Tag Archives: Street

Elizabeth Warren tells Wall Street: ‘Bring it on’

Elizabeth Warren in 85 seconds

Elizabeth Warren has a clear message for Wall Street: “Bring it on.”

The senator from Massachusetts said Monday that she will continue to call for financial reforms and for big Wall Street banks to be broken up, despite potential retaliation against Democratic candidates.

Last week, Reuters reported that Citigroup (C), Bank of America (BAC), Goldman Sachs (GS) and J.P. Morgan Chase (JPM) might withhold campaign contributions to Senate Democrats because of Warren’s negative portrayal of Wall Street.

“You bet I believe it’s a serious threat,” Warren told a packed room at a Barnes & Noble in New York City’s Union Square — a few miles north of Wall Street.

“It is so brazen. If they think they can say in public, ‘I don’t like your tone, I don’t like the way you talk about financial regulation’ … I got news for them: bring it on,” the Democrat said.

Related: Elizabeth Warren says the market is broken

Warren stressed that she only wants two things from Wall Street: banks shouldn’t be able to cheat people, and no financial institution should be able to risk destroying the economy because it’s too big to fail.

“If they want to fight on either one of those, I’m ready,” she said to much applause.

Warren says no to presidential run: Several members of the audience held up “Elizabeth Warren for President” signs and chanted “Run, Liz, Run” during the event.

“No, I am not running for president,” Warren said. “I am not going to run for president.”

Elizabeth Warren event March 30 Moumita Ahmed, left, and Emiljana Ulaj hold signs urging Elizabeth Warren to run for president at an event on March 30, 2015 where the senator spoke.

Instead, she called herself a “nerd” who loves her Senate job. Her top priorities at the moment are reducing the interest rate on student loans, increasing funding for the National Institutes of Health and raising the federal minimum wage above $ 7.25 an hour.

Related: Elizabeth Warren is worth millions

Emiljana Ulaj was one of the people holding a sign at the bookstore and urging Warren to run. An immigrant from Albania, she has a full-time job but believes the American Dream is at risk.

“I hope she’s just deliberating about running and didn’t chose this moment to announce,” Ulaj, 28, told CNNMoney. She was pleased to hear Warren stand up to the banks, “That’s when you know you’re making change.”

What’s ahead: The stakes for Warren may be higher if Sen. Charles Schumer, a Democrat from New York with close ties to business, becomes the Senate Democratic leader after Sen. Harry Reid retires in 2016. Schumer is widely viewed as the top candidate for the leadership post.

Schumer and Warren would likely clash on financial regulation, and he might push her to soften her tone in order to help fundraising. If the banks didn’t contribute, the Democratic Senatorial Campaign Committee could lose up to $ 15,000 per bank a year — and possibly more if individual bankers stopped donating as well. Warren is already trying to fight back by asking supporters for donations in a blog post Friday.

Related: Wall Street welcomes expected Chuck Schumer promotion

Warren is currently promoting her book, “A Fighting Chance.” She read from a passage about her fight against the big banks to create the Consumer Financial Protection Bureau, which she says has forced banks to return $ 5 billion “to consumers they cheated.”

Elizabeth Warren: 8 ways to restore the middle class

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Charles Nenner;Buy Gold and Silver & sell stocks says top Wall Street Guru

Charles Nenner;Buy Gold and Silver & sell stocks says top Wall Street Guru

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Shake Shack set to shake up Wall Street

Shake Shack burger

NEW YORK (CNNMoney)

Shake Shack is already immensely popular with foodies in Manhattan and Brooklyn. And now it’s about to take another part of New York by storm: Wall Street.

The upscale burger joint priced its initial public offering at $ 21 a share Thursday evening. That’s above the price range Shake Shack set earlier this week, which it had already raised to due to strong demand.

At $ 21 a share, Shake Shack is raising $ 105 million, making the company worth $ 745.5 million.

Shake Shack (SHAK) is set to debut on the New York Stock Exchange Friday morning.

To celebrate its first day as a public company, Shake Shack said it will turn the New York Stock Exchange into the New York SHACK Exchange. In other words, it plans to park a Shake Shack food truck in front of the exchange and dish up free food.

Restaurateur Danny Meyer, who is chairman of Shake Shack and founder of the Union Square Hospitality Group that started Shake Shack, owns a 21% stake in the company. His share is now worth $ 156.2 million.

Shake Shack, which started in 2001 as a hot dog cart in New York’s Madison Square Park, has quickly become a Big Apple icon.

