JPMorgan Creates ‘Volfefe’ Index to Track Trump Tweet Impact

Sep 9, 2019

First Read

Hits & Takes
By JLN Staff

Andrej Bolkovic, Chief Executive Officer at ABN AMRO Clearing Chicago LLC, is running the Chicago Marathon on October 13 and raising money on behalf of Cradles to Crayons. Cradles to Crayons provides children from birth through age 12 living in homeless or low-income situations with the essential items they need to thrive – at home, at school and at play. They supply these items free of charge by engaging and connecting communities that have with communities that need. Cradles to Crayons will serve 82,500 Chicagoland children experiencing poverty with the essentials they need to thrive this year alone. Please click HERE to learn more and to support his fundraising effort.~JJL

CME Group Chief Commercial Officer at CME Group Julie Winkler has written a commentary on LinkedIn titled “Three Keys to Driving Innovation at a 170+ Year-Old Financial Services Company.”~JJL

SIFMA’s Listed Options Symposium is next week on September 18 from 12:00 p.m. to 6:15 p.m. at the SIFMA Conference Center in NYC. Speakers from the sell-side, buy-side, exchanges and regulatory agencies will discuss market structure, emerging tech, risk, and regulation and how they affect the options markets. Webinar also available. Click HERE to see the program and register.~JJL

TABB Group reports that nearly half of all buy-side survey participants plan to increase their allocation to crypto assets in the next five years. However – surprise! – the lack of regulatory clarity remains a big issue, according to TABB head of fintech research Monica Summerville.~SR

CurveGlobal is trying a buffet style for some fees. CurveGlobal Markets is going to launch an unlimited ‘all you can eat’ pre-paid trading fee scheme.~JJL

If you missed the first video from our Open Outcry Traders History Project, you can see my interview with Leo Melamed HERE.~JJL

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Ethics: Yesterday, Today and Tomorrow

MarketsWiki Education

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Exchange Analytics President Larry Israel talks about the role of ethics in the futures industry with the 1989 FBI sting at the CBOT and CME serving as a historical starting point.

Watch the video »

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Bitcoin Futures on ICE Grow Nearer With Custody Warehouse Start
Matthew Leising – Bloomberg
Exchange will offer two Bitcoin futures beginning Sept. 23; Custody part of the plan starts Friday for customers to test
Intercontinental Exchange Inc. is closer to offering Bitcoin futures trading as its Bakkt unit opens its digital-asset custody warehouse today to customers. Here are the nuts and bolts of how it will work.
/bloom.bg/2UI8opP

***** The Bakkt warehouse is open and the sweet smell of freshly harvested Bitcoin is in the air.~JJL

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U.S. Is Still Considering French Wine Tariffs in G-7 Reversal
Shawn Donnan, Jenny Leonard, and Gregory Viscusi – Bloomberg
French thought they’d avoided levy threat afters leaders met; U.S. officials say Section 301 probe on French tax is ongoing
The U.S. is moving ahead with an investigation into a new French digital tax that could lead to import tariffs on French wine and other goods, despite hopes raised at August’s G-7 summit.
/bloom.bg/2UK8JYZ

*****”For imposing Taxes on us without our Consent”~Declaration of Independence

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When Corporations Changed Their Social Role—and Upended Our Politics; Large companies once offered workers lifetime security and generous benefits. Then they stopped, setting the stage for our populist moment.
Nicholas Lemann – WSJ
Presidential elections in the U.S. are traditionally about economics. Next year’s vote, and others around the world, have the feeling, however, of being not just about how the economy is performing in the moment but about something more fundamental: the economic system. What drove the rise of Donald Trump and politicians like him elsewhere was the promise that a new government with new policies could restore a fondly remembered (by some) economic and social order from the past. Those politicians’ opponents on the left have a similar interest, though with completely different specifics, in remaking the political economy. It seems like centuries ago, though it was actually only four or five election cycles, when immediate economic conditions were a political issue but not the basic design of the economy.
/on.wsj.com/2HVvcxi

***** A deep dive by the Wall Street Journal into some heavy subjects.~JJL

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Clearing Organization Sanctioned; Programmer Seeks End to CFTC Enforcement Action
Gary DeWaal – Bridging the Week
A clearing organization for futures and securities was sanctioned US $20 million in aggregate by the Commodity Futures Trading Commission and the Securities and Exchange Commission for allegedly not having and following procedures pertaining to risk management, credit exposure and liquidity risk, and information system safeguards. Separately, the purported programmer of software used by Navinder Sarao – the Flash Crash spoofer – is scheduled to present this week a motion for summary judgment to end his civil lawsuit by the CFTC, just a few months after the judge hearing his criminal trial declared a mistrial, and the Department of Justice determined not to re-file another criminal complaint.
bit.ly/319AQU6

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Friday’s Top Three
Our top read story of the day was a look at the past, the Crain’s Chicago Business piece PIT BULL, about broker James J. Kaulentis, from 1997. Second was the JLN Open Outcry History Project that debuted Friday with an interview with Leo Melamed. Third was the FT piece HKEX blames software bug for outage as website comes under attack

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MarketsWiki Stats
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CryptoMarketsWiki Website»
CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.

