First Impressions

MarketsWiki Education Chicago 2015
Chicago Intern Education Series Day 3 Wrap-Up
Sarah Rudolph – John Lothian News

For our final day of the 2015 MarketsWiki Intern Education Series in Chicago, hosted by Trading Technologies, our special guest was the city’s mayor, Rahm Emanuel, who told the audience of summer interns that Chicago is the No. 1 destination for young people looking to start their careers right after graduating from college. Chicago is a great destination for several reasons, he said, including that it has the most diverse economy of any U.S. city., incorporating industries such as healthcare, transportation, professional services, and of course the financial sector and risk management in particular.

“No single sector drives more than 15 percent of the city’s economy,” Emanuel said. “And Chicago is the country’s capital for financial technology. It is also a third of the cost of either New York City or San Francisco.”

He took questions from the audience on the impact of Chicago on the financial sector at large; where crime fits in in the larger picture of the city; and, as floor trading ends, what the city is doing to keep Chicago the center for risk management and finance.

Read about the rest of the Day 3, including talks from CME Group‘s Phupinder Gill, CHX CEO John Kerin, industry veteran Mary McDonnell and CBOE‘s Andrew Lowenthal at JohnLothianNews.com.

Quote of the Day

“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. Our company is operating well today, but we think we can make it cleaner and more accountable.”

Larry Page, CEO of Google in the story, “Google Creates New Company Called Alphabet, Restructures Stock”

Lead Stories

Google Creates New Company Called Alphabet, Restructures Stock
Bloomberg
Google Inc. is changing its corporate structure to separate its search, YouTube and other Web companies from its research and investment divisions. The shares rose in late trading.
Alphabet will be the name of what will effectively be a new holding company, the Web company said in a blog post Monday. It will include Google Inc. and Calico, a separate unit that includes Google Ventures, Google Capital, Google X and other subsidiaries.
jlne.ws/1MYWRKM

Is Marco Rubio right about 40% of banks wiped out by Dodd-Frank?
By Becky Yerak, Chicago Tribune
Marco Rubio said Dodd-Frank wiped out 40 percent of banks. That’s a bit overstated. Presidential contender Marco Rubio said during Thursday’s Republican debate that “over 40 percent of small and midsize banks have been wiped out since” the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.
jlne.ws/1DH0XUT

On the Defensive, the S.E.C. Quietly Pursues High-Profile Cases
By ALEXANDRA STEVENSON and MATTHEW GOLDSTEIN, NY Times
Wall Street’s chief regulator, the Securities and Exchange Commission, appears to some to be in need of a makeover. Critics say it is too focused on minor cases, it is not aggressive enough in forcing wrongdoers to admit liability and yet it is too aggressive in seeking an unfair advantage for trying cases.
jlne.ws/1DC3lMY

US banks lock down rate traders on pay ahead of possible Fed move
Ben McLannahan in New York, FT
Wall Street banks are rushing to lock down their top interest-rates traders, in anticipation of bumper opportunities arising from a long-promised “lift-off” from the Federal Reserve.
jlne.ws/1J5S89z

JPMorgan Chart Gurus Say Don’t Get Too Excited About This Rally
Bloomberg
Open up your umbrellas, because JPMorgan Chase & Co.’s technical analysts are raining all over today’s stock-market parade.
The bank’s Jason Hunter and Silvia Seceleanu have a note out saying that the tight trading range in which the U.S. equity market has been trapped this year could give way to a period of weakness heading into the fall.
jlne.ws/1MYTR10

Alan Greenspan: Be Afraid Of Pending Bond Market Bubble
ValueWalk
Former Federal Reserve Chairman Alan Greenspan spoke with Bloomberg’s Tom Keene about the U.S. economy, bond market and Fed policy.
On how afraid we should be of bubbles, Greenspan said: “Very much so. I think we have a pending bond market bubble. If we merely substitute the structure of equity prices and we have the price of bonds and instead of expected equity return we do have expected interest rate return. That price earnings ratio is an extraordinarily unstable position.”
jlne.ws/1IFBnwk

How Greece’s Drama Helped Balance Germany’s Books
MoneyBeat – WSJ
Germany will make a profit from the eurozone debt crisis and saving Greece, even if Athens doesn’t pay back its debt, according to a leading German economic institute.
The findings by Halle-based Institute for Economic Research, known as IWH, might come a surprise to German taxpayers who believe that Germany, as Greece’s largest creditor, is sitting on the highest bill.
jlne.ws/1IFyJGR

Bond Traders Brace for More Turbulence in Short-Term Treasuries
Alexandra Scaggs, Bloomberg
What a difference a week makes for bond traders betting on when the Federal Reserve will raise interest rates.
jlne.ws/1HBjSLR

Activist Investors’ Secret Ally: Big Mutual Funds
By DAVID BENOIT and KIRSTEN GRIND, WSJ
Activist investor gained a board seat at Microsoft Corp. two years ago, corporate boards around the country were stunned. How had a shareholder with less than 1% of the software giant’s stock forced its way into the boardroom?
jlne.ws/1f3hsPo

