Category: Global

Euro saw 40% reduction in open interest as large speculators decided to take some of their profits off the table. What was surprising was the amount by which the open interest reduced wwhich was the largest in recorded history.

Is there a possibility that we are now in the final leg of the EURO down turn? The large speculators were dead accurate when they started to reduce their long position in November first week and 30 days later we saw the EUR/USD crack down a massive 1000 pips in 60 days flat.

Dollar Index looks bullish but the large speculators have started to get tired of the rally and moving out. In my view there is one last leg left for the dollar to hit 82.5/83 before resuming its trend down.

That brings me to my favoritye commodity for 2010. Oil!!

We are quite literally staring at Gold that is Black. $100 is on the cards here. Large and massive positions have been built over the last few months even through all the stock market volatility.

Looking at this chart it almost seems that insiders are sensing something massive like a war or Israel Iran standoff all of which could spike Oil faster than you can count the ticks.

Earlier today we posted the Oil looks all set for $100

Reproduced here and originally written by Darrly Guppy:

In July 2008 when oil was trading near $146 a barrel many companies used futures and hedging contracts to lock-in prices near $146. A few weeks later oil started its plunge to the eventual low of $33. The collapse was a high probability outcome of the parabolic trend that started to develop in May 2007. This type of trend usually leads to a rapid collapse, although the eventual fall in oil was much lower than expected.

The same type of parabolic trend is found in the current gold chart. The fall from $1,200 to $1,055 was consistent with the type of collapse associated with a parabolic trend, although the gold price retreat has not been as dramatic as the retreat in oil during 2008.

Price activity is a reflection of human behavior. This behavior may be driven by objective and verifiable factors, such as the supply and demand balance for oil. However, the behavior is modified by a wide range of emotional factors. These are often classified broadly into fear and greed but this is an oversimplification. Behavior is complex, and behavior when money is involved is even more complex. Fortunately behavior shows repeated responses and these are revealed as repeated patterns of price behavior in the market.

The parabolic trend is a result of a particular grouping of emotional behaviors. The current behavior seen on the chart of NYMEX oil does not include a parabolic trend but it does include patterns that provide a guide to the emotional thinking of the market. Better price chart analysis helps understand the status of the commodity and its economics, and the status of the market for the commodity. It suggests there is increased probability oil will move towards $100 during 2010.

The weekly NYMEX oil chart shows an uptrend that has paused but this has not developed into a downtrend. The pause is defined by an up-sloping wide trading channel. The chart has several bullish features and they suggest markets are moving towards higher oil prices.

The first important feature is the long-term uptrend line starting from the low in February, 2009. From then to October last year the uptrend line acts as a support level. In December, 2009, the price dropped below the uptrend line. This price fall signaled a change in the nature of the uptrend line from a support feature to a resistance feature.

Starting December 2009, the uptrend line acts as a resistance level. The price rise in January 2010 to $83 retreats from the value of the uptrend line. The uptrend line is now the resistance level. This line defines the general behavior of the long-term trend.

The second important feature is the up-sloping trading channel. The upper edge of the trading channel starts from the high at $73 in June, 2009. The line touches the highs of $80 and $83. This is a resistance level. The lower edge of the trading channel starts from near $65 in July 2009. This line touches the lows in $66 and $69 and $71.

The third important feature is the strong historical resistance level near $88. This is the mid-year upside target for oil. The bullish environment for oil is confirmed when the oil price retreats to the historical support level near $78 and uses this for a rebound rally. This is a very bullish signal and will allow prices to move very quickly towards $88 or higher. A sustained move above $88 has an upside target near $98. The current rate of trading band momentum makes this target achievable towards the end of 2010.

The longer-term outlook for oil suggests increasing prices but the rate of increase is slower than the rate of increase in 2009.

Oil looks all dressed up. Lets see if it can take down the all important $88 and then $100.

