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Investment bankers to get biggest checks in decade as Wall St. bonuses jump – report – Reuters

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NEW YORK, Aug 9 (Reuters) – Most Wall Street workers can expect double-digit increases in bonuses this year compared to 2020, while investment bankers could see the biggest checks in roughly a decade, according to a report by compensation consulting firm Johnson Associates Inc.

Last year, Wall Street bonuses were flat-to-down due to the economic hit from COVID-19 lockdowns, but this year’s bounce back shows that financial executives feel their businesses have recovered since the pandemic wiped $21 trillion off the markets between February and March last year, Johnson said. L1N2LE0GX

“The industry has performed at a level that last year we thought was impossible,” said Alan Johnson, whose report is closely watched by financial professionals.

Investment bankers will take home the biggest bonus checks in around a decade, thanks to an unprecedented surge in deal making this year, he estimates. Bankers who do underwriting work could enjoy a 30-35% increase in their 2021 bonus, while bankers who handle advisory work and equity sales and trading professionals could get 20-25% increases, he estimates.

Asset managers, hedge fund and private equity workers could see increases of 10-15%, while fixed income traders, retail and commercial bankers should expect bonuses to be flat, Johnson said.

The analysis is based on second quarter results from 10 asset management firms and eight major investment and commercial banks. Banks will communicate and begin paying out bonuses to staff from January next year.

In recent months, big banks have stepped up pay for investment bankers, particularly first and second year workers, to compensate them for a workload that is grueling even by industry standards. L1N2P904W

While money is nice, it may not be enough to make staff happy, said Johnson.

“It’s not really all about the money,” he said. “They feel overworked with no end in sight.”

Reporting by Elizabeth Dilts Marshall
Editing by Michelle Price and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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Olaf Carlson-Wee’s Polychain Capital Co-Leads $230 Million Investment In Ethereum Challenger Capitalizing On DeFi – Forbes

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Ethereum challenger Avalanche has raised a $230 million investment led by Singapore-based hedge fund Three Arrows Capital and Olaf Carlson-Wee’s Polychain Capital (Carlson-Wee was the first employee at now the largest cryptocurrency exchange in the U.S., Coinbase, and ultimately led its risk management).

Announced today, the capital raise, conducted as a private sale of the platform’s AVAX token, closed in June and also included investors such as R/Crypto Fund, Dragonfly, CMS Holdings, Collab+Currency, Lvna Capital as well as a group of angel investors and family offices. Similar to initial coin offerings (ICOs) that raised over $20 billion from the public a few years ago, this fundraising mechanism allows blockchain projects to raise capital from accredited investors in exchange for cryptographic tokens. Last year, the project raised approximately $60 million through token sales from prominent venture firms including Andreessen Horowitz (a16z) and Initialized Capital. 

The Singapore-based non-profit Avalanche Foundation, which oversees the blockchain’s ecosystem, will use the funds to subsidize projects building decentralized finance (DeFi), enterprise, and other applications developed on the Avalanche blockchain. The support will include grants, token purchases and other forms of investment, according to Emin Gün Sirer, the founder of the project and director of the foundation.

The investment comes as a number of similar networks dubbed “Ethereum killers”, including Solana, Algorand, Cardano and Polkadot, have exploded in value over the past year and shows a continued appetite for innovation beyond the original blockchain that popularized smart contracts and enabled the next generation of decentralized applications.

“When you have a war chest like this, it’s a very comfortable situation to be in,” says Sirer. “We will certainly have partnership announcements coming up. I am really excited about the new unique deployments that are already in the pipeline.” Sirer also told Forbes that he had recently stepped down from his teaching position at Cornell University to focus on Avalanche. 

Conceived in 2018, the platform claims to process transactions hundreds of times faster than its competitor, more than 4,500 transactions per second vs. Ethereum’s 14, for a fraction of Ethereum’s fees. Commonly known as gas, transaction fees on Ethereum have skyrocketed earlier this year due to the high on-chain activity, peaking near $70 in May. 

Avalanche’s main network launched in September 2020 and has since claimed a stake in the swelling market. Over 225 projects are building on the platform, and the total amount of assets locked in Avalanche’s DeFi ecosystem, encompassing peer-to-peer exchanges and lending applications that operate without intermediaries, grew at the end of last month to over $1.6 billion from about $250 million in mid-August. Avalanche’s AVAX token, 14th largest cryptocurrency with a market capitalization of $13.13 billion, more than doubled in price, reaching an all-time high of $66.45 earlier this week, Messari’s data shows. 

Much of that growth can be attributed to the launch of the “Avalanche Rush” initiative, announced on August 18. Over the next few months, the program will inject $180 million worth of AVAX into the Avalanche ecosystem with the aim to lure blue-chip DeFi applications to the network by providing the tokens as liquidity mining incentives for users of protocols like Aave, which facilitates cryptocurrency lending, and decentralized exchange Curve, though additional integrations may follow. “We’re in talks across the board with every single category of DeFi projects you might imagine,” Sirer says. 

