I Love London
By John J. Lothian
I love London. Last year our MarketsWiki Education World of Opportunity Series attracted 142 interns, college students and young professionals to our events at the CME Group‘s offices and the London Stock Exchange
Next week, yes next week, we will be at Nasdaq‘s offices in the Woolgate Exchange building to present our 2015 MarketsWiki Education World of Opportunity Series. I am pumped by the great lineup of speakers we have.
We have tracked down Garry Jones, CEO of LME, to come speak during a very busy LME Week in a talk titled “Managing an Exchange in Uncertain Times.” During my trip to Geneva, Switzerland I was able to secure Nils-Robert Persson, executive chairman of Cinnober Financial Technology, as another speaker.
Our dear friend David Setters, senior associate of Contango Markets and one of the stalwarts behind Futures for Kids, has agreed to speak. You will recall David’s guest editorship of JLN when he announced he has ALS. His presentation is called “The Derivatives Industry as a Community, Maximizing the Opportunities.”
We have Mark Spanbroek, acting chairman of the European Principal Traders Association and chairman CME Europe speaking, as well as Adrienne Seaman, associate general counsel for Europe, Middle East and Africa (Emea) with CME Group.
Lee Hodgkinson , CEO, Euronext UK and head of markets and global sales is another speaker who will give us a great European perspective to the series.
If you have not signed up your interns, newer employees, friends, colleagues, daughters, sons, nephews and nieces in London interested in careers in the markets, please do. The free event sign up is HERE
I have been to London many times. I love that we have been able to bring this series there and positively impact so many young people, firms and the industry. You can help do the same by giving us one last shout out before our event next week.
The MarketsWiki Education World of Opportunity is just in its third year and second in London. It is just the start of something really great for the future of our industry. Help us out. Get the word out one last time this week. We could not have put on the London, New York or Chicago events without the generous support of the CME Group, our global premier sponsor.
We will be sharing videos from this series on all our sites, including aggregating them all on MarketsWikiEducation.com
Quote of the Day
“Going back to Biblical times, there was something dirty about charging for money. But a business owner can buy this beer for a dollar, mark it up eight times, and sell it to idiots like us, and no one cares.”
Abe Zeines, co-founder of merchant cash advance firm Pearl Capital, in the story, “How Two Guys Lost God and Found $40 Million”
Treasury auction sees US join 0% club
Patrick McGee – Financial Times
For the first time ever, investors on Monday parked cash for three months at the US Treasury in return for a yield of zero per cent.
The $21bn sale of zero-yielding three-month Treasury bills brings the US closer into line with other developed economies, whose central banks have set overnight borrowing rates at negative levels.
Historic Pacific trade deal faces skeptics in U.S. Congress
Krista Hughes and Kevin Krolicki – Reuters
Twelve Pacific Rim countries on Monday reached the most ambitious trade pact in a generation, aiming to liberalize commerce in 40 percent of the world’s economy in a deal that faces skepticism from U.S. lawmakers.
The Trans-Pacific Partnership (TPP) pact struck in Atlanta after marathon talks could reshape industries, change the cost of products from cheese to cancer treatments and have repercussions for drug companies and automakers.
Brokers enthusiastically aided Libor conspiracy, prosecutor tells court
Kirstin Ridley – Reuters
Six former interdealer brokers from ICAP, RP Martin and Tullett Prebon were rewarded for “enthusiastically” helping a trader rig a key benchmark interest rate, a prosecutor told London’s second Libor trial on Tuesday.
What the bankers can teach stimulus-addicted economists
Ludger Schuknecht – Financial Times
Myopia contrasts with more convincing action to repair the financial sector, writes Ludger Schuknecht
Macroeconomic stimulus is a hard habit to kick, so many economists keep asking for more.
U.S. stocks, Treasuries liquidity risk ‘elevated’: New York Fed
Liquidity risk on U.S. stocks and Treasuries seems “elevated” even as investors and traders can easily buy and sell these securities, a New York Federal Reserve blog released on Tuesday showed.
The increase in liquidity risk in these two sectors likely stemmed from structural changes rather than, as some analysts suggest, from tighter capital regulations on Wall Street dealers which traditionally make markets for stocks and Treasuries, a group of New York Fed economists wrote in a blog titled “Has Liquidity Risk in the Treasury and Equity Markets Increased?”
