Category Archives: financial news
What can venture capitalists expect for the last part of 2015? If the first two quarters are any indication it does not look too bad. However, that is not without some concern in key areas. Venture capital backed companies saw 1,819 deals in the first half of the year and raised over $32 billion. Globally, these figures were reflected with an impressive $59.8 billion. The first two quarters of 2015 were representative of about a 49% increase over the increases seen in the same two quarters of last year.
What is driving growth?
There were some very large deals in the first part of this year that drove funding trends worldwide. Presently, VC funded companies are on the rise and in the first half of 2015 there were over 100 mega rounds. Just the second quarter saw 61 deals that raised over $16 billion investment dollars. Driving this growth are lower interest rates. It is expected for this growth trend to continue throughout the remainder of the year since interest rates are remaining pretty much the same.
Another factor behind the trending growth is more participation in mutual funds, VC funding and hedge funds. Right now, the amount of available capital remains huge. Companies being backed with venture capital funding are staying private for longer periods of time and some of the best companies have a decent variety of funding options. These trends are also seen on a global basis and startups continue to reshape the markets across the board from hospitality to transportation and healthcare. Read the rest of this entry
The news about China’s economic woes is wide spread and it seems that the equity markets in China are along for the ride. This has been felt even in the stock markets in the US since investors like Efraim Landa can become concerned about what impact China’s economy may have on the economy on a global level. Plenty of negative influences are heard because of the upheaval.
Is China okay?
It’s rather obvious even to the casual observer that everything is not running perfectly in China. However, there should be some thought given to the economic growth in China and perhaps there is a different perspective from which to view it. In 2015, the GDP of China has been estimated at more than $11 trillion. This is not actually too bad when you compare them to others like Germany and Japan who are both closing in on the United States at 7% growth factors. This is an enormous amount of growth considering it’s not been done before. China’s economy has lots of prospects and investors who are patient will likely be rewarded eventually.
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Efraim Landa is a venture capitalist who provides both funding and expertise to emerging companies. A venture capital firm typically works with a startup company that needs funding and support to handle those first turbulent years until they can make an IPO. When a VC firm invests in an emerging company it basically purchases a portion of the company in exchange for a profit that will come as the company matures. It is generally expected that a company will be able to transition from its inception to an IPO inside of 10 years with the average being somewhere around 5 to 7 years. The venture capital firm provides the necessary funds to keep the business running efficiently until the time when a profit can be made. Entrepreneurs and venture capitalists such as Efraim Landa also offer their working expertise to the business to help ensure their successful business venture. Many successful entrepreneurs have stated that the expertise that is gained from experienced businessmen is more valuable than the funding that was secured. Read the rest of this entry
Efraim Landa is a venture capitalist who understands fully the challenges faced by an entrepreneur or a start-up business who is attempting to secure funding. A venture capital firm such as Effi Enterprises provides an investment into the business which is intended to provide the finances needed for the business to grow. VC firms are a type of high risk investment but they also have potential returns that are way above average. The venture capital firm invests finances into the emerging business in exchange for a return after the business becomes profitable. When a VC firm invests funds into a business, the goal is that within 10 years the company should be able to move from its inception to an Initial Public Offering (IPO). In most cases, an entrepreneur comes up with an ingenious idea, begins a business to market it and then enlists the help of a VC firm that can fund the business until it is profitable. Read the rest of this entry
With recent computer glitches chipping away at investor’s confidence in the market, a repeat of the stock market crash of 1929 becomes a real fear. Investors such as Efraim Landa must continue to exercise caution in their investments. Effi Enterprises is a consulting business which offers counsel to emerging businesses and entrepreneurs regarding financial investments and how to increase the value of the company. They offer marketing strategies and assist in helping businesses get started with brokers, divestiture strategies, capital sources and IPOs. Because Effi Enterprises helps businesses create value it is important to stay up to date on various aspects of the market and note how changes can affect business on every level. One of the acts that helped shape the market as we know it today was the Glass-Steagall Act.
The Glass-Steagall Act (GSA) brought about a separation between commercial banking activities and the investment markets. This was due to the fact that most agreed that too much commercial bank involvement in market activities was behind the stock market crash of 1929. According to Congress banks were taking too large of risks with their depositors’ money. The GSA continued as established until it was repealed in 1999.
