First Impressions

Garry Jones, London Metal Exchange – Managing an Exchange in Uncertain Times

“It doesn’t matter where you start, it matters where you finish. Don’t just do the job for the money. Do your research, work hard…and it might work out.”

Garry Jones, CEO of the London Metal Exchange, says that our lives and the career path we go down shouldn’t be seen like a checklist – expecting to work at Company X by the time one is a certain age or saying that “By age Y, I will be married and have children” is unrealistic. Jones himself graduated with a degree in Geology and Geophysics; it would be later in his career that he became interested in banking and the financial industry. Jones stresses that it is important to take risks and not be afraid of failure. He also says that when speaking with other companies in hopes of employment, research is key.
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Quote of the Day

“A market being ‘positively’ surprised tends to rise; history shows that during the busiest reporting weeks the S&P 500 has risen 60 percent of the time versus less than 50 percent during the quietest weeks. The simple message is this: don’t be short during U.S. reporting seasons.”

Andrew Lapthorne, global head of quantitative strategy at Société Générale, in the Bloomberg story, “SocGen Slams the Corporate ‘Cheating’ Season”

Lead Stories

Accused Spoofing Trader Tells Jury His Orders Helped Market
Bloomberg Business
The first trader to be tried on charges of spoofing told Chicago jurors that commodities orders he placed “improved the market for everyone” and that he tried to promote trading activity. Michael Coscia, the head of Panther Energy Trading LLC, said repeatedly under questioning by prosecutors Friday that he intended to trade every order he placed in late 2011, even though more than 460,000 large orders he placed on CME Group Inc. exchanges were canceled.

George Soros’s firm pulls $500 million from Bill Gross of Janus
Bill Gross just got a huge vote of “no confidence” from billionaire investor George Soros.
Soros Fund Management LLC, which Soros chairs, pulled its roughly $500 million from an account run by Gross at Denver-based Janus Capital Group Inc (JNS.N), a source familiar with the matter said on Monday. The trade publication Pension & Investments earlier reported on the outflow.

Greenspan’s Nightmare Chart Spoils Labor Department Data Party
It was supposed to be a celebration: The U.S. Bureau of Labor Statistics was trumpeting 100 years of the Current Employment Statistics survey, the backbone of its monthly jobs report. Then the maestro rose to deliver bad news.
Alan Greenspan, the former Federal Reserve chairman, damped the mood at the Oct. 19 festivities by pointing out that, while the department has a respected history of data collection, its numbers show the economy will struggle.

New York’s ‘snarling watchdog’ seeks new master
Somewhere in New York there is an ex-drug addict who owes a debt of thanks to the NYDFS — but there are few banking executives who would offer similar warmth towards the regulatory institution.

SocGen Slams the Corporate ‘Cheating’ Season
Andrew Lapthorne, global head of quantitative strategy at Société Générale, has a certain disdain for the game of “lower and beat” that companies play with the analyst community each quarter.

Eurozone banks still swamped with bad loans
British and American banks have acted fast to clean up their balance sheets, but European lenders are still weighed down with loans which are not being paid off

China Steps Up Market Reforms Amid Record Capital Outflows
Ye Xie – Bloomberg
Stability in the currency market encourages further opening up
Offshore and onshore yuan exchange rates have converged
China is signaling that it’s not letting record outflows this year deter capital-market reforms.

Fund houses face ‘collateral damage’ in tax reform
Plans for a global crackdown on corporate tax avoidance threaten to reduce returns for fund investors, hit profits for asset managers and disrupt cross-border investment flows in Europe. Managers of hedge funds, private equity, infrastructure and property vehicles stand to be affected the most by the proposed reforms, which aim to ensure that tax is paid where profits are earned.

Company Spokesmen, Reporters Lose Sleep as NYSE Shifts Open
Bloomberg Business
The New York Stock Exchange last month redefined the “trading day” for purposes of company announcements, to 7 a.m. to 4 p.m., from 9:30 a.m. to 4 p.m. Companies that report earnings during the trading day have already had an additional obligation to give NYSE Group Inc. 10 minutes’ warning of any information that could affect their stock price, such as earnings. So, to avoid the extra hassle, they’re simply sending out their earnings earlier.

Bill Ackman wants us to remember how a young Warren Buffett took advantage of the ‘Great Salad Oil Scandal of 1963’
Yahoo Finance
Bill Ackman wants people to remember salad oil. In a conference call on Friday defending his stake in Canadian pharmaceutical company Valeant, Ackman recalled an opportunity found by a then-35-year-old hedge fund manager named Warren Buffett after American Express got caught up in the “Great Salad Oil Scandal of 1963.”

