First Impressions

Think Positive: Gail Osten Leaves Fond Memories
Jim Kharouf – JLN

There are some people who just get it.

Gail Osten was one of those people who just got it. Got what? You name it, work, personal issues, a joke – life. As a professional, her career spanned more than four decades starting in marketing at the MidAmerica Commodity Exchange and ending as director of corporate communications at the Chicago Board Options Exchange. She was also a mother of two boys, Dan and Jon, and wife to Joe Osten, all of whom she spoke about regularly.

Gail Osten

Osten, who died Thursday morning at the age of 65 after a second bout of cancer (she defeated an earlier case a couple of years ago), was known fondly by many in the industry for being truly good at what she did, a “consummate professional,” as CBOE Chairman Bill Brodsky put it.
“And one of the things I liked most about Gail was she was always upbeat,” he said.

Her career was a fluid mix of marketing, education, public relations and journalism. She worked for four different exchanges over her career, starting in public relations in 1973 at the Chicago Board of Trade and its Mid-Am subsidiary. Osten spent the bulk of her career – nearly 17 years – at the Chicago Mercantile Exchange, in marketing and advertising, and then later at CME Group as director of market education. She also consulted for the single stock futures exchange NQLX. Osten crossed over into the options space with the CBOE in 2008.

Read the rest of the obituary at JohnLothianNews.com

***** JJL: I am very saddened by the death of my dear friend, former colleague and Elmhurst neighbor Gail Osten. She was one of the most loved people I know. She was a light in this world. She had brass, and I love brass. We were blessed to work with her when we started MarketsWiki, and it was her work on the options exchanges that helped her get her job at the CBOE. Her belief in my idea and what we were trying to do with MarketsWiki was a great reassurance we were on the right track. I will be ever grateful for her contributions to MarketsWiki and in awe of the mark she left on the industry and on the hearts of the so many of us who loved her.

Quote of the Day

“All banks are in great difficulty, including us. If you look at the amount of provisions that we have created in the fourth quarter of this year and the first two months of this year, they are huge.”

Herman Gref, OAO Sberbank Chief Executive Officer in the story, ” Worst Yet to Come for Russian Banks, Sberbank CEO Gref Says”.

Lead Stories

Investing’s Old Guard Gets Its Algorithm On; Vanguard and Charles Schwab follow startups into the robo-adviser race
by Margaret Collins, Bloomberg
Throughout 2012, John Petrosky kept hearing about a potential financial crisis in Europe. The Houston father of three remembered the losses he’d suffered in 2008, when the U.S. system was on the brink of collapse, and got scared. He pulled money out of the markets—only to miss big gains in 2013.
jlne.ws/18Ofa3Z

Bank tax rise stokes pressure for StanChart, HSBC to quit UK
Reuters
Asia-focused banks Standard Chartered (STAN.L) and HSBC (HSBA.L) could be tempted to abandon their London headquarters to avoid a jump in the UK bank tax set to cost them a combined $2 billion a year, investors and analysts said.
Investors in both banks, but particularly Standard Chartered, have in the past encouraged their boards to consider leaving Britain, and this week’s jump in the UK bank levy is building pressure.
jlne.ws/1ARtY9n

AIG investors’ $970.5 mln settlement wins approval
Reuters
American International Group Inc shareholders won approval on Friday of a $970.5 million settlement resolving claims that they were misled about its subprime mortgage exposure, leading to a liquidity crisis and $182.3 billion in federal bailouts.
jlne.ws/1FMXW3S

HSBC to Shuffle Board Roles of Several Directors
Dealbook – NY Times
The British bank HSBC said on Friday that it planned to shuffle the roles of several members of its board of directors.
In a statement, HSBC, which is based in London but generates much of its income from Asia, said that Simon Robertson would stay on as deputy chairman of HSBC’s board for an additional year following the company’s annual shareholder meeting in April but would give up his role as chairman of the lender’s remuneration and nomination committees.
jlne.ws/1ARsbRx

The Dark Side of Strong Bond Returns
By Richard Barley, WSJ
Coupon clipping – the staple activity of the traditional, cautious bond investor – is rapidly becoming passé in Europe.
jlne.ws/1AOSqbq

