No Leverage alpha in spot FX: QEPs and Professionals only

The EES flagship managed product FXV1 has recently been modified to meet a growing demand from institutional investors seeking deleveraged models in light of the new financial climate.   FXV1 achieved slightly greater than 2% return (after commissions but before performance fees) in February using leverage ratios between 1.5:1 and .5:1.    Maximum open position drawdown was less than 1.1%, with no realized account balance drawdown for the month.

The minimum account size for the FXV1 managed account program is $100,000 USD.  FXV1 can be traded at any broker using the Meta Trader 4 platform.  Money Managers, CTAs, and Hedge Funds wishing to use the model on their clients' accounts may run the strategy in-house using their own facility.  

The performance shown is actual performance of a live account. EES continually invests in the development of risk management mechanisms using robust and efficient mathematical and programming tools.

www.fxv1.com

Foreign-Exchange Turnover Dropped ‘Sharply’ in 2008, BIS Says

Foreign-Exchange Turnover Dropped 'Sharply' in 2008, BIS Says

By Kim-Mai Cutler

March 2 (Bloomberg) -- Trading in the world's three leading currency pairs fell by about 50 percent on electronic-broking services in the last quarter as volatility climbed to a record, the Bank for International Settlements said.

"Activity levels dropped sharply across the board," Paola Gallardo and Alexandra Heath, analysts at the Basel, Switzerland-based BIS, wrote in a report released yesterday. "Market makers may have been less willing to quote on electronic platforms to avoid being caught by adverse price movements, thereby driving activity through phone transactions."

Currency fluctuations became more exaggerated after Lehman Brothers Holdings Inc.'s Sept. 15 bankruptcy drove investors to sell riskier assets and repay loans. Volatility implied by dollar-yen options expiring in one month, a measure of expectations for future currency moves, rose to 41.79 percent on Oct. 24, the highest level since Bloomberg began compiling the data in December 1995.

Increased volatility can deter traders by making profits more difficult to predict. Firms that rely on electronic transactions, such as proprietary and prime brokerage accounts, may have scaled back foreign-exchange trading in line with other asset classes, the BIS said. Quantitative trading may have fallen as computer-based models failed to capture the changing market environment, according to the bank.

"Some forms of trading activity, such as automated trading, which rely on electronic execution methods and are based on rules designed to work in normal conditions, may be abandoned at times of high volatility," the bank said.

Money-Market Squeeze

The BIS said bid-ask spreads, or the difference between the best buying and selling prices, more than doubled between September and December as turnover fell. Euro-dollar is the most actively traded currency pair, followed by dollar-yen and pound- dollar, the BIS said in its triennial survey published in 2007.

As currency trading volumes slumped, short-term dollar funding needs for banks outside the U.S. became "acute" as financial institutions hoarded cash, freezing money markets, in the wake of Lehman's bankruptcy, BIS analysts Patrick McGuire and Goetz von Peter wrote in a separate study released yesterday.

Before the credit crisis erupted in August 2007, financial institutions accumulated positions in foreign-denominated assets that led to a short-term dollar funding gap for major European banks of between $1.1 trillion and $1.3 trillion, the report said. Institutions met their funding needs by borrowing from central banks and money markets, the BIS said.

The cost of three-month dollar loans rose to 332 basis points more than the Federal Reserve's target rate on Oct. 10, the biggest difference since at least 1984, as short-term funding markets dried up.

"The crisis has shown how unstable banks' sources of funding can become," the BIS said. "When heightened credit risk concerns crippled these sources of short-term funding, the chronic U.S. dollar funding needs become acute."

To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net

Last Updated: March 1, 2009 16:07 EST

Rogers Long Sugar Civil Unrest in US

CNBC: Roubini on Banking Transformation http://www.cnbc.com/id/15840232?video=1047735517&play=1

Arsonists Torch Berlin Porsches, BMWs on Economic Woe

http://www.bloomberg.com/apps/news?pid=20601109&sid=auZeM63nrgzo&refer=home Arsonists Torch Berlin Porsches, BMWs on Economic Woe (Update1)

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Rick Santelli CNBC sets stage for capitalist coup

http://www.cnbc.com/id/15840232?video=1039849853

SEC Charges R. Allen Stanford, Stanford International Bank for Multi-Billion Dollar Investment Scheme

