The World Economy Is Stumbling Toward Disaster

Oct 21, 2019

First Read

Hits & Takes
By JLN Staff

The CME Group released a statement about last week’s Vanity Fair Article titled, “There is Definite Hanky-Panky Going On”: The Fantastically Profitable Mystery of the Trump Chaos Trades,” saying: “CME Group regularly monitors its markets for suspicious activity. As it relates to the Vanity Fair article published on October 17, 2019, regarding activities in the E-mini S&P 500 futures contract, the allegations about the trading activity are patently false. These transactions were entered into by a significant number of diverse market participants.”~SR

The Chicago Tribune has a feature on an exclusive look inside the Chicago Old Post Office, the soon to be new home of the Cboe.~JJL

Over the weekend I attended the 50th reunion of the independence of the Purdue Exponent into a separately owned foundation. I reconnected with many old friends from my days writing for the school paper and met some new ones. One former Exponent cartoonist is Bob Peterson. According to Fandom.com, “Peterson was nominated for an Oscar for his screenplay for Finding Nemo. Bob is a co-director and the writer of Up. He also performed the voices of Roz in Monsters, Inc., Mr. Ray in Finding Nemo, Dug and Alpha in Up and the Janitor in Toy Story 3.” ~JJL

Tabb Forum released this video of an interview with Katherine Cooper, a partner at Murphy & McGonigle, by Larry Tabb, Chairman of the TABB Group. In the video, Cooper explains the current messy state of the legal framework for cryptocurrencies in the U.S. She also discusses potential challenges those idiosyncrasies and shortcomings might pose for institutions looking to get into the digital asset business, as well as potential solutions.~MR

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Supreme Court to Consider Structure of Consumer Finance Watchdog
Critics say Consumer Financial Protection Bureau’s leadership is unconstitutional because of accountability issues
Yuka Hayashi and Brent Kendall – The Wall Street Journal
The Supreme Court will review whether the leadership structure of the Consumer Financial Protection Bureau is constitutional, a case with ramifications for the president’s powers to control the direction of independent government agencies.
/on.wsj.com/2J5auLR

*****Good dog or bad dog? Still a dog.~JJL

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Russian cyberattack unit ‘masqueraded’ as Iranian hackers, UK says; Turla group hijacked the tools of an Iran unit to lead attacks against 35 countries
Helen Warrell and Henry Foy – FT
A Russian cyber espionage unit has hacked Iranian hackers to lead attacks in more than 35 countries, a joint UK and US investigation has revealed.
/on.ft.com/2PchfiG

*****Or it is a 400 pound guy sitting on his couch?~JJL

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The world’s top economists just made the case for why we still need English majors
Heather Long – The Washington Post
A great migration is happening on U.S. college campuses. Ever since the fall of 2008, a lot of students have walked out of English and humanities lectures and into STEM classes, especially computer science and engineering. English majors are down more than a quarter (25.5 percent) since the Great Recession, according to data compiled by the National Center for Education Statistics. It’s the biggest drop for any major tracked by the center in its annual data and is quite startling, given that college enrollment has jumped in the past decade.
/wapo.st/2Mw7XMW

****** Of all the current student journalists I met at the Purdue Exponent reunion over last weekend, none were studying journalism or English or even humanities. They were engineers and every other major.~JJL

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Stablecoins; Telegraph and TON; FINRA Examination Findings
Gary DeWaal – Bridging the Week
The Group of Seven Working Group on Stablecoins conceded that utilization of stablecoins might help address the lack of access to financial services by a large portion of the world’s population and inefficient cross-border retail payments. However, the intergovernmental economic organization solely identified obstacles to stablecoin rollout without suggesting any practical ways to expedite their introduction. Separately, the Financial Industry Regulatory Authority published its annual findings of not so best practices at member firms.
bit.ly/2W5CLXZ

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Friday’s Top Three
Our top read story from Friday was Bloomberg’s Reddit Investing Tips: Online Trader Turns $766 into $107,758. Second was Thom Thompson’s JLN piece Kent Law College Covers Kraft-Mondelez, Renato Mariotti, and US v. Andrei Flotron. Third was Bloomberg’s follow-up to a Vanity Fair piece with Wall Street Has a Few Issues With Trump ‘Chaos Trades’ Story. CME doesn’t think Vanity Fair got it right either. (See Hits & Takes above.)

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Lead Stories

The World Economy Is Stumbling Toward Disaster; If a new recession strikes, the Trump administration will get — and deserve — much of the blame.
Editorial Board – Bloomberg
The world’s finance ministers and central-bank governors gathered this past weekend in Washington and looked out at a global economy badly in need of treatment. Most say they understand the dangers, but that seems open to question. With the facts in plain sight and the need for policy changes all too apparent, they’ve shown little sense of urgency, and even less sign of action. Prodded by an unhinged U.S. administration, the world could be stumbling into the next global recession.
/bloom.bg/2MYCbqT

JPMorgan Warns U.S. Money-Market Stress to Get Worse
Tracy Alloway and Stephen Spratt – Bloomberg
Funding pressures tipped to resurface heading into year-end; Bank of America, Goldman Sachs also say funding issues remain
JPMorgan Chase & Co. says the money-market stress that sent short-term borrowing rates surging last month is likely to get much worse despite the Federal Reserve’s attempts to inject billions of dollars into the financial system.
/bloom.bg/31yAl5t

