Oil and rice race to record levels...
Authorities lose patience with collapsing dollar...
Sunday, April 20, 2008
Oil and Rice hit record
Thursday, April 17, 2008
Tuesday, April 15, 2008
Food Prices soar most in 17 years while retail chains go under
http://www.nytimes.com/2008/04/15/business/15retail.html?_r=1&hp&oref=slogin
Retailing Chains Caught in a Wave of Bankruptcies
http://biz.yahoo.com/ap/080414/inflation_squeeze.html?.v=4 Food Costs Rising at Fast Clip, Squeezing Poor, Forcing Food Vendors to Explain Higher Prices
Sunday, April 13, 2008
USD gaps up, EUR/USD down 200 pips on G7 fears
Saxo Bank - 7:27 PM
FX: Over the weekend, the G7 meeting resulted in a statement, which included the following sentence: "sharp fluctuations in major currencies' could have implications for economic and financial stability." This is a tightening of the laissez faire stance from the prior G7 meeting (Feb, Tokyo), but it is still not really convincing.
7:27 PM
FX: US Secretary of the Treasury, Paulson, has been stating afterwards that he "reiterated in very strong terms our commitment to a strong dollar". With the Fed cutting aggressively and the last reading on the monthly budget statement at nose-bleed low levels, it is hard to see that he and the rest of the administration are backing these words by actions.
7:28 PM
FX: The only reason for the USD to go higher is that the negative expectations for US data could be too far ahead of the real data releases. We have seen signs of such a situation lately, and strong forces are working to introduce a larger role for goverment and semi-goverment institutions in the market place to alleviate the volatility and the credit crunch.
7:28 PM
FX: G7 might be an obvious candidate for this and the threat of concerted intervention might keep the USD supported for a couple of days.
8:20 PM
FX: G7 announced worries for the too fast depreciating USD and its contributuion to global inflation. This leading to lower consumer spending and complicating policy decisions for centraL bankers who might other wise lower interest rate further to avert continuing economic downturn. The tougher talks on fx
8:20 PM
FX: (continued) markets over the weekend led to speculations on whether world leaders were planing direct intervention in the currency markets to prevents further USD decline. EURUSD opened 1.5 figures lower on back of these developments. Bids at 1.5630 and 1.5600. Offers at 1.5715 and 1.5745.
In other news…
Saturday, April 12, 2008
GE sell off sparks larger fears while G7 debates currency intervention
``We believe the miss and cut to guidance raises credibility concerns for GE over the near-term, given that CEO Jeff Immelt had expressed confidence and reaffirmed guidance and operating targets on his March 13 retail webcast,'' New York-based Goldman analyst Deane Dray wrote in a research report today. ``This implies that the back half of March deteriorated significantly, which is especially unnerving.''... http://www.bloomberg.com/apps/news?pid=20601087&sid=abWAFU294qKY&refer=home
U.S. Stocks Slide After GE Cuts Its Forecast; Investor Says He's `Shocked'.... ``It's shocking in the sense that somebody at GE should have said something earlier,'' Stanley Nabi, who helps manage about $8.5 billion at Silvercrest Asset Management Group in New York, said in an interview with Bloomberg Television. ``There has been a very strong feeling in Wall Street among all analysts who follow GE that earnings would be respectable.''... ``You're shocked,'' Benjamin Pace, who helps oversee about $60 billion as chief investment officer at Deutsche Bank Private Wealth Management in New York, said in an interview with Bloomberg Television. ``They're saying, just like the rest of the financial services industry, `We took the hit as well.' We're still cautious about the U.S. market.''... http://www.bloomberg.com/apps/news?pid=20601087&sid=abVFVmSU6Fcw&refer=home
G7 update:
- G7 ministers and central bankers "The turmoil in global financial markets remains entrenched and more protracted than we had anticipated"
- G7 endorses recommendations of Financial Stability Forum (FSF) including disclosure of remaining exposure, liquidity risk management revisions, improved accounting standards for off-balance-sheet units within 100 days. New capital requirements to be phased in gradually. Welcomes any monetary and fiscal policy that support underlying economic activity and ensure price stability.
- FSF report suggests creation of a "college of supervisors" to oversee each of the largest global financial institutions, and improved infrastructure for the over-the-counter derivatives market
- Luigi Spaventa: Central banks intervening directly in the RMBS market is not necessary. Instead issue government-backed Brady bond-like securities at a discount in exchange for toxic waste on banks' balance sheets.
