Billionaire David Koch, Who Spent Heavily to Back Conservative Causes, Dies

Aug 23, 2019

First Read

Hits & Takes
JLN Staff

Correction: The FIA Futures and Options EXPO this year is the 35th and will be held on October 29-31. Thank you to all who responded to my error of dates and edition. One reader noted that EXPO falls not only on Halloween, but also on the date Brexit is scheduled to occur, which will be a ghoulish display one way or another. If I was clever, I would say I did this on purpose as a test to see if you are paying attention to when this very important conference is. More likely this was just a brain poof.~JJL

CME’s Globex notices for the week are up here. CME Group is introducing iLink 3, a new order entry protocol, that will launch in new release on Monday, August 26. All those using the Market Segment Gateway need to migrate to iLink 3 by Q4 2020. The CME’s client impact sheet and more on the timeline can be found here.~SD

Jon Najarian and his brother Pete ran into Jon Corzine at a New York restaurant. They were their normal polite and graceful selves in greeting Mr. Corzine, and Pete even gave a shout out on Twitter to the former MF Global CEO. Mr. Corzine responded on Twitter as well with the following remark from his @joncorzine1 account: “I would say it was nice to see you @petenajarian and in point of fact, I did say that, but that was before you and your brother put your drinks on my bar tab.” Nice going, guys!~JJL

Intercontinental Exchange has a new episode of its Inside the ICE House podcast available for your listening enjoyment. It features ICE Futures U.S. President Trabue Bland.~SD

A disciplinary notice hit the wire from ICE – Phillip Ferguson, while neither admitting nor denying the allegations, was fined $40,000 and suspended for one month for spoofing Russell 2000 futures during 2017.~SD

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Itiviti Expands Offerings Amid Industry Consolidation

JohnLothianNews.com

Itiviti is working with Bloomberg to help clients using Bloomberg SSEOMS transition to Itiviti’s multi-asset Order Management System (OMS). It’s just one indication of how as other firms pull back, cut costs and/or sunset legacy technology, Itiviti is expanding its services. In this video, Itiviti President of EMEA North Lee Griggs talks about the firm’s growth strategy moving forward.

Watch the video »

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I dumped Donald Trump to save the liberal world order; Ex-White House communications director is fighting against president’s re-election
Anthony Scaramucci – FT
My uncle Anthony Defeo survived the D-Day invasion mostly by luck. His Higgins boat landed on a Normandy beach near a decoy minefield and members of his battalion who made it to the shore were able to climb up the beach into German-occupied territory.
/on.ft.com/2Nsi2v2

*****Anthony Scaramucci makes a powerful argument. We are all flawed human beings, Scaramucci and myself included, but it is an important message for us all.~JJL

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A 203-Year-Old Trading Empire Faces China’s Wrath Over Hong Kong; Beijing’s crackdown on Cathay Pacific sends a chilling message to other businesses.
Blake Schmidt, Xiaoying Zhao, Kit Chellel – Bloomberg
In the 1990s, as Britain was preparing to hand over Hong Kong to China, Adrian Swire was worried. The chairman of the Swire business empire based in the longtime British colony was concerned that its Cathay Pacific Airways Ltd. could lose traffic rights once China took charge in 1997. He decided to make a deal: allow Chinese-owned enterprises to increase a stake in Cathay to ensure friendly ties with Beijing, according to his since-declassified correspondence with John Major, U.K. prime minister at the time, and his government. State-owned Air China Ltd. is currently the carrier’s second-biggest shareholder after Swire.
/bloom.bg/2Z9x28l

***** What is 203 years in Chinese terms?~JJL

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SEC Charges Broker-Dealer And CEO With Supervision Failures Related To Hedge Fund Valuation Scheme
Mondovisione
The Securities and Exchange Commission yesterday charged New York-based broker-dealer AOC Securities LLC, and its former chief executive officer, Ronaldo Gonzalez, with failing to supervise an AOC broker who provided inflated price quotes for certain securities to a significant customer of AOC.
bit.ly/31Xx9ko

****Will the conspiratorial troll corners of the internet latch onto the “AOC” part of this filing and somehow rope in Rep. Ocasio-Cortez?~SD

