First Impressions

In case you missed it:

FinTech Chicago Gets Democratic

In case you missed it:
Today’s financial technology dialogue is often about a word you don’t usually associate with it – democracy – bringing software, data, reporting, testing and trading to the masses. And it’s not just one size for everyone – its customizable too. At the FinTech Exchange 2015 Chicago event, 13 firm executives spoke during its lightning round. So John Lothian News took the best of two hours of presentations and condensed it into three minutes. Here’s how some of those firms are democratizing and customizing technology for all of us.
Watch the video »

Quote of the Day

“The AIG which came begging to the Fed’s doorstep was the AIG that Hank Greenberg built. It’s capital structure was opaque, it was heavily dependent on short-term funding, with a highly leveraged financial products subsidiary that had been organized to evade effective regulatory oversight.” Greenberg, he said, “ran the parent company like a hedge fund with a triple A rating.”

James Millstein, the Treasury official who oversaw AIG’s restructuring in the story, “We bailed you out, and now you want what!?!”

Lead Stories

Investors say new boss brings fresh eye to Deutsche Bank’s challenges
John Cryan faces the briefest of honeymoons as chief executive of Deutsche Bank (DBKGn.DE).
Investors believe the Briton is better equipped than his predecessors to revive the fortunes of Germany’s largest bank. As a result, its shares rose 8 percent on Monday after the weekend departure of co-executives Anshu Jain and Juergen Fitschen.
But Cryan will be tested at the end of July when he has to update investors on a turnaround plan — Strategy 2020 — that he was heavily involved in creating in his role as a non-executive director and which has so far failed to win them over.

Deutsche Bank: The Economy Still Hasn’t Recovered, and the U.S. Probably Lost a Decade
Has the U.S. economy recovered from the financial crisis almost seven years ago?
The answer is a definite yes, according to one of the most popular definitions of economic recovery. Economists Carmen M. Reinhart and Kenneth S. Rogoff contend that a recovery from a banking crisis is complete when real GDP per capita reaches its pre-crisis peak. Based on that definition, the U.S. economy’s average recovery time from the nine major banking crises it’s experienced has been 6.7 years and the recovery from the last (2008) crisis was completed pretty much on schedule in late 2013.
But some are not entirely satisfied with Reinhart and Rogoff’s definition.

Give to Those at the Bottom? Sure, as Long as They Stay There
NY Times
When it comes to reducing inequality, Americans may be open to bolder solutions for reining in those at the top than for ones boosting people at the bottom.
But sometimes that depends on how close to the bottom they are.

We bailed you out, and now you want what!?!
Steven Pearlstein – The Washington Post
Americans were angry when Wall Street’s greedy and risky behavior triggered a global financial crisis in 2008. They were angrier still when the government had to borrow and spend hundreds of billions of dollars to rescue mortgage giants Fannie Mae and Freddie Mac, the largest banks and the insurance company AIG. They were outraged when they found out that executives at those enterprises were continuing to receive big salaries and bonuses.
So just imagine how it outrageous it would be if some Wall Street sharpies went to court to argue that they didn’t benefit enough from the bailouts and that taxpayers should pay them tens of billions of dollars more. In fact, they did.
And, according to legal observers, they just might prevail.

Gone Are the Days When Higher European Bond Yields Spelled Disaster
It’s been a long time since rising bond yields were greeted by the ECB with enthusiasm. So welcome to the new normal.

Stifel to Buy Barclays’ U.S. Wealth Management Unit
Dealbook – NY Times
The Stifel Financial Corporation on Monday embarked on yet another acquisition in a yearslong buying spree, this time seeking to purchase Barclays’ American wealth management business.
The deal will give Stifel control of what once was Lehman Brothers’ wealth and investment management operation, adding to a sprawling operation that had already grown with the addition of Sterne Agee earlier this year.

G.E. Nears Deal on Major Step in Retreat From Banking
Dealbook – NY Times
General Electric is near a deal to sell the bulk of a division that finances leveraged buyouts to a major Canadian pension fund, people briefed on the matter said on Sunday, as the industrial giant seeks to shed most of its GE Capital finance arm.
An agreement between G.E. and the pension fund, the Canada Pension Plan Investment Board, could be announced as soon as Monday, this person said. The Canadian fund is expected to take over assets totaling more than $10 billion.

Lehman to Pay Barclays $1.3 Billion to Settle Suit
By MICHAEL J. de la MERCED, NY Times
One of the longest-running legal fights from the financial crisis, rooted in the dismantling of Lehman Brothers, is near an end.

