First Impressions

Looking Up: RJO’s Gerry Corcoran Bullish On Managed Futures
Jim Kharouf – JLN

As CEO of one of the largest FCMs in the world, Gerry Corcoran of RJ O’Brien has diversified its services from futures execution and a clearing member firm to a host of other markets and businesses including managed futures.

To him, the managed futures space has a lot of room to grow. JLN editor-in-chief Jim Kharouf sat down with Corcoran last week at the FIA Boca Conference to talk a bit about his views of the managed futures space.

Q: What do you see in the managed futures space?

A: I’ve personally been invested in managed futures for more than 20 years. I believe in managed futures. I think it’s an important part of my portfolio. I think it plays a role in any type of high net worth, or institutional portfolio.

We looked at it and decided it was one of the new products, for us, that we wanted to invest in. When AlphaMetrix exited, we felt there was a need to serve a certain segment and we’ve been working hard on it. We have a platform business with 10 really good CTAs on it. So we’ve developed the sell side of the business. Now we need to get the buy side of the business on the platform. It’s a natural vertical to us, in the sense that we can be great at identifying CTAs, getting the right buyside platform. Most of that business can be executed and cleared through RJ O’Brien. So we capture a fee-based revenue there.

Read the rest of the interview on

Quote of the Day

“There was a whole group of people who thought the Fed was not even going to tighten this year. That is where everybody got burned.”

Terry Pigott, the head of Glacier Peak Capital Management in the story, ” Bill Gross’s Replacements Thrive at Pimco”.

Lead Stories

China Stocks Break 15-Year Link With Hong Kong as Rates Diverge
The 15-year link between Chinese and Hong Kong stocks is breaking down.
While cross-border trade and capital flows have kept the two stock markets moving nearly in tandem for most of their history, that relationship is fading as the outlook for interest rates in China and Hong Kong diverges. The MSCI China Index’s 60-day correlation with the MSCI Hong Kong Index fell to 0.31 on Tuesday, the lowest level since May 2000, according to data compiled by Bloomberg.

France, Germany and Italy Say They’ll Join China-Led Bank in Rebuff to U.S.
NY Times
Tilting toward China in a blow to Washington’s domination of international financial institutions, Europe’s biggest economies have declared their desire to become founding members of a new Chinese-led Asian investment bank that the United States views as rival to existing lenders set up at the height of American power following World War II.
The announcement on Tuesday by Germany, France and Italy that they would follow Britain in breaking ranks with Washington and join the Chinese-led venture delivered a stinging rebuff to Washington from some of its closest allies.

The Fuzzy, Insane Math That’s Creating So Many Billion-Dollar Tech Companies
Sarah Frier and Eric Newcomer – Bloomberg
Snapchat, the photo-messaging app raising cash at a $15 billion valuation, probably isn’t actually worth more than Clorox or Campbell Soup. So where did investors come up with that enormous headline number?
Here’s the secret to how Silicon Valley calculates the value of its hottest companies: The numbers are sort of made-up. For the most mature startups, investors agree to grant higher valuations, which help the companies with recruitment and building credibility, in exchange for guarantees that they’ll get their money back first if the company goes public or sells.

The Fannie and Freddie Profits: Pendulum or Pit?
MoneyBeat – WSJ
The limits of the earnings power of Fannie Mae and Freddie Mac is growing more apparent.
A paper from Urban Institute senior fellow Jim Parrott argues the remarkable profits of the mortgage giants in 2013 generated “a great deal of misplaced confidence in their financial health.”

What We Don’t Talk About When We Talk About Shadow Banking
MoneyBeat – WSJ
Shadow banking – or financial activities outside the traditional banking system – is generally mentioned in the context of an uncertain future: Financial firms are providing new types of products and services in nontraditional ways, and academics and regulators are watching and worried about potential risks in a largely unregulated sector.
But some economists say we should focus on the past to understand why new forms of banking are emerging and why have they grown so fast.

Results at Jefferies Expose the Bank’s Weaknesses
Dealbook – NY Times
Jefferies is rubbing salt into its own wounds. The Wall Street firm managed to avoid a second straight quarterly loss, but only barely. Net income for its first quarter was a dismal $12.5 million as the three months to February exposed some of the investment bank’s weaknesses.
One issue was Jefferies’ futures brokerage business, Bache. It is losing money and took some $7 million off the bottom line. That was largely expected, though.

