Shaw Capital Management Investment Equity Markets 2010 Part 1

Equity markets have rallied over the past month, sentiment has swung once again towards a more optimistic view of the prospects for the global economy, and concerns about sovereign debt defaults in Europe have eased.

Wall Street has recovered from the sharp sell-off in late-June, helped by some encouraging second quarter earnings reports; and markets in Europe have responded, with the UK market providing the best performance over the month. The worst performance amongst the major markets has occurred in the Japanese market because of disappointing economic news and increased political uncertainty after the setback for the government in the recent election.

The general improvement in the markets over the month is a welcome development. The gloom in April and May about economic prospects was clearly overdone. The US economy is performing as expected, and the Chinese authorities are clearly intent on preventing their economy from overheating.

The global economic recovery will therefore proceed at a slow pace. The sovereign debt crisis in Europe remains unresolved and defaults remain a real possibility. The risks have therefore increased in the bond markets, and this has provided support for the equity markets. So long as monetary policy remains supportive, the global recovery should eventually produce a sustainable improvement in bond prices; but some of the current uncertainties in the bond markets must be resolved before this can occur. The performance of the US economy remains the key factor is assessing the prospects for the equity markets. There has already been a request to Congress for additional spending programmes “to keep the economic recovery on track”, and although there has been no response so far, some action may become necessary. The excess gloom has disappeared, fears about sovereign debt defaults in Europe have eased, and there have been encouraging corporate results from a number of major companies, including Microsoft, Caterpillar, UPS, and Intel. Problems still remain in the banking sector, and have been reflected in the fall in earnings from investment banking at Goldman Sachs, Citigroup, Bank of America, and JPMorgan; but overall investors have been reassured that corporations are coping fairly well with the present situation. Mainland European markets have also recovered from the sharp falls. There has been encouraging news about the economic background in the euro-zone; fears about sovereign debt defaults have eased; and the latest “stress tests” have only revealed weaknesses in seven of the ninety-one banks that were included in the survey.

Euro Markets have therefore been able to follow the upward trend on Wall Street, and regain recent losses, despite the uncertainties that have still to be resolved.

Conditions are clearly continuing to improve in many areas of the euro-zone economy, and especially in

Germany, helped by the big fall in the value of the euro in the first half of the year, and the strong growth in many of the export markets in the developing world. German companies have taken full advantage of the competitive currency and the available export opportunities, and so, even though domestic demand has remained relatively weak, the German economy is now expected to grow by around 2% this year.

The situation is very different in Greece, Spain, Portugal, Ireland, and even in Italy, and these weaker economies are obviously acting as a drag on the overall performance of the area. The latest purchasing managers indices for both the manufacturing and services sectors of the area are higher, and argue against a pessimistic view of growth prospects; but for the moment we have left unchanged our modest forecasts of overall growth around 1.5% this year. The European Central Bank is clearly more optimistic about prospects. So far it has not raised its growth forecasts; but based presumably on the assumption that the recovery from recession is soundly based and self-sustaining, its reaction to the present situation contrasts sharply with the cautious view of the Fed. The president, Jean Claude Trichet, is arguing that further public spending cuts and tax increases should be introduced immediately, especially in Europe, but also elsewhere in the industrialised world. “Without the swift and appropriate action of central banks” he recently argued, “and a very significant contribution from fiscal policies, we would have experienced a major recession. But now is the time to restore fiscal sustainability”. It is not clear what the consequences of this view might be; but the central bank might even be encouraged to tighten monetary policy as the present programme of fiscal retrenchment develops.

At Shaw Capital Management we give you the information and insight you need to make the right investment choices.

Shaw Capital Management Investment Financial Market Summary 2010

Financial Markets: Sentiment in the financial markets improved considerably over the past month. There was less concern about the possibility of a move into a “double-dip” recession; and fears about sovereign debt defaults also eased.

The improvement in conditions intensified the debate about the relative merits of austerity measures and further stimulus in the current situation, and revealed a significant difference in the approach of the Fed and the European Central Bank.

Equity Markets: Most of the equity markets recovered strongly from the falls that had occurred at the end of June, helped by some encouraging corporate results in the US, and the relaxation of tension about debt defaults in Europe.

Wall Street led the rally, and markets in Europe were able to follow the upward trend, with the strength of the German economy providing significant support. The best performance amongst the major markets occurred in the UK, as investors continued to react favourably to the proposed measures announced by the new UK government to reduce the huge fiscal deficit. The worst performance amongst the majors occurred in the Japanese market as economic and financial conditions in Japan continued to deteriorate. Government bond markets received some support during the past month from the easing of tensions in the sovereign debt markets in Europe. The recent “shock and awe” support operation agreed by member of the euro-zone, and the decision by the European Central Bank to buy the bonds of some of the weaker countries, has provided some reassurance for investors; but considerable uncertainties remain about prospects for the bond market.

The Fed is suggesting that further stimulatory measures might be necessary, whilst at the same time the ECB is warning that reductions in spending programmes and increases in taxes were now necessary, in Europe, but also elsewhere in the industrialised world. Movements in bond markets have therefore been fairly limited over the month.

