First Impressions

Kapil Rathi, BATS – Start Your Career with Confidence

“What are your opportunities? You’re starting with a clean slate. You haven’t done anything wrong to anyone — yet. Nobody hates you day one. I call it the honeymoon period.”

If you’re starting a new job, have your house in order, literally. Kapil Rathi, vice president of options business strategy with BATS, focused his talk on the all-important moments at the very beginning of a new job or career. While confidence is key in nearly all endeavors, there are some simple steps that, if executed properly, put people in a position to succeed before even completing day one. When it comes to room and board, be fully settled. Don’t have moving logistics, roommates, a child’s schooling opportunities, negotiations with a landlord, a different transit route and the like to contend with. Try to have life’s usual messiness in the rearview mirror, at least temporarily, in order to be able to focus 100 percent on the work. Also, learn as much as possible about your employer. If there are relevant articles, books or white papers to read — read them. If soon-to-be-co-workers are available — meet them for lunch. Rathi firmly believes that setting and accomplishing goals beforehand ensures that walking into that fresh lobby, vestibule or elevator is not intimidating.

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Quote of the Day

“Expectations toward the ECB are just too high — we’re not going to solve the environmental crisis and we are not going to solve the migrant crisis. The more is expected from the ECB, the more you make the point that something is missing elsewhere.”

European Central Bank Executive Board member Benoit Coeure in the story, “Coeure Says Don’t Expect ECB to Solve Problems Outside Mandate”

Lead Stories

LSE aims to secure place in interest rate futures market
Philip Stafford – Financial Times
The London Stock Exchange Group is to launch an aggressive push into the European futures markets dominated by Deutsche Börse and Intercontinental Exchange with a £30m bank-backed venture.

Collateral damage – How bank funding may be squeezed in the next crisis
The Economist
When the financial system teetered on the brink of collapse in 2008, the biggest problem was a lack of liquidity. Banks were unable to refinance themselves in the short-term debt markets. Central banks had to step in on a massive scale to offer support. Calm was eventually restored, but not without enormous economic damage.

Hundreds of bank branches are disappearing
Jonathan Marino – Business Insider
Wall Street’s biggest banks have been shutting down branches since the financial crisis.
The reason: They can do so without it having any real impact on the amount of business they pick up.

Goldman: Sached
Financial Times
Nobody, apparently, ever got fired for hiring Goldman Sachs. But should anyone be fired for owning it? The bank’s shares have done badly. Over the past five years they have produced a total shareholder return of 28 per cent. That might not seem too bad, but the other four big Wall Street banks have produced an average return of 49 per cent in the period. The KBW banks index (which includes lots of smaller banks) has returned 72 per cent. If you wanted to play the US economic recovery by owning a bank, Goldman would not have been the one to own.

Beware: the money supply is growing too quickly
Allister Heath – The Telegraph
It was Sir Winston Churchill who warned that “if you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions”. Churchill, of course, was right – but that merely means that we should be discerning in which economists we listen to.
Of those currently working in the City of London, one of my favourites is Simon Ward, chief economist at Henderson. His insights on how money and liquidity interact with the real economy are exceptional. At a time when many economists are worried about deflation, he is worried that liquidity is spiralling out of control and that this could eventually push up inflation.

Putin Allies Said to Be Behind Scrutinized Deutsche Bank Trades
Irina Reznik, Keri Geiger, Jake Rudnitsky and Gregory White – Bloomberg
Several close associates of Russian President Vladimir Putin may have benefited from Deutsche Bank AG trades that are now coming under the glare of U.S. prosecutors, according to people familiar with the matter.

Why Today’s Capitalism is No Longer Laissez-Faire
Dov Seidman – Fortune
As companies realize that growing at all costs can quickly turn off consumers, capitalism has taken on a new meaning.
If ever we needed any evidence that we are undergoing a huge shift in the very nature of capitalism, how our economy is organized and what business fundamentally is, we need only look to how and how much new business language is being invented. While business often gets accused of being jargony, of creating unintelligible phrases, I think much more is going on with this flowering of ethically-minded language.