As the program kicked off following the introduction of the Avalanche Bridge, a technology that enables the transfer of assets between blockchains, namely Ethereum, market watchers, including Joseph Young and Nick Chong, authors of the DeFi-focused Forbes newsletter Alpha Alarm, noted the resemblance of Avalanche’s growth with Polygon, a platform for Ethereum scaling and infrastructure development. Many Ethereum-native DeFi applications, including the money market protocol Aave, have migrated to Polygon to escape Ethereum’s rising transaction fees due to the network’s congestion. 

Yet Avalanche is also capitalizing on the burgeoning popularity of non-fungible tokens. On August 11, it was revealed that legacy trading cards and collectibles company Topps partnered with Avalanche to build a marketplace for NFTs and launched the first collection featuring highlights from the German football league’s 2020–2021 season. A few days later, however, it became known that Major League Baseball, Topps’ major partner for 70 years, is ending its licensing agreement with the company in favor of a deal with the up-and-coming sports collectible brand Fanatics. But Sirer says Avalanche has more in store: “We are a big believer in NFTs and their future, and we plan to grow in that area in many different ways.”

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Factoring Changing Weather Patterns Into Investment Decisions – Forbes

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Although the total damage from Hurricane Ida, which rampaged a trail of destruction from New Orleans to New York City, is still being tabulated, there is little doubt that it will have a significant impact on the US economy this year. After all considerations, AccuWeather estimates that the price tag for Ida’s damage could reach $95 billion. And although that’s a pretty big number, it would rank Ida as only seventh on the list of most-devastating hurricanes over the last 20 years.

For example, Superstorm Sandy, number three on that list with total economic impact of $210 billion, caused more than $37 billion in damages to New Jersey alone according to The Rutgers School of Public Affairs and Administration. Those damages were split with $7.8 billion for residents, $3.6 billion for businesses, $2.2 billion for municipalities, and $23.5 billion to the state for hazard mitigation. This massively dampened NJ’s economy.  Furthermore, even though Sandy hit nine years ago, numerous state residents remain displaced from their former homes.

We used to call these events “100-year storms” or even “500-year storms”. I’m not sure what we’ll call them now that they have become nearly annual occurrences. Empirical evidence shows that large-scale natural disasters, “acts of God” in insurance terms, are happening more frequently and on a greater scale. And it’s not just hurricanes. We’re also seeing devastation from tornadoes, droughts, earthquakes, tsunamis, mudslides, and wildfires.

Data from the National Centers for Environmental Information (NCEI) show that, between 2010-19, there were 119 climate- and weather-related events that cost $1 billion or more, causing an average of $80.2 billion in damages per year. The decade before that (2000–09) saw only 59 billion-dollar events in the US, at an average cost of $52 billion. And the 1990s saw even fewer considerable weather crises: 52, which cost an average of $27 billion per year. So, not only are we experiencing these events more frequently, but their cost is continually rising.

This is in line with data collected by the National Oceanic and Atmospheric Administration (NOAA) over the last 40 years, which shows that the frequency of extreme weather events is rapidly increasing. NOAA says there were 22 such events in 2020, the highest in history. Additionally, over the last five years, there have been on average 16.2 extreme weather events annually. Between 1980, when NOAA started collecting data, and 2020, the annual average was 7.1 events. This year looks like more of the same since we’ve already had numerous extreme weather events each costing more than $1 billion, and hurricane season is far from over. Similarly, wildfires continue to rage across vast swaths of several states – fires have already consumed nearly five million acres in 2021 but we are still in the third quarter. How will the economy handle these natural crises?

Unfortunately, it doesn’t look like things will get better anytime soon. Last month, the U.N. Intergovernmental Panel on Climate Change (IPCC), in its Sixth Assessment Report, called its findings “a code red for humanity” and concluded that the greater frequency and intensity of extreme weather events can be attributed to climate change with a high degree of certainty.

With disasters like this approaching biblical proportions, we’re obviously seeing economic distress in addition to horrible losses in human life and property. This is so not just for people directly affected by a weather event, but also for companies and governments that get pushed into distress and even bankruptcy.

Puerto Rico was already in bankruptcy due to its $123 billion in liabilities when Hurricane Maria, second on the AccuWeather list of the most expensive weather-related disasters, struck in 2017. That storm killed an estimated 3,000 people and knocked out power across the island, in some cases for close to a year, with more than $30 billion in damages. Maria saddled the island and its restructuring professionals with a nearly insurmountable task of addressing an infrastructure in shambles even as a smaller workforce remained due to long-term human exodus. Unfortunately, with additional devastating storms and the COVID-19 pandemic, the task of restructuring Puerto Rico became even more difficult along the way.

