First Impressions

Veronica Augustsson, CEO, Cinnober – The Why & How of Technology

“If you don’t know the technology, you don’t really know what you can achieve. It’s when you combine the business knowledge and the technology that you achieve something special.”

Veronica Augustsson, CEO of Cinnober, discusses the importance of tying together technical and business knowledge. Augustsson says that as a developer, one must not be easily discouraged when others tell them their ideas seem impossible. Knowing the capabilities of your technology will help generate new solutions to existing problems. Augustsson also touches on the importance of curiosity and why we should be driven by our curiosity to innovate and improve existing technologies. She says that finding an environment that helps inspire and drive your curiosity is essential.
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Quote of the Day

“I think people will be conservative for a while to start,” he said, adding that after a while, traders would likely start to make on-the-spot decisions that fell into a riskier category. “I think people will feel freer to send their analysts out to get information and they’ll take more risks.”

Glen Kopp, a former prosecutor at Bracewell & Giuliani in the story, “U.S. authorities face new fallout from insider trading ruling”.

Lead Stories

$1.1 Trillion U.S. Spending Bill Goes to Senate; Eases Rules on Bank Bailouts
Kathleen Hunter and Erik Wasson – Bloomberg
The Senate is poised to take up a $1.1 trillion U.S. government spending bill opposed by two senators who agree on almost nothing — Democrat Elizabeth Warren and Republican Ted Cruz.
Timing for a Senate vote is uncertain. The House today extended government funding through Dec. 17, giving the Senate until then to act without risking a shutdown.

Banks Fined Over Pursuit of Work on Toys ‘R’ Us IPO
By Telis Demos And Alexandra Scaggs, WSJ
Finra Says 10 Wall Street Banks Offered Favorable Coverage to Secure Spot as Underwriters
Citigroup Inc., Goldman Sachs Group Inc. and eight other securities firms were fined a total of $43.5 million by regulators who said the companies offered favorable stock research in hopes of winning underwriting business in an initial public offering by Toys “R” Us Inc.

Don’t Fear Twitter, Bankers Told Over Tea and Hashtags
By Kit Chellel, Bloomberg
Tweeting bankers can wreak havoc in 140 characters. They can also use Twitter to help restore trust in financial services, according to Kitty Parry, founder of the Social Media Charter.
At a seminar in a conference room at the U.K. Houses of Parliament yesterday, Parry pushed the benefits of Facebook posts and tweets as bankers were served scones with jam and clotted cream on silver plates.

Moribund Inflation Igniting Dash for Bonds From Europe to U.S.
David Goodman – Bloomberg
Inflation is moribund and bond buyers love it.
As crude oil leads a collapse in commodity prices, a German gauge of the outlook for inflation over the next five years has fallen below zero. With no increases in consumer prices in sight, bondholders’ interest and repayments are worth more, inflaming demand for fixed income. The longest maturities are setting the pace from Europe to the U.S.

Even if Fed Drops ‘Considerable Time,’ Markets Shouldn’t Have Tantrum
Scott Gamm – The Street
If the Federal Reserve removes “considerable time” from its statement next week, a rate hike could come sooner than expected, but don’t expect the markets to crash and burn.
The Fed has stuck to its nebulous language, saying short-term interest rates, which have remained near zero for six years, will stay low for a “considerable time” after its quantitative easing program ended in October.

Wall Street’s Win on Swaps Rule Shows Resurgence in Washington
By Cheyenne Hopkins and Silla Brush, Bloomberg
Wall Street is re-emerging as a force in Washington as it closes in on one of its biggest wins against regulation since the financial crisis.

Heather Capital: How a $600 Million Hedge Fund Disappeared
By Laurence Fletcher, WSJ
Gregory King’s Fund Pulled in Money From Big-Name Investors, But Liquidators Have Found Little
In the run-up to the financial crisis a hedge fund took in hundreds of millions of dollars from wealthy investors. Now the money is gone?and the man who ran it has disappeared from their sights.

Junk-Bond Well Runs Dry as Oil Shock Quells Debt Supply
Cordell Eddings and Nabila Ahmed – Bloomberg
The market for new junk bonds has all but shut as plunging oil prices and borrowing costs at an 18-month high deter issuers.
Even as sales of high-yield, high-risk notes in the U.S. reached a record $353.1 billion this year, offerings have stalled this month with the slowest pace for a December since 2011. Junk is on track to deliver its second straight quarterly loss, the first time that’s happened since 2008, and trimming gains for the year to 1.47 percent, according to Bank of America Merrill Lynch index data.

Hearst to Increase Stake in Ratings Firm Fitch to 80%
Matt Robinson – Bloomberg
Hearst Corp., the media company with stakes in A&E and ESPN, is paying $1.97 billion for an additional 30 percent stake in Fitch Group, the owner of the third-biggest credit ratings firm.
Hearst, which owns 15 daily and 34 weekly newspapers as well as 29 television stations, is increasing its interest to 80 percent after buying its first stake in the company in March 2006, the closely held company said today in a statement. The transaction is expected to close in the first quarter.

U.S. authorities face new fallout from insider trading ruling
By Nate Raymond and Aruna Viswanatha, Reuters
U.S. prosecutors, already smarting from a appeals court ruling that weakens their ability to crack down on future insider trading, on Thursday faced widening fallout from the decision as some existing cases threatened to unravel.

Europe Bank Union Opponents Told to Gird for Extra Cost
Frances Schwartzkopff and Peter Levring – Bloomberg
Staying outside Europe’s banking union comes at a cost, according to the Danish central bank.
As the Scandinavian nation awaits the outcome of a study by its Justice Department on the merits of joining, the country’s highest monetary authority says nations that stay outside the banking union may need to impose stricter capital requirements. The government is also warning that there will be ramifications of opting out.