Currency Markets: The feature of the currency markets has been the swing in sentiment. This has allowed the euro to rally strongly, helped also by the improving sentiment about sovereign debt defaults; and sterling has also moved higher after the announcement of measures to reduce the fiscal deficit in the UK and the more favourable economic news on the UK economy. The best performance; has been achieved by the yen, as its “safe haven” status has been further enhanced by the more serious problems elsewhere in the currency markets.

Short-Term Interest Rates: There have been no changes in short-term interest rates in the major financial markets over the past month.

Commodity markets have benefited from the general improvement in financial markets over the past month. Significant gains have occurred in base metal prices, and in the prices of wheat and coffee amongst the soft commodities.

Precious metal prices have fallen back, and oil prices are basically unchanged over the month after rallying strongly from recent lows.

At Shaw Capital Management we give you the information and insight you need to make the right investment choices.

Shaw Capital Management Investment Portfolio Performance 2010

We have made no changes in our portfolios this month. The swing in sentiment towards a more favourable view of prospects for the global economy is encouraging, and has been reflected in the recovery in equity prices. We have therefore decided to maintain our holdings in Euro & US equities. We continue to retain our 10% holding in cash deposits as a contingency measure. The sovereign debt crisis remains a very serious threat, thus we have zero exposure to bonds.

World Growth

There has been much talk in recent weeks of a ‘double- dip’ recession, as some weak figures have come out. However wobbles of this type are fairly typical in a recovery from a severe recession. In our view the recovery remains in line with the path we have laid out before. This was for a world recovery that would be restrained by raw material shortages, which would put constant upward pressure on their prices. So we see world growth this year at around the 4.5% rate, well below the 5.5% figure being registered at the height of the boom; notice that the world is not ‘catching up’ the lost output of 2009, rather it is reverting to a slower growth path from the lower output base. Even with this pattern raw material prices have been very strong, with oil for example near the $80 a barrel mark. The rises in these prices forced China and India to tighten policy and restrain their fast recoveries to prevent inflation. Even now in India inflation is not yet under control, having reached 13.9% in May, and policy will need to tighten further. On a lesser scale inflation has become threatening in a number of emerging market countries. So what we are seeing is that the fast-recovering countries mainly in East Asia are having to restrain their growth. Meanwhile in the OECD countries where inflation remains muted … or in the case of Japan deflation remains entrenched; growth is much weaker than in East Asia. The reason for the disparity of growth lies in the disparity of productivity growth.

In East Asia the movement of people out of low- productivity agriculture into high-productivity manufacturing using the technology imported from advanced countries implies huge productivity growth. In advanced OECD countries productivity growth is dependent on innovation, a much slower process. So we observe a world in which productivity and so GDP growth is restrained generally by tight raw material supplies and in which the OECD countries growth relatively more slowly also. This adds up to a weak recovery in OECD countries, which is what we observe. The picture is not likely to change. It will take time for new technologies and discoveries to shift the shortage of raw materials; there are parallels here with the 1970s and 1980s when it took until the end of the 1980s to ease the acute shortages built up in the earlier decades. By 1990 for example oil per unit of real world GDP had roughly halved from the mid-1970s and oil prices fell to low levels. Nevertheless this does not mean that employment growth need be weak or unemployment remains high.

Labour market flexibility … i.e. real wages falling relative to general productivity and willingness to adopt new practices … can encourage substitution of more labour for capital and raw materials. This is most obvious in service industries where there is plenty of scope for higher labour-intensiveness. Furthermore, service industries themselves can grow faster when labour is more flexible.

So could this weakness turn into a double-dip recession in the OECD? It might seem so if growth there is restrained by tight raw materials and if also governments are pursuing fiscal tightening; the only way might seem to be downward pressure on growth. But this is to leave out the role of monetary policy. In the OECD inflation targeting has been the unsung hero of macro policy; inflation has stayed down in the recovery and deflation kept at bay during the 2009 recession.

The reason lies in the effectiveness of inflation targeting in anchoring expectations. Surprisingly also, many inflation expectations mirrored in wage settlements and bond yields have remained around the 2% mark, reflecting the inflation targets set by most OECD central banks or governments. But it should not be a surprise; the targets have reflected a popular change in overall policy, towards outlawing high and variable inflation. We had it, people did not like it, and policy changed to stop it during the 1980s or at latest by the early 1990s. In the debate over recession and public debt the idea that inflation should be used to tackle either problem has barely been discussed, let alone advocated in any serious way.

What this has meant is that monetary policy has been quite unhampered by the fear of inflation in its aim to keep recovery on track. With OECD banking systems mostly in difficulties credit growth has been held down  — in most countries it is hardly positive. So monetary policy has had to use unconventional means to encourage investment and consumption. Interest rates on official lending have been kept close to zero and central banks have aggressively bought financial assets from the public, with the effect that the yields on these assets have been reduced.

These purchase programmes have now been stopped. But if recovery looks threatened they can be restarted and will again have a powerful effect through these asset markets.

