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Silicon Valley Investors Are Bonkers For European Startups

Index Ventures partner Danny Rimer always planned to move back to London from Silicon Valley. But when Rimer returned to England a year ago after seven years establishing Index’s U.S. foothold with stakes in companies like Dropbox, Etsy and Slack, he had company: investors from U.S. venture capital firms Benchmark, NEA and Sequoia were also appearing at startup dinners, leading deals and even looking to open offices.

“We’ve always been surprised at how our U.S. peers flew over Europe,” says the Canada-born and Switzerland-raised Rimer, 49, who opened Index’s London office in 2002. As a full-time European resident again, he debuts at No. 3 on the 2019 Midas List Europe, thanks to multi-national investments including Discord, Glossier, Farfetch and Squarespace. Rimer says he watched as investors flocked to pour money into India, China, and Latin American countries, instead. “A very successful Welshman talked about Europe being a museum,” says Rimer, alluding to billionaire investor Michael Moritz, the Sequoia partner and Google and Yahoo investor who moved from Wales to Silicon Valley decades ago. “Now his firm is all over the geo looking.”

More money is flowing into European tech than ever, and it’s increasingly coming from venture capital’s elite U.S. firms. European startups are likely to receive a record $34.3 billion in investments this year, according to investment firm Atomico, with 19% of funding rounds including an American firm, double the portion when Atomico started tracking in 2015. Those American investors will account for about $10 billion, or nearly one-third, of the total amount invested.

American interest in European companies isn’t new: Palo Alto, California-founded Accel opened a London office nearly twenty years ago, and other firms followed suit. But many retreated in subsequent economic down cycles, says Philippe Botteri, No. 6 on Midas List Europe. Botteri, a French citizen, started his venture career at Bessemer Venture Partners in San Francisco and joined Accel in London in 2011. The years leading up to the U.S. firms’ return witnessed a global economic crisis, while access to customers, engineering talent and programs like startup accelerator Y Combinator drove a host of European founders, such as Stripe’s Collison brothers, to relocate to the U.S. Considered a splintered market with regional regulations and languages, Europe faced a fresh hurdle with “Brexit,” when the United Kingdom voted in a 2016 referendum to leave the European Union, a process still ongoing. Its ruling body, the European Union, has made an anchor policy of challenging big tech companies on how they use data.

Blossom Capital founder Ophelia Brown says she was met with incredulity when, as a young investor at Index Ventures between 2012 and 2016, she visited West Coast counterparts and described the opportunity in European tech. “Everyone would push back: Europe was a little travel, a little ecommerce, a little gaming,” she says. “They felt there was nothing of substance.” In 2017, when she set out to raise Blossom’s first fund, many U.S. investors told her the opportunity for new firms seemed greater in the U.S. and China. Just two years later, Brown says she now hears from institutions asking how to get more exposure to Europe’s startup scene.

What’s changed: A mix of high-profile public offerings such as Adyen and Spotify and a maturing ecosystem that’s made it a much easier draw for U.S. firms, facing intense competition at home, to risk millions in Europe. Spotify, the Stockholm-based music streaming service that went public via direct listing in April 2018, and Adyen, the Amsterdam-based payments company that went public two months later, have created nearly $50 billion in combined market value. The IPOs of Criteo in Paris and Farfetch in London have also produced a network of millionaires primed to write “angel investor” personal checks into smaller tech companies. Today there are 99 unicorns, or companies valued at one billion dollars or more, compared to 22 in 2015, according to Atomico’s data.

“The question used to be, can Europe generate a $1 billion outcome, and then you had Spotify and Adyen creating tens of billions of market cap,” says Botteri, who notes that winners are also coming from a broader base of cities in Europe – 12 hubs, not all from London and Tel Aviv. (As on the Midas List Europe, European investors often include Israel’s tech-heavy startup scene.) “Now the question is, can Europe generate a $100 billion company? And my answer is, just give it a few years.”

For startups in far-flung places like Tallinn, Estonia, where Pipedrive was founded in 2010, or Bucharest, where UiPath got its start, the influx of U.S. venture capital counts for more than just money – it means access to former operators who helped scale businesses like Facebook, Google and Slack, introductions to customers in New York or executive hires in San Francisco. And with their stamps of approval comes buzz that can still kickstart a startup’s brand recognition, investors say.

But they also come with a risk: heightened pressure to deliver, board members who may be 5,000 miles away, and potentially overheated valuations that can prove onerous should a founder misstep. Sarah Noeckel, a London-based investor at Dawn Capital and the publisher of women-in-tech newsletter Femstreet, has tracked a number of recent seed-stage deals in which a U.S. investor swooped in with an offer too rich for local alternatives to match, for companies that sometimes haven’t sold anything yet. “I think there’s little validation at this point how it actually plays out for them,” she says.

For the U.S. investors, there’s a clear financial incentive to “swoop in.” On average over the past year, one dollar’s worth of equity in a European startup in a Series A funding round would have cost $1.60 in the U.S. for a comparable share, according to the Atomico report. Investors insist that for the most in-demand companies in Europe, such as London-based travel startup Duffel, which raised $30 million from Index Ventures in October, prices already match Silicon Valley highs.

