $27 million at BoxOfficePro.com to $41 million at the Hollywood Stock Exchange. The film didnt play well with critics, earning 34 percent favorable reviews at RottenTomatoes.com and 41 percent on Metacritic, though it fared better than its predecessor in that regard.

                            Studio Forecast

                            Paramount was forecasting $35 million to $40 million in weekend sales and will need a long run in domestic theaters, as well as a strong performance overseas, to come close to its predecessor.

                            The last few months, a number of sequels have done less than their prior chapters, especially in the U.S.,” Rob Moore, vice chairman of Paramount, said. It reminds us all that the challenge is to take the characters and stories and make sure we keep putting them in unique, fresh and fun situations.

                            About 40 percent of the audience was under 18, compared with about 27 percent for the prior film, he said. That may have hurt because the school year hasnt ended yet.

                            Paramounts first Turtles feature, released in 2014, opened with weekend sales of $65.6 million, according to Box Office Mojo, and grossed almost $500 million worldwide, including $302 million outside North America. This Turtles grossed $34 million overseas this weekend in 40 markets. The studio expects the film to mirror the performance of its predecessor in most of the world, and perform even better in China, where it will open July 2.

                            In the latest version of the series, the four turtles — Michelangelo, Donatello, Leonardo and Raphael — go up against the Shredder and the evil Krang, whos trying to open a space portal for world domination.

                            The family film will have only two weekends before it faces stiff competition. Disneys Finding Dory, a sequel to the Pixar hit Finding Nemo, opens on June 17.

                            Teenage Mutant Ninja Turtles beat out two other new releases, Me Before You, a Warner Bros. film starring Emilia Clarke from Game of Thrones, and Popstar: Never Stop Never Stopping, a parody of concert films.

                            Source: http://www.bloomberg.com/

                            One of Wall Street’s Biggest Stock Bears Ratchets Up His Bitcoin Forecast to $6,000

                            Thomas J. Lee, one of the most bearish stock strategists on Wall Street, is feeling a lot more optimistic about the prospects for bitcoin.

                            The cryptocurrency could reach $6,000 by the middle of 2018, according to a note Friday from Lee, the Fundstrat Global Advisors co-founder and former chief U.S. equity strategist at JPMorgan Chase & Co. He said user accounts are likely to rise 50 percent and usage per account to climb 30 percent.

                            • Every 10% increase in user accounts adds $222 to bitcoin’s value, and each 10% rise in activity per account adds $274, Lee said
                            • Lee still expects bitcoin to reach about $25,000 by 2022 amid institutional sponsorship, better transaction platforms and increasing public adoption
                            • Traders should watch out for "another volatile consolidation period" into the end of August since bitcoin is getting close to resistance levels with short-term momentum becoming overbought; Fundstrat sees $4,500-$4,800 as the next resistance range
                            • NOTE: July 7, Biggest S&P 500 Bear Says Bitcoin May Hit $55,000 on Low Supply
                            • NOTE: June 23, Tom Lee, Wall Street’s Biggest Bear, Cuts S&P 500 EPS Estimates

                              Read more: http://www.bloomberg.com/news/articles/2017-08-18/bitcoin-forecast-ratcheted-up-to-6-000-by-lee-as-optimism-grows

                              Dimon Sides With Bears, Says Sovereign Bonds Are Too Pricey

                              Jamie Dimon is siding with the bond-market bears.

                              “I do think that bond prices are high,” the chief executive officer of JPMorgan Chase & Co. said Tuesday in an interview on CNBC. “I’m not going to call it a bubble, but I wouldn’t personally be buying 10-year sovereign debt anywhere around the world.”

                              The remarks echo a chorus of bears in the Treasury market who say an expanding economy will boost yields as the Federal Reserve increases its benchmark rate. Dimon, 61, didn’t go as far as former Fed Chairman Alan Greenspan, who said last month that the bond market is experiencing an actual bubble, warning that real long-term interest rates are too low to be sustainable. Signs of economic expansion in Europe are also feeding concern fixed-income prices in the region could be headed for a fall.