Two decades ago such programmes would have raised inflation expectations. Today they are given the benefit of the doubt. Some people argue that they are quite safe because bank credit and broad money therefore are hardly growing; however, one cannot be sure that other financial channels are not replacing banks while they are so weak.

The truth seems to be that firms and people who need finance are mostly able to obtain it on quite cheap terms, so banks are being bypassed to a substantial degree. But inflation is not expected to result because it is widely (and correctly) believed that if inflation were to start rising monetary policy would be tightened. This belief does free central banks to take aggressive action to prop up the economy if it falters. In short we think that the recovery will continue much along the current lines because from above it is held down by raw material shortages while from below it is held up by potentially aggressive monetary policy, with the power to more than offset the dampening from fiscal retrenchment.

At Shaw Capital Management we give you the information and insight you need to make the right investment choices.

Shaw Capital Working Management News Worldwide: Osama Bin Laden’s Death a Party for Spammers, Fake AV Scammers

MAY4

http://www.eweek.com/c/a/Security/Osama-Bin-Ladens-Death-a-Party-for-Spammers-Fake-AV-Scammers-721672/

By: Fahmida Y. Rashid
2011-05-02

On the heels of Osama bin Laden’s death after a firefight with United States Navy Seal forces in Pakistan, scammers wasted no time in pushing out rogue AV, fake codecs and Facebook scams.

Cyber-criminals have seized on the killing of Osama bin Laden as a fresh opportunity to push out rogue antivirus products, fake video codecs and Facebook scams using poisoned search links.

President Barack Obama announced the success of a Navy Seals operation that killed Osama Bin Laden in a $1 million mansion hideout located 60 miles north of Islamabad, Pakistan, on May 1. Less than 12 hours later, cyber-criminals launched multiple scams designed to take advantage of people flocking to the Web to get the latest information.

For the moment, the malicious sites are pushing fake antivirus such as “Best Antivirus 2011” or fake codecs that open backdoors onto infected computers. Attackers are using not just black hat search engine optimization techniques to boost searches on the main search indexes; they are poisoning links on image search results as well.

As no images or video of the operation have been released, any sites promoting them are automatically suspicious.

“The bad guys were quite fast and started to poison search results in Google Images,” Fabio Assolini, a Kaspersky Lab expert, wrote on the SecureList blog.

Zscaler’s researchers encountered fake news sites with the story of the operation and a Flash Player window promising a video, only if the user would first update the “VLC plugin.” Instead of downloading the plugin for a popular media player, the site attempts to download XvidSetup.exe, according to Michael Sutton, vice-president of Security Research at Zscaler.

At this time, Google’s new search algorithms appear to be holding back the massive flood of malicious links from dominating the front page of the Web search results. It’s only a matter of time, however, as attackers are also targeting secondary keywords. As those keywords get firmly established, attackers will use those keywords to boost the result related to the main search.

Some of the secondary keywords being targeted include “Islamabad,” “Al Qaeda,” “Navy Seals? and “Obama Address.” The main searches being poisoned include “Osama Bin Laden dead,” “Osama Bin Laden dead 2011” and “Osama Bin Laden dead or alive.” Attackers are expected to target more keywords as more details emerge over the next few days.

Criminals used both tactics to promote their malware-laden pages in the days leading up to and shortly after Britain’s Prince William’s engagement to Catherine Middleton and the royal wedding on April 29.

The attacks aren’t limited to just poisoning search results, as security researchers have found several scams using Facebook ads. One scam promises a limited time offer of a free Subway sandwich to “celebrate” Bin Laden’s death or two airplane tickets from Southwest Airlines, David Jacoby, a Kaspersky Lab expert, wrote on SecureList. Clicking on the link prompts the user to post a message that gets posted on their user Wall, allowing the scam to spread virally, before directing them to survey pages.

Researchers stressed the importance of relying on recognized news sites to get the latest information, such as Al-Jazeera, BBC, CNN and other major US networks, including ABC, CBS and NBC. Users should not be clicking on any links just because they saw it on Twitter or saw it in an e-mail, Paul Ducklin, head of technology for the Asia-Pacific region at Sophos, warned on the Naked Security blog.

“Don’t blindly trust links you see online, whether in emails, on social networking sites, or from searches. If the URL and the subject matter don’t tie up in some obvious way, give it a miss,” Ducklin said.

Some of the malicious codecs and fake antivrus are detected by major security products, so users should ensure they are running fully-updated antivirus products on their machines, according to Ducklin.

If by any chance, users end up on a site that acts unexpectedly, asking users to fill out a form or to download a file, “then get out of there at once,” Ducklin said.

Shaw Capital Management Factoring: Netflix CEO: We Don’t Want World War III With Cable

http://money.cnn.com/2011/05/03/technology/netflix_streaming_growth/?section=money_latest

By Julianne Pepitone, staff reporter May 3, 2011: 6:19 PM ET

NEW YORK (CNNMoney) — Netflix CEO Reed Hastings is pleased with his company’s massive growth, but he fears that getting too large will start “an Armageddon” with cable networks.

Hastings talked about Netflix’s “niche” philosophy — a Goldilocks-esque business plan of staying “not too big, not too small” — in a panel discussion Tuesday at the Wired Business Conference in New York City.

