Bits & Pieces
By JLN Staff
Tomorrow is Good Friday and JLN is taking the day off. We will be back on Monday. For those who celebrate Easter, have a glorious day.
Doug Ashburn will be back in the office next week, but Jim Kharouf will be taking the week off. John Lothian will be in and out, as he continues to move his homestead and travels to New York on April 8 & 9 with Doug Ashburn. Jeff and Sarah continue to slave away at JLN global headquarters in the CBOT Building.
The CFTC has sued Kraft alleging they manipulated the wheat market, which has left many with a bad gooey cheese taste in their mouths.
Gary DeWaal is raising money for Doctors Without Borders. Sponsor his ride across New York. You can donate here. I donated, will you too?
Thank you to all who reached out to Kim Taylor following our commentary. Let me know if you donated and I will send you a wrist band.
Shining Star: SGX’s Ramaswami Says Asia Risk Mitigation Still In Early Stages
When exchanges look at growth areas, Asia gets top ranking. The Singapore Exchange, which has positioned itself as the Asian gateway for international traders over the past 30 years, now sees great potential in the decades ahead.
Muthukrishnan Ramaswami, president of SGX spoke with John Lothian News editor-in-chief Jim Kharouf at the FIA Boca conference, and said the exchange is ready to expand geographically through technology upgrades and by asset class as well, especially in FX and commodities.
Watch the video »
Quote of the Day
“Market liquidity is going to get worse before it gets better as regulatory headwinds remain. It’s not just a problem in the riskier credit markets.”
Joyce Chang, the global head of research at JPMorgan Chase & Co. in the story, ” Bond Traders Find Answer to Broken Market: Switch to Currencies”.
Stock split could cost Google over $500 million
The News Tribune
An unorthodox stock split designed to ensure Google CEO Larry Page and fellow co-founder Sergey Brin retain control of the Internet’s most profitable company could cost Google more than half a billion dollars.
Wall Street trader makes $2.4M — thanks to a tweet
By Bruce Golding, NY Post
A savvy stock trader scored a $2.4 million windfall by using a tweet about a possible tech deal to outrace a herd of rival bulls. The unidentified Wall Street whiz paid $110,530 on Friday afternoon for the right to buy around 300,000 shares in computer-chip maker Altera at $36 a share, according to reports.
How Computers Trawl a Sea of Data for Stock Picks; Funds managing billions hunt for investment clues in newswires, weather, Twitter
By BRADLEY HOPE, WSJ
In SoHo offices where robots occasionally ply the hallways, dozens of Ph.D. scientists with degrees in fields like astrophysics, immunology and linguistics huddle every day around computer screens that show billions of dollars zapping around the world.
Bernanke Says Global Imbalances Bedevil the World Economy. Discuss.
Ben Bernanke and Larry Summers are in the midst of a vigorous blog debate about why the world’s economy is so messed up and how it can be fixed.
Mr. Bernanke says a “global savings glut,” caused by people and governments overseas saving too much, has driven unemployment up in the United States, and driven wages, G.D.P. and interest rates down. The mechanisms are complicated, but one of the main reasons imbalances matter is that any country that’s saving too much is not buying enough American exports.
Europe Loses a Stock Market as Oslo Bors Plans a Dark Pool
by John Detrixhe and Will Hadfield, Bloomberg
The owner of Oslo’s stock exchange is closing a trading venue that failed to gain traction from European regulatory changes that increased regional competition.
JPMorgan Chase on track to pay $4 billion to homeowners as part of settlement
JPMorgan Chase & Co (JPM.N) is on track to meet its mandate to provide billions of dollars in consumer relief to struggling homeowners as part of a settlement it reached over bad residential mortgage-backed securities it sold before the financial crisis, an independent monitor said on Thursday.
Joseph Smith, the monitor overseeing the settlement the largest U.S. bank reached in 2013 with the federal government and five states, credited Chase $2.2 billion out of the $4 billion goal it is required to provide to consumers by 2017.
Recapitalizing Fannie and Freddie is a Bad Deal for Taxpayers
MoneyBeat – WSJ
Imagine if someone offered you these choices: (a) receive income today with the risk of having to pay it back in the future or (b) give up that income now in exchange for not having to pay that amount later.