                              In the wide-ranging interview Dimon also said he believes his bank has moved beyond the “London Whale” debacle, when JPMorgan traders were accused of hiding more than $6.2 billion in trading losses on wrong-way derivative bets five years ago. Dimon said he doesn’t blame Bruno Iksil, the Frenchman at the center of the case, for the incident. Iksil said last year he wasn’t responsible, and blamed his managers.

                              Dimon, a member of President Donald Trump’s Strategic and Policy Forum, also said in the interview that he’s not interested in taking a more formal role in politics. The chief executive has been criticized for his support for the president and he’s said he helps Trump because it’s his obligation as a patriot.

                                Read more: http://www.bloomberg.com/news/articles/2017-08-08/dimon-sides-with-bears-says-sovereign-bonds-are-too-pricey

                                Paramounts Ninja Turtles Opens to Slow Sales Over Weekend

                                Teenage Mutant Ninja Turtles: Out of the Shadows opened to disappointing weekend sales in North American theaters, a setback for beleaguered Viacom Inc. and its struggling Paramount Pictures film division.

                                The live-action film featuring four masked, crime-fighting turtles produced weekend sales of $35.3 million in U.S. and Canadian cinemas, researcher ComScore Inc. said Sunday in an e-mailed statement. That was less than estimates of as much as $41 million, based on data compiled by Bloomberg.

                                The picture is one of three major summer releases from Paramount, including a new Star Trek and a remake of Ben-Hur. Viacom executives have made a turnaround of the money-losing studio one of their priorities and have sought to sell a stake in the film division to finance more production. Thats triggered a fight with Viacoms controlling shareholder, billionaire Sumner Redstone, who opposes such a move.

                                Turtles is an important franchise for Viacom. Its a sequel franchise, and they dont have a lot of sequel franchises, Matthew Harrigan, a Wunderlich Securities analyst, said before the weekend results were announced. A lot of people feel that this movie and the next Star Trek are absolutely essential for the studio and even for the management.

                                Slow Start

                                While the weekends take was enough to lead the box office, its a slow start for a movie that cost $135 million to make and tens of millions more to market. Hollywood studios are leaning heavily on sequels and revivals this year, yet most have come up short. Paramounts 2016 slate features at least five such films, including Turtles.

                                Last weekend, Walt Disney Co.s Alice Through the Looking Glass bombed in theaters and 20th Century Foxs X-Men: Apocalypse failed to match the prior picture in the series. Paramounts three biggest movies of the summer are all sequels or revivals.

                                Analysts had modest forecasts for Turtles, ranging from $27 million at BoxOfficePro.com to $41 million at the Hollywood Stock Exchange. The film didnt play well with critics, earning 34 percent favorable reviews at RottenTomatoes.com and 41 percent on Metacritic, though it fared better than its predecessor in that regard.

                                Studio Forecast

                                Paramount was forecasting $35 million to $40 million in weekend sales and will need a long run in domestic theaters, as well as a strong performance overseas, to come close to its predecessor.

                                The last few months, a number of sequels have done less than their prior chapters, especially in the U.S.,” Rob Moore, vice chairman of Paramount, said. It reminds us all that the challenge is to take the characters and stories and make sure we keep putting them in unique, fresh and fun situations.

                                About 40 percent of the audience was under 18, compared with about 27 percent for the prior film, he said. That may have hurt because the school year hasnt ended yet.

                                Paramounts first Turtles feature, released in 2014, opened with weekend sales of $65.6 million, according to Box Office Mojo, and grossed almost $500 million worldwide, including $302 million outside North America. This Turtles grossed $34 million overseas this weekend in 40 markets. The studio expects the film to mirror the performance of its predecessor in most of the world, and perform even better in China, where it will open July 2.

                                In the latest version of the series, the four turtles — Michelangelo, Donatello, Leonardo and Raphael — go up against the Shredder and the evil Krang, whos trying to open a space portal for world domination.

                                The family film will have only two weekends before it faces stiff competition. Disneys Finding Dory, a sequel to the Pixar hit Finding Nemo, opens on June 17.

                                Teenage Mutant Ninja Turtles beat out two other new releases, Me Before You, a Warner Bros. film starring Emilia Clarke from Game of Thrones, and Popstar: Never Stop Never Stopping, a parody of concert films.