- Guha (FT): no plans for co-ordinated intervention in markets at G7 meeting. Unofficial ideas floated at previous FSF meeting included radical strategies to fight the credit crisis including temporary suspension of capital requirements, taxpayer-funded recapitalizations of banks and outright public purchase of mortgage-backed securities.
- Bernanke, Paulson: To do: regulators and industry should focus on raising enough capital and manage liquidity in order to deleverage without cutting back lending. Focus not on new regulation but better self-regulation in line with industry demands (see IIF letter)
- BIS background paper about Credit Risk Transfer, including the numbers.
- Senior Supervisors Group: review of risk management practices that worked and those that didn't in wake of turmoil.
- Banque de France: liquidity risk management state of the art.
- IMF: Global Financial Stability Report points to spreading credit crisis with credit losses up to $1 trillion from currently $230bn.
Thursday, April 10, 2008
50 Trading Rules
50 trading rules from Matthew Bradbard
1. Use money you can afford to lose - always trade with risk capital
2. Know yourself - be disciplined, always controlling your emotions
3. Start small - do not over commit until you learn the mechanics
4. Don't over commit - always keep excess margin in your account
5. Isolate your trading from your desire for profit - try to eliminate "hope" from your trading plan
6. Don't form new opinions during trading hours - do not let day to day fluctuations change your overall plan
7. Take a trading break - trading everyday may cloud your judgment
8. Don't follow the crowd - if everyone is leaning one way it is most likely the wrong way
9. Block out other opinions - do not be influenced by others once you form an opinion
10. When you're not sure, stand aside - it is ok to be in cash and not in the market
11. Try to avoid market orders - always using market orders to buy and sell shows a lack of discipline
12. Trade the most active option month - look for where the open interest and liquidity exists
13. Trade divergence between related commodities - large divergences within the same sector generally present an opportunity
14. Don't trade too many commodities at once - following several markets at once is difficult and usually costly
15. Trade the opening range breakout - breaking out of the opening range generally sets the tone for the direction of the coming move
16. Trade the breakout of the previous day's range - this helps getting in and out of positions
17. Trade the breakout of the weekly range - again like the daily breakouts use breakouts as buy and sell signals
18. Trade the breakout of the monthly range - the longer time frame the more market momentum behind your trading decision
19. Build a trading pyramid - when adding to a position add fewer contracts than your base commitment
20. Never put your entire position on at one price - let the market prove you are right
21. Never add to a losing position - adding to a loser only adds to a mistake
22. Cut your losses short - admit when you are wrong, it is a part of trading
23. Let profits run - do not get out for the sake of taking a profit, have a legitimate reason why you are closing a position
24. Be impatient with losing positions - never carry a losing position for more than 2-3 days and never over a weekend
25. Learn to like losses - they are a part of the business so accept it
26. Use stops orders cautiously - place or at least know where your stop is when you enter the market
27. Get out before contract maturity - do not stay in during delivery because increased volatility
28. Ignore normal seasonal tendencies - too many people are aware/ remember you are looking for an edge
29. Trade the divergence from normal - trade against what is expected by most
30. Avoid picking tops and bottoms - do not buck the trend
31. Buy bullish news, sell the fact - buy the rumor and sell the fact (playing reports)
32. Bull markets die of overweight - pay attention to bearish news when bull markets look top heavy
33. Look for the good odds - look for trades that have a favorable risk/reward dynamic
34. Always take windfall profits - take quick profits and run
35. Learn to sell short - markets often fall faster than they rise
36. Act promptly - futures are not for procrastinators
37. Don't reverse your position - do not make a 180-degree turn on losers
38. Don't be a nickel and dimer - trying to squeeze that little extra out of the market can be costly
39. Know the price trend - use charts to identify trends
40. Watch for key breakouts through trend lines - use trend lines to determine breakout points and to help with order placement
41. Watch for 50% retracements of a major move - markets have tendency to retrace 50%
42. Use the half way rule when picking buy-sell spots - inside of a price channel sell the upper half and buy the lower half
43. Watch the magnitude of market change - smaller bars on charts can be early indicators of a trend reversal
44. Congestion areas mean support or resistance - when price movement slows there is indecision
45. Major moves frequently climax with a key reversal - a significant high or low can be made on trend reversals
46. Watch for head and shoulder formations - this pattern is very accurate on changes in trend
47. Watch for "M" tops and "W" bottoms - recognize these patterns they are useful and happen often
48. Trade triple tops and bottoms - incorporate this into your trading arsenal as triple tops and bottoms generally serve as solid support and resistance levels
49. Watch volume for price clues - volume up and price up buying confirmation, volume up and price down selling signal, volume decreases look to stand aside
50. Open interest may be a tip off - use open interest increases and decreases much like volume as buying and selling signals
Hedge Funds lead the way with mounting losses
http://www.iht.com/articles/2008/04/07/business/rtrcol08.php Hedge funds are ready to set records this year, but their achievements are not the stuff that managers or investors want to brag about.
