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TYPE STSP <GO>
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TYPE ALSN <GO>
Illuminating
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Phone: +44 (0)20 3725 6500
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TYPE SEPL <GO>
may
volume 23
number 5
Features
cover stories: old energy/new ideas
56
56
68
74
Double-Wide Returns
Former Wall Street bankers and private-equity firms are jostling for
position in an unlikely asset class: trailer parks.
by anthony eFFinger and katherine burton
96
88
We Want to Be Everywhere
From his beachhead on the Chinese island of Hainan, Chen Feng has
built a global business conglomerate thats worth $58 billion.
by williaM Mellor and JasMine wang
96
102
on the cover
John Browne
in London
Photograph by
alan clarke
c o u n t r y Focus
groomer for cover photo: Khandiz Joni; from top to bottom: Spencer lowell; Steve tirona; barbel Schmidt
by robert tuttle
*Estimated market share based on aggregate buy-side and sell-side notional cleared as of February 12, 2014.
May
continued
s t r at e g i e s
110 Profile
Betting on Comebacks
113 Charts
Using Heikin-Ashi
by akshay chinchalkar
Compounding Machines
by charles stein
32
agenda
22
24
26
28
30
32
by Joseph salvatore
Corporate Finance
Decarbonizing Portfolios
by gregory elders
c o m m e n ta r y
16 Editors View
18 Letters
34 Bloomberg View
110
from top to bottom: j.d. pooley/getty images (worker); beth hall/bloomberg (wal-mart); drew kelly; robyn twomey
by Jon asmundsson
Editors View
Matthew Winkler
Innovation
and Conflict
Shale gas
could be very
important,
Browne says.
It could be
transformative.
ExEcutivE Editor
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16 BLooMBErG MArkETs May 2014
ExEcuTiVE EdiTor
ronald henkoff
managing EdiTor
dan ferrara
crEaTiVE dirEcTor
siung Tjia
assisTanT managing EdiTor
Michael s. serrill
dirEcTor oF PhoTograPhy
Brenda Milis
sEnior EdiTors
robert s. dieterich
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stryker McGuire (London)
Jonathan neumann
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Joel Weber
EdiTor-aT-largE
robert friedman
rankings EdiTor
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sEnior WriTErs
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(deputy photo Editor, London)
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(Associate photo Editor)
coPy EdiTors
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Jon Asmundsson
(strategies Editor)
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(Associate strategies Editor)
sTraTEgiEs conTriBuTors
founder, bloomberg lp
michael r. bloomberg
chAirmAn
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Letters
Daniel L. Doctoroff
publisher
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Advertising sAles director,
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65-6231-3486
upDATES
Indias Shadow
Banker Jailed
Subrata Roy, who built an $11 billion empire
collecting small deposits, was ordered imprisoned in New Delhi in late February by
Indias Supreme Court. He was being held
until he presents a plan to refund $3.9 billion
to 30 million customers. Roy has maintained
in court that his company, Sahara India Pariwar, has already completed the refunds.
In Indias Shadow Banker (January
2014), BLOOMBERG MARKETS reported that
Roy was fighting to hold on to his assets
after regulators sanctioned him for selling
investment products without approval.
Roys lawyers have proposed selling
Saharas holdings to pay the refunds in
exchange for his release.
BhuMA ShRIvASTAvA
detroit sAles
Laura Cameron
44-20-7073-3425
David bradford
852-2977-4719
AsiAn sAles
Correction
In Argentinas Oil Bonanza, we should
have said that Jose Luis Manzano was
majority leader in the lower house of
Argentinas National Congress from 1989
to 1991, when President Carlos Menem
appointed him as interior minister.
consumer mArketing
director
I N F O R M AT I O N F O R R E A D E R S
lETTERS TO ThE EDITOR
steven J. mcCarthy
212-617-4332
richette robillard
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A bpA international
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18 bLoomberg markets May 2014
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RecReational
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MOtOr
vehicles
0.04
0.15
0.01
foReign tRavel
0.30
0.25
0.20
0.15
0.10
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Theres a lack of pricing power in
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Medical goods and services were 0.3
percentage point out of the 0.7 point
slowdown in the PCE index. A jump in
housing costs countered the trend. Rents
appear to be stabilizing, so housing in
2014 may give less support to inflation.
Inflation rates persistently below the
stated target can be a cause for real concern, Boston Federal Reserve Bank
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Ag e n dA
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Loans
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Ag e n dA
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Source: AlixPartners
LImIts to
Growth
As more people
move to cities,
trafc jams and
pollution may
discourage car
ownership.
Moscow
Tokyo
Sao Paulo
Beijing
Portion of population
living in urban areas
100%
61.7 %
u.s.
20
120
World
1950
JeFF greeN
aND keItH NaUgHtoN
1983
2010
2013
87.3 %
75.5 %
69.5 %
urban
Constraints
sCenario
30
2035
129
102
90
60
40
Sources:
United Nations,
IHS Automotive,
Transportation
Research Institute
Percentage of
U.s. 19-yearolds with a
drivers license
150
80
60
2000
2035
9.8 years
2013
11.4 years
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Before inVestinG, cArefully consider A funds inVestment oBjectiVes, risks, chArGes And expenses. you cAn find
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FN1410506
the wider economy: Britains possible departure from the isnt universal. Its not as though the City would be speakEuropean Union, as Stephanie Baker and Ben Moshinsky ing with one voice.
report in The City on Edge (page 80).
That feelings are mixed should come as no surprise. The
Prime Minister David Cameron has promised a referen- EUs efforts to strengthen and extend financial regulation have
dum on EU membership by the end of 2017assuming his aroused intense opposition in the City. Some of these reforms
Conservative Party wins remake sense; others dont.
election in 2015. At the moCamerons government has
ment, a Tory majority is
taken EU institutions to court
looking unlikely, and the opto push back against rules it
position Labour Party says
sees as misguided and, in some
that if it won, it would hold a
cases, unfairly directed at U.K.
referendum only if the U.K.
interests. Some of these lecedes more powers to the
gal battles, including one over
EU. Still, the EU is unpopa proposed financial transacular, and polling at the motions tax, arent settled.
ment points to a close call.
The City applauds this reIts quite possible that Britsistance. Yet it also underish voters, given the choice,
stands whats at stake if the
would elect to quit.
U.K. leaves the union. LonThat would be bad and
don is a global financial cenu.k. financial district leaders have
possibly catastrophic news
ter, its true, but much of its
had little to say about the biggest
issue clouding their future: britains
for the City. Without further
business depends on links to
possible exit from the eu.
delay, leaders of the finanEurope. Restrictions on comcial services industry should
merce with Europe and curbs
start explaining the dangers of a so-called Brexit.
on the free movement of capital and people would wound
Why the reticence to date? Two reasons. Right now, the whole economy, but banking and finance are especially
with the crash a vivid memory, the City is about as popu- exposed to a loss of business to Frankfurt or Paris. A 2013
lar in the U.K. as Wall Street is in the U.S. Theres a fear survey showed that more than 80 percent of financial leaders
and its warrantedthat too strident a pitch about whats want the U.K. to remain a member.
good for the City might have the opposite effect on the
The City needs to figure out a way to speak up. If it doesnt, the
electorate than the one intended. Staying out of what is U.K. cant have a proper debate or make a fully informed choice.
already a heated political debate seems wise. Also, the
opinion that an exit from the EU would badly hurt U.K. BY THE EDITORS Of BlOOmBERg vIEw
To read more editorials, type view <go> on the Bloomberg Professional service or
financial companies, though widely held in the industry, go to BloomBerg.com/view.
