Raju Panjwani

Interview on Asharq Business اقتصاد الشرق this morning with Cyba in an interesting discussion about the US: - Fed Chair Jerome Powell, though late in raising interest rates, and insisting previously that inflation was transitory, has finally done a good job maintaining interest rates high enough to counterbalance the massive fiscal spending. President Tump, if elected president, will not have a reason to remove him before the end of his tenor, given the Fed is most likely to cut rates in September - The added value of high interest rates is not lesser than keeping them high, given inflation is down to acceptable levels, and beginning the cuts soon makes sense. The unknown is the effect of fiscal spending, which is at around 25% of GDP, which are levels seen in crises in the US (pandemic, wars, etc). This fiscal spending is inflationary and spiraling debt upwards, while digging deficit deeper - Each $1 of debt added, is adding barely 58c of GDP, which is way lower than acceptable, and does not make send for the US to continue on this path. Before 2010, each $1 of debt was adding more than $1 of GDP. Also, more than $9 trillion of US debt will reach maturity in the next 12 months and will need re-financing at current high interest rates - In case President Trump, if elected, increases tariffs on Chinese imports, this could bring back inflation up. Remember, China becoming the manufacturing powerhouse for the US has been pretty much deflationary, and tariffs will reverse that Thank you Tabarek Jouini for having me again, always a pleasure.

18

1 Comment

About 15 years ago, Jim Simons was driving to Boston to give a speech at his alma mater, MIT. He had retired a year before. He was 72 years old. He was, at the time, the most successful hedge fund manager of all time. His wife asked if he was going to mention any guiding principles that made him successful. At first, he thought, “I don’t know that I have any.” Upon reflection, he wrote down five that are both pithy and profound. -Don’t Run with The Pack -Hire the Smartest People -Don’t Give Up Easily -Be Guided by Beauty -Hope For Good Luck! Simons arrived at his list organically after building his business. It doesn’t feel artificial. It’s not derived from some acronym. It reflects what worked for him over the course of a remarkable life. Simons died yesterday at the age of 86. His career consisted of following one passion to the next, ten-year building blocks stacked one on the other. After Simons graduated with his PhD, he worked as a code breaker for the government during the Cold War. He was fired for opposing the Vietnam War. Next, he spent a decade running the math department at Stony Brook University. At about 40, his life took a serious turn. Simmons became so interested in markets and convinced he could build a better system that he quit his prestigious job to trade stocks in an office over a strip mall. DON’T RUN WITH THE PACK Having never worked in the financial industry, he proceeded to hire a group of physicists and astronomers to build something new, a quant trading firm. HIRE THE SMARTEST PEOPLE He spent 10 years building a platform based on data that didn’t work until all of a sudden it did. It became a flywheel that minted money. DON’T GIVE UP EASILY He built the most successful financial firm in history without hiring anyone from Wall Street. He regarded doing something well as a form of art.  BE GUIDED BY BEAUTY The Medallion Fund, launched in 1988, went on to return 66% a year and generate more than $100 billion in trading profits. HOPE FOR GOOD LUCK He was never celebrity famous like Warren Buffet. He didn’t tweet principles like Ray Dalio. He didn’t buy a sports team like Steve Cohen. He was well known for his habit of not wearing socks and chain-smoking cigarettes. Simons’ success lay in combining his mathematical prowess and insights with a passion to build and inspire teams of people. In the MIT speech, he lays out his recipe: “Great people. Great infrastructure. Open environment. Get everyone compensated roughly based on the overall performance… That made a lot of money.” Gregory Zuckerman wrote the definitive book on Simons called The Man Who Solved the Market. Simons didn’t want it written. Later, he said it is “pretty good.” Ironically, it probably did more than anything to cement his reputation as the world’s best performing hedge fund manager.

