MasterFeeds: March 2011

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March 29, 2011


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March 30th Buy Israeli Goods Day
March 30th has been designated as a day to isolate and punish Israel through a proposed "day of action" that will promote the BOYCOTT of Israeli goods. Please forward this to your community and your friends in other cities and ask them to help start the movement to counter the "boycott Israel day" designated on March 30. You can help start this movement. We had tremendous success the last time we did this November 30.
MARCH 30 IS BUY ISRAELI GOODS DAY--- its BIG!! and you can help. Learn more at

March 21, 2011

A Million HFT Algos Cry Out In Terror And Are Silenced in Citi 1 For 10 Stock Split

 A Million HFT Algos Suddenly Cry Out In Terror And Are Suddenly Silenced As Citi Announces 1 For 10 Reverse Stock Split
Tyler Durden

zero hedge

March 21, 2011 13:19: CET

While the wacky desperation antics of America's nationalized bank (that would be Citigroup for the cheap seats) enter the surreal zone, after the bank just announced a 1 for 10 reserve stock split (finally returning the stock price to Al Waleed's cost basis, if not entrance market cap) and a 1 cent dividend (which effectively means the Fed can now exit the prop each failing bank game... but won't), the bigger question is what happens to the momentum algos that traditionally traded 500 million shares of Citi stock, providing a supporting base for the market courtesy of massive momentum surges that provided a buying feedback loop mechanism driven out of pure churn volume. Those days are now over, as the volume will plunge pro rata from half a billion to a measly 50 million shares. Furthermore, with algos receiving liquidity rebates on a volume basis, it is conceivable that the biggest piggy bank to the 3 man Ph.D. HFT operations is about to break, as exchanges cut their rebate payouts by 90%. And with the stock market these days being far more a function of volume churn than technicals or, heaven forbid, fundamentals, what happens with the natural HFT support to the market is anyone's guess. One simple assumption: the next time the S&P does a May 6, or a USDJPY flash crash, the liquidity providers will pull out that much faster, leading to a massive freefall without any of the foreplay.

March 19, 2011

Ex-Goldman programmer gets 8 years for code theft | Reuters

Ex-Goldman programmer gets 8 years for code theft

6:50pm EDT
By Grant McCool
NEW YORK (Reuters) - A former Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) computer programer was sentenced to eight years in prison on Friday for stealing secret code used in the Wall Street bank's valuable high-frequency trading system.
Sergey Aleynikov, was arrested by the FBI and charged in July 2009 with copying and removing trading code from Goldman before taking a new job at Teza Technologies LLC, a high-frequency trading startup firm in Chicago.
A onetime collegiate-level competitive ballroom dancer, Aleynikov, 41, was convicted of trade secrets theft and transporting stolen property across state lines on December 10 after a two-week long jury trial in Manhattan federal court.
High-frequency, computer-driven trading has become an important and competitive business. The software codes that trade shares in milliseconds are closely guarded secrets.
"I very much regret the foolish thing of downloading information," the Russian-born father of three said at his sentencing on Friday. "Part of this information was proprietary to Goldman. I never meant to cause Goldman any harm or harm anyone at the bank."
Aleynikov's words fell short of U.S. District Judge Denise Cote's hopes for "an open and honest statement of responsibility" for his criminal conduct.
"You did not do that," said Cote, imposing a sentence of 97 months that was within the eight to 10 years recommended by the government. Cote also fined him $12,500.
Aleynikov's lawyer, Kevin Marino, had originally asked for a sentence of probation but in court on Friday he suggested two years was adequate for what he called Aleynikov's "foolish, tragic, horrible, ridiculous mistake."
Aleynikov has the right to appeal the sentence. His defense lawyers have argued that the matter belonged in civil, not criminal court.
U.S. prosecutor Joseph Facciponti said the stolen code was Aleynikov's "golden ticket" to Teza and "he stood to make millions more" there than he did at the bank. Facciponti said Aleynikov spent several months planning his move, eventually transferring 500,000 lines of Goldman Sachs source code to an outside server.
Cote had revoked the bail of Aleynikov, a dual citizen of the United States and Russia, on the grounds that there was a risk of him fleeing before sentencing.
Throughout the trial and sentencing phase, many comparisons were made with a similar case in the same courthouse against a former Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) trader, Samarth Agrawal.
The citizen of India was found guilty by a jury last November of stealing high-frequency trading code from the French bank before going to a new job. On February 28, a judge sentenced him to three years in prison and he will be deported when he completes his sentence.
The case is USA v Aleynikov, U.S. District Court for the Southern District of New York, No. 10-00096.
(Reporting by Grant McCool; Editing by Tim Dobbyn)

Ex-Goldman programmer gets 8 years for code theft | Reuters: "Ex-Goldman programmer gets 8 years for code theft

- Sent using Google Toolbar"

-- The MasterFeeds

March 17, 2011




That's the total amount of money rumored to be injected by the BOJ in order to keep the Nikkei going for a whopping 4 days. According to PTI the BOJ has offered to add an additional ¥13.8 trillion today, to go with the tens of trillions already noted previously on Zero Hedge. If proven true, this would bring the total taxpayer backstop injected in just 4 days to $700 billion dollars! This whole exercise to keep the bank holiday away is starting to be just a little expensive to Joe Peasant.

From PTI:

The Bank of Japan has offered an additional 13.8 trillion yen (some USD 170 billion) to money markets, bringing to 55.6 trillion yen the total emergency funds made available by it to protect the nation's banking system from the negative impact of Friday's massive earthquake.