ZERO HEDGE reports

One may be forgiven to believe that via its FX liquidity swap lines the Fed only bailed out foreign Central Banks, which in turn took the money and funded their own banks. It turns out that is only half the story: we now know the Fed also acted in a secondary bail out capacity, providing over $350 billion in short term funding exclusively to 35 foreign banks, of which the biggest beneficiaries were UBS, Dexia and BNP. Since the funding provided was in the form of ultra-short maturity commercial paper it was essentially equivalent to cash funding. In other words, between October 27, 2008 and August 6, 2009, the Fed spent $350 billion in taxpayer funds to save 35 foreign banks. And here people are wondering if the Fed will ever allow stocks to drop: it is now more than obvious that with all banks leveraging the equity exposure to the point where a market decline would likely start a Lehman-type domino, there is no way that the Brian Sack-led team of traders will allow stocks to drop ever”¦ Until such time nature reasserts itself, the market collapses without GETCO or the PPT being able to catch it, and the Fed is finally wiped out in one way or another.

The 35 companies in question:
UBSDexia SABNP ParibasBarclays PLCRoyal Bank of Scotland GroupCommerzbank AGDanske Bank A/SING Groep NVWestLBHandelsbankenDeutsche Post AGErste Group Bank AGNordLBFree State of BavariaKBCHSH Nordbank AGUnicreditHSBC Holdings PLCDZ Bank AGRepublic of KoreaRabobankSumitomo Mitsui Banking CorporationBanco Espirito Santo SABank of Nova ScotiaMizuho Corporate Bank, Ltd.Syngenta AGMitsui & Co LtdBank of MontrealCaixa Geral de Dep?sitosMitsubishi UFJ Financial GroupShinhan Financial Group Co LtdMitsubishi CorpAegon NVRoyal Bank of CanadaSumitomo Corp

INVESTING CONTRARIAN

See original here:
Meet The 35 Foreign Banks That Got Bailed Out By The Fed (And This Is Just The CPFF Banks)

