Thomson Reuters/Jefferies CRB Index

The CRB index tracks a basket of commodities.

Jefferies Website:

- Data
- Documentation

Canadian Inflation

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=CAD

Mon 27 Dec 2010 - Chinese Equities Fall

SSE - The Shanghai Composite Index - closed 1.9% down on the day, in apparent response to the earlier-than-expected rate increase announced by the Chinese central bank on Christmas day.

The effect of the negative news is compounded by the reduction in equity market liquidity resulting from recent successive reserve-ratio increases.

China stocks fall after central bank's weekend rate hike, amid speculation more hikes to come

CHINA MARKETS-Chinese stocks fall as rate rise reality sets in

CHINA MARKETS-Chinese stocks fall as rate rise reality sets in
Stocks, U.S. Futures Fall on China Rate Concern; Treasuries Drop
China stocks close down – Dec 27

25 Dec 2010 - Chinese Central Bank Raises Prime Rate

China Raises Rates
Yahoo Finance news

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2010-01-07
http://www.reuters.com/article/idUSTRE7060SD20110107?loomia_ow=t0:s0:a49:g43:r4:c0.032727:b40798056:z0
China Money: Bank reserves turn top weapon in liquidity fight

SSE Composite Index

Wikipedia:
The SSE Composite Index (Chinese: 上海证券交易所综合股价指, 简称上证综指) is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange.

Price Graphs
Google Finance
Sina[Chinese]

The Evolution of the Current Crisis

2007

The Market for Commercial Paper Locks Up

Federal Reserve Bank of St. Louis Review, Nov/Dec 2009, 91(6), pp. 589-612:

"Since its inception in the early nineteenth century, the U.S. commercial paper market has grown to become a key source of short-term funding for major businesses, with issuance averaging over $100 billion per day. In the fall of 2008, the commercial paper market achieved national prominence when increasing market stress caused some to fear that, given its size and importance, the market’s failure would sharply worsen the recession. The Department of the Treasury and Federal Reserve enacted programs targeted at providing credit and liquidity to restore investor confidence."

Brian Bethune @ IHS Global Insight:

"The U.S. commercial paper (CP) market is a vital source of liquidity that supports a broad range of financial activity and transactions in the economy (see "Background on the Commercial Paper Market").

However, this key segment of the financial market encountered some major stresses in August and September; stresses that led to significant pressure on commercial paper borrowing spreads and a sharp decline in net issuance of an unprecedented velocity.

The ultimate source of the problem was in the U.S. housing market, where a protracted housing recession—the current housing recession is on track to be the worst since the early 1980s in terms of housing activity—combined with higher borrowing rates and downward pressure on housing prices precipitated significant upward pressure on mortgage delinquencies and foreclosures.

Associated downward pressure on mortgage backed securities' credit ratings and prices led to a significant flight to quality, and this contagion spread from mortgage-backed securities to engulf other major areas of the credit markets, including asset-backed commercial paper, jumbo mortgage loans, and less-than-AAA-rated corporate bonds...

A decline in commercial paper outstanding of this order of magnitude has not been seen since the Fed started publishing this data in early 2001. The shock to the markets from September 11, 2001 precipitated a drop of $61 billion in one week, but markets recovered thereafter. The crunch in CP credit markets in August and September was several times the order of magnitude of what we saw on September 11, 2001.

In order to put this decline in even better perspective, the peak- (May 9, 2001) to-trough (April 21, 2004) decline in combined CP and bank commercial and industrial credit during the last recession was $408 billion over close to three years. The decline in the same broad measure of total credit was $282 billion in August and September—clearly this decline is of recessionary proportions."

NYTimes 24 Aug 2007:

The size of the commercial paper market, a crucial source of short-term financing for businesses, decreased 4.2 percent last week, the biggest drop in at least seven years, as investors fled asset-backed debt and opted for the safety of Treasuries.

Short-term debt maturing in 270 days or less fell $90.2 billion to a seasonally adjusted $2.04 trillion in the week that ended yesterday, according to the Federal Reserve. Commercial paper outstanding has fallen by $181.3 billion, or more than 8 percent, in two weeks.

Rex Nutting @ MarketWatch Aug 30 2007 Commercial paper market still shrinking. Asset-backed securities fall 15.6% in past three weeks:

Outstanding commercial paper in the U.S. financial system dropped sharply for a third straight week, indicating that a severe credit crunch has not eased in the market that supplies most large companies with operating funds.

Outstanding paper fell by $62.8 billion, or 3.1%, in the week ending Wednesday to $1.98 trillion, bringing the total decline in the past three weeks to $244 billion, or 11%, the Federal Reserve reported Thursday.

The declines in outstanding paper have been felt strongest in the asset-backed portion of the market, which represents about half of all commercial paper. These securities are backed by assets such as credit-card receivables or mortgages. In the latest week, asset-backed paper fell by $59.4 billion, or 5.6%. In the past three weeks, this kind of paper has fallen by $184.9 billion, or 15.6%

CNN Money Sep 13 2007 - Why the credit crunch may deepen - With the $2 trillion commercial paper market locked up, it's harder for banks to lend money.

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2008 - commodity prices peak in unison, plunging the dagger into the heart
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2008
US EQUITY MARKETS COLLAPSE

MoneyZine 2008: Only time will tell the full story of the stock market crash of 2008, but on Monday October 6, the stock market would start a weeklong decline in which the Dow Jones Industrial Average would fall 1,874 points or 18.1%.

CNN Money - Sep 2008:

EW YORK (CNNMoney.com) -- Stocks skidded Monday, with the Dow slumping nearly 778 points, in the biggest single-day point loss ever, after the House rejected the government's $700 billion bank bailout plan.