"The bubble has popped, and there is going to be a lot of pain," said Bradley Alford, the founder of Alpha Capital Management, a hedge fund advisory firm. "There will be a massive reassessment of where money should go."
Until recently, this was a red-hot industry known for its double-digit returns, money pouring in and billion-dollar paychecks. But amid terrible returns, more and more companies are now facing investors asking for their money back as staffs worry whether there will be another paycheck.
As pressure from poor returns and redemptions builds, more funds than ever will be forced to liquidate, investors said. Many expect the $1.8 trillion industry's estimated 10,000 funds to be winnowed down by a few thousand in a few years.
"This year is going to be really ugly," said one manager, who did not want to be identified because his investors did not know yet about his double-digit losses. "One day you are off 2 percent and, before you blink, you are down 20 percent. This year is just unpredictable and crazy."
Tallying the wreckage of the first quarter, including the collapse of the hedge funds Peloton Partners and Sailfish, investors agree things will get worse before they improve.
They are not much more optimistic about the private equity industry, where deals requiring big debt financings are getting done less often.
"At this point, when the liquidity spigot is turned off pretty much, its a brave new world and one in which the private equity game rules have changed dramatically," said Michael Holland, chairman of the private investment firm Holland and a former partner at Blackstone.
Mounting job losses coupled with the deepening housing crisis may have already pushed the U.S. economy into recession and certainly have frightened Wall Street banks into lending less to hedge funds. For many managers, borrowed money, or leverage, was the lifeblood for strong returns. With those gone, analysts expect investors may be tempted to put their money with managers who charge less than hedge funds' hefty fees.
In the face of sagging returns, the new trend in hedge funds will not be how much they pull in, but trying to stop the money that they have from fleeing, investors and managers said.
In February, investors sent only $8.4 billion to hedge funds after adding nearly three times that amount in November, according to data from research firm TrimTabs.
"Hedge funds are going to become the kind of hotels where you can check in, but you can't check out," Alford of Alpha Capital said, explaining that managers are desperately adding restrictions to keep all the money from leaving at once.
Hedge fund investors and managers will be discussing these topics next week at the Reuters Hedge Fund and Private Equity Summit in New York, London, Singapore, Hong Kong and Tokyo.
Managers are right to fear outflows, as industry analysts forecast the average hedge fund probably lost between 5 percent and 8 percent in the first quarter.
Those numbers will be released in a few days, but because hedge funds, unlike mutual funds, report returns only voluntarily, the data may paint a misleading picture. Failed hedge funds' heavy losses are no longer counted and losing managers often do not report either, skewing the data.
Some of the industry's biggest names are among the losers so far in 2008.
Tudor Investment Group's $4.3 billion Raptor fund lost 5.3 percent through the middle of March, with its assets now half what they were last summer. Barton Biggs' Traxis Fund tumbled 13.8 percent through the middle of March. And Och-Ziff, one of the few publicly traded hedge funds, said its funds were also down in the first quarter.
Losses loom larger still at many less prominent funds that specialize in Asian securities and emerging markets.
But some managers see a silver lining for hedge funds amid the crumbling markets.
"Ultimately, we believe the liquidity crisis will migrate not only within North American markets, but broadly among international geographies, as well, presenting opportunities for investors capable of chasing liquidity on a global basis," the hedge fund firm D.B. Zwirn told investors last month.
Other news…
WaMu gets $7 billion infusion, cuts jobs, sees big loss
Washington Mutual Inc (NYSE:WM - News), the largest U.S. savings and loan, said on Tuesday it obtained a $7 billion capital injection from private equity firm TPG Inc and other investors, but that mortgage problems will lead to a $1.1 billion quarterly loss and the elimination of 3,000 jobs.
