In case you missed it:
Stacey Cunningham, NYSE – The Intersection of People and Technology
“It’s not about you. You don’t take it personally. You’re working for a goal.”
Stacey Cunningham, COO of NYSE, says the driving factor in her career has been “choosing what was right for the business and choosing what was right for the organization.” Some of those decisions were a good fit for her as well, but not always. She also talks about how technology has created speed and access to the financial markets in ways no one could have predicted. Here’s her story on the intersection of people and technology, and how that can work best on a single technology platform at NYSE.
Watch the video »
Quote of the Day
“It’s an illusion to think that if we give everyone cheap loans that will get the economy growing. We went through that in 1992-1993, when we gave everyone loans and wound up with 1000% inflation.”
Sergey Dubinin, former chairman of the Russian central bank and current board member at state bank VTB, in the story, “Fractures Form Inside Russia’s Central Bank as Recession Deepens”
The World’s Credit Investors Are Getting More and More Skittish
Cordell Eddings – Bloomberg
The last time investors in the $11 trillion corporate-bond market were so risk-averse, it was 2013 and the Federal Reserve’s move to unwind its crisis-era stimulus had triggered what became known as the “taper tantrum.”
A little more selling and the market will be at its worst since the fourth quarter of 2012, when the world was still recovering from Europe’s sovereign debt crisis.
The IMF is caught in a geopolitical tug-of-war between Germany and the US
Tim Fernholz – Quartz
The International Monetary Fund faces a stern test of its independence that could have repercussions far beyond the fate of the Greek economy, by far its biggest headache of the moment.
Euro-zone finance ministers are expected to approve a new rescue deal for Greece after months of contentious negotiations on debt relief and austerity ended in the capitulation of Greece’s left-wing government to its creditors. Those creditors include other euro zone governments, the European Central Bank, and the IMF.
Goldman Sachs Isn’t Like the Money Center Banks
Roger Arnold – TheStreet
I write about the financial condition of the four money centers: JPMorgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC) and Citigroup (C). The reason I focus on them, to the exclusion of the rest of the banks, is that they are operated essentially as government agencies.
These banks are largely responsible for the implementation of monetary policy for the rest of the banking system and have business strategies (as reflected in their financial conditions) that are most logically the result of coordinated efforts with various other government agencies and regulatory bodies.
Greece’s creditors publish stark debt analysis as Syriza faces bail-out rebellion
Szu Ping Chan – The Telegraph
Greece’s creditors have voiced “serious concerns” about the sustainability of the country’s debt ahead of a vote on a third bail-out deal in Athens that is likely to cement a split within the government.
Analysis prepared by the country’s European lenders projected that Greece’s debt share would rise to 201pc of gross domestic product (GDP) next year.
Economic policy: Stop cheering, Keynesians
The appeal of Jeremy Corbyn, the likely Labour party leader, is said to be that he offers an alternative to austerity. Indeed his rise has been championed by Keynesians such as Paul Krugman. And there is plenty of scope for arguing about whether the British government has placed too much emphasis on deficit-cutting in recent years.
But is that what he is really offering? One of his key supporters, John McDonnell, wrote in the Guardian this week that: “Labour under Jeremy Corbyn is committed to eliminating the deficit and creating an economy in which we live within our means.”
The Keynesian approach would be to allow economic growth to bring the deficit down gradually, via higher tax revenues and lower benefit spending (as unemployment fell). Instead Mr McDonnell says: “Our cuts will be to the subsidies paid to landlords milking the housing benefit system, to the £93 billion in subsidies to corporations, and to employers exploiting workers with low wages and leaving the rest of us to pick up the tab.”
Dollar Dilemma Returns: China’s Gambit Fogs the Fed’s Rate Path
Andrea Wong – Bloomberg
China’s new currency strategy is lending the dollar additional strength that may keep U.S. interest rates lower for longer.
The nation’s devaluation of the yuan comes at a time when the Federal Reserve’s own dollar index, which puts the biggest weight on the Chinese currency, surpassed its high in March. That was when the Fed fired the first of a series of warnings that a stronger dollar, which makes U.S. goods more expensive overseas, may harm growth by slowing exports.
Signs of pushback on US interest rate rise call
Michael Mackenzie – Financial Times
The prospect of the US Federal Reserve finally shifting official interest rates higher in the coming months remains a hot topic among investors. While many Wall Street economists forecast a rate rise next month, US markets are showing increasing signs of pushing back on that call.
