Tuesday, December 2, 2008

Market collapse a boon for FX quant systems, and suggests FX is an emerging asset class

Fear and market declines have plagued the headlines, but a different story is emerging from automated black box traders in the FX markets.

"Ever since the collapse of Lehman Brothers, our phone has been ringing off the hook. I don't have enough time in the day to properly follow up all the new leads coming in," says Joe Gelet, President of Elite E Services FX Systems. He continues, "While retirement accounts are being wiped out, our systems are over-performing our expectations. Some client accounts were up over 250% in a single week of trading! (These systems are high-risk systems and should be treated as such) The volatility has been great for our systems, and clients are seeking an alternative to the traditional."

Frank Franze, President of Z Trade FX, says: "We're getting requests that simply didn't exist 3 months ago. Brokers are saying they opened more accounts in the last 6 weeks than they did in 2007. Everything is shifting around – some brokers who are plagued with liquidity issues are seeing clients flee to those who aren't. Z Trade FX is positioning itself to be a world-class Introducing Broker to multiple global firms, so clients are handed a choice."

Elite E Services has completed an Expert Advisor trading system after 8 months of research & development. The system has been named "Golden Grid" because it is a Grid trading system based on Fibonacci, a.k.a. Golden Ratio. The golden ratio appears in nature and in the markets; the Golden Grid system takes a simple approach to trading, and by implementing the Golden Ratio both in the positioning of the grid itself and in the money management, it enables a simple system to work on any market in any condition. Built into the system is an account protection risk module that can be set by the user, normally to 5%. This protects any account from a black swan event causing a large drawdown. Golden Grid is available on the Meta Trader 4 platform.

EES has also developed an entire range of systems for the Tradestation platform six of which are being released this week which can be traded as a multiple currency basket and make up a portfolio designed with a low-risk money management profile. When traded as a portfolio further protection again is offered with a maximum 10% risk. The first six crosses now available are EUR/USD, EUR/AUD, GBP/USD, EUR/CHF, NZD/USD, and AUD/USD. These systems can be traded individually or as a portfolio wherever Tradestation is available.

Z Trade FX is offering clients a $500 instant rebate to any customer who opens an account and deposits at least $50,000 USD by December 31^st, 2008. See more detail at www.ztradefx.com

Elite E Services develops quantitative systems for the FX market as well as advising investors about FX at www.startelite.com

Monday, December 1, 2008

European Banking collapse imminent as US catastrophic ISM data looks less Armageddon like

Why should we care that these emergency economies are on the verge of collapse? Because …European Banks Loaned These Countries A Staggering $3.5 Trillion. When They Go Down, So Will Europe's Largest Banks! http://www.marketoracle.co.uk/Article7550.html

DECEMBER FREEZE...

Data signal deep global downturn...
Manufacturing hits 26-year low...
Schwarzenegger declares fiscal emergency in CA...
Bush: 'I'm sorry' crisis is occurring...
Oil plunges below $50...
Treasury Yields Plunge to Lowest on Record...
Bernanke: 'No comparison' to Great Depression...
Bank stocks suffer biggest one-day decline since crisis began...

The National Bureau of Economic Research today announced that its Business Cycle Dating Committee had officially determined a peak in economic activity at December 2007, which signals the start of the recession. I am a member of the committee. Though I speak only for myself, not the committee, I offer my views on two questions of possible interest:

(1) Who needs the NBER Business Cycle Dating Committee (BCDC) anyway?

(2) Why did we pick December 2007 as the starting month of the recession? The National Bureau of Economic Research today announced that its Business Cycle Dating Committee had officially determined a peak in economic activity at December 2007, which signals the start of the recession. I am a member of the committee. Though I speak only for myself, not the committee, I offer my views on two questions of possible interest:

(1) Who needs the NBER Business Cycle Dating Committee (BCDC) anyway?

(2) Why did we pick December 2007 as the starting month of the recession?

Paul Krugman: Deficits and the Future

Deficit hawks who are complaining about the stimulus package have it all wrong:

Deficits and the Future, by Paul Krugman, Commentary, NY Times: Right now there's intense debate about how aggressive the United States government should be in its attempts to turn the economy around. Many economists, myself included, are calling for a very large fiscal expansion to keep the economy from going into free fall. Others, however, worry about the burden that large budget deficits will place on future generations.

http://economistsview.typepad.com/economistsview/2008/12/paul-krugman-de.html

Sunday, November 30, 2008

Pound joining Euro

http://www.breitbart.com/article.php?id=081130204959.yq2a770m&show_article=1 Britain is considering joining the eurozone as a direct consequence of global financial turmoil, European Commission President Jose Manuel Barroso said Sunday.