34 BloomBerg markets May 2014
In 1953, we invented
transcontinental service.
aa.com/reinvented
aa.com/reinvented
John Browne
says drillers will
have to be very
thoughtful
about the land
atop the shale
formations.
o l d e n e rgy
n E w i d E as
BloomBErg markEts 41
o l d e n e rgy
n e w i d e as
a drilling-site
protest near
manchester,
england.
activists, left
to right,
opposite, gave
their names as
Beth, gigi, mac,
maggie and
john-jo.
Even relatively small Britain is sitting on a gas mother lode. The Bowland-Hodder formation, a belt of
shale that stretches across Englands
midsection, holds more than 37 trillion cubic meters (1,300 trillion cubic feet) of natural gas, according to
estimates from the British Geological Survey. Thats almost the same
size as the Marcellus deposit under
the Appalachian Mountains, the No. 1
shale gas find in the U.S. The mineral
is so impermeable that it yields only
a fraction of its hydrocarbons to producers. The Marcellus is on course to
give up about 9 percent, according to
data from the Marcellus Center for
Outreach and Research at Pennsylvania State University in University
Park. If the Bowland performs similarly, Britain will have enough gas
to meet its needs for more than 40
years, according to data from the BGS
and the EIA.
Such a windfall would be welcome
in a country that expects to import 70
percent of its natural gas by 2020 as
its North Sea reserves dwindle, says
Michael Fallon, the U.K. energy minister. Shale gas is coming to the U.K.
one way or another, says Fallon,
Prime Minister David Camerons
point man on shale gas development.
It would be far nicer if it came from
underneath Britain rather than be
imported from the U.S. or elsewhere.
Later this year, the U.K. government
plans to issue a new round of oil and
gas exploration licenses for an area
n e w i d e as
Brownes Pivot
Po ints
His 45-year career
mirrors tHe evolution
of tHe modern oil
industry.
1969
posted to Alaskas North slope as
a petroleum engineer for bp.
1981
manages oil production from the Forties field in
the North sea off scotland.
1988
leads bps deep-water
exploration of the Gulf
of mexico.
1997
becomes the first industry
head to acknowledge
climate change. Three
years later, he refurbishes
the company logo.
2003
Forges a joint britishRussian oil venture,
TNK-bp, winning over
president vladimir putin.
2014
leads the fracking push in the u.K. against strong
public opposition.
Source: Bloomberg
Top To boTTom: JoHNNY EGGITT/AFp/GETTY ImAGEs; RAlpH CRANE/TImE & lIFE pICTuREs/GETTY ImAGEs; HulToN ARCHIvE/GETTY ImAGEs; GIllEs bAssIGNAC/GAmmA-RApHo vIA GETTY ImAGEs
o l d e n e rgy
o l d e n e rgy
n e w i d e as
VISIT
KASE <GO>
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Early
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Late
Expansion
Current
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Late
Recession
Early
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-25.04%
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Commodities
o l d e n e rgy
n e W i d e as
ADVERTISEMENT
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Rabobank Group will publish its 2013 annual results on February 27th, 2014.
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o l d e n e rgy
n e w i d e as
Whe re t h e Sh a l e IS
TwenTy years afTer a Texas wildcaTTer named GeorGe miTchell blasTed shale
wiTh waTer, enerGy firms are racinG To frack The mineral for oil and naTural
Gas around The Globe.
shale formaTions
conTaininG oil and Gas,
as of may 2013
CAnAdA 5
U.S. 2
1
2
3
4
5
russia
U.s.
China
argentina
libya
75
58
32
27
26
1
2
3
4
5
China
argentina
algeria
U.s.
Canada
1,115
802
707
665
573
ArgentinA 4
*Extractable quantities. Sources: Bloomberg, company reports, U.S. Energy Information Administration
The Bowland-Hodder
formation may yield a 40-year
supply of natural gas for the U.K.
The Bazhenov formation may double
Russias crude output.
IGas, Total
China 3
algeRia 3
libya 5
Australias little-explored
Canning Basin has
geology similar to
North Dakotas booming
Bakken formation.
players: Apache, Buru
Energy, Mitsubishi
players: Chevron,
Shell, YPF
o l d e n e rgy
n e w i d e as
w h e n you lo o k at th e ba l a nc e of
ris k an d r ewa rd, i t s ev i d e nt that
t h is is s om e t h i n g t h ats going to
b e don e , b row n e says .
a well ruptured or wastewater spilled
upstream from his farm, it could contaminate his pastures.
Whats more, the U.K. Environment Agency found in 2011 that the
flowback water from Cuadrillas
fracked well contained high levels of
radium, a naturally occurring radioactive byproduct of uranium that can
cause cancer. Im not a bloody treehugger, but if I have to raise cows on
radioactive grass, whos going to buy
my milk? Pemberton, 57, says. Im
out of business.
Browne says fracking and farming
can coexist because the shale lies
thousands of meters below the water
table. By making sure the wells remain intact, there will be little danger
that wastewater will leak near the
surface, he says. To minimize the surface area of land affected by drill
sites, Cuadrilla plans to bore two to
four lateral underground shafts from
each vertical well. Well have to be
very thoughtful here about how much
54 bloomberg markets May 2014
Ian Roberts, co-founder of Residents Action on Fylde Fracking, decries these gestures as bribes. His
organization is urging the Lancashire
County Council to reject Cuadrillas
fracking applications in coming
months. Cuadrilla is not doing this
in the national interest; its self-interest, says Roberts, a retired human resources manager at HM
Revenue & Customs, the British tax
collection agency. We still have the
power to stop it, adds Tina Rothery,
bloomberg tps
You can use the Bloomberg Industries natural gas production dashboard to
find research and data related to European shale gas. Type BI NGASE <Go>
and click on Themes. Scroll down to the theme entitled The Challenge
From Shale Gas in Europe and click on it to display recent research pieces.
For information on the portfolio of Riverstone Holdings, John Brownes
private-equity firm, type 312903Z US <Equity> DES <Go> and click on Portfolio. To watch a recent appearance by Browne on Charlie Rose, type NSN
N27U0R6S972R <Go> 97 <Go>. JON ASMUNDSSON
Powershares QQQ looks to companies that are looking forward. Thats why the ETF
invests in 100 of the worlds most revolutionary companies. Each is listed on the
Nasdaq Stock Market and includes household names such as Oracle, Starbucks,
Microsoft, Intel, Cisco Systems, and Google. With all of these revolutionary companies
in one fund, innovative investing is within your reach.
powershares.com/forward |
@PowerShares
may acquire those shares from the Funds and tender those
shares for redemption to the funds in Creation Unit aggregations
only, typically consisting of 50,000 shares.
