First Impressions

Clive Furness, managing director, Contango Markets – Commodities’ Oddities

JohnLothianNews.com

“Commodities are now so much part of the infrastructure of the marketplace and the asset classes that buy side investors get involved with…that they are going to continue to look for those opportunities.”

Clive Furness, managing director of Contango Markets, discusses commodities and how the commodities markets function. Starting with a brief history of commodities, Furness illustrates why commodities sit uneasily with other mainstream products and the pros and cons of the situation. He then discusses the evolution of commodities, covering the shift in technology and people’s attitudes then and now. Finally, Furness gives his predictions and thoughts on the future of commodities and discusses a project he is currently working on with an African exchange in order to build the products the exchange will trade.

Watch the video »

Quote of the Day

“‘Oh, we can get bigger yields than that — we’ll go to the real estate investment trusts. And, of course, they are a legalized Ponzi scheme.”

Julian Robertson, founder of Tiger Management LLC in the story, “Robertson Calls Monetary Policy Like Japan’s ‘Dangerous'”.

Lead Stories

Japan’s Central Bank Unexpectedly Eases Monetary Policy Further
Reuters
The Bank of Japan surprised global financial markets on Friday by expanding its massive stimulus spending in a stark admission that economic growth and inflation have not picked up as much as expected after a sales tax hike in April.
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Robertson Calls Monetary Policy Like Japan’s ‘Dangerous’
Kelly Bit – Bloomberg
Julian Robertson, the billionaire founder of Tiger Management LLC, called global monetary policy, such as Japan’s surprise expanded stimulus today, dangerous as central banks push bond yields down and create a bubble.
“The monetary authorities all over the world are trying to cheapen their own currencies — it’s a race everywhere and I’m not sure it’s the best thing to do,” Robertson said today in an interview on Bloomberg Television with Tom Keene, Scarlet Fu and Brendan Greeley. “We have a bubble developing because we have forced bonds to almost no yield and it’s really the thing that’s the most dangerous going on economically in the world.”
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JPMorgan Tapped by Fannie Mae for New Risk-Sharing Bonds
Jody Shenn – Bloomberg
JPMorgan Chase & Co. (JPM)’s sale of a new type of mortgage-linked bonds is the best glimpse yet into a possible future of the $9.4 trillion U.S. home-loan market.
The $47 million of securities raised cash from investors this week that can be used to offset some of Fannie Mae’s losses on its mortgage guarantees. The transferring of risk from almost $1 billion of loans packaged into separate Fannie Mae (FNMA) bonds resembles a model envisioned by bipartisan legislation passed by a Senate committee this year and endorsed by the Obama administration.
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High-yield bond sales dry up in Europe
Andrew Bolger – Financial Times
Fresh sales of European high-yield bonds have virtually ground to a halt as prices have dropped, according to Standard & Poor’s.
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Happy Halloween: Five scary charts from M&G’s Bond Vigilantes
Anna Fedorova – Investment Week
You may see some scary sights this Halloween night, but none as terrifying as these global economic statistics. M&G’s Bond Vigilantes have put together five scary charts guaranteed to make your hair stand on end, which they have labelled ‘not for the fainthearted’.
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Efforts to replace Fed hawks Plosser, Fisher pick up speed
Jonathan Spicer and Ann Saphir – Reuters
Two regional Federal Reserve banks have taken steps to replace their hawkish presidents, Charles Plosser and Richard Fisher, whose departures early next year could change the tenor of debate within the U.S. central bank’s policy-setting committee.
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Quantitative pleasing
James Mackintosh – Financial Times
With the end of QE, just a quick chart to reiterate that central bank bond buying doesn’t work the way one might expect. Far from reducing bond yields, when the Federal Reserve buys bonds, it tends to make yields go up.
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Why didn’t QE3 raise inflation expectations?
Matthew C Klein – Financial Times
The Fed’s balance sheet is no longer in expansion mode, which means it’s time for post-mortems of the most recent asset purchase programme. (Our colleague John Authers has a very good round-up of what did and didn’t happen since QE3 began.)
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QE’s break-up with markets: no regrets?
Tracy Alloway in New York – Financial Times
Dear Quantitative Easing, It’s me, Markets. I know our time with each other is at an end and that you are on your way out, but my therapist thought it would be a good idea for me to write this letter to you. We have been through so much together. She says I need closure.
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Central Banks