The Great Chinese Crash of 2008
Have you heard a lot about Chinese stocks lately? Neither have I.
That's probably because the Chinese stock markets are experiencing a nosedive not unlike the Nasdaq plunge of 2000. Since their October highs, the Shanghai Composite (SSE) is down 44%, and the Hang Seng is down 24%. I guess our financial media is too concerned about the S&P's 13% decline to care.
Oil Prices Above $112 As Supplies Fall
The price of oil has surged to a new record, with a barrel a crude trading above $112 a barrel on the New York Mercantile Exchange
America at a critical turning point
This nation is bleeding profusely; it is literally hemorrhaging. We are on the road to national bankruptcy as our national debt is over $9 trillion, our annual trade deficit is at $800 billion, our housing industry and associated financial institutions are in a chaotic state. The Federal Reserve continues to pour hundreds of billion of dollars into the black hole of unregulated, devious financial practices. The foundations of our economy are structurally unsound. And we have no clue on how to extricate ourselves from the quicksand of Iraq. We are digging ourselves into a massive hole but we cannot stop digging.
Government employs 22,387,000 Americans, 8,744,000 more than manufacturing. Even the category leisure and hospitality employs 13,682,000 Americans, slightly more than manufacturing. There are as many waitresses and bartenders as production workers.
Fed Officials Worried About Recession
Even as the Fed battled in almost unprecedented fashion to stem a widening credit and housing slump, some Fed members fretted over the possibility of a "prolonged and severe" business downturn. It was in that environment that they voted -- with two dissents -- to cut this important interest rate by three-quarters of a percentage point, to 2.25 percent. That action capped the most aggressive Fed intervention in a quarter-century.
IMF Approves Selling 400 Tons Of Gold
The executive board of the International Monetary Fund has approved the sale of some 440.3 tons of its gold supplies in a wide-ranging financial overhaul and to replenish its depleting coffers.
Members of the Federal Reserve's policy-setting committee worried at their most recent meeting that housing and financial market stress could trigger a nasty slide in the economy, even as inflation pushed higher, minutes of the meeting released on Tuesday show.
We're all paying for the bankers' greed
Our Money Mail investigation highlights the widening gap between low interest rates paid to savers and spiralling loan repayments demanded from borrowers.
The dot com bubble was nothing compared with the sub-prime mortgage con jobs and the immensity of the scam is something no one wants to talk about, especially in light of the coming elections. This sub-prime business, like the dot -com business, was a deliberate rip off from the beginning.
US Fed Prepares for More Bank Failures In Wake of Housing Market Collapse
US Fed Prepares for More Bank Failures In Wake of Housing Market Collapse...
Fed Auctions Another $50 Billion
The Federal Reserve, still working to combat the effects of a severe credit squeeze, said Tuesday it had auctioned another $50 billion to cash-strapped banks. Meanwhile, the International Monetary Fund warned that further actions are needed globally to prevent more wrenching problems.
Long commutes, gas prices crimping American Dream
A gallon of gas at the time was $1.76 - $150 a month for their 2002 Chevy Malibu. It beat paying more for a similar house closer to work.
But now, with gas averaging $3.30 and rising, the McCausland dream is getting soaked at the pump to the tune of $300 a month, or $3,600 a year, double their cost four years ago. They are among many families of modest means who took on big commutes from exurbia for a taste of upward mobility.
With US in crisis, IMF warns of global economic slowdown
The global economic outlook is becoming increasingly grim as the United States appears unable to escape recession from a housing meltdown whose effects are still spreading, the IMF said Wednesday.
Truckers Protest, the Resistance Begins
Until the beginning of this month, Americans seemed to have nothing to say about their ongoing economic ruin except, "Hit me! Please, hit me again!" You can take my house, but let me mow the lawn for you one more time before you repossess. Take my job and I'll just slink off somewhere out of sight. Oh, and take my health insurance too; I can always fall back on Advil.