PowerShares is a registered trademark of Invesco PowerShares Capital
Management LLC. ALPS Distributors, Inc. is the distributor for QQQ.
Invesco PowerShares Capital Management LLC is not afliated with
ALPS Distributors, Inc.
o l d e n e rgy
n e w i d e as
bloomberg markeTs 57
o l d e n e rgy
n e w i d e as
I f w e d on t
ca ptu re ca rb on
fro m n atu ra l
gas , w e ca n t get
w h e re w e n eed
to b e o n c l Im ate
fast en ou gh, J oh n
th o m pson says.
andre boulet,
CEO of Inventys,
opposite, stands
in front of the
prototype of his
carbon-capture
equipment, left.
broader uses: helping gas- and coalfired power plants and industrial sites
respond should governments restrict
CO2. Starting in 2015, Canada will cut
average pollution from new coal-fired
plants roughly in half by limiting them
to 925 pounds (420 kilograms) of CO2
emissions per megawatt hour. EOR is
n e w i d e as
CapturE
CO 2
C
o
2
1
VEnt
n
The nitrogen is
released through
a vent.
Flue
gaS
wash
4
The carbon filter
turns. Steam
breaks the chemical
bond and washes
away the CO2.
CO 2
5
SCale
output
C
o
human
60 bloomberg markets May 2014
Source: Inventys
o l d e n e rgy
o l d e n e rgy
n e w i d e as
Clean Energy Systems Inc. in Rancho Cordova, California, uses a modified space shuttle engine, which can
also burn synthesis gas, or syngas, extracted from coal, for combustion. The
companys roots date to World War II.
Founder Rudi Beichel worked on V-2
rockets with Wernher von Braun, the
German physicist who emigrated to the
U.S. and later helped put men on the
moon.
Rocket scientists always understood
that sealed, high-pressure combustion
needs less fuel and produces fewer
emissions than other types, but they
didnt see a civilian power market because nobody got penalized
NET Powers
for pollution. The model we
bill brown is
have today is to take carbon
working with
out of the ground, use it and turbine maker
Toshiba
throw it into the air, CEO
Power.
Keith Pronske, 54, says. In
the future, we should put it back, he
says, referring to sequestration or EOR.
Pronskes engine looks like a hydraheaded machine with its tangle of natural gas, oxygen and water tubes. A
honeycombed fuel injector lets in
enough gas and oxygen for combustion
and enough water to prevent melting.
Burning produces CO 2 and steam,
which spins a turbine to create power.
Most plants waste energy in this step.
Pronske says his system is 45 percent
efficient, meaning that it converts that
much of its fuel to usable power. That
theres absolutely
equals the efficiency of so-called combined-cycle gas plants, which use gas
no doubt this
and steam turbines in tandem, and retechnology can
lease CO2. Customers can sweeten the
produce tens of
deal with Clean Energys technique by
billions in revenue
selling CO2 for $30 a ton. A 250-megawithin 10 years, ceo
watt plant would also create 600,000
bill brown says of
gallons (2.3 million liters) of potable
water a day, enough for 6,000 people,
net powers systeM.
Pronske says.
Clean Energy is finding interest in
major gas-producing locales. Maersk
Oil, a unit of Copenhagen-based A.P.
is part of the United Arab Emirates,
Moeller-Maersk A/S, agreed in Januwhich wants to devote more of the
ary to investigate the technology with
worlds second-largest proven gas restate-owned developer Masdar Abu
serves to its industries. In 2018, a gasDhabi Future Energy Co. Abu Dhabi
fired plant is scheduled to supply
62 bloomberg markets May 2014
P ollution P ro o fing
P ow e r P la nts
2
1
combustIon
chamber
rEsourcEs out
heat-recovery
steam generator
ExhAust gAs
natural
gas
generator
e lect r i c i t y
p r o d u ct i o n
c ost 1
$ 91.63 2
per megawatt
hour wIth
carbon capture
ElEctricity
Steam
gas turbIne
condenser
steam turbIne
exhaust
stack
air
115
metrIc tons of
generator
nItrogen oxIde
ElEctricity
1 Natural gas mixes with air and burns, creating pressure that spins a gas turbine. 2 The hot exhaust gas expands through a
heat-recovery unit and powers a separate steam turbine. 3 Thirty percent of the plants heat is used to convert cooling water into
steam. CO2 and other emissions can be captured or released up the stack. 4 Both turbines power generators to make electricity.
resources in
1
rEsourcEs out
co 2
turbIne
heat exchanger
combustor
aIr-separatIon unIt
CO2 +
H2O
wAtEr
e lect r i c i t y
p r o d u ct i o n
c ost 1
$ 62.85
Av e r Ag e A n n uAl
e mi ss i o n s 3
CO2
Or syngas
tons of co 2
ElEctricity
water
separator
natural
gas
1.5
mIllIon metrIc
per megawatt
hour burnIng
natural gas
Pure
oxygen
Av e r Ag e A n n uAl
e mi ss i o n s
w i t ho u t cA r b on
cA pt u r e
some Co 2 ReCyCled
EnhancEd Oil
rEcOvEry Or
stOragE
0nItrogen oxIde
0 co
somE co 2
pipEd Out
1 Minimum
1 Oxygen is separated from nitrogen in the air-separation unit and sent to the combustion chamber. 2 A mix of oxygen, CO2 and
natural gas or other fuel burns, creating pressure to spin a CO2-powered turbine and run an electricity generator. 3 Hot CO2 from the
combustor passes alongside cool CO2 coming back from a device that separates water from CO2. 4 Some CO2 is recycled back to the
combustor, where its reburned. 5 Other CO2 can be diverted to a pipeline for enhanced oil recovery or storage underground at no
additional cost.
depending
on size of plant, etc.
2 Electricity
production costs
without carbon
capture are $63.98.
3 Diverting CO 2
into a pipeline for
storage or EOR.
Sources: NET Power,
Panda Power Funds
o l d e n e rgy
n e w i d e as
similar to a gas turbine. The CO2 is recycled back to the combustion chamber. It arrives at 750 degrees Celsius
(1,382 degrees Fahrenheit), meaning
NET Power needs just 400 degrees Celsius more to hit its optimal operating
temperature. The process saves fuel
and eliminates a boiler, steam turbine
and condenser, says Brown, 58, who has
worked at Goldman Sachs Group Inc.
and Morgan Stanley, where he was
global co-head of listed derivatives.
We have to replace a lot of power
plants that were built after World War
II, says Ralph Eads, vice chairman of
Jefferies Group LLC, which holds an
equity stake in the startup. NET Power
has a solution thats economical and
environmentally friendly.
NET Power has attracted Toshiba
Power Systems Co., one of the worlds
largest turbine makers. Hideo Nomoto,
the Yokohama, Japanbased research director of Toshiba Power, ranks NET Powers technology among the top energy
innovations of the past 100 years, alongside nuclear power and combined-cycle
combustion. Chicago Bridge & Iron Co.
has signed on to build NET Power electricity plants if a demonstration project
succeeds; Exelon Corp. will run them.