Japanese authorities admitted that the unusual step to drop water from twin-rotor CH-47 helicopters to cool overheating pool containing spent fuel rods would not resolve the multifarious problems confronting them. These rods are still radioactive and as dangerous as the rods inside the reactors.

"It's not so simple that everything will be resolved by pouring in water. What we are trying to do is to avert other problems, said Edano.

India's top diplomat in Tokyo said all Indian nationals in Japan are safe and that efforts are underway to facilitate the return of those wishing to leave the quake-ravaged region.

A group of Indians stranded in Sendai, one of the worst- affected in the quake and the devastating tsunami, have been moved to Tokyo, Indian Ambassador Alok Prasad said.

He said the Indian mission has set up a 24-hour helpline and has been giving regular updates on its website.

Reflecting the mounting international concerns, France has asked its nationals in Tokyo to leave the country or move south.

View article...

March 16, 2011

Black Swans Now a Regular Part of Market Landscape Article: Black Swans Now a Regular Part of Market Landscape

For global financial markets, once-in-a-lifetime events are happening with such regularity that black swans may as well be white swans.

Full Story:


March 15, 2011

Japan Update: It’s Much Worse than it Looks

Japan Update: It's Much Worse than it Looks
zero hedge - on a long enough timeline, the survival rate for everyone drops to zero
March 15, 2011 17:00: CET

I just got off the phone with several frightened, somewhat dazed survivors of the Japanese earthquake who work in the financial markets, and I thought it important to immediately pass on what they said. Some were clearly terrified.

Japan's economic outlook now appears far more dire than I anticipated only a day ago. It looks like GDP growth rate is going to instantly flip from +2% to -3%, a swing of -5%, similar to what we saw after the Kobe earthquake in 1995.  We have just had a "V" shaped economy dumped in our laps, and we have just embarked on a precipitous down leg. Two very weak quarters will be followed by two strong ones. The initial damage estimate is $60-$120 billion, and that will certainly rise.

Kobe had a larger immediate impact because of its key location as a choke point for the country's rail and road transportation networks and ports. But the Sendai quake has affected a far larger area. Magnifying the impact is the partial melt down at the Fukushima Dai Ichi nuclear power plant, forcing the evacuation of everyone within a 12 mile radius.

Most major companies, including Toyota, Nissan, Honda, and Sony have shut down all domestic production. Management want to tally death tolls, damage to plant and equipment, and conduct emergency safety reviews. In any case, most employees are unable to get to work because of the complete shutdown of the rail system. Tokyo's subway system is closed, stranding 25 million residents there.

Electric power shortages are a huge problem. The country's eight Northern prefectures are now subject to three hour daily black outs and power rationing, including Tokyo. That has closed all manufacturing activity in the most economically vital part of the country.

Panic buying has emptied out every store in the major cities of all food and bottled water. Gas stations were cleaned out of all supplies and reserves, since much of Japan's refining capacity has been closed. There are 20,000 expatriates waiting at Tokyo's Narita airport as foreign companies evacuate staff to nearby financial centers in Hong Kong and Singapore. Airlines are diverting aircraft and laying on extra flights to accommodate the traffic.

The Tokyo Stock Exchange absolutely took it on the nose on Monday morning. Trading lasted exactly four minutes until, with the TOPIX Index down 7%, the circuit breakers kicked in. Most lead blue chips were down 10%, and 175 stocks never opened. Only construction stocks were up. Most of the selling was being done by foreign institutions and hedge funds, locals having vacated this market ages ago. This could be the beginning of a new bear market that will last for many months.

Prime Minister Naoko Kan has asked the Bank of Japan "to save the country." The central bank responded promptly with ¥15 trillion, or $187 billion worth of credit market purchases. The yen spiked at the opening, as I expected, to ¥81.4, as carry trades were unwound en masse. Then the BOJ showed its heavy hand, slapping it back down to ¥82.2 where it has sat since. They appear to be taking on all comers at this price, and have the printing presses to fall back on. The situation remains fluid.

My global macro call proved spot on. Oil is down $2, plunging to a two week low below $100/barrel, blindsided by shrinking Japanese demand. Equities were sold worldwide. Uranium miners in Australia took a particular pounding, as the nuclear crisis casts a long shadow over this reviving energy source. Insurers were unloaded in London and Zurich. The S&P 500 opened down 10 points to 1,295 in the futures markets, close to Friday's low.

It looks like we are seeing the first multiple partial nuclear melt downs in history. But a professor at nearby UC Berkeley tells me this is more of repeat of Three Mile Island, where half the fuel rods melted, than Chernobyl, where they all did. Small amounts of low radiation cesium and iodine have already been released, which should be measurable on American roof tops in about ten days. Neighboring countries are enforcing radiation testing of all food imports from Japan.

The death toll is certain to ratchet up considerably. Seaside villages that have been wiped off the face of the earth don't return phone calls. Japan's maritime self-defense forces are scouring the seas off of Sendai, rescuing a lucky few clinging to floating debris.

Finally, I wish to thank the many who sent me emails of concern, aware of my long family ties to Japan. Everyone is safe as they were fortunately out of the country when the disaster struck, or did not live in the worst affected areas.

Further updates to follow.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on "This Week on Hedge Fund Radio" in the upper right corner of my home page.

Read more…

Markets update from the FT: Risky assets dumped as Japan crisis intensifies

March 15 2011 4:37 PM GMT
Risky assets dumped as Japan crisis intensifies
ByFT reporters
Markets are enduring a turbulent session as the worsening nuclear crisis in Japan sees traders frantically dump riskier assets and push funds into the haven of US Treasuries

Read the full article at:

CalPERS corruption: Scathing report alleges corruption at CalPERS -

In a scathing report, a former chief executive of the California public employee pension fund was accused of pressuring subordinates to invest billions of dollars of pension money with politically connected firms.

