First Impressions

Stefani Sandow, product manager, Trading Technologies – What Vitruvius Can Teach Us About Software Development

“If you’re interested in getting into financial software, you should remember Vitruvius. You should create software that is solid, that is useful, that is delightful.”

Stefani Sandow, product manager at Trading Technologies, shows the relationship between the Roman architect Vitruvius and software development. She discusses three key concepts of Vitruvius’s teachings, Firmitas, Utilitas and Venustas, which translates to Solid, Useful and Delightful. Sandow stresses the importance of the user experience and how developers should be paying close attention to the design and interface of the software as well as its functionality. Finally, Sandow concludes by discussing the future of trading software design and function.

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***** JJL: You can see all the MarketsWiki World of Opportunity series videos at

Quote of the Day

“Lowflation is the new enemy as it harms debtors, reduces the scope for negative real interest rates and damages central bank credibility.”

Joachim Fels, Morgan Stanley’s chief international economist in the story, “Central Banks Will Stay Easy in 2015, Because They Have No Choice”

Lead Stories

U.S. Corporate Bond Sales Pass $1.5 Trillion for Annual Record
Katherine Chiglinsky – Bloomberg
U.S. corporate bond sales swelled to an annual record as a late-year rush by borrowers to lock in low interest rates pushed offerings for 2014 past $1.5 trillion.
Issuance was bolstered by heart-rhythm device maker Medtronic Inc. (MDT)’s $17 billion bond sale yesterday, the largest dollar-denominated offering in more than a year, according to data compiled by Bloomberg. Internet commerce company Alibaba Group Holding Ltd. (BABA) sold $8 billion last month, helping push this year’s volume past the previous high of $1.494 trillion set last year.

***** JJL: Firms have to pay for those buyback programs somehow.

Hedge Funds Shut as Managers Struggle in Year of Two Percent Returns
Katherine Burton – Bloomberg
Hedge funds are shutting at a rate not seen since the financial crisis, as many managers post disappointing returns and an elite group of firms dominate money raising.
The $37 billion Brevan Howard Asset Management LLP is the latest firm to close a fund. Last week it pulled the plug on its $630 million commodity fund managed by Stephane Nicolas after it had tumbled 4.3 percent this year through the end of October, according to a person with knowledge of the firm.

***JK – One wonders, just how many of these funds invested or hedged using options – equity or futures on options? And if so, how many would still be around today?

‘Too big to fail’ worries reach clearing houses
Philip Stafford, FT
Clearing houses, which sit between two sides of financial trades, have become risk managers for global markets in the post 2007-crisis era. But they are having to defend their role in a growing debate over what would happen if one of them failed.

***** JJL: Clearinghouses are getting more attention, some good, some bad. On the whole, they will be better for it.

Globalization Is in Peril, Bankers Say
By Peter Coy – BloombergBusinessweek
A group of international bankers says in a new report that the pendulum of financial markets has swung too far away from globalization. “There is a danger that the profound benefits of globally integrated financial markets are being frayed and even reversed,” the Institute of International Finance says.

***** Remember there are two things that move markets, fear and greed. Today we are selling fear.

The Secret to a Top-Performing Bond Fund May Be in Europe
Lisa Abramowicz – Bloomberg
Gary Herbert manages a bond fund that’s beating 97 percent of his peers with 11 percent gains this year. The reason: mortgage debt in Europe. Herbert, who manages the Legg Mason BW Alternative Credit Fund (LMAMX), is joining Blackstone Group LP (BX) and Lone Star Funds in buying mortgages in European nations, especially those that are struggling the most, such as Spain, Portugal and Greece.

UBS names global equity derivatives head
By Matt Turner, Financial News
UBS has promoted a former global head of equities structuring at RBS to the role of global equity derivatives head, following the appointment of its new co-head of global equities in September.

*****JJL: I never like the description, head. How about the heart of the organization too.

Bankers can soon cash in on deferred recession era bonuses
By James Covert, NY Post
When it comes to bonuses, the waiting on Wall Street is about to pay off. A rash of bonuses that were deferred in the wake of the financial crisis will begin to vest in the coming weeks, resulting in vastly larger paydays than if bankers and traders had been paid in cash, according to a report by Crain’s New York Business.