"We are now closer than ever before. I'm not going to break the confidentiality of certain conversations, but some British politicians have already told me: 'If we had the euro, we would have been better off'," Barroso told a weekly French news programme, referring to the fall in the pound's value since markets and liquidity meltdown earlier this year.

UK should trade pound for euro, Hong Kong leader says

SIFMA Global SmartBrief | 11/28/2008

Donald Tsang, a leader in Hong Kong and an elder statesman of finance in Asia, said Britain's attempts to hold onto the pound are futile because the world's economy is dominated by the most powerful currency blocs. "I do not believe in the sustainability of a small floating currency. Look at the pound -- it's being attacked," he said. "The euro is a good move ... Other options are less palatable if you really want to become a big, strong economic union." Telegraph (London) (11/27)

Saturday, November 29, 2008

RBS taken over by British Government and other news

http://online.wsj.com/article/SB122788503709864215.html?mod=googlenews_wsj

LONDON -- In an expected move, Royal Bank of Scotland Group PLC said the U.K. government is to take majority control of the bank, after its shareholders took up just 0.24% of its £15 billion ($23.1 billion) stock offering.

The offer was priced at 65.5 pence ($1.01) a share, but as RBS stock hasn't traded above that level since Nov. 7, the lackluster investor participation came as no surprise. As underwriter, the U.K. government will be left with 57.9% of the bank's shares. The deal forms the biggest portion of the government's plan to recapitalize the country's banks.

RBS's shares Friday rose 0.6%, to 55.3 pence, while the FTSE 100 index was up 1.5%.

The capital increase will fatten up RBS's balance sheet, making the bank more resilient amid the weakening economy and providing a cushion against impairments and further asset-value deterioration. But, along with the previously agreed £5 billion preference-share issue to the government, the deal comes with a strategic overhaul of the bank and a moratorium on dividends.

RBS won't be able to pay dividends until it has repaid the preference shares, which mature in five years. The bank has indicated it wants to redeem the preference shares within 12 to 18 months, assuming the government agrees to early redemption.

"We welcome completion of the capital raising process that has strengthened RBS considerably," Chief Executive Stephen Hester said in a statement.

Mr. Hester thanked the government for underwriting the offer. "We regret that existing shareholders did not take up their pre-emptive rights but understand that market sentiment toward the banking sector made this uneconomic in the short term," he said.

RBS's new management team will focus on rebuilding the bank, Mr. Hester said, adding that "there remain substantial uncertainties and challenges outside our control but for our part the job is under way."

The government's move to take control of RBS was expected, said Oriel Securities analyst Michael Trippitt, adding that "it's unclear whether the government has very much to add" because Mr. Hester is already set to conduct a review of the business over the next year.

"In such a tenuous and difficult point in time, you just have to get on with getting the business on a firm footing. That could take about a year," Mr. Trippitt said. "In theory, the government could control things like bonuses, but there aren't any profits with which to pay bonuses," he said.

Mr. Hester's review of the bank will continue until the second quarter of next year. He has said that no business lines are safe and that job losses are to be expected as economic-activity levels decline.

The global banking and markets business is seen as particularly vulnerable because of the reduced business activity in the past year, and because it has suffered heavy losses on credit investments.

RBS has been one Europe's hardest-hit banks in the financial crisis because of its big exposure to subprime loans and its acquisition of parts of Dutch bank ABN Amro Holding NV just before the credit crunch.

Write to Vladimir Guevarra at vladimir.guevarra@dowjones.com and Ragnhild Kjetland at ragnhild.kjetland@dowjones.com

Track Your $8.5 Trillion In 'Rescue Funds'

UK Could Collapse Like Iceland

RBS To Be Taken Over By British Govt

Failed Fiat Money System Heads For Inflation

Spain Pumps £11B Into Sagging Eonomy

Bankruptcy Update...Britain Plus California

RBS Now 58% Owned By UK Govt

Japan Factory Output Points To Deep Recession

Econ Benefits Of Mass Immigration About Zero

First Credit Crunch Happened In Roman Republic

Thursday, November 27, 2008

London warms to Islamic finance

The land of Adam Smith now teems with a vibrant Islamic banking sector, with even non-Muslims being lured by the model's promise of transparency and stability.