A 17-month investigation also found that Federico Buenrostro Jr. — along with former pension fund board members Charles Valdes and Kurato Shimada — strong-armed a benefits firm to pay more than $4 million in fees to consultant Alfred J.R. Villalobos, who later hired Buenrostro.

The report, prepared for the California Public Employees' Retirement System by Washington law firm Steptoe & Johnson, comes amid widening attacks on public employee pension funds in California, Wisconsin, Iowa and other states for providing lavish benefits that cash-strapped governments can no longer afford.

The findings of insider dealings at CalPERS could provide fresh ammunition to Republican lawmakers here who want Democratic Gov. Jerry Brown to convert traditional pensions with guaranteed payments for life into 401(k)-type plans that rely heavily on employees' own contributions.

"Fixing California's pension problem is difficult enough without the stench of corruption and collusion that saps public confidence and gives taxpayers a reason to withhold support," said Dan Pellissier, president of Californians for Pension Reform, a group that is pushing a 2012 ballot initiative that would diminish state employee pension benefits.

DOCUMENT: Read the full report, annotated by Times staff

Shimada, Buenrostro, Valdes and Villalobos either declined to comment or did not return calls.

Buenrostro served as CalPERS chief executive for six years, leaving in August 2008. The day after quitting, he went to work for Villalobos — a former CalPERS board member and deputy Los Angeles mayor who acted as an agent for investment firms seeking CalPERS money. The report said Villalobos hired Buenrostro with a $300,000 annual salary and gave him a Lake Tahoe condominium.

While at CalPERS, Buenrostro repeatedly "inserted himself in the investment process in a manner inconsistent with prior practice at CalPERS, pressing its investment staff to pursue particular investments without evident regard for their financial merits," the report said.

It said Buenrostro intervened with staff on behalf of Aurora Capital Group of Los Angeles to obtain investment money. Buenrostro told subordinates that Aurora was politically powerful, and that Aurora principal Gerald Parsky served on a state commission dealing with public employee benefits, the report said.

Aurora was a Villalobos client, and Buenrostro told CalPERS staffers that he would represent it once he went to work with Villalobos, the report said.

The report also noted that Buenrostro often intervened on behalf of favored private equity funds that staff called "friends of Fred."

Staffers ultimately complained about Buenrostro to the board, and those complaints "became a basis for the board's efforts to replace him as CEO," the report said.

CalPERS is the nation's largest public pension fund, with $228 billion in assets, providing benefits to about 1.6 million state and local government employees, retirees, spouses, children and other beneficiaries.

In May 2010, the California attorney general sued Villalobos and Buenrostro, accusing them of scheming to enrich themselves through self-dealing and other misconduct in seeking CalPERS investment money on behalf of clients.

According to the report, one of those investment funds — Apollo Global Management — asked Buenrostro to sign documents acknowledging that CalPERS was aware of so-called placement agent fees it was paying to Villalobos.

Several CalPERS investment officers refused to sign the disclosures, the report said — but Buenrostro did, using pasted-on letterhead to make them look more official.

Buenrostro made "representations regarding placement agent fees and related deal documents that are either demonstrably false or sufficiently suspect," the report said.

The report, citing Buenrostro's ex-wife and an unnamed girlfriend, described Buenrostro as "a puppet" of Villalobos, who the report said earned more than $50million in placement agent fees.

During his six years as head of CalPERS, Buenrostro received many valuable gifts from people and firms with financial interests in doing business with CalPERS, the report said.

When he was married in 2004, he allowed Villalobos to host the wedding at his Zephyr Cove, Nev., home. Buenrostro also traveled with Villalobos and Valdes to the Middle East and Asia — with Villalobos picking up much of the costs, the report said.

"Buenrostro does not appear to have ever disclosed these gifts or recused himself from any CalPERS matters based on any of these apparent relationships," the report said.

Valdes also pressured CalPERS investment staff to do business with Villalobos' firm, Arvco Capital Research, the report said.

In September 2000, Valdes was close to being ruled out of order for raising his voice in support of a Los Angeles real estate investment firm, CIM Group, the report said. CalPERS staff had recommended a smaller investment than originally proposed. Arvco and Villalobos received a $9-million commission on the investment transaction.

CIM also provided Academy Awards tickets to Valdes and other CalPERS people, the report said. Valdes attended in 2005 and 2006 but did not report the gifts on state financial disclosure documents.

The report also provided new details about CalPERS dealings with Medco Health Solutions Inc. before the firm was awarded a $26-million contract to provide drug benefits to members.

In May 2004, Villalobos hosted a meeting at his Lake Tahoe home with Medco CEO David Snow. Buenrostro attended.

"Soon after the May 2004 meeting at the Villalobos home, Medco agreed to retain Villalobos as a consultant and pay him $4 million," the report said.

Villalobos received a final check for $1 million immediately after the CalPERS board approved the contract, according to the report, and also received a $20,000-a-month retainer until sometime in 2009.

Last year Villalobos filed for personal bankruptcy protection, citing nearly $5 million in debts to Nevada casinos. It was his second personal bankruptcy.

The report recommended that CalPERS improve accountability and reduce the risk of future abuses, including providing additional training to board members so that board business is not conducted in clandestine meetings with managers, and prohibiting the release of sensitive CalPERS information outside the organization.