Bond bubble puts global financial system at risk; IMF warns fixed-income funds are vulnerable to liquidity shocks
Chris Flood – FT
Bond funds holding assets worth about $1.7tn could face difficulties in repaying investors promptly if volatility increases, according to the IMF, which warned that problems in fixed-income markets could potentially destabilise the global financial system.
/on.ft.com/32AzVMW

Facebook Open to Currency-Pegged Stablecoins for Libra: Reuters
Hailey Waller – Bloomberg
The head of Facebook Inc.’s Libra project said that it could use cryptocurrencies based on national currencies like the dollar, rather than the synthetic one it initially proposed, Reuters reported.
/bloom.bg/2BtdzRF

Fidelity Investments Fully Rolls Out Crypto Custody Service, Exec Says
Cointelegraph.com
American financial services company Fidelity Investments has fully launched its cryptocurrency custody service. Abigail Johnson, CEO of Fidelity Investments, revealed the development in an interview with the Financial Times published on Oct. 18. Johnson said that the company is ready to roll out its crypto custody business following a year-long preparation and accumulation of clients.

How to go beyond shareholder primacy in good conscience; Corporations should bring evidence to measure their social impact
Maryanne Hancock – FT
In August, the Business Roundtable, an association of chief executives from US companies, officially shed Milton Friedman’s “shareholder primacy” doctrine — the notion that the sole purpose of an enterprise is to maximise financial returns — and embraced the belief that corporations can, and should, play a role in addressing global challenges.
/on.ft.com/2Bspord

African swine fever takes toll on China’s corn sector; Prices tumble after steep decline in demand for hog feed
Sun Yu – FT
The rapid spread of African swine fever has taken its toll on companies operating in China’s corn sector, where prices have plummeted after a sharp fall in demand for hog feed, the primary use of the crop.
/on.ft.com/2MAMbrw

Investors should look beyond the bottom line; Asset managers have a key role in changing corporate perspectives
The editorial board – FT
This newspaper has welcomed the shift among corporate leaders from a narrow focus on shareholder value to the pursuit of a broader purpose — for a hard-headed reason: when business takes a broad perspective, it can leave everyone more prosperous, including shareholders. Rejecting the dogma of shareholder primacy is not a question of bleeding hearts, it is a matter of enlightened self-interest.
/on.ft.com/2By9M5u

Behind Ken Fisher’s Ads, a Hardball Culture Reels in Billions
Sabrina Willmer – Bloomberg
‘It was just a nightmare,’ ex-staffer says citing panic attack; Others say they weren’t surprised by Fisher’s vulgar remarks
The cold calls go out, hundreds a day, from a dank basement in the redwood hills south of San Francisco. Inside the rambling, rustic-chic house, the billionaire Kenneth Fisher has deployed a division of his mostly young, mostly male acolytes on a single, high-pressure mission: sell.
/bloom.bg/2MZ75zn

FinTech Innovation Lab New York Now Accepting Applicants for 2020 Class
Press Release
Applications are now being accepted for the FinTech Innovation Lab New York, a 12-week program co-founded by Accenture (NYSE: ACN) and the Partnership Fund for New York City that helps early- and growth-stage fintech companies accelerate product and business development through in-depth collaboration with top financial services and venture capital firms.
/bwnews.pr/2BqN6Ev

Stock markets cannot be the only sun at the centre of the economic universe; Central banks have been complicit in keeping stock markets revved up and feeding asset bubbles, but with monetary policy near exhausted, fiscal stimulus will have to take over. Expect an end to the bull run
Anthony Rowley – South China Morning Post
Stock markets, in the United States especially, have become bubbles that refuse to burst or liquidity lakes that refuse to drain even as vitality leaks from the global economy. What is with this death-defying quality that many equity (and bond) markets appear to have taken on?
bit.ly/2J9JWZR

US business schools realise ESG is no fad but part of long-term trend; Institutions back sustainability amid growing concerns about climate change and inequality
Gillian Tett – FT
The University of Chicago has long been considered the epitome of free-market thought. No wonder: this was the intellectual home of economists such as Eugene Fama and Milton Friedman, who championed the pursuit of profit and the doctrine of shareholder primacy which has driven corporate America for nearly half a century.
/on.ft.com/2VYwgq1

Everyone’s Trying to Scam the Elderly, Including Lawyers, Insurers and Advisers; Phone fraudsters and greedy children aren’t the only ones manipulating older Americans, and the threat to their assets is growing.
By Nick Leiber – Bloomberg
Terry Ann McIntosh’s financial nightmare began four years ago, soon after she hired a caregiver through a family services website. McIntosh, then 75 and in a wheelchair, had assumed that the young woman who eventually showed up at her San Mateo, Calif., home wouldn’t steal from her. She was wrong.
/bloom.bg/2P1IpJj

Ex-CEOs to plead guilty to roles in U.S. college admissions scandal
Nate Raymond – Reuters
Three wealthy parents including the former chief executives of bond manager Pimco and specialty finance lender Hercules Capital Inc (HTGC.N) will appear in court on Monday to plead guilty to participating in a vast U.S. college admissions cheating and fraud scheme.
/reut.rs/35TLKQs

