An influential group of investors refuses to give up hope that Trump will get something done

• Joe Ciolli
 

• Aug. 27, 2017, 6:03 AM
• 5,198
 

Stock mutual funds still haven't given up hope on the Trump administration making progress on tax reform and deregulation.Reuters/Carlo Allegri

You don't need to follow the market to know that expectations around President Donald Trump's proposed policies have dimmed considerably.

But if you look closely enough at the investment universe, you'll notice one area hasn't abandoned hope: equity mutual funds.

That's according to Goldman Sachs, which says that mutual funds are still positioned to benefit from tax reform and deregulation — two of Trump's policies that are still kicking around.

The firm analyzed 543 equity mutual funds with $2 trillion under management and found that, on average, they were overweight a basket of companies that pay the most taxes. Goldman uses this group as a proxy for sentiment around tax reform, and their findings suggest that investors are still betting Trump can get something done.

In order to arrive at the conclusion that mutual funds still expect at least some deregulation, Goldman looked at the excess return for the banking industry, relative to the S&P 500. This is because they've maintained a "net positive weight in banks in excess of the their benchmarks and firms levered to changes in the 10-year US Treasury yield."

Here's a visual representation of Goldman's findings:

Positioning suggests that funds expect some tax reform and deregulation, but few rate hikes.Goldman Sachs Global Investment Research

As you can see in the chart above, Goldman provided some bonus analysis beyond Trump policy, pertaining to Federal Reserve rate hike expectations. In order to assess what mutual funds are doing, they looked at how the average large-cap manager is positioned relative to stocks that track the 10-year Treasury yield and inflation expectations, and found that they're underweight.

"Underweight allocations to firms that will most likely outperform if labor costs and inflation rise, the pillars of the Fed’s dual mandate, suggest that mutual funds expect a slow pace of interest rate hikes," a group of Goldman analysts led by chief US equity strategist David Kostin wrote in a client note.

So mutual funds are bullish on the prospect of select Trump policies, but bearish on the number of rate hikes the Fed is going to do. Now only time will tell if they've put too much faith in Trump, and too little in the Fed.

SEE ALSO: Trump's richest campaign donors are being left out of the stock market's surge

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More: Stocks Stock Market Donald Trump Tax Reform 

The Trump Organization was reportedly pursuing a deal in Moscow during the election

• Natasha Bertrand
 

• 14h
• 16,261

President Donald Trump on the South Lawn in Washington, DC.Thomson Reuters

A Russia-born businessman who served as a real-estate adviser to the Trump Organization was pushing for Donald Trump, then a presidential candidate, to pursue a Trump Tower deal in Moscow in late 2015, The Washington Post reported on Sunday.

The businessman, Felix Sater, told Talking Points Memo earlier this month that his "last Moscow deal for the Trump Organization was in October of 2015" but that it "didn't go through because obviously he became president."

"Once the campaign was really going-going, it was obvious there were going to be no deals internationally," Sater said. "We were still working on it, doing something with it, November-December."

The deal apparently fell apart in January 2016 because the Trump Organization did not have the land or permits to pursue it. That summer, the Trump Organization renewed unused trademarks it had acquired from the Russian government from 1996 to 2007 for hotels and branding, according to The New York Times. Russia approved four of the requested trademarks on November 8.

Sater visited Trump Tower in July 2016 for reasons he said were "confidential," Politico reported at the time. He also donated $5,520 to the Trump campaign.

Sater's lawyer declined to comment. The White House referred questions to Stephen Ryan, the lawyer for Michael Cohen — Trump's personal attorney at the time the Moscow deal was reportedly pursued. Ryan did not respond.

Sater, who was accused nearly two decades ago of being a conspirator in a $40 million fraud and money-laundering scheme involving four Mafia families, began advising the Trump Organization while he was an executive at the real-estate firm Bayrock in the early 2000s.

Trump worked with Bayrock on at least four projects, including the Trump SoHo in Manhattan, and said in a 2007 deposition that Bayrock frequently brought Russian investors to Trump Tower to meet with him.

A former Bayrock finance director, Jody Kriss, alleged in a 2010 lawsuit against Sater and others that "for most of its existence," Bayrock "was substantially and covertly mob-owned and operated," engaging "in a pattern of continuous, related crimes, including mail, wire, and bank fraud; tax evasion; money laundering; conspiracy; bribery; extortion; and embezzlement."

The Post reported that Sater began pushing for Trump to visit Moscow in November 2015 and at the time was in touch with Cohen. Trump never traveled to Moscow, but his organization signed a letter of intent, according to The Post.

Michael Cohen at Trump Tower. Stephanie Keith/Reuters

Cohen and Alan Garter, the Trump Organization's chief legal officer, did not respond to a request for comment.

Sater was evidently still in touch with Cohen as recently as late January of this year. The two met at a New York hotel on January 27 to discuss a peace plan for Russia and Ukraine that was drafted by a Ukrainian politician, Andrey Artemenko, The New York Times reported.

Cohen is said to have delivered the plan directly to Michael Flynn before he resigned as Trump's national security adviser on February 13, though Cohen has disputed that in interviews.