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Lead Stories

JPMorgan Creates ‘Volfefe’ Index to Track Trump Tweet Impact
Tracy Alloway – Bloomberg
Presidential tweets have “statistically significant” impact; Volatility on 2-, 5-year rates particularly affected by tweets
Make market volatility great again? Analysts at JPMorgan Chase & Co. have created an index to gauge the impact of Donald Trump’s tweets on U.S. interest rates, which they say is on the rise.
/jlne.ws/2HTHsyo

Euroclear plans bond investment link with China; Move would allow foreign investors to use renminbi debt as collateral elsewhere
Don Weinland – FT
Euroclear plans to open a link for international investors to access the Chinese bond market, which will allow renminbi-denominated debt to be used as collateral anywhere in the world.
/jlne.ws/2UGlROY

Deutsche Börse’s Eurex makes fresh euro clearing push ahead of Brexit
Philip Stafford – FT
Deutsche Börse has made a fresh attempt to pull euro interest rate swaps businesses from the UK by announcing it will scrap booking fees until the end of the year for customers that want to switch their portfolios to Frankfurt.
/on.ft.com/2HW7hxv

ETFs for the Currency War; There are three U.S. exchange-traded funds for investors who want to enter the China skirmish
Nick Ravo – WSJ
Few currencies have attracted more attention in recent weeks than China’s yuan. The People’s Bank of China’s abrupt decision earlier this month to set the currency’s daily exchange rate at more than 7 to the U.S. dollar sparked condemnation and threats of trade retaliation from Washington, as well as a drop in stock markets around the world.
/on.wsj.com/2UG3Osg

A Year After Armageddon, Stock Traders Stare Into a Familiar Abyss
Elena Popina and Vildana Hajric – Bloomberg
The variety of risks hasn’t changed much since September 2018; Last year’s plunge continues to reverberate with Fed’s Powell
Nobody knew it then, but this time last year, the rallying U.S. stock market was about to begin a plunge that would erase $5 trillion from share values and convince a lot of people a recession was at hand.
/bloom.bg/2HTSh3u

This Single Variable Explains What Drives Managed Futures Performance
Julie Segal – Institutional Investor
Managed futures are performing well so far in 2019. But years of underperformance prior to this year’s gains have fueled a debate on whether the model for the complex strategy is broken.
PivotalPath, a research and hedge fund data firm, says managed futures funds — which are designed to provide returns in good markets and protect investors during downturns — found that for all the debate, interest rates can simply explain the strategy’s performance.
/jlne.ws/2UyrcrE

Gas Plants Will Get Crushed by Wind, Solar by 2035, Study Says
David R Baker – Bloomberg
Generators now on drawing boards will be left uneconomical;Development would be a dramatic reversal of fortune for gas
Natural gas-fired power plants, which have crushed the economics of coal, are on the path to being undercut themselves by renewable power and big batteries, a study found.
/bloom.bg/2UI84r1

FX prime brokers JP Morgan and NatWest Markets join ECN Spotex; JP Morgan and NatWest will provide access to Spotex’s institutional FX electronic communication network.
Hayley McDowell – The Trade
US foreign exchange trading technology and liquidity services provider Spotex has onboarded prime brokers JP Morgan and NatWest Markets, building out its institutional client base.
/jlne.ws/2UJ91PO

Eurex removes fees as incentive for clearing ahead of Brexit; Fees will be removed for market participants migrating derivatives positions to Eurex as part of Brexit preparations.
Hayley McDowell – The Trade
Eurex has taken steps to encourage market participants to migrate their derivatives positions to the German clearinghouse by removing fees for those making the move ahead of Brexit.
/jlne.ws/2URoH3X

Bank regulatory revisions pose dangers and could lead to financial crisis: critics
Ed Zwirn – NY Post
Is the US condemned to repeat the past? While the economy remains the strongest it has been in years, concern is growing that recent revisions to the country’s banking regulations could bring an end to the current record-long bull market.
/jlne.ws/2UFi5p8

How Fannie and Freddie Have Changed Since the Crisis; The two mortgage giants have shed some risk, paid back their bailout and now report billions in income
Ben Eisen and Andrew Ackerman – WSJ
The Trump administration said Thursday it would like to make big changes to Fannie Mae and Freddie Mac , FMCC -8.21% including pushing to release them from government control.
/jlne.ws/2HV3Wz1

