First Impressions

Alternative Lifestyle: What’s up for alternative investments in ‘14?
By Jim Kharouf, JLN

A new report reflecting the views of institutional investors in private equity funds, hedge funds, real estate and infrastructure says that their impression of alternative investments is “particularly positive” over the next 12 months.

The report, Preqin Investor Outlook: Alternative Assets H1 2014, said that investors across all asset classes are planning to put the same or more capital into alternative assets. That’s good news for private equity and hedge funds, which are looking to raise more investment capital.

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Quote of the Day

It has been decided to advertise the position of the governor as open for applications. That is done to give authorities greater flexibility in relation to possible changes to the laws on the central bank.

In a memo from Iceland’s ministry of finance, as quoted in the Bloomberg story “Iceland Memo Reveals Central Bank Governor May Be Replaced”

Lead Stories

G-20 Pushes Growth as Stimulus Withdrawal Backed, Draft Says
Matthew Brockett – Bloomberg
The Group of 20 will take “concrete actions” to bolster growth while backing the normalization of monetary policy in advanced economies, according to a draft communique seen by Bloomberg News.

***DA: Now, we just need to define “normalize.” A committee will be convened shortly.

A Chronicle of Uncertainty, Then Bold Action, in 2008 Fed Transcripts
WASHINGTON — On the morning after Lehman Brothers filed for bankruptcy in September 2008, most Federal Reserve officials still believed that the American economy was growing, and that it would continue to grow, avoiding a recession.

Japan Record Trade Gap Shows Risk of Abenomics Losing Steam
Andy Sharp – Bloomberg
Japan’s record trade deficit adds to sinking consumer confidence and an April sales-tax increase, threatening to undermine Prime Minister Shinzo Abe’s bid to engineer a sustained recovery.

***DA: Rumor has it grocery stores are running low on Kool-Aid.

U.S. Deflation Risk Seen Growing in Wells Fargo Model
Simon Kennedy – Bloomberg
The U.S. economy may prove more prone to deflation than the Federal Reserve acknowledges and that may present a reason to keep monetary policy loose, according to a model created by Wells Fargo Securities LLC.

Iceland Memo Reveals Governor of Central Bank May Be Replaced
Omar R. Valdimarsson – Bloomberg
Iceland advertised the position of central bank governor after the current incumbent Mar Gudmundsson questioned the government’s intention to push through the world’s biggest household debt relief program.

***DA: Political establishment seeks lapdog to follow pre-established game plan. Financial experience preferred but not necessary.

Cleared US dollar swap volumes drop 80% on first day of Sef regime
Peter Madigan –
Interest rate swap trading volumes fell more than 80% on the first day of mandatory trading on swap execution facilities (Sefs) in the US, according to data collected by the International Swaps and Derivatives Association. Dealers believe many firms avoided trading while the untested regime beds down.

***DA: No one wants to be the guinea pig.

Investor support for US bonds on the wane
Henny Sender –
Bond market investors are a downbeat lot. They live in an asymmetric world because bonds can go down much more than they can go up. And investors in Treasury securities are the most downbeat and risk averse of all since they prize safety above all else.

***DA: I hear the Fed is buying, just not as much.

Italy to Test Appetite for Bonds As New Government Looms
Emese Bartha – MoneyBeat – WSJ
Italy will test investors’ appetite for its paper with two auctions next week as markets await its new government, while Germany will round off this month’s heavy issuance of ultra-long-dated debt in Europe.

Morning MoneyBeat Europe: Factory Data Suggest U.S. Can Take the Taper
David Cottle – MoneyBeat – WSJ
The U.S. manufacturing sector has put a spring in global markets’ step, and European indexes are expected to rise at the open Friday, despite intensifying violence in Ukraine.

Hopes grow that US CCPs will get green light from EC
Lukas Becker –
Banks and central counterparties (CCP) are increasingly hopeful the European Commission will overlook differences in transatlantic clearing house rules and decide the US regime is equivalent to that in Europe – a step that would remove the threat of European banks giving up their membership of US CCPs.

Russia says better positioned than peers to deal with U.S. policy impact
Russia may see a balanced budget this year, which puts the country in a better position than other emerging markets to fend off the impact of the U.S. decision to curb its monetary stimulus, Finance Minister Anton Siluanov said on Friday.

KKR Looks to Fill India’s Credit Needs
With India’s economy downshifting and credit hard to come by as the country’s big banks struggle with bad loans, companies are scrambling for funding. For KKR & Co. co-founder Henry Kravis, that means opportunity.