All the more reason that as U.S. investors hunt in Europe like never before, they’re doing so quietly. Though Lightspeed Venture Partners announced its hiring of a London-based partner, Rytis Vitkauskas, in October, other U.S. firms have been on the ground without advertising it publicly. Leaders from NEA, with $20 billion in assets under management, passed through London in recent weeks on a venture capital tour as the firm plans to invest more heavily in Europe moving forward, sources say. Sequoia partners Matt Miller and Pat Grady, meanwhile, have been spotted around town meeting with potential job candidates. (Sequoia’s never employed a staffer in Europe before.) NEA and Sequoia declined to comment.

“Everyone would push back: Europe was a little travel, a little ecommerce, a little gaming. They felt there was nothing of substance.”

Blossom Capital founder Ophelia Brown

Many more U.S. investors now pass through London; some even stretch the meaning of what it means to visit a city through months-long stays. “I always used to have to travel to the West Coast to see friends that I made from the show,” says Harry Stebbings, who has interviewed hundreds of U.S. venture capitalists on his popular podcast, ‘The Twenty Minute VC.’ “Now, every week I can see three to five VCs in London visiting.” For the past several months, longtime Silicon Valley-based Accel partner Ping Li has lived in London with his family. Asked if he’d moved to the city without any public announcement, Li demurred – “I would argue that I’m spending a lot of time on British Airways,” he says – before insisting he plans to return to California in three to six months. “I don’t think you can actually be a top-tier venture capital firm without being global,” he says. Firms without plans for a permanent presence in London are creating buzz among local investors, too. Kleiner Perkins investors Mamoon Hamid and Ilya Fushman have been active in Europe recently, they confirm. Benchmark, the firm behind Snap and Uber, invested in Amsterdam-founded open-source software maker Elastic, which went public in 2018, and more recently London-based Duffel and design software maker Sketch, based in The Hague. “Europe’s just more in the spotlight now,” partner Chetan Puttagunta says.

Against the backdrop of Brexit, the inbound interest can feel like a surprise. London-based investors, however, appear to be shrugging off concerns and hoping for the best. “In and of itself, it means nothing,” says Index Ventures’ Martin Mignot, a French and British citizen investing in London and No. 7 on the Midas List Europe. “The only real question is around talent, whether it’s going to be more difficult for people to come and work in London, but how difficult that is remains to be seen.” Or as his colleague Rimer quips: “Having spent seven years in the U.S., I don’t exactly think the political climate of the U.S. was necessarily more welcoming.”

When Rimer attended the Slush conference, a tech conference of 25,000 in Helsinki in November, he brought along a guest: Dylan Field, the CEO of buzzy San Francisco-based design software maker Figma. If Field were European, Index would be leading him around Silicon Valley; instead, with 80% of Figma’s business outside of the U.S., Rimer wanted Field to experience the energy of Europe’s tech community first-hand. Explains Rimer: “It’s just a reflection of the reality today.”

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I’m an associate editor at Forbes covering venture capital, cloud and enterprise software out of New York. I edit the Midas List, Midas List Europe, Cloud 100 list and 30 Under 30 for VC. I’m a Fortune Magazine and WNYC alum. My tech focus would’ve perplexed my college self, as I studied medieval history and archaeology at Harvard University. Follow me on Twitter at @alexrkonrad and email me at akonrad@forbes.com. Securely share tips at https://www.forbes.com/tips/

Source: Silicon Valley Investors Are Bonkers For European Startups

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A interview with Venture Capitalist and Co-Founder of Andreessen Horowitz, Marc Andreessen In this interview, Marc discusses how Silicon Valley works and why it is so hard to replicate. Marc also talks about what he looks for in investments and gives advice to students. 📚 Marc Andreessen’s favourite books are located at the bottom of the description❗ Like if you enjoyed Subscribe for more:http://bit.ly/InvestorsArchive Follow us on twitter:http://bit.ly/TwitterIA Other great Venture Capitalists videos:⬇ Marc Andreessen: Venture Capital Investment Philosophy:http://bit.ly/MAndreessenVid1 Billionaire Chris Sacca on Investing, Venture Capital and Life:http://bit.ly/CSaccaVid1 Billionaire Peter Thiel on Entrepreneurship, Innovation and Competition: http://bit.ly/PTheilVid1 Video Segments: 0:00 Introduction 1:58 Something you really screwed up? 3:09 How does Silicon Valley work? 6:33 Why has Silicon Valley never been replicated? 10:24 Where does the value of cryptocurrency come from? 12:46 Is it going to disrupt governments? 14:26 What makes a fundable company? 19:23 What do you see in the future? 22:48 Advice to students? 24:52 How do you get rid of fear? Marc Andreessen’s Favourite Books🔥 Life: The Movie:http://bit.ly/LifeTheMovie Confessions of an Economic Hit Man:http://bit.ly/ConfessionsEconomic And the Money Kept Rolling In (and Out) Wall Street:http://bit.ly/MoneyKeptRolling Last Call:http://bit.ly/LastCallMA Startup Rising:http://bit.ly/Startuprising Interview Date: 29th March, 2018 Event: Udacity Original Image Source:http://bit.ly/MAndreessenPic1 Investors Archive has videos of all the Investing/Business/Economic/Finance masters. Learn from their wisdom for free in one place. For more check out the channel. Remember to subscribe, share, comment and like! No advertising.

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Keeping Up With E-commerce: Last-Mile Delivery Service Deploys ‘Ninjas’ In Online Shopping Boom

Packages are piled higher than people at Ninja Van’s biggest sorting center at a freight facility near Singapore’s Jurong port. Southeast Asia’s big e-commerce operator, Shopee, has just finished its “9/9” online shopping sale and says it got a record 17 million orders in one day. Ninja Van now has the task of delivering most of those orders. “We spend months preparing for how much capacity they require, making sure that we change our processes and have enough drivers,” says Ninja Van’s 32-year-old founder Lai Chang Wen.