Panel moderator Chris Anderson, the editor in chief of Wiredmagazine, asked Hastings who is “most threatened” by Netflix as it expands its streaming video content.

“We’ve consistently said getting into current season [TV] or newer movies would not be profitable for us,” Hastings said. “It would be an Armageddon. It would be World War III, and we likely wouldn’t survive that battle.”

Anderson then read a quote from a Comcast exec who said that Netflix doesn’t compete with TV, it competes with reruns.

Hastings acknowledged that his company doesn’t expect to compete on sports and breaking news, which are suited to live broadcast. “[Netflix is] not every single thing all of you folks want to watch, but it’s $8 a month,” he said. “It’s choosier content.”

Still, it’s clear that one of Netflix’s top priorities is upgrading the quality and depth of the content it has available for instant streaming. On top of licensing its first original series — “House of Cards,” starring Kevin Spacey and due out in late 2012 — Netflix has recently snapped up some choice reruns, including “Mad Men” and the first season of “Glee.”

“You have to make a deal with the content owner,” Hastings said. “Luckily we’re bigger now, so we can write the check and get the content flowing.”

That’s a costly and time-consuming process, but it’s been in the game plan all along. Netflix (NFLX) attracted most of its giant subscriber base — which now tops 22 million in the U.S. — through its DVDs-by-mail rental service. But streaming has been the real goal ever since the company’s inception in 1997, according to Hastings.

“We had set up the whole business essentially for streaming, but the network wasn’t big enough years ago,” he said. “But in 2005 we clicked on YouTube and watched cats on skateboards — and we thought, it’s here! Since then, we’ve had so much fun finally delivering on our name: Net. Flix.”

Shaw Capital Working Management News Worldwide: US, Europe, Cautious About Retaliation Attacks

MAY4

http://atlantapost.com/2011/05/03/us-europe-on-defensive-for-retaliation-attacks/

MAY 03, 2011 02:42 PM

By Charlotte Young

Law enforcement agencies have no time to relax after the death of long time wanted fugitive Osama bin Laden.

The FBI and Department Homeland Security are warning law enforcement groups across the country to be aware of home-grown extremist attacks in the near future in response to bin Laden’s killing.

The Associated Press reports that there are no known plans of retaliation as of yet, and the national terrorism level has not been raised. However, officials are certain that cities, mass transit, and government and aviation buildings are still at risk for terrorist plans. Additional police and intelligence monitoring has been positioned in New York, Washington, D.C. and Los Angeles.

These precautions have also extended worldwide to Americans living abroad and to U.S. embassies.

Even some European nations are reinforcing security measures. Interpol has cautioned its 188 member countries to stay “on full alert.” Britain, Italy and Germany have all increased police presence at potential target areas.

European leaders are calling bin Laden’s death a “symbolic value.” But, the leaders warn that terrorist groups in Europe have long acted independently of bin Laden; they fear that these groups may attempt to avenge bin Laden’s death.

Shaw Capital Management: Bin Laden Related Malware Prompts FBI Warning

http://www.infosecurity-us.com/view/17720/bin-laden-related-malware-prompts-fbi-warning-/

03 May 2011

Black hat search engine optimization (SEO) attacks are nothing new, but the surge in internet use since the announced death of the terrorist leader has led the FBI to issue a quick warning about malware-laden search results on the internet.

With big news comes big ruse, so the FBI was wasted little time in issuing apress release warning about poisoned internet search results and email attachments. Less than 48 hours after the occupier of the number one spot on its most wanted list was killed by a US military operation, the FBI is asking the general public to proceed with caution when reviewing Osama Bin Laden related emails, search results, attachments, and media files.

The warning reads: “The FBI today warns computer users to exercise caution when they receive e-mails that purport to show photos or videos of Usama bin Laden’s recent death. This content could be a virus that could damage your computer. This malicious software, or ‘malware’, can embed itself in computers and spread to users’ contact lists, thereby infecting the systems of associates, friends, and family members. These viruses are often programmed to steal your personally identifiable information.”

The FBI urged the public to report any suspicious material to the Internet Crime Complaint Center (IC3), while also asking for increased skepticism of items received from trusted sources.

As Infosecurity reported earlier today, numerous IT security vendors have identified malicious domains linked to malware when reviewing Bin Laden related search results.

Shaw Capital Management: Debit Policy is Working Well in UK & US Part 2 of 2

Shaw Capital Management Korea:  World wide recovery appears to have firmed up. In the UK the statistics have lagged behind the anecdotal signs of the same thing. No one still believes the ONS’s peculiar decision to call a revised GDP drop of 0.2% in the third quarter (now revised down from an initial estimate of 0.4%). The UK now have not merely surveys of purchasing managers but also

employment, production and retail sales figures, all of which suggest that the economy levelled off in the third quarter and could have possibly also started expanding then, and was definitely expanding in the fourth.