Huffington Post
A lot can turn on an active verb. Hamlet said, “To be or not to be ” that is the question.” The same applies to the new Dodd-Frank financial reform bill’s whistleblower provisions, signed by President Obama last week, which requires that any whistleblower providing “original information” leading to a penalty over $1 million “shall” receive between 10 and 30% of that collection.
For many companies, a world of hurt will soon turn on that single word, “shall,” unleashing a whirlwind of decentralized private enforcement for a public issue that’s taken even greater importance in the Obama administration and the Department of Justice’s Criminal Division ” the nexus of corruption, bribery, and terrorism.
The Foreign Corrupt Practices Act of 1977 (“FCPA”) was enacted to make it unlawful for certain classes of persons and entities to offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business.
This criminal statute, which permits jail time for its (often white collar) offenders, applies to all U.S. persons and certain foreign issuers of securities, as well as foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. The new bill will empower the SEC to reward FCPA whistleblowers financially.
For anyone who remembers the movie Syrianawith George Clooney and Matt Damon, the FCPA is often associated with shady dealings and government contracts in far-away places. With the new financial reform law, however, acts in distant countries will haunt businessmen here at home. These new whistleblower “bounty” provisions mean that well-meaning employees (or even disgruntled employees with a bone to pick), are now incentivized to do well by doing good ” collecting monetary rewards from Uncle Sam, while helping put U.S. executives in prison for violations of the FCPA.
This is partly about foreign policy. President Obama’s foreign policy sees the roots of bellicosity in civil society, meaning that lawlessness abroad can become lawlessness exported. With the stroke of a pen, President Obama not only democratized the global fight against corruption, he created a new weapon against the sorts of cultures that breed violent extremism, whether in Afghanistan or Pakistan, India or Russia.
But foreign policy will be far from the minds of the most immediate beneficiaries of the new law. To be blunt, the word “shall” will open up a world of financial security for hundreds of potential new whistleblowers, rewarded for their candor and courage with potentially enormous payments. This is especially the case when you consider the penalties paid by companies for FCPA-related offenses. In 2010, BAE paid $400 million, and in 2008 Siemens settled a FCPA mater for a staggering $800 million. With settlements ” now mandatory ” likely to run the hundreds of millions, you don’t need to be a mathematician to know a 10 to 30% cut will provide a prove powerful incentive to cooperate with the government.
For these new bounty-hunters, just as much turns on the word “shall,” much will also turn on how the statute is translated into practice. Two major inflexion points will be: (1) the discretion exercised by the officials at the Securities & Exchange Commission, and (2) how whistleblowers can avoid the potentially adverse consequences of disclosing corruption.
Let’s take those in turn. As the Securities Docket blog reports, “It will be interesting to see how the SEC exercises its discretion here.”
We’ll say. The legislation gives the SEC complete discretion to determine the amount of the award. They’ll be considering factors such as the significance of the whistleblower’s information and the degree of assistance provided. In other words, the decision to blow the whistle is only the beginning.
This all means that whistleblowers will need to ensure that they are as helpful (substantively and process-wise) to the SEC as possible in order to receive the maximum award.
The second question is even more pressing for the whistleblower, considering the hundreds of millions of dollars in penalties that firms have paid for FCPA violations.
With these stakes, the most vulnerable actors in the new system will be ” no surprise here ” the whistleblowers themselves. To cite another movie, anyone who saw The Insider (where Russell Crowe plays a whistleblower employed by a tobacco company) remembers the world of fear that can envelop someone exposing corrupt practices.
Experience shows that whistleblowers can be put through challenging and even dangerous experiences as a result of their actions. A recent study by professors at the University of Chicago and University of Toronto found that 82% of named whistleblowers experienced harassment or altered responsibilities. Many said, “If I had to do it again, I wouldn’t.”
True, the new law requires protections against retaliation. A wrongfully discharged individual will be entitled to reinstatement, twice back pay, litigation costs, and reasonable attorneys’ fees.
With these stakes, however, it’s likely that whistleblowers will decide that the greatest insurance is anonymity. The law provides that whistleblowers can submit information anonymously, as long as they are represented by counsel (and, of course, disclose their identity prior to receiving the award).
In the manure of corruption, let a thousand flowers bloom. By allowing counsel to represent such whistleblowers, Obama’s financial reform bill will also empower a new generation of lawyers to do well by doing good ” helping fight corruption by helping whistleblowers bring these cases to light.
Michael Signer, a 2010 candidate for the Democratic nomination for Lieutenant Governor of Virginia, is managing principal of Madison Law & Policy Group PLLC, where he works on financial regulation matters. Mark Vlasic, a former prosecutor and head of operations of the World Bank’s Stolen Asset Recovery Initiative, works on international and anti-corruption matters as a partner at Ward & Ward PLLC.
INVESTING CONTRARIAN
See the original post:
Mark V. Vlasic: The Next Financial Reform Floodgate