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Ten Weeks in Chicago. Ten Students. One Memorable Summer Internship.
Alexandra Garza, Marketing Intern – Trading Technologies Blog
As the summer of 2019 quickly fades away, I’m reflecting with my fellow interns on our time at Trading Technologies. The past couple of months flew by, and although we started as strangers, we’re ending as teammates with shared experiences working at the Chicago headquarters of this global trading software company.
bit.ly/2zeyNBV

***** Alexandra was very helpful to JLN for our MarketsWiki Education series.~JJL

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CryptoMarketsWiki Coin of the Week: Libra
Things are starting to take a turn for Facebook’s darling cryptocurrency, Libra. According to the Financial Times, some of Libra’s early backers are feeling significant reluctance to publicly support the nascent cryptocurrency in the face of regulatory scrutiny. In addition to the severe skepticism expressed by the U.S. Congress, the EU has reportedly begun an antitrust investigation into Libra. At least two member organizations of Libra have reportedly discussed ways in which they might distance themselves from the project.
bit.ly/2yeZrKi

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Thursday’s Top Three
Our top item of the day on Thursday was the Federal Reserve Bank of Chicago’s working paper The Concentration of Cleared Derivatives: Can Access to Direct CCP Clearing for End-Users Address the Challenge? Second was the FT’s Patrick Byrne and the comic tragedy of life as a 40-something man. Third was Prooftrading’s Market Data Fee Calculator, which is designed to provide the “differences in cost between different patterns of market data consumption.”

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CryptoMarketsWiki Website»
CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.

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Lead Stories

Billionaire David Koch, Who Spent Heavily to Back Conservative Causes, Dies; He also donated more than $1.3 billion of his fortune to charity
Melanie Grayce West and John McCormick – WSJ
David Koch, the billionaire libertarian who gave more than $1 billion to charitable causes but was better known for using his money to reshape U.S. politics, has died.
/on.wsj.com/2P5DacX

*****Condolences to the family, friends and colleagues of David Koch, especially childhood and lifelong friend former FIA President John Damgard.~JJL

‘Greater fool’ theory drives weird world of negative yields; Lending at a loss only makes sense if there are other buyers willing to risk bigger hits
Neil Collins – FT
So, Mr Christiansen, how much would you like us to pay you for the privilege of lending you money? Would 0.5 per cent a year be enough? This is not fantasy. Jyske Bank, a highly respectable Danish financial institution, is offering its domestic customers 10-year euro mortgages at a rate of minus 0.5 per cent. It is paying them to take the money.
/on.ft.com/2Z8X5fP

UBS Faces Client Backlash Over Options Strategy; Program suffered in last year’s market volatility
Gretchen Morgenson – WSJ
A complex investment strategy pitched as low-risk by stockbrokers at UBS Group AG UBS 1.53% has triggered a backlash from clients of its securities unit. The strategy, called Yield Enhancement Strategy, or YES, has generated at least $60 million in losses for clients and more than two dozen customer complaints, according to a lawyer for the investors.
/on.wsj.com/2Z8XNK1

Facebook’s Libra backers look to distance themselves from project; Some early supporters of cryptocurrency consider cutting ties amid regulatory scrutiny
Hannah Murphy and Shannon Bond – FT
Intensifying regulatory scrutiny of Facebook’s Libra digital currency has spooked some of the project’s early backers, with at least three privately discussing how to distance themselves from the venture.
/on.ft.com/2Z6vZpA

As bond e-trading takes off, debt sales business may be ripe for automation
Virginia Furness – Reuters
With banks’ bond trading desks increasingly going electronic, another of the last bastions of old-school banking – the business of helping companies and countries raise capital – may be about to succumb to the tide of technology.
/reut.rs/2Z9ro60

Deutsche Bank reaches $16.2m settlement with SEC over recruitment; Lender alleged to have hired relatives of officials in bid to win business in Russia and China
Kadhim Shubber – FT
Deutsche Bank has agreed to pay $16.2m to settle civil allegations that for years it hired the relatives of government officials in order to win business in China and Russia.
/on.ft.com/2Z8LSvT

Banks in Hong Kong ask for mental health help amid anti-government protests; City Mental Health Alliance says banks in the region have asked for advice on mental health as a result of the anti-government protests
Emily Horton – Financial News
Banks in Hong Kong have asked for guidance on how to assist staff suffering from stress and mental health concerns caused by the anti-government protests that have gripped the region for almost three months.
bit.ly/2Nozxwi

