Former Trader Admits To Spoofing And Manipulation Scheme At Prop Firm; BofA to Drop Merrill Lynch Name

Feb 26, 2019

First Read

Hits & Takes
JLN Staff

Barron’s first put out its review of online brokers in 1996 – the winner, Lombard Institutional Brokerage, charged roughly $34 a trade.~SD

Growth in the emerging world is slowing, but growth in the developed world is slowing even faster, The Financial Times reports – suggesting that emerging market currencies are undervalued against the dollar. Trying to picture “slowing faster” is giving me a headache.~SR

In the past 15 years, more than 1,800 newspapers have closed in the U.S. There have been more jobs lost in the newspaper industry in those 15 years than in coal mining. Via the FT’s weekend piece, “US ‘ghost newspapers’ struggle for life.” ~SD

From a speech by Fed Governor Lael Brainard: “The American Economic Association reports that in the 2016-17 academic year, seven black/African American women were awarded a doctorate in economics in the United States, along with eight black/African American men, out of a total pool of 1,150 economics Ph.D.’s awarded overall.” That’s 1.3 percent of the overall pool. As of July 2018, 13.4 percent of the U.S. populace is black, according to census data. ~SD

Michael Dawley was re-elected by the NFA’s Board of Directors to serve as chairman. The Board also re-elected Maureen Downs as vice chairman.~SD

On May 13, CFTC Commissioner Brian Quintenz and SEC Commissioner Hester Peirce will headline the Coin Center Annual Dinner 2019, an annual fundraising dinner that takes place during Consensus. ~SD

Jessica Darmoni has posted an interview on the Hehmeyer Blog Post: Three Minutes With Michael Creadon, Writer And Founder Of 4Rev.Com – Darwinism in the Age of Blockchain. Creadon writes and publishes, a site for blockchain and cryptocurrency news.~SR

Research from law firm RPC shows that the number of data breaches reported by UK financial services firms to the FCA jumped 480% year-on-year in 2018.~SR


Best Online Brokers of 2019
Matt Miller – Barron’s
Market volatility is commonplace. Interest rates, which a few months ago seemed certain to rise, now look likely to remain flat or possibly decline. The chances of an economic slowdown in the U.S. and overseas are high. So it’s tempting to follow the S&P 500, our own portfolios, and investment opportunities the way some of us check the weatheróconstantly and doggedly. Online discount brokerage firms are happy to accommodate. They provide mobile apps that let customers monitor, analyze, and trade, often with the same speed, ease, and completeness as a desktop, and with complete interoperability.

****Top five teaser is as follows – 1) Interactive Brokers, 2) Fidelity, 3) E*Trade, 4) TD Ameritrade, 5) Merrill Edge.~SD


Janet Yellen: Trump Is an Even Bigger Idiot Than He Looks
Bess Levin – Vanity Fair
In an interview with Marketplace’s Kai Ryssdal, Yellen was asked, point blank: “Do you think the president has a grasp of macroeconomic policy?” And instead of dancing around the issue or offering some kind of “I don’t know what’s in his heart” answer, she responded, “No, I do not.” That most of us had a hunch this was the case does not change the fact that it’s shocking Yellen would just come out and say it! And, apparently, macroeconomics is just one of several things she thinks President Buy and Sell knows nothing about, the others being international trade, business, and the entire purpose of the Federal Reserve.

****I’m not surprised she has this opinion. Remember President Trump said Yellen was too short to be Fed chair. ~JB


Monday’s Top Three
Our top read story on Monday was Terry Duffy‘s personal career story and lessons learned in Investor’s Business Daily’s CME Group CEO Duffy Learned From Crisis To Create Long-Term Success. Quite a journey for Duffy, who got his start with money from his parents. But the story only starts there. Speaking of money, Bloomberg delves into it with Brexit Backer Arron Banks. How Much Is He Worth?. Third was The Wall Street Journal’s As Ex-Enron CEO Exits Prison, Some of Company’s Old Businesses Thrive. And sticking with the money thread, if it weren’t for Enron’s boom and bust, the Intercontinental Exchange might not be where it is today. ICE currently has a market cap of $42.8 billion.


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Lead Stories

In CFTC Action, Former Trader Krishna Mohan Admits To Engaging In Spoofing And Manipulative Scheme At A Proprietary Trading Firm
The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Krishna Mohan (Mohan), in which Mohan admits to engaging in manipulative and deceptive schemes, along with other individuals, which involved thousands of acts of spoofing (bidding or offering with the intent to cancel the bid or offer before execution) in a variety of futures contracts traded on the Chicago Mercantile Exchange and Chicago Board of Trade. The Order finds that Mohan engaged in this unlawful activity while trading for his former employer, a proprietary trading firm named as “Firm A” in the Order.

