First Impressions

Happy Holidays

This issue will be our final JLN Financial Newsletter of the year. Have a great holiday! We will return on January 2. Thanks for reading.

JLN Financials Staff – Jon Matte, Jeff Bergstrom, Doug Ashburn and Jim Kharouf

Quote of the Day

“Certain elements of the proposal, if implemented as written, will create negative impacts on the markets, will further exacerbate existing differences across jurisdictions, and will not contribute to the shared goal of reducing risk in the system as a whole.”

Citigroup in the story, “Central Bank Chiefs to Weigh Debt Rule Changes Amid Bank Outcry.”

Lead Stories

CME Sues Ex-Executive Paulhac in Breach-of-Contract Case
David Voreacos and Christie Smythe – Bloomberg
CME Group Inc., the owner of the world’s largest derivatives marketplace, sued former Managing Director Laurent Paulhac for breach of contract, seeking to block him for a year from becoming chief executive officer of ICAP Plc’s swap-execution facility.

Confusing Signals in Chinese Financial Policy Reflect Challenges of Reform
Michael J. Casey – WSJ
If you’re struggling to figure out what’s going on in China’s banking system, where authorities appear to making decisions on the fly amid a troubling year-end cash squeeze, you’re not alone. Chinese banks are equally confused.

Getting qualitative with monetary policy
Izabella Kaminska – FT Alphaville
In our money entanglement posts this week, we presented the view that a nation’s money should not be judged as a neutral and interchangeable stock of identical value units, since it’s actually made up of a web of competing monies, issued by many different entities.

Economic Growth in U.S. to Quicken Next Year, Lagarde Says
Sandrine Rastello – Bloomberg
The International Monetary Fund is raising its outlook for the U.S. economy, as a budget deal in Washington and the Federal Reserve’s plan to taper its bond buying ease doubts about the future, IMF Managing Director Christine Lagarde said.

Try MoneyBeat’s Holiday Quiz for Some Festive Fun
David Cottle – WSJ
So folks, do you know your Abenomics from your forward guidance, or do you think Shutdown and Tapering are a firm of Dickensian lawyers?

A Great Ride, but Reality Is Returning
It’s been the kind of year that makes an average investor feel like a genius: You could just put your money in a stock index fund and watch the market speed ahead. Why not take a few moments to savor it?

Cyprus gets next IMF aid installment under bailout
The International Monetary Fund signed off on Friday on Cyprus’s progress in meeting the conditions of its bailout program, giving the euro zone country another $114 million.

Bloomberg’s Miller Bitcoin Gift Stolen
Sam Ro – Business Insider
Bloomberg TV’s Matt Miller is currently experiencing the “12 Days Of Bitcoin,” a series for the business news television station. On Friday, Miller learned an important lesson. It was an experience that everyone should remember before they start moving their money into the digital currency.

Central Banks

What could go very right in Europe…
Joshua M Brown | The Reformed Broker
Will the Northerners fix the banking system this year and consider stimulus? Because if so, there could be a dramatic impact on the rest of the world

Central Bank Chiefs to Weigh Debt Rule Changes Amid Bank Outcry
Jim Brunsden – Bloomberg
Central bankers from around the world will meet next month to discuss whether to scale back their plans for a debt limit that banks say will force them to rein in lending.
Bank of England Governor Mark Carney has said that central bank and regulatory chiefs will meet in Basel in January “to come to an agreement, an international agreement, on the definition” of the debt-limit rule, known as a leverage ratio.

The Fed At 100: So Why Did They Call It The ‘Federal Reserve’ System?
Bob McTeer – Forbes
One hundred years ago today President Wilson signed the Federal Reserve Act, thus creating the Federal Reserve System, our central bank. It wasn’t called the Bank of the United States, following the lead of the Bank of England, and it wasn’t called the Central Bank of the United States. Why such an odd name, the “Federal Reserve” System?

China cash squeeze persists even after central bank reassures market
China’s cash market squeeze showed little sign of easing on Monday, reinforcing the view the central bank has shifted to tighter monetary policy.


Analysis: As Fed tapers, don’t count out emerging market currencies
When the Federal Reserve first started talking about cutting its massive stimulus earlier this year, emerging-market currencies went into a tailspin. This time round, investors don’t see that happening.

China leads fresh regulatory response to Bitcoin bubble
Rebecca Brace – Euromoney magazine
Governments are still grappling with how to respond to the rise of cryptocurrencies, leading to different responses from regulatory authorities.

Into the Bitcoin Mines
On the flat lava plain of Reykjanesbaer, Iceland, near the Arctic Circle, you can find the mines of Bitcoin. To get there, you pass through a fortified gate and enter a featureless yellow building. After checking in with a guard behind bulletproof glass, you face four more security checkpoints, including a so-called man trap that allows passage only after the door behind you has shut.

Banks Mostly Avoid Providing Bitcoin Services
Robin Sidel –
Companies trying to cash in on the newfangled bitcoin craze are having trouble getting old-fashioned bank accounts. Lenders are leery of dealing with virtual-currency companies because of concerns that the businesses could run afoul of anti-money-laundering laws or be involved in illegal activities, banking executives say.

Bitcoin More Speculative Than Real Currency, Study Finds
Simon Kennedy – Bloomberg
Bitcoin behaves more like a speculative investment than a currency, according to a new economic study.
Inspired by the virtual currency’s fivefold gain against the dollar in November, David Yermack of the Stern School of Business at New York University probed its historical trading behavior to see if it behaves like a traditional sovereign currency.

**JB: Not in the least bit surprising. Bit Coin has a long way to go before, if ever, it behaves akin to real world currencies.

Indexes & Index Products

Indexes make new highs on volume spike, while key indicator fails
Robert McCurtain – Futures Magazine
Last week we received an email from a reader asking for definition on “the cycles” to which we often refer. He asked, “What do those all mean?”
In a nutshell, most everything in the universe is cyclical and moves from one extreme to another. Whether you’re talking about politics, weather, hemlines, or the stock market, perpetual change is the norm.


Gold Is Testing ‘Last Ditch Support’ Before It Falls Further Into the Abyss
Steven Russolillo – MoneyBeat – WSJ
Gold’s ugly year could get much worse. That warning comes from Michael Shaoul, chairman of New York-based Marketfield Asset Management, who blasted a note to clients Friday morning cautioning that gold could suffer another “accelerated decline” from current levels.

Hedge Funds Cut Gold Bull Bets Amid Record Outflows: Commodities
Joe Richter – Bloomberg
Hedge funds got less bullish on gold before prices dropped to the lowest level since 2010, leaving the metal poised for the worst annual loss in 32 years as investors dump bullion at a record pace.

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