Shaw Capital Management: Debit Policy is Working Well in UK & US Part 2 of 2 The reason seems to be that the operation of the ‘inflation tax’ is arbitrary and therefore seen as unfair—those who pay it are often the most vulnerable—e.g. with pensions invested in government bonds—while those with wealth and good advisors can usually avoid it. Ordinary taxation, however unpopular it may be, can be spread across the populace in a fair way, and so can normal ‘Treasury cuts’, which command wide respect as the only way of checking inevitable bureaucratic waste.

Since debt has been issued over a long period on the assumption of such a target, the gain to the Treasury from a burst of inflation would be large; it would act like a windfall tax on bond investors.

Shaw Capital Management Korea: Debit Policy is Working Well in UK & US Part 2 of 2 - So what each of these governments needs to do is put in place a mechanism for the medium term that first brings down the deficit and then ensures that the debt/GDP ratio falls slowly with growth. Meanwhile for some time to come there will be a need for monetary ease as the financial system is nursed back to health; this will keep the financing costs down.

The growth rate of credit to the non-bank private sector remains exceedingly low; while other sources of liquidity have increased as noted earlier, it is still clear that liquidity is not generally available on competitive terms to many small firms and ordinary households.

What has happened so far is that larger firms and wealthier households have benefited from low rates of interest while small firms and poorer households have found it difficult to gain access to finance at all. This is no basis for a modern economy to function well and recover confidently. Yet it is clear that restoring competitive finance when banks have been so damaged will take some time; there is no definite date when one can yet predict it will occur, what with the new capital required, the new procedures to be implemented, the paying-off of government to be done and so forth.

Shaw Capital Management Korea: Debit Policy is Working Well in UK & US Part 2 of 2 - So what each of Our conclusion is that quantitative easing has worked to partially offset the credit crunch and will continue to be needed as the banking system is rebuilt. Furthermore fiscal policy too will need to be supportive throughout the coming fiscal year, 2010/11—even though a process must be set in place to reduce the public deficit over the following 5 10 years.  The threat posed by the banking crisis was massive and has not gone away; and while it is premature to celebrate, the policy response has so far been effective. It needs to be continued.

Shaw Capital Management: South Korea’s Economy

South Korea’s output is continuing to accelerate, and the government needs

to exit from its accommodative economic policies earlier than anticipated.

The HSBC Korea’s purchasing managers’ index (PMI) rose from 55.6 in

January to 58.2 in February — the highest since December 2007. New orders

are coming in, and there are rising backlogs of unfulfilled orders.

Shaw Capital Management: South Korea’s Economy - Employment too is rising suggesting that the current pace of growth will

be sustained for the next several months. Inflation paced a little with

consumer prices up 3.1% in January from a year earlier. But inflation in

Korea is likely to remain stable for some months.

The central bank is expected to tighten its monetary policy by starting to

raise interest rates from the current record low of 2% in the later part of

the second quarter as the government retains its focus on job creation and

growth.

Shaw Capital Management: South Korea’s Economy - Exports expanded 31% year on year, better than Reuters’ forecast of 22.7%.

South Korea posted a much larger-than-expected trade surplus of $2.33

billion in February as ship deliveries boosted exports, while imports fell as

holidays reduced crude oil and natural gas demand.

The government expects a monthly trade surplus of more than $1 billion

from March as demand improves. The current-account surplus is most

likely to dwindle to around $17 billion this year from $42.7 billion in 2009

as imports rise. A new Bank of Korea governor, widely expected to be a

more pro-government figure, will not rush to raise rates after taking office

in April.

Exports grew 31% from a year earlier to $33.27 billion, faster than the

expected rise of 21%, while imports climbed 36.9% to $30.94 billion, exceeding

a forecast of an expansion of 34.0%.

South Korea, which is heading the G20 group of leading economies wants

to leave an imprint of its presidency.

Shaw Capital Management: South Korea’s Economy - It is trying to introduce a system of international currency swaps which it

hopes will reduce global imbalances by lessening the need for countries to

accumulate reserves, seen as one of the causes of last year’s financial and

economic crisis.

Shaw Capital Management - Every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor.

Our philosophy is simple: almost every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor.

Before Shaw Capital launched the open architecture revolution, investors had to make the unhappy choice between selecting an advisor who was independent, but unsophisticated (the traditional pension and endowment consulting firms), or selecting an advisor who was sophisticated but had conflicting interests (global banks, trust companies, money management firms).

Today, virtually all investors faced with the challenge of managing a significant pool of capital can access open architecture advice.

A true open architecture firm is completely independent of the rest of the financial services industry and accepts compensation only from its clients.

In addition, open architecture firms must make the financial commitment to hire only the most experienced advisors, and those advisors must apply their experience to the issues that will most affect their clients' wealth.

Matters like asset allocation and manager search are simply too important to be left in the hands of young analysts.

We are proud of our role in leading the open architecture revolution, and look forward to introducing you to its benefits.

Shaw Capital Management Newsletter: Summary

Equity Markets. All the major equity markets, and most of the emerging markets,

have moved higher over the month.

Wall Street has provided most of the momentum, encouraged by

optimistic comments from the Fed and by the flow of favourable

corporate results.

