In a Shutdown, IRS Will Take Your Money, but Give No Refunds; With limited funding, thin-staffed IRS prepares for busy individual income-tax filing season
Richard Rubin – WSJ
A prolonged government shutdown would likely delay billions of dollars in income-tax refunds. The Internal Revenue Service is one of the agencies that now lacks funding, and the U.S. tax collector has been operating with about 1 in 8 employees under the shutdown plan it uses outside the tax-filing season.
***** Here is the reason that will end the government shutdown. As US taxpayers file their taxes, they will want their refunds. All people. All parties. And they will make their position known. To contact the President of the United States, send a letter addressed to the White House, 1600 Pennsylvania Avenue NW, Washington, DC 20500. You can also try calling the White House by dialing 202-456-1111. Of course you can tweet at the President too, use #GiveMeMyRefundNow as the hashtag.~JJL
Hits & Takes
Gerry Corcoran of RJ O’Brien shared yesterday with RJO employees that Florence Geraldine (“Gerry”) McCarthy O’Brien passed away on Monday. Mrs. O’Brien, who would have turned 100 years old on January 8, was the wife of RJO’s Chairman Emeritus, Robert J. O’Brien, Sr. and the last surviving child of the founder of RJO, John V. McCarthy. The service will be in Sea Island, Georgia, this Saturday, with a memorial service planned in the future in the Chicago area. Condolences to the O’Briens and friends on this loss.~JJL
The story of John McCarthy and R.J. O’Brien & Associates, LLC can be found in RJ O’Brien’s 100th Anniversary film from 2014 on our MarketsWiki page on the company, produced by John Lothian Productions. Robert J. O’Brien, Sr. is still going strong at 100 years of age.~JK
CME Group posted record volumes in interest rates, metals, FX and options in 2018.~JK
Today is a historic day on Capitol Hill, with over 100 women being sworn in to the 116th Congress – a new record.~JJL
There have been 21 government shutdowns since 1976.~SD
Worth Magazine’s current issue contains the WorthPower100 list. The list included people from bankers to businesspeople, pundits to presidents. They are the 100 most powerful men and women in global finance for 2018, according to Worth.~JJL
On the WorthPower100 list, ICE’s Jeff Sprecher is number 42. Nasdaq’s Adena Friedman is 86. Citadel’s Ken Griffin is 33. SEC’s Jay Clayton is 32. Blythe Masters is 27, though she was listed at her former position as CEO of Digital Assets. Vladimir Putin is number 2. Donald Trump is number 1.~JJL
The New York Stock Exchange finished the year with $125 billion in proceeds raised from 356 transactions. NYSE issuers raised $30 billion in proceeds from 73 IPOs, according to parent company ICE.~SR
You can pay for your 2019 subscriptions to this newsletter HERE. Or, if you need an invoice, email me at email@example.com and we will send you one.~JJL
Chicago traders in their ’80s heyday had a crazy move called the ‘O’Hare Play’
Kate Rooney – CNBC
Traders were already famous for risk-taking in the 1980s. But one bet is particularly absurd. Producers for an upcoming Showtime series used stories told by former traders in episodes of “Black Monday,” premiering Jan. 20. Throughout the ’80s, Chicago commodities traders were deploying something known as the “O’Hare Play.”
***** Why do I expect to be sorely disappointed by this?~JJL
They forgot to hedge
Lanre Sarumi – via Medium
With the run up in prices of every cryptocurrency in 2018, everyone wanted to be a miner. Who doesn’t like found money? Now it seems like the new year’s resolution of some crypto mining firms is “no more mining”. At least the ones in Japan anyway.
****** The best run companies in the world hedge. They understand risk and how to manage it.~JJL
New for 2019: Laws on Guns, Harassment, Cannabis-Spiked Drinks; A look at some notable changes heading into the new year
Jacob Gershman – WSJ
The new year is bringing in a flurry of new laws and ordinances across the countryófrom crackdowns on plastic straws and foam containers to new measures spurred by last year’s school shooting massacre in Parkland, Fla., and the #MeToo scandals. Here is a look at some of notable changes to the books heading into 2019.
