First Impressions

Bridge Builder Reprise

A few weeks ago we featured a bio/commentary on Stanley Fischer, just as rumors circulated about a Fischer nomination as vice-chairman of the Federal Reserve. Now that President Obama has officially nominated Fischer as the Fed’s “Number Two,” we felt it appropriate to give readers another opportunity to click to the story.

The Fed’s Bridge Builder?
Doug Ashburn, John Lothian News
What would it mean to have Stanley Fischer as vice-chairman of the Federal Reserve? More hawkish or more dovish? Is it a bold move or a safe pick? Will he, to paraphrase Obi-Wan Kenobi, “bring balance to the force” by acting as a bridge between Janet Yellen and the hawkish wing, which becomes more prominent on the FOMC in 2014?

The man looks like a middle-of-the-road pragmatist, with plenty of experience at the central bank level as well as in the private sector. He has called QE “dangerous but necessary” and seems to be more willing to discuss the unintended consequences of zero interest rates and a bloating of the Fed’s balance sheet.

Quote of the Day

“Like Janet Yellen and many others, he is of unquestioned brilliance at knowing when and when not to pay attention to academic concerns or models.”

Adam Posen, president of the Peterson Institute for International Economics, in the Reuters story “Obama moves to fill Fed board, taps Fischer to be No. 2”

Lead Stories

Obama moves to fill Fed board, taps Fischer to be No. 2
President Barack Obama on Friday nominated former Bank of Israel Governor Stanley Fischer to be vice chairman of the Federal Reserve, and tapped two others to round out the U.S. central bank’s top ranks just as it begins winding down its historic economic stimulus.

***DA: Among Fischer’s resume highlights is his stint at the IMF where he helped navigate the Asian Contagion in the late 1990s. I wonder if that experience will be important to his job at the Fed.

Argentina’s Woes Push Investors Away
Investors are pulling out of Argentina’s currency and bonds as its financial situation deteriorates. After a stellar 2013, the country’s government bonds have fallen sharply over the past week, as a deep drop in the value of the peso and dwindling foreign-exchange reserves are raising questions about the country’s ability to pay future debts.

***DA: For more on this sad story, see Friday’s commentary, We Cry for Thee, Argentina

Bond funds worldwide attract $5.3 bln inflow – BofA
Investors poured $5.3 billion into bond funds in the week ended Jan. 8, marking the biggest flows into the funds since May of last year, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

***DA: Not wrong, just early.

US bond issuers find love across the Atlantic
Sarah Krouse in New York – Financial News
It’s been a match made in heaven. US companies are looking to borrow money at super-low rates but are worried rates in their home markets will rise. In Europe, European bond investors are looking for portfolio diversity.

***DA: Few places left to hide in the intertwined global economy.

Treasure hunt in US bond junkyard turns tricky
Vivianne Rodrigues in New York –
Hunting treasure in the junkyard of capital markets has been easy in recent years. Junk – or high yield – bonds have rallied strongly since the financial crisis. But as benchmark interest rates start to rise, that search is about to become a good deal more challenging.

***DA: I would be more concerned about whether prior acquisitions are indeed “treasures.” Don’t count one’s chickens before they have hatched, or matured, in this case.

Record dim sum bond issue for London
Christopher Thompson –
Bank of China has sold a record Rmb2.5bn bond to investors, the biggest offshore renminbi bond to date in London.

***DA: My guess is this record will not stand for long, as there is much more to come.

Portugal plans post-bailout cash cushion
Ralph Atkins in London –
Portugal plans to build a substantial cash cushion ahead of exiting its international bailout programme after last week taking advantage of a powerful New Year rally in the debt markets of the eurozone’s crisis-hit “periphery” countries.

Central Banks

Fed’s Lacker sees $10 billion taper on table at next meeting
U.S. Federal Reserve policymakers will likely discuss another $10 billion reduction in the monthly pace of bond buying at their next meeting, said a senior Fed official on Friday, who warned against reading too much into a weak jobs report for December.

***DA: I have consulted my Magic 8-ball, which said that tapering will taper in aggressiveness.

German Choice for ECB Heralds Shift as Rate Clout Slips
Jeff Black and Jim Brunsden – Bloomberg
In sending Sabine Lautenschlaeger to the board of the European Central Bank, Germany could be gaining power over the region’s lenders at the expense of its monetary-policy clout.

Markets run into fog of forward guidance
Satyajit Das –
A paucity of policy options facing central bankers has increased reliance on forward guidance; an oxymoron as any guidance must be about future events.