CalPERS corruption: Scathing report alleges corruption at CalPERS -

-- The MasterFeeds

March 14, 2011

Japan and precious metals: a snapshot - SILVER NEWS | Mineweb

Japan and precious metals: a snapshot

As the country still reels from the devastation of a massive earthquake and tsunami, we provide a brief view of where Japan fits into the world precious metals markets

Author: Rhona O'Connell
Posted: Monday , 14 Mar 2011


It feels callous writing about such an awful tragedy in terms metals markets, but sadly there is perhaps a call for a quick review of Japan's typical position in terms of normal demand levels. This piece is not designed to take a view on the prospects for longer-term increased demand in terms of reconstruction, not to try and quantify how demand may contract in the short-term as some of Japan's industries have to struggle to contain their losses or temporary shut-downs; it is aimed more at giving a snapshot of Japan's market share in different sectors.

The PGMs

The platinum group metals are the logical place to start, especially given Japan's long history of platinum jewellery demand. This is based partly, but not only on the concept of purity. Platinum jewellery needs to be a minimum of 85% and there is no 'caratage' concept as such; this partly informs the fact that for many decades Japan was the world's largest consumer of platinum in jewellery as Japanese people have high standards and have always valued high purity (this though has been changing in the gold market through economic force of circumstances). The other reason goes back some centuries to the Shogun era, when the Emperor desired his merchants to wear while metal rather than yellow, in an effort to minimise ostentation - this was more important than the generally accepted concept of white metal looking better on the Japanese complexion than yellow metal.

Back in 1991, purchases of platinum for jewellery manufacture in Japan were 1.26 million ounces or 39 tonnnes (Johnson Matthey figures). This was some 31% of world demand for platinum in all forms and 85% of the world jewellery sector, which was 4.1M ounces or 252t.

Preliminary JM figures for 2010 put world purchases of platinum for jewellery at 2.4M ounces or 149t. This of course is now dominated by China; the Japanese figure for 2010 is just 330,000 ounces, a fall of 74% from 20 years previously. GFMS is currently estimating actual Japanese fabrication demand in the sector at a lower figure and has noted recently, but before the earthquake, that while the bridal sector remained relatively steady, falls in adornment demand were likely to continue. This is ascribed both to slow economic growth and demographic shifts in spending patterns as well as other endemic changes in the local sector.

JM figures suggest that Japanese demand for platinum in the auto sector accounted for just over half a million ounces in 2010 or 18% of the world total, but the Japanese auto market is a palladium story rather than platinum.

Johnson Matthey's estimate (which, as noted above, reflects purchases of metal for the sector as opposed to actual fabrication demand) for the overall Japanese share in the platinum market in 2010 is 1.2M ounces, or 15% of the world total. Autocatalyst and jewellery, as the two largest demand sectors, took up 75% of local purchases, with glass in third place.

Japan's position in the palladium market is slightly larger than that of platinum, reflecting its greater use in the auto and electronics sectors. JM estimates that Japan's overall demand for palladium in 2010 was 1.5M ounces or 16% of the world total.

More than 50% of this was accounted for by the auto sector, at 765,000 ounces. Japan's share of palladium demand in the world auto sector was therefore 15%.

Globally, the second largest use of palladium is the electrical and electronics sector, notably the latter. This sector took up 1.4M ounces in 2010, or 16% of world demand. In Japan the offtake was 295,000 ounces, giving it a 21% share, well ahead of Europe and the United States and second only to China.

Meanwhile Japan‘s demand for palladium in the dental sector is the world's largest at almost 47% of the total.


A fully up-to-date breakdown of silver demand by country is not yet available (GFMS will be publishing its World Silver Survey for the Silver Institute in early April). Broadly speaking, however, Japanese demand for silver is something over 2,000 tonnes, or 9% of world total. The largest end-use by far is the broad 'industrial' category, which includes the auto sector, construction, medical uses and solar cells, which latter are garnering an increasing amount of popular comment. The photographic sector has been falling as heavily in Japan as it has elsewhere in the face of the onward march of digital technology; the fall in Japanese demand between 2000 and 2009 was 63%, while world usage fell by 62%. Jewellery and silverware is a minimal end-use in Japan.


In the gold market, meanwhile, Japan's share of world gold fabrication (i.e. exclusive of investment demand) is approximately 6% of the world total, with the majority of this concentrated in the electronics industry in which it has consistently been the world leader. The tonnage involved in Japan is close to 100t for a world total in the region of 250t. Jewellery demand is low, both on a gross and an outright basis, and scrap recycling has been relatively heavy in recent years, meaning that net demand has typically been well below 50% of gross demand - and more recently has been more like 20% of total. Caratage in new pieces has been falling as economic conditions have been constricting expenditure.

Gold investment bars, meanwhile, have been flowing back into the market. World Gold Council publication 'Gold Demand Trends' (figures compiled by GFMS) show that with the exception of the fourth quarter of 2008, Japanese investors have been net sellers of gold bars on a quarterly basis right back to the start of 2006, since when the net release of small bars has been over 220 tonnes. This negates the net purchases of gold bars going back to the second quarter of 2002. Between the start of 1999 and Q2 21002, net purchases were almost 300t - so we may yet find that these sorry circumstances lead to more such sales. - The world's premier mining and mining investment website Japan and precious metals: a snapshot - SILVER NEWS | Mineweb

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March 12, 2011

U.S. Commodities: Oil Falls After Japan Quake Shuts Refineries

U.S. Commodities: Oil Falls After Japan Quake Shuts Refineries

Crude oil fell, capping the first weekly drop in a month, after Japan’s strongest earthquake on record shut refineries and dissidents in Saudi Arabia failed to stage planned protests.