The day's loss knocked out approximately $1.2 trillion in market value, the first post-$1 trillion day ever, according to a drop in the Dow Jones Wilshire 5000, the broadest measure of the stock market.

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2009 - tax-payer governments agree to take over losses/debt of financial intermediaries
2009 - equity markets recover
2010 - ratings agencies start to down=grade European sovereign debt
bond market vultures circle over Europe
2010 - equity markets continue to shine, midyear wobbles withstanding
- Arnold Schwarzenegger - the Governator - Presides over LaLa Land
- China starts to show signs of stress


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Mono-Line Municipal Bond Insurer AMBAC to Declare Bankruptcy

Ambac Financial Group, a holding company for Ambac Assurance Co, itself an insurer of American municipal debt in the form of bonds, has petitioned for chapter 11 bankruptcy relief. This has occurred as a result of Ambac being unable to service its debt obligations, reported as $ 1.6 billion.

- - - - - - - - - - - - - - - - - - - -

NOV 8, 2010 6:37pm ET
Patrick McGee @ The Bond Buyer
Ambac Financial Group Files Chapter 11 Petition


Ambac Financial Group announced late Monday it filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.

The company, which held $1.6 billion of debt as of June 30, said it will “continue to operate in the ordinary course of business as 'debtor-in-possession’ under the jurisdiction of the Bankruptcy Court.”

...

Shares of the insurance holding company sunk by more than one-third in after-hours trading to $0.34. In normal hours, the company’s stock rose 3.75% to $0.52. The company’s stock, which peaked at $96.08 on May 18, 2007, fell below $1 for the first time in February 2009.

Ambac announced on Nov. 1 that it would skip paying a $5.9 million interest payment owed on its debt that day. The company said it was unable to raise fresh capital and would be forced to file for bankruptcy under Chapter 11 unless an agreement could be reached with its creditors on a prepackaged bankruptcy.

Those talks failed, according to a press release Monday.

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November 1, 2010, 3:47 PM EST
Colin Barr @ fortune.com
Ambac sees bankruptcy ahead

 Bond insurer Ambac failed to make a scheduled $2.8 million interest payment on some debt and warned that it expects to be in bankruptcy by year-end, one way or another.

...

New York-based Ambac said it decided not to make a scheduled payment on $75 million of 7.5% debentures due 2023. If the firm doesn’t make the payment within 30 days, it could be in default on the notes and could face acceleration of that debt’s maturity.

Bankruptcy talk is nothing new for Ambac, which warned around this time last year that it could run out of funds in 2011. The firm’s fate was further solidified in August, when Ambac said for the first time it was working on a prepackaged bankruptcy with creditors.

Ambac has $1.6 billion in outstanding debt and has been trying to restructure those obligations to reduce the drain on its cash position. The firm made a mint writing insurance for Wall Street on bonds and related derivatives, such as collateralized debt obligations, during the past decade.

...

The company said one complicating factor is that while creditors will be expected to convert their debt claims to stock ownership in a reorganization, the timing of their debt purchases could knock the struts out from under the tax shelter the company has erected out of its massive postbubble losses.

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September 29, 2010 — 10:46 PM SAST
Karen Freifeld & David Mildenberg @ Bloomberg Business
Ambac Sues Bank of America Over Countrywide Bonds

Ambac Assurance Corp. sued Bank of America Corp. over $16.7 billion of mortgage-backed securities, saying the bank’s Countrywide Financial Corp. unit fraudulently induced Ambac to insure bonds backed by improperly made loans.

Ambac found that 97 percent of 6,533 loans it reviewed across 12 securitizations sponsored by Countrywide didn’t conform to the lender’s underwriting guidelines, according to the complaint filed yesterday in New York state Supreme Court. Many of the loans were made to borrowers with limited or no ability to meet their payment obligations, Ambac said.

The lawsuit follows negotiations between Bank of America, which acquired Countrywide in 2008, and Ambac over mounting losses caused by loans made during the early 2000s as U.S. housing prices soared. Ambac has paid $466 million in claims from more than 35,000 Countrywide home-equity loans that have defaulted or been charged off, according to the lawsuit.

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Nov. 10, 2009 10:24 PM ET
Edward Harrison @ http://seekingalpha.com/
Ambac: Now It Warns of Bankruptcy?

Bond insurer Ambac Financial (ABK) has warned bankruptcy is a distinct possibility, sending its shares plummeting more than 30% Tuesday.

What is intriguing about this pending bankruptcy is how this company escaped bankruptcy in 2008, was downgraded continually in 2009, yet just reported billions in profit 5 days ago. Now it warns of bankruptcy?

This story also is related to municipal bonds...

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Mon Nov 8, 2010 8:08pm EST
Tom Hals @ Reuters
UPDATE 5-Bond insurer Ambac files for bankruptcy

* Files for bankruptcy with $1.68 billion in liabilities

* Company had been in talks with bondholders

* Shares down 63 percent at 19.5 cents after hours (Adds bankruptcy details, background; updates share price)

BoC-HongKong Swap Makes Yuan Available for IPO's

The Bank of China has arranged currency swap facilities with the Hong Kong Monetary Authority, resulting in Yuan being available outside the PRC for the first time without the previously associated premium. The Yuan deposits have been made available in order to allow Yuan-denominated IPO's to take place, decreasing reliance on foreign money.

2010-12-23
Yuan Offshore Premium Drops as HKMA Starts 20 Billion Yuan Fund

US FED Dollar-Swap Facilities

What is a Currency Swap ?