Huffington Post World News reports:
Khaled Abu Toameh, to my mind the best Arab journalist working in Israel and the Palestinian territories, reports in today’s Jerusalem Post that “Palestinian Authority President Mahmoud Abbas has told his Fatah movement he wants a more specific US commitment on the borders of a future Palestinian state before agreeing to direct talks with Israel.
“Abbas says he received assurances from US President Barack Obama, but that they weren’t clear “˜enough. ,” reports Abu Toameh “ He says he expects enormous pressure, but that he will not go “˜blindly’ into negotiations. “
In other words, until Mahmoud Abbas knows the specific outcome of peace negotiations with Israel, he won’t even begin to negotiate the terms directly with Israel’s Benjamin Netanyahu. Even in Arabic that’s known as “hutzpa”.
All of which resurrects the question many of us have been asking for decades: if the Palestinians are truly ready to divide Palestine into two peace abiding states ” one Arab and one Jewish -, why have they turned down every offer that’s ever been made to them to do just that ” even the one proferred in 2007 at a U.S.-sponsored peace conference in Annapolis by then Israeli Prime Minister Ehud Olmert for a Palestinian Arab state in 97 percent of the West Bank and the entire Gaza Strip. Abbas also used the occasion, and has used several since then, to categorically dismiss the request to recognize Israel as a Jewish state alongside the would-be Palestinian state, insisting instead on full implementation of the “right of return” of Palestinian “refugees” and their millions of on the global dole descendants..
The answer, I fear, is that the Palestinians really don’t want that peaceful solution and will continue to stall for time until the Arab fantasy day when the Jewish state vanishes ” their ultimate goal.
One of the best histories of this steady blockage procedure comes from Mideast historian Efraim Karsh. Editor of the Middle East Quarterly and author most recently of “Palestine Betrayed” (Yale), Karsh is professor of Middle East and Mediterranean Studies at King’s College, University of London.
In a biting new article in the Jewish Ideas Daily and reprinted by the Middle East Quarterly, Karsh carefully traces the history of Palestinian avoidance of a Mideast peace solution that will result in two states for two peoples. Indeed, as he pointedly asks, “”¦ is there in fact a fundamental distinction between Hamas and Fatah when it comes to a two-state solution? Neither faction formally accepts Israel’s right to exist; both are formally committed to its eventual destruction. Moreover, for all the admittedly sharp differences between Arafat and his successor Abbas both in personality and in political style, the two are warp and woof of the same dogmatic PLO fabric.”
Anyone interested in the truth about the Mideast crisis should read Karsh’s article in full:
http://www.meforum.org/2689/against-two-state-solution
INVESTING CONTRARIAN
Read more:
Richard Z. Chesnoff: Do the Palestinians Really Want Two States ” Or Are They Just Stalling?

Tagged with: china, PIIGS

The man who will soon be proven to have been right all along, Ron Paul, was interviewed on CNBC earlier discussing topics such as the Greek contagion, Goldman Sachs, surging gold and, of course, the Fed. Asked if this is just the beginning, the response is “Yes, this shouldn’t surprise anybody, how long should we have been anticipating this? I have anticipated it since 1971, because the system that replaced Bretton Woods was an unviable system and this is proving the point, so this is the unwinding of the system and until we replace it with something you are going to continue to see this”¦ You can’t correct the problem of debt with creating more debt, expecting the Fed to endlessly create more money and credit. We are in for a lot more trouble as far as I can see.” Can we grow our way out of this debt? “You’d have to cut taxes drastically and cut spending drastically. Politically you can’t do that. People will resort to more spending, more deficits and more inflation of the money supply. If you see a GDP number go up, it is about equivalent to the money we have created ” you don’t have any more growth than the artificial stimulus of the money that we put in. We have not allowed the liquidation of debt, we have not allowed the elimination of the malinvestment still in the system.”
Ron also says anger at Goldman should be focused at the Fed: “When the history of this time is written people will say ” how in the world did they believe that a few people in a secret room can decide what interest rates should be, how much the money supply should be, who should fail, what worthless assets taxpayers have to buy. It is absolutely bizarre.”
Lastly, Ron has a word of caution against those politicians who time after time vote to retain the Fed’s secrecy: “The Fed is a big issue and those individuals in the Senate who votes against auditing the Fed, there will be a political price to pay for that just as much as those who voted for the bail out. Right now those who vote to enhance the Fed will get punished politically because the people are waking up and they realize that the Fed is the culprit.”
Not surprisingly, Ron Paul is not too happy with the handling of the Vitter amendment. Yet Paul’s conclusion is most insightful: “The markets are more powerful than governments, the markets are even more powerful than the Fed. We fixed the price of gold at $35 for years, but we knew the market couldn’t sustain it. We knew the Bretton Woods agreement would break down. This is why we knew in 2000 that the dollar would crash in measurement toward gold.”