***Some interesting new legislation around the U.S. this year. California is really cracking down on those plastic drinking straws. ~SR
Wednesday’s Top Three
Our top read stories were led by Kelly Loeffler‘s piece in Medium about the new ICE start-up, First capital raise: complete. Second was the CNN piece NYSE’s most famous trader fights for his job. Third was Bloomberg’s This Was a Great Year to Be a Math Geek
138,771,103 pages viewed; 23,362 pages; 216,051 edits
‘Flash-Crash’ Moves Hit Currency Markets
Ruth Carson and Michael G Wilson – Bloomberg
Apple’s revenue outlook cut may have been a trigger: Jefferies; Yen will continue rally, could appreciate to 102: UBP
It took seven minutes for the yen to surge through levels that have held through almost a decade.
****** Here is the FT version of this story and Reuters’ take.~JJL
Deutsche Boerse’s straight-talking boss; CEO Theodor Weimer has improved Deutsche Boerse’s relations with politicians and investors, but can he make the acquisitions that will take the company into the big league?
Andreas Kroner – Handelsblatt
Theodor Weimer is no diplomat. Since becoming Deutsche Boerse CEO a year ago, the 59-year-old manager has become known for spontaneous straight talk and caustic turns of phrase. For some in the company, owner of the Frankfurt Stock Exchange and other European markets, he is a breath of fresh air. Others have felt bruised and confused.
Tesla Stock on a Blockchain Offers Hint of Where Crypto’s Headed
Alastair Marsh – Bloomberg
DX.Exchange plans to offer digital versions of big U.S. stocks; Tokenization of real-world assets is a hot trend in crypto
A digital exchange opening next week will enable investors to trade in companies including Apple Inc., Facebook Inc. and Tesla Inc. outside of the U.S. even when the stock markets are closed.
OCC Clears Record-Setting 5.24 Billion Total Contracts in 2018; December volume up 26.2 percent year-over-year; most active December in OCC’s history; ETF options volume up 25.7 percent in 2018, securities lending CCP activity up 17.2 percent
OCC, the world’s largest equity derivatives clearing organization, announced today that it set new annual cleared contract volume records for the U.S. exchange-listed options and futures industry. In 2018, OCC cleared 5.24 billion total contracts and 5.14 billion options contracts. These numbers surpass the previous records, set in 2011, of 4.60 billion total contracts and 4.56 billion options contracts. Compared to 2017, OCC had a 21.1 percent increase in total contracts cleared and a 22.6 percent increase in options contracts cleared.
Behind Lumber’s Collapse: A Perfect Storm of Housing and Trade; Confluence of market pressures brought about an epic collapse after the commodity hit a record last May
Ryan Dezember – WSJ
Lumber futures reached a record in May that was 30% above the old all-time high set in the early 1990s. Still, lumber ended the year as one of the worst-performing commodities.
‘ETFs as Asset Class’ Is Among the Top 2019 Trends in Markets
Sarah Ponczek and Vildana Hajric – Bloomberg
Funds are a key ‘tool for institutional portfolios’: Greenwich; Investors should treat ETFs differently from individual stocks
Wall Street’s going to have to adjust its business to account for a not-so-new but fast growing asset class: exchange-traded funds.
Apple’s iPhone Warning Comes Years Too Late; The company has reached the end of its denial phase.
Shira Ovide – Bloomberg
The optimistic narrative about Apple Inc.’s iPhone business is falling apart in front of our eyes.
The EU and Euro Keep Defying the Doomsayers; Is the end nigh? History would suggest not.
Alan Crawford – Bloomberg
The Hotel Grande Bretagne is an Athens institution. The opulent 19th century mansion on Syntagma Square has been the backdrop to key episodes in modern European history: The first International Olympic Committee convened here in 1896; Adolf Hitler and Field Marshal Erwin Rommel bunked here after the Nazis seized the hotel in 1941 at the start of the wartime occupation. More recently, it was witness to the most existential threat yet to Europe’s experiment in unification.
Fracking’s Secret ProblemóOil Wells Aren’t Producing as Much as Forecast; Data analysis reveals thousands of locations are yielding less than their owners projected to investors; ‘illusory picture’ of prospects
Bradley Olson, Rebecca Elliott and Christopher M. Matthews – WSJ
Thousands of shale wells drilled in the last five years are pumping less oil and gas than their owners forecast to investors, raising questions about the strength and profitability of the fracking boom that turned the U.S. into an oil superpower.