Wikipedia:

These swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve.

When the foreign central bank lends the dollars it obtained by drawing on its swap line to institutions in its jurisdiction, the dollars are transferred from the foreign central bank's account at the Federal Reserve to the account of the bank that the borrowing institution uses to clear its dollar transactions. The foreign central bank remains obligated to return the dollars to the Federal Reserve under the terms of the agreement, and the Federal Reserve is not a counterparty to the loan extended by the foreign central bank. The foreign central bank bears the credit risk associated with the loans it makes to institutions in its jurisdiction.

- 1
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2008 Establishment of US Dollar Swap Facilities
- http://wallstreetpit.com/658-fed-to-provide-unlimited-dollar-funding-under-swap-facilities

Official FED Announcement on MAY 2010 Facilities

Release Date: May 9, 2010
For release at 9:15 p.m. EDT

In response to the reemergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the reestablishment of temporary U.S. dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.

Federal Reserve Actions
The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank. The arrangements with the Bank of England, the ECB, and the Swiss National Bank will provide these central banks with the capacity to conduct tenders of U.S. dollars in their local markets at fixed rates for full allotment, similar to arrangements that had been in place previously. The arrangement with the Bank of Canada would support drawings of up to $30 billion, as was the case previously.

These swap arrangements have been authorized through January 2011. Further details on these arrangements will be available shortly.

------------------------------
Dec 2010

Fed Extends Swap Lines With ECB, Other Central Banks:

"The Federal Reserve authorized the extension through Aug. 1 of its temporary dollar liquidity swap arrangements with the European Central Bank and the central banks of Japan, Canada, Switzerland and the United Kingdom.

The arrangements had been authorized through January, the Fed said today in a statement. Fed officials voted in May to restart the emergency currency-swap tool to keep Europe’s sovereign-debt crisis from spreading to U.S. markets."

- federal-reserve-re-establishes-dollar-liquidity-swap-facilities
- boe-to-extend-dollar-swap-line-with-fed-until-aug-1-2011
- here
- fed-oks-dollar-swap-facility-with-bank-of-japan

Wall Street Journal:
"Under swap lines, the Fed makes loans to foreign central banks, which in turn use the funds to make U.S. dollar loans to financial institutions in their home markets"

Algorithmic Trading

InvestoPedia:
A trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets. The strict rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on a stock's price. Large blocks of shares are usually purchased by dividing the large share block into smaller lots and allowing the complex algorithms to decide when the smaller blocks are to be purchased.

WikiPedia

GRAHAM BOWLEY January 1, 2011 - NY Times
Electronic Trading Creates a New Financial Landscape

PodCasts
algotradingpodcast.com

Litany Against Fear

I must not fear.
Fear is the mind-killer.
Fear is the little-death that brings total obliteration.
I will face my fear.
I will permit it to pass over me and through me.
And when it has gone past I will turn the inner eye to see its path.
Where the fear has gone there will be nothing.
Only I will remain.

- order of the Bene Gesserit - from Frank Herbert's Dune novel

StuxNet

StuxNet is a soft(ware) weapon

Reports indicate that StuxNet was used to saboutage the Iranian nuclear programme.

- StuxNet as a game-changer on the order of the F15 jet fighter
- stuxnet-is-game-changing-weaponized
- the-big-picture
- stuxnet-the-first-weaponized-computer-virus
- on the F15 comparison
- bits-before-bombs-how-stuxnet-crippled-irans-nuclear-dreams
- anandtech forum thread
- evolving-understanding-of-stuxnet
- strategypage

Nuclear scientist killed in Tehran was Iran's top Stuxnet expert

Reddit Articles

Wired.com articles:

Blockbuster Worm Aimed for Infrastructure, But No Proof Iran Nukes Were Target
All posts tagged ‘Stuxnet’

New Clues Point to Israel as Author of Blockbuster Worm, Or Not

The Investment Answer

The (Investment) Answer is an asset-management guide written by Gordon Murray and Dan Goldie.

Murray is in the final stages of terminal brain cancer, and feeling in the mood to contribute positively to humanity in his last hours. He previously worked for a variety of big Wall Street institutions, where active management is favoured, but came to the realization that passive management is a more profitable strategy over the long run, after coming into contact with Dan Goldie. Goldie, an advocate of passive management, was working for Dimensional Fund Advisors at the time, and acted as investment advisor to Murray.

A recent NY Times article outlines their core recommendations, which are summarised below:

1. Chose between managing your own money, and paying an investment advisor.

Hire an adviser who earns fees only from you and not from mutual funds or insurance companies. That way your 'advisor' is rationally incentivised to make YOU money, and not the predatory financial hulks which KICK him BACK a percentage of whichever of THEIR products he sells to you. This way he's your partner, as opposed to a parasite.

2. Divide your portfolio into a couple of mini funds. Your primary division is between stocks and bonds. Then, within your equity category, subdivide further into large and small caps, and between value and growth.

""A less volatile portfolio may earn more over time than one with higher volatility and identical average returns. “If you don’t have big drops, the portfolio can compound at a greater rate,” Mr. Goldie said.""

3. Further subdivide between foreign and domestic holdings

Buying only domestic bonds and equities is also a bet on your local territory's fortunes, if you have the opportunity, consider diversifying to include foreign securities.

4. Decide if you want to manage your holdings actively or passively.

Remember that emotions are tricky to control, and often one's worst enemy. Very few active fund manager's succeed in beating (or even matching) the passive benchmarks over the long term. [If you are going to manage more actively, then formulate and stick to a written strategy, algorithm or rule set.]

