First Impressions

Bits & Pieces of Cake, Etc.
By John J. Lothian

Patrick Lothian married Amanda McCune this weekend in Ohio. The couple will live in Perrysburg, OH while she completes clinical studies for a Ph.D in psychology, and he will work remotely for John J. Lothian & Company, Inc.
Patrick&Amanda

The rehearsal dinner for their wedding was just down the road from The Andersons’ grain elevators in Toledo.

Doug Ashburn is on a well-deserved vacation this week with is family.

I finished my book on Byron by Fiona MacCarthy and my book on the Wright Brothers by David McCullough. I recommend both. I note that at the end of Byron’s life, he was trying to help the Greeks secure a loan from London in order to help secure their independence. Different menace now, but how the world has changed.

Our Summer Intern Education Series in Chicago will be on August 4, 5 & 7. The events on August 4 & 5 will be at IIT Stuart School of Business and the August 7 event will be held in Trading Technologies’ cool office.

We are holding a one-day, two session event in New York on July 15 at the New York Stock Exchange. We will have sessions at 1 and 3:30 PM. Twenty lucky attendees will get a tour of the trading floor between the events.

We will be posting sign-up links for both events this week. Stay tuned.

Quote of the Day

“We never realize what the tipping point is until after it happens. We’re as defensive as we’ve been since pre-crisis.”

Jerry Cudzil, TCW Group’s head of U.S. credit trading in the story, “Major Money Manager Braces for Bond-Market Collapse”.

Lead Stories

Banks did not do enough to police FIFA transactions, says global agency
Reuters
A global group of government anti-money-laundering agencies said that financial institutions have not done enough to police suspicious financial activity by officials at soccer’s global governing body FIFA, and cautioned banks to step up scrutiny.
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Banks Barraged by Cyber Stickups
By DAVID REILLY, WSJ
Speak to any bank regulator nowadays and they will freely admit the threat of cyber-attacks is what keeps them up at night.
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The Hunt for the Financial Industry’s Most-Wanted Hacker: The malware known as ZeuS and its rogue creator have been at the cutting edge of cyber-crime for nearly a decade
June 18, 2015, Bloomberg
In any global outbreak, it’s important to identify Patient Zero. In the movies, you get a leggy Gwyneth Paltrow. In the nine-year online epidemic that helped create cybercrime as we know it, you get “fliime.”
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EU Leaders Prod Greece for More to Clinch Aid Accord This Week
Bloomberg
European leaders urged Prime Minister Alexis Tsipras’s government to make a final push to satisfy creditors and finally end a five-month standoff over aid.
An accord by the end of the week is “possible but it’s not yet certain,” Belgian Prime Minister Charles Michel said as he arrived for an emergency euro-area summit in Brussels. German Chancellor Angela Merkel was less committal still, saying the leaders’ meeting would be consultative only since as yet there was “no basis for a decision.”
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Gross’s Pimco Exit Shows Fund Risk Not Systemic, IOSCO Head Says
Bloomberg
Pimco’s ability to cope with a stampede of investor withdrawals after Bill Gross’s departure gives credence to arguments that mutual funds don’t threaten the broader financial system, the chairman of a global group of market regulators said Monday.
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How are Active Managers Beating the Market? By Taking More Risk.
thereformedbroker.com
Savita Subramanian’s group at Bank of America Merrill Lynch is out with an update on the state of actively managed mutual funds, noting that “44% of all managers outperformed” the Russell 1000 index of US large caps year to date. “Value managers had the highest hit rate of 77%, while 36% of Growth and 29% of Core managers beat their benchmarks.”
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Major Money Manager Braces for Bond-Market Collapse
Bloomberg
TCW Group Inc. is taking the possibility of a bond-market selloff seriously.
So seriously that the Los Angeles-based money manager, which oversees almost $140 billion of U.S. debt, has been accumulating more and more cash in its credit funds, with the proportion rising to the highest since the 2008 crisis.
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U.K. Bankers More Likely to Misbehave Under Pressure, PwC Says
by Ambereen Choudhury, Bloomberg
Bankers are more likely to behave unethically when under pressure to reach tough performance targets, according to a survey of British financial-services employees.
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EU agrees rules to curb bank trading risks
BY FRANCESCO GUARASCIO AND HUW JONES, Reuters
EU finance ministers agreed a draft law to rein in trading risks at banks on Friday, including an exemption for Britain’s lenders because they already face similar curbs.
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Wages of Sin Still Weigh on Big Banks; Bank stocks could fall out of favor if compliance costs remain elevated
By JOHN CARNEY, WSJ
The tide might not be turning. Hopes that regulatory and compliance costs at the biggest U.S. banks might begin to retreat after years of rising may be premature.
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UK banks fear block on cross-selling, RBS chairman warns
Martin Arnold and Patrick Jenkins in London, FT
British banks fear being blocked from cross-selling products to their clients under new ringfencing rules that hand a big advantage to foreign rivals, the chairman of Royal Bank of Scotland has warned.
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SEC Fights Challenges to Its In-House Courts; Securities and Exchange Commission deploys countermeasures to defend its approach
By JEAN EAGLESHAM, WSJ
The Securities and Exchange Commission is fending off a flurry of legal challenges to its in-house court system, which has become a key cog in its enforcement strategy but has drawn mounting criticism.
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Why You’re Paying Too Much in Fees
By JASON ZWEIG, WSJ
The way financial advisers charge for their advice often makes no sense, and it needs to change.
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Santander Bank Ready to Invest in Blockchain Technology?
NEWSBTC
After releasing a paper covering 20 to 25 uses of blockchain technology, Santander is reportedly ready to invest in a cryptocurrency startup to sustain their initiatives. Santander is the tenth largest bank in the world, according to a list by Forbes.
The bank has come up with Santander InnoVentures, which is the banking giant’s $100 million fintech investment fund. This was launched last year and has made three investments so far.
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WIRED Money Q&A: Francisco González on reinventing finance in the digital age (Wired UK)
Catherine Lawson – Wired
Francisco, you’ll be speaking in the “Transforming Banking Via Digital” session at WIRED Money, Together with BBVA. What elements of the digital transformation are you planning to focus on?
I will focus on the need for conventional banks to develop a new knowledge-based business model. This model has three mainstays: the content — the things being sold, customer experience — how the product or service is presented and used, and the technology platform, which shapes production and distribution.
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Central Banks

