First Read

Good Friday
By John J. Lothian

Many markets are closed today for the Good Friday holiday. This was not always the case. I spent many a Good Friday in my day working my trading desk for markets that were open.

Yesterday I learned something about the word “Eucharist” when a customer of the Jewish faith wished me “Happy Thanksgiving.” Eucharist in Greek means Thanksgiving. My minister shared this definition during our church’s Maundy Thursday service.

Many years ago, when I was on the board of deacons of the church I grew up in, we used to recreate the Last Supper in a Maundy Thursday service. On the night we practiced, I was selected to play Jesus. The director told me that I was so big everyone was going to be looking at me anyway, so I might as well have the role.

At that time I was looking for a new job and had taken a number of tests at a securities firm up in Milwaukee, WI. One of the tests asked you the same questions in different ways 13 different times, with much of the focus on taking, selling, and sharing drugs.

The manager of the firm told me I scored very high, a 125. I asked if that was good. He told me that it either meant I was a pathological liar or very religious. I asked him if I told him that I was playing Jesus in a passion play that week, would it answer that question for him.

The next highest scorer on the test was a used Cadillac salesman. What can I tell you – one’s faith can be a shield.

I wish all of you a Happy Thanksgiving, a day late on this Good Friday. Enjoy the day off if you have it and the family gathered together this weekend. Shalom!


Make Financial Reform About Simplicity
Bloomberg Editorial Board
President Donald Trump’s top economic adviser — former Goldman Sachs executive Gary Cohn — has come out in favor of a radical reform: restoring the Depression-era Glass-Steagall Act, which for much of the 20th century separated bread-and-butter commercial banking from high-octane investment banking.

***** Bloomberg goes all KISS.


Lies, Damned Lies, and Data Mining
Cliff Asness – AQR
We are the whipping boy for a recent article on the dangers of data mining in our field. And the whipping is delivered largely based on an unsupported shot taken by my frequent foil and sparring partner, Rob Arnott. Before I take on this attack1 we need to back up a bit. Data mining, that is searching the data to find in-sample patterns in returns that are not real but random, and then believing you’ve found truth, is a real problem in our field.

****** Fool’s gold is the problem.


Pure Comedy
The Reformed Broker
The Kentucky Coal Museum just switched over to solar power to save money on energy costs. An employee of the NRA just shot himself at NRA headquarters. Morgan Stanley financial advisors in Massachusetts held a contest to see who could give their clients the worst financial advice. The Secretary of Education hates public schools.

****** The world has turned upside down since the Chicago Cubs won the 2016 World Series.


Why You Shouldn’t Judge a Hedge Fund by Its Name
by Hema Parmar – Bloomberg
Such funds have lower returns and may shutter sooner: report; Paper finds gravitas reflects influence, seriousness, power
What’s in a name? For hedge fund investors, sometimes a warning sign. Hedge funds often choose names with words that reflect authority, stability and power — i.e. words with gravitas. Now a report from researchers at the University at Buffalo and Finland’s University of Oulu finds that investors should beware. Funds with gravitas-laden names “have lower returns, alphas, sharpe ratios and manipulation-proof performance measures, higher volatilities and maximum drawdowns as well as higher probabilities of extinction than the funds with lower name gravitas,” according to the report, which examined nearly 18,000 hedge funds globally that on average manage about $160 million. These funds also tend to charge higher management fees and lower incentive fees.

***** Macho BS is macho BS.


Thursday’s Top Three
Leading off our top stories for Thursday is yet another story about someone changing jobs, in the FOW story, Head of marketing Mead leaves CME. Perhaps it is just me but there seem to have been a lot of these recently. Must be the season. In second is a nifty infographic from the FIA, Trends in Customer Funds. Third is a Daily Herald story, CME Group president provides insight on business ethics


MarketsWiki Stats
97,851,044 pages viewed; 22,464 pages; 205,359 edits
MarketsWiki Statistics


Lead Stories

White House Weighs Renominating Ex-House Aide to CFTC; Brian Quintenz could get another chance at Republican seat; Senate Democrats favor Russ Behnam for their party’s slot
By Andrew Ackerman – WSJ
The Trump administration is considering renominating a former House aide and investment manager to a Republican vacancy on the Commodity Futures Trading Commission, according to people familiar with the White House’s thinking.

