First Impressions

Video Killed the Radio Star: J2’s Esposito Stresses Importance of Digital Media

“Video is king. Video is everywhere.”

Joan Esposito, co-founder of the media consulting firm J2 Strategic Communications, said that more companies are putting CEOs and other key personnel in video for their websites, internal communications and external strategies.

“That’s wonderful because it puts a human face and hopefully a passionate face on the company,” she said. “But if they make a video like that and they are dull or not energetic, or not passionate, or not clear, that’s not helping your company.”
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Quote of the Day

“This was a decision that reflects the serious concerns about the commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.”

Melba Acosta, the president of Puerto Rico’s Government Development Bank, in the story “Puerto Rico Agency Misses Full Bond Payment in First Default”

Lead Stories

Puerto Rico Agency Misses Full Bond Payment in First Default
A Puerto Rico agency defaulted on bonds for the first time Monday, initiating a clash with creditors as the struggling commonwealth seeks to renegotiate its $72 billion debt load.
The Caribbean island paid just $628,000 of what was due on securities sold by its Public Finance Corp. because the legislature didn’t provide enough money, Melba Acosta, the president of its Government Development Bank, said in a statement. About $58 million of interest and principal was due.

China freezes Citadel unit’s account in war on stock speculation; Markets watchdog freezes account affiliated with Citadel
By Nathaniel Taplin and Pete Sweeney, Reuters
China’s markets regulator has frozen a trading account linked to Citadel Securities, a unit of the U.S. group that also owns hedge fund Citadel LLC, as Beijing battles against speculators to prop up China’s ailing stock markets.

A Towering Bond Trade Has Been Quietly Falling Apart
If credit ratings were food, AAA-rated bonds would be quinoa, healthy and entirely unsatisfying. BBB-rated debt might be roast potatoes, not so bad for you and flavorful. And CCC-rated debt would be a double cheeseburger with bacon, unhealthy but oh so very tasty.
Years of low interest rates have encouraged some of the riskiest corporate borrowers to tap yield-hungry investors to finance their growth (or share buybacks and dividend payouts), spurring issuance of debt that comes with triple-C credit ratings. Such bonds are just a few notches above D for default and are typically classified as carrying “substantial risks.” For investors willing to shoulder the burden of those extra risks in exchange for heftier returns, CCC-rated bonds have been alluring.

Former Citigroup and UBS Trader Convicted in Libor Case
Dealbook – NY Times
Tom Hayes, a former trader at Citigroup and UBS, has been convicted on eight counts of conspiring to manipulate a global benchmark interest rate known as Libor, bolstering efforts by prosecutors here to pursue financial wrongdoing.
Shortly after the verdict, Mr. Hayes was sentenced to 14 years in prison.

Meet China’s Stock Savior: He Never Saw the Crash Coming
After China’s stocks crashed in June, the government put more than $400 billion at the disposal of a little-known state agency, the China Securities Finance Corp., headed by an academic and bureaucrat named Nie Qingping. It was told to save the market.

Greek Traders See No End to Stock Trauma
Waves of selling battered Greek stocks and made life miserable for equity traders Monday. It’s a trauma that investors should get used to.
Given their first opportunity to trade since late June, people chose to sell, sending the benchmark ASE Index down 16 percent — the worst one-day decline since at least 1987. It should’ve been worse, said local brokers, who sometimes found routine tasks like buying and selling impossible due to a host of emergency restrictions enacted Friday.

Rising profits at big U.S. banks boost executive pay: KBW
Top executives at big U.S. banks received fatter paychecks last year as profits rose, brokerage Keefe, Bruyette & Woods (KBW) said on Monday.
Compensation for top executives rose 26 percent at these banks as reported earnings increased 2.6 percent on average on a per-share basis, KBW said, adding that the pay rise was consistent with the increase in profits.

British Government to Begin Partial Sale of R.B.S. Stake
Dealbook – NY Times
The British government said on Monday that it would sell a 5.2 percent stake in Royal Bank of Scotland, its first sale since the bank received a huge bailout seven years ago.
In a news release, U.K. Financial Investments, which oversees the government investment in R.B.S. and Lloyds Banking Group, said it planned to sell 600 million shares in a private placement to institutional investors, representing a 5.2 percent stake in R.B.S.