Expanding … but not too quickly. The company currently operates just 63 restaurants worldwide — but 16 of them are in the metropolitan New York City area.

And Shake Shack has already planted outposts in several global markets, such as London, Moscow, Kuwait, Turkey and the United Arab Emirates.

Shake Shack has said that it wants to expand relatively slowly. It is targeting 10 new locations in the U.S. a year as well as more international locations.

Related: 8 of the world’s craziest fast foods

The strategy has been extremely successful so far. Shake Shack reported revenue of $ 83.8 million in the first three quarters of last year, an increase of more than 40% from the same period in 2013.

Shake Shack is also profitable. But net income fell in the first nine months of 2014, primarily due to higher costs for paper, food and labor as the company opened more locations.

Profiting from the problems at Mickey D’s? So will the stock be a big hit? Aren’t consumers backing away from unhealthy burgers and fries? McDonald’s (MCD) just announced its CEO is retiring after a period of weak sales.

That’s true. But Shake Shack and other gourmet burger companies appear to be doing well at the expense of McDonald’s.

Related: McDead? More lousy results from McDonald’s

Shake Shack bills itself as a “fine casual” dining chain, a play on the fast casual term popularized by Chipotle (CMG) and Panera (PNRA).

In addition to having the backing of star chef Meyer, Shake Shack says in its IPO filing that it prides itself on using “sustainable ingredients, such as all-natural, hormone and antibiotic-free beef.”

The proof is in the prices. A typical burger at Shake Shack can cost twice as much as a Big Mac.

Related: $ 7.54 for a Big Mac? Only in Switzerland

Shake Shack also differentiates itself from other burger restaurants by selling hot dogs, beer, wine and — of course — frozen custard shakes.

And investors are clearly hungry for restaurant IPOs.

El Pollo Loco (LOCO), Potbelly (PBPB), Noodles (NDLS) and Zoe’s Kitchen (ZOES) are just a few chains that have gone public in the past two years that have soared on their first day of trading.

There is a lot of competition in the burger wars. But those four stocks are now well off their highs.

So is Habit (HABT), a popular California burger chain that went public last November and more than doubled in its debut.

Habit may not be as well-known to New Yorkers as Shake Shack. But its burgers were voted best in America by readers of Consumer Reports last year.

To that end, competition could prove to be the biggest risk for Shake Shack.

Related: White Castle now serving veggie burgers

Even though its burgers are delicious, so are ones made by privately held Five Guys, Smashburger, Bareburger, In-N-Out and many other regional and national upstarts.

Heck, Sonic (SONC)is doing really well lately thanks to strong demand for its burgers.

So Shake Shack may soar on Friday like other restaurant IPOs have done lately.

But the challenge is going to be staying at those lofty levels. The company now has to satisfy the fickle tastes of Wall Street as well as the palates of hipster burger gourmands.

CNNMoney’s Ben Rooney contributed to this report.

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Wall Street bets on Russia and Venezuela defaults

Falling oil prices are ‘so dramatic’

NEW YORK (CNNMoney)

Wall Street is betting that Russia and Venezuela are getting closer to defaulting on their debt.

Plunging oil prices have slammed the economies of both countries, which are highly dependent on oil revenue.

On Wall Street currently, the cost to insure Russia’s five-year bonds have surged to the highest levels since 2009.

The fears stem from the fact that the Russian government gets half of its revenue from oil and gas exports. Recently, the ruble has gone into a tailspin and the Russian central bank has hiked interest rates five times this year in an attempt to prop its currency.

russian credit default

Still, despite the state of high alert among Wall Street traders, Moscow does have significant foreign exchange reserves to service its debt. And so far the ratings agencies aren’t that concerned.

Standard & Poor’s reaffirmed Russia’s credit rating in October, though it warned of a downgrade over the next 18 months if the government’s finances deteriorate.

The situation seems much more dire for Venezuela. Oil prices have dropped 40% since June.

Oil makes up 96% of its export earnings and Venezuela stands to suffer much more because it costs more to produce it there.

oil prices fall

The Venezuelan economy had already been struggling with political instability and sky high inflation. And the spectre of default looms larger for the nation’s socialist government, which is deep in debt and has been burning through its foreign currency reserves.

For every dollar that the price of oil declines, the Venezuelan government loses $ 800 million in export receipts, according to a recent report from the Institute of International Finance.