7

WHY THE CONSENSUS ON GOVERNMENT BONDS IS WRONG It is very tedious when ( virtually ) every commentator when asked about Goverment Bonds just repeats the same old tired narrative about strong US economy ( debatable & becoming more so ) and "sticky" inflation ( transitory ?) Since hitting it's major low in October 2023 the Ultra Long UK Gilt rose 26% in 9 weeks ( in Elliott Wave parlance a clear impulse wave ).It then embarked on a Elliott secondary reaction which saw it lose about 16% from the December high traced out over 4 months.ie it took twice as long to give up about 2/3 of the gain.This is a strong signal that the primary trend of the market is up.On the assumption that this secondary reaction is now over it will be replaced by another impulse wave ie a sharp upward move on a par with the Oct-Dec 2023 but probably bigger - starting anytime now.So in the real world what is going to cause Gilts & Tbonds to take off given the consensus view referred to above.Well yesterday the US Treasury announced a very interesting programme involving buying back US Tbonds ( despite the record deficit ) with the obvious aim of getting the entire yield curve lower in the run up to the US election.This monkeying around with the market also involves a facility where Banks & the Fed can swap low coupon TBonds for Higher ( current ) coupon Bonds to help stave off any Bank runs by boosting the cash flow from the higher coupon Bonds enabling the Banks to offer higher deposit rates in order to deter withdrawals.None of this is priced into the market and when it is put into practice it's effect on the prices of Bonds ( especially Long Bonds ) will be explosive as the demand for long Bonds will greatly exceed the supply irrespective of whether Inflation is "sticky ". A (the ?) major component of sticky inflation has been higher Oil prices and as Oil has now gone into sharp decline so Inflation will now become less sticky.Throw in a probable recession / sharply slowing economy with the long awaited effect on the Jobs market and all the ingredients are in place. It is a strange phenoneum in markets that when a strong consensus develops it usually turns out to be wrong - This could be a classic textbook example

11

Stay up to date with the latest information on Commercial Real Estate Finance by signing up for George Smith Partners' weekly newsletter. As a long-time follower of the newsletter for over 15 years, I highly recommend it to anyone looking to stay informed in the industry. Sign up now at the following link: https://lnkd.in/gkVMDkK . Additionally, check out some of the Q1 highlights for GSP in the LinkedIn post linked below. #CRE #finance #realestate #newsletter

10

Lineage Bank yesterday filed objections to the emergency sale of Synapse's assets to TabaPay & to Synapse's settlement with Evolve Bank & Trust: Lineage clarifies it isn't seeking to prevent or delay the proposed asset sale, but is seeking to preserve its rights to the extent the proposed sale agreement is contrary to applicable law, may violate the rights and/or interests of Lineage and/or end users under the law or Lineage's agreement with Synapse, or is inconsistent with Lineage's bank regulatory requirements, including its recent consent order. Some notable claims Lineage makes in its filing: -Synapse added ACH/wire originators without telling Lineage in advance, overloading it with unexpected volumes of transactions -- causing Lineage's federal reserve account to become overdrawn -Lineage is terminating all ACH & wire processing for Synapse effective tomorrow, 5/9 -- with payment processing moving back to Evolve -Lineage's filing claims Synapse moved $60m from an account titled to Synapse at Evolve to a Reserve account at Lineage, but that these were actually customer funds, not Synapse's -Lineage disputes Synapse's proposed cure amount of about $276,000, saying Synapse owes it about $755,000 -Lineage objects to the proposed settlement between Synapse and Evolve, saying inadequate information has been disclosed to evaluate if the $2 million payment is fair

75

5 Comments

👉 M2 now positive with rates at 5.5%. And rate cuts/QE/YCC are just a matter of time https://lnkd.in/e7C679Tx ~~~ #finance #web3 #FED #investors #interestrates #crypto #inflation #startups #stocks #wallstreet #IPOs #QT #VCs #bitcoin #Ethereum #ETFs

4

Interview on Asharq Business اقتصاد الشرق with Cyba Audi صبا عودة yesterday: - There is a huge focus on the Fed, every tone, every gesture that Chair Powell or any member of the Fed board. The stock markets are ticking up or down to every blink the Fed and its board makes. This is not healthy, and this makes it a traders markets rather than an investors market - Most of the mutual funds specialized in US equities have underperformed the S&P500, and one of the reasons is diversification. The S&P500 is not a diversified index reflecting the US stock market anymore, but a reflection of a handful of stocks. This is a very good thing for traders, but a bad thing for investors who have processes and diversification rules - Jobs last week were a good headline, and the Fed looks at headline. Also, wages have gone up, which is inflationary. Hence, we do not expect any cuts this year, all things being equal. There is a massive loss of full-time jobs and a massive gain in part-time jobs Thank you Tabarek Jouini for having me again, always a pleasure.

17

3 Comments

Intringuing theory on election year and US equity performance during the second half of the year. Limited observable data points for sure. But the consistency of returns over the years is remarkable. This year, with tons of money waiting at the sidelines and a Sep rate cut that is becoming nearly certain, a turbo charged rally into the rest of the year looks increasingly likely.