Bharara’s Deputy Wall Street Cop Brings CV Pairing Citi, Gotti
by Greg Farrell, Patricia Hurtado, Bloomberg
As a federal prosecutor, he twice failed to win racketeering convictions against the son of the late mob boss John Gotti. As a private lawyer, he helped Citigroup avoid criminal charges in the Libor rate-fixing scandal.

New York Regulator Moves to Suspend Promontory Financial
Dealbook – NY Times
The Promontory Financial Group occupies a position of trust in the global financial system, acting as a consultant to big banks, foreign nations and the Vatican. Its influence has soared over the years, positioning it as a sort of shadow regulator that provides government authorities with a window into bank misconduct. And the firm’s political ties run deep, thanks to its founder and chief executive, Eugene A. Ludwig, a former top banking regulator and a law school friend of Bill Clinton.

Another Court Tells SEC to Reconsider How It Names Its Judges
A federal judge in Manhattan gave the Securities and Exchange Commission seven days to say if it will change the way it appoints its administrative law judges, adding to pressure on the agency to change its system.

Banks must ‘adapt or die’ in the digital world, study warns
Emma Dunkley, FT
Banks must “adapt or die” in the digital world to meet the surging demand for mobile banking with the number of mobile customers set to jump to more than a quarter of the world’s population, a new study has warned.

Morgan Stanley brokers say they were underpaid
Gina Chon in Washington, FT
Several Morgan Stanley financial advisers say they were underpaid thousands of dollars by the bank, which rebuilt its business on the back of the wealth management division where they work, insiders say.

Asset managers promise to put clients first from now on
The Trade News
Members of the Investment Association have signed up to a Statement of Principles designed to ensure asset managers behave in the best interests of customers.

Goldman falls out of list of top-10 European fund managers
Attracta Mooney, FT
Goldman Sachs and Natixis have fallen out of a list of the top 10 bestselling fund managers in Europe, as some investment companies struggled to cope with the fallout from the Greek crisis.

Central Banks

Fed’s Powell Says Rules Could Be Hampering Bond Liquidity
Wall Street’s complaints that new rules have hurt bond-market liquidity got a boost Monday when a Federal Reserve governor said forcing banks to hold more capital might be discouraging them from facilitating trades.
Though financial regulations “had little to do” with Treasury market volatility last October, they “may be one factor driving recent changes in market-making,” Fed Governor Jerome Powell said at a Brookings Institution conference in Washington. “Requiring that banks hold much higher capital and liquidity and rely less on wholesale short-term debt has raised funding costs,” he said.

Why the Federal Reserve’s indecision to raise rates?
Futures & Options World – Let’s Talk Derivatives
The US Federal Reserve appears ready to raise its target federal funds rate for the first time in a decade, even if it is still toying with the markets about timing. Job creation and the unemployment rate are flashing a clear green. Core inflation is still a little below the Fed’s long-term 2% target, but easily within measurement error distance. US 10-year Treasury notes yield above 2%, suggesting a lack of deflation fears. So, why the wait? Why the indecision?

ECB Exceeds Monthly Asset-Purchases Target Before Summer Lull
The European Central Bank exceeded its monthly asset-buying target in July before liquidity dries up in the region’s prime vacation month.
The ECB bought 61.3 billion euros ($67 billion) of public and private debt under its quantitative-easing program, data on the institution’s website showed on Monday. Purchases have exceeded the ECB’s monthly goal of 60 billion euros since May.

China central bank defends online payment rules amid criticism
Financial Times
China’s central bank has moved to defend draft rules that would force online payment processors to channel large payments through traditional bank accounts, a requirement that industry observers say will stifle innovation while protecting the interests of incumbent banks.
The People’s Bank of China in mid-July laid out a broad regulatory framework for internet finance, which includes payments, wealth management, peer-to-peer lending and crowdfunding, among other services.

China’s central bank lends $47 billion to banks in July to bolster growth
China’s central bank injected 292.9 billion yuan ($47.2 billion) into banks in July to boost lending, it said on Monday, in yet another step to bolster growth in China’s cooling economy.

Key rate of Russian Central Bank: Carrots or sticks?
What influence does the key rate of the Central Bank have on the economy of the Russian Federation? Many business people and members of the scientific community raise many questions about the policy of the Russian Central Bank. Pravda.Ru asked these and other questions to deputy of the State Duma of the Russian Federation Yevgeny Fyodorov and director of the analytical department of Alpari, Alexander Razuvaev.