Then, on April 1, in a wave of defiance, truck drivers began taking the strongest form of action they can take - inaction. Faced with $4/gallon diesel fuel, they slowed down, shut down and started honking. On the New Jersey Turnpike, a convoy of trucks stretching "as far as the eye can see," according to a turnpike spokesman, drove at a glacial 20 mph. Outside of Chicago, they slowed and drove three abreast, blocking traffic and taking arrests. They jammed into Harrisburg PA; they slowed down the Port of Tampa where 50 rigs sat idle in protest. Near Buffalo, one driver told the press he was taking the week off "to pray for the economy."
US hits quota on visas for professionals; random lottery set
The completion of the 65,000 annual quota for the H-1B visa program, used for many high-tech professionals, had been widely expected by business leaders, who argue the cap is too low and hurts their ability to hire skilled workers.
Recipe for Catastrophe: Climate, Fuel, and Food
This didn't start with the current economic crisis which comes with the so-called "mortgage crisis." It doesn't start with the recent sky rocketing increase in oil and gasoline. It started with the U.S. turn to bio-fuels production. It has been accelerated by multiple other issues.
Railcars idle as economy falters
BNSF Railway Co., the nation's top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn't enough freight to keep them rolling.
Cars that often carry 40-foot containers of goods shipped from Asia stand like an iron fence between the Missouri River and this Montana burg known for world-class fly fishing. They stretch as far as Sandee Cardinal can see when she stands outside her home on the river's west bank between Helena and Great Falls.
Iceland's big freeze is a lesson for independence
IT LOOKS like a fight to the death between the puffin-eaters and the fat cats. The Icelandic prime minister, Geir Haarde, has declared war on the international financial speculators. He claims "false rumours" are behind a recent run on the krona, which has lost a third of its value. The international investors say Iceland simply lived too fast and furious in the boom years and is now paying the price.
Japan's foreign reserves hit record $1 trillion
Japan's foreign reserves hit record $1 trillion...
Republicans muzzle credit card victims
Four workers robbed by their credit card companies sat silently at recent congressional hearings on the matter, afraid to share their horror stories with the people elected to represent them.
Batten down the hatches: this is the big one
"Whole cities of pain. A continent of pain," said the great, if eccentric, Wall Street money dealer Jim Cramer recently. He was talking about the economic pain spreading across the United States, of course.
Railcars idle as economy falters
''What is that but a symbol of how America is down in the dumps right now?'' Cardinal asked as she gazed at the cars that haven't moved for about three months.
Man who helped develop the mortgage backed security mess has been put in charge of same
How sweet it is! Next time you visit the henhouse and notice that their are chicken feathers scattered all over the grounds, and most of the chickens are missing, don't even believe you're lying eyes when you see the fox, lying on his back, with a swollen stomach, while he's gnawing on a chicken bone, don't even believe for one moment that the fox had anything to do with the theft of your chickens.
Hedge funds face tougher times
"The bubble has popped, and there is going to be a lot of pain," said Bradley Alford, the founder of Alpha Capital Management, a hedge fund advisory firm. "There will be a massive reassessment of where money should go."
Monday, April 7, 2008
Friday, April 4, 2008
Depression sinks in
UK House Prices 'Will Crash Soon'
Fed Pres Yellen - US Economy 'All But Stalled'
New Housing Bill Called 'Scant Help'
UK Customer Bank Overdrafts Up By $4B In Feb
US Banking Industry To Lose 200,000 Jobs
The Mega Commodity Move - Why It's Happening
2 More UK Banks Join Mortgage Market Exodus
3M UK Homes To Go Negative Equity In Year
IMF - US Faces Greatest Crisis Since The Depression
Higher Prices Sink Consumer Spending
Bernanke Offers Bleaker View Of US Economy
Thursday, April 3, 2008
Forex Intelligence Wiki Released – www.forex-intelligence.com
EES Forex Intelligence - http://www.forex-intelligence.com The Forex Intelligence Wiki
This wiki has been created to act as a knowledge base of active FOREX Intelligence. FOREX seems to be lacking any comprehensive source of information and intelligence. Some who know, are not willing to share. Please contribute anything from original experiences, links to resources, research on specific FX, banking, trading, economics, econometrics, or global markets related topics.
Please feel free to post questions, post links, modify and use this wiki!
If you are new to FX, visit FX Cyber School at http://fxcyberschool.com Also, please register for FX Trading Forum at http://www.eesfx.com and EES Forex Coding and Strategy Google Group
Our Axioms:
- Supercomputer is affordable
http://en.wikipedia.org/wiki/Cell_processor
- Market is Random
http://en.wikipedia.org/wiki/Fooled_by_randomness
- Evolutionary programming will create strategies that trade successfully
http://www.youtube.com/watch?v=BfY4jRtcE4c Why? Current GA applications are extremely complex comparing with FX, which is a limited set of discrete values which change within limited range.
