First Impressions

Sandra Ro, CME Group – Financial Services Disruption: the Rise of Bitcoin and Blockchain

“There is this big debate as to whether bitcoin is a currency or a commodity. I would argue that it is its own category.”

Sandra Ro is a veteran in the world of bitcoin and blockchain, which simply means that she has been following the cryptocurrency and its underlying technology for over two years. In this MarketsWiki Education talk, Ro takes us through the nascent world of digital currencies, from the volatility of bitcoin, to the rise of blockchain technology and massive investments being made by venture capitalists, banks and other strategic investors. According to Ro, the next few decades are going to be exciting.

Watch the video »

Quote of the Day

“One of the biggest, most interesting things to us right now is how different the Fed is from most other developed-market central banks.”

Raman Srivastava, Standish Mellon Asset Management’s codeputy chief investment officer and managing director of global fixed income, in the story, “DIVERGENCE: The biggest issue facing investors right now”

Lead Stories

Debt Market Distortions Go Global as Nothing Makes Sense Anymore
Something very strange is happening in the world of fixed income.
Across developed markets, the conventional relationship between government debt — long considered the risk-free benchmark — and other assets has been turned upside-down.

Buffett’s Berkshire cuts crisis-era Goldman stake
Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) on Monday said it reduced its stake in Goldman Sachs Group Inc (GS.N) by 13 percent during the third quarter, paring a successful investment it made during the height of the global financial crisis.
In a U.S. Securities and Exchange Commission filing, Berkshire said it owned 10.96 million Goldman shares worth about $1.9 billion as of Sept. 30, down from 12.63 million shares worth $2.64 billion three months earlier.

Ex-Deutsche Bank broker’s U.S. tax charges could be dropped in deal
Nov 16 A former Deutsche Bank AG broker accused of participating in the largest tax fraud in U.S. history has reached a deal with federal prosecutors approved by a judge on Monday that could result in charges being dropped in a year.
A U.S. prosecutor disclosed in court that his office had reached a deferred prosecution agreement with David Parse, whose 2011 conviction on charges including mail fraud was overturned by a federal appeals court in January.

Court Says Congress Must Comply with Federal Insider-Trading Investigation
WASHINGTON—Federal law-enforcement officials can resume a high-profile insider-trading investigation after a New York judge said Congress must cooperate with investigators looking into a possible leak of government health-care policy.

BlackRock Seeks Approval for Nontransparent ETFs
BlackRock Inc. is seeking regulators’ approval for actively managed exchange-traded products that don’t disclose their holdings daily, considered a frontier for the industry.
In a filing to the Securities and Exchange Commission dated Nov. 12, several BlackRock units sought approval that “would permit applicants to operate actively managed exchange-traded funds that do not disclose their portfolio holdings on a daily basis.”

World Exchanges Launch Global Financial Education & Literacy Initiative
Press Release
The World Federation of Exchanges, which represents public markets around the world, will start a new global industry initiative to promote financial education and entrepreneurial skills among school children and university students, following an overwhelming response from its members to join a new study group on the topic.
Thirty exchange and clearing house members of WFE have joined up to date.

Measuring How Financial Advisers Handle Uncertainty
NY Times
Remember how you felt during the financial crisis in 2008? People were scared. Even the professionals were uncertain about what might happen. I know, because I was scared, too.
But I couldn’t show it. Whatever was going on, my clients still needed me to provide thoughtful advice and to help stop them from doing something stupid.

AIG, Under Pressure From Icahn, Amends Bylaws on Proxy Access
American International Group Inc., the insurer pressured by activist investor Carl Icahn to split into three companies, amended its bylaws to allow certain shareholders to include director nominations in the proxy statement for annual meetings.

ICE beats CME to Trayport with $650m deal
IntercontinentalExchange has trumped its great rival CME Group to bolster its position in European energy trading markets by agreeing to buy Trayport, an electronic energy trading platform, from BGC Partners for around $650m (£427m) in stock. ICE will take control of an asset that has been owned by BGC, a US interdealer broker, for just seven months when it bought Trayport’s parent company GFI Group for $750m, reports Philip Stafford.

Closet tracking: ‘Gigantic mis-selling phenomenon’
Madison Marriage – FT
Investors have been overcharged in at least 20 of the world’s largest investment markets, according to new academic research that has intensified calls for regulators to put an end to a systemic mis-selling crisis in the fund industry.