The arrangement melds the creativity of
startups with the massive resources
needed to fight climate change, Nomoto
says. We will have a very big market, he
predicts. It could be any power plant,
anywhere in the world.
NET Power can with no added cost divert CO2 into a pipeline for EOR or sequestration. The company says it
achieves 51 percent efficiency for coal
and 59 percent for natural gas. It also
says costs, including capital and operating expenses, are $62.85 per megawatt
hour for a NET Power plant burning
natural gas. That compares with $91.63
for a combined-cycle gas plant capturing CO2. A coal plant trapping carbon
costs $101.25, NET Power says.
Weve got to be cheaper, says Brown,
who left Wall Street in 2007 to teach at
his alma mater Duke University School
of Law and start 8 Rivers Capital LLC,
64 bloomberg markets May 2014
Clean Energy
Systems
CEO keith Pronske
uses a modified
space shuttle
engine, shown
below, to produce
power without
releasing emissions
into the air.
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from Investment Trends 2013 Singapore CFD & FX Report. Issued by CMC Markets Singapore Pte Ltd (UEN 200605050E). This advert is for information
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therefore, available to all persons or in all countries. iPad is a trademark of Apple Inc., registered in the U.S. & other countries.
o l d e n e rgy
n e w i d e as
Main Use
natUral gas
petroleUM
coal
Power plants,
refineries,
petrochemical plants
Transportation,
home heating
p o U n ds o f co 2
p er M M bt U
117.0
157.2 1
205.7
av er age
ef f i ci en cy o f
U. s . p ow er
p l a n t f l eet
42.4 %
31 %
32.5 %
cost p er
M M bt U 2
$4.65
$19.26
$2.36
1 Gasoline only.
2 Reflects U.S. only.
bloomberg tps
sifting tHROUgH
emissiOns data
Type ESG <Go> for information on environmental, social and governance data
on the Bloomberg Professional service. You can use the Financial Analysis
function to dig into environmental data for a company. Type AEP US <Equity>
FA ESG <Go>, for example, to analyze data for Columbus, Ohiobased American Electric Power Co. Click on the Environmental subtab for the companys
greenhouse gas emissions. Type BI CLIMG <Go> for the Bloomberg Industries
dashboard on climate change. Click on Utilities under Industries on the left
side of the screen for research on power generation. JON ASMUNDSSON
Individual Insights.
Collective Wisdom.
To really understand an
opportunity, you cant rely on
a single viewpoint. You need
expert input from all sides.
Z AC K SH A FR A N
I V Y F U N D S .C O M
SM
FA C EB O O K .C O M / I V Y F U N D S
Past performance is no guarantee of future results. Investment return and principal value will fuctuate, and it is possible to lose
money by investing.
Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus
containing this and other information for the Ivy Funds, call your fnancial advisor or visit us online at www.ivyfunds.com. Please read
the prospectus or summary prospectus carefully before investing. I V Y F U N D S D I S T R I B U TO R , I N C . 18 69 0 (0 5 /14)
o l d e n e rgy
n e w i d e as
68 bLoombeRg maRkets
by robert tuttle
n e w i d e as
o l d e n e rgy
g as wa r ?
Japan
$16.90
15
10
$9.69
U.k.
5
$4.65
U.s.
3/10/13
77.4 Million
Tons
23.1
3/10/14
20.8
20.0
18.1
JaPaN
88.1 Million
Tons
36.8
14.7
spain
india
14.5
13.3
o l d e n e rgy
n e w i d e as
r eve n ue f ro m t h e
exp ort of nat u ra l
gas h as giv e n
qatar s c it i ze n s
the h igh est p e r
cap ita in co m e
i n t h e wor l d :
$ 10 1 ,0 0 0 in 20 1 2.
ac q u is itiv e
Qatar Petroleum InternatIonal has resPonded to the challenges to Its lng hegemony
by buyIng uP gas and oIl fIelds and exPort facIlItIes around the world.
ActiOn
investment
Oct. 2012
$10 billion
April 2013
$902 million
Dec. 2013
$1.6 billion
JAn. 2014
$1 billion
bloomberg tps
Looking at
Lng Prices
You can use Bloomberg Industries data to analyze global LNG prices. Type
BI LNGG <Go> and click on Trade & Prices in the left column for a list of
netbacks for LNG exports from and to various countries. A netback is the
price at the import destination minus shipping costs. Click on the plus sign
next to From Qatar To for prices of Qatari gas in different countries. To track
shipments from Qatars Ras Laffan, type NOON LNG <Go> for the Noon
Seaborne Report and click on the plus sign to the left of Middle East.
rocky swifT
VXUS
Vanguard Total International Stock ETF
Help put a world of opportunities in your clients hands.
All investing is subject to risk, including the possible loss of the money you invest. Investments in stocks issued by non-U.S.
companies are subject to risks including country/regional risk, which is the chance that political upheaval, nancial troubles, or
natural disasters will adversely affect the value of securities issued by companies in foreign countries or regions; and currency
risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable
changes in currency exchange rates. Stocks of companies based in emerging markets are subject to national and regional
political and economic risks and to the risk of currency uctuations. These risks are especially high in emerging markets.
Prices of mid- and small- capstocks often uctuate more than those of large-company stocks.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors
must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor
may incur brokerage commissions and may pay more than net asset value when buying and receive less than
net asset value when selling.
For more information about Vanguard ETF Shares, visit advisors.vanguard.com/VXUS, call 800 339-5978, or
contact your broker to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important
information are contained in the prospectus; read and consider it carefully before investing.
2014 The Vanguard Group, Inc. All rights reserved. U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and
8,417,623. Vanguard Marketing Corporation, Distributor.
Follow us @Vanguard_FA for important insights, news, and education.
TYPE VETF <GO>
bloomberg marketS
hits. The litmus test was if we told someone at a cocktail party what we do and
their response was a grimace, we were
on the right track, Shlachter says.
A family friend had made a fortune
in roller rinks, so real property enticed
them. They settled on trailer parks and
started a long, hard search. Many of the
nicest parks are owned by Zell or another big player. The smaller parks are
often neglected slums.
In Fort Worth, Texas, a woman with
the e-mail name spaceylacey0420 was
selling a park that looked promising,
save for the sewage it drained into a nature preserve. In Banning, California,
a barista at the local Starbucks
which was, strangely, out of milktold
Shlachter to get out of town because
there was nothing good there.
Finally, in November 2012, they
closed on a 191-pad park in Odessa,
Texas, called the Vista West Mobile
Home Ranch. They were finally park
they sAy it wouLd be A disAster for the u.k. to puLL out of the europeAn union.
From a corner
conference room
overlooking the
Thames, Michael
Sherwood, a vice
chairman of
Goldman Sachs
Group Inc., has
the guts to voice
publicly what many
in Londons centuries-old financial
district are increasingly worried about
behind closed doors: that threats to
Britains membership in the European
Union are threats to British business.
Over the past 15 years, Goldman, like
many of the other 250 foreign-owned
banks in the City, has consolidated its
European operations in London to take
advantage of the EUs $16.6 trilliona-year single market. Wideopen access to that market is now
in doubt because of U.K. Prime
Minister David Camerons promise to hold a referendum on EU
membership by the end of 2017.
