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Federal Reserve Chair Powell will speak this week – to push back on negative interest rates

  
  Analysis
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Fed’s Powell is to speak at a Peterson Institute for International Economics event (webinar)

  • He is billed to discuss his economic outlook, but is also to expected to address monetary policy (more on this below)
  • text with a Q&A to follow
  • Wednesday 13 May at 1300GMT
In brief – while there has been intense speculation about the Fed moving to negative interest rates, it seems likely Powell will push back on this. Other Fed officials who have spoken recently have all expressed caution on moving to negative rates but it may be time to wheel out Powell to more effectively quash the chatter.
Some of the recent remarks on likely negative rates have come from big hitters in the industry, while market pricing has also indicated sub-zero rates.
  • Scott Minerd, global chief investment officer of Guggenheim Partners said on Friday he expects rates below zero ‘soon’ – he cited declining Treasury yields
  • Other market movements are also reflecting expectations –  eg. falling LIBOR,
  • Jeffrey Gundlach, co-founder of DoubleLine Capital tweeted last week on mounting pressure on fed funds to go negative and said “fatal” consequences may have brought the expectations to the fore (more here: Jeffrey Gundlach says pressure building on Fed funds to go negative)
Fed's Powell is to speak at a Peterson Institute for International Economics event (webinar) 

A story of how honesty cost one trader his job.

  
  Education
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With the current climate surrounding the investment banking culture in the wake of the Barclay’s Libor scandal, it is interesting to read about the story of Steve Clark taken from his interview with Jack Schwager in the Hedge Fund Market wizards. 
 
Clark is a highly successful hedge fund manager, running the Omni Global fund which during the period since inception in 2001 has returned almost 20% per annum, with a maximum peak to trough drawdown of just 7% and not a single losing year. However during the 90s he tells a story of how he was forced out of a major investment bank purely for being honest. 
 
The excerpt from the interview goes as follows:
 
‘Nomura ended badly for me because there was a change in management. The new guy in charge wasn’t straight. He had a convertible book, and all he was doing was buying illiquid convertible bonds and every month pushing the price up. He was the market because he owned most of these issues. So all he had to do was buy a few hundred bonds every month to push the price up. (more…)

Leeson: Rogue trader culture is more rife than ever

  
Economy, Education
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Nick Leeson, the original rogue trader whose actions led to the collapse of the venerable Barings Bank and to a six-year prison sentence, yesterday warned that the culture of the City has spun out of control.

With banks reeling from numerous scandals and the London financial district under intense pressure to reform itself, Mr Leeson said that unless punishments are increased traders will continue to run amok.

“Rogue trading is on the increase. The latest scandals are just a sign that the culture is running riot without any checks in place.

“Every day you wake up and see something different,” he told The Independent. (more…)

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