U.K. Bans Ex-Rabobank Trader in First Individual Libor Penalty
by Liam Vaughan, Gavin Finch, Bloomberg
The Financial Conduct Authority took its first public action against an individual involved in Libor-rigging, banning former Rabobank Groep trader Paul Robson from the U.K. financial-services industry.

Would-Be Financial Whiz Is Charged With Stealing From Investors; Mark Malik’s fund won praise from ranking firms
By Jean Eaglesham, WSJ
Mark Malik seemed to have a knack for making money. The 33-year-old New Yorker ran his own hedge fund, reporting assets of $100 million and eye-popping returns that won plaudits from several services that rank hedge funds. He explained he had honed his skills at top investment banks and a boutique trading firm.

Bill Gross’s Replacements Thrive at Pimco
by Miles Weiss, Bloomberg
The new managers of the Pimco Total Return Fund have been trumping former boss Bill Gross since he left the world’s largest bond fund, boosted by an opposing bet tied to short-term U.S. interest rates.

How a Rising Dollar Is Creating Trouble for Emerging Economies
NY Times
In India, it is a leading electric utility, Jaiprakash Power Ventures, selling off facilities and negotiating with lenders to avoid a default, having increasing its debts thirtyfold in six years.
In China, it is one of the country’s largest real estate developers, the Kaisa Group, threatening to pay only 2.4 cents on the dollar to its creditors in the face of corruption investigations and a mass resignation of executives, leaving countless would-be Chinese home buyers stuck in the middle of a multibillion dollar standoff.

S.E.C. Chief Voices Support for Higher Advice Standard for Brokers
Dealbook – NY Times
The chairwoman of the Securities and Exchange Commission announced on Tuesday that she planned to explore setting a higher standard for how brokers dispense investment advice, putting the agency in the middle of a potential fight between the Obama administration and the financial industry.
Speaking at a conference hosted by the Securities Industry and Financial Markets Association, one of Wall Street’s main trade groups, the chairwoman, Mary Jo White, expressed her personal support for setting up a so-called uniform standard of fiduciary duty.

Bill Gross’s Replacements Thrive at Pimco
The new managers of the Pimco Total Return Fund have been trumping former boss Bill Gross since he left the world’s largest bond fund, boosted by an opposing bet tied to short-term U.S. interest rates.
Following Gross’s surprise Sept. 26 exit, the trio that took over the $125 billion fund reduced its exposure to debt maturing within five years, according to filings. Gross went the other way on shorter-term debt after joining the Janus Global Unconstrained Bond Fund on Oct. 6, plowing two-thirds of its net assets into corporate bonds coming due before 2018.

Central Banks

Fed’s Bid for Flexibility on Rates Sets Stage for Market Volatility
After years of reassuring the public that interest rates would stay low, the Federal Reserve is about to create some uncertainty by veering away from such promises.
The central bank has provided strong verbal guidance about the likely level and direction of short-term rates for more than a decade, making it a key policy tool for influencing other borrowing costs in the economy. Such signals have been particularly important since December 2008, when officials began promising to hold their benchmark short-term rate near zero for a long time.

Federal Reserve Invites Participation On Improved Payments
The Federal Reserve has announced two new task forces to address ways to improve the US payments system.
The Faster Payments Task Force and Secure Payments Task Force are open to all interested stakeholders with relevant payments knowledge and experience who can commit the required time and resources to these key initiatives.

5 Things to Watch in the Fed’s March Meeting
The Federal Reserve is widely expected to take a small step Wednesday toward raising short-term interest rates later this year by dropping its promise to be “patient” in deciding when to start. The Fed’s policy making committee issues its statement and new economic projections Wednesday at 2 p.m. ET, followed by Chairwoman Janet Yellen’s press conference at 2:30 p.m. Here are a few things to keep an eye on.

