East and West: CME’s Gill Looks For Growth in Asia and Europe
Forget the doom and gloom of years past in the markets. CME Group had a great year in 2014, even with the ongoing headwinds from the Fed’s ongoing freeze on interest rates and more regulation hitting the market-base, said Phupinder Gill, CME’s CEO, at the FIA Boca conference.
“We saw double digit growth in fourth quarter across all six of the asset classes,” Gill said, adding that the exchange ended up handling about 13.7 million contracts per day for the year. “I’m very pleased to see that momentum from the fourth quarter continue into the first quarter of this year.”
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Quote of the Day
“Interest-rate reductions are being transmitted to the whole financial intermediation channel and credit contraction is receding. The falling cost of financing makes investment opportunities interesting that in the past were not profitable.”
Mario Draghi in the story, “Draghi Says ECB Will Reach QE Target Even in Shorter First Month”.
Liquidity storm could throw UK into chaos, Bank of England warns
By Szu Ping Chan, The Telegraph
Bank of England warns that liquidity has become “more fragile”, as it says threat of Greek default poses “significant risks” to the UK
The Bank of England has warned that a global liquidity storm could endanger financial stability if investors suddenly demanded their money back, adding that the threat of a Greek default posed “significant risks” to the UK.
Warren Buffett and 3G May Have One Barrier to Even Bigger Deals
Dealbook – NY Times
Warren Buffett and 3G Capital have created a fearsome merger and acquisition machine. The deal on Wednesday to merge the consumer food giants Kraft and H.J. Heinz, worth some $80 billion, is the boldest collaboration yet between the Sage of Omaha and the Brazilian investors behind Anheuser-Busch InBev, after earlier swoops on Heinz and Tim Hortons. The only barrier to even bigger deals may be 3G’s capacity for new projects.
Goldman Yield Calls Fall Below Street as Central Banks Damp Rout
The end of a six-year, worldwide rally in the bond market may be a little less painful than Goldman Sachs Group Inc. thought.
The New York-based investment bank this week cut its year-end forecasts for how much benchmark government borrowing rates will rise across the developed world. Because bond prices fall as yields rise, that limits potential losses in a market that’s seen yields plunge to record lows since 2008. Where before Goldman’s yield forecasts were generally above the average estimates in a Bloomberg survey, they’ve now fallen below.
George Osborne Says British Bank Tax Is Here to Stay
Dealbook – NY Times
In 2010, Britain’s chancellor of the Exchequer, George Osborne, announced a bank levy, or tax on bank balance sheets, to force the industry to pay for the mess it had made.
Now he has made clear that the tax is not going away, even though the banking system has drastically decreased its risk profile through shrinking balance sheets and increased capital.
EU signals further divergence from global banking rules
The European Union will continue to diverge from global banking regulations where necessary to avoid overburdening smaller lenders, the bloc’s financial services chief said on Thursday.
European commissioner Jonathan Hill, in the job since November, said he would extend his predecessor’s policy of tailoring global banking rules where justified.
South Korea Says It’ll Join Regional Development Bank Led by China
South Korea — South Korea became on Thursday the latest American ally to announce its intention of joining the Asian Infrastructure Investment Bank despite Washington’s qualms about the Chinese-led regional development bank.
First New York Fined Again by Finra Over Illegal Short Sales
by Matthew Robinson, Bloomberg
First New York Securities LLC manipulated company stocks with illegal short sales less than two years after having been fined for similar misconduct, the brokerage industry’s self-regulator said.
Lawmaker Proposes Bipartisan Insider-Trading Ban; Currently when prosecutors bring insider-trading charges, they rely on their general anti-fraud authority and court precedents
By Andrew Ackerman And Aruna Viswanatha, WSJ
A House lawmaker whose Connecticut district is home to one of the highest concentrations of hedge funds introduced bipartisan legislation Wednesday that would ban insider trading, taking aim at a financial crime that has tripped up some of his own constituents.
The Ludicrous Idea Of Trying To Abolish Cash
Tim Worstall, Forbes
Ken Rogoff is an extremely fine economist. It’s also possible that Ken Rogoff is wrong this time: for he’s suggesting that it might be time to try and abolish cash from the economy. He’s got two major reasons for trying this and I’m vaguely sympathetic to one of them and vehemently against the second line of reasoning. But my really big point about this proposal is that it simply wouldn’t work. For while we do often say that a government provides value to a fiat currency by insisting that tax is paid in it, this isn’t, really, what provides value to money. It might support it in some manner, but the true definition of money is whatever it is that people will accept as money. And if government stops providing people with something that can be used as physical money then they will simply turn to something else. It might be something worse, less convenient, riskier, but as sure as eggs is eggs there will be something or other used.