China’s propaganda chief says Cold War mentality hindering mutual trust in cyberspace
Josh Horwitz, Yingzhi Yang – Reuters
A “Cold War mentality” and “bully behavior” are hindering mutual trust in cyberspace, China’s propaganda chief said on Sunday at the start of the World Internet Conference in the eastern Chinese town of Wuzhen.
/reut.rs/35R7tbR

The downside to Charles Schwab and TD Ameritrade eliminating trading fees (yes, really)
MarketWatch
Andrew Keshner – MarketWatch
There might be no such thing as a free stock trade. After the news that Charles Schwab Corp. and TD Ameritrade would soon be dropping trade commissions, some financial advisers and market experts say it’s possible mom and pop investors could still end up paying — just in a different way. Inexperienced investors could overtrade or make risky stock bets, unimpeded by fees to make them stop and think a second, advisers told MarketWatch.
/yhoo.it/2N5yBvk

Exchanges, OTC and Clearing

CME Group Statement on Vanity Fair Article
CME Group
CME Group regularly monitors its markets for suspicious activity. As it relates to the Vanity Fair article published on October 17, 2019, regarding activities in the E-mini S&P 500 futures contract, the allegations about the trading activity are patently false.
bit.ly/2o3GQzj

LCH clears first EURSTR swaps
LCH
LCH is first clearing house to offer clearing of Euro-denominated swaps benchmarked to the new reference rate, EURSTR; Launched in response to strong market demand to clear the products; Demonstrates LCH’s support for global rates reform
LCH, a leading global clearing house, today announced that it has cleared the first Euro interest rate swaps referencing the Euro short-term rate (EURSTR). LBBW and Morgan Stanley were among the first participants to clear derivatives using the new rate, first published on 2 October 2019.
bit.ly/32BkIeS

LCH clears first EURSTR swaps trades with Morgan Stanley and LBBW; Morgan Stanley and LBBW have cleared the first EURSTR derivatives referencing the new interest rate benchmark.
Hayley McDowell – The Trade
LCH has cleared the first swaps trades referencing the new euro short-term interest rate (EURSTR), having recently launched a clearing service for the new benchmark that replaces Eonia and Euribor transactions.
bit.ly/2MvSOLv

Eurex Exchange Readiness Newsflash | Change in selected Eurex Liquidity Provider reports
Eurex
We would like to inform you about upcoming changes in some Eurex Liquidity Provider reports, which are scheduled for an implementation in December 2019.
bit.ly/32AZi1h

SGX and E-Steel unveil bigger and broader Singapore Iron Ore Week for 2020
SGX
Expanded event will feature new forums on steel, coking coal and freight to bring together more industry players in the ferrous metals ecosystem
Singapore Iron Ore Week (SIOW) 2020 is set to be Asia’s largest event for the ferrous metals industry, as it expands its focus beyond iron ore to feature other key components along the ferrous metals supply chain. To be held on 18-21 May 2020 at Sands Expo & Convention Centre, the 8th SIOW will bring together an unrivalled line-up of industry experts and decision makers globally across the steel-making and trading value chain.
bit.ly/2BraEJr

Adena Friedman, Nasdaq CEO on the IPO market today: Success will be determined over time
Yahoo Finance Video
In a conversation with Yahoo Finance, Adena Friedman, Nasdaq CEO, discusses the state of the U.S. IPO market, including whether or not we’re at a top. “Every IPO has its own story.”
/yhoo.it/33N36N3

Surge in LIS Volumes when HKEX made its bid for LSE
Steve Grob via LinkedIn
I was chatting last week with the team at big xyt about how market structure reacts to real world events. So we looked at trading in LSE shares while it was subject to its bid from Hong Kong a few weeks back.
bit.ly/31tvBxO

Fintech

Meet the Buffett bot: quant fund tries to crack the ‘value’ code; Computer-powered Havelock is battling the market’s shrinking attention span
Robin Wigglesworth – FT
In a small basement office near Portman Square in London, wedged between the Grazing Goat pub and the Red Sun Chinese restaurant, a handful of eggheads are attempting to code a robotic Warren Buffett.
/on.ft.com/32zR8q3

Fidelity’s search for the technology of tomorrow; Buffeted by falling fees and rising costs, the asset manager is investing heavily in an effort to remain competitive
Robin Wigglesworth – FT
Scrawled flow charts and a mission statement for blockchain adorn the meeting room, while an early bitcoin mining processor stands on a table next to a dispenser of M&Ms, Skittles and spicy pumpkin seeds. Swivelling, speech-sensitive video conferencing cameras add to the sense of earnest tech feng shui.
/on.ft.com/33PNmco

Are Fintech Startups More Ethical Than Banks?
Ron Shevlin – Forbes
There’s a misguided notion permeating the banking industry: That fintech startups are somehow more ethical than legacy banks, or that there is a fintech “ethos” that distinguishes fintechs from banks (and somehow makes fintechs morally superior).
bit.ly/2pBx5ZE

IHS Markit deploys machine learning to expand dividend forecasting tool; IHS Markit’s dividend forecasting service has been expanded with the help of advanced analytics and machine learning models.
Hayley McDowell – The Trade
IHS Markit has implemented advanced analytics and machine learning technology to double the number of companies covered in its dividend forecasting tool.
bit.ly/32zySNs

UK venture capital arm to write ‘big cheques’ for tech sector; A division of British Business Bank is prepared to replace EU funding hit by Brexit
Daniel Thomas – FT
The state-owned British Business Bank’s venture capital arm will “write big cheques” to support the country’s tech sector, as Brexit squeezes funding from the EU.
/on.ft.com/2Jb7a1P