In addition to hurricanes, we’ve seen an increase in the number of massive wildfires over the last few years. Several such fires forced Pacific Gas & Electric

PCG
into a massive Chapter 11 in 2019 in what at the time was called “the first climate change bankruptcy”. A report from Columbia University’s Center on Global Energy Policy emphasized that wildfires could become as much as 900% more destructive by midcentury, which should set off some alarms, particularly with so many fires currently raging this year.

The proposed Biden $3.5 trillion infrastructure plan seeks to address some of the issues connected to climate change and extreme weather events, although how much of the proposal actually makes it into law remains to be seen. But relatively minor improvements to infrastructure may help alleviate major catastrophes. Adie Tomer, a senior fellow at the Brookings Institution’s Metropolitan Policy Program, has been widely quoted stating that $400 million in investments in weatherized improvements to the Texas power grid could have prevented some of the worst impacts from Winter Storm Uri. Uri, which killed over 100 people in February this year, forced the Brazos Electric Cooperative into bankruptcy, while Vistra Energy suffered $1.6 billion in costs directly related to that storm.

Through it all, the US government seems to be taking on a larger and more expensive role every time. In a 2019 report, the Congressional Budget Office predicted that damage from hurricanes and other weather events would cost the federal government an estimated $17 billion annually ($11 billion in losses to the public sector, $4 billion in direct aid to affected individuals, and $1 billion in administrative expenses.) This astounding figure highlights the impact of weather-induced damage on governmental costs.

When we talk about the cost of these disasters, we usually only look at direct affects — homes and commercial buildings, automobiles, power lines, roads, and levees. However, there are also many other less obvious economic effects, including disruptions to businesses due to severe property damage or loss of workforce. The National Centers for Environmental Information estimates the damage from Hurricane Katrina at $172.5 billion, while AccuWeather, which factors in dozens of additional variables, such as the impact of people unable to work, travel and tourism disruption, as well as clean-up costs, estimates a shocking $320 billion.

The cost of climate change and the resultant frequency of extreme weather events is something investors should be well aware of going forward. It certainly adds a new dimension to the analysis of companies in certain sectors, such as utilities, travel and tourism, insurance, and natural resources to name a few. As with any event that causes distress, climate related events can create risks but also opportunities for the astute investor.

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World shares slide on China investment worries – Financial Post

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NEW YORK — Global share markets edged lower globally on Thursday as concerns about investments in China and a mixed day on Wall Street outweighed positive economic data in the United States.

The three major indexes spent much of the day in negative territory as rising U.S. Treasury yields pressured market-leading tech stocks, and the rising dollar weighed on exporters.

International investors who have been piling into China in recent years are now bracing for one of its great falls as the troubles of over-indebted property giant China Evergrande come to a head.

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Dwindling resources set against 2 trillion yuan ($305 billion) of liabilities have wiped nearly 80% off the developer’s stock and bond prices, and an $80 million bond coupon payment now looms next week.

Hong Kong’s Hang Seng index dropped to its lowest level so far this year.

A report from the U.S. Commerce Department on Thursday showed retail sales unexpectedly rose in August, indicating America’s economic recovery is strengthening on positive trends in consumer spending.

The strong data sent safe-haven gold down nearly 3%.

However, the U.S. labor market remains under pressure, with initial jobless claims rising by slightly more than expected last week.

“(Retail spending) categories that were strongest in August were in COVID-beneficiary categories,” wrote Ellen Zentner, chief U.S. economist at Morgan Stanley.

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“Now incorporating today’s retail sales release, we lift our real (personal consumer expenditures) tracking to +1.9% and GDP to +5.0%.”

The MSCI world equity index was last down by 0.25% , off an all-time high on Sept. 7. MSCI’s broadest index of Asia-Pacific shares outside Japan closed down 0.83%.

European equities bucked the trend, and Europe’s STOXX 600 closed up 0.44%.

The Dow Jones Industrial Average fell 63.07 points, or 0.18%, the S&P 500 lost 6.95 points, or 0.16%, and the Nasdaq Composite added 20.40 points, or 0.13%.

Markets remain focused on next week’s Federal Reserve meeting for clues as to when the U.S. central bank will start to taper stimulus, especially after the flurry of U.S. economic data out this week.

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On Tuesday, data from the U.S. Labor Department showed inflation cooling and having possibly peaked, but inflation in Britain was the highest in years, according to data on Wednesday.

The dollar index rose 0.441%, with the euro down 0.41% to $1.1767.

The yield on 10-year Treasury notes US10YT=RR was up 2.9 basis points at 1.333%.

Spot gold dropped 2.3% to $1,751.53 an ounce. U.S. gold futures fell 2.27% to $1,751.70 an ounce.

Oil prices steadied on Thursday after hitting a multi-week high a day earlier as the threat to U.S. Gulf crude production from Hurricane Nicholas receded.

Brent crude LCOc1 ended the session up 21 cents, or 0.3%, at $75.67 a barrel. On Wednesday Brent touched $76.13, its highest since July 30.

(Reporting by Elizabeth Dilts Marshall; editing by David Evans, Steve Orlofsky and Sonya Hepinstall)

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In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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