Royal Mint plans first stock exchange product with gold ETF; Institution founded under Alfred the Great more than 1,100 years ago responds to investor demand
Chris Flood – FT
The Royal Mint plans to launch its first gold exchange traded fund in response to rising demand from investors that has pushed holdings in bullion-backed ETFs close to a record.
/jlne.ws/2UG4I8d

Exchanges, OTC and Clearing

Eurex Clearing launches incentive program to support Brexit preparations; Eurex Clearing introduces a CCP Switch Incentive Program until year-end 2019 to support market participants in migrating OTC interest rate derivatives positions.
Eurex
Regulators and central banks have recently renewed their call on market participants to prepare for all possible Brexit scenarios and reiterated that the EU’s temporary measures for CCPs expire in March 2020.
/jlne.ws/2UGiiZ0

Promising market opportunities with Eurex ETF options
Eurex
The European market for exchange traded funds (ETF) has grown substantially. Providing the broadest choice of ETF derivatives in Europe, Eurex offers interesting market opportunities to implement option strategies on this portfolio with more than 30 of the most liquid ETFs in Europe. We spoke with Matthew Riley, Equity & Index Sales EMEA, about possibilities and opportunities.
/jlne.ws/2UFiCr8

Euronext announces volumes for August 2019
Euronext
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for August 2019. Following the completion of the acquisition of Oslo Børs VPS, below figures include all Oslo activity from July 2019[1] (of which Fishpool in future commodity and OTC derivatives designated as Taylor Made).
/jlne.ws/2UJ0s7Z

The World Federation of Exchanges highlights competitive issues to ESMA regarding market data & consolidated tape
WFE
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has published a letter in response to the European Securities and Markets Authority’s (ESMA) consultation paper on prices for pre- and post-trade data and the consolidated tape for equity instruments.
bit.ly/2UGpunY

Fintech

How the Algorithms Running Your Life Are Biased
Allison Ingersoll – Bloomberg
Every minute, machines are deciding your future. Software programs don’t just recommend books and movies you might like: they also determine the interest rate you’ll pay on a loan, whether you land a dream job and even the chance you might commit a crime. The hope was that computers trained to find patterns in vast pools of data would make such decisions more objectively than humans do. Instead, researchers are finding that algorithms — the logic at the heart of software programs — can replicate and even amplify the prejudices of those who create them. The U.S. Congress is weighing a bill meant to address such bias by forcing algorithms out into the open.
/jlne.ws/2HVEk4Z

How Machine Vision Can Transform Financial Services
Naveen Joshi – Forbes
The implementation of machine vision in finance is proving to be beneficial not only to businesses but also to consumers in general. Although it seemed far-fetched five years ago, financial institutions have been using advanced technologies in their operations. These technologies enable organizations to improve the customer experience and lighten employees’ workloads. The global machine vision market is expected to grow at a CAGR of 7.7% to reach USD 18.24 billion by 2025. There, however, remains a certain level of skepticism amongst the institutes and consumers in the adoption of machine vision in the finance sector.
bit.ly/2UMkG0C

CreditEase Fintech Investment Fund Doubles Down in UK and Europe, and Invests in Railsbank for Singapore expansion
Yahoo Finance
CreditEase, a Beijing-based leading FinTech conglomerate in China, announced today that its CreditEase FinTech Investment Fund (CEFIF), participated in the recent $10 million Series A funding round of Railsbank, a London-based Banking-as-a-Service (BaaS) platform that promises to give technology companies access to financial services using its API platform. Railsbank already has several clients across the UK and Europe and is in the process of opening its Asia-Pacific office in Singapore.
/yhoo.it/319xXm7

DriveWealth Brings New Talent to Executive Team
Press Release
DriveWealth Holdings, Inc., a leader in global digital trading technology, announced the further strengthening of its executive team, naming Ryan Burke to the role of Chief Information Officer of its subsidiary DriveWealth Technologies. Burke has more than 16 years of senior operations, brokerage and risk experience in the equities and capital markets sector.
/prn.to/2lCDpOx

Cryptocurrencies

Former US Congressman Harold Ford Jr. calls for ‘sensible’ crypto regulations at the federal level
The Block Crypto
Harold Ford Jr., a former Democratic Congressman representing Tennessee’s 9th District in the U.S. House of Representatives, has called for “sensible” regulations in the cryptocurrency sector at the federal level.
bit.ly/2UK5BMJ

UK Fund That Aims to Capitalize on Crypto Volatility Raises $50 Million
Daniel Palmer – Coindesk
U.K.-licensed Nickel Asset Management says it has raised $50 million for a fund aimed to make profits off the volatility of cryptocurrencies.
bit.ly/2UHa9DI

MIT Media Lab Director Joi Ito Steps Down Over Epstein Financing
Daniel Palmer – Coindesk
Joichi Ito, head of the Media Lab at the Massachusetts Institute of Technology (MIT), has resigned after it was revealed that he and other Media Lab staff had attempted to conceal financial contributions from convicted sex offender Jeffrey Epstein.
bit.ly/2kzRsEn