****It appears there are more pieces of the cookie yet to crumble as “the Order recognizes Mohan’s entry into a formal cooperation agreement with the CFTC’s Division of Enforcement” and “reserves its determination as to monetary sanctions against Mohan in recognition of Mohan’s agreement to continue to cooperate with the Division.” ~SD

Bank of America to Drop Merrill Lynch Name From Some Businesses
Rachel Louise Ensign – WSJ
Mother Merrill is fading away. Bank of America Corp. said it would phase out the name Merrill Lynch. Charlotte, N.C.-based Bank of America bought that storied Wall Street firm more than a decade ago.

Former Fed Chair Janet Yellen: Far from retired, nowhere near done
Kai Ryssdal – Marketplace
Janet Yellen made history as the first woman to chair the Federal Reserve Board ó a position that has been called “the second most powerful person in government” and the peak of a nearly 17-year career at the institution. As the president of the San Francisco Fed, she was one of the first to spot the decay in the housing market that was ultimately revealed to be at the root of the financial crisis. During her tenure, which received high marks from many economists, the economy grew and unemployment fell; she was also criticized for lackluster wage growth and not being as strong at politics as some previous Fed chairs. She has been described as a feminist hero and a “pop culture phenomenon.”

Investment banks have a problem with volatility
Peter Thal Larsen – Reuters Breakingviews
Be careful what you wish for. That’s the phrase haunting the world’s largest investment banks as they lick their wounds after a painful fourth quarter. For years, bankers complained that markets were too calm. But when bonds and stocks tumbled in the last few months of 2018, almost all trading divisions suffered. It doesn’t bode well for business if markets stay choppy.

***This is exactly the point made at the end of last week’s episode of “The Spread.” ~SD

SEC Examines Guggenheim-Related Bond Trades; The agency has sought information related to trades by insurance companies tied to Guggenheim Partners
Justin Baer – WSJ
U.S. securities regulators are reviewing a series of bond trades by three insurance companies tied to Guggenheim Partners LLC, according to people familiar with the matter. The Securities and Exchange Commission has sought information on trades recommended by Strategy 11, a trading algorithm developed by Guggenheim to help the insurers select corporate bonds, the people said. At one point, the insurers had used recommendations generated by the Strat 11 program to invest nearly $13 billion, according to an independent audit of the algorithm’s performance.

SEC seeks contempt charge against Tesla’s Musk, says tweet violates deal
Alexandria Sage – Reuters
The U.S. Securities and Exchange Commission (SEC) is pursuing a contempt order against Tesla Inc CEO Elon Musk, saying he violated a fraud settlement by tweeting material information without preapproval, sending the firm’s shares down 5 percent. The SEC’s request potentially could reopen a turbulent chapter for the electric vehicle maker in which regulators last year accused Musk of fraud for making misleading tweets about plans to take the company private, and demanded that he be stripped of his CEO title.

****Also see the FT’s Stuff Elon says, SEC compliance edition.

Evidence for man-made global warming hits ‘gold standard’: scientists
Alister Doyle – Reuters
Evidence for man-made global warming has reached a “gold standard” level of certainty, adding pressure for cuts in greenhouse gases to limit rising temperatures, scientists said on Monday.

Betting on blockchain to simplify carbon trading
Synergy’s carbon credit trading platform VER, currently in its testing phase, is set to launch in March. The company also launched its own carbon credit-backed cryptocurrency ECO2, which is already trading on two cryptocurrency exchanges, to enable companies and individuals interested in purchasing and trading carbon credits to engage with more efficiency and transparency.

Women take more CEO roles at asset managers but gaps remain As LGIM appoints Scrimgeour, 3 of world’s top 15 asset managers run by women
Owen Walker – Financial Times
Legal & General Investment Management last year launched its Gender in Leadership (Girl) fund, which allocates a greater weight to UK companies led by women. Nine months on, Britain’s largest fund manager has put investment theory into practice by hiring its first female chief executive.

A Chinese Brokerage for U.S. Stocks Seeks a Nasdaq Listing; Owner of online-trading platform Tiger Brokers plans to raise up to $150 million in IPO
Stella Yifan Xie – WSJ
One of China’s largest and fastest-growing online brokerages filed plans to go public in New York, offering a window into the world of Chinese investors who are increasingly trading U.S.-listed stocks. The owner of the Tiger Brokers online-trading platform said in a prospectus filed Friday with the U.S. Securities and Exchange Commission that it plans to raise up to $150 million in a Nasdaq initial public offering. Backers of Tiger, which was founded in 2014, include U.S. online brokerage Interactive Brokers Group Inc. and Chinese smartphone giant Xiaomi Corp.

