This is fantastic. Stop for 5 minutes today and watch this well made video.
On Sept. 23, Leo Melamed, widely known as the father of financial futures, addressed an audience of Futures industry professionals at the CTA Expo, offering personal stories of his experiences that got him to where he is today.
Melamed said that the first lesson his father taught him occurred when their family was in Lithuania. His father held up one Polish złoty and one Lithuanian litas, asking the young Melamed how much they were worth in relation to each other. Melamed could only guess that they were the same, as the government had dictated. His father then took him to a bakery and bought a piece of bread, worth one Lithuanian litas. But when his father tried to pay with one złoty, the baker stopped him and said, “Two złoty, one litas.”
“It was a lesson I never forgot,” Melamed said. “Because what my father explained was the Milton Friedman doctrine…only the free marketplace can give you the true value of nearly anything.”
Many years later, Melamed would carry that lesson with him as he entered the world of futures and revolutionized it beyond recognition. Perhaps echoes of the baker’s words resounded in Melamed’s head as he observed the global fixed exchange rate system, which had been established at the Bretton Woods conference in 1944, and realized that a new system would be coming.
“By [the 1960s], I recognized that the world had totally changed,” Melamed said. Not only had the international balance of power changed—Japan, the U.K., and Germany were now much more powerful and influential—communication capabilities had also developed over the past few decades. Information traveled “at lightning speed,” and as a result, the value of currencies could change just as quickly. If a finance minister said something that would have an effect on the country’s currency, the news could spread within minutes.
Melamed saw that a fixed exchange rate system would no longer be sustainable with these new developments. “By 1970, I was convinced that the world was going to reject the fixed-rate system and was going to adopt a different system, probably for floating rates,” he said. And this gave him a novel idea—currency futures.
At that time, the Chicago Mercantile Exchange was struggling and in no mood to entertain wild ideas from a 30-year-old trader. Even if Melamed could convince the CME’s (NASDAQ:CME) old and entrenched board to take a flyer on this revolutionary concept, he knew he would have to gain legitimacy for the concept through a trusted source outside the niche futures industry. He chose future Nobel Laureate in Economics Milton Friedman, who was teaching at the University of Chicago at the time and whose lectures Melamed would often attend.
The world-famous economist loved his idea and encouraged him to go forward with launching a futures market in currencies; Friedman was even willing to write up a feasibility study, but at a price.
“Seventy-five hundred [dollars] for a feasibility study on why currencies will make a good futures market,” Melamed recounted, smiling. “$7,500! The Merc today is worth $22 billion. That was the best trade I ever made.”
Friedman’s name worked its magic wherever Melamed went. Secretary of the Treasury George Shultz told him, “If it’s good enough for Milton, it’s good enough for me.”
“That was the magic of his name,” Melamed said. He was elated. The Board of Directors at the CME gave him approval to go forward with the idea, and the futures market was transformed. Melamed realized quickly that a new exchange was needed after a meeting with Billy Salomon, who worked at New York investment firm Salomon Brothers at the time. Melamed could not list currency futures with to the agricultural ones if he wanted influential and wealthy traders to become members and use the new market. “We can’t be trading currencies right next to pork bellies. We needed a separate exchange.”
The International Monetary Market (IMM) was created to list these new currency futures. Melamed added that, though a separate exchange, the pit was physically next to the pork belly pit.
Melamed concluded by summarizing a few things he wanted the audience to learn from the story. The history of financial derivatives is not very long, and as an instrument of finance, it can be used in both right and wrong ways, just like other financial instruments. He noted, however, than in 2007, the CME clearinghouse did not encounter any problems. “The futures system works,” he said. “We didn’t go under, even though Lehman Brothers was one of our biggest customers.” He also confidently asserted that “financial instruments of this sort are not going away.”
He pointed out that the industry, as his story shows, has the ability to change and indicated that futures markets could provide the answer to the vexing issue of health care insurance costs. Speaking of the current law, he said, “Futures could probably do it better.”
Melamed ended his speech by praising America’s financial system and atmosphere of experimentation. “This story represents the beauty of this nation,” he said. “There’s no other system that allows people like me or others to use their imagination as they do in America.”
He had started out as a boy in Poland who was unsure of the relative worth of the Polish złoty, and he went on to revolutionize the American financial system. A combination of lessons from his past, as well as open minds, carried him to this day. “So this story, in a way, epitomizes the greatness of this nation,” Melamed concluded.
About the Author
Skylar Zhang is an undergraduate student at Northwestern University’s Medill School of Journalism, focusing on magazine journalism. She is also majoring in economics. She is currently an intern for Futures magazine. In her free time, she enjoys writing, taking pictures, and beating her engineering friends at math.
