This guest post is from Mark Haefele, global chief investment officer at UBS Wealth Management and also chairman of the UBS Global Investment Committee.
Note that Mark will be fielding questions on the topic of poverty during Markets Live at 11am on Tuesday. A UBS white paper on fighting poverty is available here.
Global economic growth, the rise of China, and the fall of communism have all contributed to lifting hundreds of millions out of poverty in the past 25 years. Unfortunately, the ‘easy gains’ have been made. The aforementioned factors are either one-off in nature, or likely to be less supportive in the future. As a result, private individuals, particularly wealthy investors, have a potentially significant role to play in reducing poverty, through a combination of sustainable and impact investing, and philanthropy. Read more
According to a white paper released by UBS for this week’s World Economic Forum in Davos, the world economy remains as unbalanced today as it has been over the past quarter century – with big implications for the global economic recovery.
The authors argue that the adjustment of current account imbalances in the world economy was mostly a function of recession, not shifts in competitiveness. Large current account deficit countries restored external equilibrium at the cost of domestic disequilibrium, so output plummeted and unemployment soared. Read more
According to a white paper released by UBS for this week’s World Economic Forum in Davos, one of the surprising factors ‘reshaping the world’ – the Davos theme this year – is an aggregate absence of austerity among governments globally.
Viewing the global economy as a single unit, the authors see a very different picture to the post-crisis world of austerity. Indeed, the two largest components of global GDP, namely private consumption and fixed investment, both hit multi-year peaks in the first quarter of 2008. The ensuing recession was arguably made less severe by the ongoing rise in government consumption. Read more
That’s a compressed summary of a white paper released by UBS on Wednesday, How trade, technology and finance can help keep the recovery going
The gist is that recent advances in information and communications technology, new innovations in methods of manufacturing, and fresh ways of harnessing and exploiting energy could unleash significant growth benefits for the world economy over the next few decades. Read more
This guest post is from Mark Haefele, Global Head of Investment at UBS Wealth Management, and his colleague Chris Wright, Cross-Asset Strategist.
A key rule in financial markets is that rational investors should not take unnecessary risks. It is strange, then, that some savvy investors still allocate to commodities over a long-term, five-year-plus horizon. The assumption is that commodities diversify portfolios, hedge against inflation, and, in the case of gold, offer a safe store of value. But our research suggests these justifications for long-term bets on commodities are illusory. Read more
Although huge, all conquering, dollar-scooping behemoths of asset management would also seem to work.
Towers Watson and Pensions & Investments have counted up money manager dollars world-wide, once again, and when it comes to size, passive investment products are (almost) the only game in town. Read more
Alexander Friedman, global chief investment officer of UBS AG, and his colleague Kiran Ganesh, cross asset strategist at UBS Wealth Management, share their thoughts on the core issues behind the Washington impasse. For reference, Friedman is American and oversees $1.7 trillion in managed assets…
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Risk is on. The sun’s out (at least in London). Cue two fun slides from Julien Garran of UBS. Click to view.
The Aussie banks are very good companies. They are profitable, resilient, well capitalised, well managed, shareholder focused and have a very strong industry and regulatory structure. However, following the significant leveraging of the Australian & NZ households over the last thirty years they are now low growth and remain heavily exposed to housing, funding markets & unemployment risk. Read more
René Stulz and other academics members of the avowedly non-partisan Squam Lake Group have come out with an update of their well-received 2010 paper on fixing finance, post the crisis. Click below to read their fresh thoughts on banker pay and the knotty problem of properly aligning incentives.
UBS reported a fourth quarter loss of CHF1.2bn — actually CHF1.9bn, when considering Libor fines and other regulatory and legal costs, plus restructuring costs. The loss came in a little lower than the median estimate of analysts surveyed by Bloomberg.
The full monstrous PDF is here, but meanwhile, we note the FT’s Daniel Schäfer scooped an interesting change to the bank’s bonus policy for its 6,500 highest earners: Read more
Soon, it appears, we’ll have another big Libor settlement to write about — this one from RBS. Both the FT and the WSJ are tipping the fines to be in the order of £500m. The FT says it could be more than £400m to the US authorities and about £100m to the FSA; the WSJ doesn’t mention how it might breakdown between the US and UK, but says the settlement “could be completed within the next two weeks”.
Also, yikes! RBS (or specifically, an Asian unit of RBS) might have to plead guilty to some criminal charges if the US prosecutors have their way, says the WSJ.
Shockingly RBS does not like this. But… RBS may not have any choice: Read more
If you wanted to see a group of British MPs not really getting why a group of former UBS execs didn’t get that a Libor scandal was raging under their watch, the only place to be was the Thatcher Room in the House of Commons on Thursday. Read more
The competition is on! Sure, UBS is already ahead of Barclays in the FSA fine stakes, but will the inevitable embarrassing communiques beat “done for you, big boy”? Opening gambit from the FSA’s Final Notice to UBS on Wednesday morning (emphasis ours):
For example, on 18 September 2008, a Trader explained to a Broker: “if you keep 6s [i.e. the six month JPY LIBOR rate] unchanged today … I will f[**]king do one humongous deal with you …
The FSA’s component of the UBS settlement relating to Libor and Euribor was £160m — the largest fine it has ever imposed.
