First Impressions

JLN Team Arrives in London for MarketsWiki Education Events
By John J. Lothian

Doug Ashburn, Patrick Lothian, RJ Roxas and I have landed in London for this week’s MarketsWiki Education World of Opportunity events at Nasdaq’s offices in the Woolgate Exchange. Jim Kharouf will be following tomorrow.

JLN Managing Editor Sarah Rudolph is leading efforts back in Chicago, with the help of CIO Jeff Bergstrom and Associate Editor Spencer Doar

We have surpassed the number of sign-ups for last year’s events in London and still have some room for a few more, but not many.

Thank you to all who helped get the word out. We greatly appreciate all your your help. Thank you also to our great lineup of speakers. I can’t wait to hear them all.

Have a great week, wherever you are.

Quote of the Day

“Pimco is Wall Street-upon-Newport Beach. You come here, you have good ideas, you prove yourself and you can make hedge fund-size money.”

Charles Skorina, a headhunter for the asset management industry in the story, “Bill Gross suit throws up battle of Pimco bonus pool”.

Lead Stories

My Plan to Prevent the Next Crash
By Hillary Clinton – Bloomberg View
Seven years after the financial crash, despite important new rules signed into law by President Barack Obama, there are risks in our financial system that could still cause another crisis. Banks have paid billions of dollars in fines, but few executives have been held personally accountable. “Too big to fail” is still too big a problem. Regulators don’t have all the tools and support they need to protect our economy. To prevent irresponsible behavior on Wall Street from ever again devastating Main Street, we need more accountability, tougher rules and stronger enforcement. I have a plan to build on the progress we’ve made under President Obama and do just that.

Igor Gensler Helps the Wicked Witch of the West Wing Create Son of Frankendodd
The Streetwise Professor
Hillary Clinton has announced her program to reform Wall Street. Again.
The actual author of the plan is said to be my old buddy, GiGi: Gary Gensler. Gensler, if you will recall, was the Igor to Dr. Frankendodd, the loyal assistant who did the hard work to bring the monster to life. Now he is teaming with the Wicked Witch of the West Wing to create Son of Frankendodd.

Why Do High-Frequency Traders Cancel So Many Orders?
By Matt Levine – Bloomberg
The issue of high-frequency traders who cancel a lot of their orders seems to have been in the news a bit recently, so let’s kind of reason it out from first principles.

Larry Tabb Says “Hillary’s Plan To Save Wall Street Could Harm Main Street”
While many of the planks in Hillary Clinton’s plan to avoid the next crash on Wall Street have already been rolled out as part of Dodd-Frank or are in the process of being implemented, her proposal shared yesterday on Bloomberg View includes a few wild cards. Depending on how they are implemented, they could have very negative impacts not just on the financial markets, our pensions and retirement plans – but on Main Street as well.

Cracks Emerge in Bond Market
Falling profits and increased borrowing at U.S. companies are rattling debt markets, a sign the six-year-long economic recovery could be under threat.

China Bolsters Panda Bond Diplomacy Ahead of IMF Yuan Decision
China is expanding the small part of its credit market open to foreign borrowers as it seeks to win global reserve status for its currency.
HSBC Holdings Plc and BOC Hong Kong Holdings Ltd. each issued 1 billion yuan ($158 million) of panda bonds last month, taking the number of foreign issuers of onshore notes in the Chinese currency to just five since the nation first allowed such securities in 2005. The latest sales come just weeks before the International Monetary Fund is expected to decide whether the yuan meets requirements for inclusion among reserve currencies in its Special Drawing Rights basket.

China targets automated share trading
Patti Waldmeir – Financial Times
China’s securities regulators are taking aim at automated trading in shares, part of Beijing’s campaign to restrain stock market volatility by intensifying pressure on the financial industry.

Bond Funds Have Been Borrowing to Boost Returns; The objective: equity-like returns on fixed-income investments.
Tracy Alloway – Bloomberg
For more than two decade, Bill Gross did the seemingly impossible, according to Bill Gross.

Ethical investment can be surprisingly unethical
John Plender – FT
The ESG fund universe covers a very wide spectrum, warns John Plender
Every defined contribution pension plan has a small group of members who want their fund’s investments to reflect their own ethical values. Unfortunately, no two ethically conscious members have the same view of what constitutes an unethical investment worthy of being screened out; nor, again, of what amounts to constructive environmental, social and governance behaviour that can readily be counted in.

Bill Gross suit throws up battle of Pimco bonus pool

Investing May Be Cheaper, but Fees Still Hurt
By TIM GRAY – NY Times
Mutual fund expenses can take a big bite out of shareholders’ returns. That bite, on average, is shrinking, but academic and industry experts say it could — even should — be diminishing faster: Plenty of investment companies still charge a lot, and many consumers still opt for pricey funds.

A Timely Reminder of Bonds Funds’ True Value
The Federal Reserve’s decision not to raise its target interest rate drew plenty of attention last quarter, but the real news for bond investors was what actually did happen.