Russell 2000 Index Futures and Options to Return to CME Group July 10
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that starting July 10, 2017, CME Group will launch both futures and options based on the Russell 2000® Index, as well as basis trade at index close (BTIC) functionality on the futures contracts, pending regulatory approval.

Big US banks defy calls they should be broken up
Ben McLannahan, Alistair Gray and Adam Samson – Financial Times
The biggest banks in America are defying calls to break themselves up, arguing that the benefits of size and diversity were on display during a very mixed set of first-quarter results. At JPMorgan Chase, finance chief Marianne Lake said on Thursday that the bank’s universal model was a “source of strength” for the broader economy, as she unveiled a 20 per cent drop in quarterly profits from consumer banking.

Credit Suisse executives agree 40% cut to their bonuses; Move by 12-strong board comes after fierce backlash to proposed SFr78m of awards
by: Laura Noonan in London – FT
Credit Suisse chief executive Tidjane Thiam and his top managers have agreed to a 40 per cent bonus cut after their planned SFr78m ($77.6m) of awards triggered a fierce backlash from shareholders and politicians.

Dong Energy breaks subsidy link with new offshore wind farms; Danish group to build German schemes without financial aid in groundbreaking deal
by: Pilita Clark, Environment Correspondent – FT
The green power industry has hit a milestone after the world’s largest offshore wind farm company said it would build two German schemes without any subsidies.

UBS moves to resuscitate asset management business; Swiss bank tries to stem the tide of outflows it has suffered over the past decade
by: Chris Flood – FT
Significant reforms are under way at UBS to revive the Swiss bank’s asset management business and stem the tide of outflows it has suffered over the past decade.

Could Glass-Steagall Crown the Next King on Wall Street?
BY CRAIG WILSON – Daily Reckoning
Trump’s economic reform policy could the next part of an “Art of the Deal” doctrine signaling that lawmakers are now wanting modern Glass-Steagall bank reform. That would mean a major shakeup on Wall Street, in markets and a new found king within the world of big finance.

Exchanges, OTC and Clearing

Change in Interest Rate on Guaranty Fund USD Cash Balances
CME Group
Effective on April 17, 2017, CME Clearing will increase the interest rate paid on USD cash Guaranty Fund balances from the current rate of 37 basis points to 70 basis points per annum.

Agriculture Margins – Effective April 17, 2017
CME Group
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below.

Product Modification Summary: Expansion of Listing Schedule for the Existing Henry Hub Natural Gas Financial Calendar Spread Option Contracts
CME Group
Effective Sunday, April 23, 2017 for trade date Monday, April 24, 2017, and pending all relevant CFTC regulatory review periods, please be advised that the New York Mercantile Exchange, Inc. (NYMEX or EXCHANGE) will expand the listing of contract months for the products listed below on CME Globex and available for submission for clearing on CME ClearPort.

“Watched VI” – Deutsche Börse Photography Foundation and C / O Berlin invite you to the lecture “Seeing Machines” with James Bridle
Deutsche Börse
The Deutsche Börse Photography Foundation and C / O Berlin invite you to the last event of the series “Watched!” Surveillance, Art & Photography. On April 20, 2017, British artist James Bridle gave a lecture entitled “Seeing Machines”. The event takes place at C / O Berlin in the Amerika Haus in Berlin.

Bats Welcomes New iShares Fund to Bats ETF Marketplace
30 Issuers, 163 Funds Now Listed on Bats in the U.S.
Bats, a CBOE Holdings, Inc. company, and a leading market for exchange-traded fund (ETF) trading globally, today welcomed a new iShares iBond fund to the Bats ETF Marketplace.


Exclusive: Company behind bitcoin ‘creator’ sold to private investors
Jeremy Wagstaff and Byron Kaye – Reuters
A company built around the research of Craig Wright, who has claimed to have invented the bitcoin cryptocurrency, has been sold to a private equity firm in a deal the company says is the biggest to date involving bitcoin’s underlying blockchain technology.

Ukraine to launch big blockchain deal with tech firm Bitfury
Gertrude Chavez-Dreyfuss – Reuters
Ukraine has partnered with global technology company the Bitfury Group to put a sweeping range of government data on a blockchain platform, the firm’s chief executive officer told Reuters, in a project he described as probably the largest of its kind anywhere.