Disappointing Economic Data Probably Won’t Faze the Fed
Michelle Jamrisko and A Catarina Saraiva – Bloomberg
U.S. economic data have been more disappointing than at any time in six years. That hasn’t shaken a plurality of economists who still see the Federal Reserve cranking up their benchmark interest rate in June, for the first time since 2006.
Thirty economists project the central bankers, who start a two-day meeting Tuesday, will pull the trigger at their June 16-17 gathering, according to a Bloomberg survey completed March 12 that yielded 66 responses. Another 21 said the Fed will embark on rate rises in September.

Japan’s Central Bank Warns of Temporary Return to Deflation
Over the past two years, the Japanese central bank governor, Haruhiko Kuroda, has accomplished what a string of more cautious predecessors had failed to do: reverse a prolonged and damaging slide in the price of goods and services in Japan.


Citigroup, Barclays Close to Settling Forex Lawsuit With Private Investors
Citigroup Inc. and Barclays PLC are expected to pay as much as $800 million combined to settle a lawsuit with investors who say the banks manipulated foreign-exchange rates, according to people close to the situation.
The expected settlements would come apart from continuing negotiations the two banks and a number of their peers are conducting with the Justice Department and other regulators over similar allegations. If finalized, the payments would add to the fallout from the multiyear, world-wide foreign-exchange probe that has already cost banks billions of dollars in payouts and fines.

Forex Losses Surge – The CFO Report
A strengthening U.S. dollar took a big chunk out of fourth-quarter company earnings, and the trend is expected to continue through 2015.
“The impacts are going to be much higher in the first quarter,” said Andy Gage, a vice president at FiREapps, a currency risk-management consulting firm.

Fraud Alert: Belgium FSMA Warns Against a New Breed of Forex Scams
Forex Magnates
Fake lawyers, accountants and financial advisors are claiming that they are somehow able to recover deposits of clients who have lost money in trading forex and off exchange binary options contracts.

Indexes & Index Products

American Airlines Group Set to Join the S&P 500
American Airlines Group Inc. will replace Allergan Inc. in the S&P 500 after the close of trading on Friday, March 20. S&P 500 constituent Actavis plc is acquiring Allergan in a transaction expected to be completed tomorrow.

Ding dong! Avon kicked out of S&P 500 after 50 years
CNN Money
Avon has been one of the worst stocks in the S&P 500 for the past few years. That’s about to change — but not because of a turnaround in the company’s fortunes.

The Dow we know and love, but don’t really use
The Washington Post
One of the great disconnects of the financial world involves our best-known stock market indicator — the Dow industrials. The Dow has virtually no investment market share — the $33 billion tied to it as of year-end 2013 is barely a rounding error compared with the $1.87 trillion tied to the S&P 500 – but boy, does it have mindshare. Ask “How is the market doing?” and most people (including me) will refer to the Dow, not the S&P.

Are ‘smart beta’ funds intelligent investments?
Mutual fund marketers call the investment strategy “smart beta.” Morningstar, the research company known for its five-star fund ratings, calls it “strategic beta.” Vanguard founder Jack Bogle calls it “stupid.” But whatever you call the strategy, which tries to deliver better risk-adjusted returns by tweaking conventional market indexes, investors want more of it.

Do any mutual funds ever beat the market? Hardly.
The Washington Post
Stocks have been going up and up for six years now, but many ordinary investors aren’t reaping the full benefits of those gains. If they aren’t buying and selling their stocks at the wrong time, many people are staying put – in costly mutual funds that aren’t doing any better than the stock market overall. In fact, research shows that the number of active mutual funds outperforming the market on a consistent basis isn’t just low, it’s zero.

Nasdaq Lists The Global X SuperDividend REIT ETF
Nasdaq announced that Global X Funds will list a new exchange-traded fund (ETF), The Global X SuperDividend REIT ETF (Symbol:SRET), which will begin trading on The Nasdaq Stock Market today.


Gold-Bug Narrative Has Just Not Worked: Barry Ritholtz
On “Before The Bell,” Bloomberg View Columnist Barry Ritholtz and Bloomberg’s Betty Liu discuss the state of the gold market. They speak on “In The Loop.” (Ritholtz is a Bloomberg View columnist. The opinions expressed are his own.) (Source: Bloomberg)

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