First Impressions

Out of Chaos: ICE’s Sprecher Says Exchange Is Set For Growth
JohnLothianNews.com

The Intercontinental Exchange Group had a record 2014, but for CEO Jeff Sprecher “boy, it was a chaotic year.” ICE posted revenues of $3.01 billion last year from transaction and clearing fees, as it consolidated operations from the 2013 NYSE Euronext acquisition, navigated changing regulations, handled energy market volatility and eyed its Asian expansion.

Sprecher, who spoke with JLN editor-in-chief Jim Kharouf at the FIA Boca conference, said regulation will continue to be a strong influence on the marketplace in 2015. But ICE is not waiting for the US and European rulemaking process to reach its conclusion. The exchange plans to launch a new Singapore-based exchange and clearinghouse to complement its US and European operations.
Watch the video »

Quote of the Day

Our remarks this morning will focus on the so-called global slack hypothesis, the notion that, as a result of globalization, the concept of slack that is most relevant for thinking about short-run tradeoffs between inflation and real activity is global rather than local. We argue that the global slack hypothesis has analytical content even under a floating exchange rate regime in the context of at least one widely used framework for thinking about inflation dynamics in open economies and, furthermore, is consistent with what we see in the data…As foreign goods become more important in the consumption bundle, the strength of the relationship between the foreign output gap and domestic inflation will increase, while the relationship between the domestic output gap and domestic inflation will become weaker.

Mark Wynne, vice president, associate director of Research and director of the Bank’s Globalization and Monetary Policy Institute at the Federal Reserve Bank of Dallas in the story, “The Fed wonders where inflation comes from — 2009 transcripts edition”.

Lead Stories

BSI Becomes First Swiss Bank to Settle Under D.O.J. Disclosure Program
Dealbook – NY Times
BSI, one of Switzerland’s largest private banks, on Monday became the first Swiss lender to reach a settlement with the Justice Department under a disclosure program intended to encourage Swiss banks to cooperate in an inquiry into wealthy Americans who used secret Swiss accounts to avoid taxes.
As part of its settlement, BSI, based in Lugano, Switzerland, entered a nonprosecution agreement with the Justice Department and agreed to pay a $211 million penalty.
jlne.ws/1CEz90A

Soros says ready to invest $1 billion in Ukraine if West helps
Reuters
George Soros is ready to invest $1 billion in Ukraine if Western countries help private investment there, and sees a 1 in 3 chance Greece will leave the euro, the billionaire financier told Austrian newspaper Der Standard.
jlne.ws/19BXUih

Bond Trader Buzzkill Is the Suspicion That Losses May Come Fast
Bloomberg
Making easy money in the bond market has perhaps never felt this unnerving.
Bond investors are questioning themselves as they cast aside their historical models and watch their debt holdings keep on rallying — thanks to central banks across the globe that are making government bonds scarce by hoarding trillions of dollars worth of them. So, even though the $40 trillion broad global bond market is handing investors above-average returns in 2015, asset managers are preparing for catastrophe.
jlne.ws/1CEFtp5

Bond Traders Fear Oct. 15-Style Volatility Could Repeat
Bloomberg
A group of U.S. Treasury market professionals sponsored by the Federal Reserve Bank of New York expressed concern that the large gyrations seen in that market on Oct. 15 could be repeated in the future, according to minutes of their meeting released Monday.
jlne.ws/1CEFTeX

Did Bernanke forget about QE?
Financial Times
Economics blogger Ben Bernanke wrote today on why interest rates are lower than they’ve been in the past. His argument is that changing estimates of future growth and inflation are to blame, rather than an overly activist Fed. While we have some sympathy for this view, we’re struck by the fact that it partly contradicts what Bernanke said when he was actually at the Fed.
jlne.ws/1CEFbyp

Why Soaking the Rich Won’t Fix Income Inequality
Bloomberg
As Congress works through a budget and Americans file their tax forms, both Democratic and Republican presidential hopefuls have been talking about the gap between rich and poor. Hillary Clinton noted “the overriding issues of inequality and lack of mobility” at an event last week in Washington. Jeb Bush said in Detroit last month that “[t]oday Americans across the country are frustrated. They see only a small portion of the population riding the economy’s up escalator.” Neither candidate, however, talked much about raising taxes as a solution—in fact, Bush was clear that “no tax, no welfare program will save our system or our way of life.”
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Ackman says shutting Herbalife down is key to him
Reuters
Hedge fund mogul William Ackman, who has spent more than two years accusing Herbalife Ltd (HLF.N) of running a pyramid scheme, said on Monday that shutting down the company is the most important thing he can do.
jlne.ws/19BY8WK

ABN Amro IPO back in sight after executives concede on pay
Reuters
The Dutch government will reconsider selling off ABN Amro [ABRGPA.UL], Finance Minister Jeroen Dijsselbloem said, after senior managers agreed to give up a controversial pay rise that had stalled progress on the bank’s proposed share listing.
In the face of a widespread public outcry, the managers said they would give up raises of 100,000 euros ($110,000) each, which had been approved by the supervisory board for six members of the managing board, all but Chief Executive Gerrit Zalm.
jlne.ws/1CEBuc6