The government has been selling assets and borrowing from China, but the continued decline in oil prices could force a “massive devaluation” of the Venezuelan currency, the IIF warned.

“Worsening conditions are increasing the risks of default, social unrest and political instability,” in Venezuela, according to the IIF.

venezuela credit default

It’s no surprise that the insurance contracts, or the credit default swaps as they known on Wall Street, cost five times more than they did in June. To insure $ 10 million of Venezuela’s five-year bonds, traders today have to pay as much as $ 5 million.

Related: Break-even point for oil prices at these countries

Related: These countries are getting killed by cheap oil

Related: Plunging oil prices may trigger unrest

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Wall Street firm pushes for student loan forgiveness

student debt homebuyer Wall Street

NEW YORK (CNNMoney)

One Wall Street firm has an idea that’s raising eyebrows: forgive some student debt for first-time homebuyers.

It’s too early to say exactly how the stimulus measure BlackRock (BLK) suggested would work, but it would take Congressional action because the federal government administers the majority of student debt.

The move could be a creative way to ease student debt, which has quickly become a $ 1.2 trillion Achilles heel in the American economy.

Millennials aren’t buying many homes. Mounting student debt may be part of the problem.

“Fiscal policy initiatives targeted at young workers with high levels of student indebtedness might, perhaps surprisingly to some, have an outsize impact in supporting the housing recovery and financial markets,” Rick Rieder, co-head of Americas Fixed Income at BlackRock, wrote in a recent commentary.

BlackRock estimates there are about seven million people in the U.S. that would be eligible for an FHA-approved mortgage but are burdened by student loans. The thinking is that because they are devoting a large chunk of their income to pay down student debt, they probably aren’t saving for a down payment on a house.

If just one million of them are converted to homebuyers through some form of student debt forgiveness, more than three million jobs could be created, Rieder recently told CNNMoney.

Related: Why people still feel the economy stinks

“That then becomes productive debt. There is a real velocity to that. Those people have jobs, they start spending, they are taxpayers and essentially you self-fund” the program, Rieder said.

He hopes such a proposal could get bipartisan support given that it boosts the housing sector and jobs — and tax revenue.

Related: Is student loan debt hurting the housing recovery?

The huge debt obstacle: Student loan debt has surged by over 350% since 2003, while mortgage debt is up just 50% over that span, BlackRock said.

A recent National Association of Realtors survey revealed that almost half of Americans pointed to student debt as a “huge obstacle” to homeownership.

For every $ 250 a month in student loans that a household owes, it reduces their power to purchase a home by $ 44,000, according to estimates by John Burns Real Estate Consulting.

These struggles can also trickle down to the rest of the real estate market. Lower levels of first-time buyers “makes it more difficult for existing homeowners to sell and trade-up,” New York Fed President William Dudley said in a recent speech.

student debt A much larger portion of personal debt for people aged 20 to 29 is devoted to student loans than in 2005.

To look at it another way, stats from Bloomberg and BlackRock show that student loans now account for 36.8% of personal debt for people aged 20 to 29. It was only 12.9% in 2005. Mortgage debt, however, has fallen. It now makes up less than half of personal debt, down from nearly two-thirds in 2005.

Is this good policy? Despite these points, academic economists are still debating the relationship between student debt and the real estate market.

“The arguments that student loan debt causes a decline in first mortgage rates are extremely weak,” said Mark Kantrowitz, an expert on college financing and publisher of Edvisors.com. He said it’s more likely that first mortgage rates are being dragged down by the sluggish economy.

“The solution to helping someone with too much debt isn’t to let them put on more debt,” Kantrowitz said.

Related: 40 million Americans now have student loan debt

Beth Akers, a fellow in the Brookings Institution’s Brown Center on Education Policy, said that while it’s a “reasonable hypothesis” that student debt is preventing first-time home buys, it’s still “not substantiated.”

She said the fraction of take-home pay that households are devoting to student loans is actually flat or even declining over the past two decades.

Forgiving student debt for first-time homebuyers “probably would make a difference, just as writing checks to people, regardless of their student debt, would make a difference. But it isn’t necessarily good policy,” Akers said.

Related: Dirty tricks of the student loan industry

Will Congress act? There are already some programs on the books for loan forgiveness, though most of them focus on aiding health-care professionals or public service jobs.

The White House and others have proposed to ease the student debt burden by extending the terms of the debt and lowering rates, but BlackRock’s idea would go a step further.