3

The Irresponsible Profits of Debt Delusion But in Reality There is Only Cost For four decades Americans have made debt or cost appear as profit in perpetual money creation in the form of unproductive loans on existing assets.This delusion has become the standard of living in appearance for US citizens but has also became the primary vehicle for elite inflation extraction & dollar debasement of the publicIindeed it is the specific social & economic responsibility to accept business cycles.But few can read the tea leaves to the end of MMT burn rate despite,global contraction cost. Peter F Drucker’s basic assertion is still pretty shocking: there is no such things as profit.Profit is an artifice created by accountants to make the books balance. CNBC reported that America’s national debt"permanently crossed over to $34 trillion on Jan. 4, , according to the U.S.Treasury. It reached $33 trillion on Sept. 15, 2023, $32 trillion on June 15, 2023.Few realize this is war against deflation & natural law.U.S. debt, In essence a cost delusion wealth effect of dollar base artificial prices,now stands at $34.4 trillion $1M per head & $1 trillion interest rate tax fee.”Fed officials don't expect inflation to reach 2% until 2026'. Peter Drucker once said that businessmen habitually complain about the economic illiteracy of the public,double think.But the same businessmen who so loudly complain about economic illiteracy are themselves the worst offenders of it's self capture.They do not seem to know the first thing about profitability.The essential fact about profit is that there is no such thing.There is only costs(credit).Profit is also tomorrow's jobs & tomorrow's pensions.Profit is not peculiar to capitalism. It is a prerequisite for capitalism to exist.There is no conflict between profit & social responsibility.To earn enough to cover the genuine costs,which only the so-called profit can cover,economic & social responsibility, It is not the business that earns a profit adequate to its genuine costs of capital,to the risks of tomorrow & to the needs of tomorrow's worker & pensioner, that 'rips off' society. Profit from debt with no place to transfer capture to mitigated the capital risk without China or India's inflated value as absorber of speculative money creation & Treasuries. Given its relatively low savings rate,the U.S. economy depends heavily on foreign shrinking capital inflows from countries with high savings rates (ie..China) to meet its domestic investment needs & to fund the federal budget deficit. This leaves the pandemic creative destruction with no where to go but the narrative of technological hype removed from human value,a herding tool to digital fraud. The willingness of foreigners to invest in the U.S. economy & purchase U.S. public debt has helped keep U.S. real interest rates low.However, many economists contend that U.S. dependency on foreign savings exposes the U.S. economy to dollar debasement & Treasury risks(deflation).

2

2 Comments

The ease of raising capital is not a good reason to move your small company onto the OTCMarkets, it is somewhat easier but, it is by no means easy. The reason to go public is to provide information to would-be investors and give them the opportunity for liquidity - should they invest. The OTCMarket is a platform for capital formation and a proving ground for management. #shefford

2

🚀 Emmis Capital LLC Initiates $10 Million Capital Raise with tZERO Group, Inc. Securities Services 💼📈 Emmis Capital LLC a distinguished managed fund specializing in pre-IPO and emerging growth companies, has announced a significant $10 million capital raise in collaboration with tZERO Group, Inc. This strategic initiative leverages tZERO Securities, a leading technology platform for capital markets that is regulated by the SEC and FINRA, to facilitate this new funding round. Highlights of the Capital Raise: 1️⃣ Strategic Funding: Aimed at investing in high-potential pre-IPO companies and emerging growth public companies, this capital raise is set to bridge these firms to further growth and liquidity. 2️⃣ Experienced Leadership: Backed by over 50 years of combined C-suite level Wall Street experience, Emmis Capital's team brings a deep understanding of the market and strategic investment opportunities. 3️⃣ Innovative Platform Use: The use of tZERO's regulated broker-dealer services underscores a move towards democratizing access to investment opportunities traditionally reserved for institutional investors. Democratizing Investment Opportunities: This capital raise not only aims to support the next generation of public companies but also opens up investment to a broader audience, enhancing transparency and inclusivity in the investment process. This initiative is particularly significant as it represents a pivotal step towards opening up market opportunities that have historically been exclusive to Wall Street firms. Investor Participation: Interested investors can find additional details and participate in this exciting opportunity through Emmis Capital's dedicated investor site or directly contact their team for more personalized engagement. 💬 How do you view the impact of blockchain and modern platforms like tZERO on the democratization of capital markets? What do you think are the key benefits and challenges of these emerging investment avenues? 🔄 Join the discussion and share your insights on how technology is transforming traditional investment landscapes! 🔗 For further details on this capital raise and to explore investment opportunities with Emmis Capital, visit their official site: https://lnkd.in/g-DeHUzB #EmmisCapital #tZEROSecurities #CapitalRaise #Investment #Blockchain #Fintech #PreIPO #EmergingGrowth

