First Impressions

Let’s dump the debt-ceiling
Jim Kharouf, editor-in-chief, John Lothian News
It is not clear whether this is simply a fun academic exercise for, um academics, many of which are segregated from real world experience, or an idea that actually should garner some action. The debt ceiling, which limits the amount which the US government can borrow, is now under fire by many economists.

In CBC’s story “U.S. government shutdown: Is the debt ceiling a ‘stupid’ idea?,” John Blank of Zacks Investment Research cites a January report from the University of Chicago which found that 84 percent of economists surveyed, agreed or strongly agreed, that “a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse financial outcomes.” And those who disagreed? Just 3 percent.
So the question is, now that it is becoming a more dangerous political weapon, should we just take it away from the fools in Washington who continue to wield it around like amature trick show wannabes?

The article also points out a bi-partisan bill from Republican Johnny Isakson and Democrat Jeanne Shaheen that would dump the debt ceiling and replace it with a 2-year budgeting system, with a year focused on appropriation, and the second year on oversight of that spending. The bill, called the Biennial Budgeting and Appropriations Act, was proposed in 2011. Maybe its time has come.

Quote of the Day:

“I call him the ‘Groundhog Day’ president. It’s Sonny and Cher at 6 a.m., every day.”

Larry Sabato of the University of Virginia, in Charlottesville in the Christian Science Monitor’s piece: “Debt limit deal: Obama may have won, but victory is hardly lasting.”

Lead Stories

Debt limit deal: Obama may have won, but victory is hardly lasting
Christian Science Monitor
Obama ended up conceding little to get Republicans to end the government shutdown and raise the debt limit, but all he won was a delay of a few months before the next (same) fight.
http://jlne.ws/1gNTAfF
**JK – I am shocked it is this high – “Public approval of the Republican Party is at an all-time low, 28 percent – a 10 point drop in just the last month.”

Debt deal fails to impress world markets
By Charles Riley – CNNMoney
World markets gave the U.S. debt deal a tepid reception Thursday, even as lawmakers opened the government for business and removed the threat of a costly default.
http://jlne.ws/1etOh30
**JK – It fails to impress most of us.

China’s Dagong Cuts U.S. Credit Rating After Debt Limit Raised
Bloomberg
China’s Dagong Global Credit Rating Co. cut its sovereign rating for the U.S. hours after President Barack Obama signed legislation raising the federal debt limit.
http://jlne.ws/1aRJRjz

JPMorgan Admits the Obvious: We Were Reckless
Bloomberg
JPMorgan Chase & Co. (JPM)’s chief executive officer, Jamie Dimon, initially called the bank’s “London whale” trading debacle a “tempest in a teapot.” Some teapot. Today the bank agreed to pay $100 million to settle an action brought by the Commodity Futures Trading Commission. But more important than that relatively modest sum is the bank’s admission that its traders were “recklessly aggressive.”
http://jlne.ws/1gNSdh5

CFTC split over JPMorgan ‘whale’ deal
FT.com
One commissioner insisted that the Commodity Futures Trading Commission should have tried to prove that the bank intentionally manipulated a key index
http://jlne.ws/1gmDdJh

French government against intra-day financial trading tax
Reuters
The French government opposes extending a financial transaction tax to intra-day trades, a move backed last week by the finance committee of the lower house of parliament, France’s budget ministry said on Wednesday.
http://jlne.ws/1aQNTZG

Lack of cross-border swaps clarity starts to bite
Financial News
Buyside firms are moving their trading in privately negotiated derivatives away from US banks to avoid being caught by aggressive US derivatives reforms. The development follows a series of warnings by European institutions and trade bodies who have long feared that the US Dodd-Frank reforms could adversely affect European institutions. The situation has also been exacerbated by the shutdown of the US federal government.
http://jlne.ws/1gmDfRs

DTCC’s Bodson Appointed Omgeo Board Chairman
WatersTechnology
The Depository Trust and Clearing Corporation’s president and chief executive officer will align the business strategies of DTCC and Omgeo, following DTCC’s 100% acquisition of Omgeo
http://jlne.ws/1gmDegp

Central Banks

Summary of Economic Reports by Federal Reserve District Banks
Vince Golle – Bloomberg
Following is a summary of U.S. economic conditions as reported by the 12 Federal Reserve district banks in the central bank’s latest regional survey, also known as the Beige Book.
The Federal Reserve Bank of Chicago prepared the latest report. Information was collected on or before Oct. 7.
http://jlne.ws/1aRMy4L