Berkshire’s Negative S&P Watch Hits Almost 1,000 Muni Bonds
Brian Chappatta – Bloomberg
Municipal bonds from California to Puerto Rico may lose their second-best credit rating from Standard & Poor’s after the company put Berkshire Hathaway Inc. and its core insurance units on a negative watch.
Berkshire Hathaway Assurance Corp. had the outlook on its AA+ rating cut Tuesday, and S&P began dropping its view of the 966 muni securities the insurer backs on Wednesday, according to data compiled by Bloomberg. Berkshire Chairman Warren Buffett got into the muni-bond insurance business in 2008, after the subprime mortgage market began to implode.
Noble Group Faces Liquidity Woes, Bonds Slump on Rating Fear
Yuriy Humber and Christopher Langner – Bloomberg
Concern is mounting that shrinking liquidity at Noble Group Ltd. is edging Asia’s largest commodity trader closer to losing its investment-grade credit rating, as its bonds fall to the lowest in three years.
On Monday, Noble’s Chief Executive Officer Yusuf Alireza said the company’s seen some counterparties trim credit lines. While Alireza said he expects the situation to normalize later this year, on Wednesday Moody’s Investors Services cut its outlook on the firm’s Baa3 score to negative.
This is probably the last Greek GDP growth we’ll see for a while
Jason Karaian – Quartz
Defying expectations, Greece’s economy grew at a surprisingly rapid pace in the second quarter, according to new numbers published today. Yes, that Greece.
In High-Yield Energy Debt, Contrarian Sees Value Where Everyone Else Sees Defaults
Lisa Abramowicz – Bloomberg
Most junk-bond investors can’t sell their energy-related holdings fast enough. Then there’s Matt Eagan.
The money manager at Loomis Sayles & Co. is going the other way, buying debt in an industry where an alarming number of borrowers increasingly can’t meet their obligations. He’s lured to yields that have surged to the highest since 2009 on the speculative-grade securities of oil and gas companies — in some cases to over 30 percent.
China 2015 Is Not China 2010 (Opinion)
Paul Krugman – NY Times
If there is a central policy theme to Donald Trump’s candidacy other than immigration — actually, there isn’t, but there are some particular things he bellows about — it’s China-bashing. The unifying principle is probably xenophobia; but anyway, China’s currency moves are about to become a US political issue. And pretty soon, I expect, people will point out that some liberals also used to complain about Chinese currency manipulation.
But that was a while ago — mainly in 2010. And the underlying situation has changed, a lot.
Why Asian Economies Won’t End Up In A Debt Prison Like Greece
Investors are turning their heads to Asia emergent markets (EEM). The plunge in China’s main exchanges, coupled with lower growth for the whole region, has brought back fears about what will happen to the global economy. More specifically, the slowdown in China could deploy an economic slump in the surrounding smaller economies, which in turn could result in a new debt crisis in the region.
Bernanke, Paulson and Geithner Join Yale Effort to Update Crisis-Response Playbook
Ryan Tracy – WSJ
Former Federal Reserve Chairman Ben Bernanke and former Treasury Secretaries Henry Paulson and Timothy Geithner gathered last week in an auditorium to reflect on their response to the 2008 financial crisis.
The Fed Is on Thinner Ice Than It Realizes, and It May Be Setting Us Up for Recession
Timothy A Duy – Bloomberg
Have members of the Federal Reserve already engineered a soft landing?
And are they even asking that question?
Account of the monetary policy meeting
European Central Bank
Since the Governing Council’s monetary policy meeting on 2-3 June 2015, financial markets had again been characterised by volatility, in part driven by uncertainty related to developments in Greece. The Eurosystem nevertheless continued to smoothly execute the expanded asset purchase programme (APP), in line with the announced moderate frontloading of purchases.
ECB on Track but Ready to Do More, Say Economists
Todd Buell – WSJ
Economists say that the most recent European Central Bank meeting minutes suggest that economic conditions are broadly in line with what the central bank expects, but that rate-setters in Frankfurt want the market to know that they are ready to pump more money into the economy should conditions worsen.
Bank of Japan may boost monetary easing to respond to China devaluation
Mike Bird – Business Insider
Since the People’s Bank of China started cutting the yuan’s value against the dollar earlier this week, people have been preoccupied with how that may affect the Federal Reserve’s coming decisions.
But the Fed is probably not the major central bank that will pay most attention to moves in the Chinese currency.
Why the PBOC Isn’t Like Other Central Banks
Carlos Tejada – WSJ
When China’s central bank defended its recent currency moves before the media Thursday, it marked a departure from the circumspect way the institution usually works.