Greece’s Big Challenge: Fix Bad Loans Without Destroying Banks
Jack Ewing – NY Times
Apostolis Paliouras was proud of the bookstore he ran on the ground floor of an apartment building in a middle class neighborhood here. Greek authors came to give readings and sign their works. People gathered to debate matters literary and political.
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But his sales plummeted in 2011 after the Greek government, bowing to demands from its international creditors, imposed a new property tax and added it to utility bills in an attempt to stem the country’s notorious tax evasion. People who did not pay risked having his power shut off. The tax crackdown crippled consumer spending.

This Comic Book Robot Cat Predicted Abenomics
Yuji Nakamura and Nao Sano – Bloomberg
An all-out attack on deflation, radical steps to boost the birthrate and a list of ways to rouse the economy ranging from welcoming foreign tourists to legalizing casinos.

There’s No Way to Avoid Default Without Raising the Debt Limit, Treasury Says
Nick Timiraos – WSJ
The U.S. Treasury Department rejected again on Friday the idea that so-called payment prioritization would provide a way for the U.S. to avoid a severe hit to its creditworthiness if Congress didn’t raise the federal borrowing limit before the Treasury runs out of cash.

Ex-Rabobank trader turned U.S. cooperating witness testifies at Libor trial
Yahoo Finance
A former Rabobank trader known within the bank as the “Ambassador” testified against two of his former colleagues on Thursday in the U.S. Justice Department’s first trial spilling out of the investigations into Libor manipulation.

Wynn Resorts, WalMart: One coin in the world economy
James Saft – Reuters
Big fish Chinese gamblers afraid of a corruption crackdown and poorly paid Walmart workers in the United States might seem to have little in common.
But in the global economy, they are in some ways two sides of the same coin, and to understand that is to understand more than why the two disparate groups were blamed for horrendous earnings at two very different companies: Walmart and Wynn Resorts.

Trader caught up in Libor scandal sues Deutsche Bank
The Financial Times
The most senior female trader to be caught up in the Libor-rigging scandal is suing Deutsche Bank for alleged sex discrimination and unfair dismissal for whistleblowing. – Financial Times
Shivani Mathur, who was Deutsche’s London-based global head of economic resources, has lodged the employment claim in London. Her tribunal claim also includes allegations of unequal pay. No public hearing has yet been set for the case, according to tribunal records. Deutsche will contest her claims.

Goldman CFO on Bond-Trading Rebound: That May Take a While
Michael J Moore – Bloomberg
Harvey Schwartz found himself in a familiar position Thursday on Goldman Sachs Group Inc.’s earnings conference call with analysts: preaching patience on fixed-income.
“You won’t really see the outcome of all the steps we’ve taken until you see a pickup in client activity and the competitive environment continue to shift,” said Schwartz, the firm’s 51-year-old chief financial officer. “That may take a while.”

What’s different about Curve?
William Mitting – Futures & Options World
The history of the derivatives markets is an annual of failed exchange launches.
Whether rival products or new exchange launches, it is notoriously hard to shift liquidity from an incumbent and it is into this litany of failure that the London Stock Exchange will launch its new rates platform.

The third wave of the global financial crisis
Michael J. Kosares – GoldSeek
By the time Goldman Sachs published its widely referenced warning of a third wave in the global financial crisis (mid October), the physical precious metals’ markets were already feeling the strain of very strong demand against a rapidly dwindling supply. China, the country seemingly at the epicenter of the developing emerging market crisis, by itself had taken 911 tonnes of gold off the market in the first half of 2015 – a number when annualized that represents nearly two-thirds of the world’s mine production. India, another of the so-called BRICS nations (Brazil, Russia, India, China and South Africa) was a strong second at 400-500 tonnes. In the occident, gold demand was strong, but silver demand was even stronger. Global mints were reporting off-the-charts demand for silver bullion coins. Coin premiums were on the rise in extremis at one point reaching almost $6 per ounce on the propular silver American Eagle.