****Interactive Brokers is a backer of Tiger, which offers futures, options, and stock trading.~SD

Launch Of Acuiti And The Acuiti Derivatives Insight Report – New Business Intelligence Platform For The Derivatives Market
William Mitting, the former publisher of FOW and managing director of the Global Investor Group, has today announced the launch of Acuiti, a business intelligence platform focused on the derivatives market.

U.S. Firms Dial Back China Plans Amid Trade Fight
Chao Deng and Julie Wernau – WSJ
U.S. companies are planning their lowest rate of expansion in China since 2016 in response to growing uncertainty about U.S.-China relations and a slowing Chinese economy, according to a survey by the American Chamber of Commerce in China. About 32% of 314 U.S. companies that responded said they have no plans to expand investment in China or plan to expand less this year, compared with 26% last year, according to the survey released Monday. Companies that have moved capacity outside of China or are considering doing so cited U.S. tariffs on Chinese exports as their chief concern, along with rising costs and slower economic growth.

Exchanges, OTC and Clearing

China’s Dalian exchange to allow foreign individuals to trade iron ore futures
China’s Dalian Commodity Exchange said on Tuesday it would allow individual foreign investors to trade iron ore futures on the bourse starting from Wednesday, widening access to the market in the world’s biggest consumer of the steelmaking raw material.

Nasdaq Dubai to partner with FTSE Russell for more derivatives offerings
The National
Nasdaq Dubai, the first Arabian Gulf exchange to offer derivatives and futures trading, is partnering with the global index provider FTSE Russell on several new products including futures country specific indexes as it looks to expand its offerings and investor base, its chief executive said.

London Stock Exchange, Ghana to co-operate in developing capital markets
Ghana Business News
The London Stock Exchange (LSE) has agreed to partner Ghana in a bid to aid the development and robustness of her capital markets infrastructure.

Glencore complains to LME about access to metal in Malaysia
Glencore has lodged a complaint with the London Metal Exchange (LME) about the company’s inability to take speedy delivery of aluminum from warehouses owned by ISTIM UK in Port Klang,

ASX to sell entire stake in IRESS
The software company worked with ASX for many years on its trading platform for financial market and wealth management participants, and was a foundation customer of the exchange’s co-location facility, the Australian Liquidity Centre.

FTSE Russell CEO Waqas Samad Rings Market-Opening Bell At Exchange – Nasdaq Dubai Launches Futures Trading On FTSE Russell Saudi Arabia Equity Index
Investors have new route to gain exposure to Saudi stock price movements Launch comes ahead of Saudi Arabia’s inclusion in FTSE Russell’s Emerging Markets Index Nasdaq Dubai today launched futures trading on FTSE Russell’s FTSE Saudi Arabia Index, which tracks 46 Saudi Arabia-listed companies. The futures are designed as investment tools for global and regional investors including funds that use the index as a benchmark for investing in Saudi equities.

Korea Exchange Official: US Decision on Bitcoin ETF Will Set Tone for Local Crypto Market
An official at South Korea’s sole securities exchange operator, the Korea Exchange (KRX), says the bourse is closely eyeing developments from United States regulators in regard to Bitcoin (BTC) exchange-traded funds (ETFs).

International Women’s Day: March 8 is all about female investors
Lecture programme for women at the Frankfurt Stock Exchange / Worldwide Opening Bell at the start of trading
Together with other Frankfurt-based institutions, Deutsche Bˆrse is organising an extensive programme to promote financial literacy for women on International Women’s Day (8 March).
At the beginning of the trading day, Deutsche Bˆrse participates in a global event of the “Women in ETF” initiative, during which bells are rung on numerous stock exchanges around the world at the start or close of trading. During a network breakfast on the trading floor, Claire Peel, CFO of the DWS Group, will give a keynote address on the motto of this year’s event: “Think equal, build smart, innovate for change”. This refers to the 2019 United Nations Women Campaign.

Tel Aviv Stock Exchange expects IPO to go ahead this year
The Tel Aviv Stock Exchange (TASE) expects to float nearly a third of its shares in an initial public offering some time this year, its chief executive officer said on Monday.


United Capital Fortifies Its Industry-Leading Investment Management Offering with SpiderRock and iCapital Strategies
Business Wire
United Capital Financial Advisers LLC (“United Capital”), the country’s first and largest financial life management firm, has created a sophisticated suite of defensive strategies in the U.S. With newly-added strategies from SpiderRock Advisors, LLC, and iCapital Network, the United Capital Investment Management platform rounds out a formidable suite of protective and tactical strategies offered with competitive fees.

