First Impressions

“Money isn’t everything, Mortimer”
Carl Gilmore – KCG
So said the late Ralph Bellamy in his role as Randolph Duke in the memorable, and arguably best trading movie of all time – 1983’s “Trading Places”. While I wouldn’t put Randolph Duke (or his brother Mortimer for that matter) at the top of my list of role models, this quote (without the
irony of course) has lots of relevance lately.

With some recent big-profile fines in the billions, it would appear that some executives will have some explaining to do to their boards and shareholders. Whether these astronomical fines will deter future wrong-doing remains to be seen. I suspect not much will change until “bad actors” do actual time in prison. What is obvious however, is that the authorities are taking a much tougher position in some cases. Not to worry if you conduct your business properly.

Since it is a holiday week, these fines started me thinking about what people have said about money over the years. Here are some of my favorites:

1. “I am not worried about the deficit. It is big enough to take care of itself.” – Ronald Reagan

2. “They usually have two tellers in my local bank, except when it’s very busy, then they have one.” – Rita Rudner

3.“What’s the use of happiness? It can’t buy you money.” – Henny Youngman

4. “If you lend someone $20 and never see that person again, it is probably worth it.” – Unknown

And lastly, best of luck to Team USA today as they take on Belgium in the round of 16 at the World Cup. London friends, if you are looking for a bandwagon to hop on, we’ve got plenty of room!

Note: Carl Gilmore is Managing Director and Head of Futures for KCG Americas, LLC. This commentary appeared in today’s John Lothian Newsletter where Gilmore is acting as guest editor this week.

Quote of the Day

“Very few people saw commodities outperforming emerging market equities or high-yield corporate bonds at the start of the year. The diversification benefits of commodities also started to resonate with investors as correlations between commodities and other asset classes broke down.”

Tom Kendall, head of global commodities research at Credit Suisse in the story, “Long-dated US debt emerges as one of big 2014 winners”.

Lead Stories

Long-dated US debt emerges as one of big 2014 winners
Michael Mackenzie and Gregory Meyer in New York and Neil Hume in London – Financial Times
Long-dated US sovereign bonds have emerged as one of this year’s strongest performing assets, eclipsing gains in the benchmark S&P 500 stock index and commodities including oil and gold.

Argentina Faces a Deadline for Hedge Fund Payments
PETER EAVIS – Dealbook – NY Times
Argentina’s government has 30 days to decide whether it should try to make peace with a group of New York hedge funds that it has bitterly fought for years in a dispute that could change the global market for government bonds.

Comment: Banking to be defined by technology
Matteo Cassina – Financial Times
The global banking industry is at crossroads and evidence of change is more tangible than ever. There are many drivers to the bank restructurings we are seeing, including rising cost of capital, declining profit margins, litigation risk, rising technological complexity and costs. The universal banking model may be threatened as a result of these changes, but it’s too soon to write its epitaph.

[Video] Pari passu: AV vs Martin Wolf
David Keohane – Financial Times
In the Alphaville corner… 64 posts and counting of the saga: We discuss Martin’s recent column, our response, why sovereign debt is strange, whether we should save bondholders who can’t be bothered to read the contract — and beyond Argentina… whether official-sector holdouts are also the problem.

Bulgaria’s Long Run Problems
Alen Mattich – MoneyBeat – WSJ
Bulgaria suffered runs on its third and fourth largest banks last week. National and European Commission regulators did what they were supposed to do by stepping in and stabilizing the situation before it had a chance to become a systemic problem.

Hungary Plans to Convert Foreign Currency Loans
Margit Feher – WSJ
A top official from Hungary’s ruling party said the government plans to convert foreign-currency loans into forints at below-market rates to ease the financial burden on Hungarians, partly at the expense of the banking sector.

Why CLS’s Court Win Was Important
David Puth, CEO of CLS Bank, via Profit & Loss
The global financial economy has undergone severe shocks over recent years, from which it has not yet fully recovered. Stable economic growth and the preservation of market confidence must be the priority for central bankers and market participants around the world. The organisation I am proud to lead, CLS, is a critical component of providing that stability to the world’s largest and most liquid market, foreign exchange.

Markets, Sprinkled With Fairy Dust
Mohamed A. El-Erian – Bloomberg
Financial markets sure did well in the first half of the year, despite an unexpected share of economic disappointments, policy misses and geopolitical drama. They will need better news in the next six months to sustain that performance, and if they succeed it is unlikely that they will repeat those same, broad-based gains.

Central Banks

Fed’s Williams sees no rate hike until after mid-2015
Ann Saphir – Reuters
The Federal Reserve will probably need to keep interest rates near zero for at least another year, a top Fed official said on Monday, even as he expressed optimism the economy is well on its way to health.


FX players reveal favoured regulatory fix
Catherine Snowdon – Euromoney Magazine
As the FX regulatory landscape gets revamped, data from the Euromoney FX Survey 2014 shed light on what the market wants when it comes to benchmark reform, including its views on sticking with the current WM Company and Thomson Reuters fix.