The world’s most important central banks often signal their moves well before those moves are made. When they don’t, markets can be sent into turmoil.
The People Bank of China follows a different playbook. Tuesday’s action to devalue the currency was only the latest in a series of surprise policy moves. Its decisions are typically announced with little warning, and often late at night or on weekends, leading to sometimes sharp market jumps or drops on the next trading day.
Fractures Form Inside Russia’s Central Bank as Recession Deepens
Evgenia Pismennaya and Ilya Arkhipov – Bloomberg
In his first stint as a top Russian central bank official in the early 1990s, Dmitry Tulin saw how flooding cheap credit to dying industrial giants delivered hyperinflation instead of growth.
Now back as the bank’s monetary chief, Tulin, 59, has argued internally for easier credit and more targeted lending to industry to revive an economy driven into recession by plunging oil prices and U.S. and European sanctions, say officials who have attended meetings with him. They discussed internal bank deliberations on condition of anonymity.
China central bank tries to soothe markets, says no reason for yuan to fall further
Kevin Yao and Pete Sweeney – Reuters
China’s central bank said on Thursday there was no reason for the yuan to fall further given the country’s strong economic fundamentals, helping to restore calm to jittery global markets after it devalued the currency earlier in the week.
Malaysia’s Central Bank Says it Has Completed 1MDB Probe
Jason Ng – WSJ
Malaysia’s central bank said Thursday it has completed an investigation into debt-laden 1Malaysia Development Bhd, or 1MDB, and submitted a report recommending “appropriate enforcement action” to the country’s chief prosecutor.
The troubles faced by state investment fund 1MDB, which has racked up more than $11 billion in borrowings while facing a cash crunch, have in part weighed on the country’s fiscal health because of a government guarantee on some of its debts, and on Malaysia’s ringgit, which recently slumped to a 17-year low.
Yuan Devaluation Boosts Investors Betting Against Asia
Laurence Fletcher and Carolyn Cui – WSJ
China’s currency devaluation is delivering a windfall to investors that anticipated a slowdown in the second-largest economy and then bet against the free-floating currencies of China’s regional trading partners.
A 4% decline over two days in the yuan has hammered the Malaysian ringgit, Singapore dollar and Indonesian rupiah, among others. Many investors expect further declines across the region, reflecting likely economic weakness as China competes more vigorously in export markets.
China, Citigroup Agree: There’s No Need for Big Yuan Devaluation
Ye Xie – Bloomberg
There’s some truth in China’s claim that the yuan doesn’t need to fall much further.
While China’s exports are slowing, they’re still edging out competitors. The country’s share in global exports surged to an unprecedented 15 percent this year, from 8.7 percent in January 2010, according to data compiled by Bloomberg. The ratio increased even as the inflation-adjusted yuan rate appreciated 33 percent against its major trading partners.
U.S. Officials Invoke Threat to Dollar in Pitching Iran Deal
Nick Timiraos – WSJ
U.S. officials rarely muse publicly about threats to the dollar’s elite global status. But the Obama administration is invoking that concern in a novel way in urging Congress not to block its nuclear agreement with Iran.
Singapore Dollar Pays Liquidity Price as Yuan Move Shocks Asia
Netty Idayu Ismail – Bloomberg
Singapore’s dollar is paying the price for being easy to sell.
It’s tumbling at the fastest pace since 2001 following China’s shock devaluation as traders use it as a proxy for less-liquid currencies such as the Thai baht and Indonesian rupiah. The island state’s dollar dropped below the S$1.39 year-end estimate in a Bloomberg survey, leaving banks including Commerzbank AG, the most-accurate forecaster, and HSBC Holdings Plc rushing to review predictions.
Alternative Currencies Flourish in Greece as Euros Are Harder to Come by
Nadim Roberts – WSJ
When Christos Papaioannou noticed his car needed new tires, the Greek computer engineer bought them with euros—but used an alternative currency, called TEM, to pay his mechanic for the labor.
His country has avoided a catastrophic exit from the common currency, at least for now. But a small but growing number of cash-strapped Greeks, who are still grappling with strict money-withdrawal limits, have found another route in TEM and other unconventional payment systems like it.
The next currency wars phase could be close
Philip Baker – Australian Financial Review
If Vimal Gor is right, investors should prepare for the next instalment in the currency wars: a move by the Bank of Japan to lower the yen.
Malaysia sees no need for capital control measures
Reuters – Straits Times
Malaysia sees no need to re-peg the ringgit to any other currency or impose capital controls in spite of its fall to 17-year lows, central bank governor Zeti Akhtar Aziz said on Thursday (Aug 13).