Today, Ninja Van delivers on average one million parcels a day around the region, deploying some 20,000 full-time delivery staff, who are dubbed ninjas. Ninja Van’s sales in 2017 rose 9% from a year ago to $13 million and Singaporean Lai was inducted into Forbes 30 Under 30 Asia in 2016.

Ninja Van has so far raised $140 million from a group of investors that includes B Capital and super app Grab. “They’ve really been a leader in last-mile delivery. They are today, we believe, the best service in terms of delivery rates. Everything they’ve achieved using technology is driven to increase customer satisfaction,” says B Capital cofounder Eduardo Saverin, who is a director on the company’s board (and cofounder of Facebook).

Today In: Asia

Lai cofounded Ninja Van in 2014 after a stint as a derivatives trader at Barclays and then setting up Marcella, a custom menswear shop based in Singapore. Monk’s Hill Ventures Managing Partner Lim Kuo-Yi remembers passing on Lai’s pitch to invest in Marcella, but was intrigued by Lai’s proposed solution to the firm’s delivery hurdles.

That proposal is now Ninja Van. Its value proposition is providing a more effective way for Southeast Asia’s small and midsized enterprises to deliver their products as e-commerce in the region explodes. Over 150 million Southeast Asians are now buying and selling online, triple the number from 2015, according a recent report by Bain, Google and Temasek. “What Ninja Van has shown in the last four or five years is the ability to grow the business threefold year-on-year,” says Lim.

Ninja Van is one of a slew of companies offering logistics services for e-commerce deliveries such as Lalamove, GoGoVan and UrbanFox. Competing on cost, speed and reliability isn’t enough, Lai says. Ninja Van also works with SMEs to cut costs and expand their markets. Ninja Van in September introduced a program in Indonesia called Ninja Academy that teaches SME owners about social marketing, inventory management, procurement and sales strategy. “A big part of the question around Ninja Van is how do I evolve my customer base to enable the long tail of commerce,” says Saverin.

Ninja Van entered the logistics scene at an opportune time. Photo: Sean Lee for Forbes Asia

Sean Lee for Forbes Asia

Ninja Van also mines its data to find hidden efficiencies. For example, when multiple merchants are buying the same raw material or product, Ninja Van can then broker a deal to buy in bulk for a lower price on behalf of several customers. The same goes for freight space. “We are the biggest purchaser of air cargo across Indonesia,” says Lai.

With as much as 70% of its transactions still cash on delivery, Ninja Van processes more than a billion dollars in payments a year. While processing those payments, it’s sitting on a massive pool of liquid capital. “There’s opportunity there to extend some level of working capital financing to bridge that gap,” says Lim.

Grab’s investment in Ninja Van is the culmination of an ongoing discussion about collaboration. “We kept finding ways to work together,” says Lai, who first started talking with Grab’s cofounder Anthony Tan four years ago about merging their fleets to improve efficiency.

The two eventually decided that having separate, specialized fleets was more efficient than a combined one, but they have developed a special partnership. Grab customers can access Ninja Van on Grab’s app depending on the kind of delivery. Grab deploys its drivers for on-demand pickups and deliveries, but offers Ninja Van as a discount option for less urgent, next-day courier service to SMEs. Grab has already integrated Ninja Van into its service offering in Indonesia and the Philippines, and plans to do so in Vietnam later this year.

Lai, meanwhile, spends much of his time now in Malaysia and Indonesia, where Ninja Van launched in 2015. “The landscape is very exciting right now, comprised of a lot of small merchants selling on marketable channels,” Lai says. But the real prize, he says, lies beyond Southeast Asia. “There’s a lot more global flow,” he says. Lai won’t name any potential partners, but says the U.S. is “definitely a target.”

Pamela covers entrepreneurs, wealth, blockchain and the crypto economy as a senior reporter across digital and print platforms. Prior to Forbes, she served as on-air foreign correspondent for Thomson Reuters’ broadcast team, during which she reported on global markets, central bank policies, and breaking business news. Before Asia, she was a journalist at NBC Comcast, and started her career at CNBC and Bloomberg as a financial news producer in New York. She is a graduate of Columbia Journalism School and holds an MBA from Thunderbird School of Global Management. Her work has appeared in The New York Times, Washington Post, Yahoo, USA Today, Huffington Post, and Nasdaq. Pamela’s previous incarnation was on the buy side in M&A research and asset management, inspired by Michael Lewis’ book “Liar’s Poker”. Follow me on Twitter at @pamambler

Source: Keeping Up With E-commerce: Last-Mile Delivery Service Deploys ‘Ninjas’ In Online Shopping Boom

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Sick of online shopping deliveries that go MIA or take forever? Ninja Van’s Lai Chang Wen saw how traditional couriers were spoiling the experience – so he jumped in to spoil the market. Even though he had zero experience. Catch the series Game Changers on Monday, 8pm SG/HK. Watch catch-up episodes on Toggle http://bit.ly/2nRyB7Q

Last Week Confirms It. Goodbye, Recession – Hello, Bull Market

 

It is time to get excited, optimistic and bullish. Last week put the final nails in the “Oh, woe is me” recession coffin. RIP.