Telegram Finally Releases Code for Its $1.7 Billion TON Blockchain
Anna Baydakova – Coindesk
Telegram’s blockchain project, TON, has entered the last preparation stage before going live. The code for running a blockchain node was released on the test network portal late Friday. Now developers and community members interested in the messaging app provider’s blockchain can start kicking the tires of a full node, a validator node and the blockchain explorer.
bit.ly/2k5miV6

The crypto whiz kid who paid $4.6 million for lunch with Warren Buffett asked Donald Trump and several crypto bosses to join them. Here’s everyone he invited.
Theron Mohamed – Business Insider
Tron founder and CEO Justin Sun invited executives from Ethereum, Litecoin, Binance, Circle, Huobi, and eToro to attend the charity meal. Sun is working to reschedule the lunch after postponing it in July, a move that sparked conspiracies he was in trouble with the Chinese government.
bit.ly/2k5miV6

Binance Charity Accepts Cryptocurrency Donations for Hurricane Relief
Aaron Wood – Cointelegraph
Binance Charity, the philanthropic wing of major cryptocurrency exchange Binance, has begun a campaign to help support victims of Hurricane Dorian. On Sept. 5, Binance Charity started accepting cryptocurrency donations for a campaign that will help provide food and aid for hurricane victims through local organizations in affected areas.
bit.ly/2m0sE8P

Crypto Exchange Binance.US to Launch ‘in the Coming Weeks’
Adrian Zmudzinski – Cointelegraph
Major cryptocurrency exchange Binance’s United States-based branch Binance.US will launch in the coming weeks, preceded by Know Your Customer (KYC) registration a few days earlier. According to a Medium post published by Binance.US on Sept. 6, while the launch of the trading platform itself is expected in the following weeks, KYC onboarding will start a few days earlier. The aim of this is to ensure that users will have time to verify their accounts and deposit their funds.
bit.ly/2lGxSXc

Why are celebrities like Manny Pacquiao getting involved in cryptocurrency when Floyd Mayweather and others got so badly burned?
Kevin McSpadden – South China Morning Post
In 2017, the price of bitcoin, and its sister coins, exploded, and then crashed. It was one of the most remarkable financial bubbles in recent memory. While the market has stabilised since that year, one positive outcome is that cryptocurrencies, and specifically the industry’s most famous brand, bitcoin, have entered the mainstream.
bit.ly/2kAtMzK

Massive $1 Billion Bitcoin Whale Transaction Makes Waves
John Biggs – Coindesk
A massive 94,505 bitcoin transaction made crypto headlines as investors and investigators speculated from whence the BTC came. The wallet, first accessed late on September 5, 2019, has been involved in only seven transactions including the massive whale move. Other moves include a $6,644 deposit early on September 6 and a deposit of $6.66 a few hours later.
bit.ly/2kzSznx

$1 Billion BTC Transaction: PlusToken Payout or Bakkt Deposit?
Rachel McIntosh – Finance Magnates
A transaction that involved the sending of 94,505 BTC (worth roughly $1 billion) to a Bitcoin wallet on Friday has been the center of much speculation over the last several days. Some analysts have made connections between the transaction and the massive exodus of crypto from the PlusToken ponzi scheme; other crypto community members have hypothesized that the transaction could be associated with the launch of Bakkt’s institutional trading platform.
bit.ly/2lCCgqd

U.S. Government agencies paid nearly $10M for blockchain analysis; led by IRS, FBI and ICE
Larry Cermak – The Block Crypto
Companies focusing exclusively on blockchain analysis have raised more than $100 million in venture capital to date. These firms help businesses that deal with cryptocurrencies remain compliant with strict AML and KYC obligations.
bit.ly/2HVvsMM

Politics

Trump’s Wall Threatens the Nation’s Defenses; The diversion of Pentagon construction money defies Congress and hurts military readiness, while accomplishing nothing.
Editorial Board – Bloomberg
Kudos to the Pentagon for shedding more light on an enduring mystery of Donald Trump’s administration: Who will pay for building a wall along the 2,000-mile U.S. border with Mexico?
/jlne.ws/2HXFqNx

Fracking Is the Bridge to Renewable Energy; Banning it now will only make the goal of a green America harder to achieve.
Noah Smith – Bloomberg
Senator Bernie Sanders is leading the charge for a national moratorium on hydraulic fracturing, the process of extracting oil or gas by cracking open subterranean rock. Unfortunately, such a ban would make another of his goals – switching to green energy – harder to achieve.
/bloom.bg/2UIao1i

Next BOE Governor Must Be Politically Sensitive, Barker Says
David Goodman and Jill Ward – Bloomberg
It’s important that the next governor of the Bank of England is politically sensitive, according to Kate Barker, who is part of the panel interviewing candidates for the job.
/bloom.bg/2UI8Bcv