Overstock.com Chief Executive Resigns
Peter Rudegeair and Paul Vigna – The Wall Street Journal
Patrick Byrne made a career of provoking Wall Street. In his two decades as chief executive of Overstock.com Inc., OSTK 8.31% he tormented short sellers, picked fights with journalists and burned millions of dollars on cryptocurrency projects.
That career ended Thursday when Mr. Byrne announced his resignation in a discursive letter to shareholders that alluded to a romantic relationship with jailed Russian agent Maria Butina and covert activities on behalf of the U.S. government.
/on.wsj.com/2ZcxW42

Investors pull money from hedge funds at fastest pace since 2016; Rebound in returns this year has not stopped clients punishing managers for weak 2018
Lindsay Fortado – FT
Investors pulled around $56bn from hedge funds in the first seven months of this year, the worst start for fundraising since 2016 despite the best stretch of performance in a decade for the struggling industry.
/on.ft.com/2ZiRML7

Against the grain: bearish US forecast sows seeds of doubt in corn market; Strong projection unsettles traders who had been braced for impact of heavy rains
Emiko Terazono – FT
After more than four years of low prices, extreme weather, and a trade war with China, frustration on American farms seems to be boiling over.
/on.ft.com/2Zcq6Y3

The Down Under Scammer You’ve Probably Never Heard of; A look inside the mind of Australia’s most notorious insider trader
David Wilson – Institutional Investor
Absurdly – or maybe not – convicted Ponzi schemer Bernie Madoff is campaigning to have President Donald Trump slash his 150-year prison sentence. And sadly – for some, if certainly not all – Jeffrey Epstein, the financier whose vast wealth is a source of much suspicion, is dead.
As such, it’s worth revisiting Australia’s singularly tragic version of both men: the bipolar insider trader Rene Rivkin, who after being sentenced to just nine months of weekend detention stints, sparking national gloating, killed himself in 2005.
bit.ly/2zriyl7

Top law firm Weil Gotshal botched millions in pay for bankers
Kevin Dugan – NY Times
Two powerful Wall Street investment bankers could be on the hook for millions of dollars in back taxes and penalties after one of the world’s most prestigious law firms botched their pay packages — and then left them in the dark about the error for years, The Post has learned.
bit.ly/2NC2DZx

Patrick Byrne, Overstock C.E.O., Resigns After Disclosing Romance With Russian Agent
Cade Metz and Julie Creswell – NY Times
For two decades as the chief executive of the online retailer Overstock.com, Patrick Byrne has never been far from controversy. He posted elaborate theories on his personal website, railed against an unnamed Wall Street figure he named the Sith Lord and then, last week, delivered the most eyebrow-lifting tale of all. Mr. Byrne — operating on the advice, he said, of the Berkshire Hathaway chief executive Warren Buffett — disclosed that he had been in a romantic relationship with Maria Butina, a woman accused of being a Russian spy who tried to infiltrate circles of political power before the 2016 presidential election.
/nyti.ms/2Ntr7nl

Jes Staley: the last man in European investment banking; After Deutsche’s retreat, Barclays is the continent’s only participant with global ambitions in the industry
David Crow – FT
Following Deutsche Bank’s dramatic retreat, there is now just one European investment bank that hopes to remain a global force: Barclays. “The world doesn’t want to see just US investment banks,” said Jes Staley, the American chief executive of Barclays. “Being reliant only on the US financial industry is just not prudent.”
/on.ft.com/2NqSxuk

Switzerland Tried Negative Rates in the 1970s. It Got Very Ugly; In the looking-glass world of negative-interest rates, the Swiss are in a special category.
Stephen Mihm – Bloomberg
In the looking-glass world of negative-interest rates, the Swiss are in a special category. The Swiss National Bank went below zero ahead of everyone else back in 2014; now they’re poised to slash rates still further. Swiss banks like UBS have followed suit: They’ll soon start charging larger depositors to hold their cash.
/bloom.bg/2ZcDvPY