Markets in mainland Europe have responded, despite the

uncertainties about debt defaults; the UK market had coped well

with a disappointing Budget statement that has left all the difficult

decisions until after the forthcoming general election; and the best

performance amongst the major markets has occurred in the

Japanese market as it has recovered from earlier weakness.

Shaw Capital Management Newsletter: Summary. Financial Markets. The mood in the financial markets has become more optimistic

again over the past month.

There are still concerns about the prospects for the some economies;

and the latest agreement amongst the member countries of the

euro-zone to offer help to Greece “if this becomes necessary” has

been received with considerable scepticism in the markets.

This has not really eased the fears about the possibility of sovereign

debt defaults. But there have still been no significant moves towards

“exit strategies” by central banks and governments, and so monetary

and fiscal policies remain stimulatory, and this has helped to

reassure investors that the global economic recovery will continue,

even if the pace in the Euro zone is disappointing.

Government bond markets have had another difficult month. The

latest agreement amongst the member countries of the euro-zone

to offer help to Greece has not been well received, Greek bonds

have continued to weaken, and this has provided further momentum

to the switching operations out of the bonds of weaker countries.

For most of the past month these switching operations benefited

the major bond markets; but towards month-end a series of

disappointing auctions led to a sharp fall in the world bond market

and increased the overall mood of uncertainty.

The massive funding requirements resulting from the measures to

counter the recession are clearly putting great strain on all the

bond markets.

Movements amongst the major currencies have been fairly limited

over the past month, but the markets remain very uncertain. The

dollar has retained its “safe haven” status, despite the sudden

weakness in the world bond market.

Investors and traders have awaited further evidence about debt

problems in Europe that might affect the euro, and about the policy

decisions in the UK after the general election that might affect

sterling; but the view in the markets seems to be that both currencies

will fall further against the US dollar.

The yen has also weakened over the month, with the move

attributed to the resumption of “carry-trade” operations financed

by cheap yen borrowings.

Short-Term Interest Rates. There have been no changes in short-term interest rates in the

major markets over the month.

Shaw Capital Management Newsletter: Summary. Commodity markets have been encouraged by the general

improvement in sentiment, but have produced a mixed

performance.

Base metal prices are sharply higher, but soft commodity prices

are mixed, with the further big fall in sugar prices as the main

feature.

At Shaw Capital Management we give you the information and insight you need to make the right investment choices.

We look forward to working with you and being the open architects of your financial well being.

Every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor.

Our philosophy is simple: almost every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor.

Before Shaw Capital launched the open architecture revolution, investors had to make the unhappy choice between selecting an advisor who was independent, but unsophisticated (the traditional pension and endowment consulting firms), or selecting an advisor who was sophisticated but had conflicting interests (global banks, trust companies, money management firms).

Today, virtually all investors faced with the challenge of managing a significant pool of capital can access open architecture advice.

A true open architecture firm is completely independent of the rest of the financial services industry and accepts compensation only from its clients.

In addition, open architecture firms must make the financial commitment to hire only the most experienced advisors, and those advisors must apply their experience to the issues that will most affect their clients' wealth.

Matters like asset allocation and manager search are simply too important to be left in the hands of young analysts.

We are proud of our role in leading the open architecture revolution, and look forward to introducing you to its benefits.

Shaw Capital Working Management News Worldwide: Pension funds flock to investment comfort zone

APR4

http://www.efinancialnews.com/story/2011-04-04/pensions-flock-to-comfort-zone

William Hutchings

04 Apr 2011

Fiduciary management, where a pension scheme hands significant influence over its investment decisions to someone else, has grown exponentially since the financial crisis.

Asset managers, consultants and pension scheme managers agree that the crisis – and the losses that tipped previously solvent pension schemes deep into deficit – has shocked institutional investors into seeking much more from their investment advisers – although they realise they cannot delegate their responsibilities entirely, a change in aspirations compared with 10 years ago.
The recent appointment of Axa Investment Managers as fiduciary manager of the €2.5bn Ahold pension scheme is likely to be one of the largest mandates in the entire asset management industry this year, but it is only one of many fiduciary management mandates being awarded.
Nigel Birch, a researcher at UK market intelligence firm Spence Johnson, which researches data on the fiduciary management industry, said: “Half of all the mandates awarded in the last decade have come in the last two years. Competition is fierce.”
More competition
Mike Faulkner, managing director of P-Solve Asset Solutions, an investment consulting firm that has offered fiduciary management since 2001, said: “We are seeing tons more interest from clients, and loads more competitors.
“For the first time ever, the volume of clients looking for fiduciary management outweighs the clients looking for traditional consulting, and for the first time we’re seeing investors with more than £100m coming straight into fiduciary management, without having been a consulting client.”
Firms such as APG, a manager spun out of the Netherlands pension scheme ABP,BlackRock, the world’s largest fund manager, and Mercer, the biggest investment consultant, have spotted the opportunity and are offering their services as fiduciary managers.
The service can be expensive for clients – 10 times as much as regular investment consulting services, according to asset managers – and offering such a service may not be profitable for all managers.
Erwan Boscher, head of Axa Investment Managers’ fiduciary and liability-driven investment team, said: “It’s a package with a lot of services provided at a very tight price, and there is an intensive upfront fixed cost. The only ones who can do this are those with pockets deep enough to bear losses until they get scale.”