Banks’ post-crisis legal costs hit $300bn
Ben McLannahan in New York, FT
The total cost of litigation aimed at a group of the biggest global banks since 2010 has broken the £200bn ($306bn) barrier, according to a new study that challenges assumptions that banks are through the worst of post-crisis reparations.

There’s No Place to Hide as Bonds Move in Tandem With Equities
Investors who’ve tried to balance their holdings between stocks and bonds may be less protected from asset-price swings than they think.
Here’s why: bonds globally are becoming more volatile as the Federal Reserve considers raising interest rates for the first time since 2006. And the debt, traditionally thought of as a haven investment, has been moving in tandem with stocks during recent periods of turmoil.

Jeffrey Peek Named an Executive Vice Chairman at Bank of America
Jeffrey M. Peek, who once lost a race to become the chief executive of Merrill Lynch, is coming home, in a way. Mr. Peek will become executive vice chairman of global corporate and investment banking at Bank of America, which bought Merrill Lynch during the financial crisis, according to an internal memorandum sent on March 31.

How a Carried Interest Tax Could Raise $180 Billion
When Hillary Rodham Clinton opened her campaign for the Democratic presidential nomination in Iowa, the first substantive issue she raised was a safe one: carried interest. “There’s something wrong when hedge fund managers pay lower tax rates than nurses or the truckers that I saw on I-80 as I was driving here,” she said.

Plenty to chew over at Buffett lunch
Stephen Foley in New York, FT
The folks who successfully bid $2.3m for lunch with Warren Buffett can expect a convivial event filled with jokes, investment wisdom and life advice, according to those who have won in previous years — but they had better keep an eye on their soft drinks.

Bill Gross Will Manage Money for ‘Old Friend’ at Janus
Chalk up a win for Bill Gross. Following his departure last September from Pacific Investment Management Co., investors have shown lackluster interest in his new mutual fund at rival Janus Capital Group Inc.JNS +2.29%

Greece, Creditors Consider Extending Eurozone Bailout Until March
BRUSSELS—Greece’s international creditors have suggested extending the country’s bailout program until the end of March 2016, but disagreements over the conditions attached to the continued support and what would happen afterward risk undermining that plan, three people familiar with the negotiations said Monday.

Central Banks

Bond Traders to Lagarde: You’re Wrong, the Fed Will Hike in 2015
U.S. bond traders had a very clear message for Christine Lagarde on Friday morning: Your advice to the Federal Reserve is wrong.
Lagarde, managing director of the International Monetary Fund, advised the Fed on Thursday to wait until 2016 before hiking interest rates.

Tug-of-war ahead as central banks seek control
Financial Times
The recent volatility in the sovereign bond markets of Europe and the US has rightly caught many people’s attention. Its primary drivers, German government bonds, have displaced the traditional global price setting role played by US Treasuries.
It involves bonds that serve as benchmarks for a host of other government and corporate securities throughout the world, and thus has systemic global influence on borrowing, investment and saving behaviour. And it has spilled over to other markets, particularly commodities and foreign exchange but also equities. Assessing the underlying causes of this unusual volatility is key to forecasting its persistence and implications.

Volatility Is a QE Bug, Not a Feature
European Central Bank President Mario Draghi warned last week that “we should get used to periods of higher volatility.” The yield on the benchmark 10-year German bund promptly skyrocketed to nearly 1%, capping off a two-month period in which investors have grappled with bond prices moving very quickly in unexpected ways.
But Mr. Draghi left something out of his comments. He attributed this new era of increased volatility to the low-interest-rate environment, as if that environment were a natural force like the weather, beyond human control.

Turkey’s Central Bank Tries to Prop up the Lira
For investors expecting the one-directional play of the U.S. dollar to dominate this morning’s trading session, it’s a rude awakening: the greenback dropped from a multiyear high versus the yen after reports emerged the U.S. president is concerned about the dollar’s strength.

Banks Face Basel Push to Prepare for Interest Rate Change
Banks are set to face tougher international rules on the capital they must have on hand to cope with a change in interest rates, amid regulators’ concerns that current standards may be too flimsy to fully capture the risks.
The Basel Committee on Banking Supervision, a group bringing together regulators such as the U.S. Federal Reserve and the European Central Bank, proposed overhauling its current rules for interest-rate risk, including possible binding standards on how banks should measure their resilience to shock rate changes, and on the capital they should have to cover potential losses.

Fed Policy May Have Widened America’s Wealth Inequality, Philadelphia Fed Paper Says – Real Time Economics
Federal Reserve policies launched in a historic economic slump may have exacerbated wealth disparities in the U.S., according to new research from the Philadelphia Fed.
“Monetary policy currently implemented by the Federal Reserve and other major central banks is not intended to benefit one segment of the population at the expense of another by redistributing income and wealth,” writes economist Makoto Nakajima in the second quarter edition of the regional central bank’s Business Review.