In a 2007 deposition, Trump said his organization would never have agreed to partner with Bayrock on the development of Trump SoHo had he known about Sater's checkered past. Trump also said he wouldn't be able to identify Sater if they were in the same room.

Bayrock's office was once two floors below Trump's in Trump Tower on Fifth Avenue. A person familiar with the matter, who requested anonymity for fear of retribution by Sater or his associates, told Business Insider that Sater and Trump had standing meetings each week.

Sater said in a deposition that he met with Trump "on a constant basis," Bloomberg previously reported, and Kriss told the publication that Trump valued Sater's loyalty — and his Russia connections.

"It's ridiculous that I wouldn't be investing in Russia," Trump said in the 2007 deposition. "Russia is one of the hottest places in the world for investment."

Sater showed Ivanka Trump and her brother Donald Trump Jr. around Moscow in 2006 when their father was scouting real estate in Russia. They stayed for several days at the Hotel National Moscow opposite the Kremlin, according to The Times.

Sater also acted as a fixer to help the former Kazakh cabinet minister Viktor Khrapunov buy three apartments in Trump SoHo using shell companies, the Financial Times reported. The Kazakh government has alleged that Khrapunov stole the funds for those units from the state.

SEE ALSO: Trump's lawyer threatens to lodge a complaint against special counsel Mueller if he investigates Trump's real estate deals

DON'T MISS: Trump's decision to pardon Joe Arpaio could be a crucial piece of evidence in the Russia investigation

NOW WATCH: The 9 best memes from Trump's first 200 days in office

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China is planning a crackdown on ICOs, the red-hot digital-coin-issuing trend

• Reuters

• 7h
• 2,932
 

The poster of a bank branch in Beijing seen August 16.REUTERS/Jason Lee

BEIJING — Chinese regulators are preparing new regulations on digital coin offerings and may ban them until the rules are in place, the financial magazine Caixin reported on Monday, as interest in the new fundraising channel grows rapidly in a regulatory gray area.

Digital currencies, also called cryptocurrencies, such as bitcoin and a growing stream of alternatives, allow anonymous peer-to-peer transactions without the need for banks or central banks.

They are also used by companies seeking to raise capital, in the form of initial coin offerings or initial token offerings.

The currencies exist in a legal gray area, however, with regulators scrambling to come up with rules that will not stifle innovative funding models while also protecting investors.

ICOs have become a bonanza for digital currency entrepreneurs, allowing them to raise millions quickly by creating and selling digital "tokens" with no regulatory oversight.

But Chinese regulators, including the People's Bank of China and the China Securities Regulatory Commission, are now considering how to handle ICOs, including whether to ban them outright until regulations are in place, Caixin reported, citing sources.

The report on China's plans follow comments from the US Securities and Exchange Commission in July that the tokens could be considered securities and therefore may need to be registered unless a valid exemption applies.

The PBOC and CSRC did not immediately respond to requests for comment.

The popularity of coin offerings has surged in China this year, with 65 ICOs and 2.62 billion yuan, or $394.6 million, raised from 105,000 individuals in the country, the state-run Xinhua reported in July, citing data from a government organization that monitors online financial activity.

Marketing events for a coming ICO held over the weekend at five-star hotels in Beijing and Shanghai saw standing-room-only crowds with several hundred prospective investors at each event.

The government issued draft rules targeting illegal fundraising on Thursday, as the authorities step up a campaign to crack down on risky and illicit behavior in the country's financial sector.

In China's rapidly developing financial markets, regulators periodically crack down on what they deem to be illegal fundraising schemes, including online peer-to-peer lending platforms and pyramid schemes.

(Reporting by Stella Qiu and Elias Glenn; Additional reporting by Xiaochong Zhang; Editing by Jacqueline Wong)

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Uber has picked Expedia CEO Dara Khosrowshahi to be its new CEO

• Alex Heath and Julie Bort

• 15h
• 17,303

Dara Khosrowshahi. Getty

Expedia CEO Dara Khosrowshahi has been selected to be the CEO of Uber by the company's board, a source close to the company has confirmed to Business Insider.

Uber has not publicly announced the news — apparently Khosrowshahi hasn't officially accepted the offer. But a company representative did say that the board had "voted and will announce the decision to the employees first," Recode's Kara Swisher reports.

Khosrowshahi's appointment comes after embattled Uber cofounder Travis Kalanick was ousted as CEO of the world's most valuable private company in June and as Uber has suffered an exodus of its top ranks amid mounting public scandals.

The board had narrowed the CEO search down to three people, with different factions backing different candidates. Former GE CEO Jeff Immelt was among the three, but he publicly backed out Sunday.

Another of the three candidates, HP Enterprise CEO Meg Whitman, met with Uber's board over the weekend despite her publicly saying last month that she wouldn't take the job.

Khosrowshahi's involvement in the CEO search wasn't made known until Sunday, making him a dark horse in the race.