Last week’s good news supported and confirmed recent anti-negative and pro-positive improvements. Here is the wonderful list:

Earnings reports are driving a shift to the positive

Compare these two headlines from The Wall Street Journal:

  • October 9: “U.S. Earnings Flash a Worrying Signal”
  • November 2: “Earnings Tide Lifts Most Stocks – Investors are getting a more positive picture of American corporations’ health than that painted by analysts in buildup to earnings season”
Today In: Money

The cause? Earnings reports continue to be positive on balance, with most of the September quarter-end earnings reports now in. The 336 S&P 500 companies reporting September results so far (from October 15 through November 1) represent 67% of the 500 companies and 75% of the $27T market capitalization. (Many of the remaining 164 companies will report October or November quarter-end results later.)

While reports of companies beating expectations are widespread, a good way to view investors’ complete evaluation is by examining stock performance. Below is a graph of the one-month returns (including dividend income) for all of the 336 reporting companies. I have broken out the so-called “safe” stocks (REITs and utilities) because they have been beneficiaries of both reduced interest rates and bearish thinking – therefore, expect them to underperform.

Clearly, Wall Street views this earnings report season as favorable. Additionally, the need and desire for “safe” stocks has given way to the pursuit of growth.

The Federal Reserve cuts and quits

Finally! While rates remain abnormally low (meaning there is music to be faced in the future), at least the game of will-they-or-won’t-they looks over for now. That is helpful because businesses, consumers and investors now can make decisions based on a stable rate environment.

GDP growth is just fine

A good example of how negativity can take time to turn positive is the last week’s third quarter GDP growth report. Expectations had been for a seasonally adjusted, real (adjusted for inflation), annualized rate of 1.6%, down from 2% last quarter. Instead, it came in at 1.9%. That is good news, but most reports focused on the “continued slowing” instead of the desirable surprise.

Think of that report this way. For a quarter that had its problems, growth was still around 2%, in line with the average post-recession growth rate. Looking at a longer time period provides a good perspective for that 1.9% growth rate.

Employment and consumer spending are good

The recession pundits keep expecting these shoes to drop, but they do not. The problem is the factors leading up to reduced employment are absent. Following, so long as consumers are employed, they will spend. Therefore, in spite of that previous sharp drop in consumer confidence, consumer spending has remained strong and consumer confidence has improved.

The Wall Street Journal’s November 2 lead story (print edition) says it best: “Jobs, Consumers Buoy Economy, Defying Slowdown Across Globe.”

The bottom line

Last week offered an outstanding combination of good news that removes recession pessimism and reintroduces growth optimism for 2020. Stock ownership (excluding “safe” stocks) continues to look desirable.

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During my 30-year career, I managed and consulted to multi-billion dollar funds. Using the “multi-manager” approach, I worked with leading investment managers. I now manage personal accounts and write about my analysis and decisions. … From my 50-year personal/professional investment experience, I developed the skills I use to find opportunities and avoid risks. Because markets are ever changing, I choose the strategies (safety, income, value and growth) that conditions warrant. … My one regular activity is to seek developments and trends being ignored or misinterpreted by investors. These are the situations that consistently produce higher return opportunities (or higher risk levels). … I am a CFA charterholder with an MBA from Stanford Graduate School of Business and a BS in Finance from San Diego State University. I am a former Washington DC CFA board member and currently serve on the AAUW Investment Advisers Committee and the City of Vista Investment Advisory Committee. … For more, please see my LinkedIn bio at http://www.linkedin.com/in/johntobeycfa

Source: Last Week Confirms It. Goodbye, Recession – Hello, Bull Market

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Traders Jon and Pete Najarian are joined by Sarat Sethi, managing partner at Douglas C. Lane & Associates, and Anastasia Amoroso, global investment strategist at J.P. Morgan Private Bank, to discuss calls on Netflix, Apple and Juniper Networks.

FAANG (Facebook, Amazon, Etc.) Stocks Have Lagged This Year. Here’s Why

Topline: The once high-flying FAANG stocks—Facebook, Apple, Amazon, Netflix and Google parent Alphabet—have mostly lagged the broader S&P 500 index over the past year, signaling that the market may turn to new leadership for the next leg of its advance.

  • With the recent exception of Apple—which reached a new record high last week, the FAANGs have been in somewhat of a slump, as high price volatility takes a toll on their long-time status as momentum stocks.
  • Amazon and Facebook are both 13% off their record highs, while Netflix is down 31% from its peak last year; Google, on the other hand, is just 4% from its record high.
  • These popular, high-profile names have driven the bull market to new heights in recent years, and as a result were increasingly treated as parts of a whole when it came to trading patterns.
  • But over the last 6 to 12 months, the FAANGs have not been leading the market as they once did, with Wall Street now pricing in slower growth rates, rising costs and the potential for more government oversight.
  • “These stocks have made people a lot of money, but they won’t trade as a group the way they did for several years,” says Charles Lemonides, chief investment officer of ValueWorks LLC.
  • Lemonides predicts that Wall Street will increasingly stop talking about the FAANGs as a group, as they go from being growth stocks absolutely adored by the investing public to companies that are perceived to have their own different business challenges.
Today In: Money

Key background: Analyst recommendations are increasingly varied on each of the FAANGs, which adds to the notion that they aren’t viewed as a group anymore. Most Wall Street analysts still assign “buy” ratings, though: 52% for Apple, 87.5% for Alphabet, 69% for Netflix, 96% for Amazon and 87% for Facebook, according to Bloomberg data.