Lotteries Instead of Elections? Not So Arbitrary; Selecting government officials at random is an ancient idea. Imagine the possibilities.
Ariel Procaccia – Bloomberg
Have you ever thought that 535 random people off the street would do a decidedly better job than the duly elected members of the U.S. Congress? If so, you’ve been scooped by a few millenniums; the idea of selecting government officials at random, known as sortition, is neither as outrageous nor as original as it seems.
/bloom.bg/2UK5WyZ

A JPMorgan bot analyzed 14,000 Trump tweets and found they have a ‘significant’ impact on markets
Yusuf Khan – Markets Insider
JPMorgan created a tracker to monitor the impact of Trump’s tweets on markets, and the bank said it found “strong evidence” that the president’s tweets “increasingly moved US rates markets immediately after publication.”
bit.ly/2UFQV1p

The USDA relocation to Kansas City is ripping apart the lives of its employees. Here are some of their stories.
Hannah Natanson – Washington Post
Randi Johnson raised the picture of her dead son’s football team. “What am I supposed to do with this?” she asked, tucking it back inside a growing pile of cardboard boxes in her torn-apart living room. “And these are videos of his mission trip to Mexico. I don’t have anything to play them on, but I can’t throw them away.”
/wapo.st/2HZiLAC

Democrats: Americans Won’t Pay Your Carbon Taxes; The “town hall” had a lot of excitement about the sorts of environmental policies voters have repeatedly rejected.
Ramesh Ponnuru – Bloomberg
Much has been made of the willingness of Democratic presidential candidates to risk taking positions that aren’t popular with voters at large in order to boost themselves in the primaries. Democratic politicians and strategists are aware that most people don’t want to see private health insurance banned, for example, but such leading contenders as Senators Elizabeth Warren and Bernie Sanders have come out for it anyway.
/bloom.bg/2HV7Vvt

The Trump Administration Is Playing Dirty With Automakers; A questionable crackdown on companies that already meet stringent emissions standards.
Joe Nocera – Bloomberg
The sad degradation of the Department of Justice’s antitrust division continues. An agency charged with upholding the nation’s antitrust laws, without fear or favor, has become just another tool President Donald Trump uses to reward his friends and punish his enemies in corporate America.
/bloom.bg/2HUM0UU

Another Possible Toll Of Donald Trump’s Trade War: Farmer Suicides; Mounting financial stress could further push the grim tally in rural America.
Mary Papenfuss – Huffington Post
Rural suicides in the U.S. have climbed significantly in recent years, and farm leaders and mental health care providers say the financial toll of President Donald Trump’s trade war could contribute to the tragedy.
bit.ly/2UGjj3e

Trump Changed U.S. Politics. Now He’s Changing Political Science
Ryan Teague Beckwith – Bloomberg
President upended long-held norms around U.S. institutions; Colleges report a surge of interest in poli-sci curriculums
Donald Trump isn’t just disrupting politics. He’s disrupting political science. Since the 2016 election, the president’s unorthodox behavior has breached the ivory tower, forcing professors to rip up their syllabuses, rewrite textbooks, start new lines of research, and craft entirely new course offerings.
/bloom.bg/2UFmdp8

The Trade Uncertainty Principle; New evidence that tariff shocks have put economic gains at risk.
The Editorial Board – WSJ
President Trump tweeted Friday that “The Economy is great. The only thing adding to ‘uncertainty’ is the Fake News!” Sorry, sir. The economy is fair to good, but it’s no longer as great as it was last year, and a major reason is the uncertainty caused by Mr. Trump’s trade policy.
/on.wsj.com/2HZkGoO

Regulation

CFTC to Hold an Open Commission Meeting on September 16
CFTC
U.S. Commodity Futures Trading Commission Chairman Heath P. Tarbert today announced the CFTC will hold an open meeting on Monday, September 16 at 10:00 a.m. at its headquarters in Washington, DC to consider the following:
/jlne.ws/2UGdym8

Accessing and using data in wholesale markets Call for Input
FCA
We said we would publish a Call for Input (CFI) to explore the access and use of data in wholesale markets. We expected to publish this CFI in Q2 2019/20.
bit.ly/2UJKMRN

Luxembourg considers tougher rules on fund liquidity; Financial watchdog has been consulting privately with asset managers following high-profile fund suspensions
Siobhan Riding – FT
The regulator of Europe’s largest asset management base is considering bolstering its fund rules in response to mounting liquidity risk fears following several high-profile fund suspensions.
/jlne.ws/2ULQZfV

Bank regulatory revisions pose dangers and could lead to financial crisis: critics
Ed Zwirn – NY Post
Is the US condemned to repeat the past? While the economy remains the strongest it has been in years, concern is growing that recent revisions to the country’s banking regulations could bring an end to the current record-long bull market.
bit.ly/2UHwdy5

