‘Our shares have sold off along with everything else. We have been acquiring, and will continue to acquire our own shares for value when it makes sense – and in time, we are certain they will recover,’ chief executive officer Bruce Flatt, seen here on May 16, 2019, wrote
HIDEYUKI SANO/Reuters
Brookfield Asset Management Inc. chief executive officer Bruce Flatt says his company is moving away from private assets and buying publicly traded debt and stocks – including its own – in the recent market carnage.
“We have switched our focus for investments to the listed stock markets. … There are some stocks and debt starting to trade at a large discount to intrinsic value and we are focused on these,” Mr. Flatt said in a shareholder letter released Monday.
It’s a massive shift for a company that manages more than US$500-billion in assets, largely by buying multibillion-dollar companies, real estate properties or infrastructure assets. Until the current crisis, Mr. Flatt had been sounding the clarion call that these “alternative assets” were in such demand for their long-term outperformance, they would eventually trump the public stock markets as the top option for pension funds and other huge money managers.
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In the past month of rapidly falling asset prices, however, the market for big private deals has frozen. Private-equity investors such as Brookfield borrow money to make long-term investments. Rock-bottom interest rates are great news for them – unless the companies they buy crumble in an economic crisis and can’t generate the profits needed to pay the debt.
That concern may explain why shares in Brookfield and its publicly traded affiliates have been hit harder than the average stock in the S&P/TSX 60 index of large companies. Since the Canadian markets peaked on Feb. 20, Brookfield and its Brookfield Infrastructure Partners LP, a fund focused on bridges, roads, and technology assets, are down about 40 per cent. Brookfield Property Partners LP, focused on commercial real estate, is down about 55 per cent.
“Our shares have sold off along with everything else. We have been acquiring, and will continue to acquire our own shares for value when it makes sense – and in time, we are certain they will recover,” he wrote. (He did not quantify the extent of Brookfield’s current share buybacks.)
Mr. Flatt’s letter seems an attempt to assuage his shareholders’ concerns and paint Brookfield as at least a survivor, and perhaps a victor, of the economic crisis. He said “We are also starting to receive calls from companies in need of capital, and we look forward to being helpful to companies in need, where we can.” Brookfield’s latest funds, totaling over US$50-billion, are only 40 per cent invested, “so we have a lot of capital to put to work in this environment.”
In a disclosure last week, Brookfield said it spent $6.7-million to buy an additional 1.172 million shares in Calgary-based power generator TransAlta Corp., taking its ownership of the company to 10.1 per cent.
Mr. Flatt also argued for the strength of the company’s balance sheet. He said Brookfield and its four publicly traded partnerships – which also include Brookfield Business Partners LP and Brookfield Renewable Partners LP – have about US$12-billion of lines of credit with banks, “virtually undrawn.” The Brookfield entities have US$5-billion “of financial and non-core assets that can be liquidated with relative ease (even in today’s markets) should we so choose.” Corporate debt totaled US$7-billion, versus a market cap of under US$40-billion in Monday’s trading.
“For us, compared to the direct hit we took on 9/11, this uncertainty and volatility feels manageable,” he wrote. “In 2008, with the banking system failing, real asset owners didn’t know if many lenders were going to exist in the future. Today, the banking system is in far better shape. It never feels very good to have this degree of chaos, but this will pass.”
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