Edward Bonham Carter, chief executive of Jupiter Fund Management, said: “It’s a natural development for the really big houses, but it’s not for us.”

The chief executive of another asset management firm, one that does not offer fiduciary management, said: “I’ve yet to see the guy who makes money from this.”

Many asset management chief executives have expressed a lack of interest for this reason.

John Hailer, chief executive of Natixis Asset Management, one of the world’s largest fund management groups, said: “It’s not that easy to do, it takes a lot of due diligence and work.”

The need for scale has led to industry suggestions that fiduciary management would see consolidation, despite increased demand for the service.

Hendrik du Toit, chief executive of Investec Asset Management, said: “We offer multi-asset investment services, allocating between asset classes, but we don’t do fiduciary management.

“For a mid-sized, stock-picking focused firm it’s not on: it’s hugely administration-intense and relationship-intense, and if there’s a problem it’s a big problem.”

Fiduciary managers look over their shoulder at Goldman Sachs Asset Management, which last year lost a €9bn mandate at Dutch pension fund Vervoer. Under GSAM’s management the scheme’s losses were 5.4 percentage points behind its benchmark, and Walter Brand, director of Pensioenfonds Vervoer, told Financial News at the time: “We appointed Goldman Sachs with the goal of outperformance for the whole portfolio – otherwise we would have just invested in indices.”

Hoping to minimise the reputational risk of losing money for a high-profile pension scheme, fiduciary managers want their clients to involve themselves in the investment decisions as much as possible.

More control

Birch, of Spence Johnson, said investors were keen to get involved. He said: “Pension funds came out of the crisis realising that they had been under informed by their fiduciary managers, and in particular that they were not made well enough aware of what could happen in any downturn.

“In future they will be looking for more control in what one investor described as a partnership, with understanding growing and pension scheme managers maintaining greater control.”

Michael Marks, chief operating officer of BlackRock’s fiduciary management business, which has 13 clients, including three in the UK, said: “The fiduciary manager should be helping trustees focus on the most important decisions, but the trustees own the decisions – they cannot delegate that.
“The benefit of the fiduciary manager is that it brings a more capital markets focus, and should be able to implement changes more quickly than the board of trustees.”

Transparency, and being a good cultural fit, is a way for a fiduciary manager to differentiate itself from its competitors. Marks said: “It’s hard for trustees to tell the difference between managers – 85% of what each one says is the same. It’s things like transparency that make the difference.”

The world’s largest fund manager is determined to stay the course, regardless of the expense.
Marks said: “We know that, if we do a really good job for these funds, BlackRock will have a future. We know the move to fiduciary management is going to happen anyway, so let’s get in the right place for it. This is an opportunity for a fund manager to be a partner.”

Shaw Capital Management Factoring: JAPAN DISASTER FROM A TECHNOLOGICAL VIEW

http://www.2600.com/news/view/article/12067

Posted 15 Mar 2011 02:15:16 UTC

The following comes to us from one of our friends and correspondents in Japan. After reading, please do whatever you can to lend a hand.

*****

Just a few notes on the situation in Japan.

As you have heard, last week on Friday, in the middle of the afternoon, on a normal working day, we experienced the largest earthquake that I have ever experienced in living 20 years in Japan. It started like a “normal” quake but just kept on increasing in intensity for an extraordinary long time. I scurried across the floor to get my desk and put on my hardhat. The company provides us with hardhats and emergency supplies in a belt bag for just this eventuality.

Immediately, cell phone coverage was effectively dead as the circuits were overloaded. It remained so for several hours after the quake though it was possible to get through to numbers if you were lucky, though almost all calls ended in failure.

Our mobile phones’ IP Internet service remained active and usable. Twitter became the most reliable communication method and realtime news about the situation came in all the time. I’m subscribed to several earthquake alert services on Twitter and quickly realized which area had been affected. Soon after the Tsunami warnings came in via mail, and Twitter followed with what seemed bizarre commentary from friends who were updating realtime about the amazing scenes they were watching live on TV.

After several strong aftershocks during the afternoon, we were faced with the problem of getting home. All trains in the Tokyo area had stopped and didn’t plan to restart that day except, amazingly for the Shinkansen which started again within a few hours.

I posted my situation on Facebook and within minutes several friends offered me a place to stay the night. I managed to chat with one of my friends over Skype chat on my iPhone and headed off in his direction. Near his house I called him by voice on Skype on the iPhone.

The walk over to his apartment only took about 30 minutes but it was an amazing sight. Thousands of people were walking calmly along the sidewalks next to the main roads. The convenience stores were stripped bare of produce. All bentos, bread, pot noodles and other food stuffs were gone. Also mobile phone chargers and batteries were immediately sold out. All bicycle shops were sold out as people who had a long walk purchased one there and then to ride home on.

Mobile phone shops were kept open to allow people to charge their phones and NTT call boxes were set to allow free calls within Japan. Long lines were reported at the phone boxes as there are so few public call boxes left now in the streets and public places.