Even Behind Bars, Martin Shkreli Is Still Filing Lawsuits
Patricia Hurtado – Bloomberg
‘Pharma Bro’ claims investor forced him to sign $250,000 note; Fraud suit is latest legal fued with ex-client or colleague
Convicted “Pharma Bro” Martin Shkreli is in prison serving a seven-year sentence, but that hasn’t tamed his appetite for using the courts to battle former colleagues and clients. On Friday, he claimed a former investor in his Elea Capital hedge fund forced him to sign a $250,000 promissory note that is now unenforceable.
/bloom.bg/2UFV45t

Investing and Trading

Casualties are emerging in the US leveraged loan market; Oppenheimer’s once towering bond fund is wobbling as veteran manager leaves
Joe Rennison – FT
It is not looking like the finale Joseph Welsh might have been hoping for. Invesco’s buyout of OppenheimerFunds will see the latter’s veteran loan manager depart, leaving behind a fund that he helped to build from scratch over two decades into a $10bn behemoth.
/jlne.ws/2HY5k3L

One world, many falling stocks? Prepare for an entirely new era of investing in which US companies will be playing ‘defensive’
Rana Foroohar – FT
I recently had a fascinating conversation with the chief financial officer of Arrow Electronics, a company I wrote about in my column in late July. Arrow, which distributes the components and semiconductors that go into cars, dishwashers, computers and phones all over the world, had just given a profit warning, its first in years, citing “deteriorating demand conditions”. I was interested in this, because the nature of its business means that Arrow is at the front lines of what the US trade conflict with China really means for American business.
/jlne.ws/2UGlHXS

KPMG partners quit in wake of WhatsApp row; Departures hit firm’s key financial services consulting division
Tabby Kinder, Madison Marriage – FT
Two of KPMG’s most senior financial consultants have quit the Big Four firm after Tim Howarth, their boss, was ousted following an investigation into his conduct. Mike Walters, who was head of compliance at UK lender Barclays until he joined KPMG in 2013, and Harps Sidhu, KPMG’s head of capital markets consulting, will both leave the business at the end of this month.
/jlne.ws/2HY4F2h

ECB Tiering Is Likely to Exempt 30% of Excess Reserves From Negative Rates
David Powell and Maeva Cousin – Bloomberg
Bloomberg Economics expects the European Central Bank to introduce a major stimulus package this week, including relaunching quantitative easing with purchases of 45 billion euros ($50 billion) a month in bonds for one year, a 10 basis point reduction in the deposit rate and the introduction of a tiering system. That setup would reduce the cost of the additional excess reserves created by the bond purchases and of moving the deposit rate further into negative territory. BE’s core scenario is for the ECB to exempt 30% of excess reserves from the deposit rate via tiering.
/jlne.ws/2HY3IqJ

Financier for ‘Joker’ Has Made Movies Into Ultimate Yield Play
Natalie Wong – Bloomberg
Former Canadian banker one of biggest independent backers; Cloth says his business is most ‘alternative of alternatives’
Jason Cloth manages risk in his film-financing business just like he did as an investment banker, scrutinizing deals with one big question in mind: “How do I not get screwed?”
/bloom.bg/2HV8B3Z

Long-Term Federal Debt Unlikely to Be a Hit; History shows that countries that exhibit persistently irresponsible budgetary policy end up with high inflation.
WSJ
Stephen Moore (“Refinance U.S. Debt While Rates Are Low,” op-ed, Aug. 30) is very likely correct in asserting that sharply lengthening the average maturity of U.S. Treasury debt by issuing 50- and 100-year bonds now to retire shorter-term debt would ultimately save the Treasury several billions of dollars annually in interest expenditures. It should be noted that these significant benefits to the U.S. Treasury and taxpayers will likely accrue as all bondholders, especially those who purchase the new long-maturity bonds, are shortchanged.
/on.wsj.com/2HT3XmL

The Fed Can’t See Its Own Shadow; Its asset purchases are squeezing nonbank lending and sinking long-term bond rates.
Andy Kessler – WSJ
The Federal Reserve Board building in Washington, March 19. PHOTO: LEAH MILLIS/REUTERS
What’s going on with the bond market, especially what the Journal has called “the relentless demand for longer-term debt securities”? Over the past few weeks 30-year bonds yielded less than 2% interest. That inverted the yield curve as short-term rates were higher, including the rate on repurchase agreements and what the Federal Reserve pays on excess reserves.
/on.wsj.com/2HXbLnJ

Investors Notch Victory Over Fannie, Freddie Profits; An appellate court overturned a ruling that supported a government decision in 2012 to sweep all the mortgage-finance giants’ profits to the Treasury Department
Andrew Ackerman – WSJ
Investors in Fannie Mae and Freddie Mac notched a win in their yearslong challenge to the U.S. sweep of nearly all of the mortgage-finance giants’ profits, a victory in their fight for gains from the companies’ return to profitability.
/on.wsj.com/2HWwwQC