ECB Has Your Back If Greece Breakdown Tips Markets Into Turmoil
Bloomberg
This time, the European Central Bank should have what it needs to do whatever it takes.
If Greece fails to secure the extension of aid needed to avert a default as soon as next week, President Mario Draghi’s ECB would again prove to be the defensive front line should financial markets be thrown into turmoil. Euro-region heads of government meet with Greece’s leadership later on Monday in another attempt to strike a deal.
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Central banks will continue to lift prices for years to come
MarketWatch
Even after the Federal Reserve raises interest rates, central banks will continue to play an outsize role in bolstering equity and bond market returns, said Russ Koesterich, global chief investment strategist at BlackRock.
In a weekly commentary piece published Monday, Koesterich examined how central bank policies can influence the market.
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Investors Play the Confidence Game in Trusting Central Banks
MoneyBeat – WSJ
Rarely have so many U.S. investors appeared so confident in the world’s central banks.Money managers are so sure of central banks’ ability to rescue economies and protect financial markets that they are largely shrugging off the risk of a Greek debt default and the likelihood of a Federal Reserve interest-rate increase in September, the first since 2006.
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As Greece Deadline Looms, European Central Bank Plays Key Role
NY Times
As Greece’s standoff with its creditors enters the final stretch, the European Central Bank finds itself in the awkward position of being both the country’s savior and its scold.
Europe’s central bank has been the lender of last resort for Greece, keeping its banking system — if not the country itself — from collapse. But the E.C.B. has also been among the most recalcitrant of its creditors, pushing Greece to the verge of default by refusing to offer relief on its heavy debts.
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Swiss Central Bank Tries to Ride Out European Storm
Bloomberg
Pity the Swiss National Bank. At the central bank’s policy meeting last week, it acknowledged that the exchange rate it manages is overvalued, which means it is likely to undermine economic growth, turn away tourists and hold back long-term prosperity. Yet the SNB refrained from doing anything about it, and the franc immediately appreciated even more, adding to the challenges facing the bank and Switzerland.
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Currencies

Don’t Worry About the Euro; It’ll Be Fine
Bloomberg
To many observers, especially in the U.S. and the U.K., what’s happening to Greece is only a symptom of a broader euro crisis. Many people blame the common currency for low economic growth, the excessive debt burdens and high unemployment in the European Union’s periphery, and pretty much everything that’s wrong with Europe’s economy. Yet the euro works, and most people who use it like it, including Greeks.
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Time to transform the world’s currency system
Financial Times
The pending International Monetary Fund review of special drawing rights is much more than a rejigging of a currency basket, or a decision on whether or not the Chinese renminbi will be included. It is about whether the IMF is willing to take serious steps towards the transformation of the international monetary system. It will matter greatly for the interplay of currencies and for financial markets.
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China’s renminbi liberalisation leaves capital controls intact
Gabriel Wildau – Financial Times
China is close to its goal of making the renminbi convertible for investment purposes, a senior Chinese central banker has said, highlighting Beijing’s view that strict controls on cross-border capital flows are consistent with convertibility.
China is actively seeking the International Monetary Fund’s endorsement of the renminbi as an official reserve currency, a designation that requires a currency to be “freely usable”.
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Senate drops its digital currency report in bitcoin’s ledger – Technology & Science
www.cbc.ca
The official ledger of all bitcoin transactions now contains something a little unusual — courtesy of the Canadian Senate.
The Standing Senate Committee on Banking Trade and Commerce released its new report on digital currency late last week, not just on the Parliament of Canada website, but also as a message in the bitcoin blockchain — the public ledger of all transactions involving bitcoin, by far the world’s most popular digital currency.
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Indexes & Index Products