5. Rebalance - pare-back the winners and feed the losers

Buy low and sell high.

Anti Money Laundering - AML

from the website:

"The Wolfsberg Group is an association of eleven global banks, which aims to develop financial services industry standards, and related products, for Know Your Customer, Anti-Money Laundering and Counter Terrorist Financing policies.

The Group came together in 2000, at the Château Wolfsberg in north-eastern Switzerland, in the company of representatives from Transparency International, including Stanley Morris, and Professor Mark Pieth of the University of Basel, to work on drafting anti-money laundering guidelines for Private Banking. The Wolfsberg Anti-Money Laundering Principles for Private Banking were subsequently published in October 2000 (and revised in May 2002)"

Wolfsberg AML Principles

Definition of 'Politically Exposed People' / PEP's

Tobin's Q Ratio

Economist James Tobin defined the so-called Q-Ratio, which in the case of a publically listed company, is calculated as:

(Total Market Value i.t.o Market Cap) / (Total Asset Value)

GlenCore - Xstrata - March Rich - Pincus Green - Ivan Glasenberg

Bloomberg BusinessWeek article on GlenCore

Of Belgian birth, Marc Rich renounced American citizenship, and currently holds Israeli and Spanish passports, with his primary residency being in Switzerland.

He is the subject of a recent biography - The King of Oil - by Daniel Amman.

He broke away from his first employer, dominant trading company Phillips Brothers, taking fellow trader Pincus Green with him, to form what ultimately became the commodities trading group March Rich & Co.

Under Rich & Greens' stewardship, the good ship March Rich & Co sailed from war torn port to war torn port, magicking money from chaos - trading with a host of ill-favoured regimes & tyrants to obtain the life bloods of industry.

Protracted legal assault by an American government intent on obtaining its pound of flesh from his activities resulted initially in Rich's swift and permanent relocation to the exquisite environs of Zug Switzerland, and ultimately in his apparently abandoning direct control of his operation, largely selling out to his former partners.

Bill Clinton delivered presidential pardons to both Rich and Green as one of his final acts of office. Much subsequent analysis credits Rich's relationship within Israeli intelligence as having been an important fulcrum on which to lever the pardons.

Glencore

Notable amongst the spawn of Marc Rich and Co. is Glencore - which is owned and managed by former partners Ivan Glasenberg & Willy Strotthotte. Glencore effectively controls mining company Xstrata, and is most likely the largest broker of oil trades in the world today.

Marc Rich and Pincus Green can be regarded as being instrumental in the development of the spot market for crude oil.

Ivan Glasenberg - Glencore
TheBigPond
RSA MiningMX
FinancialMail Profile
123 People Profile
Wikipedia
Official XStrata corporate profile
Forbes Profile

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2011/02/28
Reuters: Glencore primes analysts as IPO talk heats up:

Glencore GLEN.UL, the world's largest commodities trader, is briefing analysts ahead of a possible flotation that could be one of the biggest listings ever seen in London, sources familiar with the situation said.
If it goes ahead, an initial public offering (IPO) of Glencore could value the company at as much as $60 billion, according to Liberum Capital estimates.

2011/03/02
Reuters: Special report: The biggest company you never heard of

In the world of physical trading -- buying, transporting and selling the basic stuff the world needs -- Glencore is omnipresent and controversial, just as Goldman is in banking. Bigger than Nestle, Novartis and UBS in terms of revenues, Glencore's network of 2,000 traders, lawyers, accountants and other staff in 40 countries gives it real-time market and political intelligence on everything from oil markets in Central Asia to what sugar's doing in southeast Asia. Young, arrogant, and often brilliant, its staff dominate their market. The firm's top executives have forged alliances with Russian oligarchs and well-connected African mining magnates. Like Goldman, Glencore uses its considerable heft to extract the best possible terms in every deal it does.

Some might add that Glencore also fits the description that Rolling Stone magazine gave to Goldman: "a great vampire squid wrapped around the face of humanity".

Sometime in the coming weeks, Glencore is likely to announce its Initial Public Offering. The firm currently operates as a privately held partnership, with staff sharing the profits according to a performance-based incentives scheme. Sources familiar with Glencore's plans say it may list 20 percent of the company, possibly split between the London Stock Exchange and Hong Kong. Such a listing could yield up to $16 billion and value the firm at as much as $60 billion.

...

UNDER THE RADAR

Nestling in a lakeside village in Switzerland's low-tax canton of Zug, Glencore's starkly modern headquarters reflect a culture where trading aggression is coupled with public discretion. In front of the building a simple concrete sculpture -- A SPHERE SPINNING ATOP A PYRAMID -- hints at Glencore's global reach

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Articles

South African Mail & Guardian article at time of IPO

Desmond Lachman

Bio @ the American Enterprise Institute for Public Policy Research"

2009 Piece on Emerging Markets

2010 Piece on the Global Macro Situation

S&P GSCI Index

Formerly the Goldman-Sachs commodity index (GSCI), now the S&P GSCI.

Blurb from the Official Site

"The S&P GSCI® is widely recognized as a leading measure of general price movements and inflation in the world economy. It provides investors with a reliable and publicly available benchmark for investment performance in the commodity markets, and is designed to be a “tradable” index. The index is calculated primarily on a world production-weighted basis and is comprised of the principal physical commodities that are the subject of active, liquid futures markets."

Bloomberg, Nov 4 2010 - The S&P GSCI index of 24 commodities climbed to the highest level since October 2008.

The US's 15 Largest Trading Partners

http://www.census.gov/foreign-trade/statistics/highlights/toppartners.html

CGIC - Credit Guarantee Corporation of South Africa

Credit Guarantee Insurance Corporation of Africa Limited (“CGIC")

CGIC insures debt, providing credit default insurance, in the South African territory.