E.C.B. Takes Reins of Italian Bank to Prevent Wider Crisis
Jack Ewing – NY Times
The European Central Bank took control of a troubled Italian bank Wednesday, an unprecedented step that spotlighted the risks to the eurozone’s financial system from political chaos in Rome and a sputtering economy.
Ed Wicks: The bigger picture
John Brazier – The Trade
Three years after joining Legal & General Investment Management to run its equities trading, Ed Wicks now heads up the firm’s global trading operations, placing emphasis on the benefits of incremental improvement. Wicks speaks to John Brazier about the changes he has made during his time with the asset manager and what the future holds for the head of trading role.
Exchanges, OTC and Clearing
CME Group Reached Record Average Daily Volume of 19.2 Million Contracts in 2018, up 18 Percent from 2017
CME Group, the world’s leading and most diverse derivatives marketplace, today announced 2018 average daily volume (ADV) reached a record 19.2 million contracts, up 18 percent from 2017. During 2018, 91 trading days exceeded 20 million contracts, up from 34 days in 2017.
MGEX Finishes 2018 as the Second-Best Calendar Year in History
Investigation set – Ex-Bˆrsen boss Kengeter pays nearly five million euro; The investigation against the manager was discontinued. Deutsche Bˆrse also has to shell out an amount in the millions.
Elisabeth Atzler – Handelsblatt
Not only the Deutsche Bˆrse pays in the wake of the insider affair to their former boss Carsten Kengeter a million fine, even Kengeter itself has to pay a large sum. So Kengeter has to pay almost five million euros.
DGCX Breaks Annual Volumes Record to Round-Off an Exceptional 2018
The Dubai Gold & Commodities Exchange (DGCX) announced today that it has rounded off a highly successful 2018 by breaking its annual volumes record, trading 22.26 million contracts, up 28% from the previous year. The total value of the contracts was USD 474.94 billion, beating its previous highest value of USD 448 billion traded in 2013. Average Daily Volumes (ADV) also finished the year at an all-time high, reaching 86,615 lots.
The Spanish Exchange Traded EUR587.47 Bn In 2018
The Spanish Exchange traded 587.47 billion euros in Equities in 2018, having reported 38.7 billion euros in December – down 5.4% from November – and down 18.7% from the same month the previous year. The number of trades in December reached 3.1 million, 15.8% lower than in the previous month and 5.7% lower than in December 2017.
Boerse Stuttgart generates 2018 turnover of around EUR 71.2 billion; High growth in leveraged products // Boerse Stuttgart maintains position as top German exchange for securitised derivatives and corporate bonds
Based on the order book statistics, turnover from all trading activities at Boerse Stuttgart amounted to around EUR 71.2 billion in 2018 – 11 percent less than in the previous year.
Changes in minimum block trade sizes for Euro STOXX 50Æ Corporate Bond Index Futures (FCBI)
Effective 7 January 2019, the Management Board of Eurex Deutschland decided the following:
Xetra-Gold’s stock rises to 181.47 tonnes at the end of the year; Growth of seven tonnes over the previous year / Europe’s largest physical-backed gold security
Deutsche Bˆrse Group
The gold holdings of the Xetra-Gold exchange-traded bearer bond (ISIN: DE000A0S9GB0 ) rose to 181.47 tonnes at the end of the year. That’s a plus of over seven tons over the course of the year. At the beginning of January 2018, 174.2 tons of gold were still stored in the central safe deposit for German securities in Frankfurt. Xetra-Gold is Europe’s leading physically backed gold security.
Bloomberg, Predata collaborate as alternative data goes mainstream
Predata CEO Hazam Dawani says big players like Bloomberg are positioning themselves for the change
Artificial Intelligence Vs. the Hackers; Machine-learning algorithms watch hackers’ behavior and adapt to their evolving tactics.
Dina Bass – Bloomberg
Last year, Microsoft Corp.’s Azure security team detected suspicious activity in the cloud computing usage of a large retailer: One of the company’s administrators, who usually logs on from New York, was trying to gain entry from Romania. And no, the admin wasn’t on vacation. A hacker had broken in. Microsoft quickly alerted its customer, and the attack was foiled before the intruder got too far.