SEC Charges R. Allen Stanford, Stanford International Bank for Multi-Billion Dollar Investment Scheme FOR IMMEDIATE RELEASE 2009-26 Washington, D.C., Feb. 17, 2009 — The Securities and Exchange Commission today charged Robert Allen Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program.   Additional Materials Litigation Release No. 20901 SEC Complaint   Stanford's companies include Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management. The SEC also charged SIB chief financial officer James Davis as well as Laura Pendergest-Holt, chief investment officer of Stanford Financial Group (SFG), in the enforcement action. Pursuant to the SEC's request for emergency relief for the benefit of defrauded investors, U.S. District Judge Reed O'Connor entered a temporary restraining order, froze the defendants' assets, and appointed a receiver to marshal those assets. "As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors," said Linda Chatman Thomsen, Director of the SEC's Division of Enforcement. "We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors." Rose Romero, Regional Director of the SEC's Fort Worth Regional Office, added, "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world." The SEC's complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called "certificates of deposit" to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years. According to the SEC's complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in "liquid" financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff's massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no "direct or indirect" exposure to the Madoff scheme. According to the SEC's complaint, SIB is operated by a close circle of Stanford's family and friends. SIB's investment committee, responsible for the management of the bank's multi-billion dollar portfolio of assets, is comprised of Stanford; Stanford's father who resides in Mexia, Texas; another Mexia resident with business experience in cattle ranching and car sales; Pendergest-Holt, who prior to joining SFG had no financial services or securities industry experience; and Davis, who was Stanford's college roommate. The SEC's complaint also alleges an additional scheme relating to $1.2 billion in sales by SGC advisers of a proprietary mutual fund wrap program, called Stanford Allocation Strategy (SAS), by using materially false historical performance data. According to the complaint, the false data helped SGC grow the SAS program from less than $10 million in 2004 to more than $1 billion, generating fees for SGC (and ultimately Stanford) of approximately $25 million in 2007 and 2008. The fraudulent SAS performance was used to recruit registered investment advisers with significant books of business, who were then heavily incentivized to reallocate their clients' assets to SIB's CD program. The SEC's complaint charges violations of the anti-fraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act, and registration provisions of the Investment Company Act. In addition to emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest. The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter. The SEC's investigation is continuing. The Commission acknowledges the assistance and cooperation of the Financial Industry Regulatory Authority (FINRA) in connection with this matter. FINRA independently developed information through its examination and investigative processes that contributed significantly to the filing of this enforcement action. # # # For more information, contact: Rose Romero, Regional Director Steve Korotash, Associate Regional Director, Enforcement SEC's Fort Worth Regional Office (817) 978-3821     http://www.sec.gov/news/press/2009/2009-26.htm

East European Economies meltdown as US capitalism collapses, more fraud discovered in Standford

We wrapped ourselves in an intellectual security blanket sewn together by our brightest economists and many of their mathematically gifted progeny, the Ph.D. "quants" of Wall Street. We were taken in, as we so often are, by an inflated belief in our own powers. And hubris--as always--was rebuked with catastrophe.

Is It Capitalism's Fault?     http://www.realclearpolitics.com/printpage/?url=http://www.realclearpolitics.com/articles/2009/02/the_end_of_american_capitalism.html

Given the amount of time that the SEC and the media have been sniffing around his operation, today's fraud charges can't have come as much surprise to Allen Stanford. And given that he owns banks in many different jurisdictions (the FT has found entities not only in the US and Antigua, but also New Zealand, Switzerland, Colombia, Ecuador, Mexico, Peru, Venezuela, and, of course, Panama), as well as what Matthew Goldstein calls "a number of private jets", one expects that at this point his contingency plan is well underway.    http://seekingalpha.com/article/121037-stanford-the-manhunt-begins

The China bulls have commented approvingly on the growth in loans in China, seeing it as a sign of pending recovery, along with an upswing in stock prices. We've pointed out that economist and China commentator Michael Pettis has heard quite a few reports that many of these loans were in fact sham transactions to meet government targets.