While none of us predicted the massive crash of May 6 2010, premium readers at Investing Contrarian were fully aware of a S&P fall to 1120 from 1190 which was the day when we initiated short position.
Read our post at: Massive crash coming!
Looking at COT charts this week, we are once again forced to believe that the currency markets are pointing to another crash and this time it could endanger almost every asset class including Gold. The crash expected thanks to new found love for EURO carry and sometime even against the old carry love YEN.
EUR/USD
The EURO positions have now reached an unreal 113k short positions. I have worked in currency markets for over 10 years and I have not seen a more accentuated market in my life. I probably took a while to digest the fact that markets and funds have allowed themselves to short even when the positions outstanding are so massive that any rip could be fatal.
Selling EURO has become the favorite hobby of almost almost entry level analysts and am sure most of them on being asked their favorite trade will reply with the obvious.
Over the last 3 updates of COT, I have again and again stressed that shorting EURO is a dangerous game than shorting even dollar. EURO has a central bank which in the past has taken the brave step of raising rates to kill the shorts when no one expected it. (Ref 2004).
We are firmly off the view, that PIIGS is not a genuine case for EURO breakup but it is a self sustaining vicious move by the funds and institutions who first shorted the EURO during its early stages. The foolish government of EURO zone over reacted by letting the funds take control of the markets.
We do not know how far EURO will fall but the situation as it stands today should make one extremely nervous as EURO shorts are now fueling a dangerous carry trade into equities and Gold. Gold has no reason to find itself standing at 1250 (ignoring the Bugs) except that EURO is being borrowed to invest into Gold and the likes.
We continue to look at the euro fundamentals and we believe that the situation in Dec 2009 was no different than May 2010. There 5 countries with bloated deficit nos but the banks within these countries continue to have ample liquidity (except Greece which too became a problem only in April, a good 4 months post Dec 2009).
There is now a real possibility that PIIGS may be asked to stand out of the EURO and let their own currencies to trade while the ECB may help them tide over the debt refinancing for a fixed period. If such a proposal is executed, we believe that will be bullish for the EURO.
Not withstanding the proposals, we believe, the current EURO shorts are now stretching the system to a point of breaking. Either the EURO goes, or it snaps back with a speed that can take straight to 1.5 before falling back to 1.4. In the ensuing system restoration, we could easily see a correction in S&P and Gold.
EURO carry is the new buzz and it is poisonous the least to say.
S&P: Normal back?
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Traders have reduced their bet on the short side which means that the short trade on S&P looks over for now. But if the realities of EURO unwind as foretasted above materializes, S&P may not be the most viciously affected. All bets seem to be off on the S&P for the time being and it only means that it may move in sideways for sometime.
Gold: Enjoy whole it lasts?
Gold seems to have benefited thee maximum from the EURO carry and hence an unwind could see this falling straight to 1100 to the absolute horror of Gold bugs who will keep cursing the COMEX goons.
It is surprising that Gold bugs refuse to believe that Gold will not have role in the new monetary form being formulated. It is impossible for central bankers to agree to a Gold standard.
COMEX shorts which are the greatest complaint for the Gold bugs, are standing courtesy against an equal number of longs. And hence if the Shorts cover, the longs as well unwind. It is that simple.
But having said that I do see Gold at 1400 this year given the overwhelming expectation for Hyperinflation and hence the resulting demand for Gold to be part of the portfolios.
The greatest risk to the Gold rally is via EURO and one needs to watch this pair very carefully. For a change, dollar is not the center of focus here and that well indicate that the world is finally breaking away from dollar centred trade. By experience, we know that a carry currency will be the reserve currency of the world as its circulation increases manifold. The latest action by ECB to increase circulation may well be the steps required to make EURO centered trade balance.
Gold longs stand at 235k still 18% below its peak in 2009.