Exchanges, OTC and Clearing

New expiration and final settlement dates for EONIA Futures (FEO1)
Eurex
Eurex circular 082/19: New expiration and final settlement dates for EONIA Futures (FEO1)
bit.ly/2ZaBQKP

Six months Eurex ESG Futures – a first summary
Eurex
Six months after their launch in February, our Environmental Social Government (ESG) derivatives have reached 235,000 traded contracts and recently peaked at EUR 782 million in open interest. Time for a first review with Michael Peters, Member of the Eurex Executive Board.
bit.ly/2NxO9cK

Fintech

Cloud9 and IPC to Launch Next-Generation Voice Trading Solution
Cloud9
IPC, a leading provider of communications and networking solutions for the financial markets, and Cloud9 Technologies (“Cloud9”), a leader in cloud-based communications, are working together to offer an advanced, open voice trading and collaboration solution. The integrated cloud-based service unites Cloud9’s C9 Trader voice communications and analytics platform, IPC’s Unigy trading communications platform and the Connexus™ Cloud financial ecosystem.
bit.ly/2zhxuCe

VMWare to Buy Carbon Black for $2 Billion
Andrew Martin – Bloomberg
VMware Inc. agreed to purchase Carbon Black Inc. for about $2 billion, adding cybersecurity services to its data-center software offerings.
/bloom.bg/2zioMDu

Cryptocurrencies

Amazon Cloud Outage Causing Major Issues at Some Crypto Exchanges
Daniel Palmer – Coindesk
Problems with Amazon’s cloud service, AWS, are disrupting services at some cryptocurrency exchanges on Friday. The Binance exchange is seeing problems internationally, according to its CEO Changpeng “CZ” Zhao, who tweeted:
bit.ly/2NqtjMt

Cryptocurrency Exchange Introduces Block Trading for Derivatives
Alastair Marsh – Bloomberg
Deribit and messaging service Paradigm partner in the venture; Trading effort seeks to move market closer to the mainstream
A venture between an exchange and a messaging service is introducing block trades to cryptocurrency derivatives, seeking to drive the market closer to the mainstream.
/bloom.bg/2TZnerF

Employees connect nuclear plant to the internet so they can mine cryptocurrency
Catalin Cimpanu – ZDNet
Ukrainian authorities are investigating a potential security breach at a local nuclear power plant after employees connected parts of its internal network to the internet so they could mine cryptocurrency.
/zd.net/2TZTavT

****What could possibly go wrong? Chernobyl is only about 300 miles away from there so you’d think plant safety would be foremost in their minds. ~JB

Chainalysis Launches First Actionable Real-Time Alerts for Suspicious Transactions Across 15 Cryptocurrencies
Chainalysis
Chainalysis today announced the launch of suspicious cryptocurrency transaction alerts in Chainalysis Know Your Transaction (KYT), the real-time anti-money laundering (AML) compliance solution for monitoring cryptocurrency transactions. It is the first compliance alerts solution available across 15 cryptocurrencies.
bit.ly/2zgEvmQ

Patrick Byrne, Cryptocurrency Champion, Resigns as Overstock CEO
Nikhilesh De – Coindesk
Patrick Byrne, a rare champion of cryptocurrencies among the heads of public U.S. companies, has stepped down from his roles at Overstock.com. Byrne wrote in a letter to shareholders Thursday that he was stepping down from the company both as CEO and as a member of its board of directors due to insurability and other reasons after admitting to a three-year relationship with Maria Butina, a Russian agent currently serving 18 months in prison after pleading guilty to charges of acting as a foreign agent.
bit.ly/2U22eR5

Japan Wants to Rival SWIFT With a Cryptocurrency Network
JP Buntinx – The Merkle Hash
Japan is a prominent country for blockchain and cryptocurrency activity. So much even that government officials are building a new type of infrastructure. It is labeled as the “SWIFT of cryptocurrency”, although living up to those expectations won’t be easy. This new network will be used on an international scale and aims to thwart money laundering.
bit.ly/2MySQTY

Top-Rated Crypto Exchanges Comprise 5% of Total Trading Volume: Report
Marie Huillet – Cointelegraph
Untrusted exchanges still command the lion’s share of global cryptocurrency trading volumes, a CryptoCompare report published on Aug. 21 reveals. As of July, D-E rated low-quality exchanges represented 64% of trading volume — a staggering $316 billion — whereas top-rated AA platforms accounted for just 5% or $31 billion.
bit.ly/2L4uP47

