Finance

Hedge against political cycles is better investment than AI: Van Eck

Published

9 months ago

September 21, 2024

Defending the year's two hottest trades: one loud, one quiet

A major exchange-traded fund and mutual fund manager finds the winning gold trade isn’t talked about as much as the artificial intelligence trade — but maybe it should be.

VanEck CEO Jan van Eck thinks the best investment this year is “the hedge against political cycles.” To him, that means investing in gold.

“It is quietly the best performing asset this year,” Van Eck told CNBC’s “ETF Edge” from the Future Proof conference in Huntington Beach on Monday.

Gold hit another record on Friday, its 37th record this year. As of Friday’s market close, it is up 28% since the start of the year.

Van Eck, whose firm runs the VanEck Gold Miners ETF, expects foreign investments in bullion will continue to give the commodity a boost. It should also help in lifting gold miners higher, which started the year lagging the commodity. But as of Friday, the VanEck Gold Miners ETF has started to outperform, up 31% this year.

“I think you own both because the miners, if they catch up at all, it’s going to rip,” he said.

As for the AI trade, van Eck says it’s “amazing” how investors refuse to give up on it.

“It’s like part of people’s model portfolios, or core portfolios, is to have this tactical overweight to semis. And some of our biggest clients actually bought on the dip over the last week or two,” the VanEck CEO said.

Last month, his firm launched the VanEck Fabless Semiconductor ETF. It’s a companion to its VanEck Semiconductor ETF that excludes companies that run their own foundries, such as Intel.

FactSet reports the new ETF’s top holdings as Nvidia, Broadcom and Advanced Micro Devices as of Friday.

“Why spend billions of dollars on building the chips if you don’t have to?” van Eck said. “Nvidia doesn’t build its own chips. So that’s another kind of investment strategy.”

Since launching on Aug. 28, the VanEck Fabless Semiconductor ETF is up a half percent.

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Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

10 hours ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

12 hours ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”