First Impressions

George Martin, Cheevers & Co. – Keeping The Human Element

“The human element is critical. There’s so much power in a handshake or a face-to-face meeting.”

George Martin, trade support specialist at Cheevers & Co., discusses the importance of human interaction in the financial industry. Despite the fact that technology has moved a majority of trading activity from open outcry pits to digital screens, Martin stresses how human interaction is still a key element in the industry. He also gives a brief background of his own trading career, and recalls the state of the financial industry before the technology boom. Giving an example from his own office, Martin tells the audience how he receives instant messages from someone a few feet away from him, when instead he would prefer them to get up and ask him the question. While Martin is not completely against technology, he believes that there is a balance that must be found between spending time in front of a screen and spending time in front of another human.
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Quote of the Day

“It got us thinking about how quaint that conversation felt to us: a bank; loans; regulators who looked at the books, understood the business and had expertise and experience in controlling the risks of the institutions under their supervision or focus.”

Paul Singer in the story, “Paul Singer Calls For “New Glass-Steagall” As He Proposes Derivatives Solutions”.

Lead Stories

Paul Singer Calls For “New Glass-Steagall” As He Proposes Derivatives Solutions
It wasn’t long ago that senior management at Elliott Management, a hedge fund that has been widely critical of the topic rarely discussed in media – unregulated derivatives that are positioned to threaten the world economy – also accurately predicted the 2008 derivatives meltdown and warned European Central Bankers beforehand.

Rise in financial alchemy is worryingly familiar
Tracy Alloway in New York, FT
Low yields mean risky inventions are bound to spring up
Those searching for evidence of Wall Street’s never-ending wackiness need look no further than the man who is convinced investors are wary of corporate bonds because the debt is just too risky.

The Eight Unlucky Countries Facing Deflation This Year
by Andre Fonseca Tartar, Bloomberg
Deflation, deflation, deflation. It was the doomsday mantra of 2014, and nowhere was it sung louder than in growth-starved Europe. As of just a few weeks ago, economists surveyed by Bloomberg News were convinced 2015 would be the first year since 2008 that no country saw annual deflation. No longer.

The euro crisis: Debt, morality and the cycle
The Economist
AT THE heart of the battle between Greece and its EU partners over its debt crisis are conceptions about morality over debt and economics; issues that have been debated for thousands of years. The idea of interest payments on debt was around at the time of Hammurabi, ruler of Babylon in around 1800 BC; his code set maximum rates of 33.3% for loans of grain and 20% for those of silver. There was a lot of focus on what was “fair”; those who lent cattle to their neighbour were entitled to some or all of the calves that might be born. The Sumerian word for interest, mas, means calves. Aristotle argued that an inert commodity like silver, which did not bear fruit, should not carry interest.

Gross Owns Majority of Janus Fund Through Two Brokerages
Miles Weiss and Mary Childs – Bloomberg
Bill Gross and his family own more than half of the bond fund he runs on behalf of Janus Capital Group Inc., after acquiring their shares through brokerage accounts at Morgan Stanley and Charles Schwab Corp.
Gross and his family held a 51.2 percent stake in Janus Global Unconstrained Bond Fund as of Dec. 31, according to a filing Friday by Denver-based Janus with the U.S. Securities and Exchange Commission. The shares had a market value of $739 million, based on net assets of $1.45 billion at year-end.

Today’s Jobs Report Marks a ‘Sea Change’ for the U.S. Labor Market
Peter Coy – Bloomberg
The January jobs report isn’t just a single piece of good news. It marks a sea change in the labor market in which the middle class and working class are finally starting to get ahead. Even before the January data came out, Michael Feroli, the chief U.S. economist of JPMorgan Chase, picked up on the trend in a research note titled, “A little bit less of these workingman’s blues.”

As investors move to passive funds, stockpickers get creative
By David Randall, Reuters
Undaunted by the popularity and outperformance of index-tracking investments, mutual fund companies last year rolled out 193 new actively managed stock funds, many with some highly colorful concepts.

ICE commits to NYSE for at least 2 years
Philip Stafford in London and Gregory Meyer in New York, FT
The owner of the New York Stock Exchange has indicated it will give the institution at least two years to deliver better performance, batting down speculation its recently acquired bourse was for sale.

Family money puts its faith in European technology
By Andrew Winterbottom, Reuters
Some of Europe’s wealthiest families are investing chunks of their cash in technology companies, bringing the benefits of long-term horizons to start-ups and filling a funding hole for the continent’s fledgling Facebooks.

Nostalgia, but little outcry, over CME decision to close futures pits
By Ameet Sachdev – Chicago Tribune
End of an Era: CME to close most futures trading pits by July
CME’s futures trading pits remembered fondly.
The CME Group’s announcement late Wednesday afternoon to close most of its futures trading pits in Chicago and New York evoked a wave of nostalgia.