Rethinking the Shift-to-Bonds Strategy
Investment adviser Brett Danko has a warning for a New Jersey couple in their early 50s who’ve sought his help about how to plan for retirement: Either allocate more savings to stocks than fixed income, or risk having to scrimp in old age.
Investors Scoop Up Companies’ Bonds
Record pace of $438 billion of new debt purchases has been set for the year through Tuesday
Regulators cast shadow on US-EU recognition hopes
By James Rundle, Financial News
The ongoing dispute between the US and EU over recognising one another’s regulatory regimes for derivatives trading will not be easily solved, European regulators have said, amid urgent calls from the industry to fix the problem.
Options Secure New Multi-Million Pound Banking Facility With RBS
Options, the leading managed services provider to the global capital markets industry, today announced that they have secured a new multi-million pound banking facility with the Royal Bank of Scotland (RBS). The new facility comprises a Revolving Credit Facility (RCF) from NatWest and an Asset Finance facility extension from Lombard.
Bank of America C.E.O. Took 7% Pay Cut in 2014
Dealbook – NY Times
Bank of America’s chief executive, Brian T. Moynihan, took a 7 percent pay cut in 2014, as the giant bank faced mounting legal costs related to government investigations into the sale of mortgage investments leading up to the financial crisis.
Does the Hedge Fund industry benefit society?
Don A. Steinbrugge, CFA, Managing Partner at Agecroft Partners
It is no secret that the hedge fund industry is viewed negatively by a large portion of the general public, but should it be? Such a perception is driven primarily by the fact that most hedge funds are not permitted to market themselves to the general public, and because the mainstream media has a negative bias toward their coverage of the industry. The average person is inundated with negative articles creating the image that: 1.) Most hedge fund managers are dishonest and frequently commit fraud or violate insider trading laws. 2.) Hedge funds are highly risky investments. 3.) Their devious actions are bad for the general public. 4.) Hedge funds generate bad performance and their fees are too high.
Fed market gurus prep rate hike amid last-minute anxieties
The New York Federal Reserve officials tasked with prying interest rates off the floor have been meeting with bankers and traders to plot how best to do it, amid deep uncertainty over how much control they will really have over short-term lending markets.
With the U.S. central bank expected to raise rates later this year, Simon Potter and his team of market technicians have the tricky job of implementing higher rates using some new and lightly tested tools as well as some that may not work as well as in the past. They’ll be operating under intense global scrutiny that’s centered on the prospects for the world’s biggest economy.
Fed’s Bullard: now may be good time to normalize U.S. monetary policy
Now may be a good time to start normalizing U.S. monetary policy, Federal Reserve policymaker James Bullard said on Thursday.
In the text of comments delivered to an audience in Frankfurt, St. Louis Fed President Bullard said doing that would direct policy “so that it is set appropriately for an improving economy over the next two years.”
ECB’s Draghi says money printing already helping recovery
Bond-buying by the European Central Bank will reinforce the euro zone’s economic recovery, its president, Mario Draghi, said on Thursday, adding that there was already evidence that the scheme was taking effect.
Draghi Says ECB Will Reach QE Target Even in Shorter First Month
European Central Bank President Mario Draghi said he’s confident that his bond-buying program will hit its targets in the first month of operation.
“We count on reaching” the target of 60 billion euros ($65 billion) though the operation only started March 9, Draghi told Italian lawmakers in Rome on Thursday. “All feedback we have from markets tell us that there are no difficulties in carrying out these operations.”
Bank of England Warns of Risks From Greece and Market Liquidity
Dealbook – NY Times
The Bank of England said Thursday that Britain’s stability continued to be threatened by international risks, including Greece’s financing needs, China’s slowdown and potentially inadequate market liquidity.
How Different Sectors of the Market Perform Once the Fed Starts Hiking Rates
As the market prepares for the possibility of Federal Reserve rate hikes, Credit Suisse is out with a note titled “Lessons for Liftoff” that analyzes what rate hikes actually mean for markets.
The note contains two useful slides looking at sector performance in the aftermath of the three most recent tightening cycles.