Research Pools:
- Global Consciousness Project http://noosphere.princeton.edu/
http://en.wikipedia.org/wiki/Global_Consciousness_Project
http://www.redorbit.com/news/display/?id=126649 So could the Global Consciousness Project really be forecasting the future? - Bell's Theorum http://en.wikipedia.org/wiki/Bell's_theorem
http://plato.stanford.edu/entries/bell-theorem/
http://www.quantiki.org/wiki/index.php/Bell's_theorem
Spooky Action at a distance: explanation of Bell's Theorum
Bell's theorem tells us, in short, that the correlations between quantum mechanical systems cannot be explained by classical probability theory unless one accepts the existence of a nonlocal interaction that acts faster than the speed of light.
Forex Intelligence – Get FX Intel @ www.forex-intelligence.com
A production of EES RD www.eesrd.com
Monday, March 31, 2008
Paulson speaks about new regulation
PAPER: Fed eyes Nordic-style nationalization of banks...
US-UK TEAM TO THWART FINANCIAL CRISES...
MORE POWER...
...Authority Over Markets
'Brace for $1 Trillion Writedown'...
THE BIG FIX
WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Monday a sweeping revamp of the U.S. financial regulatory landscape was not intended as a response to current market turmoil and should not be implemented until the difficulties are resolved.
Sunday, March 30, 2008
Reaction to Fed Proposal
http://seekingalpha.com/article/69979-the-fed-is-deflating-10-reasons-why
- Interest rates too low in 2003-2004
- Higher supply of dollars and higher imports
- Dollar continues depreciating
- Fed raises interest rates
- Real estate market tops in mid 2005
- Domestic credit crisis in real estate financing starting in August of 2007
- Dollar continues to fall
- Fed cannot extinguish excess dollars (it would make the crisis worse) and cannot expand dollars (to offset deflation) as it may severely impact the market for U.S. treasuries ... so it essentially freezes the monetary base and "follows the market down" (we're here now)
- Lower interest rates and rising prices spur inflationists to declare victory (perhaps they are right, but isn't it premature?)
- Deflationary effects begin to overcome the initial inflationary effects perhaps late in 2008 or in 2009, although oil and other goods remain buoyant (supply / demand).
- 1 trillion in losses and 2-3 trillion in credit disappears, the net effect being several hundred billion subtracted out of GDP (about 2%-4% lost). The knock-on effects are larger than any correction since the great depression. Interest rates remain stubbornly high as risk aversion continues. Supply/Demand issues dominate in mortgage banking with "too many banks" being propped up for fear of a cascade of losses (like Countrywide).
- The near future coincides with extremes in Euro valuation against the dollar ... which will likely reverse, until both currencies see themselves in trouble against the Yuan.
- The Euro is given second thought as China will roughly equal U.S. GDP in 2011 (or near there) and their growth prospects, with some corrections, looks huge with the size of their population and available capital outbuild. Per capita GDP won't hit the U.S. level until an estimated 2040. Imagine the size...
http://www.cnn.com/2008/US/03/26/beck.deficit/index.html
Let me give you three numbers that will put this economic asteroid into perspective: $200 billion, $14.1 trillion, and $53 trillion.
$200 billion is the approximate total amount of write-downs announced so far as a result of the current credit crisis.
$14.1 trillion is the size of the entire U.S. economy
And $53 trillion is (drum roll please) the approximate size of this country's bill for the Social Security and Medicare promises we've made.
- NYT: March 31: Treasury's Blueprint for regulatory reform: Consolidate a large number of regulators into roughly three big new agencies: 1) Prudential Financial Regulator for deposit institutions; 2) merge the Commodity Futures Trading Commission with the S.E.C. for investor protection across all markets and instruments; 3) create a national regulator for insurance companies.
- NYT: Paulson: expand Fed's troubleshooter role and authority to intervene when system stability is threatened wrt banks, broker dealers, hedge funds, private equtiy. However: no calls for tighter regulation.