The birth of new reserve currencies
Financial Times
Some 95 per cent of all global foreign exchange reserves are invested in just four currencies: the US dollar, the euro, the yen and sterling. The central banks of the ‘Big Four’ are all expanding their balance sheets or have been doing so for years with no sign of immediate reversal. They are all trying to convert huge debt problems into inflation problems, and when they succeed their currencies will weaken sharply.

Here’s the next stage in global currency wars
The race for a devalued currency is set for a new set of twists and turns this summer as analysts contemplate how the U.S. Federal Reserve will deal with a dollar that is far stronger than its global counterparts.
According to Societe Generale’s Albert Edwards, the spark for this new round of “currency wars” – whereby countries manipulate foreign exchange to gain a global advantage — is the Japanese yen, which fell to its weakest against the greenback since 2002 on Tuesday.

Forex Africa: It’s A Currency Rout Across Sub-Saharan Markets
Earlier this year, AFKInsider columnist Jeffery Cavanaugh predicted a rough year for African currencies as the US Fed ended quantitative easing on the back of improving employment numbers.
In 2014, African currencies depreciated an average of 10.4 percent as the US dollar strengthened against all major currencies in the world and commodity prices, which are a major revenue earner for many countries in the continent, fell to record lows.
With these external factors persisting into the new year, the rout on nearly all African currencies has increased in 2015.

Will Former Soviet Republics Adopt A Single Currency?
Given the eurozone’s many woes, it’s hard to imagine why another region would want to embark on a unified currency project. But the world is full of surprises.
On May 29, at a summit in Kazakhstan, Russian Prime Minister and former President Dmitry Medvedev announced that the Eurasian Economic Union (EEU) would “consider the possibility and conditions of launching a monetary union in the long term.” RT and Sputnik, both owned by the Russian state and widely decried as Kremlin propaganda outlets, reported the story in broadly the same terms.

Indexes & Index Products

Indexes Open China to Millions More; MSCI to decide whether to include mainland stocks in its emerging-market and global indexes
Global investors are soon going to get a taste of stock trading, China-style.

STOXX Launches True Exposure Index Family To Help Investors Achieve Efficient Strategic Asset Allocation
Press Release
STOXX Limited, a leading provider of innovative, tradable and global index concepts, today announced the launch of the STOXX True Exposure index family, in short STOXX TRU. The indices allow investments in predefined countries or regions by selecting companies that have a dominant economic exposure to the targeted area. By enabling investors to sharpen portfolio exposure to selected regions, these indices allow for improved asset allocation that significantly de-risks portfolios with the same regional allocations.


Here’s a Few Facts and Charts That Gold Bugs Might Not Like
Here are a few golden facts for your consideration:
a) Gold is down ~38% from a weekly June 11, 2011 peak.
b) Pretty much the chart shows lower-lows and lower-highs
c) The London Spot Gold series has delivered ~5.55% per year in the past two decades. The S&P 500, ~9.00%.
d) Gold bugs are still adamant… higher.

The Chartology of Currencies and Gold
In this Weekend Report I would like to show you an in depth look at some of the more important currencies on the planet to see where we’re at in the big picture and how they may affect the price of gold. In general when a currency (other than the US Dollar) is headed lower the price of gold tends to rise and just the opposite happens when a currency rises . So following the different currencies is important.

Ancient trade route shows gold’s enduring power
A new study has shed more light on how the value of gold has endured – and changed – since ancient times.
Archeologists at the University of Southampton in the United Kingdom have discovered a prehistoric gold trade route between Ireland and southwest England that dates as far back as the Bronze Age, or about 2500 B.C. The route’s existence implies that gold workers in Ireland chose to import the metal from Cornwall despite likely knowing how to extract the material from local deposits – suggesting variations in how the two cultures regarded gold, according to Dr. Chris Standish, the study’s lead author.

Gold monetization scheme: Why offering higher rate of interest is critical for its success
The crux of the suggestions received by the government from public on the proposed Gold Monetization Scheme (draft guidelines of which were released on 19 May and feed backs sought till 2 June) somewhat sums up the mentality of average Indian households on gold.No one wants to see his long-preserved, family-inherited, emotionally-critical, piece of yellow metal lose its identity and ‘feel’ by melting it. Two, nobody seems to be happy with the lower rate of interest being talked about (about 1 percent to 2 percent) and, finally, no one is particularly keen to produce any sort of invoices that confirms his ownership of the yellow metal.

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