First Impressions

Yesterday’s most read stories:
We have tried this with some of our other newsletters and it has been a popular feature so thought we might give it a try on JLN Financials. Let us know what you think!

Friday’s top three stories:
The most read story last Friday was Jamie Dimon Wants to Protect You From Innovative Start-Ups. Good thing he’s looking out for us. In second place was depressing – Goldman Sachs Cuts More Jobs in its Securities Business. In a close third was the story Here is the GOP’s Presumptive Nominee on Negotiating Treasury Payments

Quote of the Day

“People should become aware of this problem right now. They should be on the lookout for communications from their advisers next year — and everybody should respond. If you don’t, you’ve signed off on whatever your financial adviser may be doing in your account, and that may not be the best thing for you.”

Marcia Wagner, a Boston lawyer who is an expert on the law governing retirement investments in the story, “The Looming Danger of All the Investment Fees You Don’t See”

Lead Stories

The Repudiation Phase of the Bubble
The Reformed Broker
I’ve read many books on the history of financial markets (like more than four dozen) over the last 20 years. I eat, sleep and breathe this stuff. One of the common threads of every financial or asset bubble throughout human history is that they all have a repudiation phase – a moment where all the lies that had been built up alongside the excess are aired out in public. Even reputable companies and players get caught up in it.

The Looming Danger of All the Investment Fees You Don’t See
NY Times
Stay the course, pay attention to the big picture, and don’t sweat the details. That string of mantras makes sense for saving and investing, but only up to a point.
Once you start paying attention to fees, it becomes clear that the details really matter.

Steve Wynn lashes out on ‘unconscionable manipulation’ in the stock market
Nicole Sinclair – Yahoo Finance
On Wynn Resorts’ (WYNN) first quarter conference call, Chairman and CEO Steve Wynn was asked about the company’s recent announcement to increase its share repurchase to $1 billion. Wynn responded back with a full-on critique of the stock market, which he says resembles casino activity.

China stocks plunge again as hopes for economic recovery fade
China stocks fell sharply again on Monday, reaching eight-month lows, as investors saw hopes for a strong economic recovery fade and worried about fresh regulatory curbs on speculation.

Simpler merger code to further boost China’s overseas M&A push
China is planning to remove the need for State Council approval for large, sensitive outbound deals and will allow Chinese companies to vie for the same target, a move likely to further boost record overseas acquisitions by Chinese companies.

Two Convicted in Insider Trading Conspiracy in London
Dealbook – NY Times
A former investment banker and a businessman were convicted of insider trading on Monday in what the British authorities have described as the largest crackdown on improper trading in Britain.

What Is ‘Maker-Taker’? And How Could A New SEC Test Program Change Your Trading?
Wayne Duggan , Benzinga Staff Writer
On Friday morning’s PreMarket Prep, KOR Group President Dave Lauer and founder/CEO Christopher Nagy discussed the origins, impact and shortcomings of the “Maker-Taker” market structure.

Banks Face New Rule That Magnifies Loss Reserves in Weak Economy
Yalman Onaran – Bloomberg
Impact depends on conditions when FASB standard takes effect; `It’s very hard to guess where the economic cycle will be’
A new accounting rule that will force banks to set aside provisions for bad loans long before they sour could cannibalize profits and eat into capital at U.S. lenders.

The Economy Is Rigged, and Other Presidential Campaign Myths
If you want to learn about the economy, there are good and bad places to go. Probably the worst source of reliable information is the current crop of presidential candidates. Dissembling and exaggeration are no strangers to politics, but this year’s campaigns have been particularly egregious.

Central Banks

A Fast Talk With New York’s Fed Chief, and a View of a Steady Economy
NY Times
William Dudley, the president of the Federal Reserve Bank of New York, may well be the most powerful policy maker in America who is neither elected nor confirmed by Congress. Mr. Dudley serves as vice chairman of the Fed’s policy-making committee, the Federal Open Market Committee, and he is the only regional reserve president who holds a permanent vote on monetary policy.

U.S. Fed awards $23.24 billion in reverse repos
The Federal Reserve on Monday awarded $23.24 billion of one-day, fixed-rate reverse repurchase agreements to 17 bidders at an interest rate of 0.25 percent, the New York Fed said on its website.

Fed’s Kashkari says current U.S. interest rates ‘about right’
Minneapolis Federal Reserve Bank President Neel Kashkari on Monday signaled his support for the cautious and patient approach to rate hikes laid out by Fed Chair Janet Yellen, saying the current stance of monetary policy is “about right.”


Brexit and Sterling: The Phoney War Could Yet Get Real
Referendum, what referendum?
The debate about the U.K.’s membership of the European Union ahead of June’s vote has revealed deep political fractures and even led to warnings about continued peace and security in Europe. Polls continue to suggest a close-fought contest.