***** JJL: There are dividends and then there are dividends.

How Bloomberg’s Algo-Writers Serve The Cult Of Keynesian Central Banking
David Stockman – Seeking Alpha
If you ever needed proof that the financial press has been completely indoctrinated in the cult of Keynesian central banking consider the attached Bloomberg note on the recent tiny decline in Chinese industrial company profits. Without breaking for anything more than a comma, its hapless Hong Kong stringer, one Malcolm Scott, conjoined the fact of less profits with the imperative for moar……money.

Central Banks

Fischer Says Fed Nearing End of ‘Considerable Time’ Rate Pledge
Jeff Kearns – Bloomberg
Federal Reserve Vice Chairman Stanley Fischer signaled officials are closer to dropping a vow to keep interest rates low for a “considerable time” and will stress economic data to guide the first increase since 2006.
“You saw in the minutes of last meeting there was some discussion of that, and it’s clear we are closer to getting rid of that than we were a few months ago,” he told the Wall Street Journal CEO Council Annual Meeting in Washington today.

Fed’s Stanley Fischer: We still need to deal with shadow banks
Stephen Gandel – Fortune
The Federal Reserve is planning on digging into the darker parts of the U.S. financial system.
Stanley Fischer, the vice chairman of the Federal Reserve, indicated on Monday that he would like to see the U.S. central bank and other regulators do more to rein in the U.S.’s large shadow banking system. Fischer said that shadow banks make up about 80% of the banking sector in the U.S. He said that’s large compared to other countries, in which shadow banks generally make up about 20%. “We have not started to deal with the problem of shadow banks,” he said.

***** JJL: “We have not yet begun to fight,” said John Paul (Stanley Fischer) Jones.

Central Banks Will Stay Easy in 2015, Because They Have No Choice
Simon Kennedy – Bloomberg
The world’s central bankers could be forgiven for thinking that things are never going to get back to normal. More than six years after the financial crisis plunged the world into recession, monetary policy looks nothing like it did before those events.
Even as economists predict that the U.S. Federal Reserve and Bank of England will finally begin to raise benchmark rates in 2015, the central banks are unlikely to push borrowing costs anywhere near pre-crisis, inflation-fighting levels. And even though the Fed in October ended the bond-buying campaign it undertook when the U.S. economy was weaker, it isn’t shedding the assets it bought. The European Central Bank and Bank of Japan, for their part, are stepping up purchases.

Russian Politician: The Central Bank Is An ‘Institutional Enemy Of The Country’
Elena Holodny – Business Insider
State Duma deputy and chairman of the Committee on Economic Policy and Entrepreneurship, Yevgeniy Fedorov, has called for a criminal investigation of the Russian Central Bank, according to a report by NewsRu.
“We have sent a request to initiate criminal proceedings against the Central Bank. The Prosecutor’s General Office replied that it is working on it, and that they have started a preliminary examination of the actions of the Central Bank,” he said on [a Russian] radio station.

Deutsche Bank Breaks Ranks to Call 2015 RBA Rate Cut on Jobless
Michael Heath – Bloomberg
Australia’s central bank will reduce its key interest rate next year as unemployment rises, Deutsche Bank AG said, breaking ranks with its major counterparts.
Policy makers will lower the cash rate by a quarter percentage point in the second quarter and another quarter point late in the third or early in the fourth quarter to 2 percent, Chief Economist Adam Boyton said in a research report. His view is in line with money markets that are pricing in an 80 percent chance the Reserve Bank of Australia will cut rates.

The ‘Worst’ Central Bank, Like, Ever
David Gaffen – Reuters
One day ahead of Friday’s key U.S. jobs report, markets will turn their attention to the European Central Bank, which is currently engaging in what strategist Rich Bernstein of Richard Bernstein Advisors calls a quest to become “the worst central bank in all of history.”
As the ECB once again meets to either do what ECB chief Mario Draghi says it will do “whatever it takes,” (which apparently involves a lot of jawboning while contracting, not expanding, its balance sheet), or what the Germans want (pretty much what it’s doing now), we look again to see that the ECB in recent days has not done all that much to move the needle when it comes to getting more aggressive.