End of ‘Too-Big-to-Fail’ Banking Era Endorsed by World Leaders
John Glover, Ilya Arkhipov – Bloomberg
G-20 to back ruleset replacing `bail-outs’ with `bail-ins’
World leaders are set to endorse plans by regulators to end the era of too-big-to-fail banks, forcing them to raise as much as $1.2 trillion, and backed proposals to wrap up sweeping reforms of rules for the global banking system.

Jury finds Ernst & Young liable over investor’s Madoff losses
Ernst & Young LLP was found liable on Friday by a Washington state jury for the losses of an investment firm from the collapse in 2008 of fraudster Bernard Madoff’s multibillion dollar Ponzi scheme.

Goldman Sachs Promotes More Women Than Ever—But It’s Still Not Enough
by Valentina Zarya – Fortune
The bank’s newest class of managing directors is 25% female.
Slow clap for Goldman Sachs, whose newest class of managing directors consists of 106 women, out of a total 425 employees who were promoted.

Central Banks

So Why Exactly is the Fed Likely to Raise Interest Rates in December?
The improving job market is the official answer. But there may be more to it than that.
Why Ben Bernanke Still Believes in Wall Street
Here’s What Friday’s Jobs Report Means for the Fed’s Rate Hike
Why September’s Jobs Report Was a Huge Disappointment
You don’t have to read any tea leaves to try to figure out what the Fed is thinking when it comes to interest rates.

DIVERGENCE: The biggest issue facing investors right now
There’s a funny trend in the global markets that we haven’t seen for many years.
It’s the divergence between what’s going on at the Federal Reserve, as it prepares to raise interest rates for the first time in nearly a decade, and what everyone else around the world is doing.

Ben Bernanke defends Federal Reserve policies in Fort Worth talk
The Star-Telegram
Former Federal Reserve Chairman Ben Bernanke defended the central bank’s actions after the financial crisis, telling a gathering in Fort Worth on Monday that warnings about the risks of higher inflation and a collapsing dollar as a result of the Fed’s policies have not transpired.
In terms of economic stability, Bernanke said, “I think we’re a lot safer today than we were in 2007.”

ECB Finds $1.87 Billion Capital Gap in Stress Test of Nine Banks
Jeff Black – Bloomberg
Shortfall of 1.4 billion euros found at Portugal’s Novo Banco
ECB says other banks have already raised necessary funds
The European Central Bank found capital gaps totaling 1.74 billion euros ($1.87 billion) among nine lenders it tested, with the biggest hole at Portugal’s Novo Banco SA.

Fed Suspense Grips Africa Central Banks in Final Policy Move
Central banks at three corners of Africa have a last chance in coming days to prepare their economies for any liftoff in U.S. interest rates as they grapple with policy already complicated by record-low currencies.

SE Asia’s central banks prepare to ease in face of Fed
Financial Times
Earlier this year it felt as if many emerging market central banks were paralysed in the face of the Fed.
On the one hand they feared the long-awaited interest rate “lift-off” by the US Federal Reserve and what it might do to their currencies and capital flows; on the other, they urged US policymakers to get on with it rather than dither?…?which, of course, is exactly what the US central bank ended up doing.

Emergency central bank funding to Greek banks up by 340 mln in Oct.
Nov 16 Emergency central bank funding to Greek lenders rose by 340 million euros in October, Bank of Greece data showed on Monday.


What’s Next for the Yuan After Joining the IMF’s Currency Club?
Bloomberg News
Proposal’s need for board approval brings politics into play
Invesco’s Hu sees increased flows into onshore yuan market
The yuan is set to join the IMF’s exclusive club of reserve currencies, with the fund’s staff supporting its inclusion after months of persuasion and policy changes by China.

China capital flows turn positive on improved renminbi outlook
Gabriel Wildau in Shanghai – FT
Capital flowed into China last month for the first time since an unexpected currency devaluation in August shook investor confidence in the economy, easing fears over financial stability following an unprecedented bout of outflows.

How Long Do Forex Traders Let Terrorism Impact Currencies?
In light of all the tragedy in France, it is refreshing to see that the terrorists did not successfully terrorize the financial markets. U.S. and European equities ended the day steady or slightly higher and even though investors sold the EUR/USD, the decline could have been a lot steeper. In fact we did not see any unusually large moves in currencies. Some analysts attribute the muted reaction to uncertainty but if that was true, we would see more risk aversion. Other analysts believe the attacks give the Federal Reserve the perfect excuse to forgo a rate hike next month, but today’s rise in the U.S. dollar and the relatively mild drop in Treasury yields signal that investors have not adjusted their positions for this possibility.