Aite Group Announces The Launch Of A New Cybersecurity Practice
Aite Group
Aite Group, an independent research and advisory firm focused on business, technology, and compliance issues in financial services, has announced the launch of a new practice, Cybersecurity. The Cybersecurity practice will support information security executives and the technology vendor community with practical research into the best practices and technical solutions that can strengthen the cyber risk profile of financial institutions, insurance companies, payment processors, merchants, and healthcare industry stakeholders.

Volante Technologies Supports SWIFT Standards Release 2019
Volante Technologies Inc., the global provider of software to accelerate digital transformation and modernization, today announced support for the latest SWIFT Standards Release 2019.

Trends in Cloud Migration for Financial Services
Maven Wave
While the public posture for cloud migration in financial services is one of caution and restriction, the word on the ground tells a different story. With names like JP Morgan Chase, Nasdaq, FINRA, and Capital One cropping up as cloud adopters, it has become apparent that there is more than meets the eye when it comes to the true rate of cloud migration in financial services. What is the true state of migration to the cloud and what are some of the key lessons for moving forward?

Why Controlling 5G Could Mean Controlling the World
The United States believes that whoever controls fifth-generation cellular networks, known as 5G, will have a global advantage for decades to come. The fear is that China is almost there.

British fintechs are so hot they’re bubbling
John Detrixhe – Quartz
For entrepreneurs running a financial technology company in the UK, there’s no shortage of money these days. Venture capital investment into the sector set records all over the world last year, and Britain was no exception. But could there be too much of a good thing?

RegTek.Solutions Shortlisted For Best Compliance Solution & Best RegTech Solution In 2019
RegTek.Solutions, leader in global regulatory reporting solutions, is proud to announce that it has been shortlisted for the FTF News Technology Innovation Awards in two categories: Best Compliance Solution and Best RegTech Solution.

Thomson Reuters posts 9 pct rise in quarterly revenue
Thomson Reuters on Tuesday reported a 9 percent rise in quarterly revenue, stripping out the impact of currency, helped by higher sales at its Legal and Tax & Accounting businesses.

China drove fintech funding globally in 2018 despite rising tensions with US, report says
Chad Bray – SCMP
Despite escalating tensions between the US and China over trade and technology, Chinese companies accounted for nearly half of all fintech investments globally last year, according to a new report by the consulting firm Accenture.


Blockchain Beyond Crypto: A Conversation with tZERO’s CEO Saum Noursalehi
Brian Mehta – Trading Technologies Blog
In 2018, we made a concerted effort to expand into cryptocurrencies. Among other initiatives, we launched new crypto trading tools, we added support for bitcoin futures on CME and CBOE, and we recently invested in the new CoinFLEX exchange. We recognize crypto’s potential, and we’re passionate about making sure our users have the best possible tools to trade in that space.

Suspected wash trading rife at major exchanges, per study
Ryan Todd – The Block Crypto
CoVenture Crypto, a business line of CoVenture, released a study that analyzes the “true liquidity” of crypto exchanges by exploring where (exchanges) and what people trade (liquidity pairs). Key findings from the report include: 1) Reaching similar conclusions from the Blockchain Transparency Institute report that found 2 of the top 5 reported liquidity pairs have less than 1 percent of their reported volume and 2) true liquidity is in bitcoin pairs on exchanges that have been operating since 2015 (Coinbase Pro and Bitfinex) and have low API driven trades.

Coinbase Exchange Users Can Buy and Sell XRP Starting Tomorrow
Nikhilesh De – Coindesk
Crypto exchange Coinbase is launching support for XRP, the third-largest cryptocurrency by market capitalization. The exchange announced Monday it would be listing XRP on its professional trading platform, Coinbase Pro, in “transfer-only” mode, meaning customers can only deposit tokens to begin with. After a minimum of 12 hours, the company plans to activate other trading services, though this timeline is variable.

***Note: this article was written yesterday, the 25th – Coinbase’s XRP trading should be live today. Click HERE to go to Coinbase’s home page.~MR

Accenture’s New Blockchain App Lets Users Tip ‘Sustainable’ Producers
Anna Baydakova – Coindesk
Accenture has announced a prototype blockchain-based supply chain app designed to reward business practices that conserve natural resources. Announced today, the consulting firm said it’s working with Mastercard, blockchain startup Everledger and humanitarian aid organization Mercy Corps to encourage the introduction of the so-called “circular supply chain.”

Electroneum Launches $80 Smartphone That Mines Crypto
Yogita Khatri – Coindesk
Blockchain startup Electroneum has just launched a dirt-cheap Android smartphone that mines cryptocurrency.
Announcing the news on Monday, the firm said its new M1 is a Google Mobile Services (GMS)-certified smartphone that comes with a cloud mining technology integration enabling users to earn crypto through an app.
The $80 smartphone, however, will at launch mine only Electroneum’s native token ETN, with a claimed monthly return of “up to $3.” Once set up, mining can be carried out offline, the firm said.