Western banks axed 59,000 jobs last year, more cuts to come in Europe
Reuters
Top European and U.S. banks axed 59,000 jobs last year as they restructured and cut costs, with headcount expected to shrink further in Europe as bosses strive to improve profitability that has been hit hard by tougher regulation.
Lenders have also sold or shut businesses to narrow their focus to avoid falling foul of regulators concerned that some have become too big and complex.
jlne.ws/1CEBado

Wall Street Regulator Gears Up for Labor Fight With Its Workers
Silla Brush and Robert Schmidt, Bloomberg
The top U.S. derivatives regulator is used to battling Wall Street. Now, it’s gearing up for a potential fight with its own employees.In February, the Commodity Futures Trading Commission contracted to spend as much as $420,000 on outside labor lawyers after its workers joined a union, public documents show. The CFTC retained the attorneys in case labor negotiations break down and the agency becomes embroiled in a legal dispute, said a person briefed on management’s thinking who requested anonymity.
jlne.ws/1ysgVKy

What Silicon Valley Learned From the Kleiner Perkins Case
NY Times
Kleiner Perkins’s victory Friday in the gender discrimination suit brought by Ellen Pao could be seen as an affirmation of the Silicon Valley old boys club. But venture capitalists have said that the trial has already put the tech industry on notice: It can no longer operate as a band of outsiders, often oblivious to rules that govern the modern workplace — even if that has been a key to its success. Silicon Valley has always prided itself on doing business differently. Forget bureaucracy and the traditions of bigger, older companies, the thinking goes. Instead, wear jeans to work, bring your dog, don’t ask permission to try something new, and embrace failure.
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Merger That Came to Aid of Knight Capital Struggles; All the top Knight-era executives have exited
By BRADLEY HOPE, WSJ
Every Monday morning for the past 20 months, Daniel Coleman has stepped off his private jet from Alabama and straight into a storm.
jlne.ws/1G1v2hP

Wealth managers risk enforcement actions as FCA ‘runs out of patience’
Dan Jones, InvestmentWeek
Wealth management firms are facing more serious consequences from a failure to meet suitability requirements as the regulator puts practices under fresh scrutiny.
jlne.ws/1DkePnB

G-20 Leak Revealed World Leaders’ Personal Details
WSJ
Australian authorities inadvertently revealed personal details of world leaders, including their passport numbers, by accidentally emailing the information to organizers of a soccer tournament.
jlne.ws/1CECooZ

Former JP Morgan banker to head Barclays’ UK ECM team – source
Reuters
Barclays (BARC.L) has hired Barry Meyers, a former executive director at JP Morgan (JPM.N), to head its UK equity capital markets (ECM) team, a source familiar with the matter said on Monday.
jlne.ws/1CEB1GJ

S.E.C. Accuses Financier Lynn Tilton of Defrauding Investors
Dealbook – NY Times
Federal regulators accused Lynn Tilton, the self-described “turnaround queen,” and her firm, Patriarch Partners, on Monday of defrauding investors by hiding the poor performance of assets she managed for them.
jlne.ws/1CEyRXJ

U.S. investor lawsuit over Harbinger’s LightSquared is dismissed
Reuters
A federal judge on Monday dismissed a lawsuit accusing Philip Falcone and his Harbinger Capital Partners LLC of misleading investors by taking a majority stake in wireless company LightSquared Inc without disclosing the investment or its risks.
jlne.ws/19BYjRV

R.B.S. Says Head of Its Corporate and Institutional Bank Will Leave
Dealbook – NY Times
The Royal Bank of Scotland said on Monday that Rory Cullinan, the recently appointed head of its corporate and institutional bank, was leaving the company at the end of April.
jlne.ws/1CEzf8w

UPDATE 1-AIG Chairman Steve Miller to step down in July – WSJ
Reuters
American International Group Inc Chairman Robert “Steve” Miller intends to step down in July after five years in the role, the Wall Street Journal reported.
The insurer’s directors have not yet decided on a replacement, but the next outside chairman is expected to be a current board member, the Journal said, citing a person familiar with the matter. (on.wsj.com/1CEe7iO)
jlne.ws/1CEC5KM

Central Banks

BoE and ECB settle four-year battle over City clearing houses
Alex Barker in Brussels, Claire Jones in Frankfurt, FT
Britain and the European Central Bank have ended a four-year battle over City of London clearing houses in a deal that could ease fears about the UK’s future in Europe’s single market.
jlne.ws/1HWzzD1

Bank of England Outlines Parameters of 2015 Stress Test
By JENNY ANDERSON, NYT
The Bank of England will test major British banks on their potential performance against financial shocks including a global slowdown, a sharp drop in inflation, and a reduction in worldwide appetite for risk.
jlne.ws/1NybGlp