Tensions Rising at Facebook Libra as Backers Consider Quitting: Report
Daniel Palmer – Coindesk
Several backers of Facebook’s Libra cryptocurrency project are said to be considering backing out due to growing pressure from regulators.
bit.ly/2NqtgQN

Circle is raising $100 million for its new venture fund
The Block
Cryptocurrency company Circle is planning to raise a $100 million venture capital fund for its equity crowdfunding platform SeedInvest. The development has been revealed in a job posting by Circle, where it is seeking to hire a general partner for the proposed fund. CoinDesk reported the news first.
bit.ly/2ziLhbs

Ex-Morgan Stanley Asia Derivatives Head Joins Alumni Crypto Firm
Alastair Marsh – Bloomberg
Jeffrey Wang, who used to run foreign exchange spot and derivatives trading for Asia at Morgan Stanley, has joined a cryptocurrency firm run by his former colleagues, part of a growing cohort of ex-Wall Streeters taking a shot in the volatile world of digital assets. Wang will work out of Vancouver as head of Americas for Shenzhen, China-based Amber Group.
/bloom.bg/2U479Ba

While Big Banks Hesitate, Small Banks Seize the Crypto Scene
Rachel McIntosh – Finance Magnates
It’s still hard for crypto companies to find banks, but a number of small institutions have stepped up.
bit.ly/2U7funL

Litecoin Foundation employees ‘voluntarily decreased salaries’ in wake of reduced donations
The Block
Employees of the Litecoin Foundation have volunteered for a pay cut to help the organization sustain through the times of decreased donations, especially in Q1 of 2019. Xinxi Wang, a board director at the Litecoin Foundation, told XCong.com in an interview published Thursday, “our employees voluntarily decreased their salaries, which helped the foundation weather the storm.”
bit.ly/2P8FYWU

CoinDesk Talks to Supporters, Critics at Craig Wright’s Contempt Hearing
John Biggs – Coindesk
CoinDesk traveled down to West Palm Beach on Aug. 5 to cover Craig Wright’s second sanctions and contempt hearing. Wright, the self-declared man behind bitcoin, failed to comply with a court directive to produce a full list of his bitcoin addresses acquired prior to 2014, as part of a $10 billion lawsuit brought by Ira Kleiman, brother of Wright’s former business partner Dave Kleiman.
bit.ly/2NlXzIu

Ethereum Poised to Be First Public Blockchain in Hyperledger Consortium
Nathan DiCamillo – Coindesk
Ethereum could become the first public blockchain on Hyperledger – if the open-source consortium’s technical steering committee approves a proposal to adopt the ConsenSys-backed Pantheon project.
bit.ly/2Z88wo6

Bitcoin Trading Is Actually Far Less ‘Noisy’ Than Traditional Markets
Benjamin Pirus – Forbes
Bitcoin (BTC), the world’s first and largest cryptocurrency, made its debut approximately one decade ago. Since its creation, an increasing number of traditional market traders and experts have found their way into the crypto space in one form or another. Financial analyst, author, trader and creator of the widely used Bollinger Bands charting indicator, John Bollinger, became involved in the industry roughly three years ago, seeing opportunities to trade these digital assets, which have less “noise” than traditional market products.
bit.ly/2Zcyg2D

Politics

Harvard Economist Warns Hong Kong Could Trigger World Recession
Enda Curran – Bloomberg
City’s anti-government protests began almost three months ago; Fed’s Rosengren this week also warned on Hong Kong impact
Hong Kong’s rolling political turmoil could prove a tipping point for the world economy, Harvard University economist Carmen Reinhart said.
/bloom.bg/2Nt5pjq

YouTube Channels Are Yanked for Alleged Disinformation Campaigns in Hong Kong; Decision follows similar moves by Twitter and Facebook, with concern that China is trying to discredit pro-democracy demonstrators
Robert McMillan – WSJ
Google pulled 210 YouTube channels from its platform, saying that they appeared to be part of a coordinated disinformation campaign in response to pro-democracy protests in Hong Kong.
/on.wsj.com/2ZcxRxg

