First Impressions


Emerging Opportunity: Silvercrest’s Mike Dubin on Matching Small Funds with Large Investors
The managed futures space continued to struggle to post enticing returns in 2013, but Silvercrest Asset Management’s managing director Mike Dubin says that has not kept his firm from looking for emerging manager talent in the space. Dubin, who spoke at the Emerging Manager Forum in Miami in December, says the research shows that smaller emerging managers have continued to outpace larger funds by 2 percent to 4 percent per annum. There have been a number of studies that conclude that smaller funds that produce nice returns tend to perform poorly going forward when they have large pools of capital to manage and invest. Here’s how Silvercrest is matching small funds with large investors.

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Quote of the Day

“For the IMF fire brigade to arrive with lights flashing and sirens wailing before a crisis occurs risks provoking a crisis that might not otherwise happen.”

Stanley Fischer, nominee for vice chairman of the Federal Reserve in a 1998 article reported in the story, “What Stanley Fischer Did at the IMF”.

Lead Stories

China Dwarfs U.S. in Monetary Stimulus
Move over, Janet Yellen and Ben Bernanke. Step aside, Mario Draghi and Haruhiko Kuroda. Compared with Zhou Xiaochuan, the longtime governor of the People’s Bank of China, they are all lightweights when it comes to monetary stimulus.

***DA: This is no puff piece or feel-good story. It is about a nation soon to endure some growing pains.

What Stanley Fischer Did at the IMF
Matthew C. Klein – Bloomberg
Stanley Fischer has officially been nominated to serve as vice chairman of the Federal Reserve. Although he is eminently qualified, one item on his resume is a potential cause for concern: his tenure as second-in-command of the International Monetary Fund from 1994 through much of 2001, a period when the IMF was aiding Russia’s post-Soviet transition, as well as responding to crises in Asia and Latin America.

***DA: I and others have questioned another section of his resume – the one where he served as a Citigroup exec as the behemoth was leveraging up. View our recent commentary here:

Barclays Traders Said to Face U.K. Libor Interviews
Suzi Ring – Bloomberg
Several former Barclays Plc (BARC) traders suspected of involvement in Libor manipulation were ordered to report to U.K. fraud prosecutors for interviews, according to a person with knowledge of the case.

***DA: Blood in the water and sharks are circling.

Is China’s Focus on Reform Clouding the Picture on Shadow Banking?
Bob Davis and Lingling Wei – MoneyBeat – WSJ
To be a player politically in China means to be a reformer, at least when it comes to the economy. But when it comes to controlling the growth of shadow banking and China’s spiraling debt, the reform fixation could be backfiring.

***DA: If I have said it once I have said it a thousand times – navigating a “soft landing” is a near impossible task.

China bank lending slows as PBOC walks policy tightrope
China’s new bank lending slowed more than expected in December and broad money supply growth also eased, highlighting the policy tightrope the central bank must walk as it tries to contain risky debt levels without braking the economy too hard.

Hollande Faces Investors Deserting French Debt: Euro Credit
Mark Deen and Anchalee Worrachate – Bloomberg
President Francois Hollande’s surest supporters since taking office have been buyers of French bonds. Some of them are now deserting the country’s debt.

***DA: They’re not deserting, they’re just not buying as much.

Analysis: Greece hopeful, but any debt relief likely to be symbolic
Greece expects the euro zone to provide some debt relief to Athens later this year but the impact on its vast liabilities will be little more than symbolic.

***DA: Putting band-aids on deep gashes.

Fed hawks, wielding votes, urge faster end to bond buying
The Federal Reserve should bring its bond-buying program to a swift close, according to two of its most hawkish policymakers who take up voting power this year, with Dallas Fed chief Richard Fisher vowing to use his vote to support cuts to the program even if stocks, now near record highs, take a tumble.

***DA: What? I thought stock market appreciation became part of the Fed mandate a few years ago.

Deflation fears to renew currency wars as ECB poised for QE, say analysts
Simon Watkins – Euromoney magazine
With global economic growth still stuttering, currency depreciation has become a zero-sum game for central banks, and recent developments in some key currencies have shown that fears of an inflation undershoot or outright deflation will remain an important driver for their currency policies.

***DA: Beggar thy neighbor.

Credit strategists are… bearullish, we guess
Cardiff Garcia | FT Alphaville
Our broad US outlook for 2014 is that it represents an inversion of the situation from the start of last year: while the conditions for economic growth in the US now seem better than they were then, the prospects for debt and equity markets are much more complicated.