                                Read more: http://www.bloomberg.com/news/articles/2016-06-05/paramount-s-ninja-turtles-open-to-slow-sales-of-35-3-million

                                Boeing Delivers First 737 Max to Lion Group

                                Boeing Co. delivered the first 737 Max to the jetliner’s largest customer, Lion Mentari Airlines PT, a step toward reaping a cash bounty from the best-selling aircraft in company history.

                                The Tuesday hand-off in Seattle to Lion’s Malaysia affiliate, Malindo Airways, was only one day later than first scheduled after the U.S. planemaker quickly recovered from a possible engine manufacturing defect, which had grounded the fledgling Max fleet last week. Before that hiccup, the upgraded 737 had coasted through development and flight-testing months ahead of schedule — a rarity in an industry where delays are common.

                                The 737 and Airbus SE’s A320 family are the sturdy workhorses for budget carriers worldwide, built to withstand multiple short flights a day. And thanks to manufacturing scale and processes honed over decades, they are the biggest profit generators for the planemakers, one reason why investors have closely watched the progress of the latest Boeing single-aisle jet so closely.

                                The Max “is the most important program at Boeing both now and in the future,” said George Ferguson, senior air transport analyst with Bloomberg Intelligence. “It is the cash generator and they can’t screw it up.”

                                Boeing is counting on smooth sailing for the 737 Max, the newest member of the jet family dating back about fifty years. That is essential if the Chicago-based company is to make good on the cash it has promised to return to investors as production slows for the 777, the second-largest source of profit, ahead of a transition to a new model.

                                Net Orders

                                The Max family had netted 3,714 orders through the end of April, with the bulk of sales coming from the midsize -8. That jet, the first to debut, promises 8 percent lower operating costs than Airbus’s A320neo jets from upgrades that include new fuel-efficient engines and winglets.

                                To convert that order backlog to cash, Boeing is speeding output at the Renton, Washington, factory where the jets are manufactured by 12 percent this year to a 47-jet monthly pace. Additional step-ups are planned for 2018 and 2019.

                                If all goes to plan, current-generation 737 planes and the Max will generate about $25 billion in revenue this year, about 27 percent of the company total, according to Ferguson. He estimates Boeing will reap about $4 billion in operating profit from the single-aisle jets in 2017, 43 percent of its total.

                                “This airline will change the face of the single-aisle market,” Kevin McAllister, chief executive officer of Boeing’s commercial airplanes division, said in a statement Tuesday.

                                The manufacturer plans to roll out three other models in addition to the Max 8 headed to Malindo at a pace of about one a year. And the company’s salesforce is working to find customers for a possible stretched model, the Max 10, ahead of a possible debut in Paris next month.

                                Malindo, whose name is derived from the country names of Malaysia and Indonesia, will be the first airline to fly the 737 Max commercially. The carrier is owned by Malaysia’s National Aerospace and Defence Industries and Lion Air. Its Indonesia-based parent announced a 201-plane order for the Max in early 2012.

                                Southwest Airlines, which placed the initial order for the newest 737 in late 2011, is due to take its first delivery in July, about two months earlier than expected. The Dallas-based carrier plans to start commercial flights with the Max on Oct. 1, after retiring the oldest planes in its fleet.

                                Read more: http://www.bloomberg.com/news/articles/2017-05-16/boeing-s-flying-cash-machine-debuts-as-lion-takes-first-737-max

                                Dollar Bears Say Fed Hawks Cant Lift Rate Odds Above Coin Toss

                                Federal Reserve Chair Janet Yellens reiteration that the pace of U.S. interest-rate increases should be gradual wont be enough to raise odds for a hike this year much above a coin toss, according to Westpac Banking Corp. and BNP Paribas SA.

                                The dollar rose against the yen for a third day Thursday, paring a third straight quarterly loss, after Yellen told lawmakers on Wednesday that a majority of Federal Open Market Committee members see a rate increase likely needed this year, while reiterating there is no fixed timetable. The odds of Fed action by year-end rose to 54 percent from 50 percent prior to Yellens remarks, but are down from 61 percent a week earlier. Westpac and Paribas both expect the U.S. currency to drop back below 100 yen.

                                Markets arent likely to take seriously Fed protestations that the November meeting is live, and pricing for December should struggle to rise much beyond 55 percent, said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. We see the dollar as still on track for a slip back below 100 yen.