- March 26: Secretary Paulson wrt primary dealer discount window: Tight regulation/supervision for broker dealers necessary as long as they have access to discount window. However, this is a temporary emergency feature, not permanent.
- Frank: Single regulator/greater power to Fed good idea. Regulators should re-examine capital reserves, risk-management practices and consumer protection without regard to whether companies were commercial banks, investment banks or nonbank mortgage lenders.
- Wolf: Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died.Implication: there will have to be far greater regulation of complex financial institutions.
- Both President Bush and Mr. Paulson remain philosophically opposed to restrictions and requirements that might hamper economic activity--> major overhaul unlikely this year.
- Bernanke: 3 principal public policy objectives: financial stability, investor protection, and market integrity. Challenges: Complexity, illiquidity, leverage
--> central banks and other regulators should resist the temptation to devise ad hoc rules for each new type of financial instrument or institution. Rather develop common, principles-based policy responses that can be applied consistently across the financial sector to meet clearly defined objectives. - Roubini: It would be a most dangerous step to expand the lender of last resort support of the central bank to most non-bank financial institutions beyond the few systemically important ones, even to all securities firms: risks of additional fiscal bailout costs of insolvent securities firms would be serious.
- Economist: Deposit-taking banks should keep their government guarantee, whereas banks that want to live like hedge funds should learn to die like them too.
- Krugman, Lex: Banking crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure--> reintroduce variant of Glass-Steagal separating banking and securities business and was repealed in 1999.
- SIPC: customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash.
http://www.rgemonitor.com/index.php
http://www.msnbc.msn.com/id/23853415 Most sweeping changes since the great depression: msnbc
Hedge Funds change as Fed Socializes finance – Subprime architect dies
http://www.france24.com/en/20080330-free-market-thinking-takes-hit-us-economic-crisis
Ed Yardeni at Yardeni Research said Fed chairman Ben Bernanke "made monetary history" by opening the discount window and "crossed even further over to the dark side of financial socialism" by allowing the firms to pledge illiquid mortgage debt as collateral.
"Comrade Ben is determined that there will be no financial meltdown and no depression while he is in command," Yardeni said. "Given the initial positive reaction in stock prices last week, I suppose this means that on Wall Street, we are all financial socialists now."
Todd Harrison, a former Wall Street trader who writes a blog on the website Minyanville, argues that the Fed is placing its balance sheet at risk by assuming troubled mortgage debt.
"If the economy continues to deteriorate, the Federal Reserve would effectively and eventually become insolvent. It won't go bankrupt -- it will simply print more currency and further dilute the value of the dollar."
But Harrison said the problems would fix themselves if authorities allowed the free market to work.
"Our current conundrum can be traced back to the implosion of the tech bubble," he said. "If we were allowed to take our medicine rather than being injected with artificial drugs, we would already be on the road to recovery."
http://www.banknet360.com/blogs/Item.do?pkId=348&serviceId=2 Roland Arnall, an architect of modern subprime mortgage finance, died yesterday, He was 68. He was a secretive person, reportedly amassing a fortune of $1.5 billion. He was a survivor of the Holocaust, and was a founder of the Simon Weisenthal Center in Los Angeles, which tracked down and brought to justice Nazis worldwide.
But it was his role in subprime mortgage finance that will be his legacy. In 2006, Ameriquest/Argent paid $325 million as part of a predatory-lending settlement with 49 states and the District of Columbia. Ameriquest/Argent was a vapid, aggressive lender, pricing loans to amass tremendous volumes, at one point reaching around $10 billion of loan originations per month.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/30/cchedge130.xml
The credit crunch is exposing the masters of the universe as mere mortals after all, reports Louise Armitstead With their dominance came increasingly displays of hubris and extravagance. Two years ago Albourne Partners, a hedge fund adviser, hired Knebworth and staged Hedgestock - the "alternative conference for the alternative investment industry" - one of the most extravagant and bizarre business meetings ever organised.
There were talks and meetings like any normal business conference, except the grounds were decked out as if it were a 1960s music festival, with the additions of a polo field, laser clay pigeon shooting range, hot-air balloon station and remote-controlled duck racing, while 4,000 delegates were dressed as hippies and danced to a live performance by rock giants The Who.