‘Lincoln and the Jews’ Explores Bonds With a Nation’s Growing Minority
By JENNIFER SCHUESSLER, NY Times
ON Sept. 20, 1862, Abraham Lincoln had a lot on his mind. The Civil War was raging, and just days later he would issue the preliminary draft of the Emancipation Proclamation.
jlne.ws/1MTP9gz

The Power of Markets
by Joshua M Brown, The Reformed Broker
One of the hallmarks of our investment approach is to respect the fact that markets are extremely powerful (though not infallible) as forecasting tools. On average, they do a pretty damn good job at incorporating all of the expectations for the future into current prices, adjusting on the fly with every headline and every trade.
jlne.ws/18OgEv1

Big banks braced for rate rise boon
Tom Braithwaite and Ben McLannahan in New York and Martin Arnold in London, FT
Do not look to Goldman Sachs for a clear forecast on US interest rates: its top executives have different views. Lloyd Blankfein, chief executive, has warned for years that rates could rise faster than investors expect and recently sounded more optimistic about the benefits of an impending Federal Reserve increase.
jlne.ws/1I4wIoI

‘Unstoppable evolution’ in payments poses threat to irrelevant banks
Banking Technology
Banks have been warned that new entrants will come and ‘eat their lunch’ if they fail to remain relevant to the modern consumer in the face of an ‘unstoppable revolution’. The point was made repeatedly during sessions at the Payments International conference in London this week.
jlne.ws/19EWDIc

Worst Yet to Come for Russian Banks, Sberbank CEO Gref Says
Bloomberg
OAO Sberbank Chief Executive Officer Herman Gref said the worst is yet to come for Russia’s banking industry still reeling from last year’s collapse of the ruble and the economic slump.
Russia’s banking sector has not yet surpassed “the peak of its problems,” Gref, who runs the country’s largest lender, told reporters in Moscow on Friday. “They are still ahead.”
jlne.ws/1FMZqew

BofA under pressure to defend structure
Ben McLannahan in New York, FT
Bank of America will have to defend its current structure at its annual meeting in May and Citigroup and JPMorgan may have to do the same next year, after the Securities and Exchange Commission allowed a small shareholder the right to challenge the board on a break-up.
jlne.ws/1xF5Vcj

Swap Gauge Expands in Latest Effort to Revive Derivatives Market
by John Glover, Bloomberg
Gauges investors use to hedge against losses or speculate on the credit quality of Europe’s financial companies have been expanded in the latest effort to revive the $14.8 trillion credit derivatives market.
jlne.ws/19EWBQG

Fed says worth considering dropping banks’ exemption on commodities
Reuters
A top Federal Reserve official on Thursday said the U.S. central bank would consider overturning a decades-old rule that allows two U.S. banks to trade physical commodities, as part of its review of Wall Street’s involvement in oil and metals markets.
jlne.ws/1BaF2gQ

How an Ex-Moore Trader Got Caught in the Most Complicated Insider Trading Investigation in British History
by Suzi Ring, Bloomberg
British authorities swept through the darkened streets of Oxford that Tuesday toward their appointment with a most wanted man.
jlne.ws/1FcUgt9

China Starts 10-Year Bond Futures Trading as Rate Controls Ease
Bloomberg Business
China will allow trading of 10-year government bond futures, the latest step in a plan to build a market-based yield curve and liberalize interest rates. The China Financial Futures Exchange will officially list the 10-year contracts on Friday, after allowing trading of five-year sovereign debt futures in September 2013. That followed an 18-year hiatus after an investigation into alleged market manipulation in the late 1990s.
jlne.ws/1BaEJCT

European exchange lobby group names Riess as its head
Philip Stafford, FT
Rainer Riess, the former Deutsche Börse executive, has been named as the permanent head of the Federation for European Securities (Fese) as part of an overhaul of top executives at Europe’s main exchanges lobby group.
jlne.ws/1I4x6DA

European Union: EMIR:”Too Big To Fail”, Again?
Mondaq
“…just to give you an idea of the actual impact of Lehman Brothers, we can consider the figures published by one of the Lehman’s counterparties: Merrill Lynch, which in the third quarter of 2008 disclosed a US$2 billion pre-tax trading loss, which was mainly due to the unwinding of trades for which Lehman Brothers was a counterparty. Merrill Lynch was only one of the hundreds of counterparties of Lehman, so the aggregate impact on counterparties’ losses of Lehman’s default was much bigger than the one generally used.1 “
jlne.ws/1BWkJr0