BOJ Stands Ready to Buy Every New Bond Abe’s Government Issues
Toru Fujioka – Bloomberg
The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues.
The BOJ said it plans to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month under stepped-up stimulus it announced today. That gives Governor Haruhiko Kuroda leeway to soak up the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month.
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Swiss Central Bank Swings to Profit
Neil MacLucas – WSJ
Switzerland’s central bank swung to a profit in the first nine months of the year as foreign currency and gold prices boosted its performance.
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ECB-Fed divergence triggers corporate hedging
Farah Khalique – Euromoney Magazine
The US has reached a milestone by announcing the end of its eight-year quantitative easing stimulus programme as its economy recovers, but the news highlights the increasing policy divergence between the US and Europe. Corporates have as a result started factoring in increasing euro weakness ahead of 2015.
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Fed’s Yellen Says Economics Can Benefit From More Diversity
Pedro Nicolaci da Costa – MoneyBeat – WSJ
Janet Yellen, the first woman to lead the Federal Reserve in its 100-year history, said Thursday the economics profession, which is dominated by white males, could benefit from a more diverse range of views.
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Fed’s Williams Says Central Banks Should Refocus on Inflation – WSJ
Patrick McGroarty – WSJ
Reserve Bank of San Francisco President John Williams said Friday that central banks should start turning away from the extraordinary measures taken to spur growth in recent years and return to the narrower focus of controlling inflation.
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Speech By Chair Janet L. Yellen At The National Summit On Diversity In The Economics Profession, Washington, D.C., October 30, 2014, Welcoming Remarks
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Currencies

South Korea Plans to Start Won-Yuan Direct Trading in December
Jiyeun Lee and Cynthia Kim – Bloomberg
South Korea will start direct trading between the won and the yuan in Seoul from December and is considering selling sovereign debt denominated in the Chinese currency for the first time.
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Goldman Sees Russia Ending Easy Ruble Short-Seller Trade
Matthew Brown and Vladimir Kuznetsov – Bloomberg
Currency traders who have been taking advantage of the Russian central bank’s predictable market interventions are about to find making money a lot harder, according to Goldman Sachs Group Inc.
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Argentina Gets Reserves Boost From China Currency Swap
Camila Russo – Bloomberg
Argentina’s Central Bank reserves are set to rise after receiving the first installment of yuan as part of a three-year, $11 billion currency swap agreement with the People’s Bank of China.
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Bitcoin Foundation’s Executive Director, Jon Matonis, Resigns
Sydney Ember – Dealbook – NY Times
The Bitcoin Foundation announced on Thursday that Jon Matonis, one of the foundation’s founding board members, was stepping down as its executive director, effective on Friday. Mr. Matonis will remain on the foundation’s board until Dec. 31.
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Indexes & Index Products

Gross’ Pimco Exit Sets Up Bond ETFs for Record Monthly Inflow
Chris Dieterich – MoneyBeat – WSJ
Bill Gross’ abrupt departure from Pacific Investment Management Co. turned into a bonanza for U.S. bond exchange-traded funds, which are poised to net their biggest-ever monthly cash hoard.
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New Benchmark For PEA-PME Eligible Companies: EnterNext Launches “EnterNext PEA-PME 150” Index – A New Addition To Euronext’s Pea-Pme Index Family
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Gold

Gold, silver tumble to 4-year lows on rocketing dollar
Clara Denina – Reuters
Gold and silver slumped to their lowest since 2010 on Friday as the dollar soared following a new round of quantitative easing by the Bank of Japan and data showing a robust U.S. economy.
Spot gold slid as much as 3 percent to its lowest since July 2010 at $1,161.25 an ounce in earlier trade and was down 2.7 percent at $1,166.51 by 1444 GMT.
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Gold slumps towards worst week in over a year – fastFT: Market-moving news and views, 24 hours a day
Financial Times
Goldbugs are getting squashed. The price of gold has tumbled another 2.2 per cent today to just $1,172 per ounce. That is the biggest decline in over three months, the fifth day of losses in a row, and if it closes at this level, it will be the lowest in four years.
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