***DA: Forward guidance is redundant, not oxymoronic. Trading off of forward guidance may be moronic, though.

ECB’s Draghi wins new central bank governor’s award
European Central Bank Governor Mario Draghi has won the inaugural Governor of the Year award for 2014 from specialist publication Central Banking, the London-based media group said on Monday.


Investment: Dollar disruptions
Robin Wigglesworth –
For a brief moment in 2007 Gisele Bündchen became the fetching face of dollar doomsayers, when her agent revealed that the Brazilian supermodel would prefer to be paid in euros rather than the struggling US currency.

***DA: Luckily she did not choose to be paid in reales.

Federal Reserve Said to Probe Banks Over Forex Fixing
Keri Geiger and Caroline Salas Gage – Bloomberg
The Federal Reserve is investigating whether traders at the world’s biggest banks rigged benchmark currency rates, raising the risk that firms will be penalized for lax controls as regulators look for wrongdoing.

Citi’s European spot forex head trader Ramchandani out amid probe
Citigroup’s head of European spot foreign exchange trading, Rohan Ramchandani, has left the global bank, a spokesperson told Reuters on Friday.

Yuan’s Rise Hurts China’s Exporters
China’s reputation as the world’s factory floor is being undercut by the yuan’s upward march against the dollar, which along with rising wages, is pushing manufacturers to look for cheaper production bases in Asia. Exports in December were up just 4.3% compared with December 2012, down from a much stronger 12.7% year-over-year rise in November, according to customs data released Friday.

Fresh approaches to foreign exchange
Joe McGrath – Financial News
Historically, institutional investors have been relatively unconcerned about the amount they pay for currency trades or how the organisations that provide those services make their money, but this has been changing of late.

Ex-Citadel Execution head joins Saxo Bank to lead institutional push
Matt Turner – Financial News
The former president of Citadel Execution Services Europe, who also previously held trading roles at Merrill Lynch and Goldman Sachs and part-owns a luxury Italian bike brand, has joined Saxo Bank to lead its push into the institutional market.

Specs boost long US dollars to highest in four months-CFTC, Reuters
Currency speculators boosted bets in favor of the U.S. dollar in the latest week to their largest in four months, according to data from the Commodity Futures Trading Commission released on Friday.

Corporates join bitcoin-brigade to lobby for digital currency
Business Standard
As more bitcoin operators shut shop in India on fears of regulatory and enforcement actions, some large corporates are believed to have begun lobbying hard with regulators and government departments in favour of ‘digital currency’.

Indexes & Index Products

Vanguard Ups Global ETP Market Share
Sarah Krouse – MoneyBeat – WSJ
U.S. fund manager Vanguard was the only one of the three largest exchange-traded product providers globally to increase its market share in 2013, highlighting the competitiveness of a sector in which the top three firms account for 70% of assets.

Xetra/Börse Frankfurt: New PIMCO Active ETF Launched On Xetra
First Actively Managed Bond ETF On The Global Market For Covered Bonds For The First Time


INSIGHT-Gold mine stirs hope and anger in shattered Greece
A Canadian quest to mine for gold in the lush forests of northern Greece is testing the government’s resolve to prove Europe’s most ravaged economy is open again for business.

Bullish Gold Bets Hit Seven-Week High
Tatyana Shumsky – MoneyBeat – WSJ
Speculators are betting that gold will shine in 2014.

It’s not just bad economic data boosting gold, say strategists
Lawrence Lewitinn – Yahoo Finance
Gold’s gains this year may be more than just economic pains, say two strategists.
For those long gold, here’s some good news: there’s bad news for the economy.
A disappointing US jobs report sent gold UP 1% on Friday. What does that have to do with gold?

Here’s why gold’s drop isn’t done yet
Jeff Macke – Yahoo Finance
Spoiler alert: at the end of the book Old Yeller dies.
Alas some investors in the old yellow metal might consider the dog’s fate a decent alternative to what’s happened to their portfolios of late. After more than a decade of doing nothing but move higher annually, physical gold and the SPDR Gold Shares ETF (GLD) got destroyed in 2013. For good measure the Market Vectors Gold Miner ETF (GDX) () got even more walloped, and has lost more than half its value over the last 52-weeks.

Rare gold coin sold at auction for more than $4 million
Fox News
A legendary gold coin — the first of its kind ever minted in the U.S. and once featured in the plot of a Raymond Chandler novel — has sold at an auction in Florida for more than $4.5 million.


Bullish Gold Bets Hit Seven-Week High
Tatyana Shumsky – MoneyBeat – WSJ
Speculators are betting that gold will shine in 2014.

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