Central Banks

Richard Fisher, Often Wrong but Seldom Boring, Leaves the Fed
NY Times
In a decade as president of the Federal Reserve Bank of Dallas, Richard W. Fisher was frequently mistaken in his economic predictions but seldom boring.
The departure of Mr. Fisher, who stepped down on Thursday, means that the Fed is losing one of the most outspoken internal opponents of its stimulus campaign just as it is winding down. Mr. Fisher argued right up to his retirement that the central bank was increasing economic inequality, destabilizing financial markets and might yet unleash higher inflation. But he is best known not so much for what he said as for the way he said it.
jlne.ws/1ARrWpy

Fed’s Evans says ‘perfectly fine’ with removing patient vow
Reuters
One the Federal Reserve’s top advocates for restraint in raising U.S. interest rates on Friday said he was comfortable with the decision earlier this week to remove a vow to be patient on rate hikes from the central bank’s formal policy statement.
jlne.ws/1ARtuA1

Fed’s Lockhart sees interest rate ‘lift-off’ by September
Reuters
Atlanta Federal Reserve President Dennis Lockhart said on Friday he expects the U.S. central bank to raise interest rates at either its June, July or September policy meetings, barring a significant downturn in the U.S. economy.
jlne.ws/1ARtKiA

Foreign central banks’ holdings in U.S. bonds lowest in a year
Reuters
Foreign central banks reduced their holdings in U.S. bonds to the lowest in a year, Federal Reserve data showed, as they have drawn down their reserves to defend their currency pegs or to stem further depreciation against the dollar.
The Federal Reserve’s custody holdings of bonds for overseas central banks fell to $3.227 trillion on Wednesday from $3.234 trillion from the previous week, Fed data released late Thursday showed.
jlne.ws/1ARwSel

Federal Reserve System Publishes Annual Financial Statements
Press Release
The Federal Reserve System on Friday released the 2014 combined annual financial statements for the Federal Reserve Banks, as well as statements for the 12 individual Federal Reserve Banks, Maiden Lane LLC, and the Board of Governors. These financial statements are audited annually by an independent auditing firm and, consistent with prior years, received unmodified audit opinions for 2014.
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Currencies

Bank of New York Mellon’s Best FX Execution Was Pretty Bad
By Matt Levine, Bloomberg
Bank of New York Mellon provides custody services to a lot of big investor clients, pensions, endowments, etc. When those custody clients have foreign exchange needs — to buy or sell foreign securities, for instance — they come to BoNY Mellon. This creates a nice opportunity for efficiency: BoNY Mellon has a lot of clients who want to exchange dollars for foreign currency, and a lot of clients who want to exchange foreign currency for dollars, so it can pair them off against each other, operating its own little internal foreign-exchange trading venue.
jlne.ws/1C4DZE3

Bank of New York Mellon Will Settle Currency Trade Case for $714 Million
Dealbook – NY Times
The Bank of New York Mellon will pay $714 million to settle accusations that it cheated government pension funds and other investors for more than a decade, federal and state authorities announced on Thursday. It is part of a deal requiring the bank to dismiss some employees and make fuller public disclosures of its foreign exchange operation.
jlne.ws/1ARsk7G

China central bank supports currency in bid to staunch outflows
Financial Times
Central bank intervention propelled the renminbi to its biggest weekly gain on record on Friday, as authorities sought to prevent recent currency weakness from eroding confidence in the economy and inciting capital flight.
While intervention by the People’s Bank of China can never be directly confirmed, traders suspect the PBoC of drawing on its $3.8tn in foreign exchange reserves to support the renminbi in recent weeks.
jlne.ws/1ARxfW8

Treasury’s Lew says a strong dollar is a good thing
Reuters
U.S. Treasury Secretary Jack Lew on Friday said a strong U.S. dollar was a “good thing” and reflected strength in the U.S. economy, repeating a long-standing mantra of U.S. administrations.
jlne.ws/1ARul3K

