First Impressions

Scott Gordon, Rosenthal Collins Group – Seven (Slightly Unconventional) Career Tips From a Former Summer Intern
JohnLothianNews.com

“Trying is the key. I’ve had some successes in my life and I’ve had a bunch of failures — some spectacular failures… But whichever you have, if it’s a success or a failure, they’re momentary. You can take a victory lap if you have a success or you can take a misery lap if you have a failure. But in either case it’s fleeting, it’s gone and you better get on with your life.”

Scott Gordon, CEO of Rosenthal Collins Group, has career advice that applies whether you are shoveling snow or breeding horses: start by taking a holistic look at what is going on in the industry, not just the day-to-day activities that involve you personally. If you are able to take that big picture look into account, the rest is fairly simple to implement. Once aware of the situation, be ready for anything, since careers are taxis not trains — they don’t take linear paths to their destinations. Gordon expands on his career advice in this video, perhaps most importantly reminding audiences not to obfuscate their lexicon.

Watch the video at MarketsWikiEducation.com »

Quote of the Day

“The policy arsenal in the advanced economies is unfortunately very depleted, debt is still higher in the non-financial sector than it was in 2007. So we are really sitting in the sea watching the tide go out and not really able to respond effectively [in] the way we should.”

Citigroup’s Chief Economist Willem Buiter in the story, “Citi’s Buiter: World faces recession next year”

Lead Stories

US bond sell-off puts squeeze on swaps trade
Joe Rennison – Financial Times
Market dislocations often convey unpleasant truths for investors and policymakers.
That is one conclusion gleaned from the current breakdown between US interest rate derivatives and the world’s biggest government bond market.
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Treasuries Wilder Than Ever as Ultrafast Bond Traders Rise Up
Alexandra Scaggs and Susanne Walker Barton – Bloomberg
In the year since Treasuries suddenly went haywire in the bond market’s version of the “flash crash,” unusual bursts of volatility have become more common than ever before.
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Solid growth is harder than blowing bubbles
Martin Wolf – Financial Times
It used to be said that when the US sneezed, the world economy caught a cold. This is still true. But now the world economy also catches a cold when China sneezes. It has lost its last significant credit-fuelled engine of demand. The result is almost certain to be a further boost to the global “savings glut” or, as Lawrence Summers calls it, “secular stagnation” — the tendency for demand to be weak relative to potential supply. This has big implications for global economic risks.
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Deutsche Bank Executive Leaves Europe’s `Plato’ Dark Pool
John Detrixhe – Bloomberg
LSE’s Turquoise division plans to build the dark pool
Citigroup and Goldman executives to stay with the project
Deutsche Bank AG’s Stephen McGoldrick, who was leading a consortium of banks and asset managers in developing a new European dark pool for stocks, has decided to leave the project.
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Confidence in stock markets shaken by violent swings
Philip Stafford – Financial Times
Violent swings on the world’s stock markets in mid-August led to inevitable searches for the culprits. For some it was risk parity funds, which aim for a diversified portfolio of stocks, bonds and currencies balanced by the mathematical risk of each asset class. They have been likened to the development of portfolio insurance, which played a crucial role in the 1987 stock market crash.
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Traders Brace for Worst as U.S. Banks Kick Off Earnings Season
Joseph Ciolli – Bloomberg
Options traders are showing caution ahead of earnings for the nation’s biggest banks — trepidation that holds ominous signs for the broader market.
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Bond predators humbled by distressed bets
Robin Wigglesworth – Financial Times
The cleverest predators of the bond market have suffered a humbling this year, after a heap of high profile bets have gone awry.
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Leverage Loved in Europe Stocks Shows Draghi Put Is Working
Sofia Horta E Costa and Inyoung Hwang – Bloomberg
For a European company, the weaker its finances, the stronger its shares.
Loose monetary policy has helped lift stocks with the highest leverage this year, pushing them ahead of the Euro Stoxx 50 Index by the most since 2011, data compiled by Bloomberg and Morgan Stanley show. The past two months saw the steepest outperformance, while European shares suffered their most painful quarter in four years.
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Has US corporate bond market liquidity deteriorated?
Tobias Adrian – World Economic Forum Agenda
Commentators have argued that market liquidity has deteriorated in recent years as regulatory changes have reduced banks’ ability and willingness to make markets. In the corporate debt market, dealer positions, which are considered essential to good liquidity, have indeed declined, even as issuance and outstanding debt have increased. But is there evidence of reduced market liquidity?
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Voters Should Be Fed Up That No One Is Talking Monetary Policy
Forbes
Tonight, the first Democratic primary debate will be held at the Wynn Las Vegas hotel. There, party front-runner Hillary Clinton will face off against her top challenger, Senator Bernie Sanders (I-Vt.) and other lesser known candidates such as former Maryland Governor Martin O’Malley, former Rhode Island Governor Lincoln Chafee and former Virginia Senator Jim Webb. Of course, the idea of Vice President Joe Biden joining the candidates on stage after a last minute announcement is a very real possibility.
On stage, these candidates will likely tackle the hot-topic issues that most appeal to their bases, including income inequality, the environment and Planned Parenthood. But, unfortunately for sound money advocates, the candidates will likely ignore monetary policy—an issue with serious consequences for all Americans, whether they realize it or not.
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Citi’s Buiter: World faces recession next year
Louisa Bojesen and Matt Clinch – CNBC
The global economy faces a period of contraction and declining trade next year as emerging nations struggle with tightening monetary policy, according to Citigroup’s Chief Economist Willem Buiter.
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JP Morgan: Still king of the castle, though some knights have left
Lucy Burton – Financial News
Doubtless working at the top equity capital markets operation in the UK has many attractions, but one of the biggest comes with a pound sign in front. Big business means big bonuses.
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Dell Faces $60 Billion in Total Debt With EMC Deal
Bloomberg
Dell Inc. will add almost $50 billion in debt to complete its proposed acquisition of EMC Corp., the largest technology acquisition ever, bringing the closely held company’s total debt to about $60 billion, people with knowledge of the matter said.
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Fortress Confirms Plan to Close Flagship Macro Hedge Fund
Juliet Chung and Gregory Zuckerman – WSJ
Fortress Investment Group LLC said principal Michael Novogratz would retire from the firm and its board at the end of the year, and that money in the macro hedge fund he ran would be returned to investors by then.
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Nasdaq tackles high-speed trading in Treasuries
Bradley Hope and Sarah Krouse – The Wall Street Journal
Nasdaq is wading into a debate over high-speed trading in the US treasury market with a system it says can shield investors from predatory behavior.
The $12.7 trillion treasury market has come under regulatory scrutiny following a “flash crash” in October 2014, when the yield on a key bond swung wildly. Since then, some regulators and other observers have said high-speed traders are at least partly responsible for a broader rise in volatility in the market.
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ICE Clear Credit Launches Clearing for Western European Sovereign CDS; Sees 70% Increase in Single Name Buyside Clearing Year to Date
Press Release
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, introduced credit default swap (CDS) clearing for the following sovereign single names today: France, Germany and the United Kingdom.
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ESM Issues 30-Year EUR3 Billion Bond
Press Release
The European Stability Mechanism (ESM) today issued a new EUR3 billion 30-year benchmark bond with a coupon of 1.75%, maturing on Oct 20 2045. It was the first 30-year bond for the ESM, in line with the institution’s goal to lengthen maturities.
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Central Banks