Meet the New Bond Index That Will Mirror the S&P 500
By PAUL VIGNA, WSJ
S&P Dow Jones Indices, the company that produces the S&P 500 stock index as well as myriad other benchmarks, is planning to launch a bond index – the S&P 500 Bond Index – in early July that will track the debt of the S&P 500 components.
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Tomorrow’s Profit Squeeze Today
Justin Lahart – WSJ
As the second quarter draws to a close, one question is whether profit margins might finally start to contract. The better question: whether that happened a while ago.
Companies don’t seem to have fared as well in the second quarter as analysts once expected. They now see S&P 500 earnings per share to have fallen 4.7%, year over year, notes FactSet. At the year’s start, they saw 5% growth.
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Career-defining moment for Aussie analysts as financial centre of gravity shifts
afr.com
The defining event in the career of Australian sharemarket analysts is not whether Greece leaves the euro or even whether the Fed hikes interest rates. It’s got nothing to do with the Reserve Bank cash rate or the housing market. In the opinion of Credit Suisse’s Hasan Tevfik, their future will be defined by a “stroke of a pen by the boffins at MSCI and the FTSE”.
When China’s $US9 trillion sharemarket is added to global indices such as the MSCI the global centre of financial gravity will shift further in Australia’s direction. But it will render our market irrelevant.
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Shares of MSCI Inc (NYSE:MSCI) Sees Large Outflow of Money
Carmen Wimmer – OTC Outlook
MSCI Inc (NYSE:MSCI) had an volatile session and gained 0.01 points till last call. The price was at $61.97, gaining 0.02% till the last intraday data. The total uptick value was $1.51 million while the total downtick value was $7.7 million. The shares saw a net money flow of $(-6.19) million and the up/down ratio stood at 0.2. The stock has seen a change of of 0.13% for the week.
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Energy Fuels Set to Join the Russell 3000(R) Index
MarketWatch
Energy Fuels Inc. (nyse mkt:UUUU)(EFR) (“Energy Fuels” or the “Company”), one of the leading producers of uranium in the United States, is pleased to announce that the Company is set to join the broad-market Russell 3000(R) Index at the conclusion of the Russell indexes annual reconstitution on June 26, 2015, according to a preliminary list of additions posted June 19, 2015, which can be accessed through the following link:
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Gold

ICE Benchmark Administration Announced Two New Direct Participants To The Gold Auction
ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced that two new direct participants have been approved by ICE Benchmark Administration (IBA) to participate in the gold auction, which is used to determine the LBMA Gold Price.
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RBI opposes finance ministry plan to use gold deposits as bank CRR
Economic Times India
The Centre’s attempt at monetising gold lying with Indian households may face a road block with the RBI writing to the finance ministry opposing a plan to use gold deposits as bank Cash Reserve Ratio (CRR).
Finance ministry sources told ET Now that in its reservation against the move, the RBI said banks may hoard excess gold if it is included in CRR and also said the existing rules do not permit usage of gold as bank CRR.
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South Africa’s Gold Miners Begin Wage Talks
WSJ
Wage negotiations in South Africa’s gold mining sector have got under way, an intractable process expected to drag on for weeks, if not months, while any strike action could further dent the bottom lines of the country’s already-struggling mining companies.
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China’s Zijin targets Australian gold miner in M&A spree
Reuters
Zijin Mining Group launched a bid for Australian gold explorer Phoenix Gold on Monday, the Chinese company’s third planned acquisition of a foreign mining asset in less than a month.
Long-dormant M&A activity in Australia and other mining-intensive countries is showing signs of a rebirth, with Zijin the most acquisitive to date and with the deepest pockets.
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Tim Cook reveals why Apple is obsessed with gold
mashable.com
Apple’s recent obsession with gold-colored versions of its products is indeed a response to preferences in China.
Apple CEO Tim Cook told Bloomberg Businessweek that the company takes Chinese tastes into consideration when releasing new iPhones, iPads and MacBook.
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Miscellaneous

Traders Wanted: Tudor to Train Macro Managers as Banks Retreat
by Katherine Burton, Bloomberg
Paul Tudor Jones is looking for the next generation of macro managers.
The founder of the $14 billion Tudor Investment Corp., one of the best-performing and oldest macro hedge funds, is starting LaunchPad Trading, a joint venture that will give 20 young macro traders a chance to hone their craft before they start managing client money. It will be funded by Tudor partners including Jones, and HC Technologies, a Chicago firm run by Tudor alum Joseph Niciforo that specializes in algorithmic trading.
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Greece Is in a Worse Spot Than America Was in 1933
Bloomberg
Is Greece in a depression? The above is confusing. It is classic “on the one hand, on the other hand …” analysis. For Greece, it is neither confusing nor funny. They are most certainly experiencing some form of “Great Contraction” or “Great Recession.” But is it a “Great Depression” like in the 1930s? Or is Greece in the early stages of a “Long Depression” like the U.S. from 1873 to 1896—longer and shallower than what followed on in 1929?
Let’s take a look.
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