High Frequency Trading Firms Have ‘Highest Bitcoin Affinity’, Analyst Argues
Omar Faridi – CryptoGlobe
Su Zhu, the co-founder of Sensus Markets, a digital asset principal trading firm, has argued that companies focused on high-frequency trading (HFT), small family investment offices, and hedge funds have the “highest Bitcoin affinity.”


Cohen to Testify That Trump Engaged in Criminal Conduct While in Office
Rebecca Ballhaus and Warren P. Strobel – WSJ
Michael Cohen, Donald Trump’s former lawyer, will for the first time publicly accuse the president of criminal conduct while in office related to a hush-money payment to a porn star, a person familiar with his planned testimony before Congress said.

Fed’s Powell heads to Congress amid shifting landscape
Howard Schneider, Ann Saphir – Reuters
Federal Reserve Chairman Jerome Powell worked hard to strengthen ties with Congress during his first year as head of the U.S. central bank, doubling the pace of meetings with lawmakers over his predecessors and courting Democrats and Republicans alike.

Master of Summits: Kim Jong Un Goes From Trump’s ‘Little Rocket Man’ to ‘We’re in Love’
John Lyons – WSJ
When President Trump sits down this week for a second summit with North Korea’s Kim Jong Un, he will face a young dictator who has grown in outward confidence as a negotiator since their last meeting. That could make it tougher to convince Mr. Kim to give up his nuclear weapons, longtime observers of the secretive leader say.

Trump Organization Asks House Committee to Halt Investigation
Shahien Nasiripour – Bloomberg
President Donald Trump’s family business told the House Judiciary Committee it should stop investigating the Trump Organization, claiming a conflict of interest after the committee hired a lawyer whose firm has represented the company.

Billion Warren Buffett Says Billionaire Michael Bloomberg “Would Be A Very Good President
Tim Marcin – Newsweek
Billionaire investor Warren Buffett said on Monday that he would support fellow billionaire Michael Bloomberg should the former New York City mayor decide to run for president. “If Mike Bloomberg announced tomorrow that he was a candidate, I would say that I’m for him,” Buffett said in an interview with CNBC. “I think he would be a very good president. He and I disagree on some things, but I think that he knows how to run things. I think that he’s got the right goals for America, he understands people, he understands the market system … I would have no trouble being for him.”

California Warns Bond Buyers of Increasing Risks Posed by Trump
Romy Varghese – Bloomberg
California sees the nation’s capital as a growing risk. In documents circulated ahead its $2.3 billion bond sale next week, the state added four potential dangers that investors should consider before buying its debt. All but one has to do with the federal government.


FCA says Mifid II has had ‘positive’ effects; Aim of the rule was to toughen investor protections and reduce conflicts of interest
Philip Stafford and Siobhan Riding – Financial Times
The UK’s market watchdog has vowed to examine the effects of tough new EU-wide standards on analyst research ó but warned struggling providers that it has so far seen a “positive impact” from the rules. In a speech on Monday, Andrew Bailey, chief executive of the Financial Conduct Authority, said equity investors in the UK had saved more than £180m from changes to the way asset managers paid for research last year.

A View from Washington: A Conversation with CFTC Chairman J. Christopher
In the first episode of a new SIFMA series of short films, “A View from Washington,” Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo and SIFMA President and CEO Kenneth E. Bentsen, Jr. take a deep dive into the priority issues the Commission plans to tackle in the coming months.

ESMA Publishes Responses To Its Consultation On Reporting Guidelines Under The MMF
The European Securities and Markets Authority (ESMA) has published the responses received to its Consultation on draft guidelines on the reporting to competent authorities under article 37 of the MMF Regulation.

FCA says Mifid II to cut investor costs by £1bn; Watchdog says rules having ‘positive impact’ on accountability concerning research
Siobhan Riding – Financial Times
New EU rules on the funding of investment research are set to deliver £1bn in savings for UK fund investors over the next five years, the Financial Conduct Authority has said.

Russian court denies Baring Vostok partner bail
Max Seddon – Financial Times
A Moscow court has denied bail to a partner at Baring Vostok, Russia’s largest foreign private equity investor, who faces fraud charges that have shocked the business community. Moscow city court denied Vagan Abgaryan’s bail appeal on Tuesday, ensuring he will remain in jail on pre-trial detention until mid-April. Baring Vostok said it would continue to appeal.

Korea’s Financial Supervisory Service to crack down on unfair trading
Sohn Ji-young – Korea Herald
South Korean financial regulators said Wednesday that they would crack down on unfair trading practices this year, with a focus on false disclosures, unlawful short-selling and high-frequency trading activities. The Financial Supervisory Service has set its sights on curbing unlawful short-selling by closely monitoring sudden increases in stock value and their possible links to insider trading.