“It’s all helpful but the problem is those programs don’t have any velocity to it. You need to turn it into something that is productive,” said Rieder.

Representatives from the office of Sen. Elizabeth Warren, an outspoken proponent of easing the student debt burden, declined to comment for this story.

“I commend them (BlackRock) for offering an idea, but wonder whether it might be met with some skepticism by the average person (or elected officials) simply because it is coming from what people perceive to be ‘Wall Street,'” Russell Price, senior economist at Ameriprise Financial, wrote in an email.

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Wall Street is hurting … sorta

Crowning Wall Street’s top athlete

NEW YORK (CNNMoney)

Wall Street is feeling a bit of Main Street’s pain.

It’s all relative, however.

The securities industry is still hauling in multi-billion dollar profits, its employees are impressively well-paid, and bonuses are growing again.

But “the good old days” aren’t entirely back in the financial world. The industry isn’t immune from the economic downturn it sparked. Profits aren’t what they once were, jobs have been lost and financial regulators are bringing the heat.

The New York State Comptroller took the temperature of Wall Street and released a “check up” report on Tuesday. Here are five key takeaways:

Profits are down: The securities industry, the broker-dealer piece of big banks and trading firms, made $ 8.7 billion in the first half of 2014.

That’s a big chunk of change — bigger than the GDP of some countries — but it’s 13% less than last year. Last year was a down year, too: 30% less than the year before.

It’s not entirely cause for alarm. Three out of the last five years are Wall Street’s three most profitable years.

The profits show the industry is responding to the changing landscape. Trading is less profitable, but revenue has remained stable as the firms focus on their wealth management and brokerage businesses.

Related: Are stocks a trick or treat?

Regulatory costs are up: Why are profits down? One significant reason is the huge sums banks have agreed to pay out to financial regulators for misdeeds during and leading up to the financial crisis.

By one estimate, the six biggest banks have paid out about $ 130 billion.

The report notes significant settlements involving Bank of America (BAC) and Goldman Sachs (GS) will likely be reflected in earnings for the second half of this year.

10,500 people lost their jobs: The Great Recession triggered job losses across the economy, and Wall Street is down from the pre-crisis days.

About 10,500 securities jobs, or about 15%, have been lost, according to the report. Headcount in the broader banking industry is off about 4%.

Related: Three lessons investors can learn from Derek Jeter

Average salary is $ 355,000: For those who do have a Wall Street job, the securities industry still pays the best.

While the average salary of $ 355,000 hasn’t grown much in the last three years, bonuses have, climbing 15% to $ 164,530. That’s “the largest average bonus since the financial crisis,” the report noted.

1 in 9 jobs in New York City: Wall Street is just as important to New York as ever. One in nine jobs in the city “are either directly or indirectly associated with the securities industry,” according to the comptroller.

Related: How Wall Streeters blow off steam

Related: More families own cats than stocks

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Climate protesters to ‘flood’ Wall Street

flood wall street 1Activists say Wall Street Capitalism is fueling the climate crisis.

NEW YORK (CNNMoney)

Hundreds of environmental activists plan to “flood” Wall Street on Monday to protest the role Big Business plays in climate change.

The #FloodWallStreet campaign is part of a series of demonstrations taking place this week as world leaders gather in New York for a climate change summit on Tuesday at the United Nations.

The goal is to highlight “a financial system that’s perpetuating the climate crisis,” said Bessie Schwarz, a spokeswoman for the group behind the #FloodWallStreet campaign.

Thousands of protesters took to the streets Sunday in New York as part of the People’s Climate March, which organizers said was the largest climate change demonstration ever.

“One day after the biggest climate march ever, we plan to take this energy down to Wall Street,” said Schwarz, who was reached while taking part in Sunday’s protest.

Opinion: No one cares about climate change. Really?

On Monday protesters will decry the “financial profiteering” they say is exacerbating the climate crisis.

While no specific companies are being targeted, the movement is broadly aimed at “polluters and those profiting from the fossil fuel industry.”

Organizers expect anywhere from a few hundred to more than a thousand people to take part in Monday’s event.

The plan is for people to gather at Battery Park in lower Manhattan early Monday, then march to Wall Street where they “will stay until forcibly removed,” said Schwarz.

Related: Hey Occupy Wall Street, abolish my debt too!

Organizers expect participants to be “arrested in droves” as they stage “sit-ins” around New York City’s financial district. Blue-clad protesters plan to unfurl a 300-foot banner and will inflate a 15 foot “carbon bubble,” according to a statement on the #FloodWallStreet website.