Bond Traders Face Incredible Shrinking Bonus as Revenue Tumbles
Hugh Son, Michael J Moore and Dakin Campbell – Bloomberg
Equities traders, be kind to your brethren on the fixed-income desk: Their year started with such promise and is headed for a sour ending.
Traders of bonds, currencies and commodities are facing a shrinking year-end bonus pool after their revenue in the first nine months slumped 11 percent to $32 billion at the four biggest U.S. investment banks, according to results announced by the firms this week. That business started the year on decent footing, stumbled in the first half and then tumbled in the third quarter. Meantime, equities revenue surged 18 percent to $16.7 billion.

Bank of Internet Denies Accusation That It Defied Regulators
Peter Eavis – NY Times
Bank of Internet USA, one of the nation’s top-performing banks, fiercely criticized a lawsuit filed by a former employee that said the bank had not been forthcoming with its regulators.

City Insider: Barclays bags a bargain
Financial Times
Jes Staley has yet to be approved by regulators as Barclays’ next boss. But if he is, the bank will have to be patient to get their man. Assuming a Bank of England rubber stamp soonish, some had expected that the former JPMorgan high-flyer might be able to start before the end of the year.

Goldman Said to Dismiss 20 Analysts for Cheating on Tests
Sofia Horta E Costa and Ruth David – Bloomberg
Goldman Sachs Group Inc. is dismissing about 20 analysts globally in offices including London and New York after discovering they had breached rules on internal training tests, said people familiar with the matter.

U.K. Banks May Face Stress Tests Tuned to Economic Boom and Bust
John Glover – Bloomberg
The Bank of England will lay out its approach to stress testing banks next week, bringing in its most recent thinking about the way the financial system interacts with the business cycle and how to smooth peaks and troughs in lending.

Stronger Economy Cited as U.S. Reports Lowest Budget Deficit of Obama’s Tenure
NY Times
The federal budget deficit fell this year to its lowest level since President Obama took office, his administration reported Thursday, a change propelled by an increase in tax receipts amid a strengthening economy.

Central Banks

Fashion for forward guidance leaves central bankers in a muddle
Ferdinando Giugliano – Financial Times
Just like food and clothes, monetary policy too has its fashions.
“Forward guidance” — the promise by central banks to keep interest rates low — is so 2013 that one rarely hears it mentioned these days.

Here comes more QE in Europe as ECB combats deflation
Sara Sjolin – MarketWatch
The European Central Bank’s aggressive quantitative-easing program hasn’t even been around to mark its first birthday and already pressure is mounting on the policy makers to announce more stimulus.

Central banks watching the inflation genie, still in the bottle
Vesna Poljak – Sydney Morning Herald
Inflation remains elusive for most central banks around the world but three economies – the United States, Sweden and Chile – may have witnessed the first signs of low inflation thawing in the past week. And while that’s good news for the prospect of a rate hike from the Federal Reserve one day, the broader macro-economic picture is as complicated as ever.

The monetary policy dead end
Christopher Dembik – Trading Floor
The Federal Reserve’s September status quo proved how difficult it is for central bankers to bring an end to the emergency measures they adopted in the aftermath of the 2007 crisis. Fed chief Janet Yellen’s hesitation and the market turmoil since August seem to validate that it is impossible to stop the accommodative monetary policy, unless you accept that doing so would trigger a new global crisis.

Uncertain central bankers leave markets stranded
Swaha Pattanaik – Reuters
When the blind lead the blind, there’s little confidence in the direction of travel. Something of the sort is going on in global markets. Central bankers are giving out unclear directions and investors are wondering just where they should go.