Khosrowshahi, 48, has been CEO of Expedia for 12 years. During that time, Expedia's revenue grew from $2.1 billion in 2005 to $8.7 billion in 2016. He turned Expedia into the biggest online travel agency in the US, owning the travel sites Hotels.com, Orbitz, Trivago, HomeAway, and Travelocity as well as sites for vacation rentals, car rentals, and so on. When the 2008 financial meltdown hit the company hard, he reorganized and doubled down on technology.

Before running Expedia, he was the CFO at the media company IAC, which bought Expedia in 2003 then spun it out in 2005.

Khosrowshahi was born in Iran but immigrated to the US as a kid, grew up in New York state, and is a US citizen. He has a degree in electrical engineering, and before landing at IAC he went into finance, working for the investment bank Allen & Co.

He has a reputation as a good leader, according to ratings on the job website Glassdoor, with a 93% approval rating.

He will need good leadership to help Uber recover from its tumultuous past that created so much division that board members were suing each other.

Uber and Expedia couldn't immediately be reached for comment.

More: Uber

Hurricane Harvey is wreaking havoc with energy markets

• Dhara Ranasinghe, Reuters

• 5h
• 12,617

• Jesus Rodriguez rescuing Gloria Garcia after rain from Hurricane Harvey flooded Pearland, in the outskirts of Houston, on Sunday.REUTERS/Adrees Latif
  US gasoline up nearly 7% as storm bring refinery closings
• Dollar extends falls amid clouded economic outlook
• European stocks open lower, hurt by strong euro
• Asian markets subdued

LONDON — US gasoline futures jumped to two-year highs while an already weak dollar hit 16-month lows against a basket of currencies on Monday as Tropical Storm Harvey pummeled the heart of the US energy sector and raised concerns about the economy.

The dollar index, on the defensive since US Federal Reserve Chair Janet Yellen failed to mention monetary policy in a closely watched speech at Jackson Hole on Friday, extended its falls as the most powerful storm to hit Texas in more than 50 years was seen as negative for economic growth.

Weakness in the US currency helped the euro to its highest in 2 1/2 years at close to $1.20, building on gains made Friday after European Central Bank chief Mario Draghi refrained from talking down the strong currency.

Renewed euro strength pushed down European stock markets, with Germany's blue-chip index 0.5% lower and France's CAC 40 slipping by 0.4%.

Trade in general was subdued, with the London market closed for a public holiday.

"The strong euro is weighing on European stock markets," said London Capital Group analyst Ipek Ozkardeskaya.

"Tapering talks could further demoralize stock traders in the run-up to the ECB verdict (next month). IT stocks are again on the chopping block."

US stock futures were also a touch lower, suggesting a softer opening on Wall Street later in the day.

Gasoline futures soared as much as 6.8% as the storm, which came ashore Friday, continued to batter the state. They were last up 4.5%.

An oil tank damaged by Hurricane Harvey seen near Seadrift, Texas, on Saturday. REUTERS/Rick Wilking

Oil impact

The region is home to a quarter of US crude-oil refining capacity, and some areas are expected to receive a year's worth of rainfall in a week. At least two people have died.

Harvey has knocked out a quarter of oil production from the Gulf of Mexico, prompting fears it could overturn years of excess US oil capacity and low prices.

"Although the full impact of the storm's damage is yet to be determined, the markets expect the impact will be felt globally and affect energy markets for many weeks," an analyst at FxPro said in a note.

US economic growth more than halved in the quarter after Hurricane Katrina mauled Louisiana in August 2005 but bounced back by early 2006 as reconstruction began and gasoline prices moderated.

After surging Friday, oil prices were mixed Monday as markets tried to gauge Harvey's impact on oil production and refinery demand.

Brent futures, the global crude-oil benchmark, edged up 0.2% to $52.49 a barrel. US crude futures pulled back 0.8% to $47.46.

Asian stock markets including Japan's Nikkei index ended the session little changed, though shares in Japanese property and casualty insurers skidded as investors fretted about the broader impact of the US storm.

In contrast, China's major stock indexes rose to 20-month highs after a series of strong earnings.

Markets mostly dismissed North Korea's firing of three short-range missiles into the sea on Saturday.

Donald Trump. Alex Wong/Getty Images

Dollar declines

While the euro extended Friday's gains against the dollar, the US currency also slipped against the yen, easing by 0.2% to 109.14 yen.

The dollar index — which tracks the US currency against six major rivals — fell to as low as 92.372, its weakest since early May 2016, before recovering a little to trade 0.3% down at about 92.489.

Those declines came after Yellen, the Fed chief, focused more on financial stability in her Jackson Hole speech.

The remarks disappointed some investors who had hoped for hints on the Fed's plans for interest rates, though most analysts had not expected Yellen or Draghi to shed new light on policies.

"Draghi does not seem to be overly concerned with the current euro levels, which is the market's justification to move the euro higher," Commerzbank currency strategist Esther Reichelt said.

(Reporting by Dhara Ranasinghe; Additional reporting by Nichola Saminather in SINGAPORE, Danilo Masoni and Jemima Kelly in LONDON; Editing by David Goodman)

Get the latest Oil WTI price here.

More: Hurricane Harvey Oil Reuters