U.S. government shutdown: Is the debt ceiling a ‘stupid’ idea?
By Daniel Schwartz, CBC News
The U.S. has had a debt ceiling, limiting the amount of money the government can borrow, for nearly a century. But the idea hasn’t caught on with other nations (only Denmark has something similar) or with economists.
John Blank, chief equity strategist for Zacks Investment Research, calls the debt ceiling “incredibly stupid,” adding that the vast majority of “economists do not think that it’s a good idea.
http://jlne.ws/1gNWrW6

An explanation of forward policy guidance at the Federal Reserve
John C. Williams, President and Chief Executive Officer, Federal Reserve Bank of San Francisco (via Credit Writedowns)
The Federal Open Market Committee has used various forms of forward guidance to influence the views of businesses, investors and households about where monetary policy is likely to be headed. This column by the President of the San Francisco Fed presents his views on the benefits, limitations and future role of forward policy guidance.
http://jlne.ws/1aRMZMl

Interest rates may rise next year, says Bank of England chief economist
Larry Elliott – The Guardian
The Bank of England warned that interest rates might rise as early as next year as its chief economist said Threadneedle Street’s desire to keep borrowing costs low for several years could be thwarted by a combination of stronger than expected growth and unusually weak productivity.
http://jlne.ws/1aRKn14

BOE Takes to Twitter With ‘Ask Me Anything’ Session
Alex Brittain – The Wall Street Journal
Spencer Dale, the bank’s chief economist, on Friday will become the first serving official from the BOE to step into the world of Twitter, making himself available to the masses in an ‘Ask Me Anything’ session. Log on,or sign up to Twitter and post your question, including the BOE’s Twitter address @bankofengland and the subject hashtag #AskBOE. Mr. Dale will answer questions between 11am and noon London time.
http://jlne.ws/1aRLg9R

Bank of England defends unemployment target
Ferdinando Giugliano – Financial Times
The Bank of England has defended its decision to link monetary policy to the unemployment rate, in spite of criticisms that this indicator is hard to forecast.
http://jlne.ws/GSD6Fm

Currencies

U.K. FCA Opens Formal Probe Into Foreign-Exchange Trading
Bloomberg
The U.K. markets regulator opened a formal investigation of currency-rate trading amid allegations of manipulation in the $5.3 trillion-a-day market that have triggered similar probes in the U.S. and Switzerland.
http://jlne.ws/1gmDdJu

Statement on foreign exchange market investigation
Financial Conduct Authority
We can confirm that we are conducting investigations alongside several other agencies into a number of firms relating to trading on the foreign exchange (forex) market.
http://jlne.ws/1gmDegr

Indexes & Index Products

Has Berkshire Hathaway Become a Closet Index Fund?
J.C. Parets – Yahoo Finance
Why would you even bother owning Berkshire Hathaway?
As brilliant as Warren Buffett is, at this point he’s looking more and more like a closet indexer. I was surprised when I ran the numbers and could not believe how correlated Berkshire is with the broader market.
http://jlne.ws/1aRNXZg

Capped Component Version of S&P GSCI Single Commodity Family Launched by S&P Dow Jones Indices
Press Release
S&P Dow Jones Indices announced today the launch of a family of indices based on the S&P GSCI(R) Single Commodities that applies the Capped Component rules according to the ESMA guidelines on UCITS issues.
http://jlne.ws/18pcRR4

S&P Dow Jones Indices Signs MOU with Korea Exchange
Press Release
NEW YORK, Oct. 15, 2013 /PRNewswire via COMTEX/ — S&P Dow Jones Indices announced today that it has signed a memorandum of understanding (“MOU”) with the Korea Exchange (“KRX”) for the collaboration in global marketing and sales of the KRX indices, including the KOSPI200 – the flagship index of the KRX.
http://jlne.ws/18pd471

Gold

Wait, Gold Is Up on the Senate Deal?
Tatyana Shumsky – The Wall Street Journal
Gold prices are ticking higher after Senate leaders unveiled a proposal to temporarily raise the U.S. borrowing limit and reopen the parts of the federal government still closed.
Wait, what now?
http://jlne.ws/1aRJ2r7

Miscellaneous

The biggest banks just keep getting bigger
Financial News
It is sometimes said to be tough at the top. But as the number of investment banks that can be considered bulge-bracket narrows, it is tougher still for those in the middle and at the bottom.
http://jlne.ws/1gmDegk

Knight Capital Agrees to $12 Million Settlement for 2012 Errors
Bloomberg
Securities regulators fined Knight Capital Americas LLC $12 million for the trading malfunction that roiled the U.S. stock market in August 2012, saying the firm ignored dozens of error messages before its computers bombarded exchanges with millions of unintended orders.
http://jlne.ws/1gmDdJg

BNY Mellon flooded by $10bn in cash
FT.com
Bank is one of just two that act as middlemen in $2tn tri-party repo market, where financial institutions pawn assets in exchange for short-term loans
http://jlne.ws/1gmDego

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