Loeb’s Third Point: ‘More Single Short Names Than Long Positions’
Third Point is growing disenchanted with the outlook for the broader equity market.
The hedge fund, run by activist investor Daniel Loeb, chronicled the sources of stocks’ third-quarter woes in its latest letter to investors.

There are too many hedge fund billionaires
Yogi Dewan – FT
It has become hard to justify investing in the asset class, says Yogi Dewan
I have been investing in hedge funds for nearly 20 years. The basic premise was that hedge funds were a portfolio diversifier focused on absolute returns. They were perceived as an uncorrelated asset class sold as being market neutral.

JPMorgan settles California debt collection charges
JPMorgan Chase & Co will pay $50 million to settle charges that it engaged in abusive credit card debt collection practices against tens of thousands of people in California, state Attorney General Kamala Harris said on Monday.
California was one of three U.S. states, along with Mississippi and Wyoming, that did not join JPMorgan’s $216 million settlement in July of related charges by the federal government, the other 47 states and Washington, D.C.

Central Banks

Paper Says Fed’s Problem With Shadow Banks, Moral Hazard Is Nothing New
The Federal Reserve’s problem with safety net free-riders goes back to its very foundations.
A paper published Monday by the National Bureau of Economic Research finds the central bank’s current challenges with so-called “shadow banks” echo the difficulties it had with banks that didn’t want to become part of the Federal Reserve system nearly 100 years ago. The paper was written by Charles Calomiris, Matthew Jaremski, Haelim Park and Gary Richardson.

US banks face $120bn shortfall under Federal Reserve plan
Six of the biggest US banks would have to make up a $120bn shortfall in their long-term debt to boost the financial system’s resilience under a Federal Reserve proposal aimed at preventing another systemic meltdown.

Cash entices as central banks diverge
Financial Times
Recent signals from the European Central Bank and the Federal Reserve have reignited talk of divergent monetary policies among the world’s two most influential central banks.
The short-term implications for investors include a stronger dollar, greater equity market volatility and a wider trading range for key interest rate differentials. The longer-term consequences are up for grabs. Both suggest investors should revisit conventional wisdom that dismisses cash as a “wasting asset” in their portfolios.

ECB officials met bankers before key decisions
Financial Times
Some of the European Central Bank’s top decision-makers met bankers and asset managers days before major policy decisions, and on one occasion just hours before, copies of their diaries reveal.
The diaries, which cover meetings of the six members of the ECB’s executive board between August 2014 and August 2015, were given to the Financial Times under EU freedom of information rules and reveal engagements with the private sector, officials and the media.

White-knuckle time for the Federal Reserve
The job market this week faces the first of 2 big tests slated over the next month or so as part of the pre-Christmas cliffhanger set up by the Federal Reserve. As the Fed last week drew a big, red circle around its December meeting for the possibility of an interest rate hike, it raised the stakes involving jobs data. A number of recent economic readings have come in on the weak side. If forthcoming readings on October and November hiring are similarly lackluster, the Fed could be forced to delay raising interest rates once again.

Soaring Corporate Bond Issues Show That The Federal Reserve’s QE Really Did Work
There’s an interesting little report today stating that corporate bond issues are soaring. That’s not really my subject, that being about finance not economics, but it’s also an interesting proof that the Federal Reserve’s policy of quantitative easing did in fact work. Because the aim and point of the whole QE program was to get long term interest rates down so that people would go out and borrow more money. Given that they are out there and borrowing more money we’d have to say that the program to get them to do that worked.


Plunging Currencies Drive a Wedge in Emerging-Markets Bond Funds
Emerging-markets bonds have recovered a bit so far in October, but the third quarter was a painful reminder of the risks of emerging-markets currency.

ECB Stimulus Pushes Denmark Toward Currency Intervention Shift
The specter of more stimulus from the European Central Bank risks triggering a policy reversal in Denmark, forcing it to resume currency purchases in defense of its exchange-rate regime, according to Danske Bank.

Fifth Third Bank Extends Currency Processing Solutions Across Multiple Caesars Entertainment Corporation Properties
Press Release
Fifth Third Bank (NASDAQ: FITB), a leader in currency processing, today announced a strategic relationship with Caesars Entertainment Corporation to expand Currency Processing SolutionsSM (CPS) across their integrated resort franchise. CPS enables businesses to reduce labor costs and paperwork, mitigate theft, and make working capital more readily available.

