First Impressions

Gensler a “scourge”?  Really?
John Lothian News Staff

We confess to being puzzled at the Reuters story “Swaps regulator Gensler: banker turned Wall Street scourge” below talking about Gary Gensler’s legacy at the CFTC.  It is noted in the article that bankers really did not like the guy, thus leading to the question, what will Gensler’s legacy be?

If he is a scourge, as the headline points out, Wall Street’s wings will be substantially clipped in the coming months and years as the Dodd-Frank Act rules he ushered in take hold. The US banking sector, thanks in large part to Gensler’s focus on rulemaking in the derivatives space, could reduce bank profits and business practices in the coming years. In that sense, he could well be a scourge for Wall Street.

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Quote of the Day

“The Street hates him.”

Bank lobbyist speaking anonymously in the story, “Swaps regulator Gensler: banker turned Wall Street scourge”.

Lead Stories

Yellen Wins Backing of Senators to Lead Fed
The Senate confirmed Janet L. Yellen as the chairwoman of the Federal Reserve on Monday, marking the first time that a woman will lead the country’s central bank in its 100-year history.
***DA: NYT calls her “chairwoman.” Everyone else says “Federal Reserve Chairman.” Some punt and just say “chair,” which my AP Stylebook says, specifically, NOT to do. Robert’s Rules of Order say the term “chairman” is gender-neutral, and that she should be addressed as “Madam Chairman.” I agree.

Surprise drop in euro zone inflation shows deflation risk
Euro zone inflation fell in December after a small increase the previous month, increasing the European Central Bank’s challenge of avoiding deflation as well as supporting the bloc’s recovery.
***DA: Uh oh. The dreaded “D word” again rears its ugly head.

PROFILE-Swaps regulator Gensler: banker turned Wall Street scourge
Douwe Miedema – Reuters
As Gary Gensler wraps up his last day as the head of the U.S. Commodity Futures Trading Commission on Friday, he leaves behind a long list of ardent admirers of his tough-nosed reforms and passionate critics who believe he has injured well-functioning markets.
***DA: This article, and the use of the word “scourge” created quite a firestorm among the editorial team this morning. Though the final result is the above commentary, the first draft was much more acerbic. The point is, Mr. Gensler deserves the term “polarizing” but not “scourge.”

Banks Leading Bond Sales Surge in Europe as Credit Risk Declines
Katie Linsell – Bloomberg
UniCredit SpA (UCG) and BNP Paribas SA (BNP) are among banks fueling a surge of bond issuance in Europe as the cost of insuring debt against losses fell to the lowest in almost four years.
***DA: And the band played on.

Ireland’s Post-Bailout Bonds Blowout
Ben Edwards  – MoneyBeat – WSJ
When Ireland exited its bailout program at the end of last year, it turned down an offer of a credit line from its rescuers. That meant relying on capital markets for funding–a move that could have proven risky if investors were unwilling to lend the country cash. Well, it turns out they are willing after all. Very willing.
***DA: And the dancers kept dancing.

Few Specifics Mean China Banks Could Stay in the Shadows
Bob Davis and Lingling Wei – MoneyBeat – WSJ
China sent its clearest signal so far about how it wants to handle its growing debt problem: very carefully.
***DA: The key may be interbank lending rates, which are still doing a little “subprime boogie.”

Morgan Stanley’s Hadden Departs as Head of Rates Trading
Michael J. Moore – Bloomberg
Morgan Stanley (MS)’s Glenn Hadden has left as head of interest-rates trading, citing differences with his bosses over how the business should be run as the firm seeks to boost the unit’s returns.
Mitch Nadel and Jakob Horder were named to replace Hadden, 43, according to an internal company memo yesterday.
***DA: How about “profitably.” I vote for that.

Competitive devaluation through currency fragmentation
Izabella Kaminska | FT Alphaville    
We promised at the end of our previous post that we would qualify the economic case for the introduction of “free money” with some direct references to Willem Buiter, Citi chief economist and former BoE MPC member.
***DA: Free is sometimes too expensive.

Goldman to JPMorgan Say Sell Emerging Markets After Slide
Ye Xie, Ksenia Galouchko and Kyoungwha Kim – Bloomberg
Wall Street’s biggest banks say the slump in emerging-market assets that left equities trailing advanced-nation shares by the most since 1998 last year will prove more than a fleeting selloff.

The path towards definancialisation, or not?
Izabella Kaminska | FT Alphaville
In this series we have thus far presented the economic argument for the introduction of “free money”, whether it be via the rise of private market virtual units or central-bank dropped bundles of helicopter money.

Home is where the heart is, sovereign rating edition
Dan McCrum | FT Alphaville    
To the many sticks used to bash the credit rating agencies for their role in the (near) downfall of the financial system, we can now add a new one: home bias.

