First Impressions

George Martin, Cheevers & Co. – Keeping The Human Element

“The human element is critical. There’s so much power in a handshake or a face-to-face meeting.”

George Martin, trade support specialist at Cheevers & Co., discusses the importance of human interaction in the financial industry. Despite the fact that technology has moved a majority of trading activity from open outcry pits to digital screens, Martin stresses how human interaction is still a key element in the industry. He also gives a brief background of his own trading career, and recalls the state of the financial industry before the technology boom. Giving an example from his own office, Martin tells the audience how he receives instant messages from someone a few feet away from him, when instead he would prefer them to get up and ask him the question. While Martin is not completely against technology, he believes that there is a balance that must be found between spending time in front of a screen and spending time in front of another human.
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Quote of the Day

“As shareholders of these banks, we want to know how much money we have promised to give away to senior executives if they take government jobs. It’s a simple question, but the banks don’t want to answer it. What are they trying to hide?”

Richard Trumka, AFL-CIO president in the story, “Wall Street Pays Bankers to Work in Government and It Doesn’t Want Anyone to Know”.

Lead Stories

CME Group to close most floor-based trading in Chicago, New York
By Robert Channick – Chicago Tribune
Goodbye, shouting and gesticulation: CME Group to close most floor-based trading in Chicago and New York.
The CME Group announced Wednesday it will close most of its futures trading pits in Chicago and New York by early July.

Wall Street Pays Bankers to Work in Government And Wants It Secret
David Dayen – The New Republic
Citigroup is one of three Wall Street banks attempting to keep hidden their practice of paying executives multimillion-dollar awards for entering government service. In letters delivered to the Securities and Exchange Commission (SEC) over the last month, Citi, Goldman Sachs and Morgan Stanley seek exemption from a shareholder proposal, filed by the AFL-CIO labor coalition, which would force them to identify all executives eligible for these financial rewards, and the specific dollar amounts at stake.

Treasuries Not Buying Stock Optimism in Move-VIX Spread: Options
Callie Bost – Bloomberg
While bond and equity investors often see the world differently, the gap in perceptions is getting extreme.
Measures tracking levels of nervousness in the government debt and stock markets have been diverging all year and this week reached the widest since September 2013, according to data compiled by Bloomberg. Most of the spread reflects a 34 percent jump in fixed-income price turbulence as measured by the Bank of America-Merrill Lynch Option Volatility MOVE Index.

“A fancy thing that you don’t do at home”
Dan McCrum, FT
Bill Ackman there, on most Americans’ perception of short selling. His comments are part of a wide ranging interview in the new issue of Graham and Doddsville, the investment letter put out by students at the Columbia Business School which has a strong value investor heritage.

Greek Leaders Return Home for Rethink After Rebuff From Germany
Antonis Galanopoulos, Christos Ziotis and Nikolaos Chrysoloras – Bloomberg
Prime Minister Alexis Tsipras is preparing to set out the most detailed account yet of his plans to revive the Greek economy after a diplomatic push ended with a rebuff from Germany and a warning shot from the European Central Bank.
Tsipras, 40, was greeted by the rare sight of a pro-government demonstration in downtown Athens on Thursday night after he vowed to stick to his anti-bailout campaign pledges, despite their rejection by German Finance Minister Wolfgang Schaeuble. The prime minister will lay out his policy plans on Sunday, in the opening speech of the three-day-long parliamentary debate leading up to a confidence vote to confirm his government.

Hunting the Next Bear Stearns
Ian Katz – Bloomberg
A council of U.S. regulators led by Treasury Secretary Jack Lew is going to tell companies sooner when it’s assessing whether the firms should be labeled critical to the smooth functioning of the financial system, a badge they’re resisting because it means they’ll be subjected to Federal Reserve oversight.

Federal Court Orders U.S. Bank National Association to Pay $18 Million to Peregrine Customers
U.S. Bank held the Peregrine Financial Group, Inc. customer segregated funds account that Russell Wasendorf, Sr. used to misappropriate customer funds
The U.S. Commodity Futures Trading Commission (CFTC) today announced that on February 4, 2015, Chief Judge Linda R. Reade of the U.S. District Court for the Northern District of Iowa entered a Consent Order imposing a permanent injunction against U.S. Bank National Association (U.S. Bank) and ordering the bank to pay $18 million dollars to be returned to Peregrine Financial Group, Inc. (Peregrine) customers.