The 8.9-magnitude temblor unleashed a 7-meter (23-foot) tsunami that killed hundreds of people in Japan, the world’s third-largest oil-consuming country. Saudi Arabian police and anti-riot vehicles patrolled central Riyadh today, preventing a “Day of Rage” proclaimed by activists.

“This is in response to the tsunami and the lack of the Day of Rage in Saudi Arabia,” said Hamza Khan, an analyst at the Schork Group Inc., a consulting company in Villanova, Pennsylvania. “If the Japanese refineries are down, then we’re going to see lower demand for crude oil.”

In other markets, grains after Japan, a major importer of U.S. crops, was struck by the quake, threatening to curb demand. Cocoa also dropped. The UBS Bloomberg Constant Maturity Commodity Index fell 0.7 percent to 1,723.48, This week, the gauge declined 3.9 percent, the most since May. The measure was down for the fifth straight day, the longest slump since August.

Oil futures for April delivery tumbled $1.54, or 1.5 percent, to $101.16 a barrel on the New York Mercantile Exchange, the lowest settlement since March 1. The price declined 3.1 percent this week.

Futures still have gained 21 percent since Oct 1. A civil war in Libya, a member of the Organization of Petroleum Countries, and turmoil in northern Africa and the Middle East has roiled markets. President Barack Obama said today that he is prepared to release oil the U.S. Strategic Petroleum Reserve if fuel supplies tighten and cost jump.

Corn, Wheat

Corn futures for May delivery fell 18.5 cents, or 2.7 percent, to $6.6425 a bushel on the Chicago Board of Trade. Earlier, the price touched $6.5275, the lowest for a most-active contract since Jan. 31.

Japan, the largest buyer of U.S. corn, is checking ports and grain depots for damage after a tsunami that engulfed towns on the northern coast, the Ministry of Agriculture, Forestry and Fisheries said. Farmland was flooded with burning debris in some areas as the tidal surge swept inland, images from state broadcaster NHK showed.

The quake “will likely impact grain trade” after ports in Kushiro, Hachinohe, Ishinomaki and Kashima were hit by the tsunami, and some feed mills and livestock operations were hurt, the U.S. Grains Council said.

‘Economic Shock’

“There is no way to assess even the direct damage to Japan’s economy, or to the global economy,” Carl B. Weinberg, the chief economist at Valhalla, New York-based High Frequency Economics Ltd., said in a note to clients. “Experience tells us that the economic shock can be, and likely will be, much bigger than anyone can imagine.”

Japan is the second-biggest buyer of U.S. wheat and rice and ranks third for soybeans, government data show. Last month, grain prices surged to the highest since 2008 as rising demand and adverse weather cut inventories.

Wheat futures for May delivery dropped 21.75 cents, or 2.9 percent, to $7.1875 a bushel. Earlier, the price touched $7.0375, the lowest since Dec. 1. This week, the grain plunged 14 percent, the most since December 2008.

Soybean futures for May delivery dropped 21 cents, or 1.5 percent, to $13.345 a bushel. This week, the price fell 5.6 percent, the most since October.

Rice futures for May delivery fell 4 cents, or 0.3 percent, to $13.01 per 100 pounds. Earlier, the price touched $12.48, the lowest since Oct. 6. This week, the commodity tumbled 8.3 percent, the most since January 2009.


Cocoa fell, capping the biggest weekly drop since May, on speculation that supplies from Ivory Coast, the world’s biggest exporter, will increase after the government threatened to seize undeclared inventories.

Ivorian exporters have until March 31 to ship bean stockpiles or face “sanctions,” a spokesman for President Laurent Gbagbo said March 9. Gbagbo has refused to step down following a November election that international observers say was won by Alassane Ouattara, who has asked shippers to hold back exports to deny funds to his rival.

“The market is realizing there is still a lot of supply, as the situation in Ivory Coast is forcing suppliers to export in order to pay the domestic tax,” said Jonathan Bouchet, an analyst at OTCex Group, a broker in Geneva.

Cocoa for May delivery fell $33, or 1 percent, to $3,412 a metric ton on ICE Futures U.S. in New York. Prices dropped 6.7 percent this week, the most since May 14.

Commodities settled as follows:

Precious metals: April gold up $9.30 to $1,421.80 an ounce May silver up 86.9 cents to $35.935 an ounce April platinum up $16.10 to $1,781.70 an ounce June palladium down 90 cents to $765.50 an ounce

Livestock: June live cattle unchanged at $1.1695 a pound August feeder cattle up 0.35 cents to $1.37625 a pound June lean hogs down 1.95 cents to 99.5 cents a pound

Grains: May soybeans down 21 cents to $13.345 a bushel May corn down 18.5 cents to $6.6425 a bushel May wheat down 21.75 cents to $7.1875 a bushel May rice down 4 cents to $13.01 per 100 pounds May oats down 5.5 cents to $3.505 a bushel

Food and Fiber: May coffee down 6.15 cents to $2.744 a pound May cocoa down $33 to $3,412 a metric ton May cotton up 3.96 cents to $2.0494 a pound May sugar up 0.15 cent to 28.86 cents a pound May orange juice down 2.3 cents to $1.6795 a pound

Energy: April crude oil down $1.54 to $101.16 a barrel April natural gas up 5.9 cents to $3.889 per million British thermal units April heating oil down 1.59 cents to $3.029 a gallon April gasoline down 3.19 cents to $2.9877 a gallon

Others: May copper up 1 cent to $4.2075 a pound May lumber up $2 to $311.10 per 1,000 board feet

To contact the reporter on this story: Margot Habiby in Dallas at

To contact the editor responsible for this story: Steve Stroth at

U.S. Commodities: Oil Falls After Japan Quake Shuts Refineries - Bloomberg

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March 11, 2011

Sector performance YTD

Score Board --Percentages --Year-To-Date -- (some of these may surprise you).