News Analysis: Asian currencies to be more volatile next year amid strengthening of U.S. dollar
Tan Shih Ming – Shanghai Daily
As a U.S. dollar strengthened to above 1.30 Singapore dollar mark recently for the first time since late 2011, analysts said Asian currencies are poised to fluctuate more next year than this year in the face of strong greenback.
Singapore dollar, well known as a safe-haven currency in Asia, was not spared in the recent wave of depreciation among Asian currencies against the U.S. dollar.

Bundesbank chief says manipulating currencies is ‘dangerous’
Bundesbank President Jens Weidmann rejected on Tuesday suggestions that the European Central Bank might be deliberately pushing down the value of the euro and said any manipulation of exchange rates would be “dangerous”.
Asked after a meeting of German and French ministers and central bankers in Berlin whether there had been any discussion about the ECB weakening the euro to help spark growth in the euro zone, Weidmann said “No”.

U.S. dollar sideswiped as commodity currencies stage big reversal
Ian Chua – Reuters
The U.S. dollar nursed modest losses early on Tuesday, having come under pressure as currencies such as the Canadian dollar staged a dramatic reversal thanks to a broad rebound in commodity prices.
Investors were quick to cut short positions in the Australian, New Zealand and Canadian dollars as prices of oil, copper and gold rallied from lows. Benchmark Brent crude LCOc1, for example, jumped to $72.95 from a five-year low of $67.53 in a brutal squeeze of bearish positions.


Gold Resumes Retreat as Crude Whipsaw Drives Volatility Higher
Debarati Roy and Nicholas Larkin – Bloomberg
Gold fell for the third time in four sessions as a whipsaw in oil increased prices swings for bullion.
The metal surged yesterday by the most since September after crude futures rebounded from a five-year low. The oil rally fizzled today, and the dollar climbed to the highest since March 2009 against a basket of 10 currencies. Gold’s 60-day volatility jumped to the highest since March.

No Surprise Here: Gold ETF Volatility Jumps
Tom Lydon – ETF Trends
Gold exchange traded funds, both the physically-backed variety and miners funds, are among Monday?s top-performing ETFs, but investors should not expect a gold recovery to be a smooth ride.
The SPDR Gold Shares (NYSEArca: GLD), the largest physically backed gold ETF, is higher by 3.1% Monday on above average volume, an impressive recovery after bullion stumbled to a three-week low following news that voters in Switzerland rejected a ballot measure that would have required the Swiss central bank to hold some assets in gold.

Is The Recent Gold And Silver Breakdown Signal Still Valid?
Jesse Colombo – Forbes
On Sunday, I wrote a piece in which I showed two potentially bearish longer-term “pennant” patterns in gold and silver that could lead to serious declines provided that gold and silver do not reverse their recent technical breakdowns below $1,200 and $19 respectively. In keeping with the erratic, low-volume trading conditions that are common around the holidays, gold and silver plunged on Sunday night (U.S. time) after Switzerland voted “no” for the gold referendum, only to spike on Monday morning after Japan’s credit rating downgrade and because of crude oil’s bounce after its 10 percent Friday sell-off.

Good as gold: how consumers and banks still rely on it
Katie Pisa and Tracey Hobbs – CNN
London property and gold — the two safest places to put your money, or so the saying goes in recent years.
For the past several years, owners of London property have watched with delight as the values of their homes have spiked annually well into double digits. With gold, as has been the case for thousands of years, it has provided a tradable commodity which investors have turned to in uncertain times. It’s a safe haven, the asset of last resort.

Don’t let gold’s rally take you for a ride
Mark Hulbert – MarketWatch
Gold is unlikely to embark on a sustainable rally any time soon.
That is the conclusion of a contrarian analysis of gold-market sentiment.

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