Opening Bell: 10.24.17

Mark Johnson ruins it for the rest of the forex world; Klarman has Baupost at 40 percent cash; Ray Dalio is talking wealth transfers; Amazon but for weed; and more.
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HSBC Trader’s Conviction Will Echo Through $5 Trillion FX Market (BBG)
“When these cases get a conviction -- or even if they don’t end in conviction but they get a huge amount of airtime -- basically compliance tends to round people up into relevant meetings and say, ‘All right, what are our controls like,’ and ‘Let me remind you of the rules’...You’re going to see a lot more focus from the compliance professionals at these firms and higher up to really clamp down.”

Barclays May Hire More Traders as CEO Embraces Risk (BBG)
Adeel Khan -- the trader who has driven rapid growth in credit trading over the past two years -- may hire more staff and allocate capital in the British bank’s small distressed business, which has historically lagged U.S. rivals, said the person. Executives also want to expand in U.S. structured credit, especially collateralized debt obligations, or CDOs, building on its recent success with the instruments in Europe, the person said.

KLARMAN: Investors are asking the wrong question about the stock market (BI) "First-level thinking says that a 4% bond is better than a 2% bond, which everyone can see. Second-level thinking is that 4% may be insufficient return for the risk," he said. "The other facet of this thinking is the presupposition that the only relevant opportunity set is the current one." Klarman didn't specify his cash holdings in the letter, but a person familiar with the firm said Baupost holds about 40% of its assets in cash.

Two Sigma’s rapid rise to top of quant hedge fund world (FT)
Quants tend to have a different background to typical hedge funds. More than half of Two Sigma’s 1,200 staff come from outside the finance industry, with most educated in mathematics and computer science. They include the winner of a Japanese backgammon tournament and the “world’s first open-source software artist”, according to a graphic novel handed to new recruits.

Our Biggest Economic, Social, and Political Issue The Two Economies: The Top 40% and the Bottom 60% (Ray Dalio)
While my goal is simply to convey what is, rather than delve into what to do about it, I do want to be clear that giving money to be used for consumption rather than for improving production or cutting costs to improve efficiency (e.g., reducing incarceration rates and costs) will diminish the value of money and not increase the size of the pie. For that reason, some mix of a) directing resources so that they are used productively to generate more than enough income or savings in order to pay for themselves and b) productive wealth transfers appears inevitable.

Is a Taylor Tantrum on the Horizon? (PragCap)
You’ll notice there is that there’s about a 2% difference between the current Fed Funds Rate and where Taylor’s Rule says the overnight rate should be. So, it’s pretty interesting that bond markets are so ho-hum about the current environment because there’s a very real chance that Taylor will get nominated and his hawkish views could dominate the Fed’s policy moves in the coming years.

Study: NYC Could See Bad Flooding Every 5 Years (AP)
Rising sea levels could mean that floods of 7.4 feet or more that struck the New York city area roughly once every 500 years before 1800, and which occur roughly every 25 years now, could happen once every five years between 2030 and 2045. Researchers made no recommendations on what public officials or others should do to prepare.

Florida Couple’s Amazon Delivery Came With 65 Pounds of Free, Dank-Ass Weed (Gizmodo)
Two Amazon customers who purchased 27 gallon plastic storage bins earlier this year were surprised to find their UPS delivery weighed 93.5 pounds, approximately 65 pounds of which was tightly compacted bales of marijuana. Per WFTV, the Orlando couple who had placed the Amazon order somewhat understandably deemed this precious gift unwelcome and immediately contacted the authorities.

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