The Long Shadow of Bill Gross
By OLAF STORBECK, NY Times
Pimco may not have emerged from the shadow of its larger-than-life co-founder Bill Gross, who left the world’s biggest bond fund abruptly in September 2014. But Allianz, its German owner, can take Pimco’s fall from grace in its stride. The company’s half-year results suggest its insurance division and a growing in-house asset manager are taking up the slack.
jlne.ws/1L1mquv

Central Banks

Fed ‘close’ to hiking rates, economy near normal: Lockhart
Reuters
Economic conditions in the United States have largely returned to normal and a Federal Reserve decision to raise interest rates should come soon, Atlanta Fed President Dennis Lockhart said on Monday.
“I think the point of ‘liftoff’ is close,” Lockhart said in a speech to the Atlanta Press Club. “The economy has made great gains and is approaching an acceptable normal … conditions are no longer extraordinary.”
jlne.ws/1MYSSOu

WARREN BUFFETT: It’s going to be ‘very tough’ for the Fed to raise rates in September
Business Insider
Warren Buffett doesn’t think a rate hike from the Federal Reserve in September is guaranteed.
After the July jobs report on Friday, economists’ expectations that the Fed will raise interest rates next month increased.
jlne.ws/1IFBfge

U.S. inflation temporarily ‘very low,’ says Fed’s Fischer
Reuters
U.S. inflation is only temporarily “very low” due in part to commodity prices, while the U.S. economy has nearly achieved full employment, Federal Reserve Vice Chairman Stanley Fischer said on Monday.
“A large part of the current inflation is temporary. It has to do with the decline in the price of oil; it has to do with the decline in the price of raw materials,” he said on Bloomberg TV.
jlne.ws/1MYT68c

BOE’s Miles Saw ‘Reasonable Case’ for Rate Increase Last Week
Bloomberg
David Miles said there was a “reasonable” argument for the Bank of England to raise interest rates last week in order to avoid faster tightening in future.
“I thought there was a case for beginning the journey now,” the BOE policy maker said in an interview in London on Monday as he explained how close he came to voting for higher borrowing costs at his final meeting on the Monetary Policy Committee. “It was a perfectly reasonable case.”
jlne.ws/1MYTJi7

ECB Maintains Faster Pace of Weekly Bond-Buying Amid Summer Lull
Bloomberg
The European Central Bank settled 10.8 billion euros ($11.9 billion) of public-sector bond purchases last week, sticking to its increased pace to counter the summer lull.
The central bank’s purchases in the week through Aug. 7 took the total to 259.7 billion euros since the program started in March, data from the Frankfurt-based institution showed on Monday. It boosted the purchases of covered bonds to 2.6 billion euros, from a 2.3 billion-euro pace in the previous week.
jlne.ws/1IFAF27

Currencies

Markit launches centralised FX trade confirmation service
Markit
Citi and J.P. Morgan first to confirm FX options trades
Markit (Nasdaq: MRKT), a leading global provider of financial information services, today announced the launch of its FX trade confirmation service.
jlne.ws/1J5LC2x

FX technology investment strategies revealed
by Paul Golden, Euromoney
While substantial investment has been made in FX technology since the global financial crisis, there are areas of the market where its impact has yet to be felt.
jlne.ws/1MfxJhr

Standard Digital News : : Business
www.standardmedia.co.ke
Steep falls in emerging market currencies have spurred central bankers across the developing world into action to try to stem the weakness.
A JPMorgan index tracking 22 emerging market currencies has hit record lows, and with the US Federal Reserve set to raise interest rates this year, more weakness likely lies ahead.
jlne.ws/1IFAROM

Putin Praises Central Bank’s Work Strengthening Ruble
The Moscow Times
President Vladimir Putin lauded Central Bank Governor Elvira Nabiullina on Monday for efforts to stabilize and strengthen the ruble as the Russian currency traded near a six-month low.
jlne.ws/1IFAUdx

China’s Central Bank to Introduce New 100 Yuan Banknote on Nov. 12
www.chinatopix.com
The People’s Bank of China (PBoC) has announced on Monday that an updated version of the 100 yuan banknote will be introduced on Nov. 12. There would be no changes to the color and design of the new 100 yuan bill. However, it would come with advanced security features that will make it difficult to counterfeit and easily identifiable by machines.
jlne.ws/1IFB5FE

Bitcoin startups lure quant whizzes from Wall Street
Daily Times
Armed with a doctorate in financial engineering, 34-year-old Timo Schlaefer was on his way to a promising career at Goldman Sachs in London.
In February he gave that up, and launched a company called Crypto Facilities Ltd, a bitcoin derivatives trading platform, which now has six employees. For now, the platform trades bitcoin forwards, which are directly linked to the price of bitcoin, but it’s also developing other digital currency derivative products.
jlne.ws/1TeluqT

Indexes & Index Products

An Index Fan Goes More Active
WSJ
Stock-fund managers aren’t likely to beat the broad market in the long run, but some of them can help protect against a market downturn, says Antonio Caxide, an investment adviser in Columbus, Ohio.
jlne.ws/1MYTjs1

High-return era ends for many big public pension funds
Pensions & Investments
The Wilshire Trust Universe Comparison Service calculated the median return of public plans with more than $5 billion in assets at 3.4%.
jlne.ws/1P0Pm3I