Indexes & Index Products

New Deka bond index ETF launched on Xetra; ETF tracks European government bonds with highest 5-year yield
Deutsche Börse
Deutsche Börse Cash Market: A new bond index ETF issued by Deka Investment GmbH was launched and available for trading on Xetra and Börse Frankfurt since Monday, 16th.

Benchmark reshuffles to feed into livestock futures pricing
Emiko Terazono – FT
After being blamed for causing everything from cancer to global warming, cattle and hog breeders have finally had a piece of good news. The impending reshuffle of the two main commodity benchmarks — the S&P GSCI and BCOM — mean that the futures contracts for livestock will see $780m worth of buying by fund managers, as both indices have increased the weightings of cattle and hogs.

ETF industry in India over the years
Indexology – S&P Dow Jones Indices
The mutual fund industry can again be divided into active funds versus index funds, which is a passive investment style. In the active space the manager makes active investment decisions on stocks in an effort to generate alpha. However in an index fund, the manager simply attempts to replicate an index with minimum tracking error. The benefit of index fund is lower expense ratio due to lower management fees. As the markets evolved, investors realized that mutual funds, whether active or index, are not tax efficient since the capital gains realized on the sale of fund investments, including to meet redemption requests, is distributed across all the existing investors based on fund ownership.

MSCI adds 14 overseas-listed Chinese firms to emerging market index
MSCI will add 14 overseas-listed Chinese firms – including Alibaba Group and Baidu – to its influential MSCI Emerging Market index on December 1, Reuters reported, citing a statement from the company. Analysts estimate the rebalancing could trigger up to US$70 billion in net flows into the group of stocks over the next half year and bump up China’s weight in the index by three percentage points to 26% in the process.

Eurex Exchange’s MSCI news – November 2015
Eurex Exchange’s MSCI derivatives experienced their highest non-roll month volume to date. In total more than 120,000 contracts were traded in October 2015.


Sorry Ted Cruz, The Gold Standard Really Isn’t A Good Idea
Tim Worstall – Forbes
At the Republican debate Senator Ted Cruz suggested that perhaps America should move back to the gold standard. No, this isn’t a good idea, it’s a terrible one, around and about as terrible as Bernie’s idea of a $15 minimum wage.

Paulson Holds Stake in SPDR Gold Trust Last Quarter
Billionaire hedge fund manager John Paulson stuck with his holding in the biggest exchange-traded product backed by gold, looking past slumping prices for the metal.

Gold Prices Rise as Paris Attacks Spark Safe-Haven Demand
The precious metal has long acted as a safe store of value during periods of heightened global uncertainty. That role faded somewhat this year as investors have focused on the timing of the next U.S. interest rate rise, a trend that kept a tight lid on Monday’s rally.
The most actively traded gold futures contract, for December delivery, gained $2.70 to $1,083.60 a troy ounce on the Comex division of the New York Mercantile Exchange. It did touch a one-week intraday high overnight, but spent most of the session slowly retreating from there.

Why we’re flushing £13m of gold down the plughole each year
The Guardian
It may not be a story with the hustle and brute glamour of The Treasure of the Sierra Madre, but it turns out that we are all sitting on our own gold mines. Literally. Every single day. Precious metals worth an estimated £13m are being flushed down our sinks and drains each year. All the more precious, perhaps, for lurking not in majestic and Oscar-friendly hill country but in our dark, stinking sewers. As Sam Dobbs, the grizzled prospector in John Huston’s 1948 classic noted: “An ounce of gold, mister, is worth what it is because of the human labour that went into the findin’ and the gettin’ of it.” To which we might add, the producin’ of it.


Recruiting Gets Pricier For Wall Street
The biggest jump in Wall Street pay this year likely went to some of its newest arrivals. The median base salary for Harvard Business School 2015 graduates going into investment banking or sales and trading hit $125,000, up 25% from last year’s level, according to recently released data. Signing bonuses rose 18.75% to $47,500.

These Are the ‘Hall of Fame’ CEOs Who Have Made Their Investors a Fortune; Cashing in on CEOs with a proven track record.
Luke Kawa – Bloomberg
“History has proven time and time again that management matters,” comes the reminder from George Gianarikas, head of global sector and regime strategy at Fundstrat Global Advisors.

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