My home phone was not available as it is no longer provided via the analog copper cable but is an IP phone that is connected to the DSL fibre router provided by the phone company. During a power failure it is dead. We were warned about this when we subscribed for the fibre Internet service. I heard that landline to landline calls were getting through.

The following morning I searched on Google Realtime search for the name of the station and train lines nearby. From 1 minute old Twitter messages I could see people complaining about the 500m lines outside the stations. Other people who had boarded the train were tweeting how dangerously crowded the train was and how, once they had reached the platform it had taken them an hour to actually board the train.

I decided to sit it out and caught the train back later when it was less crowded, knowing in advance that the station was relatively normal.

Many people were able to receive Skype calls on their iPhones or PCs from relatives abroad but were unable to get through to their family in the same city due to problems with the mobile voice network. We also determined by coordinating over Twitter that SMSs were not getting though. Some test messages never got through at all.

One more piece of technology which has proven not to work well is the Earthquake pre-warning system. New mobile phones make a sound and display a message before incoming earthquakes as the warning can be broadcasted before the relatively slow moving ground waves arrive. There was no warning for the first very large quake, which was a total failure, and then random warnings throughout the night for relatively moderate quakes. When a whole room full of people’s phones suddenly sound an alarm, it really adds to the fear factor.

On the subject of over-the-air broadcasts, Japanese TV excels at keeping people informed. Every few months we get a tsunami warning and a map is projected over the TV program showing the areas in danger. There are remotely controlled cameras in all the major ports that NHK controls which usually in the end show tsunamis of 10 cms or so rolling in. The aerial footage that we have all seen is from the TV company helicopters, it was broadcast live. It is routine for them to head out over the affected areas at the first sign of an earthquake.

Across the Kanto plain, where Tokyo and the surrounding areas lie, the US military broadcasts on 810AM. During emergencies English speakers can get information from this station. I haven’t felt the need to listen to this, yet. NHK is running 24hr bilingual news on their net service.

Concerning the nuclear crisis, the French Embassy advised their citizens to leave Tokyo unless absolutely necessary whereas no notification has been given by others. Some non-Japanese friends have just left the country.

I’m following the news, and checking against outside experts’ analysis. The information seems to match, but the explosions don’t seem to be part of the expected failure plan. I guess there is not really a chance to test the design of a nuclear power station before it fails.

As far as I understand, the power plants were all automatically scram’ed (by the “safety control-rod axe man”) i.e., made safe immediately. The reaction was dampened with the control rods but the problem was then to dissipate the remaining heat as the reaction subsides. At this point, the cooling and emergency cooling failed. The water started to get super-heated breaking down giving off hydrogen and oxygen which, when it was let out into the containment building to reduce pressure, led to the explosion. When the officials pumped seawater into the cooling system, you know they have given up on trying to save the reactor as it usually requires very pure water to avoid corrosion. I think, after that, you basically have to decommission the reactor. It is certainly a mess that will take years to clean up.

I’m generally in favour of nuclear power, but building power stations in such an earthquake and tsunami prone area does not seem wise. I don’t understand why Japan doesn’t build thermal power stations with the abundant heat from volcanic sources.

Also, it’s well known that the nuclear industry in Japan is scandal ridden, so people are really looking closely at what they are saying and fact checking.

I will reserve panic to when the US withdraws its personnel en masse from their bases near Tokyo.

Due to the damage to the power stations, there are rolling blackouts scheduled but they haven’t come into effect yet. It is uncertain how area by area blackouts will work. Will the trains stop? Will the ticket machines work? Will there be lights in the stations on lines that are running? No one knows. I expect Shibuya and Shinjuku will be dark tonight.

We found out the schedule for the blackouts from what was obviously a pdf created from a copy of a fax! After announcing the blackout, TEPCO (the electric company)’s website went down due to the load. I managed to get a copy from someone who had archived it on their public Dropbox folder. They announced the location on Twitter. I posted this to my mailing list for local English speakers and people were soon helping each other to translate it and tell others who were having difficulty with the Japanese.

Google’s disaster relief page has also been useful and we were able to confirm that one friend in the badly affected area was alive by seeing a confirmation message posted by a family member on his entry in the people finder section.

Looking back, the thing that saved the day for me was TCP/IP. All services web, chat, ip-phone, mail, except the phone company’s mail server, worked reliably. SMS and mobile voice phone cannot be relied upon even if their network is working.

Lastly, I must note that for Tokyo this quake was an inconvenience. For Northern Japan it is a disaster which has literally wiped whole communities off the map. Only the roads remain where bustling towns of many thousands stood hours previously. People have been rescued 10s of kilometers out to sea

sitting on house roofs. The office I work for has branches around the country and as of Monday morning 200 people were not able to be accounted for. Please ask everyone to give generously to the international relief agencies that are supporting the efforts. Please give to those agencies that you already know, as several hundred fake domains were registered over the weekend in order to scam people into donating to fake relief sites.

“Off The Hook” listeners in Tokyo, at least, are doing fine.

Stuart – Tokyo