LSE to sell Russell asset management unit
Philip Stafford, FT
The London Stock Exchange Group confirmed that it is to sell the asset management business it acquired as part of its $2.7bn purchase of Russell Investments, the index provider.

Central Banks

And Now It’s Time to Talk About the Fed
Joseph Weisenthal – Bloomberg
With today’s jobs report confirming a strong labor market recovery, it’s time to turn our attention back to the Fed.
It’s clear that the market has adjusted and pulled forward its expectations of when the Fed will finally raise interest rates, as evidenced by the jump in the dollar and in short-term yields.

Fed fires back at Rand Paul
The Federal Reserve is lashing out at Sen. Rand Paul’s plan to give Congress more oversight over the central bank, a proposal that could gain traction in the new Republican-led Congress.
The Kentucky Republican reintroduced his “Audit the Fed” legislation last month with 30 co-sponsors, including other potential 2016 GOP hopefuls, Sens. Ted Cruz (Texas) and Marco Rubio (Fla.).

Solid Jobs Report Turns Screws on Federal Reserve – Focus on Funds
Chris Dieterich – Barron’s
Silence the naysayers. Job growth was solid in January.
Now cue up the hawkish calls for the Federal Reserve to hike interest rates, which have been pinned near historical lows since the financial crisis.

Greece and the ECB: The enforcer
The Economist
AS PART of his campaign to present a more conciliatory face to Greece’s European creditors, Yanis Varoufakis, the new Greek finance minister, dropped by the European Central Bank (ECB) in Frankfurt on February 4th. He met Mario Draghi, its president, in an encounter Mr Varoufakis described as “fruitful”. But there are sweet fruits and bitter ones. After his visit, the ECB’s governing council served up a bitter variety by deciding to make life tougher for Greek banks, already beset by big outflows of deposits. The decision was a warning shot to the new government over its unwillingness to abide by Greece’s bail-out arrangements.


Currency Devaluations Are an Undeclared War
by Simon Kennedy, Bloomberg
The global currency war is threatening to prove a silent killer.
So says David Woo, head of global rates and currencies research at Bank of America Merrill Lynch in New York.

All currency war, all the time
David Keohane, FT
Always beware FX analysts declaiming “the dawn of a new era” ? particularly one that suggests “we are all FX traders now” ? but BofAML’s David Woo may be somewhat justified here:

Swiss Central Bank Continues Intervening in Currency Market, Data Suggest
Reserves Grow Despite End to Hard Limit on Franc
By Neil MacLucas, WSJ
New data published on Friday by the Swiss National Bank suggest it bought around 60 billion Swiss francs (around $65 billion) worth of foreign currencies last month to blunt the surge in the Swiss franc’s value, even after the central bank removed a strict cap on the currency halfway through January.

Banks slash FX leverage for clients after Swiss franc rout
By Patrick Graham, Reuters
Banks are cutting back on the credit they offer leveraged investors in foreign exchange, after an eruption in Swiss franc volatility one day last month forced changes in risk-management models, several industry figures said on Friday.

Will Demark depeg the krone?
Denmark’s central bank is reaching for bigger bazookas to battle the speculators betting it will be forced to abandon its currency’s peg to the euro.
“They’ve thrown the proverbial policy toolkit at defending the euro-Danish peg,” Kamal Sharma, a foreign currency strategist at Bank of America Merrill Lynch, told CNBC Thursday. “They will continue to intervene with the possibility of further rate cuts, even the tail risk of the recalibration of the trading range.”

Indexes & Index Products

CBOE Set to Expand VIX, SPX Options Trading Hours in Early March
The Chicago Board Options Exchange (CBOE) announced today that it will expand trading hours for both CBOE Volatility Index (VIX Index) options and S&P 500 Index (SPX) options, adding more than six hours of additional trading five days a week. The extended hours for VIX options are set to begin Monday, March 2, while the extended hours for SPX options are expected to start on Monday, March 9.

A More Tempered Global Equity Fund
Low-volatility strategies, such as the iShares minimum volatility family of exchange-traded funds, can be attractive options for long-term investors. This is because these ETFs’ underlying MSCI indexes generally exhibit less-dramatic declines in bear markets. Over the long term, these muted drawdowns explain much of the strategy’s outperformance versus its cap-weighted benchmark.

Fidelity Adds REIT ETF to Sector Lineup
ETF Trends
Fidelity Investments, one of the largest issuers of sector index funds, introduced its first real estate exchange traded fund today with the debut of the Fidelity MSCI Real Estate Index ETF.

London Stock Exchange Looks to Sell Russell Asset Management Business
The London Stock Exchange said on Thursday that it planned to put the investment management arm of Russell Investments up for sale, a move that was widely anticipated after it bought the owner of the Russell 2000 stock market index last year.

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