Back From Boca
As John Lothian reported today in his newsletter, Thursday was the last day of the actual program part of the FIA conference in Boca Raton, Florida (today they are all playing golf). This is good news for those of you/us who missed Doug and Jim’s pithy commentaries on monetary policy and other issues. Luckily, they will be back on Monday, probably with some interesting reports (and maybe some gossip?) on the conference, as well as video interviews with exchange leaders and others. If you missed their recent commentaries, you can catch up here: http://johnlothiannews.com/c/g/commentary/
Meanwhile, Jeff Bergstrom and I (Sarah) will be grateful to have some more folks back in the Chicago office. Also, although we missed John, a big thank you to Jon Matte in Norway for adding his always quotable comments to the John Lothian Newsletter, and to Jeff for his hard work on the other newsletters – and for getting up very, very early on Monday when Jon was off duty to do John’s.
In other news, we are nearing the end of our first MarketsWiki editorial internship project, in which two hard working graduate students from DePaul came to the office and learned how to edit MarketsWiki, and helped us out by adding lots of new information to a number of pages. It has been a pleasure working with them. It was also nice to see some outside contributors sign up to help edit MarketsWiki, and to hear from people who sent us updates for their MarketsWiki pages. The more the merrier. – Sarah Rudolph
Quote of the Day
“The Great Recession has driven home the lesson that the Fed has not only to fulfill its dual mandate, but also to contribute its part to the maintenance of the stability of the financial system. Almost always, these goals are complementary. But each of them must be an explicit focus of Fed policy.”
Stanley Fischer, nominee to be vice chairman of the Federal Reserve in the story, “At Hearing, Fed Board Nominees Endorse Current Path”.
At Hearing, Fed Board Nominees Endorse Current Path
Three nominees to the Federal Reserve’s board sailed through a brief confirmation hearing on Thursday, assuring senators of their commitment to strengthen financial regulation and stimulate the economy.
***SR: The nominees all spoke in favor of constraining large banks. But as Senator Elizabeth Warren pointed out, that is a little tricky to do when the government is “well stocked with the alumni of large banks.”
Bank of England’s Mark Carney and Other Central Bankers Face Tough Decisions about Raising Interest Rates
Jason Douglas and Jon Hilsenrath – WSJ.com
One of the first things Mark Carney did when he took over the Bank of England last July was to remove a painting of Montagu Norman from a wall near his office. Mr. Norman was the eccentric BOE governor whose policies are often blamed for exacerbating the Great Depression—mistakes Mr. Carney didn’t want to repeat.
China Bond Risk Exceeds Ireland as Defaults Unavoidable
Yumi Teso, Liau Y-Sing and Fion Li – Bloomberg
China’s default risk has risen beyond that of Ireland, having been on par with France and Japan a year ago, as Premier Li Keqiang said financial leverage is making the economy’s outlook more complex.
New York Federal Reserve examined forex trade benchmarks
Gina Chon in Washington – FT.com
The Federal Reserve Bank of New York examined benchmarks in foreign exchange trades as early as October 2012, months before UK authorities began examining potential market manipulation in the industry. The NY Fed was not studying currency rate rigging at that time and was instead broadly examining which reference rates existed and how they were used.
Daimler sells first renminbi bond in China
Tom Mitchell in Beijing – FT.com
Daimler has sold a Rmb500m “panda” bond to Chinese investors, the German company announced on Friday, making it the first non-financial overseas company to tap the market for funds.
The Fed’s Age of Inflation
Justin Lahart – MoneyBeat – WSJ
Serious inflation has been absent from the American scene for years–but for the Federal Reserve, the threat remains omnipresent. Indeed, recently released transcripts show that even in the dark days of the 2008 financial crisis, many Fed officials were more worried about inflation than the economy collapsing around them.
Overshooting, once and for all
Karl Smith | FT Alphaville
Robin Harding pushes back against Cardiff’s argument that the Fed shouldn’t overreact to incipient signs of labor market tightness, and also against Ryan Avent’s contention that the Fed should try overshooting for once […]But I think that Harding’s argument is a demonstration of exactly why overshooting is so crucial.
In a tech bubble with a twist, the big danger is bonds
Gillian Tett – FT.com
Seth Klarman, the publicity-shy manager of the $27bn Baupost hedge fund, has given investors a slap. In his quarterly investment letter, he declared capital markets are in the grip of a wild bubble.
Fiscal challenges in Britain’s impoverished future
Martin Wolf – FT.com
Next Wednesday we will watch a piece of British political theatre. Nothing new is likely to emerge from the Budget. Nevertheless, this is an important juncture. With the country less than 14 months from a general election, it is time to consider the fiscal future.