The second option is clearly inferior, surrendering the time value of the income. Yet that is the approach Walter Isaac and Bob Kerrey propose in a recent paper on the Fannie Mae and Freddie Mac conservatorship. They argue the government should surrender its current rights to the profits of the two mortgage giants to allow them to build up a capital buffer against a future bailout. In other words, give up income today to avoid the risk of needing to provide bailout funds in the future.
We Just Got Another Sign of the Biggest Contradiction in the U.S. Economy
It’s a confusing moment for the U.S. economy. This morning the U.S. Labor Department reported that jobless claims fell to a nine-week low. At 268,000, they were lower than even the most optimistic economist had forecasted. Other labor data has been strong as well, with job creation happening at its fastest pace in years.
That being said, almost all other data (like retail sales and manufacturing surveys) have been weak
Goldman: Here’s Where U.S. Investors Should Put Their Money for the Rest of the Year
Goldman Sachs Chief U.S. Equity Strategist David Kostin is out with his latest U.S. quarterly chartbook, which looks back on Q1 and offers some guidance for the rest of the year.
In terms of the U.S. market, Goldman is encouraging investors to look at indices other than the S&P 500, which isn’t expected to have much more upside by the end of the year.
S.E.C. Fires Warning Shot About Confidentiality Agreements
By BEN PROTESS, NY Times
A sound that delights regulators and strikes fear in corporations — employees’ blowing the whistle on wrongdoing — is poised to become louder.
Ex-Bank of Montreal Trader Freed After Aiding U.S. Probe
by Patricia Hurtado, Bloomberg
A former Bank of Montreal trader avoided jail by helping U.S. prosecutors investigate a fraud that resulted in a record-trading loss for a Canadian bank and a guilty plea by Kevin Cassidy, the former CEO of Optionable Inc.
Big bank brokers use decoys, spy tactics to go alone
BY ELIZABETH DILTS, Reuters
Secret contracts, covert real-estate deals, scurrying around after nightfall to avoid detection: this is how far big-bank brokers are prepared to go when they plan to go independent.
Shanghai Traders Make Trillion-Yuan Stock Bet Backed by Debt
Shanghai traders now have more than 1 trillion yuan ($161 billion) of borrowed cash riding on the world’s highest-flying stock market.
German Lender Challenges ECB Supervision; Central bank took over monitoring Europe’s largest banks in November
By EYK HENNING and LAURA STEVENS, WSJ
A small German lender has filed a lawsuit against the European Central Bank in a bid to avoid coming under its supervision, marking the first legal challenge to the ECB’s new monitoring role.
ECB says national central banks have flexibility on QE bond loans
The ECB laid out plans on Thursday to make bonds bought in its 1 trillion-euro stimulus programme available for borrowing, but said national central banks would have some flexibility in how they applied them.
As part of a plan to keep its 1 1/2-year quantitative easing plan from distorting bond markets, the ECB set out a ‘securities lending’ framework that will initially see itself and eight of the 19 national euro zone central banks lending bonds.
Fed’s Yellen says research needed to understand inequality issue
More research is needed to understand what policies allow people to move up the economic ladder and what holds them back, Federal Reserve Chair Janet Yellen said on Thursday, returning to a controversial topic for the U.S. central bank.
Yellen said that research may provide evidence of what allows people to get ahead, and to predict how individual circumstances impact income inequality.
Bond Traders Find Answer to Broken Market: Switch to Currencies
Just because it’s getting harder to trade bonds doesn’t mean that investors are sitting on their hands.
Instead, they’re turning to currencies, which are largely bought and sold electronically rather than through dealers, according to Joyce Chang, the global head of research at JPMorgan Chase & Co. in New York.
Quants, Currencies and Merger Pranks
Here’s a nice explanation of how quant firms like Two Sigma work, using computers to sift market data and analyst reports and financial statements and Twitter and so forth for statistical signals that predict stock prices, and then feeding those signals into a decision engine that buys and sells stocks based on the strength and accuracy of the combined signals. For balance there are some dire warnings that these firms might be making bets based on spurious correlations, but have you met people?