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I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com

 

Source: FAANG (Facebook, Amazon, Etc.) Stocks Have Lagged This Year. Here’s Why

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Jim Cramer explains his latest take on the FAANG stocks, plus Microsoft.

How’s the Consumer Doing? Financial Sector Earnings Next Week Could Help Tell Us

Key Takeaways:

  • Big banks to kick off reporting season the week of October 14
  • Earnings for sector expected to fall slightly, analysts say
  • Brexit, trade, consumer health on topic list for Financial earnings calls

During Q2 earnings season, Financial sector results helped renew investor confidence in the U.S. consumer.

The question heading into Q3 is whether banking executives still see the same kind of strength, and if they think it can continue amid trade wars, Brexit, and signs of weakness in the U.S. economy.

Over the last three months, as the broader stock market rallied to an all-time high, slammed the brakes, and then re-tested earlier peaks, consumer health arguably did much of the heavy lifting. It felt like every time stocks pulled back, they got a second wind from retail sales, housing or some other data or earnings news that showed consumers still out there buying.

Today In: Money

The banks played a huge role in setting the stage by reporting better-than-expected Q2 results that showed signs of strong consumer demand even as some of the banks’ trading divisions took a hit. Next week, six of the biggest banks come back to talk about their Q3 experience and what they expect for Q4. Analysts expect Financial sector earnings to drop slightly in Q3.

That said, most of the major banking names have done an excellent job keeping costs in check as they wrestle with fundamental industry headwinds like falling interest rates and slowing revenue from their trading divisions. This time out, it wouldn’t be surprising to see more of the same, and you can’t rule out a bit more vigor from the trading business thanks to all the volatility we saw in the markets last quarter.

Earnings growth may not be there for Financials this time around, or it could be negligible. At the end of the day, though, Financial companies are still likely to be remarkably profitable considering a yield curve that remains relatively flat and global macroeconomic concerns, according to Briefing.com. This sector knows how to make money, but it might just not make as much as it did a year ago. Earnings will likely show large banking companies still in good financial condition with the U.S. consumer generally in decent shape for now, as the U.S. economy arguably remains the best-kept house on a tough block.

Investors have started to pick up on all this, judging from the S&P 500 Financial sector’s good health over the last month and year to date. The sector is up 3.4% from a month ago to easily lead all sectors over that time period, and up 15% since the start of 2019. The 15% gain is below the SPX’s 17% year-to-date pace, but it’s an improvement after a few years when Financials generally didn’t participate as much in major market rallies.

What to Listen For

No one necessarily planned it, but it’s helpful in a way that banks report early in the earnings season. Few other industries have larger megaphones or the ability to set the tone like the biggest financial institutions can. The other sectors are important, too, but they often see things from their own silos. Combined, the big banks have a view of the entire economy and all the industries, as well as what consumers and investors are doing. Their positive remarks last quarter didn’t really give Financial stocks an immediate lift, but it did apparently help reassure investors who were nervous about everything from trade wars to Brexit.

Going into Q3 earnings, those same issues dog the market, and bank executives have a front-row seat. How do they see trade negotiations playing out? Can consumers hold up if trade negotiations start to go south? How’s the consumer and corporate credit situation? Will weakness in Europe spread its tentacles more into the U.S.? And is there anything bank CEOs think the Fed or Congress can do to fend off all these challenges?

On another subject closer to the banks’ own business outlook, what about the shaky initial public offering (IPO) situation? That’s getting a closer look as a few recent IPOs haven’t performed as well as some market participants had expected. One question is whether other potential IPOs might get cold feet, potentially hurting businesses for some of the major investment banks.

All the big bank calls are important, but JP Morgan Chase (JPM) on Tuesday morning might stand out. Last time, CEO Jamie Dimon said he saw positive momentum with the U.S. consumer, and his words helped ease concerns about the economic outlook. More words like that this time out might be well timed when you consider how nervous many investors seem to be right now. On the other hand, if Dimon doesn’t sound as positive, that’s worth considering, too.

While few analysts see a recession in the works—at least in the short term—bank executives might be asked if they’re starting to see any slowdown in lending, which might be a possible sign of the economy putting on the brakes. Softer manufacturing sector data over the last few months and falling capital investment by businesses could provide subject matter on the big bank earnings calls.

Regionals Vs. Multinationals

While big banks like JPM operate around the world and might be particularly attuned to the effects of trade, regional banks make most of their loans within the U.S., potentially shielding them from overseas turbulence.

Regional banks also might provide a deeper view into what consumers are doing in the housing and credit card markets. With rates still near three-year lows, we’ve seen some data suggest a bump in the housing sector lately, and that’s been backed by solid earnings data out of that industry. If regional banks report more borrowing demand, that would be another sign pointing to potential strength in consumer sentiment. Refinancing apparently got a big lift over the last few months, and now we’ll hear if banks saw any benefit.

One possible source of weakness, especially for some of the regional players, could be in the oil patch. With crude prices and Energy sector earnings both under pressure, there’s been a big drop in the number of rigs drilling for oil in places like Texas over the last few months, according to energy industry data. That could potentially weigh on borrowing demand. Also, the manufacturing sector is looking sluggish, if recent data paint an accurate picture, maybe hurting results from regional banks in the Midwest. It might be interesting to hear if bank executives are worried more about the U.S. manufacturing situation.