Why Swaps Matter
Mark Whitehouse – Bloomberg View
The congressional wrangling to avoid a government shutdown — with its attendant noise about a thing called the swaps push-out rule — has brought useful attention to some unfinished business of financial reform: loosening the largest U.S. banks’ grip on the derivatives market.

Central Banks

The Federal Reserve: Opportunistic overheating
The Economist
WHEN officials at the Federal Reserve meet next week, they will wrestle with a problem most other central banks would love to have: what to do if unemployment gets too low?
The question is not hypothetical. America’s labour market is on a tear. Non-farm employment rose by an impressive 321,000 in November, the most in nearly three years. Job growth is not only strong, it is accelerating, averaging 241,000 this year, up from 194,000 last year. The unemployment rate, at 5.8%, is down 1.2 points in the past year. Within a year, at that pace, unemployment could drop below 5%. At such levels, the Federal Reserve reckons, firms struggle to find workers and so start to offer higher wages. Inflation soon follows.

Gross Says Fed May Become ‘Dovish’ as Oil Prices Plunge
Sree Vidya Bhaktavatsalam and Mary Childs – Bloomberg
Bill Gross, who used to run the world’s largest bond fund before joining Janus Capital Group Inc. (JNS) in September, said the Federal Reserve may become more “dovish” after oil prices plunged in recent weeks.
The Federal Reserve would have to take lower oil prices “into consideration,” Gross said today in a Bloomberg Surveillance interview with Tom Keene. “I think that yes, it moves towards a dovish stance relative to what the market expected a few days ago.”

BOJ Said to Reject Adding Stimulus to Ease Blow to CPI From Oil
Toru Fujioka and Masahiro Hidaka – Bloomberg
The Bank of Japan rejects the idea that additional monetary stimulus is needed to prevent the decline in oil prices in recent months from pulling down inflation, according to people familiar with the discussions.
For now, policy makers assess that while cheaper energy costs may weigh on consumer prices for a time, they ultimately will boost the economy — spurring inflation, the people said, asking not to be named as the talks are private. Less agreement is found on how much capacity the central bank has to expand its buying of government debt, some of the people said.

A Leak at the Federal Reserve
Jake Bernstein – Pacific Standard Magazine
The Federal Reserve sprung a previously unreported leak in October 2012, when potentially market-moving information about highly confidential monetary deliberations made its way into a financial analyst’s private newsletter.
The leak occurred the day before the scheduled public release of meeting minutes that shed new light on the Fed’s decision to embark on a third round of bond buying to boost the economy, ProPublica has learned.


Carney Prepping Super Thursday Deluge to End BOE Policy Whiplash
Jennifer Ryan – Bloomberg
Mark Carney is going to turn the Bank of England’s drip-feed of information into a fire hose.
The succession of releases the Monetary Policy Committee normally provides over two weeks, sometimes whipsawing investors, is about to be condensed to just one day. They will now get immediate access to everything from the latest interest-rate decision to forecasts and how the nine-member panel voted.

Indexes & Index Products

The real factor exposures in “smart beta” indexes
Amanda White –
Investors relying on nomenclature of smart beta indexes as an accurate reflection of their factor exposures should take a closer look. New research, using a “factor efficiency ratio”, finds that most smart beta indexes are unable to provide desired factor exposures without taking on substantial unintended exposures. Importantly the paper finds that some smart beta indexes advertise certain factor exposures, such as value, but have risk profiles that were dominated by unintended exposures, such as size and volatility.

Videocast: VIX spike tied to OVX

Efficient Exposure to Mid-Cap Stocks
IShares Core S&P Mid-Cap (IJH) is not the oldest or most heavily traded ETF tracking the S&P MidCap 400. That distinction belongs to SPDR S&P MidCap 400 ETF (MDY). But IJH has a structural advantage that gives it an edge. Like most funds, IJH enjoys the flexibility afforded by the Regulated Investment Company structure, whereas the more heavily traded ETF in this category, MDY, is organized as a unit investment trust, which is a more restrictive legal structure that precludes securities lending and dividends reinvestment.


Apple Co-Founder Traded His Shares for Gold. Why That Was a Horrible Investment, in 1 Chart
Mark Milian – Bloomberg
In 1976, Apple co-founder Ron Wayne sold his 10 percent stake in the company for $800 and said he has no regrets. Before auctioning off some early Apple artifacts today, he told Bloomberg TV that the first purchase he’ll make with his proceeds is gold.

Higher Prices Forecast For Gold Market Next Week
Kitco News via Forbes
With gold prices holding over $1,200 an ounce, a majority of participants in the weekly Kitco News Gold Survey forecast the yellow metal to rise next week.
In the Kitco News Gold Survey, out of 36 participants, 21 responded this week. Ten see prices up, while six see prices down and five see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Commodities Firm Gunvor Said to Exit Gold Trading After Year
Chanyaporn Chanjaroen and Andy Hoffman – Bloomberg
Gunvor Group Ltd. is giving up trading physical precious metals less than a year after the commodity house started a business dedicated to buying and selling gold.
At least two traders are leaving the company in Geneva and Singapore, according to people with knowledge of the matter, declining to be identified as the decision isn’t public. Seth Pietras, the firm’s spokesman in the Swiss city, declined to comment by phone and e-mail today.

A ‘Yenning’ For Gold
Jay Taylor – Seeking Alpha
When you look at gold in currencies other than the dollar, it has not fared so badly as the chart below shows. With the massive destruction of the yen, gold in yen terms is up 14.3% this year. It’s up 12.3% in euros and 5.8% in U.K. pounds. The U.S. dollar gold price was up 0.4% for the year as of Dec. 3.

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