Just before the depression most feel that commercial banks were too careless in their investing practices. They did a lot of investing of their assets and became greedy by taking larger risks hoping to gain even larger financial rewards. The objectives of banking itself became somewhat blurred and many loans were made into companies that the bank had invested in. They encouraged their clients to invest in the same stocks. Many feel that this mismanagement of funds caused the stock market crash. Henry Steagall was chairman of the House Banking and Currency Committee and seated in the House of Representatives at the time. Senator Carter Glass founded the US Federal Reserve System. Steagall supported Glass after they added an amendment which would allow bank deposit insurance for the first time.
The GSA was in response to financial crisis and set up a sort of regulatory firewall between investment banks and other commercial activities. Banks were allowed a one year time frame in which to decide whether they wanted to specialize in investment banking or commercial banking. The Act allowed only 10 percent of the income for commercial banks to come from securities; but one exception was allowed in which commercial banks were allowed to underwrite government issued bonds. JP Morgan and other financial giants were forced to cut the services they provided which cut their income drastically as well. The goal of the GSA was to prevent banks from using deposits if an underwriting job failed. Many in the financial community felt like the GSA was too harsh and glass even moved for a repeal right after the Act passed claiming himself that it was an overreaction.
The Federal Reserve Board is the US bank regulator implemented the GSA but in 1956 Congress decided to regulate another bank sector. To keep any specific financial corporation from gaining too much power, they extended the GSA by adding the Bank Holding Company Act to create a wall between banking and insurance companies. This stopped banks from being able to underwrite insurance companies even though they could sell insurance.
There have been many debates over whether these restrictions were the healthiest option for the industry or not. Many felt like banks should be allowed to diversify to reduce risks and that the GSA restrictions had the adverse effect and made the banking industry riskier instead of safer. After the Enron market mistakes banks are more likely to be transparent and less likely of making risky or unsound decisions regarding investment procedures. Reputation is a key component in the market today and this in itself motivates banks to regulate their own activities.
In November, 1999, congress repealed the GSA and eliminated the restrictions prohibiting affiliations between investment and commercial banks. The Gramm-Leach-Bliley Act allows banks to engage in a wider range of services which include underwriting. The intent of the GSA was to prevent deposits from being lost if there were investment failures, the repeal and establishment of the Gramm-Leach-Bliley Act demonstrates that many times attempts to regulate can end up with adverse effects.
Many people depend on the stability of the stock market from day to day. It is understood of course that there are times when it can have greater fluctuations than others. And there are times when the market becomes volatile which can be advantageous to some and a detriment to others depending on the types of trades occurring at the time. But for regular investors such as Effi Enterprises a glitch in the system can be disastrous. Efraim Landa helps business owners organize and maintain investments, offer IPOs, learn about brokers and dealers, and use many other aspects of financial resources to increase the value of their business or company. A glitch can mean real trouble for a business which is trying to achieve valuation. But we must remember that the market is primarily computer based and occasionally there are those times when a glitch will occur. Such was the case on May 6, 2010 when the Flash Crash occurred.
On this date the crisis occurred in a very short time frame of about 5 minutes just before 3 p.m. In this short amount of time the Dow Jones Industrial Average suddenly dropped almost 600 points. It was nick named the “flash crash.” Most blame it on a computer glitch of some sort while others tried to look at several trades which occurred shortly before the crash happened.
This year in May Facebook anticipated very good first day trades but on May 18 their jump into the market with their IPO ended up in chaos. A NASDAQ computer glitch delayed the opening by about 30 minutes which meant that investors were unable to purchase shares in the morning and then sell them later that day. They couldn’t even tell if their orders had gone through. NASDAQ is looking to pay nearly $62 million to different firms who suffered financial harm due to the glitch.
March of this year there was a glitch of some sort which affected at least one market which was trying to offer an IPO. Kansas City based BATS Global Markets, Inc. ended up canceling the IPO because a series of glitches never allowed the stock to open for trade. Later the CEO, Joe Ratterman, resigned as the chairman and offered a public apology.
Even though the specific details of what happened are sketchy, most of them seem to come from issues with the algorithms which keep high frequency trading afloat. These types of trades are conducted at a rate of millions in just nanoseconds. The large volume of stock trading is all computerized this means that the chance of malfunction is relatively high with the biggest problem being that a human cannot stop them before it’s too late and the damage is usually already done.
For investors such as Efraim Landa these glitches can be very detrimental. They rely on the constant working of the market and place automatic orders expecting that their brokers will sell the stocks when they hit a particular price. Kevin Callahan, the spokesman for the Securities and Exchange Commission (SEC) made a statement in which he said that they “are closely monitoring the situation.” He also stated that they were in constant contact with the New York Stock Exchange and various other market participants. Many leading businessmen are asking for better oversight of some of the practices such as high frequency trading which seems to be the culprit leading to these types of glitches.