Federal Reserve QE policies have cost savers $470 billion: Report
The Federal Reserve’s efforts to stimulate the U.S. economy after the financial crisis ended up costing savers nearly half a trillion dollars in interest income, according to report released Thursday.
Chief Paranoia Officers Aren’t so Sure About Those Euro Hedges
Here’s a type of chart you rarely see outside of penny-stock scams and maybe TV news-channel ratings when a llama chase is unfolding live: The graph shows the number of shares outstanding in the WisdomTree Europe Hedged Equity Fund, an ETF that aims to give investors the returns from European stocks without all the risk from the euro currency. So, in other words, investors really, really, really want to hedge against the euro, causing the ETF to increase shares outstanding by more than 250,000 percent.
Currency War Is Now a Dud as Windfall From Devaluations Vanishes
Currency wars, it turns out, may not be worth fighting right now.
While weaker exchange rates have at times throughout history helped stoke economic growth by making countries’ exports cheaper, the benefits are becoming hard to find.
In Country Where Beer Was Once the Currency, a New Crisis Builds
Luisa Joao sits all day in the sparse roadside shade on the outskirts of Angola’s capital, Luanda, buying U.S. dollars with a stack of kwanzas, the local currency that she doles out from her purse.
The 47-year-old mother of three is constantly on guard for police patrols. She’s a black-market trader. And raids to break up the market have become more frequent since the currency’s plunge to a record low quickened late last year.
Indexes & Index Products
STOXX Launches Daily Currency Hedged Version Of Key Indices – Euro STOXX 50 Daily GBP Hedged And EURO STOXX 50 Daily USD Hedged Indices Licensed To Lyxor ETF
STOXX Limited, a leading provider of innovative, tradable and global index concepts, today introduced daily currency hedged versions of the EURO STOXX 50, EURO STOXX, EURO STOXX Select Dividend 30, STOXX Europe 600 and STOXX Europe Select Dividend 30 indices. The new indices are aimed at investors seeking exposure to these well-known STOXX benchmarks, while at the same time looking to reduce the risk of currency fluctuations.
A Tale of Two Benchmarks: Reconstitution Effect
S&P Dow Jones Indices
This is the second in a series of blog posts relating to the in depth analysis of performance differential between the S&P SmallCap 600 and the Russell 2000. Numerous studies have been conducted on Russell’s annual reconstitution process in June, particularly regarding the downward price pressure placed on the Russell 2000. As winners from the Russell 2000 move up to the Russell 1000, and losers from the Russell 1000 move down to the small-cap index, small-cap fund managers are forced to sell winners and buy losers, thereby creating negative momentum.
James River Group Holdings, Ltd. to be Added to Russell 2000, Russell 3000 and Russell Microcap Indexes
James River Group Holdings, Ltd. (Nasdaq:JRVR) announced that effective as of the close of the market on Monday, March 31, 2015, the Company will be added to the Russell 2000 index, the Russell 3000 index and the Russell Microcap(R) index, as part of the quarterly Initial Public Offering (IPO) update to the Russell indexes.
How Much Are You Losing to 401(k) Fees? You’d Be Surprised
Sheryl Garrett, a certified financial planner and founder of the nationwide Garrett Planning Network, explained: “There are so many different ways that custodians and financial service companies are receiving compensation. There are explicit fees, sure, but then the list goes on and on. Most people don’t have any idea.”
China opening doors to gold
By Paul Ploumis, Resource Investor
The Chinese administration has decided to allow more companies to import gold directly into the country. Starting from April 1st, domestic miners having assets overseas will be allowed to import yellow metal. Currently, only 15 banks in the country have gold import permits.
China should boost gold reserves to 5 pct, says World Gold Council
China should increase its gold holdings to around 5 percent of its total foreign exchange reserves to help diversify currency risks, the World Gold Council (WGC) said.
China currently holds about 1.6 percent of its foreign exchange reserves in gold, which is relatively low compared with developed countries and some developing countries, WGC China managing director Roland Wang said.
Gold’s relationship with the U.S. dollar is about to change
By MyraP. Saefong, MarketWatch
The gold market’s moving to Asia and the metal’s relationship with the U.S. dollar will never be the same.
In a report released Thursday, the World Gold Council said gold’s GCJ5, +0.55% relationship with the dollar DXY, +0.52% is “complex,” as MarketWatch similarly observed in an article published Monday. It also said that relationship is set to “diminish” as the market shifts to Asia.