Meanwhile, London's annual Ark dinner, the industry charity night, became the biggest fund-raising night in the world. Organised by Arpad "Arki" Busson, the multi-millionaire French financier and former boyfriend of supermodel Elle Macpherson, more than 1,000 hedge fund managers and celebrities, including Jemima Khan, Bob Geldof and Liz Hurley, paid up to £50,000 for a table. Last year, a speech by Bill Clinton, a private concert by Prince and an appeal from Madonna helped raise a record of £28m.
Even when the markets turned last year, the hedge funds' high jinks continued. Stephen Partridge-Hicks, the former Citibank debt guru and head of Gordian Knot, one of the big credit hedge funds and so hit first, tackled the crisis by splurging thousands of pounds on a show-stopping party. In October, as his fund tanked, he chartered a plane to fly 150 mates to Morocco where he had hired Marrakech's upmarket Amanjena hotel for a James Bond-themed party. On top of the usual champagne and haute cuisine, Patridge-Hicks staged a James Bond scene - complete with actors, stunts, a real submarine and a fly-by from two Mig jets - starring himself as 007.
At the start of this year, hedge funds had been protected from the full impact of the credit crunch. While private equity houses experienced a sudden severance from lending, investment banks largely kept open for the hedge funds....In recent weeks, this has changed....bank bosses ordered their prime brokerage and repo departments to comb through their books again and slash risk exposure.
Lending lines have been cut, just as the funds needed them most to cope with the volatility....
A new view of hedge funds has been revealed, particularly with regards to borrowing levels. In recent years, leverage in the funds has spiralled. While hedge funds have traditionally used two or three times leverage in their funds, this figure has been multiplied to eight or nine times in many cases - and even more in some.
One prime broker said: "Hedge funds have had it easy. Every man in a pink Cadilac has been able to raise money, start a fund and do really well. Frankly, those who have taken the biggest risks have come off best because markets have been so extraordinarily kind."
The leverage that magnified gains in the rising markets has had the same impact on the way down. Weaker funds were the first victims. But now the squeezing by the lenders has meant that a far bigger number have had no cushion or protection against short-term swings.
[Ron] Beller [of failed hedge fund manager Peloton] wrote to his investors: "Because of their own well-publicised issues, credit providers have been severely tightening terms without regard to the creditworthiness or track record of individual firms, which has . . . made it impossible to meet margin calls."
In the aftermath, others have a different view. One observer says: "The only way to generate 90 per cent returns off AAA-rated bonds is if you are taking too much risk. Simple as that."
Another friend says that he often boasted that Peloton was sailing close to the wind. "I once asked Beller how he would cope if the market suddenly turned and he was forced to mark to market. He said he'd be in trouble but that would never happen."
Focus Capital, the fund that liquidated two weeks ago, was managed by Tim O'Brien and Philippe Bubb, who formerly worked at Pictet & Cie in Geneva. Focus won a EuroHedge industry award after returning more than 100 per cent in 2006. O'Brien and Bubb told investors that they had been the victims of the credit crunch and short selling. But observers disagree: "Focus took large stakes in very small, illiquid companies. In these markets that's a dangerous position to be in."....
Meanwhile, Platinum Grove, the $5.5bn New York-based hedge fund set up by former Long Term Capital Management co-founder Myron Scholes, fell 7 per cent when Japanese prices moved suddenly....
Prime brokers say that the survivors are big funds with diversified portfolios and are not overleveraged. One said: "Over the next few months, there will be a shake-up of hedge funds and the ones that survive will be stronger and more robust - essentially, the new breed of hedge funds that take the sector to the next stage of development."....
One said: "Hedge funds got carried away. Benevolent markets meant that anyone could be a superstar which couldn't be true. The current crisis will quickly show the pretenders and leave behind those that are genuine hedge funds - that can make money whatever the weather."
Swiss Privacy broken – New US Regulator proposed, while new gold rush begins
http://www.nytimes.com/2008/03/29/business/worldbusiness/29swiss.html?ei=5065&en=be96c778a5f8828a&ex=1207368000&partner=MYWAY&pagewanted=print GENEVA — Like Paul Revere, Konrad Hummler sounded the alarm last week as he made his way by train and by plane to his bank's branches across Switzerland. This country's storied role as secret banker to the world's wealthy is under threat like never before, Mr. Hummler warned.
MORE POWER FOR FED...
...overhaul of Wall Street regulation
http://www.ft.com/cms/s/0/4b243902-fd06-11dc-961e-000077b07658.html California Gold Rush
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