Offense or Defense? How to Win the Blockchain Game
Ben Jessel – Coindesk
Today, financial services companies need to have a ‘winner takes all’ mentality in order to secure a competitive advantage in the marketplace.


Trump administration narrows list for Fed regulatory post
Pete Schroeder and Olivia Oran – Reuters
A former U.S. Treasury official in the George W. Bush administration, a veteran banking lawyer, and a Harvard professor are three leading candidates as the Trump administration looks to fill the post of Federal Reserve vice chair in charge of banking oversight, people familiar with the matter said.

Donald Trump’s Recent Policy Reversals Reflect Business Influence; Reliance on former and current executives helps lead to a shift away from hard-line positions on China, Ex-Im Bank and NATO
By Eli Stokols and Michael C. Bender – WSJ
President Donald Trump’s growing reliance on former corporate executives in his White House—and business leaders outside of it—helped shape this week’s reversals on several hard-line positions that defined his campaign, according to officials.

Why Did Trump Flip on China Currency Promise?: QuickTake Q&A
Laurence Arnold and Paula Dwyer – Bloomberg
As a candidate, President Donald Trump pledged to label China a currency manipulator “on day one” of his administration. That didn’t happen — and it’s unclear if it ever will.


Wall Street CEOs downplay risk of new bank breakup law
Top Wall Street bankers on Thursday said they are having positive discussions about financial regulation in Washington, and downplayed the idea that U.S. policymakers might force their institutions to split up.

Ernst & Young Pays $10 Million to Settle Hedge Fund Legal Battle
Laurence Fletcher – WSJ
Accounting firm Ernst & Young has agreed to pay $10 million to settle a legal battle over its role as auditors for hedge fund Weavering Macro, whose 2009 collapse led to multimillion-dollar losses and the jailing of its founder, according to a person familiar with the settlement.

Regulator accuses ex-Aston Hill executives of insider trading
Staff of the Ontario Securities Commission (OSC) on Wednesday filed a statement of allegations accusing former Aston Hill Financial Inc executives of securities law violations in connection with a leaked takeover offer in 2014 by online gambling company Amaya Inc (AYA.TO).

Arbitrator Training Opportunity
NFA is pleased to be co-sponsoring an arbitration seminar entitled, “Securities Arbitration and Mediation Hot Topics 2017,” presented by the City Bar Center for CLE Programs. The seminar will be held at the New York City Bar on Friday, May 12, 2017. This year’s seminar starts at 9:00 a.m. ET and concludes with a working lunch at 12:30 p.m. ET. NFA Members and arbitrators may attend this seminar at a discounted rate.

Investing and Trading

Why We Avoid BlackRock ETFs
Andy Rachleff – WealthFront
Back in 2013, salespeople for BlackRock called to tell us about their new series of iShares exchange-traded funds (ETFs) with dramatically lower fees. They clearly expected us to share their excitement, and jump at the chance to offer the funds to our clients. After all, BlackRock is the giant of the ETF world, and we’ve always been abundantly clear about the importance of securing lower expense ratios for our clients. They were gobsmacked when we said no thanks.

How to Build a TIPS Ladder Portfolio for Millennials
Peter Tsui – S&P Dow Jones Indices Indexology
In his January blog post entitled “Try a TIPS Mixer in Your Equities Cocktail,” Phillip Murphy described the potential benefits of including Treasury Inflation-Protected Securities (TIPS) in one’s portfolio. In this blog aimed at Millennials, I would like to propose an easy way to build up a 30-year TIPS portfolio for retirement.


Wall Street Banks Are Beating Main Street Banks at the Start of the Trump Era
Dakin Campbell – Bloomberg
U.S. banks reporting their first earnings under Donald Trump’s presidency showed a stark split: Wall Street businesses are faring better than many of those serving Main Street.

These Are the World’s Biggest Banks (Hint: U.S. Doesn’t Crack the Top Five)
Ben Eisen – WSJ
The world may be focusing on three of the biggest U.S. banks on Thursday as they report earnings for the first three months of the year, but none of them even crack the top five in a global ranking of total assets. The top four spots go to banks in China, led by the Industrial & Commercial Bank of China, with $3.5 trillion in total assets at the end of 2016, according to the latest report from S&P Global Market Intelligence. Number five is Mitsubishi UFJ Financial Group, based in Japan, with $2.6 trillion.