Institutions

Numis founder Oliver Hemsley takes role at rival Zeus; City veteran hired as consultant by broker focused on Aim market
Cat Rutter Pooley – FT
Oliver Hemsley, the City veteran responsible for the rise to dominance of Numis in mid-cap corporate broking, has taken a job at a rival as London’s smaller stockbrokers battle for survival in a declining market.
/jlne.ws/2HWpNGm

Northern Trust takes the reins on Woodford decisions; US bank to have final say on investment choices under new terms of £150m overdraft
Siobhan Riding – FT
US bank Northern Trust will have final say over any further investments Neil Woodford makes in his namesake trust, in a fresh blow to the embattled UK stock picker.
/jlne.ws/2HWAQiw

Big US sustainable funds fail to support ESG shareholder proposals; Products from BlackRock, JPMorgan and Vanguard tend to back company management
Patrick Temple-West – FT
Big US fund managers that have promoted their credentials in tackling sustainability issues have done little to support environmental and social shareholder proposals, their voting records reveal.
/jlne.ws/2UHKxXc

Lloyds Bank Suspends Buyback After New Mis-Sold Insurance Claims
Viren Vaghela – Bloomberg
British lender joins RBS, CYBG in rush of August PPI claims; Scandal’s costs for banks have surpassed 50 billion pounds
Lloyds Banking Group Plc suspended its share buyback after a last-minute rush of compensation claims for mis-sold payment protection insurance, taking its total costs for the scandal to 21.8 billion pounds ($26.7 billion).
/jlne.ws/2HXFxsr

A Greek ETF Rises, After Earlier Turmoil; Global X MSCI Greece is a top performer this year among U.S. ETFs focused on foreign stocks. Last year was a different story.
Tanzeel Akhtar – WSJ
As Greece’s economy rebounds and consumer confidence increases, investors have been flocking to Global X MSCI Greece (GREK), an exchange-traded fund focused on Greek equities.
/on.wsj.com/2URqMgh

ETFs vs. Closed-End Funds: A Comparison; Unlike mutual funds, they both trade on an exchange. But investors should know their advantages and disadvantages
Leonard Sloane – WSJ
Investors have flocked to ETFs in recent years, pouring hundreds of billions of dollars into them. But most ignore another type of fund that trades on exchanges—closed-end mutual funds. Is that a mistake?
/on.wsj.com/2UK5pNI

What’s Holding Back All-in-One ETFs? Despite their popularity as mutual funds, the same approach hasn’t caught on with ETFs
Ari I. Weinberg – WSJ
There is a peculiar mystery going on inside the world of exchange-traded funds. ETFs are hugely popular with investors, and part of their appeal is how simple they are to buy and build a portfolio around. Yet there are few options out there for asset-allocation ETFs—ones that contain a mix of investments, like the familiar target-date or target-risk mutual funds in retirement accounts. And the asset-allocation options that are in the market now haven’t drawn a lot of interest.
/on.wsj.com/2URqQg1

Your ‘Diversified’ ETF Might Now Be Anything But; Funds get top-heavy with the biggest, hottest stocks—eroding their broad-based profiles. Here is what to check.
Michael A. Pollock – WSJ
One of the biggest selling points of many exchange-traded funds is that investors can get a diversified portfolio with one click. But some of these ETFs aren’t nearly as diversified as investors may believe.
/on.wsj.com/2UG3eL6

Regions

China Has Added Nearly 100 Tons of Gold to Its Reserves
Ranjeetha Pakiam – Bloomberg
Mainland central bank raises holdings for ninth straight month; Official sector demand spurred by drive to diversify reserves
China has added almost 100 tons of gold to its reserves since it resumed buying in December, with the consistent run of accumulation coming amid a rally in prices and the drag of the trade war with Washington.
/jlne.ws/2HSIXN6

Tax Dodgers’ ‘Phantom’ Cash Makes Up 40% of Foreign Investment
Chris Bourke – Bloomberg
Almost 40% — or some $15 trillion — of the world’s foreign direct investment is “phantom capital” designed to minimize the tax bills of multinational firms, according to study published by the International Monetary Fund.
/jlne.ws/2HTOXFk

Russia’s Massive Gold Stash Is Now Worth More Than $100 Billion
Yuliya Fedorinova and Anna Andrianova – Bloomberg
Value of Russia’s gold reserves climbed 42% in the past year; Russia is diversifying from U.S. assets and gold has rallied
Russia’s long-running bet on gold is looking better every month. The country quadrupled gold reserves in the past decade as it diversified away from U.S. assets, a move that has paid off recently as haven demand sent prices to a six-year high. In the past year, the value of the nation’s gold jumped 42% to $109.5 billion and the metal now makes up the biggest share of Russia’s total reserves since 2000.
/jlne.ws/2HXFdKf