Wall Street goes to war over market data and access
Hayley McDowell – The Trade
On 25 October 2018, major US exchange operators went head-to-head with Wall Street during a roundtable discussion hosted by the Securities and Exchange Commission (SEC), as part of a two-day event on an issue at the heart of market controversy: Exchange market data and access fees.
2018 saw strong fintech funding performance
Lea Nonninger – Business Insider
In the first half of 2018 alone, fintechs secured $57.9 billion, nearing the previous annual record of $62.5 billion set in 2015. Although the numbers for the full year aren’t out yet, it’s safe to say that 2018 was a standout year for fintech. Here’s what drove the strong performance:
Novogratz Increases Stake in Galaxy in Wake of Meltdown
Nick Lichtenberg – Bloomberg
Crypto advocate owns about 80% of shares in firm he founded; Bloomberg Galaxy Crypto Index declined 81% last year
Michael Novogratz is putting more of his money where his mouth is when it comes to cryptocurrencies.
Crypto’s King Midas: Backstage With CZ, the CEO Who Can’t Be Stopped
Wolfie Zhao – Coindesk
Cameras, flashlights, tweets – when Changpeng Zhao takes the stage these days, a kind of mania seems to ensue. Of course, that’s perhaps to be expected when you’re known to the world over by just two letters, but “CZ” has arguably achieved something greater in 2018 ó a celebrity status that’s equaled by his clout as an entrepreneur.
New York becomes the first U.S. state to create a crypto task force
The Block Crypto
Governor Andrew Cuomo signed a bill last month to establish a “digital currency task force” for the state of New York, according to a statement from Assembly Member Clyde Vanel. Vandel added that “New York leads the country in finance. We will also lead in proper fintech regulation. The task force of experts will help us strike the balance between having a robust blockchain industry and cryptocurrency economic environment while at the same time protecting New York investors and consumers.”
Crypto funds appeal for patience after market rout; Collapse in prices in 2018 shakes faith in the future of digital assets
Laurence Fletcher – FT
Fund managers specialising in cryptocurrencies are appealing for patience from investors, after a year in which huge falls in prices severely dented their performance.
HashCash Introduces Blockchain Solutions to Streamline Mutual Funds Management in Australia
A robust and expanding financial sector has placed Australia’s fund management industry in the higher rungs of the global hierarchy of investment markets. In order to enhance efficiency in an industry that demands working with tomes of documents, coordinating with multiple financial institutions, and ongoing client verification processes, investment firms are giving their infrastructure a high-tech makeover. Software development companies, such as Silicon Valley-based HashCash Consultants, are playing a significant part in accomplishing this goal.
The Secret for a $1 Trillion Crypto Market? Keep Building
Jim Radecki – Coindesk
Earlier this year, the total value of all crypto assets reached an all-time high of over $800 billion, driven by a flood of retail customers looking to capture opportunities in a new market.
How to Last the Crypto Winter? Seek Simplicity, Manage Complexity
Jake Yocom-Piatt – Coindesk
In 2018, we have seen the cryptocurrency market cap go from all-time highs in January to falling over 80 percent by December, despite little changing in the context of the technological fundamentals.
Thai Government Agency Develops Blockchain Tech for Elections Voting
Yogita Khatri – Coindesk
A Thailand government agency has developed a blockchain-based solution that’s set to digitalize elections voting in the country.
Stories from Alternative Crypto Sources
What Proof of Keys Celebration is and Why You Should Care
Rasmus Pihl – Toshi Times
Indian Police Warn Public Against Investing in Cryptocurrencies
Aaron Wood – Cointelegraph
Hold off the death notices for Trump’s presidency; The imminent selection of specific opponents will be to his advantage
Janan Ganesh – FT
In Washington, where even the metaphors are militarised, the White House is said to be under “siege”. The word will not do. It implies outside hordes intent on entry. President Donald Trump can but wish for such a clamour. With his caretaker chief of staff, his under-manned legal team and his sheepish desertion by once-servile Republicans, the flight of people from 1600 Pennsylvania Avenue is more notable than any gathering at the gates. We would not describe Orson Welles at the end of Citizen Kane, burning through friends and rattling around a house that is altogether too large for him, as besieged.