Howard Lutnick’s BGC Extends Offer for Clearinghouse GFI
NY Times
BGC Partners, the brokerage firm owned by Howard W. Lutnick, announced on Wednesday that it was extending the deadline on its offer for the GFI Group, the New York brokerage firm and clearinghouse that has been locked in a prolonged takeover battle.

JPMorgan unit set to take control of Towergate
Alistair Gray, FT
A $30bn alternative investments arm of JPMorgan is closing in on a deal to take control of Towergate, ending a battle among the insurance broker’s creditors over who gets what in a restructuring of its £1bn debt burden.

FIA releases recommendations on improving swap clearing infrastructure
FIA today released a set of recommendations aimed at improving important operational elements of the new clearing infrastructure for over-the-counter derivatives.

CME Group Inc. Reports Fourth-Quarter 2014 and Full-Year Financial Results
Press Release – CME Group
CME Group Inc. (NASDAQ: CME) today reported revenues of $841 million and operating income of $472 million for the fourth quarter of 2014. Net income attributable to CME Group was $306 million and diluted earnings per share were $0.91. Excluding the items noted in the reconciliation, adjusted earnings per share would have been $0.951.

Pimco’s Baker, Dada Said to Retire as Dhoraisingam Leaves
Mary Childs – Bloomberg
Pacific Investment Management Co. managing directors Brian Baker and Suhail Dada are retiring and a third has left as the investment firm recovers from the most tumultuous year in its history, according to a person familiar with the matter.

Central Banks

Warren, Cummings Press Fed on Investigation Into 2012 Leak
Craig Torres – Bloomberg
Two Democratic lawmakers asked the Federal Reserve to report on the status of an internal probe into a leak of confidential, market-sensitive information in 2012.
Massachusetts Senator Elizabeth Warren and Representative Elijah Cummings of Maryland, the ranking Democrat on the House Committee on Oversight and Government Reform, are seeking information on a leak of details from the minutes of a Federal Open Market Committee.

Billionaire Warren Buffett says he doesn’t expect the Federal Reserve to raise rates in 2015
Josh Funk – Associated Press via Star Tribune
Billionaire Warren Buffett says he doesn’t expect the Federal Reserve to raise interest rates this year because of the impact it would have on the both the U.S. and world economies.
The economies in Europe and Asia are struggling and a hike in U.S. rates would further strengthen the U.S. dollar versus the euro, yen and other world currencies. The dollar’s recent rise has already is already crimping profits of U.S. corporations with big overseas sales.

12 central banks have already cut rates this year
Alanna Petroff – CNN Money
At least 12 central banks have cut interest rates since the start of the year, signaling just how fragile the global economy is right now.
The move to make money even cheaper is sweeping across emerging markets and the developed world. Central banks representing roughly 60% of the global economy are cutting rates, or using other tools to pump more cash into the system.

Factbox – How low can they go? Central bank policy easing in 2015
Barely a month into 2015 and the direction of monetary policy around the world is crystal clear — no fewer than 17 central banks have eased policy to some extent to counter the deflationary pressures from the collapse in global oil prices.
Below is a chronological list of the central banks’ actions:


Europe exempts FX futures from mandatory clearing
Philip Stafford, FT
Europe has exempted mandatory clearing for some derivatives in the $130bn foreign exchange market after the main securities regulator was unable to decide how to define and implement new rules.

Currency conspiracy theory wide of the mark with iron ore
By Clyde Russell, Reuters
Some people love conspiracy theories and the latest is that the Australian central bank is deliberately weakening its currency to save the country’s big iron ore miners. That’s the opinion of Lourenco Goncalves, chief executive of U.S.-based iron ore and coal miner Cliffs Natural Resources but, like virtually all such theories, it fails the test of logic and credibility.

No Jobs At All Were Lost In America Due To Japanese Currency Manipulation
Tim Worstall, Forbes
We’ve another of those calls to arms over the loss of American manufacturing jobs. From the usual suspects, the Alliance for American Manufacturing (a lobby group of a few manufacturers and the United Steelworkers). They claim that Japans’s “currency manipulation” has been responsible for the loss of 900,000 jobs in the US. This isn’t, I’m afraid, true. The level of aggregate employment in the US is something that is the responsibility of Congress (fiscal policy) and the Fed (monetary policy). Trade doesn’t affect that level of aggregate employment. It might well affect the mix of employment, that’s true, but not that total level. And anyway, what is Japan supposed to do when sunk in a two decades long slump?