Franklin Templeton’s Ukraine bond bet in the red
David Oakley, James Mackintosh and Delphine Strauss –
Franklin Templeton, the global fund management group, has suffered losses on multibillion dollar positions in Ukrainian debt. Ukrainian bond yields, which have an inverse relationship with prices, have risen sharply in response to instability in the country as concerns have mounted that it is heading for civil war.

Central Banks

An Aggressive Fed Finds Critics on Wall Street
Every time Janet L. Yellen, the chairwoman of the Federal Reserve, testifies in Congress, she can expect some senators to scoff and representatives to question. But Washington’s critics pale next to Wall Street’s.

***DA: Can you blame them?

Bank of Japan likely to expand asset buying by summer
The Bank of Japan is expected to ease policy further by this summer to help boost the economy and pull it out of a 15-year deflation, as the effects from Prime Minister Shinzo Abe’s stimulus strategy loses momentum, a Reuters poll showed.

***DA: 15-year deflation? It’s 23 by my count.

BOJ’s Kuroda: Weak yen contributing a lot to price gains
Bank of Japan Governor Haruhiko Kuroda said on Friday that a weak yen and high energy prices are contributing a lot to gains in consumer prices.

***DA: Elderly have recently overtaken teenagers as the largest group of shoplifters in the nation.


China clarifies steps to get yuan cross-border business moving in Shanghai pilot
China’s central bank has clarified operational details for conducting cross-border business in the yuan currency through its pilot project in the Shanghai free trade zone, according to a circular seen by Reuters on Friday.

How low can Australia’s dollar go?
Rebecca Howard – MoneyBeat – WSJ
How low can Australia’s dollar go? Deutsche Bank says it could plunge to around 65 cents per U.S. dollar by end of next year, equivalent to a 28% drop from where it was late Friday and a level last reached during the height of the global financial crisis.

***DA: I have 68 cents as a Fibonacci move off the 2011 high.

View From Mt. Gox Reveals Bitcoin Arbitrage
MoneyBeat – WSJ
Bitcoin prices on Mt. Gox have floundered ever since the once-dominant exchange for the digital currency halted withdrawals earlier this month. While other exchanges also briefly stopped customer withdrawals, most of them have returned operations to normal. Mt. Gox. has not.

***DA: Arbitrage is riskless capture of price discrepancy. When default risk is included, many say Mt. Gox BTC is still too high relative to the street.

BitBeat: Does Bitcoin Really Need the Winkdex?
MoneyBeat – WSJ
Well Mt. Gox really showed that guy. Our colleagues in Japan wrote earlier about the lone protester outside Mt. Gox’s office in Tokyo, a man who’s flown on his own from London just to confront company officials. He stood outside the door, in the snow no less, until he corralled CEO Mark Karpeles.

Sinking rouble tests Russia’s resolve
Delphine Strauss –
A sharp depreciation in the rouble is testing Moscow’s resolve to complete a free float of the currency by 2015, hitting demand for local currency sovereign debt and hampering the fight against Russian inflation.

Indexes & Index Products

Vix spikes as short volatility trade gets tougher
Yakob Peterseil –
Trading in Vix futures hit an all-time high in January as volatility spiked around concerns about the impact of slowing growth and US Federal Reserve tapering on emerging markets, but some market participants are also blaming central bank intervention for making a reliable short volatility trade trickier to execute.

State Street Launches European Online ETF Platform
Marina Daras – WatersTechnology
State Street Global Exchange has announced the launch of FundConnect, an online trading platform for Exchange Traded Funds (ETFs) designed to enhance the speed and efficiency in European ETF order-taking process.

ETFs Gain Ground on Index Mutual Funds
Ron Vinder used to buy funds run by star managers who seemed to have the Midas touch in picking stocks. After 2008’s global financial crisis, the New York-based financial adviser decided to make a change.


Going for the Gold: Chinese Demand Could Be Gold’s Long-Term Bid
Jennifer Schonberger – Fox Business
For investors who thought gold lost its luster, think again. Call it the China effect. Just as the Asian tiger’s hunger for commodities to feed burgeoning infrastructure projects drove up prices of commodities from oil to copper, so too could Chinese demand for gold.

Who is #1 consumer of gold? Does smuggling count?
Paul Ploumis – Resource Investor
The recently released Gold Demand Trends Report 2013 by the World Gold Council states that China surpassed India to become the world’s top consumer of the yellow metal in 2013. However, based on official imports and smuggled gold, India’s consumption is still higher.

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