Crude Oil (bbl)...............+14.9
Ethanol (gal)...............+7.7
Heating Oil (gal)...............+18.4
Natural Gas (mm btu)...............-12.3
Unleaded Gas (gal)...............+20.1

Gold (oz)...............+0.4
Silver (oz)...............+15.3
Platinum (oz)...............+1.7
Copper (lb)...............-2.6 -- this could be ominous.
Palladium (oz)...............-2.3

courtesy of Richard Russell

March 10, 2011

Has Potash lost its Momentum? | Resource Investing News

Has Potash lost its Momentum?
March 9, 2011 @ 4:52 pm In Feature Articles
By Leia Michele Toovey-Exclusive to Potash Investing News [1]
[2]Financial services firm Citigroup [3] (NYSE:C [4]) believes that the recent rally in stock prices of Potash Corp. of Saskatchewan [5] (NYSE:POT [6]) and Mosaic [7] (NYSE:MOS [8]) is about to lose steam.
On Wednesday, Citi analyst P.J. Juvekar downgraded Potash Corp. and Mosaic to hold, from buy. Citigroup also advised investors to take profits on the fertilizer plays, noting that “much of the good news” in the sector has already been digested by the markets.
“Lacking well-defined near-term catalysts, we see growing risk that the stocks could trade sideways into the summer,” Juvekar wrote. Juvekar is still bullish on fertilizer fundamentals, but thinks that the momentum generated by improving farm commodity prices could slow. “When corn moved from $3.50/bushel to $7/bushel, there was ample incentive to invest in more fertilizers to improve yields. At current corn prices, growers are incentivized to apply all the fertilizer they need to boost yields. If corn prices rose from $7/bushel to $8/bushel, farmers may not apply even more fertilizer. The incremental dollar may be invested elsewhere, such as in new machinery or land.”
However, optimism still reigns over the potash market. Last night, in his Mad Money Lightning Round, Jim Cramer voiced his opinion in regards to the recent sell-off of Potash Corp. stock. “Everyone is selling everything, but it's not the end of the world. People are still running out of food. Potash needs to be bought," said Cramer.
Smartrend [9], a trend trading system, pinpointed three fertilizer stocks with high potential upside, including Citi's downgraded Potash Corp. Smartrend claims Potash Corp. has a potential upside of 25.4% based on a current price of $58.29 and an average consensus analyst price target of $73.08. Smartrend also added CF Industries (NYSE:CF [10]) and Agrium to its stock picks with high upside potential. According to Smartrend, CF Industries has a potential upside of 23.5% based on a current price of $128.94 and an average consensus analyst price target of $159.27. Agrium (NYSE:AGU [11]) has a potential upside of 14.0% based on a current price of $92.84 and an average consensus analyst price target of $105.81.
Meanwhile, Europe's biggest potash producer, K+S Ag (ETR:SDF [12]) lifted its potash price for the fifth time this week, citing agricultural inflation as the main reason. This upgrade followed a report from the United Nations Food & Agriculture Organization that said record food prices are likely to be sustained this year because of high oil costs and smaller harvests.
Company news
Global X, the New York City-based ETF issuer best known for its suite of emerging market ETFs, is continuing the expansion of its product lineup with a new filing with the SEC. Among these new offerings is a fund covering the Fertilizer/Potash Industry. The Fertilizer & Potash ETF which will seek to track the Solactive Global Fertilizers/Potash Index. This index follows the performance of the largest and most liquid listed companies globally that are active in some aspect of the fertilizer industry. The index is calculated as a total return index in USD and adjusted semi-annually. The stocks are screened for liquidity and weighted according to free-float market capitalization. Global X has cited skyrocketing interest in the fertilizer sector as the main reason for this new offering.
Allana Potash Corp [13]. (CVE:AAA [14]) has reported encouraging drill results from its Danakil Depression project in Ethiopia. Allana drilled to test the southern unexplored limits of its concessions. The drill hole intersected a 1 meter zone of 44.5% potassium chloride (KCI), the highest concentration of potash Allana has struck to date. While not particularly thick, the shallowness of the resource (at less than 120m deep) would be extremely suitable for open pit mining, which the company is considering pursuing and on which we have based our NAV,” said Dundee Capital Markets analyst Richard Kelertas. Kelertas also told his clients that these excellent results of drill hole #11 support the view that Allana is sitting on a potash resource far bigger than its current NI 43-101 resource estimate would suggest.

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Has Potash lost its Momentum? | Resource Investing News

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March 9, 2011

China: Lightning Audit Ordered for Local Governments

China: Lightning Audit Ordered for Local Governments WordPress Tags: China,
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Lightning Audit Ordered for Local Governments

Auditors are fanning out to examine more than a decade of local government-related lending – and report by summer

(Beijing) – Central government auditors launched March 1 a strict, nationwide survey of provincial and municipal government debt programs, looking closely at risks involved in direct and indirect loans backed by local governments.

Auditors participating in the lightning campaign will trace loans issued over a 13-year period from 1997, when China rolled out an expansive fiscal policy to counteract a financial crisis spreading from Southeast Asia, through 2010, the second full year of an economic stimulus initiative that successfully spared China the worst of the global financial crisis.

The State Council recently ordered auditors to study local finances and return to Beijing in four months with a full report.

Ni Hongri, a research fellow at the State Council Development and Research Center, has several questions on his plate. 'How much debt did local governments and their (financial) platforms assume after the recent stimulus plan?' he asked. 'How much banking and fiscal risk might these debts incur?