It is happening in front of our eyes while the world is focusing on lesser problems like PIIGS debt issue EURO has now taken the center stage and now almost all assets classes are getting closely correlated to EURO than the dollar. The dollar is being phased out right before you and for the first time EURO has a European treasury to manage its issuance courtesy the EU Deal of $1 trillion.
As discussed, euro and gold pairs are the real path breakers and in the coming weeks will show us the path forward. S&P and dollar role is increasingly being taken out.!
Welcome to EURO centered world where the world moves on the eccentricities of the currency.
Shaily

Tagged with: carry, crash, Dollar, dow, euro, jones, S&P

Goldman Sachs is organizing a webcast with the Jim O Neil (For those who need initiation to this nut, he is the man who cemented his place as Head of GS research after coining the term BRICs, which ultimately the hottest buzzword in the financial world that is after the name “Goldman”) on why the world is better than you think?
From Goldman Sachs:
I am not sure whether I can tolerate his insane rambling for more than 15 minutes but am happy to give him another chance to speak sense. After all am told, that you do not head a desk at Goldman without being “smart”
Needless to say, that you can check back after the webcast and all the material will be pasted here for you folks.
Shaily

Tagged with: Economy, goldman, sachs

Jim O Neil, GS head of Global research, writes one of the most funniest article concerning UK eco
An article written devoid of all forms of analysis. Almost every part of his article hinges ion future upgrade of past numbers and makes his whole thesis on prepositions and probabilities. As usual, BRIC became an important part of his thesis, even though he was talking of UK.
The article shows why the “emperor has no clothes” in that it shows how high you can rise in banking circles where your greatest acievement , the term BRICS, is something a junior in an ad agency might have devised.
Fresbee

Tagged with: gdp, pound, sterling, uk

It has been rightly said in the world of finance the real reasons are never the real reasons. While there is obsession about EUROPEAN debt that is retiring this year, but the real reason could lie some where else. Adding a few numbers will puzzle you. The total debt that is to be paid back is less than EURO 200 bn out of which 50 billion EUROs is what is under severe stress to be paid back (read Greece).
EU obviously over reacted and slushed in one trillion dollars into the credit market. Markets are still not reacting to the bailout. Why? cause the real problem is not EU debt. Infact EU Debt is far lower than US and UK. Fiscal deficit of less than 6% even with Greece and PIIGS combined. Debt retiring of less than 1% of the GDP, hardly a problem which should not worry the markets.
This was never a credit problem but we have been made to believe that this is sovereign problem visible most likely in CDS spreads widening for some notable PIIGS countries and banks. But none of this takes away the fact that the underlying problem of retiring debt is a far smaller problem than it is being made out to be. Outside of PIIGS, EUROZONE is a perfectly healthy economy infact even better than US economy. That begs the question if the real problem is the soverign risks in EU or are their other indicators which tell us a different story?
One of the best indicators to watch out for is the falling Shanghai index.

This diverges from the popular media blitz concerning EURO. The correlation between EURO and Shanghai is “eerily” high. The reasons are not very difficult to understand given that China surplus has steadily vanished with massive imports now overshadowing its exports industry. China has more or less led the recovery in US and EU begiing March 2009, a point at which EURO attached itself closely to Shanghai. In fact China started to corrected as US investors (Chanos and co) who started to raise concerns concerning China. Chinese government played its part in slowing down the domestic economy. All this began to accentuate EURO downfall in Jan 2010 beginning while the folks at FT and the likes at other firms began to take up a lesser known problem (EU Debt of 200 Billion EUROs) as the main reason.
Marketwatch quoted:
On the other hand concerning eurozone, John Paulson, now managing $ 34 billion in assets has sounded out calm and said that the health of EU debt as “manageable”.
One then starts analyzing the whole situation from very different angle, vis-vis China. Unless we see Shanghai resume it rise, we may not be able to see a sustainable rise in EURO strength. Bailouts dont matter and governments as usual have not understood the problem.

Tagged with: china, euro, shanghai

Goldman Sachs is not ready to back down from its mid year S&P target 1300 given the strong global recovery. They highlight the continuing low valuations, stronger than expected earnings, robust recovery and positive money flows. Last week’s strong labor report and robust ISM readings were unjustly ignored in their opinion. They expect the robust earnings recovery to continue into the back half of 2010 and still find the market attractive based on valuations:
GS preference includes energy, materials, info tech and companies with BRIC revenue exposure.

Tagged with: dow, jones, nasdaq, S&P