Trump Took Credit for Stock Market Records. Does He Deserve Blame for the Plunge?; America finally has a market to match the man in the Oval Office.
Peter Coy – Bloomberg
Green means up and red means down in the stock market. Lately there have been many red days. But the true color of today’s market is golden orangeóthe hue of the pompadour atop the head of President Donald Trump. Because for better and for worse, this has become Trump’s stock market. Until October, the extended bull market was reasonably called the Trump Bump. The decline over the past few months, particularly since the start of December, is the Trump Slump.
Powell and Trump Are Locked in a Battle for Wall Street’s Trust
Craig Torres and Christopher Condon – Bloomberg
Central bank chief has public remarks on Friday and next week; Fed risks having stock market defined as barometer of success
Jerome Powell has been sucked into a one-sided communication fight with Donald Trump, who blames the Federal Reserve chairman for losses in the stock market.
Disgraced former German stock exchange boss will pay £4.3m to settle insider trading charges
Carsten Kengeter is to pay £4.3m to settle insider trading charges
The disgraced former boss of the German stock exchange Carsten Kengeter, 51, is to pay £4.3million to settle insider trading charges.
U.K. Treasury Adds Two Women to BOE’s Financial Policy Committee
Jill Ward – Bloomberg
Colette Bowe and Jayne-Anne Gadhia to join panel this year; Central bank has faced criticism over lack of gender diversity
Colette Bowe and Jayne-Anne Gadhia are set to join the Bank of England’s Financial Policy Committee, the U.K. Treasury said Thursday.
Update on the SEC Shutdown from Davis Polk
Ex-London Bankers Cooperating With Cum-Ex Probe in Bid to Dodge Jail
Karin Matussek – Bloomberg
Cologne probe sets up first trial over controversial tax deals; Both men seek leniency for helping uncover ‘a Cum-Ex industry’
Two former London investment bankers cooperating with a German probe of controversial tax deals that cost the nation billions of euros are wagering that their help will persuade judges to go easy on them, according to people familiar with the issue.
Insider Trading Remains a Fixture for Securities Enforcement
Peter J. Henning – NY Times
Trading on confidential information remains hard to resist despite a decade of criminal enforcement and prison terms for those who get caught and prosecuted.
Final Statements for Broker-Dealers, Investment Adviser Firms, Agents and Investment Adviser Representatives, and Branches
FINRA is issuing this Notice to help firms review, reconcile and respond to their Final Statements in E-Bill as well as view the reports that are currently available in Web CRD/IARD for the annual registration renewal process. The payment deadline is January 21, 2019.
Investing and Trading
Apple cuts sales forecast on China weakness; Company also flags weak iPhone upgrades
Richard Waters – The Financial Times
Apple issued an extremely rare revenue warning late on Wednesday, blaming economic weakness in China and disappointing iPhone upgrades in the developed world for a shortfall of as much as 10 per cent from its previous expectations.
The news wiped more than 7 per cent from the company’s shares in after-market trading.
The 20%-a-Year Stock Picker Who Wishes His Edge Would Disappear
Sam Mamudi, Benjamin Robertson and Kana Nishizawa – Bloomberg
David Webb quit his job at 33, got rich investing in Hong Kong; His research, reform push could undermine his competitive edge
Most great stock pickers do all they can to preserve their competitive edge. David Webb is trying to make his disappear.
Wall Street’s Big Landlords Are So Hungry for Houses They’re Building Them; Companies that once gobbled up foreclosed suburban homes are now acquiring new ones for the rental market
Ryan Dezember – WSJ
Millennials aren’t the only ones having a hard time finding houses to buy. So is Wall Street. A shortage of houses in the entry-level price range where first-time buyers and big rental-home companies both shop is prompting some institutional landlords to start building new ones themselves.
Chinese Companies Flocked to U.S. Markets in 2018. The Trade War May Have Had a Role.
Stephen Grocer – NY Times
The trade war didn’t seem to discourage Chinese companies from listing their shares on American exchanges last year. In fact, it might have brought more Chinese companies to Wall Street.
Erik Prince to launch fund focused on electric car battery metals; Blackwater founder to capitalise on the scramble for once niche metals across Africa
Henry Sanderson – FT
Erik Prince, the founder of private security company Blackwater, is launching a fund to capitalise on the scramble for battery metals across Africa and Asia, as the world’s largest carmakers gear up to go electric.