Corporate debt may threaten financial stability, G-20 arm says
Neil Roland – MLex (Subscription Required)
The Financial Stability Board flagged mounting corporate debt, particularly in China and other emerging economies, as a potential risk to world financial stability.
Barclays: Profit margin decline signals recession
Sam Ro – Business Insider
We may have seen the peak in US corporate profits. And what could happen next isn’t good.
Since the financial crisis, corporations have managed to deliver robust profit growth by offsetting the drag from weak sales growth with widening profit margins. These fatter profit margins came from cutting costs, which usually means getting more productivity out of fewer workers.
But with the labor market tightening, wages are going up. And that means higher costs and ultimately tighter margins. And this is bad news for earnings.
What’s worse: This could be signaling a recession.
Biggest Banks Battle to Keep Fed Pot of Gold Out of Highway Bill
Cheyenne Hopkins – Bloomberg
Wall Street is desperately trying to persuade U.S. House lawmakers to kill a proposal that would use money from banks to fix the nation’s highways. A key concern is that once Congress taps the finance industry to help fund infrastructure projects, it won’t be able to stop.
At stake is an annual dividend of 6 percent the banks receive from the Federal Reserve, which totals less than $350 million apiece for JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. The Senate wants to cut the dividend and use the money to help pay for a highway funding bill.
Growth, Reform Central to Beijing’s Next 5-Year Plan
Wei Yao – Barron’s
The 5th plenum of China’s 18th Communist Party Congress is expected to take place in mid-October. The 13th five-year plan will be discussed then. The main themes are most likely to echo the reform strategies and policy priorities laid out since the 3rd plenum in 2012. The plan will set out two dozen policy targets, both binding and non-binding, of which the GDP growth target will be the most watched. We see a chance of it being lowered further to 6.5% per annum for 2016-2020. If Beijing is still committed to structural reform, the focus of the plan should be more about restructuring state-owned enterprises (SOEs) and liberalizing the service sector. Regardless of the reform plan, the government will strive to do just enough to hit the 7% GDP growth target this year.
Five charts that show why it’s time to worry about world economy again
Mehreen Khan – The Telegraph
Another World Economic Outlook, and another downgrade for the global economy from the International Monetary Fund.
How Wall Street is adapting to keep up with tech
Portia Crowe – Business Insider
Technology companies are evolving at an incredible rate — and Wall Street investment banks are having to adapt to keep up with them.
Goldman, Morgan Stanley win back hedge fund trading business
Olivia Oran and Dan Wilchins – Reuters
Goldman Sachs and Morgan Stanley are winning back the trading business of hedge fund clients that they lost to European rivals during the financial crisis, as new capital rules spur banks like Deutsche Bank to scale down their businesses.
Safety and Security Rise to Top Demands from Liquidity Providers
Avi Mizrahi – Finance Magnates
The landscape of liquidity providers and Prime of Prime brokerages has experienced dramatic shifts this year ever since the unprecedented action by the Swiss National Bank on January 15, 2015. The crisis highlighted the need for reliability and caused many players to examine the safety of their positions.
Big U.S. firms hold $2.1 trillion overseas to avoid taxes: study
The 500 largest American companies hold more than $2.1 trillion in accumulated profits offshore to avoid U.S. taxes and would collectively owe an estimated $620 billion in U.S. taxes if they repatriated the funds, according to a study released on Tuesday.
Americans Are Smoking Again, a Boon for Municipal Tobacco Bonds
Brian Chappatta – Bloomberg
Americans are boosting spending on cigarettes for the first time in almost a decade. While that may raise health concerns in a nation that’s worked for decades to cut smoking, it’s fueling a rally in one of the riskiest corners of the municipal-bond market.
How to invest like… The pair who called the Wall Street Crash; Messrs. Merrill and Lynch helped spread wealth and opportunity from elites on Wall Street to ordinary people
Ed Monk – The Telegraph
The names Merrill and Lynch are synonymous with both the best and worst of the investment world.
Ben Bernanke’s big blunder: The Fed should have abandoned inflation targeting
Ben Bernanke’s book is officially out and available. The Economist’s full review will be published later this week (it’s a big book). But debate about the book’s arguments is already unfolding, and I can’t resist joining in.
Japan central bank chief weighs policy easing options
Robin Harding – Financial Times
When Haruhiko Kuroda faces the press this week the Bank of Japan governor will be under more pressure than at any time since last October — when the central bank massively expanded its asset purchases.