London - Shabaz Bhatti is proud to be a devout Muslim – but his plans to remortgage the family home with one of Britain's new generation of Islamic banks isn't just about religion.

The 30-something driving instructor wants reliability, and believes Britain's growing Islamic finance sector offers this in a way that myriad traditional main street banks no longer do.

"It's simple and straightforward, which is great because ... it seems as though interest rates right now could go ballistic," says Mr. Bhatti, whose parents immigrated to England from Pakistan.

At a time of almost unprecedented financial volatility, Islamic banks are being hailed as bastions of stability. Growing numbers of individuals and companies are now embracing their workings, which are based on Koranic principles.

Using law changes and generous tax breaks, the British government is now attempting to transform London into the Western world's center for Islamic finance. Conventional banks and financial institutions are also rolling out a range of Islamic finance products.

Globally, the market for Islamic financial services is estimated to have grown more than threefold over the past decade – from around $150 billion in the mid-1990s to $500 billion in 2006.

Keen to tap into this, Britain's authorities are planning to become the first Western government to issue an Islamic bond – called a sukuk – structured to comply with the sharia law principles of Islamic finance, which forbids all forms of interest payments.

Sharia law also prohibits investing in any enterprises involved with alcohol, gambling, tobacco, and pornography – a fact that nicely dovetails with the growing number of Westerners seeking socially responsible investments.

According to a new study by International Financial Services London (IFSL), an independent organization representing Britain's financial services industry, Islamic finance will emerge largely unscathed from the current global crisis, largely because its structures make little or no use of many of the complicated instruments blamed for the current problems in conventional finance, such as derivatives and short-selling.

Although Islamic finance does allow for risk-taking, it does not permit excessive uncertainty, known as gharar. All deals to buy or sell are invalid if the object dealt with is not certain and transparent.

When risks are taken, the Islamic financial model insists they are shared. In retail, this involves the customer and their bank sharing the risk of any investment on agreed terms, and dividing any profits between them. Products revolve around principles such as murabaha, a form of credit enabling customers to make a purchase without having to take out an interest-bearing loan. The bank buys the item and then sells it on to the customer on a deferred basis.

Bhatti, who lives in the leafy London suburb of Wimbledon with his wife and young daughter, is currently a customer of Abbey National, a traditional, Western bank. He has had no objection to using conventional Western financial products. However, in the past, the couple were customers of the Bank of Kuwait when they bought a home costing nearly $200,000 in the London district of Croydon.

The Bank of Kuwait valued the house at about $270,000, based on what it was expected to be worth at a later date, and arranged for the family to pay the money back in equal installments over the next 16 years. Now, Bhatti is planning to return to such an arrangement by transferring his conventional mortgage to an Islamic bank.

"With the current economic situation, our plans to go back to Islamic banking are not just about religion, they're a financial decision. It's more secure ... and it's clearer for the future," he says.

More than 26 banks in the UK offer Islamic financial products, including major institutions such as HSBC. Six Islamic banks are wholly compliant with sharia law. A pioneer of Islamic retail banking has been the Islamic Bank of Britain, which has 64,000 account holders and branches in cities including London, Birmingham, and Manchester. The bank recently launched its most competitively priced sharia mortgage to date, offering terms that company executives hope will lure takers beyond its core market of Britain's 2 million working Muslims.

This country's growing Muslim community is helping broaden London's reputation as a financial capital, says Patrick Lamb, an official who joined a British government delegation this week to the World Islamic Banking Conference in Bahrain, where the UK authorities and a range of London-based banks and firms showcased their expertise.

"We have by far the largest concentration of Islamic finance anywhere in Europe," Mr. Lamb says.

Along with home and retail finance, increasing numbers of companies are also turning to Islamic finance to raise money for expansion, ranging from steel manufacturers to luxury gift firms, which are often owned by Muslims or have Muslim shareholders. Money from wealthy Gulf investors has been pouring into Britain in recent years. There is no more potent symbol of this than the skyline of London's financial center, known as The City.

A fund from Kuwait spent more than $600 million recently to buy the Willis Building, one of the tallest in the district, while nearly $3 billion is coming from Qatar to finance the building of what will be Europe's tallest building, a 1,000-foot-tall structure known as the Shard of Glass.

http://www.csmonitor.com/2008/1128/p06s02-wogn.html

Wednesday, November 26, 2008

JP clears 5 Trillion USD in 1 day

http://ecommerce-journal.com/news/11499_j_p_morgan_cleared_more_than_5_05_trillion_usd_in_a_single_day J.P. Morgan cleared more than $5.05 trillion USD in a single day

http://ecommerce-journal.com/news/11528_hsbc_will_construct_300_million_data_centre_in_york HSBC will construct £300 million data centre in York

HSBC has made a formal planning application for the construction of a new £300 million data centre in York, UK.