The most interesting thing about this recent glitch is that it occurred on the same day that the SEC published a rule which was set up to prevent glitches such as the “flash crash” of 2010. The goal of the rule was to establish one consolidated record of all the day’s trades. Many are calling for tighter regulations and closer monitoring to help prevent these glitches from occurring.
There are many different types of trading platforms used to process trades across many financial markets. High Frequency Trading is a specific platform that is capable of performing many trade orders, or transactions, in a very short amount of time. Computers which are used on this trading platform use complex algorithms which can analyze numerous markets and carry out orders based on the changing market conditions. Usually the traders who can trade the fastest will be the most profitable. However, there has been much debate about whether high frequency trading improves the market quality; or if it is a detriment to long term investors. Whether or not it is a beneficial sector of the market is important to those who are involved in providing financial opportunities for businesses like Efraim Landa. His company, Effi Enterprises offers counsel to businesses concerning financial matters. One of their primary concerns is helping entrepreneurs learn how to create value for their growing business and the market plays a major role in this effort.
High Frequency Trading, or HFT, is a specialized trading platform which uses computer technology to make a large number of transactions in a very short amount of time. HFT uses computerized complex algorithms which analyze many markets at the same time and executes orders based on the conditions of the market. Those traders who can execute orders at the fastest speeds usually come out more profitable than other traders who have execution speeds which are slower. Recent estimates declared that close to 50 percent of all exchange volume are from high frequency trading transactions.
HFT costs are lower, deeper and more liquid than other options. The price differences across other related markets are reduced and the prices reflect the values of stocks and commodities more accurately. The trouble is that the term “high frequency trading” has become more of a catch all phrase for many of the automated trading strategies. The term tends to lump all strategies which use computers to create, tender, monitor or revise purchases and sells of orders throughout a trading day. These types of strategies are programmed to make trading decisions based on how the decision rules developed by humans along with public information. HFT is a popular form of trading with varying types of professional traders. This includes investment banks, proprietary trading firms and investment funds. This rapid growth is due to the innovations that have occurred in trading technology along with the reforms that trading regulations have undergone which have made the markets more transparent, competitive and open.
There is a large school of thought that believes that HFT improves the overall quality of the markets. As trading has emerged to become more automated it has also become more competitive. One way that HFT improves the market is by making the market more efficient for traders who are bridging the gap between natural traders who are not all working the market all at one time. The high speed of entries helps decrease the risks of the market and becomes a beneficial tool for risk management which allows traders to revise their orders quickly by responding to changing market conditions in a real time environment. This brings more liquidity to the market since traders can offer more narrow spreads, as well as larger sized quotes which ultimately reduce costs for end users. High frequency trading is a broader type of risk management tool just like the ones marketers have used for years; but just in a faster mode due to the availability of the most accurate, up to date information available.
HFT techniques have been mostly used by professional traders such as Efraim Landa. However, even average investors can benefit from this type of trading. A long term investor who traditionally buys a mutual fund and holds it can use HFT to his benefit by using them to reduce transaction costs which are typical of the mutual fund. This allows the investor to be out less money up front and in turn end up with a greater investment return. Many mutual fund companies advise regulators that HFT can result in significant savings for mutual fund investors.
LIBOR has an influence on interest rates around the world; but recently there have been some questions raised about the rigging of interest rates. Barclays already had to pay over $45 million in fines and it looks like there may be many more fines, and possibly lawsuits to come. Many say that regulators should impose more fines on some of the other 16 banks that are members of the British Bankers Association in hopes that there will never be a repeat.
LIBOR is the London Interbank Offered Rate which is the rate which these 16 banks charge one another for short term deposits and loans. This rate becomes a benchmark for interest rates set worldwide. It influences literally hundreds of trillions of dollars. LIBOR has an influence on various financial contracts corporate loans such as those managed by companies such as Effi Enterprises, interest rate swaps and floating rate mortgages.
Presently, there is much talk about criminal charges and possible jail terms for those involved. Asia, Europe, Canada and the US are investigating what looks like a huge picture of deceit and avarice. Banks must submit their data to be used in calculating the LIBOR; but in order to hide their own institution’s financial problems, or to boost profits for traders, they have submitted falsified data. Remember, that the LIBOR influences interest rates around the world so the repercussions of these devious acts are felt worldwide. Because it affects interest rates, investment firms like Effi Enterprises have been affected by the lowered benchmark.