The Conundrum at the Heart of China’s Belt and Road Initiative
Katherine Dunn – Fortune
What is more important for China’s Belt and Road Initiative: providing energy security in developing countries—or cutting out coal? That question was at the heart of a roundtable Friday at Fortune’s Global Sustainability Forum in Yunnan, China. On the one hand, the Belt and Road Initiative represents an umbrella of infrastructure projects with an estimated $2 trillion in funding largely from Chinese banks for major investment projects in developing countries—including coal-fired power plants.
bit.ly/2kqbAsI

Brexit

U.K. Parliament Will be Suspended On Monday: Brexit Update
Kitty Donaldson and Dara Doyle – Bloomberg
Beleaguered U.K. Prime Minister Boris Johnson is in Dublin for talks with his Irish counterpart, Leo Varadkar, as he presses ahead with his hard-line plan to leave the European Union “do or die” by Oct. 31. In London, his spokesman announced Parliament will be suspended at the end of Monday’s business, sparking anger from opposition politicians.
/jlne.ws/2HUFtJS

Stockpiles of tomatoes? UK retailers bristle at demands of no-deal Brexit
James Davey, Kate Holton – Reuters
A British demand for supermarkets to prepare for a potentially chaotic no-deal Brexit by stockpiling food is stoking anger in the industry, with bosses saying they should not be blamed if people can’t find everything they want on the shelves.
/reut.rs/2UGjV92

Johnson tells Varadkar no-deal Brexit ‘would be a failure’
BBC News
A no-deal Brexit would be a failure that both the British and Irish governments would be responsible for, Boris Johnson has said. The prime minister was in Dublin for his first meeting with Irish PM Leo Varadkar since he entered Number 10. The government has confirmed Parliament will be suspended later after a vote on holding an early general election.
/bbc.in/2lLzoqV

Six ways Boris Johnson could evade block on no-deal Brexit
Peter Walker – The Guardian
The strongly pro-Brexit Tory MP Nigel Evans has claimed he and colleagues have come up with “about 20” ways Boris Johnson could get around a rebel backbench bill due to become law on Monday, mandating the prime minister to seek an extension to Brexit. Evans did not spell all of them out, but here are some of the ideas that have been floated – and their pitfalls.
bit.ly/2lE8XUm

Boris Johnson could be impeached if he refuses to delay Brexit
Adam Bienkov – Business Insider
UK prime minister Boris Johnson could be impeached and removed from office if he tries to force through Brexit. Johnson has insisted that he will refuse to delay Brexit despite members of parliament passing a law compelling him to seek a delay. Under an arcane parliamentary procedure members of parliament can be charged with “high crimes and misdemeanors.” The procedure was last used in 1806 and was considered obsolete. However, Johnson himself previously called for it to be used against former Prime Minister Tony Blair.
bit.ly/2lGMhTr

Jeremy Corbyn, Britain’s unlikely EU warrior, makes last stand on Brexit
Elizabeth Piper – Reuters
In 2009, a little-known British politician declared he didn’t want to live in a European empire of the 21st century. The speaker was Jeremy Corbyn, then a backbench Member of Parliament (MP) on the hard left of the Labour Party. He was addressing a rally against the European Union’s Lisbon Treaty that gave Brussels greater powers. Today, Corbyn is his party’s leader and he is fighting a very different campaign: Preventing Prime Minister Boris Johnson leading Britain out of the EU, “do or die,” on Oct. 31.
/reut.rs/2kc3Fiu

U.K. Group Starts Legal Bid to Ensure Johnson Follows Law
Jonathan Browning – Bloomberg
Liberty files review after minister criticized legislation; Lawsuit would be withdrawn if PM says he’ll adhere to law
A British human-rights group is bringing a legal challenge to ensure that Prime Minister Boris Johnson abides by a government bill after one of his ministers criticized the legislation that requires an extension to the Brexit deadline.
/bloom.bg/2HVP0R7

Miscellaneous

M.I.T. Media Lab Director Steps Down Over Financial Ties To Jeffrey Epstein
Shannon Van Sant – NPR
Joichi Ito, the director of the M.I.T. Media Lab, resigned on Saturday, one day after an article in The New Yorker reported the lab hid its financial relationship with the disgraced financier Jeffrey Epstein.
/n.pr/2HWIPfu

Workers Are Fleeing Big Cities for Smaller Ones—and Taking Their Jobs With Them; Places including Boise and Denver are growing fast, partly because of employees working remotely
Ben Eisen – WSJ
Kelly Swift grew tired of the Los Angeles area a few years ago so she decided to leave—and take her job with her. Ms. Swift kept her role in health-care information-technology consulting, and her California salary, when she and her family settled in a suburb of Boise, Idaho. Her employer didn’t mind that she started working from home.
/on.wsj.com/2HXOAJV

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