Cryptocurrencies

Fidelity rolls out cryptocurrency custody business
Robin Wigglesworth – FT
Fidelity is ramping up its cryptocurrency custody business, hoping to profit from the scarcity of big, regulated institutions in the chaotic world of digital assets, according to Abigail Johnson, the investment group’s chief executive. The Boston-based financial group, which has $2.8tn of assets under management, announced the launch of Fidelity Digital Assets last autumn, promising “enterprise-quality custody and trade execution services” for hedge funds, family offices and financial advisers dabbling in cryptocurrencies.
/on.ft.com/31oYE5B

Why Central Bankers Got Serious About Digital Cash
Alastair Marsh – Bloomberg
What central banks once sneered at, they’re now scrambling to master. Back when Bitcoin, the world’s first cryptocurrency, was seen as the province of anarchists and drug dealers, it was easy for the world’s central bankers to keep their distance. That’s changed in a hurry because of Facebook Inc.’s proposal to create its own digital currency, Libra, which is seen by many regulators as a threat to existing monetary regimes.
/bloom.bg/2o3rlr8

Zuckerberg Hearing May Be the Start of Next Phase of Tech Battle
Felice Maranz – Bloomberg
A House hearing scheduled for Wednesday with Mark Zuckerberg as the sole witness will kick off the “next phase” in the battle between big tech companies and the U.S. government, according to Wedbush. “The drum-roll has started” for the Financial Services committee hearing, with Zuckerberg set to defend the Libra cryptocurrency effort, which still faces a “massive regulatory spotlight,” analyst Daniel Ives wrote in a note. The hearing is titled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors.”
/bloom.bg/32AFVFw

Libra Association could launch a series of fiat-pegged stablecoins, says Marcus
Yogita Khatri – The Block Crypto
The Libra Association is open to launching multiple fiat-pegged stablecoins, rather than the synthetic one it initially proposed.
bit.ly/2W20DMk

Life after Libra: how regulators could fuel rise of digital currency; Facebook’s project to ‘reinvent money’ may lead to reform of global financial system
Patrick Jenkins – FT
What does Facebook have in common with a failed German bank? On the face of it, not much. Mark Zuckerberg’s empire, valued at more than $500bn and with 2.7bn monthly users, is a world away from Bankhaus Herstatt, a small Cologne-based lender that collapsed in a sea of foreign exchange losses in 1974.
/on.ft.com/2My3yJr

AT&T Sued Over Alleged iPhone Hack, Cryptocurrency Theft
Jacklyn Wille – Bloomberg
AT&T Inc. is facing a new lawsuit in federal court in Los Angeles from a digital media adviser and adjunct professor who says two AT&T employees hacked his iPhone and facilitated the theft of nearly $2 million in cryptocurrency. Seth Shapiro claims AT&T failed to protect him from a “SIM swapping” scheme carried out by its employees. In a SIM swapping scheme, victims’ phone numbers are transferred to a different device without their consent, allowing others to access their passwords and accounts.
bit.ly/31yWdxe

It’s Not Time to Write Libra’s Crypto Obituary Just Yet
Michael J Casey – Coindesk
To paraphrase Mark Twain, rumors of the nation-state’s demise are greatly exaggerated. The exits of Mastercard, Visa, Paypal and four other firms from the Libra consortium came after France and Germany moved to block the global “stablecoin” cryptocurrency project and after U.S. lawmakers delivered stern warnings to Libra members. This was more than a major setback for Libra founder Facebook; it was also a reminder that government power remains unrivaled. Ten years into the bitcoin revolution, it remains extremely difficult to challenge the state’s monopoly over money.
bit.ly/2p29Ac9

Bitcoin IRA, Genesis Capital launch lending program of IRA holdings
Celia Wan – The Block
Cryptocurrency individual retirement account (IRA) firm Bitcoin IRA has partnered with Genesis Capital to allow retirement account holders to earn interest on their cryptocurrency and cash holdings. Announced on Monday, the partnership enables Bitcoin IRA users to lend out their assets through cryptocurrency lending firm Genesis Capital and earn interest. The lending program is set to begin in November and will accept bitcoin (BTC), ether (ETH), litecoin (LTC), and privacy-oriented cryptocurrency zcash (ZCASH) at launch.
bit.ly/2Mz7sBD

Bitfinex Files for Subpoena in Bid to Recover $880 Million in Frozen Funds
Wolfie Zhao – Coindesk
Bitfinex has applied to a U.S. court to subpoena a former banking executive of a trust company that the crypto exchange believes can help it recover over $850 million in frozen funds. The exchange submitted a filing on Oct. 18 to a court in California for obtaining the permission to take the deposition testimony of Rondell “Rhon” Clyde Monroe, a former vice president of TCA Bancorp. It also seeks to obtain documentations of Monroe’s communication with Crypto Capital staffers.
bit.ly/32Cb63e

Bitcoin: ‘Most Dramatic’ 2020 Halving Could Cut Supply by $63M a Week
William Suberg – Cointelegraph
Bitcoin (BTC) advocates continue to focus on the May 2020 block reward halving this week as the impact on price becomes more apparent. In a Twitter discussion beginning Oct. 18, commentators noted that next year’s event will reduce the amount of new Bitcoin in circulation up to $63 million per week at current prices. The block reward refers to the amount of new Bitcoins miners receive for mining a new block. Currently 12.5 BTC, after the halving, the reward will fall to 6.25 BTC. Previous halving events have triggered upward price motion, leading to suggestions that 2020 will be no different.
bit.ly/31zLtiq