                                The dollar gained 0.7 percent to 101.36 as of 10:39 a.m. in Tokyo, adding to a 0.4 percent advance from the previous two days. It touched a one-month low of 100.09 on Tuesday, and had dropped to as weak as 99.02 — a level unseen since November 2013 — on June 24 in the immediate aftermath of the U.K. vote to leave the European Union.

                                Disappointing Data

                                The dollar has fallen against every developed-market currency except the pound this month, as economic data missed analyst estimates by the most since June. A Bloomberg gauge measuring U.S. data against economist estimates fell to a three-month low at the start of this week, after dropping below zero on Sept. 1 for the first time since July 8.

                                BNP strategists led by Steven Saywell recommended a short dollar-yen position in a note to clients dated Sept. 29, targeting a slide down to 97 in the weeks ahead.

                                Given the uncertainties posed by data and financial conditions dependency, we would not expect markets to price the chances of a December hike significantly higher than the 54 percent currently reflected in futures, the note said. We expect markets to continue to build USD short positions against this backdrop.

                                Read more: http://www.bloomberg.com/news/articles/2016-09-29/dollar-bears-say-fed-hawks-can-t-lift-rate-odds-above-coin-toss

                                The Glut Strikes Back as Oil Returns to Brink of Bear Market

                                The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs Group Inc. declared the supply glut over is rapidly ebbing away.

                                Oil is poised for a drop of 20 percent since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts.

                                The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal, said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. Its probably going to take a little longer than they expected.

                                Oil almost doubled in New York between February and June as big names from Goldman and the International Energy Agency to new Saudi Energy Minister Khalid Al-Falih said declining U.S. oil production and disruptions from Nigeria to Canada were finally ending years of oversupply. Prices are set for their biggest monthly loss in a year amid a growing recognition the surplus will take time to clear.

                                For a story on challenges the new OPEC chief may face, click here.

                                Theres lots of crude and refined products around, said David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. Demand growth has faltered a bit.

                                The stockpiles of crude and refined oil that built up in industrialized nations during the years of oversupply remain formidable, standing at a record of more than 3 billion barrels, according to the Paris-based IEA. Traders struggling to sell cargoes are hoarding the most barrels on board tankers at sea since the end of the 2008-2009 financial crisis, the agency estimates.

                                In some countries the glut seems to be getting bigger, with weekly U.S. government data on Wednesday showing a surprise inventory increase in the worlds biggest oil consumer at at time when summer driving demand should deplete stockpiles.

                                The latest challenge for the market is a shift in the surplus from crude to products, Jeff Currie, head of commodities research at Goldman Sachs in New York, said in a Bloomberg Television interview Wednesday. Refiners churned out gasoline earlier in the year to take advantage of cheap crude, and stockpiles of the motor fuel are now at the highest for the time of year in at least 20 years, EIA data show.

                                The next move lower could come as crude production ramps back up, said Adam Longson, an analyst at Morgan Stanley in New York. Canadian oil-sands producers have restored what was halted in May when wildfires menaced more than 1 million barrels of daily output. Nigeria has partially recovered after militant attacks curbed production to a three-decade low, according to the IEA.

                                In the U.S., production declines have leveled off over the past three weeks, EIA data shows. The weekly count of active oil rigs published every Friday by Baker Hughes Inc. has recorded its longest run of increases since August.

                                Hidden Surplus

                                Did the glut disappear in the first place? asked Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. It was masked for a while by the shortfalls in Nigeria and Canada, but it did not disappear.

                                Still, banks from Citigroup Inc. to Barclays Plc and Societe Generale SA are confident the overall re-balancing of the market remains on track, despite the current price retreat, and that markets will recover by the end of year. The latest sell-off reflects the strength of the dollar, which curbs investors appetite for commodities, rather than any worsening of supply-demand fundamentals, according to Goldman Sachs.

                                I would call it a bump on the road towards a looming rebalancing, said Miswin Mahesh, an analyst at Barclays in London. The supply side is adjusting sharply and we will see it slow down a lot faster than demand from the fourth quarter onwards. The low price is creating a one-two punch moment for the supply side, taking off both current and future supplies.