Commodity Rout Spurs Worst Resource Currency Meltdown in 7 Years
by Kevin Buckland, Anooja Debnath, Bloomberg
There’s been no respite in the commodity rout that’s seen prices tumble to a 13-year low — and that’s sending the currencies of nations that rely on exporting resources toward their worst year since the financial crisis.

Weak China data hits commodity currencies
Financial Times
Commodity currencies were once more under pressure on Monday, with sentiment for raw materials soured by renewed selling of Chinese equities against the backdrop of weaker economic data.
With oil and other commodities slipping at the start of a new month, the rouble led currency weakness, down 1.2 per cent against the US dollar and breaking Rbs62 for the first time since March.

Japanese police hope to shed light on bitcoin exchange’s collapse
Leo Lewis in Tokyo, FT
On Sunday afternoon, in a central Tokyo detention centre, Japanese police began questioning Mark Karpelès, founder and former head of Mt Gox, the bitcoin exchange platform that collapsed last year. (See also: Bloomberg – Former Mt. Gox Chief Karpeles Arrested, Japanese Police Say, and NY Times Dealbook – Mark Karpeles, Chief of Bankrupt Bitcoin Exchange, Is Arrested in Tokyo

Indexes & Index Products

Index tracker fund price war heats up
Pauline Skypala, FT
BlackRock now the cheapest for tracking the FTSE All Share or FTSE 100 indices
Basic economics maintains that as price rises, demand falls. There are exceptions, but that is the general rule.

Markit calls for ETF collateral
The Trade News
Markit is trying to bridge the gap between exchange traded funds (ETFs) and securities lending collateral, by launching ETF collateral lists.

CBOE to List VIX ‘Weeklys’ Options Beginning October 8
Press Release – CBOE
The Chicago Board Options Exchange (CBOE) today announced that it plans to list options with weekly expirations on the CBOE Volatility Index (VIX Index) beginning Thursday, October 8, 2015.

S&P Dow Jones Indices Market Attributes U.S. Index


Why gold has lost its shine for investors
Mohamed El-Erian, FT
The observation that gold has been a disappointing investment of late should come as no surprise to anyone in the investment world. The fact that this has occurred in the context of developments that would normally push gold prices higher is notable. But the most consequential hypothesis of all is that gold may be losing its traditional role in a diversified investment portfolio.

Gold On Sale, Says The Rational Investor
The leveraged gold futures derivatives market is knocking down the precious metal, yet in massive contrast, this drop has ignited a shopping frenzy according to gold coin dealers. I spoke with several friends and industry experts last week who confirmed the record sales numbers for the month. In fact, American Gold Eagle sales reached 161,500 ounces in July, the highest monthly figure since April 2013. What gives?
Gold often attracts conspiracy theories when it falls so abruptly, especially on Mondays. Interestingly, in a recent article on Zero Hedge, ABC Bullion out of Sydney, Australia, details some of the speculation behind the precious metal’s beatdown, which I’ve also discussed in my blog.

Gold down on dollar after worst month in two years
Gold dropped on Monday, after falling by the most in two years in July, as the dollar rose and investors monitored U.S. economic indicators for clues on the timing of a hike in U.S. interest rates.

Are you brave enough to profit from a collapse in gold?
OK, gold haters. It’s time to put your money where your mouth is.
You think gold could be going down to $350 an ounce? That’s great. Then go out there and buy some put options on the yellow metal. They will pay out, but huge, if your prediction comes anywhere close to being right.
We’re talking very little money down, and a profit of more than 3,000% if you’re right. Cha-ching!

Gold At The Bottom; In More Ways Than One
Gold is down but one small gold explorer has found a way to get its share price up and that’s by going straight to the bottom — of the ocean.
Black Mountain Resources, a mining company which has achieved little in its four-years on the Australian stock exchange, delivered a remarkable 400% price rise last week by signing up for a place in a shipwreck salvage syndicate.
There’s not much new about looking for sunken treasure but it is interesting that a company taking the risk of helping fund a search in the North Atlantic off the Irish coast would do better on the stock market than any of its rivals laboring under a gold price which seems poised to sink through the $1000 per ounce mark.

Gold: The best hope for beleaguered bulls
The gold rout accelerated in July, with the yellow metal hitting its lowest level since 2010 and suffering its worst monthly decline since 2013. Speculators are now net short gold for the first time since the government began tracking data in 2006, Bloomberg reports, and holdings in gold ETFs like the GLD are at the lowest level since 2009.

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