S&P 500 Flouts History in Break With Bonds That Often Ends Badly
Lu Wang, Bloomberg
As far as credit markets are concerned, U.S. stock investors have lost touch with reality.
jlne.ws/1ISTYnL

Invest in index funds for better returns
Gail Marks Jarvis, Chicago Tribune
Do you search the Web to find the best price on clothes or electronics? Do you drive across town to get a discount on a household item or to shave a few bucks off your groceries? Americans love a deal. But when it comes to their 401(k)s, IRAs, or other retirement and college savings, many are lousy shoppers. Consequently, they throw thousands of dollars away buying inferior mutual funds that will fail to cover retirement or kids’ college adequately.
jlne.ws/1P0Pss2

Exchange-traded funds for the active-minded
San Antonio Express-News
Actively traded ETFs have yet to burn up the track with mainstream investors, who mostly cling to passive funds that mirror indexes that are benchmarks for stocks, bonds and other investments. Unlike their passive cousins, active ETFs feature a hands-on manager who can take the reins of a portfolio and make daily decisions on how to best invest, much as in a traditional mutual fund.
jlne.ws/1P0PBvE

Tension Runs High in VIX as Stock Insurance Costs Most Since ’06
Bloomberg Business
Speculators’ appetite for protection from stock-market tempests has reached the highest in nine years. Options predicting a rise in the Chicago Board Options Exchange Volatility Index are the most expensive since 2006 relative to those betting on a drop. With gains narrowing, investors are hedging through calls on the VIX, which usually rises as the Standard & Poor’s 500 Index falls.
jlne.ws/1MkqBln

Gold

Gold Holds Its Own Against These Media Darlings
Forbes
There’s no other way to put it: Commodities took it on the chin last month.
July was the seventh worst performing month for the S&P Goldman Sachs Commodities Index, going back to January 1970. Crude oil saw its steepest monthly loss since October 2008. Both copper and aluminum touched their lowest levels in six years. And on July 19, possibly as a result of deliberate price manipulation, gold experienced a mini flash crash, sending it down to five-year lows.
jlne.ws/1MYV4FL

Gold Miners’ Stocks Just Aren’t That Special
WSJ
Beware gold bugs bearing cheap equities.
Thanks to gold’s swift descent, mining stocks have been crushed in the past month. But bargain hunters should tread carefully. While faith in the metal may have dimmed, some vestiges of gold fever remain.
jlne.ws/1MYVax7

Gold mine’s toxic plume extends to Utah
www.usatoday.com
The plume of heavy metals released last week into the Animas River from the Gold King Mine near Silverton, Colo., is now in Utah.
Evan O’Keefe, supervisor with the San Juan County Geographical Information Systems department, estimated this morning that the plume, which is now in the San Juan River, is about three hours south of Aneth, Utah.
jlne.ws/1MYUYhm

Is The “Smart Money” Ready To Bet On Gold?
ETF DAILY NEWS
For the last three weeks, gold has experienced something that has never happened before – hedge funds aggregate net position has been short for the first time in history.However, as Dana Lyons notes, this week saw another ‘historic’ shift in gold positioning as commercial hedgers shifted to the least hedged since 2001… so the ‘fast’ money is chasing momentum and the ‘smart’ money is lifting hedges into them.
jlne.ws/1MYVv2J

Miscellaneous

Algorithmic Trading: The Play-at-Home Version
WSJ
After more than 100 hours of coding over three months, Mike Soule was finally ready to switch on his project. He didn’t know what to expect. If things went right, he could be on his way to financial success. If things went wrong, he could lose his savings.
His creation wasn’t a new mobile app or e-commerce store. It was a computer program that would buy and sell currencies 24 hours a day, five days a week.
DIY’s newest frontier is algorithmic trading. Spurred on by their own curiosity and coached by hobbyist groups and online courses, thousands of day-trading tinkerers are writing up their own trading software and turning it loose on the markets.
jlne.ws/1IFw0xg

Meet the Fraternity Brothers Linked to the JPMorgan Hack; College life was an education in making fast cash online
Jordan Robertson Michael Riley, Bloomberg
When Anthony Murgio and Josh Aaron ran the place, the Phi Sigma Kappa house a block from Florida State University’s Tallahassee campus was a hive of digital moneymaking. Led by Murgio (chapter president) and Aaron (secretary), dozens of fraternity brothers paid their way through school writing Google ads that persuaded people to click links for everything from dating websites to electronics. Working in shifts, the brothers brought in thousands of dollars a month in commissions. For Murgio and Aaron, college life was an education in making fast cash online.
jlne.ws/1MT2yJo

Emerging markets: Redrawing the world map
Financial Times
When Matteo Ricci, the Italian 16th century Jesuit missionary, travelled to China to win converts to his faith, he found that his European maps, which showed China relegated to the cartographical margins, failed to endear him to his hosts. So he redrew them. The resulting world map of 1602 placed China at its centre, an accommodation that is said to have helped him win influence among the Middle Kingdom’s elite.
jlne.ws/1IFw1Bi

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