Why Americans Don’t Trust the Fed
Roger Lowenstein – WSJ
Antipathy to the central bank is a uniquely American tradition. No federal agency, except the Internal Revenue service, is held in lower regard than the Federal Reserve, according to public opinion surveys. The left accuses the Fed of being too cozy with banks; the right says it is planting the seeds of a massive inflation.

Seven trillion yuan in QE … it’s all in the policy tea leaves
Shirley Yam – South China Morning Post
Is it or is it not quantitative easing?
Mainland investors have been debating it this week. Never mind the verdict, the debate itself has proven to be good enough to fuel a week-long rally in the share market.
The trigger did not come from a big gun, but a little-known blogger, Huang Sheng.

Bank of France says held successful first reverse auction trial
The Bank of France said it had successfully completed its first reverse auction on Friday as part of a trial by the European Central Bank to look at new ways of buying public sector debt under its quantitative easing scheme.

Coeure Says Don’t Expect ECB to Solve Problems Outside Mandate
Alessandro Speciale – Bloomberg
European Central Bank Executive Board member Benoit Coeure said he’s worried by excessive reliance on the institution’s capacity to solve problems outside its scope.

Kenya’s central bank is trying to stop a mid-size bank failure from triggering panic
Lily Kuo – Quartz
Kenyan regulators and bankers are scrambling to quell panic over the suspension of a mid-sized retail bank earlier this week, the second lender to be put under management by government authorities in three months.


Aussies get behind proposal to change currency to dollarydoos
The slump in the price of key export commodities has dragged down economic growth and taken the Australian dollar with it. Thanks to Hawke and Keating’s reforms the daily fluctuations in the dollar are now largely beyond government control but there is one shot in the locker a brave government can take to lift the struggling Aussie.
An online petition that has gained over 5000 signatures calls on the leaders of Australia’s major parties to get behind a proposal to rename the currency “Dollarydoos”.

The secret currency union
Thomas Mayer – Nikkei Asian Review
What is the largest currency union of the world? The European Monetary Union, of course, you may think. Wrong. It is the U.S. dollar union. In an interesting paper, Robert McCauley and Tracy Chan of the Bank for International Settlement have shown that a large number of countries have more or less strongly pegged their currencies to the U.S. dollar (“Currency movements drive reserve composition”, BIS Quarterly Review December 2014). According to their estimate, the U.S. dollar plays a key role for an area accounting for about 60 percent of global gross domestic product. Thus, the U.S. dollar zone is six times as large as the euro zone. As is customary in a currency union, many banks and companies in the U.S. dollar zone have assets and debt denominated in U.S. dollars. Like the European Central Bank in the euro zone the U.S. Federal Reserve determines financial conditions in the dollar zone.

World’s Worst Currency Prompts Call for Divine Intervention
Matthew Hill – Bloomberg
God save the kwacha.
That’s what Zambian President Edgar Lungu wants his people to pray for on a national day of devotion and fasting on Sunday to reverse a decline in the world’s worst currency and fix a litany of problems from plunging copper prices to electricity shortages.

Dollar reprieve seen as being shortlived
Roger Blitz – Financial Times
A rally bolstered the dollar at the end of a week of increasing market anxiety at the split being publicly aired among Federal Reserve members on whether and when to tighten interest rate policy.

Rupee Swings Drop to Lowest Since August as India Inflows Surge
Nupur Acharya – Bloomberg
A gauge of expected swings in India’s rupee retreated to a two-month low and posted a fifth weekly decline as foreign investors snapped up the nation’s assets.

Indexes & Index Products

CME Group Announces the Launch of S&P 500 Dividend Index Futures
Press Release – CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the launch of S&P 500 Annual Dividend futures and S&P 500 Quarterly Dividend futures. These new contracts will be available for customer trading as of November 16, 2015, pending certification of contract terms and conditions with the CFTC and completion of all regulatory review periods.