If Britain votes to quit the EU,
Sherwood says, parts of Londons banking business would
inevitably drift to Frankfurt
and Paris. We want the U.K. to
stay in Europe, the 49-year-old
banker says. The U.K. leaving
the EU would lead to some sort
of fragmentation of our business. The City would definitely
be impacted.
Sherwood is not alone in opposing a Brexit, as a British departure
from the EU is known. A 2013 survey by TheCityUK, a bank lobby
group, found that 84 percent of
finance industry leaders want
82 bloomberg markets May 2014
michael sherwood is
opposed to a Brexit, as
a British exit from the
28-nation EU is known.
wall streeton-thames
Londons centuries-old Square Mile is a financial
gateway to Europe and the rest of the world.
2 million
7%
of the
worKing
PoPUlation
coNtributioN of
fiNaNcial aNd related
services to u.k. GdP:
174 Billion
251
No. 1
market iN:
derivatives*
49%
of global total
ForeiGn eXChanGe
40.9%
of global total
12.6%
of U.K. gDP
800
Cross-Border
Bank lendinG
18%
of global total
managing
85% of
eUroPe-baSeD
heDge-fUnD
aSSetS
U.S.
11%
says. Businesses are drawing up contingency plans, and people are asking if
the U.K. is still investable. He says the
prospect of Scotlands voting for independence from the U.K. in a September
referendumhowever unlikely that
looks in the latest pollingcompounds
the climate of indecision, further putting off investors.
U.S. banks seeking a gateway to Europe are major players in the City, and
Washington has expressed concern
over Britains increasingly strained
relations with Brussels. In January
2013, President Barack Obama phoned
Cameron and told him the U.S. values a strong U.K. in a strong European
Union, according to the White House.
In a rebuff to Obama, Cameron days
later set out his referendum pledge in
a speech, prompting UKIPS Farage
to say, The genie is out of the bottle.
In his speech, Cameron vowed to claw
back U.K. powers that he said had been
usurped by Brussels. There is a growing frustration that the EU is seen as
something that is done to people rather
than acting on their behalf, he said.
German Chancellor Angela Merkel
has backed Camerons calls for limited
change to EU institutions, stopping
short of supporting a wholesale renegotiation of the U.K.s membership.
We need a strong United Kingdom
with a strong voice inside the European
Union, Merkel said in February in an
address to the lower and upper houses
of the U.K. Parliament.
Camerons stand on Europe is temperate compared with many Tories.
Brooks Newmark, a Conservative MP
and a former partner at private-equity
firm Apollo Management LP, says the
U.K. should leave the 28-nation club.
Its a sclerotic, flat-lining EU with an
aging population, and I dont want to be
a part of it, he says. Were a global financial center.
There are City executives who agree
with him. Helena Morrissey, CEO of
Newton Asset Management Ltd., says
being in the EU is like being in a bad
marriage. You dont need to know
May 2014 bloomberg markets 83
bonus storm
New European Union rules restrict bonus pay to 100 percent of salary. In 2011, a weak U.K. economy ate
into higher 2010 salaries. In 2012, even as base pay rose amid healthier growth, the bonus ratio remained
about the same in anticipation of the EU cap, which was approved in 2013 and took effect in January.
average U.k. compensation for investment bankers earning more than 1 million a year
2010
average
salary
2011
average bonus
2.1 million
324,484
647%
279,712
2012
bonus-to-salary
ratio
1.1 million
393%
404,457
average total Pay
0
million
1.5 million
0.5
1.0
1.5
2.0
2.5
371%
Source: European
Banking Authority
PRECISION TOOLS.
VISIONARY ANALYSIS.
SHARPER FOCUS.
For over 40 years, the DeMark Indicators library has helped traders and investors alike decode the financial
markets. Offering innovative techniques designed to anticipate price reversals and identify market trends, DeMark
is the definitive name in market timing. Join today and discover what some of the biggest names in the investment
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TYPE DEMA <GO>
from Brussels. The bonus cap legislation, which Osborne tried and failed
to kill, showed that power in Europe is
shifting away from unelected bureaucrats and toward the parliament. It
was dreadful negotiating tactics from
the U.K., MEP Bowles says. They
thought they would get support from
other member states on bonuses and
the parliament would yield further
down the track.
As it turns out, banks in the City are
finding ways around the rules. As of
March 10, Barclays Plc, HSBC Holdings Plc and Lloyds Banking Group
had announced plans to pay what they
call allowances to staff, sidestepping
the cap. In the case of HSBC, it will give
665 bankers a fixed-pay allowance that
is neither salary nor bonus, CEO Stuart Gulliver said on a conference call
with reporters in February. I think we
had a compensation plan that shareholders liked, Gulliver said. Sadly,
bonds and a 0.01 percent tax on derivatives trades. After EU finance ministers rejected an EU-wide tax in 2012,
11 member statesincluding Germany,
France and Spainpushed ahead with
plans to set up a common FTT.
Although the U.K. was not one of the
11, the common FTT could affect banks
based in the City. The levy could apply, for example, to shares in a German
company traded in London between
two U.S. banks. This is not a Robin
Hood tax, Ford says. This type of tax
ends up hitting pensioners and savers.
As vociferous as these arguments
have become among politicians, the
lips of City bankers are mostly sealed.
Bank lobbyists do what they can to
ward off, postpone or circumvent vexing red tape coming at them from Brussels. At the same time, theyre urging
the U.K. government not to abandon
Europe and the rich market that lies
across the English Channel. While the
battles rage, few bankers dare to put
their heads above the parapet. Boleat
puts the case mildly: Theyre all a bit
reluctant to get into what is a political
debate. With UKIP and euroskeptic
Tories rallying for a Brexit and a potentially game-changing European election coming up, the silence of the banks
may cost them.
stephanie baker is a senior writer at
bloomberg markets in london.
stebaker@bloomberg.net ben moshinsky
covers financial regulation at bloomberg
news in london.
bmoshinsky@bloomberg.net
Shining a light
on short interest
See which stocks in your portfolio are in or out
of favour with short sellers.
Enter DXPL <GO> to get daily global short
interest delivered directly via your Bloomberg
terminal. Markit Securities Finance offers
unique insight into market sentiment and
trading transparency to better manage risk
and maximise your performance.
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2013, Markit Group Limited. All rights reserved. Any unauthorised use, reproduction or dissemination is strictly prohibited.
by
William mellor
and
Jasmine Wang
P h o t o g r a P h b y D a N I E L E M at t I o L I
We Want to Be everyWhere
investors in China. Hes also politically well connected, and unlike Chinas Internet entrepreneurs, he isnt in
industries that the government might
consider threatening to Communist
Party control.
Chen has spent more than $3 billion
on foreign acquisitions in the past six
years alone. His biggest bet was the $1.05
billion purchase in 2011 of GE SeaCo,
the worlds fifth-biggest container-leasing company, from General Electric Co.
Such deals would make HNA Group, if
publicly traded, one of the worlds top
250 companies by assets, according
to data compiled by Bloomberg. The
founder, though, has much loftier goals.