Another challenge for the entire sector is the rate picture. The Fed lowered rates twice since banks last reported, and the futures market is penciling in another rate cut as pretty likely for later this month. Lower rates generally squeeze banks’ margins. If rates drop, banks simply can’t make as much money.

The 10-year Treasury yield has fallen from last autumn’s high above 3.2% to recent levels just above 1.5% amid fears of economic sluggishness and widespread predictions of central bank rate cuts. The long trade standoff between China and the U.S. has also contributed to lower yields as many investors pile into defensive investments like U.S. Treasuries, cautious about the growth outlook.

Another thing on many investors’ minds is the current structure of the yield curve. The 10-year and two-year yields inverted for a stretch in Q3, typically an indication that investors believe that growth will be weak. That curve isn’t inverted now, but it remains historically narrow. Still, some analysts say the current low five-year and two-year yields might mean healthy corporate credit, maybe a good sign for banks.

Q3 Financial Sector Earnings

Analysts making their Q3 projections for the Financial sector expect a slowdown in earnings growth from Q2. Forecasting firm FactSet pegs Financial sector earnings to fall 1.8%, which is worse than its previous estimate in late September for a 0.9% drop. By comparison, Financial earnings grew 5.2% in Q2, way better than FactSet’s June 30 estimate for 0.6% growth.

Revenue for the Financial sector is expected to fall 1.6% in Q3, down from 2.6% growth in Q2, FactSet said.

While estimates are for falling earnings and revenue, the Financial sector did surprise last quarter with results that exceeded the average analyst estimate. You can’t rule out a repeat, but last time consumer strength might have taken some analysts by surprise. Now, consumer strength in Q3 seems like a given, with the mystery being whether it can last into Q4.

Upcoming Earnings Dates:

  • Citigroup (C) – Tuesday, October 15
  • JPMorgan Chase & Co. (JPM) – Tuesday, October 15
  • Wells Fargo (WFC) – Tuesday, Oct. 15, (B)
  • Goldman Sachs (GS) – Tuesday, October 15
  • Bank of America (BAC) – Wednesday, October 16
  • Morgan Stanley (MS) – Thursday, October 17

TD Ameritrade® commentary for educational purposes only. Member SIPC.

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: How’s the Consumer Doing? Financial Sector Earnings Next Week Could Help Tell Us

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JP Morgan Chase: https://www.zacks.com/stock/quote/JPM… PNC Bank: https://www.zacks.com/stock/quote/PNC… US Bank: https://www.zacks.com/stock/quote/USB… Banks are usually at the front of earnings season and help to set the tone for the rest of the market. However, with a terrible interest rate outlook, can the space still post good profits and give us a positive lead-off for this earnings season? Follow us on StockTwits: http://stocktwits.com/ZacksResearch Follow us on Twitter: https://twitter.com/ZacksResearch Like us on Facebook: https://www.facebook.com/ZacksInvestm…

Peloton IPO Disappoints, But Fintech Lender Oportun Gains 8% In Nasdaq Debut

Oportun Financial, a fintech company that offers low-cost loans to those it calls “credit invisible,” raised $94 million in its IPO on Thursday. The company, which offered 23% of its outstanding shares to the public, debuted on the Nasdaq under the ticker OPRT.

The trading day’s most anticipated IPO, fitness startup Peloton, ended in disappointment after the stock closed 11% lower than its IPO price, but Oportun closed its first day of trading with an 8% gain and showed no signs of slowing down in the hours immediately following the market’s close.

Oportun sold 6.25 million shares (a quarter of which were from insiders) priced at $15, on the lower end of its target range of $15 to $17.  Shares jumped to $16.43, or nearly 10%, initially, but as of 2:00 p.m. EST were trading closer to $16. Shares had climbed back $16.17 by 4:00 p.m. EST.

Today In: Money

Oportun’s focus is the 100 million American borrowers with no credit or limited credit history, as well as those it says have been “mis-scored” by traditional methods that do not accurately reflect creditworthiness. The company brought in nearly $500 million in revenue last year, up from $360 million in 2017.

Oportun was founded in 2005 to serve the underbanked Hispanic community and once operated as Progreso Financiero. It has since broadened its mission and disbursed more than $7.3 billion in loans ranging from $300 to $9,000 to more than 1.5 million customers, about half of whom did not have a FICO score when they were awarded their first loan.

The San Carlos, California-based company uses traditional credit bureau scores as well as alternative data, like a borrower’s mobile phone and utility payment history, to assess creditworthiness, much in the same way that startups like Tala, which provides micro loans to the unbanked, and Kabbage, which provides small business loans, do.

Fintech IPOs have been few and far between in recent months, despite a public market newly saturated with tech giants like Slack, CrowdStrike, Uber, and Peloton. Only three fintech unicorns went public last year, according to CB Insights, and just one in the United States: online home improvement lender GreenSky, which raised $800 million in its May 2018 IPO. Its shares have fallen more than 70% since its offering.

According to a PitchBook analysis, none of the top ten most valuable fintech companies, including Stripe, Coinbase, Robinhood, and TransferWise, all of which are at least ten times Oportun’s size, are close to a public offering.

“Our decision to go public was driven in large part by our desire to get the capital we need to continue the pursuit of our mission,” Oportun CEO Raul Vazquez said. He says the company is planning to strengthen its presence in the 12 states in which it operates, expand to new markets on the East Coast, and launch a credit card product in the first quarter of 2020. Prior to its IPO, Oportun had raised $266 million from the likes of Fidelity Management and Institutional Venture Partners.