- Company Resitration # 1956/000368/07
- Authorised Financial Services Provider # 17691

OFFICIAL SITE
@ answers.com

Artificially Creating Market Volume

Wash Trading

An illegal stock trading practice where an investor simultaneously buys and sells shares in a company through two different brokers.

This increases the activity in the stock and gives the impression that "big news" is about to come out

Painting the Tape

The illegal practice in which traders buy and sell a specific security among themselves, creating the illusion of high trading volume and significant investor interest, which can attract unsuspecting investors who might then buy the stock and enable the traders to profit.

Oct 20 NYSE SPY "Mispricing"

Bloomberg:
NYSE Software Glitch Spurs $7.9 Billion Misprice in S&P 500 ETF

A system upgrade at Arca triggered what appeared to be a 9.6 percent plunge yesterday in an exchange-traded fund that tracks the Standard & Poor’s 500 Index, a drop that would have erased $7.9 billion from one of the most popular securities in the U.S. Data published by the electronic venue at 4:15 p.m. New York time showed the SPDR S&P 500 ETF Trust at $106.46, compared with its opening level of $117.74.

The prices were later voided and the closing price updated to $118.54, up 0.7 percent, exchange officials said.

usd-jpy - Japan and the Trillion Dollar Question

Japan intervenes in currency market to weaken yen for first time since 2004
Shino Yuasa, On Tuesday September 14, 2010, 11:18 pm EDT
Dollar fades after durable-goods, home-sales data. Greenback at lowest versus Swiss franc since March 2008
Sept. 24, 2010, 3:33 p.m. EDT
Yen falls against dollar, euro after Japan intervention
AFP - 15 September 2010
Japan moves to combat rising yen
15 September 2010
Japan intervenes in currency markets to weaken yen
The Irish Times - Thursday, September 16, 2010
Yen sinks on Japan intervention; global stocks drift
By Walter Brandimarte - NEW YORK | Wed Sep 15, 2010 6:11pm EDT
Japan suspected of yen intervention, doubts arise
By Masayuki Kitano and Yoshiko Mori - TOKYO | Fri Sep 24, 2010 9:02am E

Prop Trading in 2010 and the Bail-Out Exit Plan

Goldman Trades Where Morgan No Longer Treads With Gap Widening
http://www.bloomberg.com/news/2010-09-27/goldman-trades-where-morgan-no-longer-treads-with-gap-widening.html

Treasury Said to Prepare AIG Exit, Repayment Plan
http://www.bloomberg.com/news/2010-09-26/treasury-said-to-ready-plan-to-sell-aig-stake-recoup-taxpayer-investment.html

Yahoo Finance Symbols

Assorted equity index ticker symbols for Yahoo Finance

SYMBOL  INDEX
-------------------------------------
^GSPC   us S&P500
^IXIC   us NASDAQ Composite
^DJI    us DOW-JONES
^FTSE   uk FTSE100
^FCHI   french CAC40
^GDAXI  german DAX
^N225   japanese NIKKEI
SSE     chinese SHANGHAI COMPOSITE
^HSI    hong-kong HANG-SENG