'Policymakers need a clear picture before making the next moves on macroeconomic management or fiscal allocations,' Ni said.

The National Audit Office dispatched 18 teams and mobilized 37 local audit bureaus to examine government books in 31 provinces and municipalities. They're looking at loans made to, guaranteed by, or indirectly backed by local governments.

Funds for loans with indirect government backing usually come from local government financing platforms (LGFPs), government-affiliated agencies, and government-backed non-profit organizations. Credit agreements may not expressly say so, but local governments are generally expected to bail out borrowers that default.

Estimates vary for the amount of money loaned to local governments, with official and non-official institutions weighing in.

But outstanding loans to LGFPs alone had risen to 7.66 trillion yuan as of last June, exceeding the 7.1 trillion yuan raised through central government bonds. In addition, local governments have issued bonds worth 400 billion yuan via the finance ministry since 2008.
Lightning Audit Ordered for Local Governments_English_Caixin:

A full story will be published soon on Caixin Online.

March 8, 2011

Canadian Miners Don’t Love the London Stock Exchange - Deal Journal - WSJ

Canadian Miners Don’t Love the London Stock Exchange
- Deal Journal - WSJ:
"By Phred Dvorak and Edward Welsch

When the London Stock Exchange Group Ltd. announced its proposed takeover of Toronto’s bourse, one of the supposed benefits was access–for Toronto-listed firms–to London’s deep pools of capital.

EPA/Adrian Bradshaw

That’s a topic dear to the hearts of roughly 1,500 cash-hungry start-up miners that populate the Toronto bourse and its venture affiliate. Those “junior miners”–and their constant need for money to drill, test and explore — have made the Toronto Stock Exchange, operated by TMX Group Inc., the mining-finance market of choice.

So what do those juniors think about the proposed deal? Not much, according to some of the attendees Deal Journal interviewed at the Prospectors & Developers Association of Canada conference in Toronto, the world’s largest gathering of small-cap miners.

Kerry Knoll, chairman of Canada Lithium Corp., with some $140 million in market cap, looked into listing on the LSE’s AIM market for smaller firms a few years ago and found it a much more expensive proposition than going public on the Toronto bourse. If London controlled the Toronto exchanges as well, the combined entity could raise the cost of listing in Canada, Knoll worries: “I would fear they’d bring that (higher-cost model) here and really put a crimp in our incubator.”

LSE and TMX executives selling the deal in recent weeks have said the Toronto exchange would remain Canadian-operated and regulated, and would benefit capital-seeking firms by offering truly global scale.

But David McPherson, president of Pure Nickel Inc., at some $14 million market cap, said he’d worry the interests of small, Canadian firms like his may get lost in a bigger exchange.

Pure Nickel raised money on the Toronto Venture Exchange, TSE’s junior market, in 2007 to buy land. It moved up to Toronto’s big board later that year. It’s already raised money from London institutional investors, but it doesn’t expect any additional U.K. retail-investment opportunities from a TSX-LSE combination.

“All I see is the risk that we could become insignificant in a much larger exchange,” he said.

But there are some fans, including Graham Downs, the CEO of ATAC Resources Ltd., market cap north of $600 million, thanks in part to a new discovery of gold in the Yukon.

“There’s a big resource component of the London Stock Exchange, but they are so focused on Africa and all these other places that they know,” Downs says. “They don’t have a lot of access to us, so I think it’ll open more pockets [of money] to Canadian ventures.”

Even though money may initially flow more toward London than Canada while the market finds its equilibrium, Downs says, in the end there will be a bigger pool of capital available to the best companies.

“If you’ve got good projects, if you’ve got a quality team, the money will find you,” he says.

