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Bloomberg Markets Magazine

Bloomberg Markets Magazine November 2016

Bloomberg Markets is the best kept secret in the financial industry. Get Bloomberg Markets Magazine digital subscription today and learn what many Hedge Fund and Portfolio Managers already know. Bloomberg Markets is the must have guide to what's happening now, and what will happen in global finance.

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Country:
United States
Language:
English
Publisher:
Bloomberg Finance LP
Frequency:
Back issues only
$9.99

in this issue

2 min
contributors

A veteran of two decades at Bloomberg, John Bridge(“Replicate Fixed Income’s Most Coveted Index With Optimization,” page 28) specializes in credit markets and products. “With the continued shift to passive investing, Bloomberg is developing tools such as the Portfolio optimizer so you can efficiently replicate indexes or construct creation or redemption baskets for ETFs,” the CFA charter holder says. Run the optimization tool at {PORT OP }. Edward Robinson, who covers finance and financial technology from London, wrote about Europe (“The Never-Ending Story: Europe’s Banking Nightmare Isn’t Over Yet”) and Iceland (“This Is Where Bad Bankers Go to Prison”) for the magazine earlier this year. In this issue he turns his attention to how banks are trying to work together against a growing threat (“Nothing Inspires Unity Like a Good Hack,”…

3 min
“bend your view to the charts, not the charts to your view.”

Bloomberg News’s First WordFX strategists share their favorite market sayings—and why they’re relevant. Get more at {FIRST }. Take the yen. The fundamentals may tell you that any appreciation isn’t fully justified. But if you look at a chart, it’s clear that dollar/yen is a textbook case of a downtrend since mid-December, while leveraged yen longs are at their highs since the 2008 crisis. The market wants this pair lower. So if you think the fundamentals— such as Japan’s debt burden and its sluggish growth rate— should weigh on the yen long-term, be flexible and find a good entry point to go long the dollar. And respect the price action. Vassilis Karamanis “When in doubt, do half.” Have a position you like but are worried about that looming major chart point (think South African…

8 min
banks don’t normally get along. but nothing inspires unity like a good hack

TROELS OERTING has a problem. As the group chief security officer for Barclays, he has a squad of elite ex-government agents patrolling the company’s digital perimeter. He also has a hefty budget to acquire state-of-the-art technology to protect Britain’s second-biggest bank from cyber attacks. But Oerting, with no small dose of grudging admiration, says his adversaries excel at something that can’t be addressed with deep pockets or killer software: They’re superb networkers. “The organized crime groups in cyber are sharing much better than we are at the moment,” says Oerting, a Dane with a square jaw and the watchful eyes of a cop who’s investigated the underworld for 35 years. “They are sharing methodologies, knowledge, tools, practices— what works and what doesn’t.” Now he and his counter parts at other big banks…

3 min
top-down analysis starts here

WHEN YOU’VE GOT a view of earth like this, light becomes an amazing economic indicator. Measuring its intensity from space, you can capture data on a country’s electricity usage— which can in turn correlate with changes in economic activity. But you can really get this perspective only one way: with satellites. Collecting this kind of information goes by a variety of names, such as earth observation, remote sensing, and geospatial big data. Discounting the physics and engineering that goes into it, the idea is simple. Launch a satellite into orbit. Then, once it’s perched 100 miles or more above the earth, use it as a platform for sensors pointed back at the planet. Such sensors can view the earth via different wavelengths. They can take pictures in visible light or in…

5 min
replicate fixed income’s most coveted index with optimization

REPLICATING AN INDEX is a task you may need to do for a variety of reasons. If you’re an active manager, you might have a client looking for exposure to a particular benchmark, with strategic over- or underweights in specific sectors, currencies, or other market segments. If you run passive strategies, you may need to track a benchmark that includes some relatively illiquid securities. That can make it difficult and expensive to buy every index constituent. The replication process can be done with a couple of different methods. One is to tap an optimization model to find the best trade-offs among the constraints you’re working under. Consider a fixed-income index that includes thousands of bonds. In this case, the size of your portfolio is an important constraint. Building a portfolio of only…

3 min
lower risk with emerging-markets bonds? here’s the secret

EMERGING-MARKETS BONDS have always had one thing going for them: yield. Consider a Venezuelan 10-year bond. As of Sept. 1 it was generating a 25 percent return. A Ukrainian bond that matures in 2026 was yielding 8.3 percent. Those numbers look pretty substantial in a world where the benchmark bonds of 18 developed markets yielded less than 1 percent. Of course, Venezuelan and Ukrainian bonds do come with some embedded risk, and it’s that possibility of gut-wrenching volatility that traditionally kept some investors out of emerging-markets debt altogether. Now, with the U.S. Federal Reserve seemingly inclined to hike, the expectation of higher U.S. rates may also make investors wary. Emerging markets haven’t reacted well to tighter U.S. monetary policy—not in 1981-82, 1994, or 1997-98. This time around, though, emerging-markets bonds appear to…