List of Symbols of Companies on the S&P500

comma-separated-values
as at April 1 2010
taken from wikipedia page 2010-07-18

MMM,ABT,ANF,ADBE,AMD,AES,AET,AFL,A,APD,ARG,AKS,AKAM,AA,AYE,ATI,AGN,ALL,ALTR,MO,AMZN,AEE,AEP,AXP,AIG,AMT,AMP,ABC,AMGN,APH,APC,ADI,AON,APA,AIV,APOL,AAPL,AMAT,ADM,AIZ,T,ADSK,ADP,AN,AZO,AVB,AVY,AVP,BHI,BLL,BAC,BK,BCR,BAX,BBT,BDX,BBBY,BMS,BRK.B,BBY,BIG,BIIB,HRB,BMC,BA,BXP,BSX,BMY,BRCM,BF.B,CHRW,CA,COG,CAM,CPB,COF,CAH,CFN,CCL,CAT,CBG,CBS,CELG,CNP,CTL,CEPH,CERN,CF,SCHW,CHK,CVX,CB,CI,CINF,CTAS,CSCO,C,CTXS,CLF,CLX,CME,CMS,COH,KO,CCE,CTSH,CL,CMCSA,CMA,CSC,CPWR,CAG,COP,CNX,ED,STZ,CEG,CBE,GLW,COST,CVH,CSX,CMI,CVS,DHI,DHR,DRI,DVA,DF,DE,DELL,DNR,XRAY,DVN,DV,DO,DTV,DFS,DISCA,D,RRD,DOV,DOW,DPS,DTE,DD,DUK,DNB,ETFC,EMN,EK,ETN,EBAY,ECL,EIX,EP,ERTS,EMC,EMR,ETR,EOG,EQT,EFX,EQR,EL,EXC,EXPE,EXPD,ESRX,XOM,FDO,FAST,FII,FDX,FIS,FITB,FHN,FSLR,FE,FISV,FLIR,FLS,FLR,FMC,FTI,F,FRX,FO,BEN,FCX,FTR,GME,GCI,GPS,GD,GE,GIS,GPC,GNW,GENZ,GILD,GS,GR,GT,GOOG,GWW,HAL,HOG,HAR,HRS,HIG,HAS,HCP,HCN,HNZ,HP,HES,HPQ,HD,HON,HRL,HSP,HST,HCBK,HUM,HBAN,ITW,TEG,INTC,ICE,IBM,IFF,IGT,IP,IPG,INTU,ISRG,IVZ,IRM,ITT,JBL,JEC,JNS,JDSU,JNJ,JCI,JPM,JNPR,K,KEY,KMB,KIM,KG,KLAC,KSS,KFT,KR,LLL,LH,LM,LEG,LEN,LUK,LXK,LIFE,LLY,LTD,LNC,LLTC,LMT,L,LO,LOW,LSI,MTB,M,MRO,MAR,MMC,MI,MAS,MEE,MA,MAT,MFE,MKC,MCD,MHP,MCK,MJN,MWV,MHS,MDT,WFR,MRK,MDP,MET,PCS,MCHP,MU,MSFT,MIL,MOLX,TAP,MON,MWW,MCO,MS,MOT,MUR,MYL,NBR,NDAQ,NOV,NSM,NTAP,NYT,NWL,NEM,NWSA,NEE,GAS,NKE,NI,NBL,JWN,NSC,NTRS,NOC,NU,NOVL,NVLS,NRG,NUE,NVDA,NYX,ORLY,OXY,ODP,OMC,OKE,ORCL,OI,PCAR,PTV,PLL,PH,PDCO,PAYX,BTU,JCP,PBCT,POM,PEP,PKI,PFE,PCG,PM,PNW,PXD,PBI,PCL,PNC,RL,PPG,PPL,PX,PCP,PFG,PG,PGN,PGR,PLD,PRU,PEG,PSA,PHM,QLGC,PWR,QCOM,DGX,STR,Q,RSH,RRC,RTN,RHT,RF,RSG,RAI,RHI,ROK,COL,ROP,ROST,RDC,R,SWY,SAI,CRM,SNDK,SLE,SCG,SLB,SNI,SEE,SHLD,SRE,SHW,SIAL,SPG,SLM,SII,SJM,SNA,SO,LUV,SWN,SE,S,STJ,SWK,SPLS,SBUX,HOT,STT,SRCL,SYK,SUN,STI,SVU,SYMC,SYY,TROW,TGT,TE,TLAB,THC,TDC,TER,TSO,TXN,TXT,HSY,TRV,TMO,TIF,TWX,TWC,TIE,TJX,TMK,TSS,TSN,USB,UNP,UNH,UPS,X,UTX,UNM,URBN,VFC,VLO,VAR,VTR,VRSN,VZ,VIAb,V,VNO,VMC,WMT,WAG,DIS,WPO,WM,WAT,WPI,WLP,WFC,WDC,WU,WY,WHR,WFMI,WMB,WIN,WEC,WYN,WYNN,XEL,XRX,XLNX,XL,YHOO,YUM,ZMH,ZION,

Collateralised Debt Obligation CDO's and the 2008 Crash

Anna Katherine Barnett-Hart
The Story of the CDO Market Meltdown - An Empirical Analysis
BA Hons Thesis - Harvard College Cambridge, Massachusetts

Thesis PDF

Informal Review

Argentinan Debt Crisis

2010-06
Argentina achieves new debt swap
"Creditors agreed to exchange two thirds of its outstanding bad debt for new bonds, in a deal worth around $12bn. The deal means Argentina has now settled 92% of the bad debt left from its sovereign default in 2001. The government hopes it will now be able to raise new international loans at better interest rates."

Yuan/Renminni - To Peg or to Appreciate

June 2010

China urged to allow yuan to strengthen

Benoit Mandelbrot - The MisBehaviour of Markets

Benoit Mandelbrot is regarded by many as the father of fractal mathematics.

He is highly critical of what can be described as the naive use of the normal distribution in much modern quantitative financial theory and practical modelling.

Mandelbrot considers that the normal distribution underestimates the actual frequency of extreme events.

In his excellent book THE MISBEHAVIOUR OF MARKETS he makes the case for the use of fractal based tools in the realm of quantitative financial analysis.

ABSTRACT
Randomness has distinct phases, namely slow/med/fast - analogous to the physical phases of matter - solid/liquid/gas.

[chapter 1]
Risk Ruin & Reward

RULES

1 Markets Are Risky

2 Trouble Runs in Streaks
--- turbulence tends to cluster

3 Markets Have a Personality
--- sum greater than the parts
--- prices largely determined endogenously
--- are (mathematically speaking) stationary(?)

4 Markets Mislead
--- pseudo-patterns are observable in fundamentally unpredictable processes
--- charting is alchemy

5 Market Time is Relative
-- markets move to a beat that has phases of different tempos
-- fast/slow 'trading time'
-- price movement graphs look the same over different time scales

[chapter 2]
By The Toss of a Coin or the Flight of an Arrow ?

fat cauchy tails vs. normal bell bottoms
the blind zen archer vs the coin tosser

TYPICAL EFFECT OF EXTREME OUTLIER ON AVERAGE/MEAN
Gaussian - minor - e.g. coin toss game wih sets
Cauchy - significant - e.g. distance from target of blind archer

in the markets extreme events happen more frequently than the normal distribution would have you believe

[chapter 3]
Bachelier and His Legacy
[the establishment of the canon]

1900 Louis Bachelier - price movements follow a random walk.
- each new change is independent of the past history
- changes are normally distributed (very few extreme changes)
- equal probability of up or down movement

the EFFICIENT MARKET HYPOTHESIS

In an ideal market (perfect information) all current information relevant to the price of a security will already be priced in.