These G-10 currencies are in for a bumpy ride
The euro dominated headlines in the first quarter of 2015, but the Japanese yen and Australian dollar will be in focus later this year, analysts say, as both are likely to buckle when the Federal Reserve raises interest rates.
The FX Disruptors: Why Russell Investment Built a Buyside FX Platform
With the foreign exchange markets shaken by the fallout from the 2013 FX rate fixing scandal, Russell Investments saw an opportunity to shake them up even further. While the industry explored ways to restructure the WM/Reuters daily FIX calculation window to minimize the possibility of manipulation by sellside brokers, Seattle-based Russell Investments began exploring a different model altogether.
Polish FX debt swap proposal fatal for lenders -central bank
Proposals by Poland’s financial regulator to let holders of Swiss franc mortgages convert the debt into zlotys at an historical exchange rate would be “fatal” for banks, central bank chief Marek Belka said on Thursday.
The governor’s intervention effectively kills off the proposal, one analyst said, because for the conversion to happen the central bank would have to agree to sell part of its foreign exchange reserves to the banks.
Indexes & Index Products
Active mutual funds could disappear: John Bogle
By MITCH TUCHMAN, MarketWatch
Calling active mutual funds “fat, dumb and happy” as they take in billions in pointless fees from retirement investors, Vanguard Group founder John Bogle predicts the end of the active management industry.
ICE Benchmark Administration Completes Transition to New ISDAFIX Calculation Methodology; Benchmark Renamed ICE Swap Rate
Intercontinental Exchange (NYSE:ICE), the leading global network of exchanges and clearing houses, today announced that ICE Benchmark Administration (IBA) has completed the transition to a new calculation methodology for ISDAFIX, the global benchmark for interest rate swaps, which has been renamed ICE Swap Rate, effective April 1, 2015.
Minimum Volatility: Strategy for Market Ups and Downs
Like all smart beta strategies, min vol blends aspects of traditional active and passive investing: active in that the strategies attempt to improve risk-adjusted return; passive in that portfolio construction is generally objective and based on pre-set rules.
AIG Introduces New Blended Index in the Power Series of Index Annuities(R)
American International Group, Inc. (NYSE:AIG) is pleased to announce the recent launch of a new index for use in select contracts in the Power Series of Index Annuities(R). These annuities provide an attractive combination of principal protection, growth potential and lifetime income. They are issued by American General Life Insurance Company (AGL), a member company of AIG.
Low Volatility and High Beta: When Opposite Paths Meet
By design, the S&P 500 Low Volatility Index sometimes takes large positions in sectors. Particularly in times of turmoil, the rankings-based methodology of the S&P 500 Low Volatility Index offered refuge by steering clear of sectors such as financials in 2008 and the technology sector during the 2000-2002 deflation of the bubble. On the flip side, there have also been times when having large sector concentrations caused a performance drag, particularly during strong markets.
World Gold Council considers launch of new London exchange
The gold industry’s leading trade body and half a dozen banks have agreed to explore the idea of establishing an exchange in London as the existing market faces greater regulation.
The World Gold Council, a group consisting of 19 gold miners, and at least five banks are participating in initial discussions, according to people familiar with the matter.
Barrick Gold must face U.S. lawsuit over mothballed mine
BY JONATHAN STEMPEL, Reuters
Barrick Gold Corp lost its bid to dismiss a U.S. lawsuit accusing the world’s largest gold producer of concealing problems at a troubled South American mine, and fraudulently inflated its market value by tens of billions of dollars.
Ducey vetoes bill making gold legal tender
You still can’t use gold to buy a loaf of bread in Arizona. Gov. Doug Ducey vetoed a bill making Arizona the third state behind Utah and Oklahoma to recognize gold and silver as legal tender.
Former Gov. Jan Brewer vetoed similar legislation in 2013 over concerns that its language might exempt the state from collecting income taxes on transactions involving precious metals.
Indian jewellery billionaire Rajesh Mehta to buy Australian gold assets
The Sydney Morning Herald
India’s biggest jewellery maker, billionaire Rajesh Mehta, wants to deepen his relationship with Australia’s gold industry by buying stakes in Australian mines and potentially opening retail jewellery stores in the country.