If approved, the 325,000sqft development is expected to take two years to build and generate up to 2000 construction and fit out jobs. This is expected to generate £2 million additional income in goods and services for the local economy, says HSBC.

http://www.bloomberg.com/apps/news?pid=20601101&sid=afsERvdzsvp0&refer=japan Nov. 26 (Bloomberg) -- Japan's Ashiya city has been home to the nation's industrial titans since samurai ruled the land more than a century ago. Now it's a feeding ground for hedge funds tapping the wealth of new multi-millionaires like Kunihisa Sagami.

Tuesday, November 25, 2008

England goes bankrupt, revolt in Iceland

There is now a palpable fear that global investors may start to shun British debt as the budget deficit rockets to £118bn - 8 per cent of GDP - or charge a much higher price to cover default risk.

The cost of insuring against the bankruptcy of the British state has broken out - upwards - over the last month. Yes, credit default swaps (CDS) are dodgy instruments, but they are the best stress barometer that we have. http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/11/24/is_britain_going_bankrupt

RIOTS IN ICELAND: CITIZENS REVOLT AGAINST FINANCIAL CRISIS, CORRUPT MINISTERS...

VIDEO...

UK TOP INCOME TAX RATES COULD HIT 61%...

FED PUMPS $800B MORE...

It pains me deeply to announce that, despite the massive government rescue, yesterday's collapse of Citigroup could ultimately lead to a shutdown of the global banking system.

For many years, I hoped this would never happen, and I thought we might be able to avoid it.

http://www.marketoracle.co.uk/Article7487.html

Thursday, November 20, 2008

Links from 11-20-1008 from Naked Capitalism

Sparrow numbers 'plummet by 68%' BBC

Researchers getting the lead out of electronics Network World

Don't Throw Me In That Briar Patch! Hilzoy

Is Obama really "Change we can believe in?" Ed Harrison

Record Options Trading Slows as Hedge Funds Fold, Prices Surge Bloomberg

The Dollar Trap Part II: Mutually Assured Financial Destruction Jesse's Cafe Americain

Why Can't We Admit That... Roger Ehrenberg

At WaMu, a Lack of Oversight Housing Wire

The Progress of the Financial Crisis in One Picture: Mortgages, Flight to Safety, Credit Lock Menzie Chinn, Econbrowser

Hurt by Losses, Pension Funds Criticize Rules New York Times. Funny how everyone gets to retrade their deal....except honeowners.

Panic of 1873 Redux? Stormy, Angry Bear

New Hope for Financial Economics: Interview with Bill Janeway Institutional Risk Analytics. If you are interested in the role of economics and finance theory in our current mess, this is a must read.

http://www.nakedcapitalism.com/

Wednesday, November 19, 2008

Chinese Renege on $1 Billion of Scrap Steel Deals, Group Says

Chinese scrap-metal buyers have reneged on about $1 billion in contracts from U.S. merchants as the market for the steelmaking raw material collapses, the Institute of Scrap Recycling Industries said today.

Steelmakers, foundries and traders, ranging in size from "small to very large'' and some with partial state ownership, have cancelled contracts, refused delivery of shipments or demanded lower prices, said Robin Weiner, president of the Washington-based scrap merchants' trade group.

"Based on conversations I've had with members throughout the country, we're talking about hundreds of millions of dollars and could be over a billion dollars,'' Weiner said in a telephone interview. The number in past years has been "insignificant.'' Weiner is lobbying the U.S.

government to help stop defaults on contracts between the institute's members and clients in the second-largest market for U.S. scrap steel after Turkey. Scrap merchants worldwide face plummeting prices after steelmakers slashed output amid a worsening global economic recession.

The price of steel scrap No. 1 heavy melting, shipped from the U.S. East Coast, has slumped by 61 percent in the past two months and traded at $120 a metric ton on Nov. 13, according to Metal Bulletin. U.S. sales of scrap to 152 countries last year totalled $22 billion, making it the second-largest commodity export by value, according to the institute.