A fantastic must watch message! This is an eye opener and a great way to illustrate how we could actually use technology to teach our kids (and ourselves) a great lesson
A Hong Kong movie theater asked its patrons to leave their cellphones ON
as they entered the movie house.
Then they ran an eye opening ad produced by Volkswagen.
forward to everyone you know!!!!
|Global Central Bank Watch
26 September, 2014
The era of global QE is not over
Although the Fed is about to end its asset purchases, quantitative easing in the world as a whole still has a long way to go. The BoJ has already been buying assets on a larger scale than the Fed for the past six months, and it looks increasingly likely that the ECB will unveil a full-blown government bond purchase programme within a few months.
See full article attached. Global Central Bank Watch (Sep 14).pdf
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August has been somewhat of a wake-up call for investors, in particular in fixed income. Ten-year yields are below 1% in Germany, 0.5% in Switzerland, and 2.7% in Italy, and also fell in the USA. What is going on? This was not supposed to happen in a world where most investors expect nominal growth to accelerate in H2. We believe the main driver has been soft Eurozone economic data combined with a sense that the Fed may use the benign US inflation outlook to go slow on rate hikes even if growth strengthens somewhat. On top of this, geopolitical tensions in Russia, Iraq, and Gaza intensified into early August.
So now what?
Credit Suisse has just announced the release of the September edition of their Investment Monthly. (It’s normally pretty good)
In this edition:
They look at three yield-enhancing strategies: covered calls, preferred REITs, and MLPs (Page 3). Brazilian equities rise despite bleak fundamentals (Page 4). Master Limited Partnerships still have material value to be unlocked (Pages 7-8).
By Paul Teshima – I attended Linkedin’s first global user conference called Sales Connect, in San Francisco. The focus of the conference was to bring together the community of social selling professionals and help them be more successful. The high energy from the attendees reminded me of how marketers felt when they started the same transformation a few years back with marketing automation.
Day 1 was focused on existing customers, and since I have a sales navigator license, I count as one (yeah!). Day 2 rolled into the keynotes, and breakout sessions. Overall a great experience.
Here are the Top 10 things I learned in the day and a half I spent with the world’s best social selling professionals.
10. With 313 million members (2 more every second) and approximately 600 million knowledge workers in the world, Linkedin has been adopted by 52% of their global target market. I guess you can say they own the business network. What ever happened to Plaxo?
9. After sitting in on a SMB roundtable discussion, although there is still resistance in many organizations, social selling is moving from a “nice-to-have” to a “need-to-have”. In fact many buyers expect you to know the information in their Linkedin profile before you show up for the first meeting.
8. Social sales as defined by Linkedin uses four pillars which is measured by the Social Selling Index (SSI) scored out of 100.
- Create a professional brand
- Find the right people
- Engage with insights
- Build strong relationships
7. Linkedin members average SSI score is 22.8, and for the attendees is 61.5 (note mine is 65 – as per the cool infographic they gave every attendee). It is interesting that the area that needs the most improvement is “Engage with insights” scoring the lowest by a factor of 2-3 for both groups. Maybe they need nudge?
6. Social Selling index leaders are 51% more likely to hit their quota than sales people who are social sales laggards. As anyone who has run sales knows, this improvement would have a huge impact on your ability to grow as a business.
5. In a great session with Kathleen Schaub of IDC, she presented that 84% of executive buyers use social media in their purchase decisions. Why do they do it themselves? “Because you can’t delegate trust”
4. Jill Rowley, social selling evangelist, went through some fantastic best practices on how to ensure you are becoming a “magnet for buyers”. One that stood out for me, is to ensure your personal brand is consistent across the different social networks.
3. Jill Konrath, gave a great talk on how to sell change in your organization and get them to adopt social selling practices. What she has learned after working with hundreds of organizations, is that it is best done through sharing stories. And take your time because “going slow, is the best way to go fast”.
2. Billy Beane, the famous “Moneyball” GM for the Oakland A’s talked about how during his tenure the A’s have outperformed by $1.3 billion dollars. And it was done by moving from a “based on your gut” industry-standard management style to an objective, data-driven one. Sound like another shift we are starting to see today?
1. In a personal moment Jeff Weiner (CEO) revealed that he loves TV series dramas. His favorites include The Wire, Breaking Bad and Friday Night Lights. And in the last 10 years of successful dramas, only Friday Night Lights does not have an anti-hero. Can anyone say “Clear Eyes, Full Hearts, Can’t Lose“?
Well that was it, I will definitely be back next year. It was great to see the kick-off of what I believe will be another transformative shift in sales and marketing. Hopefully by Sales Connect 2015 I can finally get connected to Jeff Weiner :)