Central Banks

Global Central Banks Split on Stimulus in 2014 as Fed Tapers
Simon Kennedy – Bloomberg
The united stimulus front of central banks is starting to splinter as 2014 dawns.
The Federal Reserve — soon to be led by Janet Yellen, confirmed today by the Senate as the next chairman — begins pulling back on its quantitative easing amid stronger U.S. growth, and the Bank of England is trying to cool its housing market. The European Central Bank and Bank of Japan lean toward more monetary action to fight weak inflation. The ECB and BOE both hold policy meetings this week.

World-Beating Debt Burden Is No ‘Serious Threat’ to Denmark
Peter Levring – Bloomberg
Danish central bank GovernorLars Rohde said most of the nation’s households would survive a jump in interest rates or a loss of income as Denmark tops world debt rankings.

Yellen’s Record-Low Senate Support Reflects Fed’s Politicization
Joshua Zumbrun and Jeff Kearns – Bloomberg
Janet Yellen’s confirmation as chairman of the Federal Reserve with the least Senate support on record shows that the central bank still faces intense political scrutiny six years after the financial crisis.
***JM: Did you subtract the id… people who voted “no” simply because they’ve vowed to vote no on everything they didn’t choose themselves?

DIARY – Major Central Bank Meetings for 2014


Dollar Gains as Trade Gap Shrinks to Four-Year Low; Franc Falls
John Detrixhe and David Goodman – Bloomberg
The dollar gained after a report showed the U.S. trade deficit shrank more than forecast in November as oil imports dropped to the lowest level in three years, boosting the allure of American assets.

Macquarie as Best Forecaster Sees Yen, Aussie Drops: Currencies
Lucy Meakin and Candice Zachariahs – Bloomberg
Macquarie Group Ltd., which has ousted Canada’s Desjardins Group as the world’s most accurate currency forecaster, is telling clients that its top picks for 2014 call for declines in Australia’s dollar and the yen.

Diverging Central Banks To Reignite Forex Action
Dean Popplewell – Forbes
As frigid weather conditions keep much of the U.S. and Canada in an icy grip, investors will get to feel the heat of real market action by way of a busy trading week chock-full of economic data releases. Since the festive holidays, all asset classes have been playing make-believe, with liquidity remaining as the unknown variable.

Analysis: Corruption scandal complicates Turkish rate policy as lira slides
A corruption scandal shaking Turkey’s government may delay for many more months a tightening of monetary policy that would stabilize inflation and stop the lira from plumbing record lows.

Zynga Helps Build Bitcoin Buzz But Don’t Get Carried Away – Yet.
Michael J. Casey – MoneyBeat – WSJ
After taking a heavy blow in December when the Chinese government effectively blocked its citizens’ from buying bitcoin with yuan, the price of the digital currency has started out 2014 on a fresh push upward.


Bond ETFs Grabbed Money Last Year Even as Bond Mutual Funds Suffered
Chris Dieterich – MoneyBeat – WSJ
A down year for the bond market drove investors from traditional bond mutual funds, but money kept flowing into bond exchange-traded funds. Old-fashioned fixed income mutual funds saw withdrawals of $85.4 billion in 2013, while fixed-income ETFs took in $27.5 billion, according to data released Monday from asset manager BlackRock Inc.

Brazil’s revamped Bovespa index falls on weak data
Brazilian stocks fell on Monday, the first day of trading on the newly-adjusted benchmark Bovespa index, after weak economic data from Brazil and its top trading partner China.

Dow Jones-UBS Commodity Indices Market Attributes Report – December 2013

S&P GSCI Commodity Index Market Attributes Report: Commodities Market Performance In December 2013 And Year-End


Gold Fund May Be Near Bottom
Michael Kahn – Barron’s
Traders are taught early to follow the trend, and the trend on gold and silver continues to be ugly. There are, however, some positive changes afoot on the charts.
First, the sordid recent history: The declines in gold and the SPDR gold trust (ticker: GLD) exchange-traded fund have been grueling.

Gold’s Decline Eats Into Swiss Reserves
John Revill, Laura Clarke and Matt Day – The Wall Street Journal
It didn’t take a heist for the Swiss National Bank SNBN.EB -4.39% to lose $16.6 billion on bullion.
That is how much the central bank said its gold holdings fell in value last year, as the price of the precious metal skidded 28%, the most since 1981. The loss was only partially offset by the central bank’s profit on foreign currencies, saddling it with a $10 billion paper loss for 2013 and forcing the bank to cancel dividends to shareholders for the first time since it was founded 107 years ago.

Hedge Funds Raise Gold Wagers as Yamada Sees $1,000: Commodities
Elizabeth Campbell and Debarati – Bloomberg
Hedge funds raised their bullish gold bets to a six-week high, splitting with analysts at Technical Research Advisors LLC and Goldman Sachs Group Inc. who are predicting more declines after last year’s rout.


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