By 2020, we can become one of the top
100 companies, and by 2030, we want to
top: Akos stiller/BloomBerg; chArt: left to right: Jerome fAvre/BloomBerg; mhp; stephen hilger/BloomBerg; cAssA hotel; seBAstien BoZon/Afp/getty imAges; vincenZo lomBArdo/getty imAges
Beginning in 2006, having already expanded across China, the cash-rich Chen poured
money into a diverse batch of acquisitions in Hong Kong, Europe and the U.S.
Hong Kong
Airlines And Hong
Kong express
ge seAco
(siNce reNamed
seaco)
cAssA Hotel,
70 west 45th st.,
New York
Aigle Azur
trAnsports
Aeriens
nH Hoteles
22-story
office tower
worlds fiftH-biggest
container-leasing
company
located near
times square and
rockefeller center
spains largest
business Hotel cHain,
witH 400 properties
around tHe world
Sources:
Bloomberg,
companies
by the numbers
We Want to Be everyWhere
transportation turbulenCe
chens Hainan Airlines dived along with the shanghai index, while Bohai, his containerleasing company, outperformed a gauge of 40 top companies listed in shenzhen.
Comparative returns
Hainan airlines
sHangHai stock excHange composite index
BoHai leasing
sHenzHen stock excHange a sHare index
30%
30%
30%
30%
20
20
20
20
10
10
10
10
7.9%
00
00
10
10
20
20
3/8/13
10
10
11.2%
13.8%
3/10/14
20
20
21.9%
3/8/13
3/10/14
Source: Bloomberg
bloomberg tps
tracking chinas
u.s. purchases
To quantify Chinas cross-border purchases, type MA <Go> on the Bloomberg Professional service for the Mergers & Acquisitions page and click on
Custom Search. Under Company Universe, click on Region/Country and, in
the pop-up window, the plus sign next to Asia Pacific (Emerging) and on
China. Make sure only the box next to Acquirer is checked below and click on
Update. Click on Region/Country again. Then click on the plus sign next to
North America and on United States. Ensure that only Target is checked and
click on Update. Click on Results at the bottom of the page. Rocky Swift
FII <GO>
TeresiTa sy-Coson,
The eldesT Child
of The PhiliPPines
riChesT man, exPlains
how she and her
siblings are running
The family emPire as
a CommiTTee of six.
By yoolim lee and ian sayson
97
for BDO, the nations biggest lender. Today, the bank has 1.3 trillion pesos ($29
billion) in deposits and 819 branches.
Its lending to companies investing in
infrastructure, a cornerstone of President Benigno S. Aquino IIIs economic
development plan. We can argue
across the table, or we can say yes, says
Sy-Coson, who, along with three of her
siblings, is a billionaire in her own right.
After years of refinement, I can say we
work together very well.
As the Sys move from management
by patriarch to management by committee, they face new challenges to
their realm of 600 malls, department
stores and retail shops. Retailing generated 71 percent of SM Investments
253.5 billion pesos of revenue in 2013.
Lucio Co, who owns Puregold Price
Club Inc., has unleashed more than
200 supermarkets and hypermarkets.
His Cosco Capital Inc. in March acquired the biggest shopping center in
Cabanatuan, a provincial city north of
Manila. Billionaire John Gokongweis
Robinsons Land Corp. plans seven new
malls in the year ending Sept. 30 for
a total of 39closing in on the Sys 48.
Profits from retailing slipped to 21 percent of SM Investments 27.4 billion
pesos of net income last year from 30.8
percent in 2007.
Several Filipino billionaires are cirsays Donald Gimbel, who heads Geneva
cling. Jaime Augusto Zobel de AyaInvestment Management of Chicago
las Ayala Land Inc. and Andrew Tans
LLCs international investment and
Megaworld Corp. are targeting propcounts SM Investments, SM Prime and
erty development and tourism. To
BDO Unibankthree of the nations 10
strengthen their real estate foray, the
most valuable companiesamong the
Sys agreed last year to meld SMs prop$7.5 billion of equities he helps manerty businesses, including the Pico de
age. They have such a leg up not only
Loro Cove resort south of Manila, into
in retailing and banking but in undertheir mall development company, SM
standing the whole of the Philippines.
Prime Holdings Inc. The move bumped
Gimbel says Henry Sys multiheaded
SM Prime above Ayala Land as the
management is working well now and
countrys biggest developer by
market value.
As the government spends
to rebuild after Super Typhoon
Haiyan, Hans Sy, Henrys secsm INVestmeNts, tHe sYs HolDINg ComPaNY, INClUDes bDo UNIbaNk.
tessIe sY-CosoN Is CHaIrmaN oF tHe baNk, tHe PHIlIPPINes largest leNDer.
ond son and SM Primes president, sees a chance to profit.
SM Investments
BDO Unibank
Hes planning new malls in
the Visayas chain of islands in
Banking contributed the most to
Under Sy-Coson, BDO Unibank went on an acquisition
the central Philippines, which
SM Investments profit last year.
spree and opened 52 branches last year.
took the brunt of the November storm that killed more
Commercial banking
Private
Property
Retail
2013
2013
Net Income 36%
Net Income 86.1%
Banking
than 6,200 people. And he sees
21%
4.9%
27.4
22.6
growth on the southern isBillion
Pesos
Billion
Pesos
Others
land of Mindanao, the site of
($615 million)
($500 million)
4.6%
a four-decade Muslim insurInvestment
gency. Hans, 58, is also targetbanking
ing China, where SM Prime will
2.6%
Banks
open one mall a year, adding to
Leasing and
43%
the five it has there now.
Finance
1.8%
Investors like the Sys
chances for growtheven without Henry calling the shots.
Price Change (in Philippine pesos)
Shares of SM Investments
600%
gained 275 percent through
SM Investments
389%
500
March 10 from their March
BDO Unibank
400
2005 listing in the countrys
369%
Philippine Stock Exchange Index
then-largest public offering.
300
250%
That outpaces a 219 percent
200
gain for the Philippine Stock
100
Exchange Index.
0
When I look at the Philip2009
2010
2011
2012
2013
3/13/09
3/10/14
pines, its tough to wander very
Based on consolidated figures. Sources: Bloomberg, SM Investments
far away from the Sy family,
FAMILY FORTUNE
BRANDISHING
BILLIONS
the families of these
five men dominate
some of the largest
industries in
the Philippines.