Contracts with steelmakers and brokers also have been broken in Europe, Canada, Vietnam and South Korea, Weiner said. Delinquencies in China have been most prevalent and extend beyond steel to other scrap markets like copper, fibres and plastics, she said. Once demand steadies, U.S.

buyers may seek stricter trade terms with their Chinese counterparts, including advance payments and letters of credit, said Bob Garino, the institute's director of commodities. Some Chinese firms have declined to receive goods unless prices are lowered, and others have been told that customs officials will object to shipments' quality unless they agree to charge less, Weiner said. (Bloomberg)

Monday, November 17, 2008

Mark Cuban charged with Insider trading, Jim Cramer recommends Russian Beverage Company, Trader shoots himself

http://finance.google.com/finance?client=ob&q=NASDAQ:CEDC Cramer recommends Russian Beverage company

http://www.reuters.com/article/usDollarRpt/idUSN1751276620081117 SAO PAULO, Nov 17 (Reuters) - A trader shot himself on Monday in the open outcry pit of Brazil's main financial exchange in an apparent suicide attempt, shocking a market already battered by the global credit crisis.

SEC charges DALLAS MAVERICKS owner Mark Cuban with insider trading...

COMPLAINT...

FRESH BAILOUT WILL HAVE TO WAIT...

GM asks German government for credit guarantee...

New, old Congress cross paths in lame duck session...

Financial Crisis Tab Already In The Trillions...

HU: Costa Rica benefits from switching ties to China...

Venezuela, Iran team up on university plan...

http://finance.yahoo.com/news/Citigroup-to-shed-another-apf-13600818.html NEW YORK (AP) -- Citigroup Inc. is shedding approximately 53,000 more employees in the coming quarters as the banking giant struggles to steady itself after suffering massive losses from deteriorating debt.

Sunday, November 16, 2008

The Canary is Dead: Something is wrong in venture capital.

http://www.slideshare.net/guest1c3ad/thefunded-canarie-presentation/v1 Click to see presentation

http://www.nytimes.com/2008/11/17/business/17views_ready.html Maybe it was the tombstone that did it. Even as Wall Street burned, Silicon Valley seemed strangely sanguine. Then a PowerPoint presentation from Sequoia Capital prophesying Armageddon — featuring an "R.I.P. Good Times" headstone — made the rounds. A month later, venture capital firms are slashing investments and counseling portfolio companies to cut jobs. Sequoia's warning may reflect the technology industry's woes, but it's more notable for what it says about venture capital.

Like Wall Street banks, hedge funds and private equity, the venture capital industry got too fat. Firms currently manage $260 billion, according to the National Venture Capital Association, 14 percent more than during the bubble, and the industry now raises more money than it creates. A shakeout was inevitable. It's just odd that it took Sequoia's PowerPoint to get it under way.

Thursday, November 13, 2008

Wal Mart affected by USD volatility

Chief Financial Officer Tom Schoewe said the "rapid changes" in exchange rates in the past few weeks are expected to hurt fourth-quarter results by about 6 cents per share.

"In U.S. dollar terms, strong operating performance in international may be overshadowed by these currency fluctuations," he said in a statement.

http://finance.yahoo.com/news/WalMarts-3Q-profit-rises-10-apf-13555854.html

Wednesday, November 12, 2008

Munitions companies rally as Obama spurs gun frenzy

VIENNA, Va., Nov 10, 2008 /PRNewswire-FirstCall via COMTEX/ -- The Allied Defense Group, Inc. (ADG:

allied defense group inc com ADG 6.28, -0.48, -7.1%) , a diversified international defense and security firm which: develops and produces conventional medium caliber ammunition marketed to defense departments worldwide; and designs, produces and markets sophisticated electronic security systems principally for North American markets, announces its third quarter 2008 financial results. http://www.marketwatch.com/news/story/The-Allied-Defense-Group-Announces/story.aspx?guid=%7BC9A90C3E-E68F-4FEB-8571-48AFD53F0EFB%7D

http://www.cnn.com/2008/CRIME/11/11/obama.gun.sales/ The owner of a gun shop in the Washington suburb of Manassas, Virginia, Conatser said sales have doubled or tripled since this time last year.

On Saturday, he said, he did as much business as he would normally do in a week.

"I have been in business for 12 years, and I was here for Y2K, September 11, Katrina," Conatser said, as a steady stream of customers browsed what remained of his stock. "And all of those were big events, and we did notice a spike in business, but nothing on the order of what we are seeing right now."