First Impressions

Extreme Makeover: Gary DeWaal Says FCM Landscape has to Change
JohnLothianNews.com
What is it? And if you can determine that, how should it be regulated, taxed, or even traded? Is this the next asset class? Some may find potential there, while others still find it a joke or worse. Our special report features a column from JLN publisher John Lothian about his thoughts on Bitcoin, a short primer on the aspects of Bitcoin, as well as some of the best articles we have found in recent weeks. This Special Report is designed to inform and perhaps, raise the debate and dialog further.
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Quote of the Day

The world has fierce disinflation or deflationary tendencies and we live in this world I think it’s a serious risk.

David Kotok, chairman and chief investment officer at Cumberland Advisors, in the WSJ article “Deflation Is Still Smoldering Under the Economy”

Lead Stories

Deflation Is Still Smoldering Under the Economy
Paul Vigna – MoneyBeat – WSJ
The smoldering fires of deflation continue to burn under the economy, and with every fresh – and increasingly weak – inflation report, it becomes clear the fire has not been put out.
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***DA: It is no coincidence that there have been calls for adding an inflation metric to the taper decision.

To Future Historians, Whether Fed Tapers Now or March Will Be Irrelevant
Michael J. Casey – MoneyBeat – WSJ
Scott Minerd, a founding partner at Guggenheim Partners, heads the investment strategy at one the country’s most successful hedge funds. He is a very smart guy. Even so, having just predicted that the Federal Reserve would start tapering its quantitative easing next week, I felt compelled during a meeting at WSJ’s offices on Friday to challenge Mr. Minerd’s view that the central bank will wait until March.
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***DA: March of what year, exactly? See article above.

Bank of England’s Hauser makes collateral call
Sophie Baker – Financial News
Andrew Hauser, head of the sterling markets division at the the Bank of England, has called on the industry to do more to encourage long-term holders of high-quality securities to release them in order to ease a potential $4 trillion collateral shortfall.
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***DA: I can’t fully wrap my head around the collateral issue. Each layer of collateral transformation will impede liquidity in a crisis, which seems to me that we are no safer than we were five years ago. Unless, of course, the collateral is sufficiently haircutted, in which case collateral efficiency has disappeared.

Everything must have a reason, even banks
Izabella Kaminska | FT Alphaville
Another good snippet from the BIS quarterly review that’s worth highlighting comes in the observation that banks are losing their raison d’etre due to the erosion of their funding advantages versus non-banks. Which means they’re increasingly resembling listless entities devoid of purpose in a capital shadowland that’s not willing to let them move onto another more deathly plane.
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***DA: But…but… we were told, when all these mega-mergers took place that created these banks was going to lead to all sorts of efficiencies that would make life great for consumers.

Why Federal Reserve Support Is Really a Bailout
STEPHEN J. LUBBEN – NYTimes.com
It has become something of an article of faith in the financial world that government support like discount-window liquidity does not count as a bailout. Namely, the argument is that if a financial institution needs to borrow some money on a short-term basis from the government, but the institution is otherwise solvent, that the lending is not a bailout. But is that right?
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***DA: The winners (and those who regulate them) write the history books.

Volcker Rule Ushers in Era of Increased U.S. Oversight of Trades
Silla Brush, Cheyenne Hopkins and Jesse Hamilton – Bloomberg
Wall Street faces increased government oversight of trading after U.S. regulators issued what they billed as a stricter Volcker rule today, imposing restrictions designed to prevent blowups while leaving many of the details to be worked out later.
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Central Banks

Policy centrist says ready to taper Fed bond buys
Reuters
A top Federal Reserve official who is sometimes seen as a bellwether for U.S. monetary policy on Monday offered his voice to a growing contingent at the central bank that has argued for reducing the Fed’s bond buying at a meeting next week.
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***DA: Sending up trial balloons before any taper is launched.

A Fed Dissident on Policy and Transparency
BINYAMIN APPELBAUM – NYTimes.com
Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, who will become a voting member of the Fed’s policy-making committee in 2014, spoke with a small group of reporters in Philadelphia last week about his view of the economy, why he doesn’t think the Fed should taper its bond-buying campaign, and why he intends to continue airing his disagreements with the Fed’s leaders.
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***DA: Though Yellen is a dove, the FOMC takes a hawkish turn in 2014 with Plosser, Dallas Fed chief Fisher and Minneapolis’ Kocherlakota.

Fed’s Fisher wants December taper, clear path to end of QE3
Reuters
The Federal Reserve should start to trim its massive bond-buying program next week, and spell out a clear path for phasing it out altogether, a top Fed official said on Monday.
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The Spirit Of The Season – Speech By Bank Of England Governor Mark Carney
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Currencies

For Bitcoin, Square Peg Meets Round Hole Under the Law
PETER J. HENNING – NYTimes.com
The advent of a new medium to conduct business inevitably means avenues for criminals to swoop in to take advantage. The development of Bitcoin, the virtual currency that is not issued by any government, presents challenges for the authorities to use laws that were not designed for the digital world to combat illegal conduct.
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***DA: Want more on bitcoin, check out our special report from a few days ago.

http://jlne.ws/1dlM9cu

Dollar Will be a Winner: Currencies in 2014
Clare Connaghan – MoneyBeat – WSJ
This year has tripped up many currencies watchers. The resilience of the euro, the long pause in the yen’s slide, the rally in sterling, and the collapse in the Norwegian krone have created a lot of head-scratching.
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Korean Won Hits Two-Year High Versus Dollar
Anjani Trivedi – MoneyBeat – WSJ
The South Korean won hit a two-year high against the dollar on Tuesday, helped by signals that the economy continued to gain momentum.
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Sterling hits two-year high after Mark Carney comments, housing survey
The Economic Times
Sterling hit a two-year high against the dollar on Tuesday as investors took upbeat comments from Bank of England Governor Mark Carney and a strong house price survey as signs that interest rates could rise earlier than previously thought.
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Recovering stolen bitcoin: a digital wild goose chase
theguardian.com
Victims of the biggest theft in bitcoin history tried to put the much vaunted anonymity of the currency to the test as they attempted to recover their stolen money. But instead, they were left out of pocket and with egg on their faces.
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Indexes & Index Products

STOXX Introduces Emerging Markets Exposed Index For Europe
STOXX Limited, a leading provider of innovative, tradable and global index concepts, today introduced the STOXX Europe 600 EM Exposed Index.
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Gold

China’s Reforms May Boost Gold ETFs
MoneyBeat – WSJ
Chinese appetites for gold as a securitized investment instrument may increase as the country shifts toward more market-oriented policies, according to a senior World Gold Council executive.
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DGCX Year-to-Date Volumes Up 51% In November
Year-to-date volumes on the Dubai Gold & Commodities Exchange (DGCX) increased by 51% in November, with over 12.9 million contracts.
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