Bitcoin Is Suddenly Surging Again
Bitcoin is back in the news, but this time it seems to be for all the right reasons.

Indexes & Index Products

Wary investors eye China’s back-door entry into MSCI indexes
MSCI (MSCI.N) will begin to add overseas-listed Chinese shares to its emerging market indexes this month, drawing billions of dollars into such stocks, which could eventually lead to mainland-listed companies finding their way into global equity portfolios.

New Source equity index ETF launched on Xetra; ETF offers access to US S&P 500 companies
Deutsche Börse
Deutsche Börse Cash Market: A new equity index fund from the ETF offering issued by Source has been available on Xetra and the Börse Frankfurt venue since Monday. The ETF tracks the performance of the S&P 500 Index using a selection of companies comprised in it.

China is about to be included in the gold standard of emerging market stocks
Saikat Chatterjee and Michelle Price, Reuters
MSCI will begin to add overseas-listed Chinese shares to its emerging market indexes this month, drawing billions of dollars into such stocks, which could eventually lead to mainland-listed companies finding their way into global equity portfolios.

Five Wild Stats from October ETF Flows; Money flowed into stocks, bonds and emerging markets last month.
Eric Balchunas – Bloomberg
The leaves and the weather weren’t the only things that changed in October.
Investor sentiment also shifted sharply across the board as shown in the month’s exchange-traded fund flows. While ETFs as a whole brought in $28 billion of extra investment – keeping them on pace to break last year’s annual record – the interesting news can be found inside specific asset classes.

2016 Target Weights for the Bloomberg Commodity Index Announced
Bloomberg L.P.
Bloomberg today announced the composition and 2016 target weights for the Bloomberg Commodity Index (BCOM). Launched in 1998, BCOM is a highly liquid and diversified benchmark for the global commodities market. There will be no new commodities added or removed as a result of the annual reconstitution.

Surfer Who Left Banking Creates a Niche Market in Fossils
Yoolim Lee – Bloomberg
For Cliff Hartono, it was a surreal moment. In October 2012, he was standing on a Wyoming hilltop, a hotbed of fossil discoveries. Dotted with Angus cattle, horses, and deer, the landscape was a world away from London’s Canary Wharf, where only a month earlier, surrounded by six computer screens, he had been selling exchange-traded funds at Credit Suisse Group.


Gold bond scheme to be launched on Thursday
Business Standard News
The Reserve Bank of India (RBI) will start issuing sovereign gold bonds on November 26, 2015, with a tenor of eight years and an interest rate of 2.75 per cent, the finance ministry said in a statement. The bonds will be open for public subscription from November 5-20, it added.

Gold slides to lowest settlement in a month
Gold futures slumped Monday to their lowest settlement in a month, with precious metal remaining under pressure after the Federal Reserve last week surprised investors by hinting at a rate rise as early as next month.
Higher rates can be a headwind for commodities like gold that don’t bear interest.

Fuljenz: Barrick Still Bullish on Gold Outlook Despite Annual Decline
The statement from the Federal Open Market Committee (FOMC) in mid-week that an interest rate hike is likely in December knocked the props out from under a budding gold rally. Gold prices dropped about $40 by early Friday.
The Fed held interest rates steady at near-zero, but the language of its statement turned more hawkish, suggesting a probable increase in interest rates at the December meeting.

Is bitcoin a better investment than gold?
An autumn rally has put bitcoin on track to finish the year in the green. Gold, meanwhile, is on track for a loss.


Kenneth Griffin Looks Back on Citadel’s 25 Years
Dealbook – NY Times
Twenty-five years ago, Kenneth C. Griffin got a break when, as a newly minted Harvard graduate, he drew backers to start a small investment firm in Chicago.
Since then, that firm has become Citadel, a $25 billion financial colossus that has become one of the biggest market makers around, a company that counts a former chairman of the Federal Reserve as a senior adviser.

When to Put the Defendant on the Witness Stand
Dealbook – NY Times
It is perhaps the most difficult question a defense lawyer and client have to answer in a criminal trial: Should the defendant testify?

CBS Plans a Streaming ‘Star Trek’ Series
NY Times
CBS announced on Monday that it had ordered up a reboot for “Star Trek,” but it’s one that won’t start for another 14 months and it comes with a surprising twist. Though “Star Trek” will premiere on CBS in January 2017, all subsequent episodes will be shown elsewhere: its digital app, CBS All Access.

***JB: Can’t help but put this here since I am a lifelong Trekkie.

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