First Impressions

Dan Day-Robinson, Chairman, Swiss Futures and Options Association – Embracing Change
MarketsWikiEducation.com

“…While some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do. – Rob Siltanen, the creative genius behind Apple’s “Think Different” campaign”

Dan Day-Robinson will be the first to tell you he has a flair for the dramatic. As a former market maker, investment banker and now head of a trade association, he has hundreds of stories, and he knows how to tell them. He takes us on a rollicking tour through his years in the financial world, including his most recent charge as head of the Swiss Futures and Options Association. He lays out the history of the SFOA, a group that was once much more prominent than it is today, and explains his vision for its future.

Will you see him as one of the crazy ones, or will you see genius?

Watch the video »

Quote of the Day

“Our system is not structured in a way to communicate seamlessly with the markets. You bet we can learn.”

Fang Xinghai, vice-chairman of China’s securities regulator and a member of a key financial policy committee, in the story, “China admits communication failings on renminbi”

Lead Stories

Debates on Blockchain eclipse talk of Basel III at Davos
Izabella Kaminska and Gillian Tett – Financial Times
When the World Economic Forum staged its flagship debate about the future of the financial services industry this week in Davos it sparked a disorderly scrum.
The Davos elites were not scrambling to listen to the debates that have dominated the WEF agenda in recent years, namely the financial crisis and regulatory reform; these are largely absent from the agenda this year. Instead the current hot issue is how financial technology or fintech could revolutionise the world of money; topics such as Blockchain have eclipsed discussions on Basel III.
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****SD: “Critics argue that the shift is a little premature.”

Davos 2016: Live
The Guardian
Davos 2016
bit.ly/1KtwTu5

****SD: Live stream of all the news coming out of Davos

Draghi’s Groundhog Day Heralds Seven Weeks of ECB Market Dialog
Paul Gordon, Catherine Bosley and Jill Ward – Bloomberg
Once again, Mario Draghi has given himself a month and a half to convince investors he’ll do what’s needed to reignite consumer prices. This time he may hone the message more.
The European Central Bank president’s hint that policy makers will bolster stimulus on March 10 raises the prospect of the Governing Council delivering another expansion to its 1.5 trillion-euro ($1.6 trillion) bond-buying program, including potentially taking it into new asset classes. Emphasizing the ECB’s ambition to reporters on Thursday, Draghi said that there are “no limits” to how far officials will go to safeguard their inflation goal.
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Eleven big banks test blockchain-based trading system
Jemima Kelly – Reuters
Eleven major banks, including Barclays, UBS and HSBC, said on Wednesday they had tested a system that could make trading much faster and cheaper, using the technology that underpins crypto-currency bitcoin.
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Barclays retreats from Asia, Brazil and Russia
Martin Arnold and Don Weinland – Financial Times
Barclays has told staff it aims to remain a “bulge-bracket investment bank” while outlining plans to cut up to 1,200 jobs by closing many operations in Asia, Russia and Brazil and exiting precious metals trading.
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J.P. Morgan to Workaholics: Knock It Off
Emily Glazer and Daniel Huang – WSJ
J.P. Morgan Chase & Co. is giving its investment bankers an unusual mandate: Relax, take some time off.
The firm launched a new effort on Thursday to encourage its investment bankers to take their weekends off—as long as there isn’t a live deal in the works.
Carlos Hernandez, J.P. Morgan’s head of global banking, announced the policy Thursday morning on an internal call, saying the rules applied to everyone from analysts to managing directors, the firm said.
on.wsj.com/1KtqTl3

Markit Global Fixed Income Focus
Press Release
Markit has published the December 2015 edition of the Global fixed income focus. The publication includes a monthly market update and special reports that leverage the breadth and depth of Markit’s pricing and analytical datasets across the various fixed income markets.
bit.ly/1Ktwzvp

Central Banks

Maybe central banks will declare victory and go home
James Saft – Reuters
Wars don’t always end with treaties; developments at the European Central Bank show how the war on low inflation may end when the loser declares victory and goes home.
ECB chief Mario Draghi on Thursday vowed a strong defense of the bank’s 2 percent inflation target, a goal it and other central banks have been signally unable to meet.
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PBOC Injects Most Cash in Three Years in Open-Market Operations
Bloomberg
China’s central bank cranked up cash injections in its money-market operations for the third week in a row, heading off a squeeze as a seasonal jump in demand for funds coincides with surging capital outflows.
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Yellen to Keep Fed Rate Options Open Amid Turbulent Markets
Craig Torres and Christopher Condon – Bloomberg
Janet Yellen’s big challenge next week is clear communication about a clouded outlook.
The Federal Reserve was expected to leave interest rates unchanged at their Jan. 26-27 meeting even before the recent rout in global stocks. But just six weeks after policy makers forecast four rate hikes this year amid solid growth, the world looks a more precarious place.
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China’s central bank mulls issuing digital currency
Asian Times
The People’s Bank of China on Wednesday said it wants to issue its own digital currency to cut the costs of circulating traditional paper money, boost policymakers’ control of money supply and improve the efficiency of global transactions.
bit.ly/1KtuJus