Net Worth*
(in billions)
Industry
Percentage of
Philippine GDP
Henry
Sy
Lucio
Tan
enrique
razon
andrew
Tan
david
conSunji
$11.3
$6.7
$4.9
$4.6
$3.4
Retail
and banks
beveRages and
tobacco
poRts and
gaming
constRuction
and eneRgy
4.5%
2.7%
2.0%
1.8%
1.4%
courtesy of sm investments corp. (2); chart: Left to right: teD aLJiBe/afp/getty images; Jay Directo/afp/getty images; ahmaD yusni/LanDov; JoeL nito/afp/getty images; kriz John rosaLes
bloomberg tps
AnAlyzing The
PhiliPPine economy
You can use Bloomberg analytics to get a macro picture of the Philippine
economy. Type COUN <Go> for the Country Guide function. Tab in to the
field, enter PHILIPPINES and press <Go>. COUN defaults to the Financial
Snapshot tab, which gives data on the main stock index, bond yields and
currency rates. Click on the Risk tab to view ratings data at the top of the
screen. Click on the fever-line icon to the right of Standard & Poors for
a history of the countrys foreign-currency, long-term debt rating. S&P
upgraded the sovereign to BBB on May 2, 2013. ROCky Swift
COUNTRY
FOCUS
FOCUS
german engineering
previous spread: ullstein bild/the granger collection (leipZig protest); barbel schmidt
COUNTRY
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your company. Interested? www.nrwinvest.com
COUNTRY
a long-term
project
Massive federal spending
notwithstanding, the east still
trails the west
by many measures. Note that
the population
of the east is
about 20 percent of the total.
Sources: Federal
Labor Agency,
Federal Statistical
Office
Western
Germany
eastern
Germany
cusp of an oil boom in her eastern election district: Central European Petroleum GmbH plans to start production
in 2017 in Brandenburg and MecklenburgWestern Pomerania. Proceeds
from drilling rigs, operating costs, royalties and taxes may pump $27.6 billion
into eastern Germanys economy during
the next 25 years, according to data provided by the oil company.
Eastern Germany still lags behind
the western part of the country in most
economic indicators. The unemployment ratewhich rose to 18.7 percent
as recently as 2005was 9.9 percent
in February, compared with 6 percent
in western Germany, according to the
Federal Labor Agency. The east, with
about 20 percent of Germanys total
population of 81 million, produces 15
percent of the nations GDP. Wages and
15 %
85 %
aveRage Wage
Jobless Rate
40,000
20%
35,000
30,000
15
25,000
20,000
10
15,000
10,000
1991
2012
1994
2013
German enGineerinG
FOCUS
csales@commerzbank.com
foCUS
german engineering
a worker preps
a Porsche
macan for
painting at the
recently
expanded
leipzig
Porsche plant.
west Germans. They dont have the luxury of inheriting, and so theyre hungry
and want to get ahead.
Wedel says the 15-story office building his company owns in Jena, one of
the citys two skyscrapers, was 70 percent empty when he bought it in 2011.
Its now 100 percent rented. Wedel says
reducing the size of rental units to cater
to information technology startups had
bloomberg tps
SnapShotS of
German data
page shows that as of mid-March, the price-earnings ratio of the DAX Index
was higher than its 52-week average. Click on the Economics tab to display
forecasts and news. To track financial conditions in the euro area, type FCON
<Go>, click on the arrow in the upper-left corner of the screen and select
Euro Area. To track German trade flows, type ECTR <Go>, tab in to the field
in the upper left, enter GERMANY and press <Go>. JON ASMUNDSSON
krisztian bocsi/bloomberg
COUNTRY
Samsung and h.h. gregg have teamed up with Drew Brees and the Brees Dream Foundation
to secure the future of our children. With funds raised by Samsung Hope for Children and
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of Samsung Electronics Co., Ltd. All other logos/marks are property of their respective owners. Screen image simulated.
strategies
PRoFILE
Betting on Comebacks
Richard Mashaal and Brian Gonicks Senvest Partners hedge fund
racked up a 79.4 percent return last year by finding
beaten-down stocks with the potential to bounce back.
By jon asmundsson
PhOTOGRAPh By ROByn TwOMEy
license back to the U.S. company, which was acquired by Tyco International Ltd. in 2001. Senvest Capital, meanwhile, remains public with
shares trading on the Toronto Stock Exchange at
C$160 on March 10. That valued the Montrealbased company, which is 70 percent owned by the
extended Mashaal family, at
C$449 million ($404 million).
FoR two decades, sen-
Richard mashaal
and Brian Gonick
(from left)
vest Capital made privateMAnAGERS,
equity investments, includSEnvEST PARTnERS
ing in one of Canadas first
Target double or triple returns
pay-TV channels, the younger
on stocks in one to three years.
Mashaal says. After he joined
Buy well below highs.
the firm in 1989, the son
Seek turnaround situations.
shifted the companys focus
to publicly traded securities.
For Mashaal, 48, the reason was simple: Stocks
were liquid and could be cheaper. Private companies are often expensive, as bidders tend to run
up a targets price at auction, he says. By contrast,
public shares may lose favor or be misunderstood
or unfollowed, creating the potential for bargains.
So Mashaal opened Senvest Partners in 1997.
Our whole premise since we started the fund is,
were doing this with our own money anyway,
strategies
PROFiLe
tiP BOx
iF we weRe
wROng On aLL OF
the tRustPReFeRReds, the
whOLe wORLd
wOuLdnt exist,
mashaaL says.
strategies
ChArTs
Using Heikin-Ashi
The new GPHA lets you chart with combo candles
to better track trends and identify reversals.
By AkshAy ChinChAlkAr
TiP BOX
In G and
Launchpad
charts, right
click on the
price series,
choose Select
Series Type
and click on
Heikin-Ashi.
CAndle mAking
Here are the calculations for a Heikin-Ashi candle.
Previous Period (t1)
Current Period (t)
strategies
Charts
change in the candle color often signals a reversal.
Last, a long-legged Dojia candlestick pattern in which the open-close range is narrow
and the upper and lower shadows are similar
lengthsis often a precursor to a trend change
on a Heikin-Ashi chart. For example, if such
a Doji appears after an uptrend, followed by a
change in color in the next session, the odds
favor a reversal. In addition, when the down
risKless return
Compounding Machines
By Charles stein
riskadJusted
total
return volatility return
1 akre FoCus
2 sunameriCa FoCused dividend
3 Weitz value
4 JPmorgan equity inCome
delaWare valuea
9.1%
8.5
8.0
7.2
7.2
13.9
14.6
13.9
15.7
15.1
125.9%
123.4
111.3
113.5
108.5
Figures are from Aug. 31, 2009, to March 10. The risk-adjusted return, which isnt annualized, is calculated
by dividing total return by volatility, or the degree of daily price variation, giving a measure of income per unit
of risk. A lower volatility means the price of an asset doesnt swing dramatically during a specified period,
reducing the potential for unexpected losses. Source: Bloomberg
Boston | Hong Kong | London | Mexico City | So Paulo | Singapore | Sydney | Tokyo | Toronto
strategies
INFLUENTIAL NEWS
Mobile Moves
TIP BOX
type NI
INFLUENTIAL
<Go> for daily
roundups of
exclusive
market-moving
stories.
Rupiah Rally
A surge in indonesias rupiah sent it to its mostoverbought level in almost three years, positioning
the currency for a reversal.
the rupiah rose more than 5 percent in february and extended gains into march, reaching
11,344 per dollar on march 10 and pushing its
14-day relative strength index to 18, a level not
seen since April 2011.
indonesias december trade surplus was the
biggest in more than two years and helped rein
in a current-account deficit. the government
banned shipments of unprocessed ore in January,
a policy that analysts say distorted trade figures.
the current account remains suspect, and an
election in July poses another currency risk, says
leong sook mei, an analyst at bank of tokyo
mitsubishi UfJ ltd. theres very little room for
the rupiah to gain because it has already strengthened so much, she says. for the original story,
type NSN N16SH76S972B <Go>.
softbank surge
CrOSS-BOrdEr FLOWS
type WFII <Go> to track investment ows
into a selected country. Click on the bond and
portfolio tabs to show amounts for those asset
classes split up over various time frames.