Barclays CEO Said to Have Told Board About Whistle-Blower Issues
Suzi Ring and Stephen Morris – Bloomberg
The most surprising part of Jes Staley’s attempts to unmask a whistle-blower, a sequence that may cost the chief executive more than $1 million and perhaps even his job, is that he had nothing to hide, people with knowledge of the situation said.

Wells Fargo says failure on ‘living will’ test hurting trading revenues
Dan Freed – Reuters
Wells Fargo & Co’s failure to convince regulators it can go through bankruptcy without severely disrupting financial markets is effectively costing the bank $100 million in trading revenues each quarter, its management said on Thursday.

Loan growth stalls despite profit, trading gains at some U.S. banks
David Henry – Reuters
Big U.S. banks revealed more evidence of a slowdown in loan growth in their earnings reports on Thursday, though executives assured there is still healthy demand from borrowers and no reason to worry about the state of the economy.

BlackRock holds CEO Larry Fink’s pay nearly flat in 2016
Trevor Hunnicutt – Reuters
BlackRock Inc (BLK.N), the world’s largest asset manager, held total compensation for Chairman and Chief Executive Officer Larry Fink nearly flat in 2016, according to a filing on Thursday.

Wells Fargo Says Scandal Costs Will Be Higher Than Projected
by Laura J Keller – Bloomberg
Expenses could be as high as $80 million a quarter, CFO says; CEO says he learned painfully that he doesn’t write headlines
Wells Fargo & Co.’s costs tied to a fake-account scandal are mounting faster than the bank expected as the company incurs expenses for consultants and lawyers.

Labour will make it illegal for banks to close high street branches; Shadow Chancellor John McDonnell will change the law to keep banks open, a policy that the industry calls ‘unsustainable’
Tom Peck – Independent
The Shadow Chancellor says he will make it illegal for banks to close high street branches Getty


China’s Gamble: How a Crusade to Prop Up the Yuan Imperils Other Pressing Mandates
Lingling Wei – WSJ
President Xi Jinping gathered with his economic mandarins in December for their annual strategy meeting at a heavily guarded government hotel. In closed-door sessions, say people familiar with the confab, he made clear what their mandate was for 2017: He would tolerate no wobbliness in the economy.

Turkey’s referendum: Turkey is sliding into dictatorship
The Economist
Turkey matters not just for its size, but also as a bellwether of the political forces shaping the world. For centuries it was the seat of a great empire. Today, as a frontier state, it must cope with the violence spewing out of war-ravaged Syria; it is a test case of whether democracy can be reconciled with political Islam; and it must navigate between Western liberalism and the authoritarian nationalism epitomised by Russia. In recent years under Recep Tayyip Erdogan, Turkey has gone backwards. This weekend it can begin to put that right.

The Great Japan Potato-Chip Crisis: Panic Buying, $12 Bags
by Shoko Oda – Bloomberg
Companies halt sales of some chip brands after bad potato crop; Calbee says it doesn’t know when chips supply will be restored
Demand for potato chips has surged in Japan this week, with products on offer for 6 times their retail price online after Japanese snack company Calbee Inc. halted the sale of some of its most popular chip brands.

Top Flour Exporter Faces Bigger Wheat Bill If Trade Spat Endures
by Anatoly Medetsky and Agnieszka De Sousa – Bloomberg
Turkey may have to pay more for wheat if Russian curbs remain; Restrictions will ‘lead to mutual losses:’ Russia’s Dvorkovich
Turkey, the world’s biggest flour exporter, may have to pay more for wheat if a food-trade spat with Russia isn’t soon resolved.


The UK’s negotiating position on Brexit is a fantasy; Britain will have to budge and make concessions despite howls of protest
by: Chris Giles – FT
A fortnight after Britain filed for divorce from the EU, the outcome of the two-year process is delicately balanced. Brexit is bad news, but in a happy scenario, the UK and the EU 27 will come away with an agreement that they believe serves their respective interests reasonably well. The alternative is worse: Britain leaves in poor grace and remains in the EU’s bad books for a long time.

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