Roger Ver’s Bitcoin.com acquires Japanese blockchain development startup O3 Labs
Yogita Khatri – The Block Crypto
Bitcoin.com, the firm backed by cryptocurrency investor Roger Ver, today announced that it has acquired Japanese blockchain development startup O3 Labs. The two firms did not disclose the price of the acquisition.
bit.ly/31trKkk

G20 members ask IMF to examine risk associated with stablecoins
Steven Zheng – The Block Crypto
G20 nations are asking the International Monetary Fund (IMF) to help establish some of the economic implications associated with stablecoins, Reuters reports. In a press release obtained by FXStreet, the nations said, “We ask the IMF to examine macroeconomic implications, including monetary sovereignty issues in its members of global stablecoins.” The nations also add that while they acknowledge the “potential benefits of financial innovation,” they agree that stablecoins could give rise to a set of “serious” public policy and regulatory risk.
bit.ly/32FcXVi

Binance U.S. adds FDIC insurance for USD deposit
Steven Zheng – The Block Crypto
USD deposits on Binance U.S. are now FDIC insured, according to a blog post published by the exchange on Friday. According to Binance U.S., the exchange holds its customer’s USD deposits in “pooled custodial accounts” at banks that are insured by the FDIC. “The pooled custodial accounts are maintained in a manner that provides access to pass-through FDIC insurance coverage up to the depositor coverage limit, which is currently $250,000,” Binance U.S. states in its blog post.
bit.ly/2MyJzdx

Bitmain opens a large crypto mining farm in Texas
Yogita Khatri – The Block Crypto
Chinese mining hardware giant Bitmain has launched a 50MW (megawatt) cryptocurrency mining farm in Rockdale, Texas. Announcing the news on Monday, Bitmain said the farm can expand to a capacity of over 300MW, making it “the world’s largest for bitcoin mining.” It is Bitmain’s third cryptocurrency mining project in the U.S., per the announcement. For building and operating the Texas facility, Bitmain has partnered with Rockdale Municipal Development District and Canadian tech firm DMG Blockchain Solutions. The first phase of the farm – 25MW facility on a 33,000-acre land owned by aluminum producer Alcoa – began last year, per the announcement. Bitmain said it will continue its construction to build the 50MW facility, and then later expand it over 300MW.
bit.ly/35SNdXh

The reasons to avoid Bitcoin are multiplying. Here’s why I say you should avoid it
Alan Oscroft – Motley Fool
“Invest EUR250 and earn more than EUR10,227 a month!”
That was in an email I just received, and it told me “Libra is shaking up Bitcoin” and that it will lead to “excellent prospects for those who choose to invest in cryptocurrencies.”
bit.ly/2J9h9oy

Politics

Prospect of President Warren Spooks Energy Investors; Analysts focus on Democratic presidential hopeful’s threat to choke off drilling on federal lands
Ryan Dezember – WSJ
Of all the market-moving tweets these days, one in particular from Democratic presidential hopeful Sen. Elizabeth Warren is sending shivers through the oil industry.
/on.wsj.com/31zT1S4

Facebook and Free Speech; Zuckerberg says progressives shouldn’t abandon liberal values. Progressives object.
The Editorial Board – WSJ
Mark Zuckerberg offered a stalwart defense of liberal values on free speech last week, and it’s a sign of our illiberal times that progressives were his biggest critics. A Joe Biden spokesman accused the Facebook CEO of using “the Constitution as a shield for his company’s bottom line,” and pundits on Twitter raged at his refusal to censor ads for Donald Trump.
/on.wsj.com/35SBqIB

We’ve been Zucked! Who is more narcissistic and oblivious to reality — Facebook’s founder or our president?
Rana Foroohar – FT
I once wrote a Swamp Note entitled “Have you been Zucked?”. I’ve now tweaked the headline since the answer is clear. I know I’m not the only one who was utterly nauseated by Mark Zuckerberg’s insipid speech at Georgetown University in Washington last week (pictured below), in which the Facebook founder and chief executive posited himself as a protector of free speech, rather than a surveillance capitalist.
/on.ft.com/33P90x8

Lagarde Says U.S. Is at Risk of Losing Global Leader Role; The incoming European Central Bank head warns of U.S.-China trade war risks and urges President Trump not to push for lower interest rates
Kate O’Keeffe – WSJ
Christine Lagarde, the departing head of the International Monetary Fund who is set to take over as president of the European Central Bank, said in an interview that the U.S. risks diminishing its role as a global leader and warned of dire consequences of its trade war with China.
/on.wsj.com/33QAfHP

UK to go further and faster to tackle climate change
UK Government
The government today set out measures to go further and faster to tackle climate change, in response to Committee on Climate Change (CCC) recommendations
bit.ly/35Q1cNy

Regulation

Goldman Sachs banker charged with insider trading; Bryan Cohen accused of tipping off trader about bids involving Syngenta and Arby’s
Kadhim Shubber and Laura Noonan and Arash Massoudi – FT
A Goldman Sachs banker has been charged with insider trading in a scheme that allegedly generated $2.6m in illegal profits as he tipped off a trader about multibillion-dollar deals involving bank clients like Syngenta.
/on.ft.com/33PhwME