Fed’s Unexpected Partner to Manage Rates: Foreign Central Banks
Matthew Boesler – Bloomberg
The Federal Reserve’s efforts to ensure its interest rate increase filters through to the broader U.S. economy have found an unexpected counterparty: foreign central banks.
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Shifting the burden: Central banks need to do less, and politicians more
The Economist
The past seven years have been an extraordinary period for central bankers. Not only have they cut interest rates to zero (and even below) in the developed world; for the first time in their history central banks have greatly expanded their balance sheets, buying government bonds and other assets. Most economists agree that vigorous action was needed in the wake of the financial crisis in 2007-08 in order to head off a repeat of the Great Depression. Nevertheless, the sheer scale and protracted nature of such monetary stimulus is now a cause for concern among some commentators; have the banks permanently distorted the economy? In December the Federal Reserve made the first, tentative step towards normality, with a quarter-point rate increase.
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Currencies

China admits communication failings on renminbi
Chris Giles and Gabriel Wildau – Financial Times
A top adviser to Chinese president Xi Jinping has conceded that poor communication contributed to global market anxiety over China’s falling currency, as he tried to reassure investors that Beijing is not pursuing competitive devaluation.
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SABMiller Pressured by Volatile Currencies
Saabira Chaudhuri – WSJ
SABMiller PLC reported a decline in its third-quarter revenue amid foreign-exchange volatility, although at constant currencies, sales growth was strong.
SABMiller, the world’s second-biggest brewer by sales after Anheuser-Busch InBev NV, said net producer revenue—which accounts for excise and other taxes—fell 8% for the quarter, a sharper decline than the 5% drop the company logged a year earlier as its key operating currencies slid against the dollar.
on.wsj.com/1KtpXgu

Saudi riyal forwards on rising trajectory
Adam Bouyamourn – The National
Saudi riyal forwards continued to rise in trading yesterday, indicating that the Saudi Arabian Monetary Agency’s move to shore up its currency has not removed pressure on the kingdom’s currency peg.
Twelve-month dollar-riyal forwards rose above 1,000 points, for the third time in 30 days yesterday. Before December, the cost of buying options had not exceeded 1,000 points since 1996.
bit.ly/1Ktq4Zn

IMF Fears Cryptocurrencies May Circumvent Capital Controls
Avi Mizrahi – Finance Magnates
The International Monetary Forum (IMF) has presented a report on cryptocurrencies to the financial leaders gathered at Davos for the yearly World Economic Forum meeting. The IMF report mainly tried to explain the uses, potential and development of blockchain technology. However, it also seems to focus a great deal on dangers to the established system as a scare tactic to bring regulators in different countries to cooperate globally.
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Bank of Russia Chief Axes Davos Trip as Ruble Speculators Pounce
Ksenia Galouchko and Vladimir Kuznetsov – Bloomberg
Russia’s central bank governor canceled a visit to the World Economic Forum as the ruble’s historic fall accelerated for a second day after speculators pounced on her comments that policy makers don’t intend to intervene in the market.
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SNB Crisis: Recollections and Repercussions
Finance Magnates
No-one who works in this industry could forget the events of January 2015, and as we passed the first anniversary of the disaster, Finance Magnates published a series of articles examining the event from a number of different angles.
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Hong Kong Dollar Erases Gain as Risk-Off Sentiment Creeps Back
Saijel Kishan – Bloomberg
Hong Kong’s dollar reversed gains and traded within 0.1 percent off its lowest level in more than eight years as risk-off sentiment crept back into Asia, sending stocks and oil lower.
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Indexes & Index Products

How Wall Street Finds New Ways to Sell Old, Opaque Products to Retail Investors
Yakob Peterseil – Bloomberg
As securities watchdogs crack down on complex investments that promise mom-and-pop investors access to strategies of trading pros, Wall Street is finding a way to sell the same products in places those regulators don’t reach.
The investments, which follow proprietary indexes developed by banks including JPMorgan Chase & Co. and Credit Suisse Group AG, are quietly spreading into more opaque retail markets. Once popular in structured notes, a form of bank debt bundled with derivatives, they are now helping pump up sales of certificates of deposit and insurance annuities. Specialized indexes now underpin more than a fifth of the $13.8 billion market for indexed annuities—investments that target retirees.
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How Much Will Markets Fall? Top Investors See No Bottom Yet
John Gittelsohn – Bloomberg
Investment managers are warning that markets probably have further to fall as China’s growth slows, oil prices plunge and central bankers lack tools to prop up economies.
The Standard & Poor’s 500 Index will drop another 10 percent to 1,650 and oil could fall as low as $20 a barrel as investors flee for safety, according to Scott Minerd, chief investment officer of Guggenheim Partners. Jeffrey Rottinghaus, whose T. Rowe Price mutual fund beat 99 percent of rivals over the past year, said stock prices could fall another 10 percent as the U.S. economy slips into a mild recession.
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Hang Seng Index Sinks Below Net Assets for First Time Since 1998
Bloomberg Business
Hong Kong stocks fell below the value of their net assets for the first time since 1998 as concerns over capital outflows and China’s economic slowdown sent the Hang Seng Index deeper into a bear market.
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Sizing Up 5 Ugly Oil ETFs
Adam Warner – Schaeffer’s Research
News flash: It’s been an incredibly ugly stretch for oil exchange-traded funds (ETFs). Seeing as we seem to be following crude point for point these days, I figured it was time to see if we’re actually following it as much as it seems. And if so, which ETF looks the least bad.
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S&P launches index of companies with long-term focus
Reuters
Dow Jones Indices launched on Thursday a new index of companies it said had the potential to create value for investors by focusing on long-term strategy. The S&P Long-Term Value Creation (LTVC), developed with the Canada Pension Plan Investment Board (CPPIB) and asset manager Robeco SAM, comprises about 250 companies that take a long-term view and have a sustained history of financial quality.
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S&P Dow Jones Indices Market Attributes: Risk & Volatility Index Dashboard
Mondovisione
2016 has not being going well for the world’s markets. The New Year has seen the S&P 500 retrace and then plunge through the lows established last August; the rest of the world’s equity markets have largely performed even worse. Accordingly, nearly every volatility measure in our report is up.
bit.ly/1Qgv9bX

