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JLN Financials: G20 final document to address U.S. policy impact on emerging markets; Global Bond Frenzy Raises Concerns; Japan’s Penny-Pinching Beer Drinkers Show Challenge to Abenomics

First Impressions

Old School/New School: Mark de Souza says County Cork blends experience with technology
JohnLothianNews.com

The managed futures space is always producing new managers with new takes on the market.

County Cork LLC, a managed futures firm, is looking to bring experience to its clients with traders in the agriculture and equity markets who’ve seen it all. John Lothian News sat down with Mark de Souza, president of County Cork to talk about what sets the firm apart from other funds at the Emerging Manager Forum in Miami in December. “The uniqueness of what County Cork has brought to the marketplace in terms of those discretionary programs is our managers don’t come from trading backgrounds,” de Souza said. “The come from production backgrounds, hedging backgrounds. They are true industry experts whether its in production, supply chain management, even procurement. They bring a real understanding of supply and demand.”

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Quote of the Day

“It’s fair to say that the market got a little overexuberant. Many years of private sector credit growth have created serious vulnerabilities.”

Scott A. Mather, head of global portfolio management at Pimco in the story, “Global Bond Frenzy Raises Concerns”.

Lead Stories

G20 final document to address U.S. policy impact on emerging markets
Reuters
The world’s financial leaders will address the impact of U.S. monetary policy on emerging markets in a final document from their meeting this week in Sydney, but the wording has yet to be agreed, a Russian G20 official said.
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***DA: This is my chief complaint about the G20 and other global overseers. They do not seek truth; they negotiate it. Which is why their “findings” will always be suspect.

Global Bond Frenzy Raises Concerns
LANDON THOMAS Jr. – NYTimes.com
Prospecting for oil in Brazil, manufacturing steel in Russia, erecting skyscrapers in China: Global bond investors have financed some of the grandest investment projects taken on by emerging economies in recent years.
jlne.ws/1mvCqZO

***DA: But they may or may not have been affected by U.S. monetary policy.

Japan’s Penny-Pinching Beer Drinkers Show Challenge to Abenomics
Dave McCombs and Yoshiaki Nohara – Bloomberg
While Prime Minister Shinzo Abe’s policies help manufacturers such as Toyota Motor Corp. rack up record profit, challenges to his reforms are showing up in a more mundane spot: the outlook for beer.
jlne.ws/1jM63Rn

***DA: My uncle, a retired cash grain broker, once offered his take on official versus realized inflation. “I measure inflation by two things – health care and Cutty Sark (his Scotch of choice). And both go up every year.”

Two Steps Forward and One Step Back for the Federal Reserve
SIMON JOHNSON – NYTimes.com
This week the Federal Reserve took a major step toward establishing a more sensible set of rules for global banks operating in the United States. Yet in a separate and almost simultaneous smaller announcement, the Fed announced a change to the board of the Federal Reserve Bank of New York that sent all the wrong signals regarding whether the United States will really end up with more effective oversight for its financial system.
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***DA: For a summary of yesterday’s final rule, visit MarketsReformWiki.

World economic recovery struggling to gain traction
Reuters
China’s vast factory sector contracted again this month and the expected acceleration in euro zone business activity failed to materialize, highlighting the fragile state of a global economy.
jlne.ws/1mvCp8b

The collective wisdom, as evidenced by the U.S. equity market, says otherwise.

SEC’s Stein calls for more reforms to short-term lending market
Reuters
The short-term lending market is in need of reform to improve its transparency, a top U.S. regulator said on Wednesday, saying that the lack of public information on how much financial firms rely on such borrowing could lead to another financial crisis.
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***DA: I have conducted my own analysis on how much they rely on short term funding. My conclusion? A lot.

China’s Latest Data Pose Policy Issues
WSJ.com
China’s economic growth appears to have slowed significantly at the start of the year, raising questions about the government’s ability to hit its expansion targets without exacerbating strains on the financial system.
jlne.ws/1mvCh8G

Washington regrets the Shinzo Abe it wished for
David Pilling – FT.com
It is fairly easy to assess the relationship between Shinzo Abe’s Japan and Xi Jinping’s China. Neither likes the other very much. Both are using nationalism as a prop to further policy aims. Both conceivably find it useful to have a “tough man” on the other side, the better to push against.
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***DA: Let’s hope von Clausewiz is not proven right on the matter of “policy by other means.”

Japan Trade Deficit Balloons to Record
WSJ.com
Japan posted a record trade deficit in January, as imports of electronics components and raw materials surged and exporters failed to boost their sales overseas despite a weaker yen.
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***DA: Devaluation does not exist in a vacuum. Other tend to respond in kind until none is better off.