European Authorities Fine ICAP $17 Million in Libor Investigation
By Chad Bray – NY Times
European competition authorities fined the British financial firm ICAP about 14.9 million euros, or $17 million, on Wednesday, saying the firm had breached antitrust laws by facilitating attempts by several banks to rig a benchmark interest rate.

Indexes & Index Products

Smart Beta ETFs: Have You Checked Your Index Lately?
A mong the many things to love about ETFs is the passive investing style. For investors, that means low costs and consistent exposure. But when it comes to portfolio holdings and weightings, not every exchange traded fund is sitting still. For successful investing , ETF owners are better off keeping up with index changes.

ProShares Expands Dividend Growers Suite of ETFs
ProShares, a premier provider of alternative ETFs, today launched two new ETFs, each investing in the best dividend growers of a major equity index.

MSCI February Quarterly Index Review Announcement Scheduled for February 11, 2015
MSCI Inc. (NYSE:MSCI) , a leading provider of investment decision support tools worldwide, including indexes, portfolio risk and performance analytics and ESG data and research, will announce the results of the February 2015 Quarterly Index Review for the MSCI Equity Indexes, as of the close of February 27, 2015.

NFL’s Offseason Nonsense Index: Topics You Will Be Sick of Before Spring
Bleacher Report
The Super Bowl may be behind us, but NFL nonsense knows no offseason. There’s an entire industry built upon round-the-calendar speculation, rumor-mongering, scandal-stoking, drama-manufacturing and out-and-out spitballing about football’s most fascinating teams and personalities.


My Gold Rush—Away From the Metal
Joe Queenan asks: Is there any metal more stupid and annoying than gold?
By Joe Queenan, The Wall Street Journal
Last Thursday, gold futures had an electrifyingly bad day, losing 2.4% of their value, their worst performance in more than a year. This was after the Federal Reserve expressed optimism about the economy, indicating that rate increases were still in the offing. Both of these things are bad for gold. All good news is bad for gold. Gold is a lustrous, highly malleable version of the Grinch.

Where Is Germany’s Gold?
Almost half of Germany’s gold is stored in vaults under the streets of Manhattan. Or is it?
by Vernon Silver, Bloomberg News
Peter Boehringer hates the word “conspiracy.” It implies something crazy, and if you spend even a little time with the 45-year-old German, it becomes clear he’s driven by a desire for order. On a recent morning in Munich, he’s dressed in a cobalt blue shirt that matches his blue tie and blue eyes. His black hair is cropped close above his receded hairline. In his gray Volkswagen minivan, the cup holder contains two identical water bottles, each filled to the same level. At the end of a daylong interview, for which Boehringer has arranged an hour-by-hour itinerary, he sends a follow-up e-mail with a numbered summation of points he’s made. No. 2 says that the crusade he’s been waging for the last three years is simply about transparency. “Questions,” he writes, “by definition cannot be ‘conspiracy theories.’?”

Govt may consider import duty cut on gold in Budget
The Times of India
NEW DELHI: With decline in gold imports, the government may consider 2-4 percent reduction in import duty on it in the forthcoming Budget, a move that could help boost exports and manufacturing of gems and jewellery, sources said.
The industry has already sought reduction in customs duty on gold to 2 percent, from 10 percent now.

Court says company can market gold recovered from SS Central America
By Kathy Lynn Gray, The Columbus Dispatch
The company that marketed tons of gold from the SS Central America shipwreck more than 15 years ago also has the right to market the latest treasure salvaged from the wreck, an Ohio appeals court has ruled. The 10th District Court of Appeals opinion, issued on Tuesday, says that California Gold Marketing Group’s 1999 marketing contract extends to the gold and silver recovered from the wreck last summer.

Chinese herdsman stumbles onto a 17-pound gold nugget
BarbaraKollmeyer, MarketWatch
MADRID — Imagine it! You’re walking along and nearly trip over a 17-pound (7.85 kilograms) gold nugget. File that under a most improbable gold bonanza.
But that’s exactly how it played out for one lucky sun-of-a-gun farmer in China.
Berek Sawut, a Kazak herdsman from Qinghe County in Altay Prefecture told Chinese news agency Xinhua that he found the giant nugget “practically lying on bare ground.” The area is in China’s far western Xinjiang Uygur region.

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