IMF cuts global growth forecasts for 2015 again
Holly Ellyatt – CNBC
The International Monetary Fund (IMF) has trimmed its expected global growth forecasts for 2015 again and has warned that downside risks to the global economy appear “more pronounced.”
3 central banks to try reverse auctions in ECB QE
Todd Buell – MarketWatch
Three central banks that use the euro will experiment this month with reverse auctions in the European Central Bank’s large-scale bond-buying program, the ECB said Monday.
Traders questioned as NY probe of automated FX heats up
Karen Freifeld – Reuters
Oct 5 New York’s banking regulator has questioned dozens of traders and executives at Credit Suisse Group AG, Barclays, Deutsche Bank and other banks about whether their electronic foreign exchange trading platforms were rigged, according to a person familiar with the matter.
Currency Dealers Withhold Trading Ideas Amid Regulatory Scrutiny
Lananh Nguyen – Bloomberg
Currency sales desks are offering fewer trading ideas and less market intelligence to clients because of increased scrutiny from regulators, according to a report from Greenwich Associates.
The report illustrates how the currency-rigging scandal that has involved some of the biggest banks in the $5.3 trillion-a-day market is filtering through to customers.
“Dealers are distancing themselves from anything that could be perceived by regulators as compromising client confidentiality,” Jasper Clark, a consultant and author of the report, said in a statement.
Bitcoins are a waste of energy – literally
John Quiggin – The Drum (Australian Broadcasting Corporation)
The digital currency Bitcoin has been seen by many as a source of threats, as potentially facilitating terrorism, money laundering, and drug dealing; undermining taxation systems; and rendering monetary policy unworkable.
While these threats have raised concerns, it appears that all can be managed with appropriate regulatory and law enforcement strategies.
By contrast, only a handful of insiders (most notably Guy Lane of BitCarbon) have noticed a threat inherent in the very design of the Bitcoin system: that of ever-increasing environmental damage from the electricity used in the ‘mining’ of Bitcoins.
Euro Stuck in Range Without Fed Action, Russell Investments Says
Lucy Meakin – Bloomberg
The euro, stuck in a 10-U.S. cent trading range for much of this year, can’t escape its bounds without a clear interest-rate trajectory from the Federal Reserve, according to Russell Investments, which oversees about $266 billion.
Renminbi overtakes Japanese yen as global payments currency
Gabriel Wildau – Financial Times
China’s renminbi has surpassed the Japanese yen to become the world’s fourth-most-used payments currency, despite an unexpected devaluation and concerns about slowing Chinese growth
Split between original Bitcoin & BitcoinXT continues
George Basiladze – Finance Magnates
In the month following the release of BitcoinXT, there has been much speculation regarding the future of the Bitcoin network. The ongoing block size debate resulted in the release of the alternative version of the software, which seeks to address the block size capacity issue. BitcoinXT functions as a sort of community referendum, as the initiation of a hard fork requires at least 75% of recently mined blocks to be using the alternative, XT software.
Yuan ‘Free Lunch’ Gone After Devaluation, Says Hang Seng Bank
Fion Li – Bloomberg
The high returns and low volatility that China’s yuan offered before the nation’s surprise devaluation in August have disappeared, according to Andrew Fung, executive director at Hang Seng Bank Ltd.
“That free lunch is gone,” Fung said at the Bloomberg Markets Most Influential Summit in Hong Kong on Tuesday. “On the other hand, as a bank, it’s good that the yuan will become more of a two-way movement.”
Spot FX trading on Thomson Reuters platforms drops from 5-mth high
Daily spot trading volumes on foreign exchange platforms run by Thomson Reuters fell more than 8 percent in September from a month ago, the company said on Tuesday, as some of the volatility created by China’s yuan devaluation waned.
Templeton Betting on `Multi-Decade’ Emerging-Market Opportunity
Ye Xie – Bloomberg
Currencies in Mexico, Malaysia and Indonesia are cheap
Money manager betting against Treasuries on inflation, Fed
The recent selloff in emerging-market assets, including Mexico and Malaysia’s currencies, has opened up investment opportunities not seen for decades, according to Franklin Templeton’s Michael Hasenstab, who’s well known for making contrarian bets.
Indexes & Index Products
It Looks Like Free Money Is Available in the Credit Market
Tracy Alloway – Bloomberg
A credit market curiosity, presented for your enjoyment.