Currency ‘Carry’ Trades Make Comeback — For Now
James Ramage – WSJ
Stable currency prices have encouraged investors to revive a reliably profitable strategy known as the “carry” trade—but some wonder how long the good times for the strategy can endure. Since early this year, many investors have put on so-called carry trades using major-market and, increasingly, emerging-market currencies as they search for investments offering yield amid generally low interest rates globally.

Renminbi’s drop likely to prove temporary
Henny Sender – Financial Times
Last year, one of the great hedge fund trades was to borrow yen, lever those yen up to five times and invest in renminbi. Investors made money on the appreciation of the Chinese currency in addition to receiving a higher rate of interest than they could on most other currencies in a world of easy money and zero rates almost anywhere else.

Pound at highest level since October 2008
Michael Hunter in London – Financial Times
Strong economic data from the UK has helped the pound rise to its best level in almost six years.

At Integral, New Appointments for Barker, Farrell Ahead of Product Refresh
Timothy Bourgaize Murray – WatersTechnology
The FX platform has given new responsibilities to Jon Barker, now managing director of products, and hired Richard Farrell as managing director, who replaces Barker as global head of sales.

Regulation Around Bitcoin Starting to Clear, Says Circle CEO
Amir Mizroch – MoneyBeat – WSJ
Bitcoin watchers today will be anxiously waiting for the results of an auction of 30,000 bitcoins seized last year as part of the Federal Bureau of Investigation’s crackdown on the Silk Road online marketplace for illicit drugs.

Meet Britain’s Bitcoin Barrister
Amir Mizroch – MoneyBeat – WSJ
At the beginning of June, the U.K.’s Financial Conduct Authority (FCA) announced the formation of Project Innovate, an initiative aimed at getting to grips with disruptions in payment from new technologies. The FCA hopes to develop the rules around disruptive payment technologies, so that financial institutions who are disrupting, and those that are being disrupted, can operate within the same legal framework. The FCA also wants to establish London as a center of financial technology innovation.

BitBeat: Who Won the FBI’s Bitcoin Auction?
MoneyBeat – WSJ
The U.S. Marshals Service will start contacting the winning bidders in its auction of seized Silk-Road bitcoins at 5 p.m. New York time. The question is, how are the rest of us supposed to find out who won?

Bitcoin Evangelist Is Bound but Not Out
Robin Sidel – WSJ
For a person under house arrest, Charlie Shrem gets around. Two months after the bitcoin entrepreneur was indicted on charges of money-laundering and other crimes tied to his virtual-currency business, Mr. Shrem speaks at industry events, has been helping New York hotels prepare to accept the virtual currency for payment, and is working as a consultant.

Indexes & Index Products

S&P Dow Jones Indices Introduces Dow Jones Commodity Index
S&P Dow Jones Indices has introduced the Dow Jones Commodity Index which is designed to serve as a broad-market commodity index with diversification and liquidity as its intrinsic characteristics. The Index may be used as a well-diversified, core beta exposure, or as a simple building block for customizable indices or product creation. The Dow Jones Commodity Index will serve as a complement to the S&P GSCI(R) — the first investable commodity index and its family of indices.

Thomson Reuters Acquires UBS Convertible Indices
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced that it has completed the acquisition of the UBS Convertible Indices – a widely used benchmark in the convertible bond market.

Mid-year Update: VPD Index is Up 7.6% Y-T-D, as SPX Historic Volatility Falls to 6.2
Matt Moran – VIX Views
As we reach the half-way point in 2014, here is an update on some key investment and volatility-related topics

Dividends Growth Slows in Second Quarter: S&P Dow Jones Indices
S&P Dow Jones Indices announced that dividend net increases (increases less decreases) rose $12.6 billion during the second quarter of 2014 for U.S. domestic common stock but lagged the $17.6 billion increase seen in the second quarter of 2013 – equating to a 28.3% quarter-over-quarter decrease.


Foreign Banks Still in the Dark About Missing Metals in China
Enda Curran – WSJ
Foreign banks are still in the dark about any possible losses related to the allegedly fraudulent use of metals as collateral for loans in China. At least a half dozen Western lenders, including Citigroup Inc. and Standard Chartered PLC, provided loans to trading firms that were backed by metals such as copper and aluminum stored in Qingdao, on China’s eastern seaboard.

Contenders line up for silver benchmark
Xan Rice – Financial Times
For a metal normally associated with second prize, silver is attracting a lot of interest. Seven contenders have entered the race to run the global silver benchmark once the 117-year-old London fix is abandoned in August.

Silver dealers weigh up benchmark alternatives
Gillian Carr –
There are no posters, placards or pre-election balls, but a historic vote is currently taking place to determine the fate of the 117 year-old silver fixing, which is set to come to an end on August 14.

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