The UK financial regulator made some revealing comments on the Swiss group’s transgressions, which it says “involved a significant number of employees and occurred over a period of years in a number of countries”: Read more
UBS will pay a total of CHF1.4bn ($1.5bn) — or, more than three Barclays — in fines and profit disgorgements related to Libor and Euribor claims. The payments will go to US, UK and Swiss regulators. The bank has also warned of losses totalling about CHF2 to 2.5bn for the fourth quarter, largely due to the settlements and provisioning, although CHF500m related to its restructuring.
Here is the statement: Read more
It might not be made public until Monday but the FT reports a fine above $1bn could be landing on UBS’s doorstep to settle allegations of Libor manipulation. Driven largely, it appears, by CFTC and DoJ penalties.
That’s more than double the Barclays record set in June… Read more
Definitely a turn-around for the books in the Kweku Adoboli case.
From the FSA on Monday, emphasis FT Alphaville’s (and the whole release really is worth a read): Read more
The following is a transcript of Kweku Adoboli’s last recorded phone call at UBS with members of the bank’s back office accounting team.
Not only does it reveal that Adoboli may have used Blackrock and SocGen as faux counterparties for hiding losses but that the “back-office genius” seemingly had difficulty grasping the difference between an asset and a liability (at least in public). Scrutiny of the bank’s unsettled trades, meanwhile, seems to be what prompted his eventual confession. Read more
The great UBS vs Kweku Adoboli trial has finally come to an end.
The verdict: Adoboli was sentenced to seven years for fraud related to a $2.3bn loss, but found not guilty of four counts of false accounting. Read more
It’s bad enough finding out that you’ve been made redundant when your pass fails to let you in to the building. But finding out that you’ve been sacked and replaced by a computer (which has more or less made your skills redundant)? That’s even worse.
So spare a thought for David Gallers, former head of CDS index trading at UBS, who was let go last week, to be replaced by snazzy new algo. Read more
The Swiss bank has wasted no time in starting the cost cutting programme it announced just this morning. Some people learnt of this when they tried to enter their offices on Tuesday morning, only to discover their passes weren’t working.
Our hedge fund sources also tell us that many of their UBS contacts “have red dots on their B’berg” this morning, meaning they’re not logged in. It sounds like sales staff have generally been the first to go. Read more
The story of Bradley Birkenfeld, the man who blew the whistle on UBS’s tax dodging schemes to the Department of Justice in the US, is very odd.
Freshly released from prison, Birkenfeld has now been rewarded with $104m by the Internal Revenue Service for his part in a case that saw UBS pay $780m in fines to the US authorities. Read more
Via UBS. (Click to enlarge)
From Martin Lueck and team at UBS:
Who’s winning? Read more
Courtesy of the European economics team at UBS…
UBS announced lacklustre results on Tuesday, saying it expected further weakness in investment banking in the first quarter.
But the bank also provided details of some interesting underlying trends at the bank, funding wise. The following table taken from the bank’s results statement provides a good summary (click to enlarge): Read more
UBS issued a gloomy outlook for the current year, noting the tough conditions experienced in 2011 were likely to be prolonged, meaning “traditional improvements in first quarter activity levels and trading volumes may fail to materialise fully”, the FT reports. The Swiss group warned such conditions would “weigh on” its first-quarter results, notably in investment banking. The downbeat forecast came as the group said net profits in the fourth quarter slumped to SFr393m ($426m), reflecting the severe pressures on earnings seen at some US rivals and at Deutsche Bank in Europe. Earnings were a fraction of the SFr1.66bn made in the same period the previous year and demonstrated the impact of tough markets, reluctant clients and heavy costs, in spite of savings. Fourth-quarter earnings in investment banking, as at some rivals, turned negative, with a SFr256m pre-tax loss, compared with a profit before tax of SFr100m the previous year. The poor results reflected sharply lower revenues in all the investment bank’s businesses, notably the two powerhouses of equities and fixed income, currencies and commodities.
Kweku Adoboli, the former UBS trader accused of causing the largest unauthorised trading loss in British history, has denied charges of fraud and false accounting, reports the FT. Mr Adoboli, 31, entered pleas of not guilty as he appeared for a third time at Southwark Crown Court in London after being accused of unauthorised trading following revelations of a $2.25bn loss at the Swiss bank last year. Mr Adoboli worked for UBS’s global synthetic equities division, buying and selling exchange traded funds. The not guilty plea will probably slow an investigation by the UK’s Financial Services Authority of alleged regulatory and compliance failings at UBS. The watchdog and Finma, the Swiss regulator, have jointly commissioned PwC to examine the losses and will probably receive a report next month. But any move to bring an enforcement action will be complicated by the need to protect Mr Adoboli’s right to a fair trial.