Here is so-called ‘skew’ in Markit’s North American High Yield CDX, a derivatives index tied to the credit default swaps (CDS) of 100 junk-rated companies and one of the most liquid credit-trading instruments around.
STOXX And Sustainalytics Publish Esg Report For Germany – Munich RE Identified As Most Sustainable DAX Component
STOXX Limited, a leading provider of innovative, tradable and global index concepts, and Sustainalytics, a leading provider of ESG and corporate governance ratings and research, today presented the research report “Global ESG Leaders (?) – Nachhaltigkeit im DAX” at a media breakfast and awards ceremony in Frankfurt. This report evaluates companies that are part of the German blue-chip index DAX from a sustainability perspective, and ranks them according to their overall sustainability profile as a group on a global level and within Germany.
Rimes adds adds new data source from S&P Dow Jones Indices
Rimes, the leading provider of managed data services for the buy-side, today announced it has added the S&P 500 Bond Index to its data sources from S&P Dow Jones Indices.
BlackRock gets Saudi regulatory nod to trade local stocks- statement
Oct 6 BlackRock Inc, the world’s largest asset manager, has been granted regulatory approval from Saudi Arabia to trade local stocks, the company said in a statement on Tuesday.
BlackRock “received a qualified foreign investor license which was obtained in order to launch the iShares MSCI Saudi Arabia Capped ETF [exchange traded fund],” it said in a statement.
El Niño Won’t Keep This Commodity Hot
Indexology – S&P Dow Jones Indices
Commodities have faced many headwinds this year from the strong U.S. dollar, high supply from OPEC and the slowing Chinese demand growth. The S&P GSCI Total Return hit a 15 year low in August, 23 of 24 commodities dropped in July and the 3rd quarter was the 3rd worst in history. For the year, all sectors are negative and all commodities are negative but one – that is cocoa. However, cocoa may not stay hot for long.
EPA rushed to judgment in blocking Alaskan gold mine, report suggests
Joby Warrick – The Washington Post
The Environmental Protection Agency appears to have rushed to judgment when it decided to preemptively block a proposed gold mine from being built near Alaska’s Bristol Bay, according to a yearlong review of the case led by former defense secretary William Cohen.
Sibanye Gold to Buy Miner Aquarius Platinum for $294 Million
Kevin Crowley and Andre Janse Van Vuuren – Bloomberg
Sibanye Gold Ltd., the largest miner of bullion in South Africa, agreed to buy Aquarius Platinum Ltd. for $294 million, further increasing its exposure to the precious metal following its agreement to buy some Anglo American Platinum Ltd. assets in the country last month.
Princess Leia’s gold bikini just sold for a whopping $96,000 at auction
Marc Bain – Quartz
For $96,000, you’d think it might really be made of gold.
That’s the price one determined bidder recently paid for the gold-ish bikini that actress Carrie Fisher wore as Princess Leia in the movie Star Wars: Episode VI – Return of the Jedi.
Alphabet to back Symphony service
Joe Rennison and Richard Waters – Financial Times
Alphabet, Google’s renamed parent company, is set to become the latest investor to back Symphony, joining a host of big banks in their attempt to dislodge Bloomberg’s dominant position in Wall Street messaging.
How Two Guys Lost God and Found $40 Million
Zeke Faux – Bloomberg
Abe Zeines’s hilltop mansion in Puerto Rico looks like a frat house after a rager. A wrecked golf cart blocks the driveway. An SUV with a blown tire sits on the grass out front. A porch overlooking the Caribbean is littered with beer bottles and cigarette butts.
It’s a Monday morning in June, and Zeines is lounging in boxer shorts in his living room, drinking a Blue Moon. Two girls in bikinis are cooking breakfast for him and Meir Hurwitz, his best friend and business partner. The men, natives of Brooklyn, N.Y., are complaining about the restaurants on the island they’ve decided to call home. “There’s no item called eggs,” Zeines says. “You have to get the eggs with ham, hold the ham.”
Scandal Erupts in Unregulated World of Fantasy Sports
Joe Drape and Jacqueline Williams – NY Times
A major scandal is erupting in the multibillion-dollar industry of fantasy sports, the online and unregulated business in which players assemble their fantasy teams with real athletes. On Monday, the two major fantasy companies were forced to release statements defending their businesses’ integrity after what amounted to allegations of insider trading, that employees were placing bets using information not generally available to the public.