Markit Assimilates HSBC’s Asian Bond Indices, Bolstering iBoxx Index Suite
Jeff Patterson – Finance Magnates
Markit (Nasdaq:MRKT), a global provider of financial information services, has integrated the HSBC’s ALBI, ADBI and AHBI indices to the Markit’s iBoxx family of indices for an undisclosed financial sum, according to a Markit statement.
bit.ly/1PHgXWD

BlackRock’s iShares Launches World First For Investing In Israel
Press Release
BlackRock has launched an exchange traded fund for European investors to invest directly in the national Israeli index. It is the first fund to offer direct exposure to the underlying constituents of this index.
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Gold

Markets No Longer Expect March Fed Rate Hike; Supportive For Gold
Forbes
The market majority no longer expects another hike in U.S. interest rates in March by the U.S. Federal Open Market Committee, which analysts say is supportive for gold prices.
At one time, the market expected the Fed to hike interest rates by another 25 basis points. Policymakers upped rates in mid-December for the first time in nearly a decade.
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Banks to get commission for unlocking household gold – RBI
Reuters
The government will pay banks a 2.5 percent commission to unlock the country’s massive stash of gold under a new monetisation scheme, the RBI said, as the ambitious plan received a poor response from banks and customers.
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RBI allows pre-mature withdrawal in gold monetisation scheme
Economic Times
In an effort to make the Gold Monetisation Scheme more customer-friendly, the RBI today said depositors will be able to withdraw medium-term (5-7 year) and long-term government deposits (12-15 years) pre-maturely after the minimum lock-in period, though with a penalty.
The Reserve Bank today made a few amendments to its Master Direction on the Scheme.
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Miscellaneous

Goldman-run funds most popular with Republican candidates, disclosures show
Luciana Lopez and Grant Smith – Reuters
Presidential hopeful Ted Cruz has in the past week been answering questions about a loan he got from Goldman Sachs in 2012. But he is far from alone among Republican candidates in having a financial relationship with the Wall Street investment bank in recent years.
A Reuters analysis of the financial disclosures of the 12 Republicans left in the race to be the party’s candidate in the November presidential election shows that funds run by Goldman have been a favorite investment destination for them.
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Callaway: A Guide to ‘Davos-Speak’
USA Today
“How is your Davos?”
It took less than a half day before I heard the flesh-crawling greeting for the first time, a traditional salutation among the monied masses at the World Economic Forum.
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****SD: Also, see the BBC’s Buzzword bingo, Davos edition

Amid Elbow-Rubbing in Davos, a Potential for Awkward Encounters
WSJ
Here in this luxe Swiss ski town, dozens of world leaders are taking advantage of one another’s presence at the massive, multi-day economic summit to get together and talk shop.
But the annual conference also draws some leaders who’d prefer not to. On Thursday morning, Iranian Foreign Minister Javad Zarif and Israeli Prime Minister Benjamin Netanyahu were spotted one floor apart at the InterContinental hotel.
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Silicon Valley’s $585 Billion Problem
Fortune
Of all the Silicon Valley IPOs in the past couple of years, Lending Club’s might have been the surest bet of all.
The San Francisco peer-to-peer lender is a star in the world of “fintech,” a growing sector made up of financial technology companies bent on disrupting the traditional banking sector. Its backers include venture capital royalty such as Kleiner Perkins and Union Square Ventures, not to mention Google and Alibaba. The startup’s gold-plated board of directors includes luminaries such as John Mack, the former CEO of Morgan Stanley; former Treasury Secretary Larry Summers; and Mary Meeker, the one-time doyenne of Internet IPOs who is now a Kleiner partner. In other words, Lending Club had assembled a very smart-money crowd. Its much-buzzed-about offering was viewed, understandably, as a slam dunk.
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