European Securities and Markets Authority and ASIC to co-operate on benchmarks
ASIC
The European Securities and Markets Authority (ESMA) and the Australian Securities and Investments Commission (ASIC) are pleased to announce that they have signed a Memorandum of Understanding (MoU) setting out cooperation arrangements in respect of Australian benchmarks[1].
bit.ly/31zyddF

ESMA and the Australian Securities and Investments Commission to Cooperate on Benchmarks
ESMA
The European Securities and Markets Authority (ESMA) and the Australian Securities and Investments Commission (ASIC) are pleased to announce that they have signed a Memorandum of Understanding (MoU) setting out cooperation arrangements in respect of Australian benchmarks.
bit.ly/2pJEw0L

SEC Proposes Amendments to Exemptive Applications Procedures
SEE
The Securities and Exchange Commission today announced that it has voted to propose rule amendments to establish an expedited review procedure for applications under the Investment Company Act that are substantially identical to recent precedent, as well as a new informal internal procedure for applications that would not qualify for the new expedited process. The proposed actions are intended to make the application process more efficient as well as to provide additional certainty and transparency to the process. The Commission also announced its intention that the staff of the Division of Investment Management begin publicly disseminating comments on applications and responses to those comments.
bit.ly/2MyOg7m

Regulation in a changing world
UK FCA
Speech by Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered at the City of London / Cicero event on Future of Regulation.
bit.ly/31z6jhQ

Basel Committee Reports On Basel III Implementation Progress
Mondovisione
The Basel Committee on Banking Supervision has today issued the Seventeenth progress report on adoption of the Basel regulatory framework. As noted by the Group of Central Bank Governors and Heads of Supervision, the Committee’s oversight body, member jurisdictions are expected to ensure a full, timely and consistent implementation of the finalised Basel III reforms.
bit.ly/35SPyS3

Fraudsters target investors with cloned firms
By Rachel Mortimer – FT Adviser
Fraudsters have been impersonating Quilter Cheviot and St James’s Place in an attempt to sell investments to potential victims. The Financial Conduct Authority warned fraudsters were attempting to dupe members of the public by operating under the name Quilter Cheviot Investment Management – a trading name of the authorised investment manager Quilter Cheviot Limited.
bit.ly/33NHiRy

Top fund manager forced to resign after BBC investigation
BBC
One of the world’s leading fund managers has been forced to resign after the BBC discovered he had broken investment rules.
/bbc.in/33SpbtR

Investing and Trading

Frackers Float ‘Shale Bonds’ as Traditional Investors Flee; Companies offer asset-backed securities as they seek new sources of capital; ‘there are not a ton of good options’
Christopher M. Matthews – WSJ
Desperate for cash, shale companies are trying to court investors with a new and potentially risky financial instrument that resembles mortgage bonds.
/on.wsj.com/2W1lbo3

Why private equity is eroding the IPO market; Financial engineering allows buyouts to extract superior returns without running companies better
Jonathan Ford – FT
Here is an experiment. You are a pension fund investor looking at buying shares in an imaginary company — let’s call it Acme. How might you want to own those shares?
/on.ft.com/2BwRBNP

US business schools realise ESG is no fad but part of long-term trend; Institutions back sustainability amid growing concerns about climate change and inequality
Gillian Tett – FT
The University of Chicago has long been considered the epitome of free-market thought. No wonder: this was the intellectual home of economists such as Eugene Fama and Milton Friedman, who championed the pursuit of profit and the doctrine of shareholder primacy which has driven corporate America for nearly half a century.
/on.ft.com/2VYwgq1

Why more asset managers are taking cues from UN sustainability goals; Asset managers are increasingly shaping investment strategies around UN ESG targets, but there are concerns around execution
Jennifer Thompson – FT
Look carefully at the lapels of some executives in asset management and you increasingly see them wearing a round brooch resembling a multicoloured pie.
/on.ft.com/2VYISxe

Proxy advisers under regulators’ glare over transparency concerns; Shareholder advisory groups are reviewing their business practices following increased legal scrutiny of how they make recommendations
Attracta Mooney – FT
“You have worked hard to save for retirement. But proxy advisory firms pose a growing risk,” read the stark warning in a US newspaper ad last year, which formed part of a six-figure media campaign.
/on.ft.com/2VZMkYj

Reputations at stake for asset managers as biodiversity concerns mount; Institutions are paying more attention to preserving natural habitats in their investment decisions
Jennifer Thompson – FT
We know about the existence of the Mount Kahuzi climbing mouse due to two specimens found on an extinct volcano in the Democratic Republic of Congo.
/on.ft.com/31x3fmp

Auditors rapped for double standards over lack of diversity; The regulator said the lack of diversity was ironic given that auditors are recruited by large corporations to help them improve their inclusion strategies
Emily Horton – Financial News
Accountancy firms advising large companies on diversity initiatives have been scolded by the UK’s auditing watchdog for not having enough women, ethnic minorities and disabled people in decision-making positions.
bit.ly/2W0zrgJ