=> today's price is independent of yesterday's

FLAWS
- price changes are not independent
- price changes not normally distributed
--- in reality there are more rare extreme values than the normal curve predicts

VOLATILITY IS VOLATILE
H = exponent of price dependence
alpha = volatility

[chapter 5]
THE CASE AGAINST MODERN FINANCE

FLAWED ASSUMPTIONS
1 People are rational and aim only to maximize profits
2 The marketplace consist of equivalent/identical actors
3 Price changes can safely be regarded as continuous
4 Price changes follow a Brownian motion

KURTOSIS
fat-tailed curve = higher
normal curve = 3
even more squashed = 1

STATISTICAL MOMENTS
1 Mean (centre)
2 Variance (spread)
3 Skewness (symmetry)
4 Kurtosis (curviness)

FRACTAL PROCESSES = self-similar
self-affine => multiple axes of self-similarity => multi-fractal

FRACTAL DIMENSION
quantifies 'roughness'
e.g. degree of space-filling of 2-d plane by 1-d line curve

H = LONG-TERM PRICE DEPENDENCE
[H : HE Hurst (Abu Nil), Ludwig Otto Holder]
H < 0.5 => anti-dependence (mean reversion)
H = 0.5 => independence, Brownian motion
H > 0.5 => long-term dependence / momentum

[chapter 12]
10 HERESIES OF FINANCE
1 Markets are turbulent
2 Markets are very risky, and the standard models generally significantly underestimate the actual degree of risk
3 Market timing matters greatly - big gains and small losses are clustered
4 Prices often leap, not glide. That adds to the risk.
5 In markets, time is flexible
6 Markets in all places and all ages work alike
7 Markets are inherently uncertain, and price bubbles are inevitable
8 Markets are deceptive
9 Forecasting prices can be perilous, but you _can_ estimate the odds of future volatility
10 In financial markets, the idea of 'value' has limited value

Articles on Benoit Mandelbrot
DailyTelegraphArticle
DailyTelegraphBio

The Quotron

http://priorartdatabase.com/IPCOM/000129593
http://wiki.answers.com/Q/What_happened_to_Quotron_systems_inc.
http://www.independent.co.uk/news/business/reuters-agrees-to-take-control-of-quotron-marketdata-service-has-lost-citicorp-millions-of-dollars-1399948.html
http://en.wiktionary.org/wiki/Quotron

September 11 2001 Insider Trading

http://911research.wtc7.net/sept11/stockputs.html
http://www.hereinreality.com/insidertrading.html
http://www.jonesreport.com/article/02_08/200208_kucinich_trading.html
http://www.historycommons.org/timeline.jsp?timeline=complete_911_timeline&before_9/11=insidertrading
http://www.globalresearch.ca/articles/HEN204B.html

Notable Central Bankers

Montagu Norman
Governor of the Bank of England: 1920 - 1944

Books To Read

Lords of Finance - Liaquat Ahamed

Analysts' Blogs

Tyler Durden @ Zero Hedge

Recommended by John Mauldin:
Dylan Grice @ Popular Delusions
Atlanta Fed - MacroBlog
Alea Jacta Est

Trades Suggest Goldman May Have Had Early Knowledge of Oil Spill

GS sells BP just prior to announcement of Gulf well-leak

Goldman Sachs cuts BP to sell from neutral

InfoWars

Hostile Siezure of Lehman by JP Morgan

Lehman sues JPM over its role

UK finance minister Alistair Darling on Barclays' rejection of Henry Paulson's proposal that it bail out Lehman Brothers. [Bloomberg 24 June 2010]

Data Sources

European Central Bank ECB Data

Bank of Japan - 1
BoJ - 2

EQUITY INDICES

US - s&p 500
US - nasdaq
US - dow-jones industrial avg
UK - ftse 100
EURO - xetra dax
EURO - paris cac40

RSA - JSE ALSI
google finance chart
jse hist data
Bloomberg Interactive Chart

COMMODITIES
TOCOM - TokyCommodities Exchange
Gold - World Gold Council
OIL - Sweet Light Crude - daily data 1983-2009 - US Energy Info Admin
Precious Metals @ The Perth Mint

CURRENCIES
E:USD

AGGREGATORS
BBC
NY Times
Bloomberg

South Africa
South African Reserve Bank - SARB
RSA - CPI - Stats SA
RSA - CPIX - Stats SA


JIBAR
Johannesburg Interbank Agreed Rate
InvestoPedia Definition
Interactive Chart @ WikInvest

Guillaume Rambourg

Gartmore suspends star trader Guillaume Rambourg

Gartmore star Guillaume Rambourg fined €300,000

Gartmore suspends senior fund manager Guillaume Rambourg

Gartmore star Guillaume Rambourg sent secret trading notes

The Role of the Credit-Rating Agencies in the 2008 Crash

Prosecutors Ask if 8 Banks Duped Rating Agencies

Here Greasy Little Piggies...

Greek Debt Swap Counterparty Risk May ‘Spook’

The late-night talks in Brussels were delayed after German Finance Minister Wolfgang Schäuble had to be taken to the hospital following an allergic reaction to medication he is taking. He was replaced at the meeting by Interior Minister Thomas de Maiziere. Schäuble is set to be released from the hospital on Monday.

Financial Crisis Tests Germany’s Ability to Lead

A Trillion for Europe, With Doubts Attached

Debt Aid Package for Europe Took Nudge From Washington

European Debt Woes Punish Corporate Borrowers: Credit Markets

Strauss-Kahn’s Greek Aid Plan Is Mission ‘Improbable’ for IMF

'The Rescue Package Has Bought Nothing But Time'

In Greek Crisis, Some See Parallels to U.S. Debt Woes

Moody’s Downgrades $28 Billion of Greek Securities

The Last Opportunity for a Strong Currency

Euro touches four-year low against dollar

2010-06-24
U.S. Stocks Fall as Greece Swaps Surge to Record
"Credit-default swaps on Greece rose 38 basis points to an all-time high of 970 basis points, according to CMA DataVision. Contracts on Portuguese government securities climbed 16 basis points to a two-week high of 336.5, while Spain rose 4 to 269."