The Fed wonders where inflation comes from — 2009 transcripts edition
Financial Times
Professor Paul Krugman feels so strongly that the US and other rich countries would have recovered better if only prices had risen faster that he wrote two columns, one in April 2012, and another in May 2013, with literally the exact same headline: “Not Enough Inflation.”
While we’re inclined to agree with his reasoning, it’s worth repeating, as we have in earlier posts in this series, that the US actually ended up getting a lot more inflation than the Fed’s staff expected at the start of the recovery. Moreover, the staff almost always expected less inflation than any of the policymakers on the Fed’s Open Market Committee.
jlne.ws/19C4027

Investment banks eye potential trading boost from ECB stimulus
Reuters
Investment banks feeling the pinch from increased regulation since the financial crisis could reap an earnings reward from a boost in trading activity under the European Central Bank’s (ECB) trillion-euro quantitative easing (QE) program.
The flood of money into markets from the ECB’s bond-buying has brought an increase in the volatility that traders crave as investors stake bets on the impact the scheme will have on inflation and long-term interest rates.
jlne.ws/1CEByZi

China central bank governor calls for vigilance on deflation
Reuters
China’s central bank governor Zhou Xiaochuan warned on Sunday that the country needs to be vigilant for signs of deflation and said policymakers were closely watching slowing global economic growth and declining commodity prices.
Zhou’s comments are likely to add to concerns that China is in danger of slipping into deflation and underline increasing nervousness among policymakers as the economy continues to lose momentum despite a raft of stimulus measures.
jlne.ws/1CEBHvK

How One Research Firm Cracked the Federal Reserve’s Code
The Street
Evan Schnidman’s research goes way beyond the old “briefcase indicator.” Schnidman is the founder and chief executive of Prattle Analytics, a consulting firm that uses proprietary data that tells hedge funds, investment banks and other Wall Street institutions how to accurately use Federal Reserve commentary in their decision-making. Despite its name, Prattle probably has a better fix on the Fed than the pundits who based their predictions of Fed actions on the changing heft of former Chairman Alan Greenspan’s briefcase.
jlne.ws/1CEGbCy

Indexes & Index Products

S&P 500 Profit Reversals Hard to Stop as Bad Quarters Add Up
Bloomberg
Analysts predict Standard & Poor’s 500 Index profits are going to decrease for three straight quarters. Investors better hope they don’t.
History shows that once earnings drop for that long, they almost always keep falling, and usually take the market with them. In fact, among 17 declines that got to nine months since the Great Depression, exactly one stopped there, in 1967.
jlne.ws/1CoXUwy

Top Ranked Small Cap ETFs For Outperformance
Seeking Alpha
Small cap stocks have been significantly beating their large cap cousins over the past few months. The Russell 2000 index that measures the performance of the small cap segment of the US equity universe has returned more than 14% in the past six months, versus about 5% return for the large cap US equity indexes. The most important reason for small cap outperformance appears to be the dollar strength.
jlne.ws/1CoXJRM

U.S. Index Futures Signal Stocks Will Climb Amid Deal Activity
Bloomberg
U.S. stock-index futures rose, signaling equities will extend a quarterly advance, amid increased deal activity and optimism central banks will support global growth.
jlne.ws/1CoYwlM

Gold

Hedge Funds Are Shorting Gold at Highest Level Since 2006
Luzi Ann Javier – Bloomberg
Hedge funds are betting that gold’s recent rally won’t last and are holding the biggest wager ever that prices will decline.
The net-long position in gold dropped by 9.9 percent to 31,653 futures and options in the week ended March 24, according to U.S. Commodity Futures Trading Commission data published three days later. That was the lowest since December 2013. Short holdings rose for a seventh straight week to 84,022 contracts, the highest since the data begins in 2006.
jlne.ws/1OQKrEd

Two Ways Individual Investors Can Gain Exposure to Gold
The Street
Individual investors interested in gold may want to consider SPDR Gold Shares (GLD), an exchange-traded fund that is backed by gold bullion and that matches the performance of Comex gold futures contracts.
Most precious metals traders focus on Comex gold futures, but the typical individual investor prefers not to have exposure to financial futures contracts and prefers the ETF because it trades like a stock.
jlne.ws/19C6LAB

When Will China Disclose Its True Official Gold Reserves And How Much Is It?
ETF DAILY NEWS
Things are heating up in the Chinese gold market.
First let’s go through the latest Shanghai Gold Exchange data and then we’ll continue to discuss the most recent developments regarding Chinese official gold reserves.
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In 20 years, the world may run out of minable gold
www.marketwatch.com
In another two decades rare commodities may become seriously scarce.
According to Goldman Sachs, the world has about 20 years each of known minable reserves of gold diamonds and zinc. Platinum copper and nickel reserves only have about 40 years or less left.
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