And now it gets even better. One analyst estimates that more than 1/3 of the total "new" lending (assuming that the loans were truly extended) may have gone into the stock market.

http://www.nakedcapitalism.com/2009/02/so-much-for-stimulus-chinese-loans.html

http://danskeresearch.danskebank.com/link/Meltdown17022009/$file/Meltdown17022009.pdf In conclusion, the crisis in Central & Eastern Europe (CEE) is getting out of hand and investors are aggressively exiting CEE markets. The most likely outcome is a very sharp fall in economic activity across the region. Pressure on CEE markets will probably continue until either the EU and/or the IMF intervene decisively.

Stimulus passes senate with Mr. Brown, AYE. Stimulus Q&A

Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China ?
A. Shut up.

Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:

If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to Hugo Chavez, the Arabs and Al Queda
If you purchase a computer it will go to Taiwan.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan and Korea.
If you purchase prescription drugs it will go to India
If you purchase heroin it will go to the Taliban in Afghanistan
If you give it to a charitable cause, it will go to Nigeria.

And none of it will help the American economy. We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer (domestic only), or tattoos, since those are the only businesses still in the US.

http://www.ritholtz.com/blog/

http://www.cnn.com/2009/POLITICS/02/13/stimulus/index.html

CBN to suspend bank for illegal forex deals

CBN to suspend bank for illegal forex deals

The Central Bank of Nigeria queried one of the top players in the banking industry on Monday evening, over its foreign exchange dealings, suspected to be full of anomalies.

This is coming on the heels of allegations that the apex bank has not lived up to its responsibility as a regulator.

According to sources, CBN auditors will immediately go into the bank to look through the bank's foreign exchange activities.

If the bank is found guilty, it will be suspended from trading on the forex market, which is still one of money-spinners for banks in these turbulent times.

"The mood is hot now at the CBN in view of the global financial meltdown and its probable effect on the Nigerian economy. So, if anything to suggest round tripping is found in the bank's books, then the bank gets maximum punishment," a source, who asked not to be named, disclosed.

Investigation by our correspondents revealed that many banks were still involved in roundtripping, despite the Central Bank of Nigeria's directive that foreign currencies sourced through its Retail Dutch Auction System must be for end users only.

Round tripping is an arbitrage transaction where retail banks buy foreign currencies from the CBN and resell at the parallel (black) market far above the stipulated two per cent premium allowed by the apex bank.

Meanwhile, the naira remained at N147.70 to the United States dollar at the inter-bank foreign exchange market on Monday.

Traders attributed the stable exchange rate to the uncertain outcome of the Central Bank of Nigeria's Retail Dutch Auction System.

"Most banks were not aggressive in their demand for dollars because of the CBN's auction today (Monday)," one dealer said.

Traders said the outcome of the RDAS would determine the level of activity in the market on Tuesday.

The naira strengthened to N147.70 to the dollar on Friday from N149 on Monday last week after big dollar inflows from the Nigerian National Petroleum Corporation and local conglomerate, Dangote Group, improved liquidity in the system.

At last Wednesday RDAS, the CBN offered $200m at the rate of NI45.30. The apex bank has been consistent with this exchange rate in the last two trading sessions.

Meanwhile, analysts have predicted that the naira might fall further to between N165 and N200.

According to a report by Vetiva Capital Management Limited, the persistent fall in oil prices, diminishing oil production as well as consistent decline in foreign reserves are some of the factors that will lead to a further crash of the naira.

The report stated that the CBN would definitely meet the dollar demand by end-users at the early stage but that as soon as the reserves began to decline without adequate means of replenishment, the naira would suffer significant depreciation.

Vetiva noted that, "We expect that the depreciation of the naira against major economies as witnessed towards the end of 2008 will be sustained in 2009. The CBN seems to have abandoned any effort to support the value of the currency, probably recognising that it would be a prohibitively expensive long term policy to pursue."

Vetiva's position also coincided with that of Citigroup which predicted that the naira might weaken to as much as 15 per cent this year should the price of oil, which accounted for 90 per cent of the nation's export earnings, declined to an average $35 a barrel in 2009.

An economist with the group, David Cowan, said, "Nigeria is very reliant on oil revenue to meet demand for foreign exchange. If the oil price averages around $35 a barrel, then the naira will face significant further depreciation."