Lawsuits are pending but as they are pursued they can mean global financial disaster. Municipal governments and investment firms purchased bonds or have entered into financial contracts which were based on LIBOR. They are now asking for compensation from the banks since they intentionally manipulated the benchmark. If the suits take place as it is assumed they will we are talking about potentially tens of billions of dollars that will have to be paid out.
Just so we understand how large of an impact this could have let’s say that LIBOR was only 0.1 percent off for one year. In that time the incongruity on the $300 trillion of swaps could easily mean that the rates were off by up to about $300 billion. This is just one type of contract; it doesn’t even take into account all the other types of contracts or any punitive damages that might be sought. It’s big enough the entire banking system could be crippled.
One suggested option would be for the banks to set up a compensation fund for the victims of LIBOR so that all the banks could pool resources to pay out. An administrator would need to be independent but he could generate a transparent formula which could estimate and calculate the damages that have been done. If the banks at least attempt to right the wrong clients might be more willing to settle instead of pursuing litigation which would be much more costly.
Of course this would take much cooperation among these banks. They would need to decide how much LIBOR had been skewed because of the misreports. Then they would also have to decide how much of the financial liability each bank should be responsible for. Government involvement could help to expedite the process. There may be more regulations set by governments which could help improve the bank’s transparency. Had they maintained transparency this would have never happened in the first place. Perhaps this is a lesson for all of those who deal with financial institutions. Consumers and businesses can benefit from open and honest transparency.
LIBOR is an acronym for London Interbank Offered Rate. It is basically an interest rate used on the federal level. It’s the interest rate that is charged between banks for loans. As far as interest rates it is the busiest in the world of finance. There are a number of banks which participate in the money market in London and they offer short term deposits to each other. LIBOR is what is used to determine the price of several other financial derivatives. These include items such as futures for interest rates, Eurodollars and swaps. This is very influential throughout the world of finance as it affects more than just the Pound Sterling. It is also important to other currencies like the US Dollar, Canadian Dollar, Japanese Yen and the Swiss Franc.
Every morning in London at 11:00 am LIBOR is set. The exact rate is found by averaging the various interest rates which are being offered by the banks in membership with the British Bankers Association. It is calculated for different time frames from as short as a day to a full year. The banks may offer varying rates throughout each day but the rate set is fixed for a 24 hour time frame. Even when the instantaneous rate and LIBOR are different it is a very small increment and for a short time.
Eurodollar futures are the most important of the derivatives which are related to LIBOR. Eurodollars are basically US monies which are deposited in banks which are outside the United States, generally in Europe. These Eurodollars are traded in Chicago at the Chicago Mercantile Exchange. Depositors outside the country are not subjected to the margin requirements enforced by the Federal Reserve which gives the depositor more leverage over the funds. LIBOR determines the interest rate which is paid on these Eurodollars and these futures provide ways to bet or hedge against the changes in the future interest rate.
There are 16 member banks in the British Bankers Association and they control the rates on about $360 trillion worth in the financial markets and products around the world. This includes the adjustable rate mortgages (ARM), which is where it affects the average Joe. When the interest rates are stable it provides several decent options for those wishing to purchase homes. For these mortgages it means no negative amortization and usually there are fair rates in terms of repayment. Usually the ARM is guided by the 6 month LIBOR plus somewhere between 2 and 3 percent.
LIBOR’s influence affects more than just the homeowner it also affects the entrepreneur and loans for small businesses, students and credit cards. It is all good while the economic climate is stable and LIBOR is doing well. But when economic uncertainty looms, particularly in the developed countries then the rates become volatile. This makes it more difficult for the banks to exchange loans among themselves. This in turn makes it more difficult for others to obtain bank loans. The trouble is that when the system is volatile the bank simply raises its interest rates for the borrower, or offers fewer loans.
LIBOR can also affect Federal rate cuts. Usually investors such as Effi Enterprises enjoy it when the Federal government cuts rates. But when LIBOR rates soar it restricts people from obtaining loans. This means that the average person does not benefit from the discounted rate because fewer loans are being offered. For those with a subprime mortgage it is important to keep an eye on LIBOR rates.
Generally the LIBOR rates do not affect the US Dollar or have little effect. It mostly has an impact on the Euro, Japanese Yen and the British Pound. However, for monies from the US which are being held in foreign banks, it is a relevant issue.