Oportun’s offering is expected to close on September 30. Barclays, J.P. Morgan Securities, and Jefferies were the lead underwriters.

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I’m an assistant editor on Forbes’ Money team, covering markets, fintech, and blockchain. I recently completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance and the Foreign Corrupt Practices Act.

Source: Peloton IPO Disappoints, But Fintech Lender Oportun Gains 8% In Nasdaq Debut

The Wall Street Journal created this video as part of their Financial Inclusion Challenge. Oportun was a finalist for using technology to help low-income workers build credit.

Ever Thought Of A 100-Year Green Bond? French Railway Firm Is Pitching The World’s First

It seems green bonds, sometimes referred to as climate bonds, are becoming ever so popular by the day with issuance tipped to reach record levels in 2019. However a French railway firm has notched industry trend setting way up the charts by launching the world’s first 100-year green bond.

Societe Nationale des Chemins de Fer Réseau (SNCF Réseau), France’s state-owned railway network management firm, which has already raised €2.8 billion ($3.10 billion) in green bonds in 2019 alone, confirmed Friday (August 23) that it has launched its 100-year product.

The near €100 million in book value raised would be used to finance green projects meeting its eligibility criteria for improvement, maintenance and “energy optimization” of railways. Some of the funds would also be allocated to sustainability components of new route and track extensions, the company said.

In total, SNCF Réseau has so far raised €5.4 billion in green bonds, nearly doubling the figure this year. Following the latest investment round in its green bond program, the French company now ranks seventh in the global green bond issuance market.

Green bonds are typically asset-linked and backed by the issuer’s balance sheet, earmarked to be used for climate and environmental projects. According to rating agency Moody’s, issuers brought $66.6 billion of green bonds to market globally the second quarter of 2019, propelling first-half issuance to a record $117 billion up 47% on an annualized basis compared to the first six months of 2018, and compared against the 11% year-over-year growth for the same six month periods of 2017 and 2018.

However, there has been criticism over the criteria for green bonds. On paper such bonds allow firms to raise finance for low carbon and climate-friendly projects thereby offering a promising solution to those looking to go green via climate initiatives.

But there have been instances of companies using the proceeds of green bond issuance to pay of other debts. Some issuers offer green bonds targeting specific projects, but often fail to outline a clear, long-term strategic environmental goal.

For its part, SNCF Réseau’s 100-year bond and previous issuance drives strictly comply with the European Commission’s green bond standard. The French railway network operator now takes over the title of the world’s longest maturing green bond from Energias de Portugal (EDP) and Energie Baden-Wuerttemberg (EnBW) whose bond had a maturity of 60 years.

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I am a UK-based oil & gas sector analyst and business news editor/writer with over 20 years of experience in the financial and trade press. I have worked on all major media platforms – print, newswire, web and broadcast. At various points in my career, I have been an OPEC, Bank of England and UK Office for National Statistics correspondent. Over the years, I have provided wide-ranging oil & gas sector commentary, including pricing, supply scenarios, E&P infrastructure, corporations’ financials and exploration data. I am a lively commentator on ‘crude’ matters for publications and broadcasting outlets including CNBC Europe, BBC Radio, Asian and Middle Eastern networks, via my own website, Forbes and various other publications. My oil market commentary has a partial supply-side bias based on a belief that the risk premium is often given gratuitous, somewhat convenient, prominence by cheeky souls who handle quite a few paper barrels but have probably never been to a tanker terminal or the receiving end of a pipeline. Yet having done both, I pragmatically accept paper barrels [or should we say ‘e-barrels’] are not going anywhere, anytime soon!

Source: Ever Thought Of A 100-Year Green Bond? French Railway Firm Is Pitching The World’s First

10 years ago, the World Bank Treasury issued the first green bond then laid out the first blueprint for sustainable fixed income investing, transforming development finance and sparking a sustainability revolution in the capital markets. Learn about the revolution.

ONEX Is Coming Back & Its Actually Perfect For Investing

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Founded in 1984, ONEX invests and manages capital on behalf of his shareholders, institutional investors and high net worth clients from around the world. ONEX platform include: ONEX Partners, private equity funds focused on larger opportunities in North America and Europe, ONCAP, private equity funds focused on middle market and smaller opportunities in North America, ONEX credit, which manages primarily non-investment grade debt through collateralize loan obligations, private debt and other credit strategies and Gluskin Sheff’s actively managed public equity and public credit funds.

In total ONEX assets under management today are approximately $39 Billion, of which approximately $6.9 Billion is their shareholder’s capital. With offices in Toronto, New York , New Jersey & London, ONEX is experienced management teams are collectively the largest investors across ONEX platforms.

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ONEX main task is to increase customer profits. In trading, ONEX use automated bots, the latest strategies and approaches for working on each exchange, this ensures the declared high income. Safety is ONEX top priority. In every decision make, ONEX is supervised by security concerns. They use the most reliable and effective technologies available to ensure the safety of investors funds.