Canadian Miners Don’t Love the London Stock Exchange - Deal Journal - WSJ

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March 7, 2011

John Paulson's Interview With The Financial Crisis Inquiry Commission

John Paulson's Interview With The Financial Crisis Inquiry Commission
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John Paulson, of the eponymous uber-hedge fund did an hour-long interview with the Financial Crisis Inquiry Commission.  I listened to it (thanks to NYT Dealbook, although not sure where they got it from), and really, I got a kick out of it even though I think my carpal-tunnel is really flaring up now.  Anyway, without further ado, here's what the man behind the Greatest Trade Ever has to say about the Financial Crisis…
Description: asked what he saw, when, and why he decided to get short, he said "First thing we noticed was that real estate market appeared very frothy, values rose very rapidly, which led me to believe real estate markets were over valued."  That's pretty simple/straightforward, no?  I think it's pretty interesting that he said the 3 homes he's bought were all out of foreclosure, and they'd increased in value 4-5x over a 2-3 year period through ~'2005.  Apparently the impetus for the research that led to The Trade was literally staring him in the face every time he got home from work!
He explained his approach, and the way he put it makes me really think the guys who didn't leave their trading desks & "never saw the bubble/crash coming" really had their heads buried in the sand deeper than I previously thought.  As Paulson said, "Credit markets were very frothy, very little attention paid to risk, spreads were very low, we thought when those securities correct, it could present opportunities on short side."
Their research approach was pretty straight-forward: Focus on subprime, where they were amazed at how low quality the underwriting was, and how low the credit characteristics were on the loans.  They found the average FICO  was around 630, and over half of the loans were for cash-out refi's, which were based on appraised, not sales prices (so "value" could be manipulated).  For many of these loans, LTV was very, very high, 80, 90, 100% with many of them concentrated in California (no surprise there).  Close to have of the mortgages they looked at were of the stated-income, no-doc variety.
Those who did report incomes had D/I ratios of > 40% before taxes and insurance.  80% of them were ARMs, so-called 2/28's with teaser rates around 6-7% for those first 2 years, but after they reset, the rates were L+ 600bps which at the point would have doubled the interest rate on these loans, and Paulson & Co thought there was very little - if any - chance borrowers would be able to afford the higher payments.
Once the rates reset, the only thing these borrowers could do would be to sell, refinance, or default.  These were people spending > 40% of their gross income on their mortgages already, once the rate jumped up after the teaser period, they expected that many borrowers would simply default, and the price of the RMBS into which these loans were securitized would fall drastically, while the price of the protection (CDS, etc) Paulson bought on them would skyrocket.
Paulson & co also went much further in their analysis, well-beyond what many of those on Wall Street were doing.  In May, 2006, they researched growth of 100 MSA's and found that there was a correlation between growth and the performance of subprime loans originated within them.  As growth rates slowed, defaults rose.  From 2000-2005, they found that with 0% growth, there'd be losses of around 7% in the mortgage pools.
When they looked at the structure of the RMBS they found the average securitization had 18 separate tranches and that the BBB level only had 5.6% subordination, essentially, once losses surpassed that point, the tranches would become impaired, and if they reached 7% losses (what Paulson thought would happen once home price appreciation only slowed to 0%), the entire tranch would get wiped-out entirely.
By mid-2006, home prices not only had slowed to 0% but were actually decreasing, albeit slowly, only about 1%.  Even still, demand from institutional investors was so great, spreads tightened to 100bps. Why?  Because as Paulson went on to explain, institutional investors were buying up the BBB tranches (the lowest investment grade ones) in hoards.
While he didn't say it, I will (for the umpteenth time!): This is what happens when institutions effectively outsource credit research to the Ratings Agencies, even though many had/have internal credit analysis groups (ahem IKB ahem).  They buy the highest-yielding security you can find that meets your investment guidelines, which meant that for many, they could only buy securities deemed by the brain trusts at the Ratings Agencies as "Investment Grade."
Paulson started their credit fund in June, 2006, and as he explained, it wasn't really as simple as it may seem. Historically - going back to about WWII - the average loss on subprime securities was 60bps, nowhere near what Paulson & Co expected was about to happen.  As he said "according to the mortgage people, there'd never been a default on an investment grade (IG) mortgage security."  These same people were also of the mindset that they'll NEVER get to the levels where the BBB tranches are impaired let alone wiped out completely.   These were also the same people who said that not since the Great Depression there hadn't been a single period where home prices declined nation-wide.  These same people thought, worst case, home price growth would drop to 0% temporarily and then return to growth, just like before.

March 4, 2011

Openness can help lift the curse of resources

Openness can help lift the curse of resources
By George Soros

Published: March 3 2011 22:13 | Last updated: March 3 2011 22:13

The natural resources sector has the potential to generate billions of dollars in revenues that can be used for poverty reduction and sound investment. For decades, however, management secrecy has allowed corruption to thrive in countries such as Angola, Cambodia, and Guinea. According to Nigeria's own corruption agency, up to $400bn of oil money has been stolen or wasted over the past 50 years. And in Libya, in particular, we now see a population rising against rulers whose control has been financed by the immense revenues they manage, and mismanage, in secret.

Ending this problem and letting new democracies flourish will, of course, not be easy. The resource curse undermines the investment climate, raises costs for companies, threatens energy and mineral security, and consigns millions of citizens in resource-rich countries to poverty. But evidence suggests that transparency in extractive industries can play an important role.

In 2002, I helped to launch the Publish What You Pay coalition, a global network of civil society organisations that has advocated for better management of oil, gas and mining revenues, and worked to ensure monies received are invested in schools, hospitals and poverty reduction. The coalition recruits oil companies, which then pledge to reveal what they pay to the governments and leaders of the states in which they operate, allowing them to be held accountable. In Liberia, this approach has seen moves towards new transparency standards, including openness on payments and contract terms – amazing progress in a country better known for former president Charles Taylor's macabre violence and blood diamonds.

There are further positive signs from the Extractive Industries Transparency Initiative, an alliance to improve standards of transparency on a voluntary basis. Azerbaijan's credit rating improved in part because it played a constructive role in the initiative. This week, after the first democratically held elections in its history, Guinea rejoined the initiative too, because its leaders know that with EITI membership comes a better investment climate.

Now, governments that regulate stock markets are going one necessary and long-awaited step further, in establishing mandatory listing rules. In July 2010, the US passed the Dodd-Frank Act, which requires all oil, mining and gas companies registered in the US to report payments to foreign governments, both by country and by project. Companies as diverse as PetroChina, BHP Billiton and BP will have to comply. Similarly, Hong Kong recently improved the disclosure of its companies' payments as a condition of listing on its exchange.

The French and UK governments have also indicated support for new European oil and mining rules. EU revenue transparency legislation could build on US plans to move towards a new global transparency standard. The London Stock Exchange is one of the world's most important financial markets, hosting more than £1,000bn worth of oil, gas and mining capital. It should follow others' lead and change its rules too.

All of these measures hold great promise. Africa is the new frontier for investors in the natural resources sector, holding a 10th of the world's oil reserves, 40 per cent of its gold and significant reserves of other minerals vital for modern industrial economies. The Middle East, meanwhile, could soon develop a string of prosperous democracies. Those promoting greater transparency in the natural resources industries are helping to reinforce powerful historical forces, which will unlock transformational sums of money to improve the lives of millions of people in some of the most fragile countries in the world.

The writer is chairman of Soros Fund Management LLC and founder of the Open Society Foundations

Copyright The Financial Times Limited 2011. 

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