UBS chairman pours cold water on Deutsche Bank talk: paper
Swiss bank UBS (UBSG.S) is not looking to merge with any other bank, Chairman Axel Weber told the Tages-Anzeiger newspaper, dismissing speculation that UBS could join forces with Deutsche Bank (DBKGn.DE).
UBS’s Weber Calls for Larger European Banks to Rival U.S. Firms
Jan Dahinten – Bloomberg
UBS Group AG Chairman Axel Weber expects European banks will need to get bigger to compete with their U.S. counterparts, adding to calls for consolidation in the industry.
Hedge fund DE Shaw eyes new ‘risk premia’ strategies; New York-based group aims to broaden products away from traditional absolute return approach
Robin Wigglesworth – FT
DE Shaw, the $50bn-in-assets hedge fund founded by the reclusive computer scientist David Shaw, is planning to open up a new ” risk premia” strategy for investors, as it expands its suite of products into a hot area of asset management.
Volatility specialists face year of rewards and reckoning; Some funds say markets are not prepared for unwinding of the ‘low vol’ regime
Robin Wigglesworth – FT
Volatility returned with a bang last year, wrongfooting many investors but leaving traders that specialise in surfing the undulations of financial markets eagerly awaiting a new era of turbulence in 2019.
Sri Lanka to halve maximum foreign holding limit in govt securities
Sri Lanka plans to restrict foreign holdings of government securities to a maximum 5 percent from the current 10 percent to prevent possible hot money flows and improve the quality of reserves, the country’s central bank chief said on Wednesday.
Spurning Erdogan’s Vision, Turks Leave in Droves, Draining Money and Talent
Carlotta Gall – NY Times
For 17 years, President Recep Tayyip Erdogan won elections by offering voters a vision of restoring the glories of Turkey’s Ottoman past. He extended his country’s influence with increased trade and military deployments, and he raised living standards with years of unbroken economic growth.
China’s Rich Brace for Tax Raid on $24 Trillion Wealth Pile
Jinshan Hong – Bloomberg
Havens are disappearing, overseas earnings will become taxable; Foreign assets to be easier to track, transfers may be levied
China’s plan to cut taxes in 2019 for the masses has the nation’s super-rich running for cover on concern the government will make up the shortfall by going after the wealthy.
Brexit ‘bad or awful’ for UK prospects in 2019, say economists; Uncertainty expected to hit business investment and depress consumer spending
Delphine Strauss and Gavin Jackson – FT
Uncertainty will hobble UK business investment and depress consumer spending in 2019, stunting long-term growth even if Britain manages to avoid a disorderly Brexit, according to a poll of more than 80 leading economists.
Great leap forward for China with landing on far side of Moon; Low-key mission to giant crater ‘opens new chapter’ in lunar exploration
Tom Hancock – FT
China has become the first country to land a probe on the far side of the Moon in a technical feat that demonstrates Beijing’s growing space ambitions.
Families sue banks, claim they funded terrorism that killed loved ones
Emily Saul – NY Post
Families from around the globe have filed suit in Brooklyn federal court against several banks they say funded terrorism that killed their loved ones. Three separate lawsuits filed Tuesday and Wednesday claim Lebanon’s Blom Bank, the Palestine Investment Bank and the Bank of Palestine maintained accounts for various branches of Hamas and other terrorist organizations, and that those funds were then used to murder innocents.
No One Is Ready for a No-Deal Brexit; By pretending to prepare for calamity, the government is deluding itself ó and its citizens.
Editorial Board – Bloomberg
With Brexit negotiations paralyzed, and fewer than 100 days till the clock runs out, it’s worth remembering that the U.K. government ó despite its assurances ó remains entirely unready for a no-deal exit from the European Union. Pretending otherwise helps no one.
Brexit freight ferry firm appears all geared up – to deliver pizzas
Ben Quinn – The Guardian
First, it emerged that the “startup” company hired to operate extra ferries as part of no-deal Brexit planning had no ships.
Now, questions are being asked about the readiness of Seaborne Freight to handle the £13.8m contract after it turned out that terms and conditions on its website appeared to be intended for a food delivery firm.