Russia’s Putin calls for regional currency union
Reuters
Russian President Vladimir Putin proposed on Friday creating a regional currency union with Belarus and Kazakhstan, Russia’s main partners in a union of ex-Soviet states facing growing economic challenges.
Putin made his proposal at a meeting with the Belarussian and Kazakh presidents, who did not respond in public but have been lukewarm about such proposals.
jlne.ws/1ARusfB

Ex-UBS Trader Darin Loses Bid to Dismiss Libor Charge
Bloomberg
Ex-UBS Group AG trader Roger Darin lost a bid to dismiss a U.S. charge that he conspired to manipulate the London interbank offered rate for yen.
Darin, a citizen and resident of Switzerland, is among at least 11 traders outside the U.S. charged by authorities there with attempting to rig Libor. A judge on Friday rejected the argument that he doesn’t have a sufficient connection to the U.S. to be prosecuted in New York federal court.
jlne.ws/1FMZbjA

Indexes & Index Products

J.P. Morgan to Drop Russian Government Bonds From Some Indexes
WSJ
Russian government bonds will be dropped from two J.P. Morgan Chase & Co. emerging-markets indexes, after the country was downgraded to junk status by ratings firms Moody’s Investors Service and Standard & Poor’s earlier this year.
In a note published on Friday, the bank said that under its rules, Russia is no longer eligible for inclusion in the widely followed investment-grade segment of its EMBI and GBI-EM suite of indexes.
jlne.ws/1ARy3KO

Index Fund Investing: When It Comes to Small-Cap Stocks, Popularity Can Be a Bad Thing
Morningstar
The Russell 2000 Index is the most popular benchmark for active small-cap managers to measure themselves against. But here is an industry secret: Active managers pick that index because it is easy to beat. If you’re going with a passive strategy, you don’t have to limit yourself to that index.
jlne.ws/1ARyeWj

ETFs based on MSCI Index set to hit the market soon
Economic Times
Two mutual fund houses will soon launch exchange-traded funds (ETFs) based on the MSCI India Domestic Index with an eye on tapping inflows from FIIs. Foreign fund managers use MSCI’s indices globally and are comfortable with them. Reliance Mutual Fund and Edelweiss Mutual Fund have filed offer documents with Sebi for launching this product.
jlne.ws/1BaBdbu

Gold

Six Banks Will Take Part in New Electronic Gold Fix; ICE says Barclays, HSBC, Bank of Nova Scotia, Société Générale and UBS will participate
By Matthew Cowley
Six banks will participate in the auction to set the new electronic gold price that will launch on Friday, according to Intercontinental Exchange Inc., which manages the new platform.
jlne.ws/1Fd0pWj

Goldman Sachs, UBS named as participants in new LBMA gold price-ICE
Reuters
Goldman Sachs and UBS will join the four existing members of the gold “fix”, which ended on Thursday, in setting the new London Bullion Market Association (LBMA) Gold Price benchmark, Intercontinental Exchange said on Friday.
jlne.ws/1CDYsC2

What The Federal Reserve And The Fear Trade Do for Gold
Forbes
Following the Federal Open Market Committee (FOMC) meeting Wednesday, Federal Reserve Chair Janet Yellen made it clear (again) that interest rates would not be raised until inflation gains more steam. With current inflation rates negative for the first time since 2009, and with the U.S. dollar index at an 11-year high, we can probably expect near-record-low interest rates for some time longer.
jlne.ws/1ARwCMb

Gold Bugs Finding Solace in ETF Using Euro to Fund Purchases
by Rachel Evans, Bloomberg
The euro is adding some much needed glitter to gold, at least in one exchange-traded fund.
jlne.ws/1FMuLO6

Role of Hillary Clinton’s brother in Haiti gold mine raises eyebrows
The Washington Post
Drive down the rutted dirt road a couple of miles to the guardhouse, then hike 15 minutes up to the overgrown hilltop, and there it is: a piece of 3 1/2 -inch-wide PVC pipe sticking out of the ground.
This is what, at least for the time being, a gold mine looks like.
It also has become a potentially problematic issue for Hillary Rodham Clinton as she considers a second presidential run, after it was revealed this month that in 2013 her brother was added to the advisory board of the company that owns the mine.
jlne.ws/1ARxyAg

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