First Impressions

Steven Schoenfeld

Indexing Israel: Steven Schoenfeld Talks About His Next Index Venture
Steven Schoenfeld knows a thing or two about stock indexes as the chief investment officer of BlueStar Indexes and author of the book Active Index Investing. He spoke with John Lothian News editor-in-chief Jim Kharouf about his latest indexes based on Israeli companies and another on Israel’s tech sector. The first is called the BlueStar Israel Invest (BIGI), a comprehensive index launched in 2011 on the top Israeli companies that are traded around the world. The index returned 0.08 percent through September this year. Schoenfeld has also developed a new index focused on Israel’s technology sector, which is among the largest in the world. BlueStar Israel Global Technology Index (BIGTech), features large, mid-cap and small-cap firms listed on the Tel Aviv Stock Exchange, plus those listed on other markets. Through September, BIGTech posted a 13.5 percent gain over the first three quarters of 2013, and was up 12.7 percent over the past five year period. Schoenfeld said there is still much more room for indexes and index growth, despite critics who say the space has been covered.

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Quote of the Day

“I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets. That could end badly.”

Nobel Laureate Robert Shiller, in the Reuters story “Nobel Prize economist warns of U.S. stock market bubble.”

Lead Stories

Your ECB: fewer hawks, more doves
David Keohane | FT Alphaville    
Two tables below the break, courtesy of Credit Suisse, detailing the ECB board’s easing predilections. Tabled story short, the increasing north/south divide that has accompanied the euro area’s drawn out crisis has led to the balance of power shifting to the periphery. Or: doves in the ascendant.
***DA: They opened the playbook, and apparently there was only one play to choose from.

Can we just hurry up and go negative already?
David Keohane | FT Alphaville    
Yup, we’re back here again. Here’s how Credit Suisse ranks the ECB’s options if, or when, the increasingly dovish governing council decides that more easing is necessary:
***DA: Follow-up to Mr. Keohane’s earlier post.

Nobel Prize economist warns of U.S. stock market bubble
An American who won this year’s Nobel Prize for economics believes sharp rises in equity and property prices could lead to a dangerous financial bubble and may end badly, he told a German magazine.

Sovereign-Rating Change Flurry Seen Amid New Rules
Lucy Meakin – Bloomberg
Regulations designed to restrict changes of opinion by credit-rating companies are triggering a flurry of rulings on euro-area nations as their year-end introduction approaches.
***DA: Sovereign ratings were already more about politics than finance. New regulations are making it even more political.

Clearing deal fuels London ambition to become renminbi hub
Paul J Davies in Hong Kong –
British and other companies trading with China can now clear transactions done in renminbi in London, marking another step in the city’s push to become a leading offshore centre for the Chinese currency.
***DA: London retains the “centre of global finance” title.

DOJ not planning to penalize banks on swaps probe – WSJ
The U.S. Justice Department is not planning any penalties on a civil probe relating to allegations that large banks tried preventing competition in the credit default swaps market, the Wall Street Journal reported, citing people familiar with the matter.

Banking on Bitcoin
If a small city state had adopted Bitcoin as its national currency, it would now be in the grip of deflation as foreign speculators siphoned away its supply of the virtual currency. Money would be scarce, and prices would fall dramatically. Authorities might try to lift prices but they would lack one of their most powerful tools. Central bankers can create money at will, by printing notes or creating deposits. Bitcoin is based on digital tokens, which are generated at an unalterable rate by cryptographic algorithms running on the computers of volunteers, making it impossible to match supply to demand.
***JB: Some deem this to be a feature and not a drawback of Bitcoin.

Pension charge cap is blunt tool
Pauline Skypala –
Price caps are suddenly all the rage in the UK. The government has recently proposed controls on the amount payday lenders can charge and a limit on workplace pension costs. This appears to be at odds with the usual rhetoric about free markets and competition working to consumers’ advantage.
***DA: I propose a rule – no criticism of any fee cap unless accompanied by an alternative idea.  