Economists: there is no such thing as the ‘economic approach’
John Kay –
Economics is not a method but a subject – one defined by the problems it tackles

***DA: Words of wisdom from Dr. Kay, one of my favorite economists.

Failing elites threaten our future
Martin Wolf –
In 2014, Europeans commemorate the 100th anniversary of the start of the first world war. This calamity launched three decades of savagery and stupidity, destroying most of what was good in the European civilisation of the beginning of the 20th century. In the end, as Churchill foretold in June 1940, “the New World, with all its power and might”, had to step “forth to the rescue and the liberation of the old”.

***JM: It’s in the animal. We grow the same crop, in the same proportion, of stellar, mediocre and harmful people in every generation. “Elites” don’t get that title as much from who they are, as they do from where they germinated, so to speak. It’s the same in business as with civic governance: there aren’t all that many good leaders and managers out there, and “proven quality” is not much of a factor in how we choose our CEOs and financial policymakers, either.

Central Banks

Australian Central Bank’s Jawboning Carries Risk
The Australian central bank’s continuing attempts to talk down the nation’s currency have been met with cheers by exporters struggling to sell their merchandise overseas. But there is a potentially dangerous side effect.

Fed banks split in December on what to do with discount rate
One regional Federal Reserve bank continued to push for a cut in the U.S. central bank’s emergency lending rate in December, while three others renewed a request to hike it, minutes of Fed deliberations released on Tuesday showed.

The updated FOMC dove-hawk spectrum
FT Alphaville

Federal Reserve Board Seeks Comment To Help Inform Consideration Of Physical Commodity Activities By Financial Holding Companies


Foreign-Exchange Futures May Double on New Rules, Greenwich Says
Joseph Ciolli – Bloomberg
Foreign-exchange futures trading has the potential to more than double as regulatory measures push investors out of options and non-deliverable forwards, according to Greenwich Associates.

Shyam Saran: The Chinese (yuan) are coming!
Business Standard
In my column titled “The Asian future of reserves” (May 16, 2012, Business Standard), I had drawn attention to the significant steps being taken by China to transform its currency, the renminbi, which is denominated in the yuan, into a full-fledged international reserve currency after the US dollar and the euro. Since then, there have been a number of further developments that merit attention.

Swiss Franc: This Time Really Is Different
Clare Connaghan – MoneyBeat – WSJ
OK. Stop us when you think you’ve heard this before: The Swiss franc is set to fall. Yup. We’ve stopped already.

Deutsche suspends trader suspected of forex rigging -paper
Deutsche Bank has suspended at least one currency trader on suspicion of manipulating benchmark forex rates, a German paper reported.

Wells Fargo organizes meet to discuss Bitcoin rules: FT
Wells Fargo & Co has called finance executives, virtual currency experts and U.S. government representatives to discuss “rules of engagement” with Bitcoin amid concern about the money laundering risk of the currency, the Financial Times reported.

Bankers’ lobby weighs Bitcoin threat
Sid Verma – Euromoney magazine
Regulators have woken up to the currency’s potentially huge impact on the global payments system, given the decentralized, virtual and anonymous nature of the peer-to-peer network.

Dogecoin transactions are outpacing those in bitcoin; here’s why that’s not surprising
The Tell – MarketWatch
Forums about the virtual currency dogecoin are getting excited about the fact that more dogecoins have been traded in the last 24 hours than bitcoins. In fact, the number of unique transactions in dogecoin — recently 94,310 in the last 24 hours — is more than all other virtual-currency transactions tracked by


Shanghai Gold Exchange to Launch Yuan-Denominated Gold Contract in New Free-Trade Zone
MoneyBeat – WSJ
Gold buyers in the world’s biggest consumer of the precious metal want more of a say in its price, and the government wants to increase the international use of its currency: The Shanghai Gold Exchange is combining these two wants with the upcoming launch of an “international board” for gold trading in Shanghai’s pilot free-trade zone.

NCDEX launches Gold Futures contract GOLDHEDGE
National Commodity & Derivatives Exchange Limited has come out with its circular on launch of futures contract of Gold. The contract will be available for trading with modified contract specifications, says the exchange.

China grants gold import licenses to foreign banks for first time: sources
China has granted licenses to import gold to two foreign banks for the first time, sources said, as moves to open the world’s biggest physical bullion market gather pace.

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