Nobel in Economics Given to Angus Deaton for Studies of Consumption
NY Times
Angus Deaton, a Princeton economist, was awarded the Nobel Memorial Prize in Economic Science on Monday for improving the measurement of basic economic indicators like wealth and consumption, particularly in developing nations.

SEC Trims Use of In-House Judges
The Securities and Exchange Commission has quietly pulled back on its use of in-house judges, a practice that brought it criticism and legal challenges.

Central Banks

Central bank cavalry can no longer save the world
In 2008 central banks, led by the Federal Reserve, rode to the rescue of the global financial system. Seven years on and trillions of dollars later they no longer have the answers and may even represent a major risk for the global economy.

Fed should not raise interest rates just yet: China Finmin
Now is not the right time for the United States to raise interest rates, given the global economic situation, China’s Finance Minister Lou Jiwei said in an interview published in the China Business News on Monday.
Speaking on the sidelines of the annual meeting of the World Bank and International Monetary Fund in Lima, Lou said developed economies were to blame for the global economic malaise because their slow recoveries were not creating enough demand.

Fed policymakers keep December rate hike in spotlight
Two Federal Reserve policymakers whose views are often at odds both suggested on Monday they could well support an interest rate hike in December, as long as the economic data does not disappoint and that rate hikes once begun are gradual.
While two does not make a crowd, their apparent agreement on the plausibility of a December rate increase came just a day after Fed Vice Chair Stanley Fischer said he too expects a 2015 hike.

The Federal Reserve And Inflation
Seeking Alpha
Fed Vice-Chairman Stanley Fischer reiterated over the weekend the point he has been making for several weeks now…the Fed’s Federal Open Market Committee is waiting for signs of a recovery in prices before it moves its policy interest rate up.
Indications are that he still expects that this might happen in 2015.

Martin Feldstein: Chinese economy and Fed policy
Business Standard Column
Janet Yellen’s speech on September 24 at the University of Massachusetts clearly indicated that she and the majority of the members of the Federal Reserve’s Federal Open Market Committee (FOMC) intend to raise the short-term interest rate by the end of 2015. It was particularly important that she explicitly included her own view, unlike when she spoke on behalf of the entire FOMC after its September meeting. Nonetheless, given the Fed’s recent history of revising its policy position, markets remain sceptical about the likelihood of a rate increase this year.


Pimco’s Bear Case Only Gets Stronger as Emerging Currencies Jump
Pacific Investment Management Co. is sticking with its pessimistic outlook on emerging-market currencies, saying the biggest rally in 17 years has only bolstered the case for making bearish wagers.

Chart of the day: China’s forex buffer
South China Morning Post
As countries hit by the Asian financial crisis lacked sufficient foreign reserves to defend their currencies, sharp currency depreciation prompted foreign creditors to cease funding, leading to a further spiral of depreciation and foreign-exchange debt defaults.

Indexes & Index Products

FTSE Russell And Johannesburg Stock
Press Release
FTSE Russell, the global index provider, today announces the launch of the FTSE/JSE Responsible Investment< Series, developed as a result of the expanded partnership between FTSE Russell and Johannesburg Stock Exchange (JSE), announced earlier this year. These indexes are available from today.
FTSE Russell and JSE have seen a significant increase in the number of institutional investors wanting to integrate ESG considerations into their investments. As a result, the businesses are collaborating to develop a suite of tools for the market to aide ESG integration. The new index series will initially comprise the FTSE/JSE Responsible Investment Benchmark and a Top 30 Index, containing the top thirty companies as ranked by the FTSE ESG Ratings. The launch builds on the existing FTSE/JSE Africa Index Series.

Russia ETF Rewards Resolute Investors as Stock Volatility Surges
U.S. investors brave enough to put money into one of the most volatile stock markets are reaping some of the biggest profits in the world.

Exchange-traded funds are safe again, money managers say
What happened with volatile exchange-traded funds in the August market meltdown in the United States and China? Are they still safe?
Professional money managers say yes, ETFs are safe to invest in. But then again, most pros weren’t hurt by widespread halts in trading among exchange-traded funds.


Gold logs highest close in 3 months
Gold futures posted their highest close in more than three months on Monday, as the yellow metal extended its gains from the prior week amid bets for a further delay in U.S. interest-rate hikes.

Gold Bugs Rejoice As Prices Near Major Rally Point
Gold bugs have something to rejoice about this week as a turnaround in the sentiment towards the commodity markets signals further gains ahead for the embattled metal.

Shhh! Gold & Silver Are Whispering…
Gold News
GOLD & SILVER investors using BullionVault don’t choose to do so because we forecast huge price gains…any day now! writes Adrian Ash at the world’s largest precious metals exchange online.
Nor do they choose to buy at the lowest costs using our service because we believe (or pretend to believe) that some kind of millennial event is about to strike the gold and silver market…again, any day now!…freeing prices for a historic surge.


Cubs World Series tickets would be most expensive in history
Bloomberg via Crain’s Chicago Business
Tickets to see the Chicago Cubs play a World Series game at Wrigley Field — if they get there — could cost at least $3,000. And that’s for the cheap seats.

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