The Third Rail Of Monetary Policy: Negative Interest Rates – Can The Fed Go There?
Michael J. Kramer – Seeking Alpha
Central banks responded to the large fall in demand in 2008-09 by lowering interest rates to zero, or very close to zero. The nominal return from holding cash is zero, and it has generally been accepted that it’s difficult for central banks to reduce their policy interest rates much below zero as cash can always be held as an alternative to negative interest rate bearing assets. There was always a Zero Lower Bound on the interest rates, and with low inflation the real interest rates were pushed into negative territory for the past few years.
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Gloomy in Lima: The autumn meetings of the IMF and World Bank conclude with a chill
The Economist
As Lima bid farewell to the annual jamboree of the International Monetary Fund and World Bank on October 11th the leaden sky that greeted the global economy’s great and good earlier in the week had cleared. But among the 12,000 delegates, policymakers, their retinues, academics and do-gooders departing the Peruvian capital, the mood was distinctly unsunny. Clouds will continue to hang over the global economy in the foreseeable future, all agreed; anxieties over China’s slowdown, weakening emerging markets, and the effects of the Federal Reserve’s decision to hold steady on interest rates have done nothing to dispel them.
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Deutsche Bank Economist: The Fed Is in Danger of Making a Mistake of Historical Proportions
Julie Verhage – Bloomberg
David Folkerts-Landau, global head of research at Deutsche Bank, says that staying at the zero bound of monetary policy for any longer would be a historic mistake.
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Tough choices for the Chinese central bank
Desmond Lachman – American Enterprise Institute
One has to pity the Chinese central bank as it struggles to come up with an appropriate policy response to the bursting of China’s credit bubble, since there is no way that it can simultaneously achieve the many policy objectives with which it appears to have been assigned. More specifically, it would seem that the Chinese central bank will have to make hard policy choices between meeting to a greater or lesser degree the often conflicting policy objectives of promoting economic growth, maintaining domestic price and exchange rate stability, and not backtracking on capital account liberalization.
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Americas’ Growth Champion Keeps Going While Neighbors Falter
Juan Pablo Spinetto – Bloomberg
Paraguay is set to grow more than 10 times faster than its regional peers in the two years through 2016 and is ruling out additional interest rate cuts to stimulate the economy for the moment, the central bank president said.
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Currencies