SEBI Declares Commodity Broking Arms of Motilal Oswal and Indian Infoline ‘Not Fit and Proper’
Market regulator Securities and Exchange Board of India (SEBI) has declared the commodity broking arms of Motilal Oswal and India Infoline (IIFL) as not “fit and proper”, as part of the action taken in the NSEL case.

Investing and Trading

Ex-Goldman Banker May Finish Massive Gold Deal Five Years Later
Danielle Bochove – Bloomberg
The man proposing to buy Newmont Mining Corp. in the world’s biggest gold takeover is the same person who was blamed for the deal falling apart five years ago — Barrick Gold Corp. Chairman John Thornton. On Monday, Barrick went hostile in its bid to acquire Newmont in a $17.8 billion bid that values the Colorado-based gold miner at an 8 percent discount to Friday’s close. The offer was blasted by Newmont Chief Executive Officer Gary Goldberg calling it a “desperate” and “bizarre” move by Barrick.

‘Loser’ vs ‘Anemic’: Barrick’s Newmont bid starts on toxic note
Ernest Scheyder – Reuters
Long-time rivals Barrick Gold Corp and Newmont Mining Corp renewed their animosity on Monday with their chief executives trading insults after Barrick launched an $18 billion hostile bid for the U.S. company, presaging an aggressive battle. The tough talk underscored deep personality and cultural differences between the world’s two biggest gold producers. Their past attempts to merge ended in acrimony in 2014, and the frictions could scuttle a deal this time too.

Howard Marks Burnishes the Legend of Jeffrey Gundlach
The distressed-debt guru reflects on what makes investors stand out from the crowd.
Brian Chappatta – Bloomberg Opinion
Howard Marks is undoubtedly an investing legend in his own right. The co-founder and co-chairman of Oaktree Capital Group LLC has built the Los Angeles-based firm into one of the world’s largest distressed-debt investors. His memos have been required reading on Wall Street for years, with Warren Buffett saying they’re the first thing he reads when they come out.

Falling Stockpiles Help Unleash Industrial Metals Rally; Copper, nickel and zinc are all up more than 10% this year
Amrith Ramkumar – WSJ
Declining inventories and growing optimism about U.S.-China trade talks are fueling a rally in industrial metals such as copperóan encouraging sign for investors fretting over the global economy. Inventories of several metals stored on global exchanges have fallen more than 25% from the start of last year through Feb. 18, according to data compiled by Capital Economics.

Trump tweet exposes oil rally’s shaky foundations US president reminds traders gathering in London that crude is rarely a one-way bet
David Sheppard – Financial Times
Donald Trump has just pulled the rug out from underneath those betting on an oil price rally. In the process, the US president might have revealed just how vulnerable the market really is. Mr Trump returned to Twitter on Monday to take aim at Opec for the first time since November, warning the oil producers cartel that prices were “getting too high” and asking them to “relax and take it easy” as the global economy was “fragile”.

The first no-fee ETF just got announced, and it could signal an industry-wide rush
Meghan Morris – Business Insider
The “race to the bottom” for a no-fee exchange traded fund is over, and the winner is a firm no experts had publicly predicted. SoftBank-backed Social Finance filed on Monday to launch four ETFs, two of which have no management fees for at least the first year before the fee could increase. The other two ETFs do not yet have management fees listed. The ETFs’ specific launch date has not yet been determined.

****SoFi launched a commission-free brokerage business this month, too. ~SD

Vanguard Ups the Ante in an ETF Race to Zero; Fees are coming down on seven ETFs, with combined assets of more than $134 billion.
Asjylyn Loder – WSJ
Vanguard Group is cutting management fees on seven exchange-traded funds, the latest money manager to trim fees on a host of investment products. The ETFs, with combined assets of more than $134 billion, include funds that invest in international stocks and bonds. The biggest is the $62 billion Vanguard FTSE Emerging Markets ETF which will cost $12 a year for every $10,000 invested. That is down from $14, making it cheaper than a competing ETF from BlackRock Inc.’s iShares Core lineup. In addition, 43 Vanguard mutual funds are also reducing fees.

Palladium rises to record high of more than $1,550 per ounce
Hudson Lockett – Financial Times
The price of palladium climbed to a record high of more than $1,550 on Tuesday as expectations of a supply squeeze in 2019, driven by stricter emissions standards in the car industry, helped drive the precious metal’s cost up almost a quarter in the year to date.