Biggest Bank in Norway Dismisses Hard Landing in Housing Bet
Niklas Magnusson & Stephen Treloar – Bloomberg
DNB ASA (DNB) says predictions of a hard landing in Norway’s property market are unfounded as the nation’s biggest bank sees scope for house prices to rise next year.
***DA: Ben Bernanke once said the U.S. housing crisis was limited to the subprime market.

Creditors in Iceland Banks Face Pressure to Speed Up Settlement
Omar R. Valdimarsson – Bloomberg
Iceland is considering forcing creditors in the nation’s failed banks to resolve their claims faster as Prime Minister Sigmundur David Gunnlaugsson says he’s looking into passing laws to speed up a settlement.

Central Banks

Fed unlikely to redraw markers for rate hike
Federal Reserve policymakers have cooled to the idea of explicitly raising the bar on future interest rate hikes, a sign the U.S. central bank is angling for a return to more subtle — and familiar — ways of explaining how it plans to steer the economy.
***DA: Remember the “more transparent Federal Reserve?” Me neither.


Euro shines in 2013, complicating deflation fight
Jessica Mortimer – Reuters
The euro is poised to become the best performing major currency of 2013, defying expectations of weakness for another year but complicating the European Central Bank’s fight to avert deflation.

CLS Group completes £160m fundraising
Philip Stafford –
CLS Group has completed a £160m fundraising after the world’s main service for settling foreign exchange deals was forced to turn to shareholders for cash by tough new capital regulations.

FCA Faces Calls for More Disclosure on Currency-Rigging
Gavin Finch, Suzi Ring & Sarah Jones – Bloomberg
The U.K.’s Investment Management Association, whose members oversee about 4.5 trillion pounds ($7.4 trillion) of assets, is pressing regulators to provide more information about the alleged manipulation of the foreign-exchange market, said two people with knowledge of the matter.
***DA: 4.5 trillion pounds – that’s about how much turkey I ate last Thursday.

Today’s Strange Bitcoin Idea, The Gold Backed Bitcoin
Tim Worstall – Forbes
This particular idea rather has me scratching me head as I can see a small publicity value to this idea and no other practical one at all. The idea being to produce physical bitcoins that are partially gold.
***DA: Hey Bitcoin, your 15 minutes are about up.

‘Bitcoin’ becoming a bit too big; regulators scramble for norms
Business Standard
As Bitcoin becomes more popular day by day, regulators are getting worried about potential money laundering risks associated with this digital currency and its possible misuse by fraudsters to lure gullible investors into ‘e-ponzi’ schemes.

FX Week Europe: ‘Patchy’ liquidity in FX a concern for the future
FX Week
A reduction in the number of liquidity providers in foreign exchange is creating an unstable market environment that could put the industry in a dangerous position in the event of another financial crisis, according to senior industry officials who spoke at the FX Week Europe conference in London on Wednesday.


Stock exchanges wage war over index rights
Tim Cave – Financial News
The rivalry between national stock exchanges and alternative trading venues has often been likened to the clash in the aviation industry between low-cost carriers and long-established airlines.

BlackRock tests appetite for liquid ETF structure
Joe McGrath – Financial News
BlackRock is poised to launch on December 16 its first European-listed exchange-traded product under a new structure that will potentially improve liquidity and slash costs across its $193 billion European ETF empire. It could also pressure smaller rivals.


Stocks Triumph for a Third Month While Bullion Tumbles
Maria Kolesnikova, Maria Levitov & John Detrixhe – Bloomberg
Global stocks beat all assets for a third month in November, the longest winning streak since 2009, on signs that economic growth is accelerating. Commodities extended declines as gold fell the most since June.

China gold consumption set to cool in 2014
While China has been a key source of gold demand this year, helping to offset selling from exchange-traded funds (ETFs) and a pullback in Indian consumption, the country’s bullion imports may slow in 2014, according to ANZ.

Australian gold production increases despite declining price
Mining Weekly
Gold production in Australia rose for the second consecutive quarter during the three months to September, despite the lower prices, mining consultancy Surbiton Associates reported on Monday.

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