                                The recovery will take prices up to $50 a barrel by the end of the year, according to Barclays and Commerzbank. In the meantime however, sentiment has soured so much that further losses to $40 are inevitable, Commerzbanks Weinberg said. West Texas Intermediate crude futures lost as much as 1.4 percent to $40.57 a barrel on Friday.

                                The oversupply will diminish, Weinberg said. But the market is deaf in one ear right now. Sentiment was too pessimistic at the beginning of the year, extremely bullish in June, and now back again to pessimism.

                                Read more: http://www.bloomberg.com/news/articles/2016-07-28/oil-glut-proves-harder-to-kill-than-saudis-to-goldman-predicted

                                Paramounts Ninja Turtles Opens to Slow Sales Over Weekend

                                Teenage Mutant Ninja Turtles: Out of the Shadows opened to disappointing weekend sales in North American theaters, a setback for beleaguered Viacom Inc. and its struggling Paramount Pictures film division.

                                The live-action film featuring four masked, crime-fighting turtles produced weekend sales of $35.3 million in U.S. and Canadian cinemas, researcher ComScore Inc. said Sunday in an e-mailed statement. That was less than estimates of as much as $41 million, based on data compiled by Bloomberg.

                                The picture is one of three major summer releases from Paramount, including a new Star Trek and a remake of Ben-Hur. Viacom executives have made a turnaround of the money-losing studio one of their priorities and have sought to sell a stake in the film division to finance more production. Thats triggered a fight with Viacoms controlling shareholder, billionaire Sumner Redstone, who opposes such a move.

                                Turtles is an important franchise for Viacom. Its a sequel franchise, and they dont have a lot of sequel franchises, Matthew Harrigan, a Wunderlich Securities analyst, said before the weekend results were announced. A lot of people feel that this movie and the next Star Trek are absolutely essential for the studio and even for the management.

                                Slow Start

                                While the weekends take was enough to lead the box office, its a slow start for a movie that cost $135 million to make and tens of millions more to market. Hollywood studios are leaning heavily on sequels and revivals this year, yet most have come up short. Paramounts 2016 slate features at least five such films, including Turtles.

                                Last weekend, Walt Disney Co.s Alice Through the Looking Glass bombed in theaters and 20th Century Foxs X-Men: Apocalypse failed to match the prior picture in the series. Paramounts three biggest movies of the summer are all sequels or revivals.

                                Analysts had modest forecasts for Turtles, ranging from $27 million at BoxOfficePro.com to $41 million at the Hollywood Stock Exchange. The film didnt play well with critics, earning 34 percent favorable reviews at RottenTomatoes.com and 41 percent on Metacritic, though it fared better than its predecessor in that regard.

                                Studio Forecast

                                Paramount was forecasting $35 million to $40 million in weekend sales and will need a long run in domestic theaters, as well as a strong performance overseas, to come close to its predecessor.

                                The last few months, a number of sequels have done less than their prior chapters, especially in the U.S.,” Rob Moore, vice chairman of Paramount, said. It reminds us all that the challenge is to take the characters and stories and make sure we keep putting them in unique, fresh and fun situations.

                                About 40 percent of the audience was under 18, compared with about 27 percent for the prior film, he said. That may have hurt because the school year hasnt ended yet.

                                Paramounts first Turtles feature, released in 2014, opened with weekend sales of $65.6 million, according to Box Office Mojo, and grossed almost $500 million worldwide, including $302 million outside North America. This Turtles grossed $34 million overseas this weekend in 40 markets. The studio expects the film to mirror the performance of its predecessor in most of the world, and perform even better in China, where it will open July 2.

                                In the latest version of the series, the four turtles — Michelangelo, Donatello, Leonardo and Raphael — go up against the Shredder and the evil Krang, whos trying to open a space portal for world domination.

                                The family film will have only two weekends before it faces stiff competition. Disneys Finding Dory, a sequel to the Pixar hit Finding Nemo, opens on June 17.

                                Teenage Mutant Ninja Turtles beat out two other new releases, Me Before You, a Warner Bros. film starring Emilia Clarke from Game of Thrones, and Popstar: Never Stop Never Stopping, a parody of concert films.

                                Read more: http://www.bloomberg.com/news/articles/2016-06-05/paramount-s-ninja-turtles-open-to-slow-sales-of-35-3-million