Central Banks

ECB Wins EU Court Ruling to Keep Greek Swap Information Secret
Stephanie Bodoni and Elisa Martinuzzi – Bloomberg
The European Central Bank won’t have to disclose how Greece used derivatives to hide its debt after the European Union’s top court quashed efforts to make the information public.
The European Union Court of Justice, in a Feb. 6 decision, rejected a freedom-of-information request by Bloomberg News to access two internal ECB papers, citing procedural errors.
jlne.ws/1jM8eED

***JB: Transparency? Accountability? Who needs it? Just trust them.

Nigeria’s President Suspends Central Bank Governor
WSJ.com
Nigeria’s president on Thursday suspended the governor of the country’s central bank, a decision that stunned investors and pointed to growing political tensions in Africa’s top oil producer.
jlne.ws/1mvCith

Undeterred, Fed on Track to Temper Its Stimulus
BINYAMIN APPELBAUM – NYTimes.com
When Federal Reserve officials last met at the end of January, they were surprised by the strength of the economy, cheered by the optimism of consumers and convinced they should continue to dismantle the Fed’s economic stimulus campaign, according to an account the Fed released Wednesday.
jlne.ws/1mvCpot

Forget the Taper, Some Fed Officials Talk Rate Hikes
Steven Russolillo – MoneyBeat – WSJ
Stocks dropped Wednesday afternoon as minutes from last month’s Federal Reserve meeting showed central-bank officials debated when to begin raising interest rates.
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***DA: Not a chance. Not anytime soon, anyway.

Carney Keeps Doors Closed on BOE Debate Flagged by Miles
Jennifer Ryan – Bloomberg
Judging by the Bank of England’s minutes, officials had little to argue about this month on the biggest policy revamp since Mark Carney began forward guidance.
Comments by David Miles to Bloomberg News suggest otherwise. His Feb. 17 remarks point to a wider debate within the Monetary Policy Committee on slack in the economy that wasn’t described in the minutes yesterday.
jlne.ws/1jM9oA1

BOJ Stimulus Impotence Threatens Inflation Aim: Chart of the Day
Masaki Kondo and Shigeki Nozawa – Bloomberg
The Bank of Japan is getting less and less bang for its yen as it expands monetary-stimulus programs aimed at boosting annual inflation to 2 percent.
The CHART OF THE DAY shows the so-called money multiplier fell in January to the lowest since 2003, when data became available, signaling the amount of money in the economy dropped relative to funds provided by the BOJ.
jlne.ws/1jMiqwS

PBOC Drains Cash as Overnight Rate Slides to Lowest in 10 Months
Bloomberg
China’s central bank drained cash from the financial system for the second time this week as the rate banks charge one another for overnight loans sank to the lowest level in 10 months.
jlne.ws/1jM6mf5

Appropriate to refresh U.S. Fed’s longer-term ‘exit strategy’: Williams
Reuters
The U.S. Federal Reserve should update its longer-term “exit strategy” for winding down its swollen balance sheet to reflect changes in the plan since it was published in 2011, a top Fed policymaker said on Wednesday.
jlne.ws/1mvCqZQ

European Bankers Grill ECB Panel
WSJ.com
Representatives from some of Europe’s largest commercial banks grilled European Central Bank officials on Wednesday over the ECB’s plan to create a single bank supervisor this year, with concerns ranging from the regulatory appeals process, fees and even in what languages they could communicate.
jlne.ws/1mvCfgR

Modest Slack, But BOE Stays Lower For Longer
Alen Mattich – MoneyBeat – WSJ
The Bank of England figures there’s 1% to 1.5% of slack in the economy. That’s a very narrow range to pin on such a hazy notion.
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Minutes Of The Federal Open Market Committee, January 28-29, 2014
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Currencies

CNH Tracker-Yuan trade settlement may pick up if commodities get onboard
Reuters
While cross-border trade settlement in yuan is expanding quickly among global corporates, a mindset change among Chinese companies and wider use of the yuan in commodities trade could help it break past existing bottlenecks, bankers say.
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Winklevoss Brothers Offer an Index to Track Price of Bitcoin
NYTimes.com
Stock traders have the Standard & Poor’s 500. Bitcoin bettors will have the Winkdex.
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***DA: A friend of mine in London suggested a change of one letter would make a better name.

BitBeat: Bitcoin Having Its Lindsay Lohan Moment
MoneyBeat – WSJ
The race to claim the first working bitcoin ATM in the U.S. is on. We’ve been waiting months for the first bitcoin ATM to hit in the U.S., since we first talked to Zach and Josh Harvey last spring. The brothers and their company, Lamassu, have been selling their bitcoin ATMs since August, but until this month they haven’t had one installed in the U.S.
jlne.ws/1mvCpoF

Bitcoin aficionados wash their hands of Mt Gox
Ben McLannahan and Stephen Foley – FT.com
When Marco Crispini joined the Bitcoin meet-up in Tokyo two years ago, there were just a handful of members, assembling every month in a Shibuya fruit shop. As interest grew the proprietor complained, forcing the group – now holding weekly gatherings – into a nearby high-rise.
jlne.ws/1mvCrg8

The World’s First Exchange Platform Taking Card Payments For Digital Currencies Launches
The world’s first exchange platform taking card payments for digital currencies including Bitcoin launches in the UK today.
jlne.ws/1mvCpoI

Indexes & Index Products

NASDAQ OMX Launches Two New Indexes in the NASDAQ IBIS Index Family
The NASDAQ OMX Group, Inc. has introduced two new indexes on the Global Index Data Service 2.0 – the NASDAQ IBIS Focused Growth Index; and the NASDAQ IBIS Focused Growth Total Return Index.
jlne.ws/1mvCfxv

Gold

China jockeys for seat at gold ‘fix’ table
Xan Rice – FT.com
South Africa’s Standard Bank, which is selling its UK-based markets division to Industrial and Commercial Bank of China, has emerged as a potential buyer of Deutsche Bank’s seat in the global gold price-setting process, according to three banking industry sources.
jlne.ws/1mvCpEY

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About Author

Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.