Currencies Show How a Small Shift in Prices Can Mean Such a Lot
Lukanyo Mnyanda – Bloomberg
The contrasting fortunes of the U.K. and Swedish currencies highlight how even a small change in inflation can send exchange rates rising, or falling, as investors use the data to gauge the policy direction of their central bank.
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China poised to issue sovereign debt in renminbi in London
James Kynge – Financial Times
China is set to issue government debt in renminbi in London, picking the city as the first overseas financial centre in which to open a sovereign debt market as it ramps up efforts to popularise its currency, officials familiar with the issue said.
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SEC: UBS To Pay $19.5 Million Settlement Involving Notes Linked To Currency Index
Press Release – Mondovisione
The Securities and Exchange Commission today announced that UBS AG has agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.
The case is the agency’s first involving misstatements and omissions by an issuer of structured notes, a complex financial product that typically consists of a debt security with a derivative tied to the performance of other securities, commodities, currencies, or proprietary indices. The return on the structured note is linked to the performance of the derivative over the life of the note. Between $40 billion to $50 billion of structure notes are registered with the SEC per year, with many of those notes sold to relatively unsophisticated retail investors.
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Binary Options Trading – the New Better Forex?
Slavena Savcheva – Finance Magnates
With more money and goods flowing in the world’s economy than ever before, it’s fair to say that world trading will continue to grow, even in the face of temporary political and financial instability. Combined with constant technological progress, global population growth and the human nature to develop and seek new markets, this becomes especially true regarding online trading, where it’s easy to see why binary options trading has established itself as one of the most appealing financial instruments of recent time.
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Deutsche Börse Supports Traders With Real-Time Risk Alerts For Most Liquid Eurex Futures
Press Release
Deutsche Börse Market Data + Services is launching the new analytic ‘Risk Alerts’ on 23 November. The new product informs market participants in real-time about unusual price and order book behaviour of the most important Eurex futures.
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Indexes & Index Products

Risk of a Stock Market Selloff Is High, CBOE Skew Index Shows
Simon Maierhofer – TheStreet
Believe it or not, there’s a little-known but rather accurate indicator designed to measure the odds of a “black swan” event in the stock market.
This indicator was created by the same exchange that’s behind the well-known VIX volatility index: CBOE Holdings’ (CBOE – Get Report) Chicago Board Options Exchange.
The other index is called the CBOE Skew Index, but many investors call it the “black swan index.” It just soared to an all-time high (based on 25 years of data)
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Exploiting ETF Structural Flaws Is Not as Easy as It Looks; Potentially profitable but also uncommon.
Eric Balchunas – Bloomberg
Hedge funds may need to get back to the drawing board if they’re planning to turn around their performance struggles by capitalizing on “shortcomings in the ETFs’ structure” via some unusual trade ideas, as highlighted in this recent Wall Street Journal article. Most funds do nothing of the sort.
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Second-generation passive investing fueling new smart-beta ETFs
Ric Dillon – Investment News
The controversy over smart-beta exchange-traded funds, or what we prefer to call “second-generation” passive investing strategies, continues to smolder as analysts and advisers argue over the value of the growing number of alternative approaches that claim to improve on traditional, first-generation passive indexes, like the S&P 500. The reason is obvious — billions of dollars are at stake, with the SPDR S&P 500 ETF (SPY) alone representing about $175 billion in assets as of late August.
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Gold

Shanghai Gold Exchange to name new chairman ahead of benchmark launch
A. Ananthalakshmi – Reuters
The Shanghai Gold Exchange (SGE) is likely to name Jiao Jinpu, an official from China’s central bank, as its new chairman, two sources said, in a move that could pave the way for the planned launch this year of a yuan-denominated gold benchmark.
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India gold discounts widen to three-month high; China demand tepid
Rajendra Jadhav and A. Ananthalakshmi – Reuters
Gold discounts in India widened to a three-month high this week as retail demand remained sluggish amid ample supplies and higher prices.
Buying elsewhere in Asia was also lacklustre. Top consumer China disappointed with moderate post-holiday demand and physical prices fell in some other major trading centres.
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Miscellaneous

Are You Ready to Buy Stocks at Your Grocery Store?
Robin Sidel – WSJ
Now selling at the checkout counter: breath mints, hand sanitizer and…$25 of Berkshire Hathaway stock?
In a new twist on the bustling gift-card business, retailers such as Kmart and Office Depot this week are starting to roll out cards that give the recipients small amounts of stock in some of the country’s best-known companies. The cards will be available ahead of the holiday shopping season at other retailers, including Safeway Inc., Toys “R” Us and Lowe’s Cos.
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U.K. Exits Royal Mail to Complete Privatization After Two Years
Benjamin D Katz – Bloomberg
The U.K. government unloaded its final stake in Royal Mail Plc, completing the privatization of the postal service in two years as Chancellor of the Exchequer George Osborne pushes to reduce the nation’s debt.
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