The New York Police Department said it would have “an adequate detail in place” to respond.

Why climate change is an economic problem

Schwarz said the demonstration will feature speeches by a number of well-known climate change activists, as well as local New York residents who were affected by Hurricane Sandy in 2012.

Related: Insurer invests $ 1B to fight global warming

The UN is not expected to announce any concrete agreements this week. But officials hope Tuesday’s meeting will create momentum for greater action on climate change at a summit next year.

The White House released a report in May asserting that climate change is real and will only worsen over time.

The National Climate Assessment said evidence of human-made climate change “continues to strengthen” and predicted that flooding, wildfires and drought will intensify if nothing is done to curb emissions of greenhouse gases.

A campaign backed by the fossil fuel industry and its allies challenges whether climate change is real, and if so, whether human activity such as increased carbon emissions from power plants, factories and cars contributes to it.

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Wall Street bets on prison growth from border crisis

Cost of unaccompanied immigrant children

NEW YORK (CNNMoney)

There’s a crisis on the U.S.-Mexico border, and Wall Street is betting that it will result in a boom for private prisons.

Geo Group (GEO)and Corrections Corporation of America (CXW) are two of America’s largest for-profit prison operators. They have thousands of open beds, and they have deep relationships with the federal agencies charged with doling out contracts to house undocumented immigrants, including children.

“It’s highly likely that the federal government will have to turn to the private sector for help with this crisis. Both companies are extremely well positioned,” said Brian Ruttenbur, an analyst at CRT Capital Group who covers the stocks of Geo Group and Corrections Corporation of America (CCA).

Investors are clearly seeing dollar signs. Shares of both CCA and Geo Group have spiked since the border crisis landed on front pages this summer. CCA has climbed 8.5% since July 30, and Geo Group is up over 7%. That’s a lot better than the S&P 500’s 1.5% advance over that time span.

Related: Crisis on the border

The Obama administration has already shifted over $ 405 million in funds to address the crisis and is urging Congress to pass a $ 3.7 billion emergency supplemental bill.

Corrections Corp stock rise

“Investors see this as an opportunity. This is a potentially untapped market that will have very strong demand,” said Alex Friedmann, an activist investor who owns shares of both CCA and Geo Group.

Positioned to profit: Some of the prisons CCA and Geo Group own are not filled and others are completely idle. That means they are in the unique position to offer their services to U.S. Immigration and Customs Enforcement (known as ICE).

Ruttenbur said CCA and Geo Group have both been talking to the federal government about how they can help.

“We are always in conversations with our government partners including ICE, but we don’t have anything new to report,” a CCA spokesman told CNNMoney. Geo Group did not respond to a request for comment.

The best outcome for these companies would be landing a contract with the government to help house some of the undocumented immigrants at existing facilities that are currently idle.

That’s exactly what happened last month when the U.S. border control inked a contract with Geo Group to give its adult detention center in Karnes County, Texas a makeover. Now the facility is able to house hundreds of immigrant women and children.

Related: How far can President Obama go on immigration without Congress?

Bullish long-term trends: Of course, there’s no guarantee CCA and Geo Group will end up benefiting from the border crisis. It’s notoriously difficult to call the timing on any government contract.

“I’ve been doing this 20 years and I’ve never gotten that right,” said Ruttenbur.

Still, analysts remain very bullish on the for-profit prison industry. Both companies reported better-than-expected earnings and raised their outlook for the rest of the year — a double high-five that investors love to see.

Wall Street also applauded when CCA and Geo Group, which went public during the 1980s and 1990s, recently converted to real estate investment trusts, or REITs. That status, which is also used by hospitals and office building operators, gives them enormous tax advantages.

Related: Hot stocks: 10 companies trading at all-time highs

For-profit prisons are not without controversy. Some of these facilities have been criticized for poor conditions, including the CCA-run T. Don Hutto Residential Center in Texas. A 2007 lawsuit that alleged immigrant families at the center were kept under virtual 24-hour lockdown and denied adequate services. The U.S. government stopped housing families there in 2009.

But investors are attracted to prison stocks because they give generate lots of cash flow, have strong dividend yields and high occupancy rates compared to other real estate options.

“The long-term trends are very much in place right now because the federal, state and local governments aren’t willing to put up the capital to build new facilities. The only group building new facilities is the private sector,” said Ruttenbur.

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