Draghi Praises European Banks That Are Cleaning Up Their Books
JACK EWING – NYTimes.com
The president of the European Central Bank said on Thursday that euro zone banks faced a period of “creative destruction” that would be healthy for the economy, and he praised the banks that were moving more aggressively to deal with their problems.
Draghi Says ECB Forward Guidance May Help to Curb Euro
Fergal O’Brien – Bloomberg
European Central Bank President Mario Draghi said his forward guidance may help to weaken the euro and lower real interest rates, easing the risk that inflation won’t return to the goal set by policy makers.
Bank of England Seeks to Expand Clawback Rules
CHAD BRAY – NYTimes.com
Bankers who engage in misconduct could have their bonuses clawed back for up to six years after the improper conduct under a new rule proposed by the Bank of England.
Russian central bank keeps rates on hold
The Russian central bank kept its key lending rates unchanged at a regular meeting on Friday, after unexpectedly raising them two weeks ago when assets tumbled on President Vladimir Putin’s declaration he had the right to invade Ukraine.
Russia’s central bank says hackers attack its website
Hackers brought down the Russian central bank’s website on Friday before a meeting on interest rates, the bank said.
Fed nominee Fischer says current policy is approximately appropriate
The U.S. Federal Reserve’s policy stance is “approximately appropriate” and central bankers still don’t have to adjust policies to ward off inflation, the Obama administration’s nominee for a top position at the Fed said on Thursday.
U.S. Fed balance sheet details for latest week
UBS Traders Found to Have Tried Rigging Hong Kong Rate
Yidi Zhao – Bloomberg
UBS AG (UBSN) traders tried to rig Hong Kong’s benchmark interest rate between 2006 and 2009, the city’s central bank said following a more than yearlong probe.
The Hong Kong Monetary Authority found about 100 internal chat messages containing “change requests” by several traders for the bank’s submissions to set the Hong Kong Interbank Offered Rate, according to a statement today. While the requests had a “negligible impact” on fixings and no fines will be imposed, the regulator asked UBS to take disciplinary action against the employees responsible.
Is the PBOC driving up the euro?
Delphine Strauss | FT Alphaville
China’s central bank engineered an abrupt end to the carry trade in the renminbi last month. Could it also be helping to drive up the ever-appreciating euro?
ECB’s Draghi: Strong Euro Pulling Down Euro Zone Inflation
European Central Bank President Mario Draghi issued his strongest statement yet that the strong euro is pulling down inflation in the euro zone, making clear that the central bank is concerned that the appreciating euro could undermine the currency bloc’s fragile recovery.
Concerns about China and Ukraine help euro to 2-1/2 year high
The euro hit a new 2-1/2 year high against the dollar on Thursday as concerns over China’s economy and international tensions over Ukraine took the fizz out of an attempted rebound in riskier assets.
The Mt. Gox Effect: Singapore Regulates, Bitcoiners Rejoice
Michael J. Casey – MoneyBeat – WSJ
Singapore has been a favorite locale for bitcoin startups, thanks to what many have seen as its permissive stance toward virtual currencies. So, now that the city-state has announced it will regulate digital currencies, what’s the bitcoin business community’s response? Mostly positive, it seems.
Latest Bitcoin Craze? Actual Bank Vaults
Startup Xapo Raises $20 Million to Store Digital Currency Underground
BitBeat: Much Good, Dogecoin; So Hip
MoneyBeat – WSJ
Dogecoin, the alt-coin launched in December and based on an Internet meme built on top of an Internet meme, has a noisy, loyal, and active fan base. They’re fun-loving, in a good way, and they’re working very diligently to build dogecoin into not only a digital currency, but, to put it in comic book terms, a force for good in this world.
Indexes & Index Products
As Stock Picking Comes Back In, ETF Use Goes Out
Dan Strumpf – MoneyBeat – WSJ
Here’s the latest evidence that stock picking is back: Investors are buying and selling fewer exchange-traded funds. As big macroeconomic headlines recede, ETFs are falling out of favor.
Gold Trades Near Six-Month High Before Crimea Referendum
Maria Kolesnikova and Glenys Sim – Bloomberg
Gold traded near the highest level in six months as escalating tensions in Ukraine, before a vote in Crimea on breaking away to join Russia, boosted demand for the precious metal as a store of value.
U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov are meeting in London today to discuss the crisis in Ukraine. President Barack Obama and German Chancellor Angela Merkel have warned that the March 16 vote in Crimea has no international legitimacy.
Stocks down but gold isn’t; here’s why gold’s back in vogue
Pras Subramanian – Yahoo Finance
From the classrooms of FIT to the ateliers of Paris, students and designers alike will tell you fashion is cyclical. ‘In with the old, out with the new’ is part of the business, but one could say that about certain assets in the investment world, specifically gold (GLD). A year of after getting sent to the return bin, gold’s back on many investors must-have list, making a steep run to 6-month highs.