The currency lost almost a quarter of its value following a November 26 decision by the CBN to limit sales of dollars to commercial banks to protect its $52bn of reserves as oil revenue shrank and foreign investors sold the nation's assets. Oil has slumped almost 72 per cent since its July record of $147.27 a barrel, cutting Nigeria's export earnings.

"The central bank can't justify using its reserves to defend the naira in a country that is still very poor," said Cowan.

CBN to suspend bank for illegal forex deals

http://www.punchng.com/Articl.aspx?theartic=Art200902102272182

Obama yells fire in a crowded theatre

Martin compares the quiet competency and professionalism of the US Airways crews that executed an emergency landing with the gross mismanagement of the Obama White House team that appears to have landed from Mars

http://www.pr-inside.com/print1055954.htm

Ready for More Bad News?

The economic crisis is even worse than Obama admits.

http://www.newsweek.com/id/184266/output/print

But this is the real thing. And it's going to drag on much longer than most people think. It will be called the Greater Depression, and it's likely the most serious thing to happen to the country since its founding. And not just from an economic point of view, but political, sociological, and military.

For a number of reasons, wars usually occur in tough economic times. Governments always like to find foreigners to blame for their problems, and that includes other countries blaming the U.S. In the end, I wouldn't be surprised to see violence, tax revolt, or even parts of the country trying to secede. I don't think I can adequately emphasize how serious this thing is likely to get. Nothing is certain, but it seems to me the odds are very, very high for an absolutely world-class disaster.    http://www.dailyreckoning.com/2009-another-year-of-shock-and-awe/

Smart money. Dumb money. All kinds of money. Like those geniuses who bought Sam Zell's real estate empire at the top of the market. Practically every one of them is now in trouble. Rents are down – not enough to cover the operating costs and debt service. And what about Sam himself? He put a big chunk of his money into publishing. And now his flagship newspapers are going broke too. Ad revenue is down and shows no sign of recovering – ever.    http://www.dailyreckoning.com/the-economic-panic-of-2009/

The Asia-Pacific region is feeling the pain faster than even pessimists expected. China, an economy on which Australia increasingly relies, is looking more vulnerable by the day. The latest sign of that was January's 17.5 percent plunge in exports.

 

"You guys are in trouble," Stephen Roach, chairman of Morgan Stanley Asia, declared at the same conference that Reddy, Stevens and many Asia-Pacific central bankers attended this week.     http://www.bloomberg.com/apps/news?pid=20601110&sid=aeU.JTMir7vA

Caterpillar CEO Contradicts President on Whether Stimulus Will Allow Him to Re-Hire Laid Off Workers    http://blogs.abcnews.com/politicalpunch/2009/02/doh-caterpillar.html

I copied each full transcript into separate Word documents. After doing that, I deleted the introductions by both men (since those are largely or fully scripted) and then deleted all reporter questions from the transcripts. What you have left are simply the answers that each president offered, off-the-cuff and unscripted, to all questions.

Then I ran Word's readability tool.

Guess what?

Bush's answers were spoken at 7th grade level. Obama's at a 10th grade level.    |-( http://www.huffingtonpost.com/mark-nickolas/obamas-press-conf-answers_b_165467.html

Too much a fan of his day job, Schiff's focus is now on expanding his business from six offices to a possible 30 worldwide. Schiff's plans may be put on hold for now, as his expansion relies heavily on the state of the U.S. economy.

 

"There might not be enough Americans with money left (to invest)," he said.     http://www.dariennews-review.com/local/ci_11688012

Gerald Celente on Economic Crisis

Taleb concerned system will collapse with exponentially increasing complexity

Expert predicts Revolution, Tax Riots, Food Riots and High Crime

Gerald Celente correctly predicts every major event last 10 years.





Trends Research Website

$550 Billion Electronic Run On U.S. Banks Nearly Triggered Financial Collapse

At 2 minutes, 20 seconds into this C-Span video clip, Rep. Paul Kanjorski of Pennsylvania explains how the Federal Reserve told Congress members about a "tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars." According to Kanjorski, this electronic transfer occurred over the period of an hour and threatened a further $5 trillion to be drawn out triggering a total collapse of the Financial System, which prompted Hank Paulson's emergency $700 billion TARP bailout action. http://www.youtube.com/watch?v=_NMu1mFao3w