In praise of Emmanuel Macron; As Trump aims to make a mockery of the G7, few leaders other than the French president have any ideas
Edward Luce – FT
I sat down to parse this week’s flurry of Trumpian lunacies — aptly described by Dan Drezner as the “beclowning of America” — referring to himself as the King of Israel, wanting to buy Greenland, accusing Jews of dual loyalty, and so on. The prospect felt exhausting. Then I recalled the cliché that it is better to light a candle than curse the darkness, which seems like a nice idea about once a month. So here goes.
/on.ft.com/2ZaAv6L

Divided G-7 Leaders Headed for Clashes at Tense French Summit; Club of rich nations is divided on how to deal with nearly every issue they are set to discuss at Biarritz gathering
Stacy Meichtry, Josh Zumbrun and Rebecca Ballhaus – WSJ
Once a showcase for international cooperation, Group of Seven summits have turned into minefields of geopolitical discord—and this year’s gathering promises another feast of high-level squabbling.
/on.wsj.com/2ZcwTkv

The Trade War Is Creating a Windfall for Rivals of U.S. Soy in China
Bloomberg News
Spread of soybean oil over palm soars in China, luring imports; Trade conflict, hog virus mean fewer beans are being crushed
The giant blow dealt to U.S. farmers by China’s retaliatory tariffs on American soybeans is shaping up to be the biggest windfall yet for palm oil producers half a world away.
/bloom.bg/2ZamYvW

U.S. Cyber Agency Says Reducing Risks From China Top Priority
William Turton – Bloomberg
CISA to focus on reducing risks of Chinese supply chain hacks; Other priorities include election security, industrial systems
A newly created U.S. cybersecurity agency said Thursday that China represents the greatest strategic risk to the U.S., and as a result, the agency’s top operational priority is reducing the risks from Chinese compromises to the global supply chain, including emerging 5G technology.
/bloom.bg/2Z8jppU

The Trump presidency is not just unfolding, it is unraveling
Michael Gerson – Washington Post
Historians studying the Trump presidency will have a prodigious amount of digital material that demands examination but defies explanation. The president’s Aug. 21, half-hour, South Lawn media availability deserves to be at the top of that list.
/wapo.st/2ZeZyW4

Our reality show President is a danger to us all
Opinion by John Avlon – CNN
There are countries that have endured unhinged leaders before. I’m thinking of Britain during the reign of King George the III, whose years of delusion were depicted in the 1994 film “The Madness of King George.” Our current civic stress test in the United States is coming courtesy of a President whose narcissistic impulses seem to be getting worse. One recent day crystallized those concerns.
/cnn.it/2Zcwb70

Banks Plan to Boost Campaign Spending in 2020; With the financial crisis fading, firms renew political engagement for presidential election year
Lalita Clozel – WSJ
Banks plan to be more active in the 2020 elections, with a large industry group promising to boost campaign spending and political advertising after keeping a relatively low profile in the decade after the financial crisis.
/on.wsj.com/2Zf1pKw

Regulation

Claims management companies must raise advertising standards, says FCA
UK FCA
Claims management companies (CMCs) must do more to ensure their promotions do not mislead potential customers according to the Financial Conduct Authority (FCA). Since the FCA took over regulation of CMCs on 1 April 2019 it has reviewed over 200 CMC adverts in various media and found widespread poor-practice in CMCs.
bit.ly/2ZcnKZe

Regulator sues National Australia Bank over ‘unlicensed brokers’; Case is expected to be the first of many following public inquiry into financial sector
Jamie Smyth – FT
Australia’s corporate regulator is suing National Australia Bank for allegedly allowing unlicensed brokers to refer customers for loans in breach of the country’s consumer protection law.
/on.ft.com/2ZcChnT

RBS, Santander Ordered by U.K. Watchdog to Fix PPI Breaches
Stephanie Bodoni – Bloomberg
Banks failed to send PPI reminders, or sent inaccurate ones; Deadline for new claims in costliest banking scandal days away
Royal Bank of Scotland Group Plc and Banco Santander SA were ordered to appoint an independent auditor for their claim processes after issuing inaccurate information, or failing to send reminders altogether, about the insurance policies that turned into the costliest scandal in U.K. banking.
/bloom.bg/2Zc69QZ