Unloved Part of Treasury Curve Keeps Signaling a U.S. Recession
Vivien Lou Chen – Bloomberg
Even as the Federal Reserve’s dovish pivot eases concerns over narrowing Treasury spreads and the recessionary signals they harbor, one section of the yield curve is indicating that the policy shift may be too little, too late. The gap between 1- and 5-year yields turned negative late last year, around the time when the Federal Reserve delivered its fourth interest-rate increase of 2018 and penciled in two hikes for 2019. The gap has largely been inverted ever since, plummeting to as low as minus 18.8 basis points on Jan. 3, and trading around minus 7.3 basis points Monday.

Why Stock Buybacks Do So Little for Americans Instead of restricting share repurchases, expand the pool of people with a stake in markets.
Barry Ritholtz – Bloomberg
Senators Chuck Schumer and Bernie Sanders recently inveighed against corporate stock buybacks and suggested they’d like a law that limits share repurchases to those companies that pay a minimum wage of $15 or more an hour. This idea, however well-intentioned, would replace management’s judgment on matters of corporate capital allocation with that of Congress’s. No thanks.


Sacked GAM director says he looks forward to clearing his name
A former GAM Holding AG executive, who was sacked after allegedly breaching the Swiss asset manager’s rules, said on Monday that he looked forward to clearing his name after most of the allegations against him were dropped.

Behind Harvard’s, Stanford’s, and Zuckerberg’s Investment Chiefs Is a Single Recruiter. Who Is He?
Leanna Orr – Institutional Investor
“I don’t like confrontation,” admits executive recruiter David Barrett, a man who makes a lucrative living confronting, among others, scores of job seekers who’ve been rejected from a role. “I’m passive-aggressive ó but when it goes, I explode.” The genial founder of David Barrett Partners is still irritated about one such instance.

Goldman needs to find less snobby bankers to chase small deals
Sujeet Indap – Financial Times
John Whitehead’s first commandment to his Goldman Sachs staff was: “Don’t waste your time going after business you don’t really want.” For decades after Mr Whitehead’s tenure as co-head in 1976-1984, his instruction has held. Goldman’s elite M&A bankers have stuck to chasing complicated, multibillion-dollar deals involving the biggest publicly traded corporations in the world.

Goldman hires 100 staff for new cash management business; US bank tries to steal market share from Citi and JPMorgan and diversify earnings
Laura Noonan – Financial Times
Goldman Sachs has hired 100 staff for its fledgling corporate cash management business, as the Wall Street bank rushes to steal revenues from Citigroup and JPMorgan Chase. A person familiar with the situation told the Financial Times that Goldman had already recruited about a third of an initial 300-person target for the venture, which was announced in January.

StanChart’s Winters Needs a Plan for Growth; The CEO’s cost cuts can take the bank only so far. It needs scale to compete effectively.
Nisha Gopalan – Bloomberg
Standard Chartered Plc is taking a knife to its bloated structure. One cheer for that, even if the cost-cutting plan doesn’t go far enough. The bigger issue now for CEO Bill Winters is where to find growth.


With 10-to-1 Leverage, Shadow Banks Fuel China’s Huge Stock Boom
Bloomberg News
Eager to pile into the world’s most-volatile major stock market with 10-to-1 leverage? China’s shadow bankers are happy to help — and that has the nation’s policy makers worried. Just hours after China’s CSI 300 Index notched a 6 percent surge on Monday, its biggest gain in more than three years, the country’s securities regulator warned of a rise in unregulated margin debt and asked brokerages to increase monitoring for abnormal trades.

Defaults Hurt, But Emerging Debt Still Wins in the Long Run; Emerging governments’ bonds gave long-term investors surprisingly good returnsóbut the long term was 200 years
James Mackintosh – WSJ
The past year has been grim for emerging markets, with currency collapses, IMF rescues and Venezuela’s descent toward anarchy. Investors seem happy to move on: The main emerging market hard-currency bond index passed its January 2018 level on Friday to set a new high. The rebound in emerging market bonds came as the U.S. Federal Reserve retreated from talk of higher interest rates and the dollar fell from postcrisis highs against emerging market currencies, making hard-currency bonds easier to service. But just as important for investors, emerging market bonds mostly continued to pay fat coupons at a time when developed-government bonds offer slim pickings.

China’s Bull Market in Stocks Feels Somewhat Fake; The rally in local equities is just following the usual pattern after an epic bubble and bust.
John Authers – Bloomberg
It is official. Chinese domestic stocks are in a bull market. By this, I mean that the CSI 300 index, which combines the biggest stocks on the Shanghai and Shenzhen exchanges, is now up more than 20 percent from its recent low (more than 25 percent, in fact, after an exceptionally strong Monday). That satisfies the widespread definition of a bull market.

Up $1.4 Trillion, China’s Stock Rally Is Nearing a Big Hurdle
Bloomberg News
Equity benchmark tried and failed to rise above key level; Mounting 3,000 would be real start of bull market, trader says
The stunning surge in Chinese equities has traders talking about the Shanghai Composite at 3,000 points again, with Tuesday’s whipsaw session underscoring the importance of that key level.