The investor has the right to:

  • 1. Produce awareness of others in order to attract them to participate in ONEX Financial Corporation;
  • 2. Create sites and post information about the company;
  • 3. Send to Administration comments or feedback to improve ONEX services;
  • 4. Require ONEX Financial Corporation fulfillment of the conditions of ONEX agreements

The ONEX Financial Corporation team has specifically designed smart, high-return investment packages. Each package has its own life and type of charges. Be careful when choosing an investment rate. Those who believe in us will be satisfied and get a good profit. For us, the most important thing is the loyalty of our customers, therefore ONEX Financial Corporation always tries to take into account the general situation in the cryptocurrency market, this allows us to consistently increase the company’s profits, and earn not only an increase but also a decrease in the market.

Source: https://onexfinancial.com

Microloan Startup Tala Raises $110 Million In New Funding

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Tala, a Los Angeles startup that makes microloans to consumers and small business owners in emerging markets, is announcing today that it has raised $110 million in funding. The new Silicon Valley venture capital firm RPS Ventures, cofounded by Kabir Misra, former managing partner at Softbank’s $100 billion Vision Fund, is leading the round. Tala’s backers include PayPal, billionaire Steve Case’s VC firm Revolution, Chris Sacca’s Lowercase Capital and Data Collective, among others. The new funding values Tala at nearly $800 million, according to an investor. Tala has raised more than $200 million in equity investment to date.

Shivani Siroya, 37, founded Tala in 2011 after stints as an investment banking analyst and as an analyst at the U.N. Population Fund, where she did socioeconomic research. Tala’s mobile app lets people in Kenya, the Philippines, Tanzania, Mexico and India take out small loans ranging from $10 to $500. Most use the app to invest in their small businesses, like shops and food stands. To evaluate borrower risk, Tala uses cell phone data instead of credit scores, looking at loan applicants’ habits, like whether they pay their phone bills on time.

Siroya first launched Tala’s app in Kenya in 2014. Today it has more than four million customers who take out three to six loans a year at a 10% average monthly interest rate. Its 600 employees are spread across offices in Santa Monica, Kenya, Mexico, the Philippines and India. The company made Forbes’ Fintech 50 list earlier this year.

Tala’s closest competitor is Branch, a five-year-old San Francisco company led by Matt Flannery, who previously cofounded donation crowdfunding platform Kiva.org. Branch has four million customers and an average monthly interest rate of 15%. Earlier this year, it raised $70 million in equity financing from investors like Visa and Andreessen Horowitz, plus $100 million in debt. Tala also raised $100 million in debt over the past year to help fund its loans.

With its new capital, Tala plans to make a bigger push into India and expand to new countries, potentially in regions like West Africa, Southeast Asia and Latin America. It also plans to launch new products. In Kenya, Tala has already tested a micro health insurance offering that would cover customer visits to a hospital. It expects to launch its first microinsurance product in the next 12 months. It has also piloted a financial education and coaching program, and it plans to test additional products over the next year.

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I cover fintech, cryptocurrencies, blockchain and investing at Forbes. I’ve also written frequently about leadership, corporate diversity and entrepreneurs. Before Forbes, I worked for ten years in marketing consulting, in roles ranging from client consulting to talent management. I’m a graduate of Middlebury College and Columbia Journalism School. Have a tip, question or comment? Email me jkauflin@forbes.com or send tips here: https://www.forbes.com/tips/. Follow me on Twitter @jeffkauflin. Disclosure: I own some bitcoin and ether.

Source: https://www.forbes.com/

Trust: How do you earn it? Banks use credit scores to determine if you’re trustworthy, but there are about 2.5 billion people around the world who don’t have one to begin with — and who can’t get a loan to start a business, buy a home or otherwise improve their lives. Hear how TED Fellow Shivani Siroya is unlocking untapped purchasing power in the developing world with InVenture, a start-up that uses mobile data to create a financial identity. “With something as simple as a credit score,” says Siroya, “we’re giving people the power to build their own futures.” TEDTalks is a daily video podcast of the best talks and performances from the TED Conference, where the world’s leading thinkers and doers give the talk of their lives in 18 minutes (or less). Look for talks on Technology, Entertainment and Design — plus science, business, global issues, the arts and much more. Find closed captions and translated subtitles in many languages at http://www.ted.com/translate
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KeyCorp Shares Slide After Revealing Fraudulent Q3 Activity

KeyCorp (KEYGet Report)  shares traded lower Tuesday after the lender uncovered fraudulent activity associated within one of its business customers in its current quarter.

KeyCorp revealed that it is investigating the activity, which it believes was associated with one particular business customer of KeyBank National Association.

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The bank holding company has launched an internal investigation into the matter to determine its exposure, which it currently estimates at $90 million. The Cleveland, Ohio-based bank said there could be an additional impact on its third-quarter earnings. Executives are working with law enforcement to determine additional details.

Shares of KeyCorp were down 1.14% at $17.38 in early trading Tuesday. The shares are down approximately 17% year-to-date.

U.S. banks began rolling out their quarterly earnings numbers this week, starting with Citigroup (CGet Report) , which Monday said that second-quarter profit rose 6.6% to $4.8 billion. JPMorgan (JPMGet Report) and Goldman Sachs (GSGet Report) both posted better-than-expected results on Tuesday before the market open.

Wall Street analysts have warned that U.S. banks could face a squeeze on their lending profits as the Federal Reserve moves toward a likely interest-rate cut later in July.

JPMorgan Chase, Citigroup and Goldman Sachs are holdings in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells the stocks? Learn more now.

JPM, WFC, GS Earnings: The Economy Is Strong, But There’s a Caveat

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Source: KeyCorp Shares Slide After Revealing Fraudulent Q3 Activity – TheStreet

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