ADVERTISEMENT
strategies
Clean energy
tIp BoX
Type BneF
<go> for the
Bloomberg New
Energy Finance
portal.
year underscores the growing presence of corporations in the environmental debt sector and the
creation of new standards that are helping to attract a wider range of investors.
Total sales reached $13.7 billion in 2013, marking average annual growth of 35 percent from
2007, when the term green bonds was first coined
by market players. Last years performance
was driven by a surge in issuance from international financial institutions and the entrance of a
new type of green bondthe self-labeled corporate. Issuance in the sector this year had already
reached $4.86 billion as of March 10, putting it on
pace to exceed $20 billion in 2014.
What defines a green bond tends to vary by issuer and industry. Until 2013, the primary securities in the market were either project bonds
whose cash flows were backed by clean-energy
developments or debt sold by global bodies like the
World Bank to fund energy and climate-change initiatives, either directly or through lending pools.
You can use the Fixed Income Search (SRCH)
1 seb
2 morgan stanley
3 bank of america merrill lynch
4 JPmorgan chase
5 citigrouP
In 2013. Source: Bloomberg New Energy Finance
amount,
in millions
number
of issues
$1,247
1,061
892
791
745
7
6
5
4
4
strategies
Clean eneRGy
almost $2.8 billion in bonds
from its International Finance
Corp. and International Bank
for Reconstruction and Development units.
The World Bank and regional
bodies like the European InType SRCH <Go> to access the Fixed Income Search and filter for green bonds.
vestment Bank still dominate
this subsector of the market,
though new players are appearing. Nederlandse 2020 Project Bond Initiative, which aims to boost
FinancieringsMaatschappij voor Ontwikkel- credit ratings on the securities and enable more
ingslanden NVthe Dutch development bank involvement from institutional investors.
Citigroup Inc., Barclays Plc and Royal Bank
known as FMO for shorthad its first issue in
November, and the Export-Import Bank of Ko- of Scotland Group Plc were the top three underwriters for clean-energy-project bonds
rea sold a $500 million bond in February.
Clean-energy bonds also had a record year, last year. The banks cooperated on three mawith $3.2 billion raised through 10 confirmed jor deals: Solar Stars, Topazs and Continensales. Des Moines, Iowabased MidAmerican tal Wind LLCsa $613 million bond backed by
Energy Holdings Co., owned by Warren Buffetts a portfolio of Exelon Corp.owned wind farms.
Berkshire Hathaway Inc., sold two bonds worth
a combined $1.25 billion to fund the 579-mega- While many major buy-side players are
watt Solar Star project and a $250 million bond signatories to sustainable-investing initiatives,
for its Topaz solar development, both in South- investors have often cited a lack of clarity on
green-bond definitions as a roadblock to growth
ern California.
Perhaps the most noteworthy development in the market.
Efforts to develop rules for the burgeoning
last year was the 305 million pound ($509 million) bond to fund the U.K.s Greater Gabbard green-bond market began in earnest in 2011 with
offshore transmission link. The project will con- the start of the Climate Bonds Standard by the
nect the 500-megawatt Greater Gabbard offshore independent Climate Bonds Initiative. The stanwind farm to the electricity grid on the mainland. dard sought to certify bonds that meet stringent
It was the first offshore-transmission bond and guidelines developed by industry working groups.
The push took another step forward on Jan. 13,
the first clean-energy issuance to use credit enhancements from the European Unions Europe when a group of major banks backed what they
called the Green Bond Principles, which set out
a fundamental definition of the securities and
provide a stamp of approval on the integrity of
Top undeRwRiTeRS of
environmental-based investments. Notably, the
Clean-eneRGy-pRojeCT bondS
initiative represents an implicit endorsement of
amount,
number
in millions
of issues
the green-bond concept by eight of the worlds top
$788
3
1 Citigroup
10 corporate-bond underwriters. This move by
2 barClays
538
3
some of the worlds leading banks could be a ma royal bank of sCotland group
538
3
jor step toward providing clarity for investors, sup4 bank of nova sCotia
441
1
porting future growth in the green-bond sector.
5 banCo santander
hsbC holdings
248
248
1
1
strategies
cheat sheet
Corporate Finance
Bi <Go>
is the portal for exclusive research from
bloomberg industries
analysts as well as for
customized tools for
digging deeper into
sectors from banking
to telecommunications to gaming.
Bill <Go>
lets you track
pending legislation,
the industries and
companies afected
and the likelihood of
passage.
twtr <Go>
lets you construct
lters for twitter
postings related to
companies, industries,
authors or bloombergrecommended
markets and topics.
pBar <Go>
drsK <Go>
lets you analyze
the credit health of
a selected company.
cast <Go>
displays a breakdown of a selected
companys capital
structure, including
the types of borrowing
ranked by seniority
and whether subsidiary debt has recourse
up the corporate ladder.
anr coMps <Go>
lets you compare
analyst recommendations for a selected
companys stock with
those of peer
companies.
reG <Go>
is a portal for information related to nancial regulations.
Fa esG <Go>
displays environmental, social and
corporate governance
data for a selected
company.
nia <Go>
wacc <Go>
splc <Go>
displays a calendar of
corporate actions for
a selected company,
including events such
as stock buybacks,
capital changes and
distributions.
MrGc <Go>
displays a summary
of litigation cases
involving a selected
company.
provides evaluations
of merger scenarios
involving a selected
company, including
the impact on an
acquirers earnings per
share, leverage,
revenue segmentation
and operating margins.
liti <Go>
enables you to
analyze the weighted
average cost of
capital for a selected
company.
BudG <Go>
enables you to identify
revenue and spending trends in the u.s.
federal budget and to
access related news
stories and insights
from bloomberg government analysts.
coMpiled by Rocky SWifT
rswift5@blooMberg.net
Want to learn
more? Turn over
to read our ad.
pull out and save. // May 2014 // press <help> twice to send a question to the blooMberg analytics help desk.
strategies
Clean enerGy
Decarbonizing
Portfolios
Climate-change risks are rising. Here are some tools you can use
to gauge and reduce the greenhouse-gas exposure of your investments.
By GreGory elders
sible for almost 40 percent of global energy consumption and an even larger share of carbon
dioxide production, are ratcheting up regulations
designed to limit emissions. From California to
Shanghai, regulations on power-plant carbon intensity, vehicle fuel-efficiency and carbon pricing
mean that investments with a high greenhouse-gas
exposure may face growing financial pressure.
One sign that investors are taking action: A
group of 70 global investors representing more
than $3 trillion in assets has asked the 45 top oil,
gas, coal and electric power companies to assess
the financial risks of climate change on their business models. In addition, investors have taken a
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