“I want to emphasize that we do not want to peg the currency,”Ms Zeti told reporters. “We’ve moved on from capital controls.”
Brazil Real Leads Losses as Rousseff Campaign Faces Allegations
Filipe Pacheco and Paula Sambo – Bloomberg
Brazil’s real led declines among major currencies as allegations of improprieties tied to President Dilma Rousseff’s election campaign threatened to undermine her ability to shore up government finances and avoid a junk credit rating.
Indexes & Index Products
China Makes it Pricey to bet Against Emerging Markets ETFs
Tom Lydon – ETF Trends
Already beaten up, emerging markets stocks and exchange traded funds were punished Tuesday after the People’s Bank of China decided to devalue the yuan. The sudden shift in its currency policy suggests that Chinese officials are seeking a way to stimulate growth after a series of monetary and fiscal policies failed to significantly bolster the economy.
Advantages of a traditional portfolio allocating to a volatility index
For decades, investors frequently perceived a traditional portfolio allocation in the range of 60 percent equities and 40 percent bonds for proper diversification. Since 2000 investors, both large and small, have experienced several moments of negative returns to their portfolios. This experience has enlightened many investors to seek wider portfolio diversification in attempts to reduce their correlation risk, tail risk and negative volatility.
FTSE Russell Launches All-World ex Coal Index Series
The global index provider FTSE Russell has launched a new entry in the FTSE All-World ex Fossil Fuels Index Series — the new FTSE All-World ex Coal Index Series. The new benchmark index will feature only companies that are not known to have exposure to coal energy, or companies with links to proved or probable coal reserves. In other words, the index will omit those that have definite links to either. The index is intended as a means of helping investors limit their portfolio’s exposure to fossil fuels (coal energy in particular here) if they so choose.
Trying To Say Something Nice About Brazil ETFs
Positive musings about the exchange traded funds tracking Brazil, Latin America’s largest economy, are unlikely to appear here. Perhaps that will change in the future, but it is also highly likely that the future is measured in months or years rather than days or weeks.
On Tuesday, Moody’s Investor’s Service downgraded Brazil’s sovereign credit rating to Baa3, the ratings agency’s lowest investment.
Global Gold Demand Drops 12% in Second Quarter
Ese Erheriene – WSJ
Global demand for gold plummeted 12% to a six-year low in the second quarter, as vital buyers in Asia lost their appetite for the metal, the World Gold Council said Thursday.
Demand for the precious metal weighed in at 914.9 tons between March and June of this year, down from 1,038 tons during the same period in 2014, according to the industry body’s latest Gold Demand Trends report.
What the Gold Mine Disaster Tells Us
Editorial Board – NY Times
The General Mining Law of 1872 is among the last surviving statutes of the boisterous era of westward expansion. Signed by Ulysses S. Grant, it establishes the basic rules for mining hard-rock minerals like gold, copper and uranium on public lands.
Useful in its day, the law is a destructive relic now. It allows mining companies to buy federal land for a few dollars an acre, demands no royalties and requires minimal environmental protections while the mine is operating and no cleanup afterward.
Its principal legacy, if it can be called that, is a battered landscape of abandoned mines and poisoned streams.
Chinese Currency Fears Fuel The World’s Oldest Currency
Press Release – Mondovisione
The inevitable economic fears following China’s decision to devalue its currency have sent some investors gold hunting this week, although interestingly, Dealing Manager at GoldMoney, Kelly-Ann Kearsey said more of their customers have been jumping on silver’s ascendency.
The Unique Cultures of 10 Hugely Successful Companies
Peter Daisyme – Entrepreneur
Corporate culture means a lot more than it used to, especially in this new age of technology. Successful tech companies are often celebrated for their uniquely designed, state-of-the-art workspaces and company perks (travel incentives, flexible schedules, team retreats, stock options, etc), but the culture of a workplace has to resonate emotionally with employees to make a successful company.
Over the past month as I’ve been hiring employees and determining what I need to do to grow my business while maintaining what I fit as an amazing company to work for. I’ve done a bit of research on a few companies that inspire me due to their culture.
Tesla puts up 2 million more shares, needs more than $500 million in funds
Gina Hall – Silicon Valley Business Journal
Tesla filed to offer 2.1 million shares on Thursday to raise as much as $566.5 million to fuel its global ambitions.
The company will use the funds to grow its retail operations, charging network and energy-storage business, build its Gigafactory and put its more-affordable electric car, the Model 3, on the market, according to a filing with the Securities and Exchange Commission.