An SEC settlement with Deutsche Bank reveals how princelings get a leg up
Mary Hui – Quartz
One contender for a job at Deutsche Bank was described as “an average-level candidate based on the interviews but failed 2 tests which means she is not good at analysis.” She was hired anyway. Her father happened to be the chairman of a large Chinese state-owned corporation.
bit.ly/2NsE15k

Investing and Trading

Fixed-Income Value Factor
Shawn Shen, Arom Pathammavong and Alex Chen – The Journal of Fixed Income
The value effect is one of the most well-studied and evidenced market factors in equities. However, there has not been a widely accepted definition of the value factor in fixed income. In this article, the authors put forward their approach to the value factor by using a model-implied OAS framework to identify under- and overvalued securities. They evaluate the model with a highly controlled testing and reweighting mechanism to best preserve the credit, maturity, and industry characteristics to filter out the noise from undesired sources. Empirical results across various global corporate bond markets show that the value factor could unlock additional returns while accompanied by higher volatilities as a result of its cyclicality.
bit.ly/2zeBxPJ

How to recession-proof your investment portfolio; Bond markets signal volatile times ahead, so investors should take stock now
Siobhan Riding and Emma Agyemang – FT
After years of worrying about how Brexit could impact their portfolio, UK investors are now facing an even greater fear — that the global slowdown could morph into a global downturn.
/on.ft.com/2ZdCSW6

Bond World on High Alert After Rallying to Historical Extremes
Liz McCormick – Bloomberg
AlphaSimplex’s Kaminski sees risk following ‘dream’ trade; Volatility, deteriorating market depth add to valuation worry
Investors are starting to question the epic bond rally that’s driven global yields to new lows and fueled the U.S. Treasury market’s best performance since the era of quantitative easing.
/bloom.bg/2Zcn4D9

Negative Rates Are Coming for Your Savings; Wealthy depositors are already being hit. The less well-off are next in the firing line.
Mark Gilbert – Bloomberg
First they came for central banks, then they came for government bonds, then they came for rich depositors. Then they came for me.
/bloom.bg/2Nr3QCx

Guggenheim’s Scott Minerd warns world bond markets are in a ‘bubble’
Jennifer Ablan – Reuters
The bond market is in a “bubble,” particularly sovereign debt, Guggenheim Partners global chief investment officer Scott Minerd warned on Thursday, and he said that efforts by the Federal Reserve to head off a recession by cutting interest rates will ultimately prove futile.
/reut.rs/2Z9Exw1

Institutions

Woodford fund to mark down value of its holding in cold fusion group; Move prompted by ‘reassessment of the current progress of the business’
Adam Samson – FT
Embattled money manager Neil Woodford has been dealt a fresh blow after one of his flagship funds was forced to mark down the value of its holdings in a company attempting to harness cold fusion.
/on.ft.com/2ZbkrkV

H2O reveals scale of Windhorst writedowns in new report; Clients withdraw EUR8bn from fund manager after FT stories
Robert Smith – FT
H2O Asset Management has revealed for the first time just how radically it marked down its holdings of illiquid bonds connected to Lars Windhorst, after the Financial Times drew attention to its heavy exposure to the controversial German financier.
/on.ft.com/2Z9lyS8

UBS hires Bank of England adviser Huw van Steenis in sustainable finance push; Former Schroders and Morgan Stanley executive to chair new committee and head investor relations
Stephen Morris – FT
UBS has recruited Huw van Steenis, a senior adviser to Bank of England governor Mark Carney, to run investor relations and chair a new sustainable finance committee, according to an internal memo seen by the Financial Times.
/on.ft.com/2Nqx30w

Deutsche Bank to transfer up to 800 staff to BNP Paribas; French lender to assume control of Deutsche’s prime brokerage unit that services hedge funds
David Crow and Stephen Morris – FT
Deutsche Bank is preparing to transfer up to 800 staff to BNP Paribas as part of its retreat from investment banking, according to several people briefed on the plan.
/on.ft.com/2NqCMU5

Muddy Waters Hasn’t Managed to Turn the Bulls on Burford Capital
Lisa Pham – Bloomberg
Litigation-finance firm has plunged after short-seller report; Stock is estimated to almost triple, according to analysts
Burford Capital Ltd. has had a challenging few weeks. Yet despite being the target of a high profile short-selling report, facing a potential lawsuit from investors and seeing its shares fall more than 40%, analysts are still overwhelmingly bullish.
/bloom.bg/2Zco8qD