3

Multi-billion dollar hedge funds now have a place for crypto in their long-term portfolios. For hedge funds, crypto is becoming more than just an arbitrage trade. The scale of financial and technical resources hedge funds are allocating to Bitcoin and other cryptocurrencies is something that the market has never seen before. New York-based Millennium Management poured nearly $2 billion into Bitcoin ETFs in the first quarter. Schonfeld, Point72, Elliott Management, and Sculptor are among the hedge funds holding Bitcoin ETFs. “Hedge funds were previously getting into crypto due to statistical and mathematical reasons because they were finding short-term trading opportunities. Now they are trying to understand the narrative behind bitcoin and other cryptoassets to find out how they will fit into their portfolio allocation theory,” said Jean-Marie Mognetti, chief executive of digital asset management firm CoinShares. Full story Financial News https://lnkd.in/e9Jfz_qM #hedgefunds #crypto #bitcoin

211

8 Comments

When JPMorgan Chase tops second-quarter revenue expectations on strong investment banking, but investors are not excited. Narrative Analysis offers the explanation. Here is the abstraction on challenges: Challenge supporting factors (capital,fed,pushing) (capital,question,fed,pushing) (capital,question,pushing) (capital,fed,gsib) (capital,question,fed,gsib) (capital,fed,basel_iii) (capital,question,fed,basel_iii) (capital,scenario,various) (capital,scenario,short-term) (capital,scenario,nir) (capital,scenario,analysis) (revenue,first_republic,bargain,visa-related) (revenue,first_republic,visa-related) (revenue,income,visa-related) (revenue,first_republic,bargain,income) https://lnkd.in/eC6rAZK3

1

Let’s Make a Deal: Financing for Direct Lending transactions requires reviewing trailing 3-year financials plus forward 5-year projections supported by a Quality of Earnings report. S&P Global Ratings reports that financial reporting has become too liberal with respect to Addbacks and Adjustments as it consistently understated a company’s leverage. The report evaluates 200 LBO transactions, analyzing the magnitude and composition of addbacks & adjustments that “creates higher event risk and potential credit degradation,” often overstating the ability for the obligor to repay debt/reduce leverage. The conclusion is that Debt-to-EBITDA leverage is ~2.5x higher post. It is important to recognize that EBITDA doesn’t account for capital expenditures, changes in working capital, debt payments and taxes, and often includes addbacks that are cash outflows. At the end of the day free cash flow may be more volatile, but it is critical to include in one’s evaluation metrics. Evaluating EBITDA, free cash, and other financial metrics as well as qualitative factors makes for a well-rounded investment decision. LBOs completed in 2015-2020 showed that 95% of the companies neglected to meet Year-1 EBITDA projections and 55% of companies missing Year-2 earnings projections by 33% or more. S&P added that sponsor models for debt reduction often failed to meet projections. S&P ran further analysis on 600 LBO transactions financed in the BSL market and the biggest component of addbacks was for “expected synergies and cost savings” representing the largest component of the calculation, which is obviously hard to forecast. Not surprisingly, the sector with the largest miss was technology, while B-rated companies chalked up a median leverage miss of 2.6x higher than projections. Interesting, PE sponsor deals showed a bigger miss v. non-sponsor transactions. It was nice to read the S&P report, as it simply confirms the approach that Curtis Lueker and the Marathon Asset Management Direct Lending team takes as we are acutely focused on financial reporting, true cash flows and credit worthiness to price risk accordingly. A page from the Marathon playbook is highlighted below that shows the High Yield & Leveraged Loan market true leverage (debt-to-EBITDA) differential between reported EBITDA v. actual EBITDA (excluding the Addbacks and Adjustments). On average, companies carry 2x or greater leverage than what is often marketed in their Debt-to-EBITDA calculations. The quality of your financial analysis matters regardless of if you are providing capital in the Private Credit market or Broadly Syndicated Loan or Bond market. It is a great time to lend, it’s never been better; however, stay skeptical, forensically verify the qualitative & quantitative, and independently build your financial model to include not only base-case, but downside scenarios to make sure the business holds up well with an eagle eye when shown addbacks and adjustments.

363

17 Comments