Yen slumps on intervention warning, higher risk appetite
The yen dropped to a two-week low against the dollar on Monday after Japan’s finance minister said Tokyo was ready to intervene in the currency market if needed, with stronger risk sentiment also easing demand for traditional safe havens such as the Japanese currency.

Japan Makes Forex Intervention Threat
Japan’s finance minister said he was “prepared to undertake intervention” in the foreign exchange market if the yen rose further and sharply, describing more explicitly than before a policy the U.S. opposes.

Drop in Japanese Yen Shows the Limits of Jawboning
MoneyBeat – WSJ
A Japanese official managed to talk down the yen by more than 1% against the U.S. dollar on Monday, but jawboning alone isn’t likely to undo the currency’s swift rise.

RBI to amend forex management rules
Business Line
In a move aimed at contributing to the ease of doing business, the Reserve Bank of India on Monday said it proposes to amend the Foreign Exchange Management Regulations to mandate that foreign investment by non-residents on repatriation basis can be made in equity, debt and any other approved securities only in dematerialised form.

Origin of 6 modern currencies
Read our guide to know how the names of these modern currencies came to be.

Indexes & Index Products

Burton Malkiel Is Still an Indexing Fan, but a ‘Smart Beta’ Skeptic
Smart beta? Just smart marketing, says Burton G. Malkiel. Mr. Malkiel, the economist known for being one of the biggest proponents of index investing, continues to be among the skeptics of these popular mutual funds and exchange-traded funds, which blur the lines between active and passive management.

This new ETF demonstrates Wall Street’s unbridled hunger for millennial money
By MARK DECAMBRE – MarketWatch
If you can’t beat ’em, join ’em. Or, in the case of Wall Street vis-à-vis millennials, if they befuddle you, figure out a way to make money from them.

Asian Fixed Income: Chinese Corporates’ Spread Widened With Headline Risk
Indexology – S&P Dow Jones Indices
According to the S&P China Corporate Bond Index, the market value of Chinese corporate bonds was approximately CNY 26.4 trillion and represented 36% of the overall China bond market as of May 5, 2016. It is a robust expansion compared with the mere 6.7% exposure in 2007 The yield-to-maturity of the S&P China Corporate Bond Index came down 170 bps to 3.66% in 2015. This spread tightening in 2015 was largely due to improved liquidity, particularly with the correction in A-shares in the first half of 2015.
However, this trend is reversing as fundamentals start to weigh in.


Should I Ever Invest in Gold?
There are two schools of thought regarding gold: One camp advocates owning gold as a hedge against inflation, a weakening dollar, and stock market disaster. The other camp, which includes Warren Buffett, argues the yellow metal has no role in a modern portfolio.

Gold Slips, But Hedge Fund Bets On Gold At Highest Levels Since 2011 – Focus on Funds
Gold closed down Monday, marking its biggest one-day dollar and percentage drop since mid-February, erasing gains it had seen after Friday’s weak jobs report as the dollar gained ground.

A Perfect Bullish Storm For Precious Metals – ProShares Ultra Silver ETF (NYSEARCA:AGQ)
Seeking Alpha
This year has been precious if you own gold, silver or platinum. These metals have taken on a new luster after over four years of bear market conditions. The overall bear market in commodity prices caused lower highs and lower lows until early 2016, and precious metals were not exempt from this price action. However, while many commodities (including silver and platinum) moved lower early this year, gold has never traded below its December 31, 2015, close. Gold charged out of the gate and it has not looked back.

If You Thought Gold Was Going To Break $1300, You May Have Predicted Bartolo Colon Would Hit a Homer
Gold’s miserable performance on Monday showed just how difficult it would be for the June Gold Futures Contract to break the $1300 level. Its difficulty can be compared to Bartolo Colon’s attempt to hit a Home Run. While June, 2016 Gold has not had a closing price above $1300 in substantially more than a year, or approximately 250 Trading Days, Bartolo Colon, in 249 Plate Appearances and 228 At Bats, has finally hit a home run.


This is how the world’s most “successful” rogue trader operated
It’s not a normal – or low risk – trading practice to amass a securities position that’s nearly five times the total economic output of Cambodia… or 1.5 times the market capitalisation of the major global bank you’re working for. It’s even less normal if the bank you’re working for has no clue about what you’re doing.

Treasury Dept.’s Never-Ending Fight to Combat Tax Cheats
Dealbook – NY Times
Benjamin Franklin once pointed out that “in this world nothing can be said to be certain, except death and taxes.” Evading taxes and shielding ill-gotten gains are an effort to avoid some of that certainty, but as much as the government tries to battle corruption in the financial system, it will almost never be enough.

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