HSBC Cuts Its Japan and Australia M&A Teams
Cathy Chan and Vinicy Chan – Bloomberg
About 10 positions were eliminated in the two countries; Bank has said it plans to cut more than 4,000 positions
HSBC Holdings Plc cut about 10 banking jobs in Japan and Australia, a person with knowledge of the matter said, eliminating the merger advisory teams based in those countries.
/bloom.bg/2NoC8Gy

Regions

Investors Say No Thanks to Ghana Debt Offering Yield Above 20%
Moses Mozart Dzawu – Bloomberg
In a world awash with negative yields, Ghana offered debt returning more than 20% — and investors weren’t interested.
/bloom.bg/2Z6v2h0

China to Soon Unveil Tariffs on U.S., Says Global Times’ Hu
Bloomberg News
Chinese action in response to U.S. tariffs, which start soon; Global Times is a newspaper connected to the Communist Party
China will soon announce tariffs to retaliate against the U.S. in an effort to hurt the American economy, according to a tweet from Global Times editor-in-chief Hu Xijin.
/bloom.bg/2Zc6mDL

China AI Startup to File for Hong Kong IPO Soon Despite Protests
Lulu Yilun Chen – Bloomberg
Megvii is moving ahead with float as city protests continue; Face++ owner may submit a filing to exchange as soon as today
Chinese artificial intelligence startup Megvii is filing documents soon for a Hong Kong initial public offering that could raise as much as $1 billion, people familiar with the matter said, proceeding despite a market downturn spurred by pro-democracy protests across the financial hub.
/bloom.bg/2ZcACPb

Dark Future for Euro Area as Nearly All Swiss Corporate Yields Go Negative
Tasos Vossos – Bloomberg
Nearly all Swiss franc senior bonds trade at negative yields; Euro credit market hits milestones first seen in Switzerland
If you think credit markets in Europe couldn’t look more forbidding, think again.
/bloom.bg/2Z8Qja1

Malaysia’s olive branch to foreign investors might not be enough
Joseph Sipalan – Reuters
Malaysia’s move to free up trading in its currency is a compromise between appeasing foreign investors and curbing hot money flows, but the changes might not be enough to immediately woo back players who had ditched the ringgit in recent years.
/reut.rs/2NlXrsu

Brexit

How UK’s refiners are playing both sides of a hard Brexit; Industry has warned that crashing out of the EU threatens two of six refineries
David Sheppard – FT
Boris Johnson once said that his policy on cake was simple: pro having it, and pro eating it. When it comes to a “no-deal” Brexit, the UK’s oil-refining sector is on the same page as its prime minister.
/on.ft.com/2ZeUAZq

No-deal Brexit ‘will see more waste going to landfill’
Faisal Islam – BBC News
More waste could be sent to landfill in the UK after a no-deal Brexit, a major waste company has told the BBC. There are worries a no-deal outcome will disrupt the export of millions of tonnes of waste to facilities in the EU, so it will have to go to landfill. It would harm the environment and pile millions of pounds of extra costs onto councils, insiders say. The Environment Agency said it expected firms to find suitable solutions.
/bbc.in/2MxygDK

Brexit: Northern Ireland farmers warn of no deal risks
Chris Vallance – BBC News
At Dean Wright’s farm in Northern Ireland, the young dairy cows are mooing as they wait to be fed but he worries that a no-deal Brexit may limit his herd’s ability to earn its feed. The milk from these calves will supply Dean’s cheese business, Ballylisk of Armagh, which sells its “triple cream” cheese over the border in Ireland. And for that reason, the future for dairy businesses is far from certain, says Mr Wright.
/bbc.in/2Ntobr0

Miscellaneous

UBS banker Scott Hapgood may not face trial over Anguilla hotel killing for 3 years
Rebecca Rosenberg – NY Post
It could take up to three years for the Connecticut banker charged with killing a hotel worker in Anguilla to even get a trial on the tiny Caribbean island, which only has one judge, sources said Thursday.
/pge.sx/2NC2jdh

John Lothian Newsletter

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