Japan Getting Crash Course in Leveraged Returns With Nikkei ETF
Inyoung Hwang and Joseph Ciolli – Bloomberg
Six years ago, securities regulators told U.S. investors they were confused about leveraged exchange-traded funds and should consider avoiding them. The message has yet to catch on in Japan.
That became apparent Wednesday after the crush of money flowing into the Next Funds Nikkei 225 Leveraged Index ETF spurred its overseer to halt additional deposits, according to a statement on its website. Assets under management in the ETF have doubled since May to 734 billion yen ($6.16 billion), making it the biggest security of its kind in the world even as its price has declined almost 26 percent.

Currency Indexes: Dollar Volatility and New Survey Highlight New Partial Currency Hedged Index Tools, Supporting Advisor Interest in Currency Hedged Indexes
Since the US dollar value relative to major foreign currencies, as reflected by the US Dollar Index, hit a multi-year high of 100.39 in March, driven in part by anticipation of a move in US interest rates, it has fluctuated as the FOMC has weighed market input but has not yet taken decisive action.

How Can The Markets Best Adapt To The Rapid Growth Of ETFs, SEC Commissioner Luis A. Aguilar, Oct. 15, 2015
Press Release
Thank you and good morning. I want to extend a warm welcome to the members of the Investor Advisory Committee (“IAC”). I look forward to your discussions today. I appreciate the important work that you do and, in turn, how this work facilitates the SEC’s efforts to fulfill its core mission. I also want to welcome the audience, whether you are participating in person or remotely.

S&P 500 Revives Its Climb Without a True Risk Backing, Dollar Stabilizes (Video)
US equities seem to have made a strong ‘risk-on’ promise with a rally to 7-week highs while the Dollar pulled out of its own dive before momentum could truly set in. Which of these benchmarks better reflects the market pace we should expect through the end of the week and beyond? Not only is broader sentiment riddled with doubt over global growth, emerging markets capital flows, China’s economy and monetary policy implications; but the economic docket is thin on event risk capable of genuinely staunching dribbling confidence.

European ETF Boom Leads To Record Inflows
Tom Lydon – ETF Trends
Exchange traded funds are not just gaining wider acceptance in the U.S. The investment vehicle is making headway across many global markets.


Gold Stages Comeback, Erasing 2015 Losses on View Fed May Delay
Luzi-Ann Javier and Joe Deaux – Bloomberg
Go ahead, call it a comeback: gold just erased its 2015 losses.
The metal jumped to the highest in more than three months on Thursday as evidence that economies are slackening from China to Europe damped expectations the Federal Reserve will soon raise interest rates. Signs of stagnating U.S. inflation and retail sales added to the case to keep rates low, which revives the appeal of gold as a store of value.

Gold Bulls Get Another Booster: Options Traders
Steven M. Sears – Barron’s
Gold bugs are back.
The lovers of yellow metal are big-footing their way across the options market, leaving evidence that they expect a major surge in gold prices by the summer of 2016
The sudden interest in gold seems pegged to expectations the Federal Reserve will not raise interest rates anytime soon, and as a result, the dollar will weaken and gold prices will rise.

China gold reserves rise to 54.93 mln fine troy oz – central bank
China’s gold reserves stood at 54.93 million fine troy ounces at the end of September, up from 54.45 million at the end of August, the central bank said on Friday.


Back to business: Michael Bloomberg
Matthew Garrahan and Ben McLannahan – Financial Times
The party to celebrate Bloomberg Businessweek magazine’s 85th anniversary took place under a 21,000lb fibreglass model of a blue whale at the American Museum of Natural History. It was a fitting location, for gathered in Manhattan on that evening last December were some of the biggest beasts in US politics, finance and entertainment. Private-equity billionaires Henry Kravis and Steve Schwarzman were in attendance, along with Henry Kissinger, George Lucas and Lady Gaga. Yet few were bigger than the host: Michael Bloomberg, the magazine’s owner and former mayor of New York.

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