Institutions

HSBC’s Stand-In Weathers Storms in Bid for Top Job; Interim CEO Noel Quinn is working hard to prove he is worthy of taking the role permanently
Margot Patrick – WSJ
HSBC Holdings HSBC -0.36% PLC started 2019 with a chief executive poised for growth and focused on making its 238,000 employees the “best version of themselves.” It is ending the year with a new boss cutting thousands of jobs, culling clients and putting businesses on the block.
/on.wsj.com/32udwB3

Hedge funds and mutual funds converge on US stock holdings; Ownership overlap increases risk of crowded trades, which can lead to large losses
Chris Flood – FT
The overlap in US companies owned by both hedge funds and traditional mutual funds has climbed to a fresh high in a convergence that elevates the risk of crowded trades.
/on.ft.com/2BtMIVR

Woodford isn’t the only worry for UK wealth managers; Rising costs and falling investor confidence are forcing wealth managers to consolidate
Kate Burgess – FT
Last week was a rough week for private client investment advisers and wealth managers. The unending vacillations over Brexit capped the final throes of Neil Woodford’s investment fund empire, eroding already weak investor confidence.
/on.ft.com/31tnkde

Money market fund managers bet on a surge in demand for ESG products; Some rebrand funds but other investors wait on the sidelines
Billy Nauman – FT
After outsized growth through the first half of 2019, fund managers are expanding their suites of money market funds that incorporate environmental, social and governance factors into their investment decisions.
/on.ft.com/32x8oMs

Hedge fund Lansdowne thinks ‘idiotic’ bond prices will fall; One of Europe’s most influential hedge funds in radical shake-up of its portfolio
Laurence Fletcher – FT
Lansdowne Partners, one of Europe’s biggest and most influential hedge funds, is betting that financial markets are on the brink of a reversal that will see a big fall in “idiotic” bond prices, a slump in technology stocks and a revival in UK equities.
/on.ft.com/31wfmQz

Former Third Avenue Management CEO Moves Into Indexes; David Barse’s XOUT Capital designs indexes and licenses them to money managers; ‘The ultimate goal is to outperform.’
Justin Baer – WSJ
David Barse, whose long career as chief executive of Third Avenue Management LLC unraveled in the final weeks of 2015, is back on Wall Street pitching a better way to invest in indexes.
/on.wsj.com/2N2BCMP

Neil Woodford fallout ‘hits promising firms’, says British Patient Capital
Patrick Hosking- The Times
The Woodford debacle has damaged confidence among venture capital investors and has left a temporary hole in the finances of potentially promising early-stage companies, according to the head of British Patient Capital, the taxpayer-backed fund.
bit.ly/35Q0VKw

A Commodities Hedge Fund Titan Is Quitting After 50 Years
By Mark Burton – Bloomberg
Willem Kooyker’s son Terence set up a new fund called Valence; The new fund aims to close with around $800 million in assets
Blenheim Capital Management, once the world’s largest commodities fund, is being wound down as founder Willem Kooyker calls time on a 50-year trading career that earned him a gilded reputation in oil, metals and agricultural markets.
/bloom.bg/2J8UisS

Regions

Creditors and politicians spar over Venezuela’s oil industry jewel Citgo; Opposition leader Guaidó seeks ways to hold on to refiner as $913m bond payment looms
Colby Smith and Gideon Long – FT
When Juan Guaidó and his Venezuelan opposition gained control of one of the jewels of the country’s oil industry — Texas-based refiner Citgo — it seemed to offer them financial muscle for an effective challenge to the regime of President Nicolás Maduro.
/on.ft.com/33LSTAz

1MDB-Linked Superyacht Is For Sale Again With a Bigger Price Tag
Anuradha Raghu – Bloomberg
The 300-foot luxury yacht once owned by Malaysia’s fugitive financier Low Taek Jho is back on the market. Just six months after the vessel was bought for $126 million, yachting company Camper & Nicholsons is listing Tranquility for sale again, its website showed. It has an asking price of $200 million, according to Business Insider, almost 60% more than what casino company Genting Malaysia Bhd. paid.
/bloom.bg/2oZbWIU

U.S. Charges Against Turkish Lender Risks Punishing Other Banks
Asli Kandemir and Ercan Ersoy – Bloomberg
Halkbank’s indictment may cause borrowing costs to jump; Bank’s bond yields soar on Iran-sanctions busting allegations
U.S. criminal charges brought against a state-owned Turkish bank risks spilling over into the rest of the industry, pushing up borrowing costs for lenders dependent on foreign funding.
/bloom.bg/2MBwlgl

ECB Restarting QE Will Need More Purchase of Private Debt
David Powell – Bloomberg
The European Central Bank is running low on sovereign bonds to buy — that undermines the credibility of its pledge to keep going until inflation picks up. If inflation takes two years to firm, the ECB could face a shortage of about 60 billion euros ($67 billion) in debt during the next phase of its asset-purchase program. At the present pace, the central bank could run out of bonds in little over a year, according to calculations by Bloomberg Economics. The best way out is to shift the composition of purchases: BE estimates the markets for corporate and covered bonds could easily bridge the gap.
/bloom.bg/2P6ul1e

Made in Taiwan: Seeds of Future Bond-Market Volatility; South Korea, Japan and Taiwan’s holdings of U.S. dollar corporate bonds have more than doubled in the past five years
Mike Bird – WSJ
Asia’s insurance behemoths, particularly in Taiwan, pose a growing risk to the U.S. corporate-bond market after a multiyear binge on greenback debt.
/on.wsj.com/2P1K1mi

