Archive for January, 2016

Startup funding slowdown hits harder in Silicon Valley than S.F

The chill that descended on fourth quarter startup funding affected Silicon Valley more than San Francisco, according to research done for TechFlash Silicon Valley by PitchBook Data.

The overall number of deals and total of dollars that poured into Bay Area venture-backed businesses reflected the dropoff from the feverish activity of recent years that PitchBook and others reported earlier this month.

But it played out unevenly in the region.

There were 176 funding deals done in Silicon Valley in the last three months of 2015, down 35 percent compared to last year’s fourth quarter.

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San Francisco had 185 deals in the fourth quarter, down by about 30 percent from last year.

Helped by a huge Q4 $1.6 billion in funding raised by Airbnb, the amount raised by San Francisco-based VC-backed companies jumped by about 29 percent year-to-year to $5.2 billion.

The dollars raised in Silicon Valley in the period dropped by about 13 percent to around $3 billion.


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Investors around the world are ditching the markets

Not to alarm you — and please don’t call your wealth manager immediately after reading this — but the entire world is going to cash.

Bank of America Merrill Lynch (BAML) sent around a report tracking global fund flows, and since the second half of last year, cash has been the most popular asset in the world.

Over that period, about $7 billion went into the stock market. Fixed-income funds saw $46 billion in outflows, which BAML thinks is mostly due to redemptions from the credit markets, as opposed to, say, the government bond market.

Over the same period, $208 billion went into cash. When we say “cash” we mean the cold, hard stuff, and anything that can easily be converted into it. That includes money-market mutual funds and bank deposits that carry interest. It basically means investors are taking their money out of the markets and sitting it out.

BAML said investors are effectively selling inflation and buying deflation, or the continued decline in the value of asset prices.

The week ending January 27 saw the largest outflows from Treasury Inflation-Protected Securities — which are supposed to provide protection from inflation — in 33 weeks. It also marked the 13th straight week of outflows from bank loan funds and the seventh straight week of outflows from financials.

“All votes of no-confidence in the economy,” BAML said in the note.

In contrast, there have been four straight weeks of “robust inflows” into super safe government and Treasury bonds, and 19 weeks of inflows into muni bonds.

Here are the charts:

There have been huge inflows into money-market funds, while bond funds have seen outflows.

There have been huge inflows into money-market funds, while bond funds have seen outflows.


Super-secure government and Treasury funds have seen four straight weeks of inflows, according to BAML.

Super-secure government and Treasury funds have seen four straight weeks of inflows, according to BAML.


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The Fed just put global financial markets on notice

Federal Reserve Chair Janet YellenREUTERS/Joshua RobertsFederal Reserve Chair Janet Yellen.

The Fed didn’t budge.

On Wednesday, the Federal Reserve kept its benchmark interest rates pegged at 0.25% to 0.50% — as was expected.

So, effectively, not much has changed.

But the Fed made a key change to make clear that it would be “closely monitoring” developments in global financial markets.

Here’s the key sentence (emphasis added):

The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.

The Fed also said that it would keep an eye on international developments as it examines the possibility for raising rates in the future (emphasis added):

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

When it comes to the Fed’s decisions, generally, its main concern is the US economy. So, often we don’t hear much about its thoughts on what’s going on overseas except for a few mentions in the minutes from each meeting, released three weeks after the initial statement.

But it looks like the Fed is once again eyeing what’s happening abroad as it is materially affecting businesses that make up the US economy.

“Although one could argue they are always monitoring global economic and financial conditions, the phrase ‘closely monitoring’ has traditionally been associated with a Fed that is quite concerned about current events. Combining this phrase with the removal of the phrase which noted that risks are ‘balanced’ highlights the uncertainty within the Committee,” according to UBS economist Drew T. Matus.

“These add up to a FOMC that, while still not willing to remove the option of going in March, is acknowledging conditions that may prevent them from doing so. Indeed, this statement could be read as making the FOMC that much more data dependent heading into the March meeting,” he continued.

Notably, the Fed previously included language about “monitoring developments abroad” in September after a rocky summer — although they subsequently took it out in December.

So now, given that the markets were quite volatile in January and various big US businesses such as Apple pointed in “softness” abroad, it’s not entirely surprising that the Fed again included such a reference.

Still, it’s worth acknowledging that this time around, the Fed’s tone was less intense.

“Note how much more benign the statement [this time] sounds than the warning that was included in the September 17, 2015 policy statement,” observed Credit Suisse’s Dana Saporta.

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Apple’s new 4-inch iPhone will be named ‘5se’ and pack updated hardware and Live Photos

Tim CookREUTERS/Stephen LamApple CEO Tim Cook.

Apple is coming out with a new iPhone called the “5se” that has a 4-inch screen and a number of new features, like curved edges and the Live Photos feature, 9to5Mac’s Mark Gurman reported on Friday.

The new phone, scheduled for release in April, is basically the same size as the old 5S, but comes with updated internal components and features that were previously only available on the newer 6-series iPhones.

Gurman reported that the “se” is supposed to mean the “special” and “enhanced” edition of the old 5S phone.

Despite the popularity of the iPhone 6 series, there has been some demand for a smaller version of the iPhone, like the 5S. Gurman says that Apple is hoping the new 5se will cause those 5S users to upgrade their old phones.

According to Gurman, the 5se also comes with similar curved edges like the 6S or 6S Plus, and features that include Live Photos and Apple Pay. It also comes with an 8-megapixel camera and the same color options as the 6S.

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