A Stock That Rides Every China Bubble Returns Stronger Than Ever
Sofia Horta e Costa – Bloomberg
A little-known maker of fire-truck engines that rides every melt up in China’s equity market is at it again. After doing next to nothing for months, Anhui Quanchai Engine Co. has surged 182 percent this year on record volume, beating all but two of the other 1,500 companies on the Shanghai Composite Index, which has rallied 18 percent. The stock’s average daily turnover for 2019 is almost 50 percent higher than that of oil giant PetroChina Co., a company about $200 billion more valuable.

UK insurer launches ‘catastrophe bond’ to cover risks of terrorism
Oliver Ralph – Financial Times
A UK insurer has launched the first ever “catastrophe bond” to cover the risks of terrorism, fanning hopes in the industry that such instruments can expand beyond their traditional heartland of windstorms and earthquakes. The cat bond, which allows investors to directly back insurance risks via the capital markets, will pay out if terror attacks in the UK cause more than £750m of losses in a single year. The three-year, $75m bond, called Baltic PCC, carries a 5.9 per cent coupon. It has been launched by Pool Re, a UK government-backed terrorism reinsurer.

Hong Kong’s green bond market to pick up steam on back of government’s proposed HK$100 billion push
Eric Ng – South China Morning Post
Green bonds and loans by local issuers in Hong Kong jumped nearly fivefold last year to US$2.3 billion, with volumes expected to rise further after the government rolls out an issuance programme, according to Climate Bonds Initiative.
A total of US$11 billion in green debt was issued in the city, showed a report published on Monday by the promoter of bonds and loans that finances projects with environmental benefits.

Landmark offshore default by Chinese state company sparks worry; Missed payments by Qinghai aluminium producer evoke Gitic collapse in 1998
Gabriel Wildau and Don Weinland – Financial Times
A Chinese state-owned enterprise from the country’s remote north-west has failed to repay a US dollar bond in Hong Kong, the first offshore default in 20 years and the latest sign investors can no longer rely on Chinese authorities to bail out state groups.


UK’s Labour says it will back call for second Brexit referendum
Kylie MacLellan, William James – Reuters
Britain’s opposition Labour Party said on Monday it would back calls for a second referendum on Brexit if parliament rejects its alternative plan for leaving the European Union.
With just over a month until Britain is due to leave the bloc on March 29, Prime Minister Theresa May is seeking changes to her exit deal in order to break an impasse in parliament.

Bring On That Second Brexit Vote Labour’s Jeremy Corbyn says he’s in favor. Better late than never.
Editorial Board – Bloomberg
The Labour Party’s sudden shift on Brexit isn’t definitive and settles nothing – but in this endless saga of ruinous incompetence, it counts as a hopeful development. After dithering for months, Jeremy Corbyn has said he and his party will support a second referendum to avoid what he calls “a damaging Tory Brexit.” About time. But it isn’t just a damaging Tory Brexit that the U.K. needs to avoid. It’s any kind of Brexit, including the supposedly less damaging Labour Brexit that Corbyn seems to have in mind.

BoE gives banks extra liquidity to alleviate Brexit cash shortfall risk
Chris Giles – Financial Times
Banks will be able to access additional funds from the Bank of England in case they run short of money as Britain leaves the EU, the central bank said on Tuesday.

No-deal Brexit or ‘short’ delay? British May offers MPs a choice
William James, Kylie MacLellan – Reuters
Prime Minister Theresa May on Tuesday offered members of parliament the chance to vote in just over two weeks time on whether to delay Brexit or go for a potentially disorderly no-deal exit from the European Union if her attempt to ratify a divorce deal fails.


Daily Mail owner looking at options for its Euromoney stake
The owner of Britain’s Daily Mail newspaper said on Monday that it is considering options for its stake in Euromoney Institutional Investor Plc, but has not yet held discussions with anyone. Daily Mail and General Trust Plc holds more than 49 percent of Euromoney, which provides business-to-business information, and is its largest shareholder and founding investor.

The death of cash has been greatly exaggerated ó just look to the $100 bill
Shawn Langlois – MarketWatch
The stock market is coming off its best January in years, the economy appears to be holding up well, interest rates are still low, cryptos and mobile payments continue to gain traction ó it’s not exactly a cash-friendly climate at the moment. Then what’s going on with the $100 bill?

John Childs Retires From Namesake Firm in Wake of Prostitution Sting
Hema Parmar – Bloomberg
John Childs, the buyout veteran who co-founded J.W. Childs Associates, retired just days after being charged with soliciting prostitution.

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