China’s demand for natural gas, infrastructure to rise even as trade war slows down economy; Trade war only affects US exporters as China has slapped 25 per cent tariffs on the commodity
Eric Ng – South China Morning Post
China’s appetite for natural gas and infrastructure needs to accommodate imports will grow strongly in the next few years, even as the prolonged trade war slows its economy and stifles purchases from the US, forcing it to look elsewhere, an industry expert says.
bit.ly/2P1KtRw

China’s Pig Crisis Is Pushing Up Bacon Prices Worldwide
By Jason Gale – Bloomberg
Bringing home the bacon will cost more. Blame African swine fever. The deadly pig disease is wiping out hundreds of millions of hogs, mostly in China, driving a global surge in pork and bacon prices from Auckland to Vancouver. In Europe, swine carcasses have soared 31% and piglets 56% in the past year. Pig-meat is poised for the steepest jump since mad cow disease and bird flu outbreaks in 2004 led consumers to eat more pork, according to an index compiled by the Food and Agriculture Organization of the United Nations in Rome.
/bloom.bg/35TLgKn

Brexit

The Window for Brexit May Already Have Closed
Parliament is delaying Johnson’s plan—and generational replacement has undercut its support.
David Frum – The Atlantic
The British people have changed their mind about Brexit. Beginning in the summer of 2017, and accelerating in the summer of 2018 by an ever wider margin, British people have told pollsters that they voted wrong in the Brexit referendum of June 2016.
bit.ly/35VmrNV

Brexit: More than 240,000 sign letter demanding Final Say referendum in less than 48 hours
Zamira Rahim – The Independent
More than 240,000 people have signed a letter within the past 48 hours demanding a Final Say referendum on Brexit.
The letter, organised by People’s Vote and The Independent, calls on officials in the UK and European Union to do all they can to allow the British public to confirm whether any final deal put forward by Boris Johnson is indeed the “will of the people”.
bit.ly/33SXnVV

Johnson’s Battle to Deliver Brexit: Here’s What Happens Next
Tim Ross – Bloomberg
Prime Minister Boris Johnson failed in his first attempt to get his Brexit deal approved in a vote in the British Parliament. He’s been forced to seek an extension to the Oct. 31 deadline, but says he’s going to fight all the way to complete the U.K.’s divorce from the European Union on time.
/bloom.bg/31tovta

Johnson asked EU leaders for a Brexit delay. He also told them not to grant it
Peter Wilkinson and Aimee Lewis – CNN
UK Prime Minister Boris Johnson has been forced to ask the European Union for an extension to the Brexit process, an outcome he once notoriously described as worse than being “dead in a ditch.”
But in an extraordinary development that followed a bruising defeat in Parliament, he simultaneously disowned the request, declaring that the three-month delay would be “corrosive.”
/cnn.it/2BvX4o4

Currency traders called in early to cover fallout from Brexit vote; Barclays, Goldman Sachs and Deutsche order staff to prepare for gyrations on market opening
Philip Georgiadis – FT
Currency traders in New York and London have been ordered into the office on Sunday to make money from opportunities unleashed by the crunch parliamentary vote on Boris Johnson’s Brexit deal.
/on.ft.com/2ByaTCc

‘No Reason to Sell U.K. Assets’: Market Strategists on Brexit
Sam Unsted, Ksenia Galouchko, and Joe Easton – Bloomberg
Pound reverses an earlier drop; some domestic stocks rise; Eyes now turn to potential vote today on Boris Johnson’s deal
This weekend’s developments in the U.K.’s path to exit the European Union have left equity and sterling investors trying to guess what will happen next, though some are optimistic that Boris Johnson may be able to win parliamentary backing for his deal this week.
/bloom.bg/2J8KcIu

Miscellaneous

MBA students seek higher ‘purpose’ than mere money; Ethical capitalism attracts graduates considering business degrees
Jonathan Moules – FT
Matt Averna went to business school with the goal of doing something of purpose. “I am aware that this could sound arrogant,” says the 28-year-old. “But I would have a very hard time getting motivated about working for a large corporation selling more of their product.”
/on.ft.com/2My4nC1

Thomson Reuters begins search for new chief executive; The company’s board has hired search firm Spencer Stuart to draw up a shortlist
Andrew Edgecliffe-Johnson, Anna Nicolaou and Alex Barker – FT
Thomson Reuters has begun the search for a chief executive to succeed Jim Smith, who has led the $34bn professional information group since 2012.
/on.ft.com/33PvgXY

Here, the opioid crisis is bigger than politics. As rehab centers replace pill mills, an Ohio River city fights back
Jazmine Ulloa – The Boston Globe
Dale King rumbled into the parking lot in his military Jeep, a black 1940s-style clunker that he maneuvered with a skull-tipped stick shift. Heavy metal music blasted from the garage that he and some friends had converted to a gym for the neighboring addiction center. Patients from next door were packed inside wearing worn T-shirts, faded athletic gear, and other hand-me-downs. Half the class were barefoot. Some wore jeans, others ankle monitors.
bit.ly/32B1DJB

Find Your Zen, Then Crush Your Job Interview; Discovering offbeat ways to center yourself can put you in the perfect frame of mind when meeting a prospective employer
Sue Shellenbarger – WSJ
The hours before a job interview can feel like torture. How can you spend that time in a way that enables you to arrive calm and centered?
/on.wsj.com/2p3UrHt

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