Gold/Silver - JPMorgan, HSBC, Goldman

Gold and Financials - Looking Deeper Under the Hood - David Varadi talks about the John Paulson, the man behind the infamous Abacus Investments vehicle used to short the subprime market, who is now (Sep 2009) supposedly long gold, and short financials.

Whistleblower Andrew Maguire involved in Federal Investigation into Price-Fixing
MineWeb 1
MineWeb 2

"Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned. The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.

"Maguire was scheduled to testify last week before the Commodities Futures Trade Commission, which is looking into the activities of large banks in the metals market, but was knocked off the list at the last moment. So, he went public."


Maguire involved in hit-and-run.
NYPost 1

---

Prison Planet on Whistleblower Maguire

From: Andrew Maguire
Sent: Tuesday, January 26, 2010 12:51 PM
To: Ramirez, Eliud [CFTC]
Cc: Chilton, Bart [CFTC]
Subject: Silver today

Dear Mr. Ramirez:

I thought you might be interested in looking into the silver trading today. It was a good example of how a single seller, when they hold such a concentrated position in the very small silver market, can instigate a selloff at will.

These events trade to a regular pattern and we see orchestrated selling occur 100% of the time at options expiry, contract rollover, non-farm payrolls (no matter if the news is bullish or bearish), and in a lesser way at the daily silver fix. I have attached a small presentation to illustrate some of these events. I have included gold, as the same traders to a lesser extent hold a controlling position there too.

Please ignore the last few slides as they were part of a training session I was holding for new traders.

I brought to your attention during our meeting how we traders look for the “signals” they (JPMorgan) send just prior to a big move. I saw the first signals early in Asia in thin volume. As traders we profited from this information but that is not the point as I do not like to operate in a rigged market and what is in reality a crime in progress.

As an example, if you look at the trades just before the pit open today you will see around 1,500 contracts sell all at once where the bids were tiny by comparison in the fives and tens. This has the immediate effect of gaining $2,500 per contract on the short positions against the long holders, who lost that in moments and likely were stopped out. Perhaps look for yourselves into who was behind the trades at that time and note that within that 10-minute period 2,800 contracts hit all the bids to overcome them. This is hardly how a normal trader gets the best price when selling a commodity. Note silver instigated a rapid move lower in both precious metals.

This kind of trading can occur only when a market is being controlled by a single trading entity.

I have a lot of captured data illustrating just about every price takedown since JPMorgan took over the Bear Stearns short silver position.

I am sure you are in a better position to look into the exact details.

It is my wish just to bring more information to your attention to assist you in putting a stop to this criminal activity.

Kind regards,
Andrew Maguire

* * *

From: Ramirez, Eliud [CFTC]
To: Andrew Maguire
Sent: Wednesday, January 27, 2010 4:04 PM
Subject: RE: Silver today

Mr. Maguire,

Thank you for this communication, and for taking the time to furnish the slides.

* * *

From: Andrew Maguire
To: Ramirez, Eliud [CFTC]
Cc: BChilton [CFTC]
Sent: Wednesday, February 03, 2010 3:18 PM
Subject: Re: Silver today

Dear Mr. Ramirez,

Thanks for your response.

Thought it may be helpful to your investigation if I gave you the heads up for a manipulative event signaled for Friday, 5th Feb. The non-farm payrolls number will be announced at 8.30 ET. There will be one of two scenarios occurring, and both will result in silver (and gold) being taken down with a wave of short selling designed to take out obvious support levels and trip stops below. While I will no doubt be able to profit from this upcoming trade, it is an example of just how easy it is to manipulate a market if a concentrated position is allowed by a very small group of traders.

I sent you a slide of a couple of past examples of just how this will play out.

Scenario 1. The news is bad (employment is worse). This will have a bullish effect on gold and silver as the U.S. dollar weakens and the precious metals draw bids, spiking them higher. This will be sold into within a very short time (1-5 mins) with thousands of new short contracts being added, overcoming any new bids and spiking the precious metals down hard, targeting key technical support levels.

Scenario 2. The news is good (employment is better than expected). This will result in a massive short position being instigated almost immediately with no move up. This will not initially be liquidation of long positions but will result in stops being triggered, again targeting key support levels.

Both scenarios will spell an attempt by the two main short holders to illegally drive the market down and reap very large profits. Locals such as myself will be “invited” on board, which will further add downward pressure.

The question I would expect you might ask is: Who is behind the sudden selling and is it the entity/entities holding a concentrated position? How is it possible for me to know what will occur days before it will happen?

Only if a market is manipulated could this possibly occur.

I would ask you watch the “market depth” live as this event occurs and tag who instigates the move. This would surly help you to pose questions to the parties involved.

This kind of “not-for-profit selling” will end badly and risks the integrity of the COMEX and OTC markets.

I am aware that physical buyers in large size are awaiting this event to scoop up as much “discounted” gold and silver as possible. These are sophisticated entities, mainly foreign, who know how to play the short sellers and turn this paper gold into real delivered physical.

Given that the OTC market (where a lot of the selling occurs) runs on a fractional reserve basis and is not backed up by 1-1 physical gold, this leveraged short selling, where ownership of each ounce of gold has multi claims, poses a very large risk.

I leave this with you, but if you need anything from me that might help you in your investigation I would be pleased to help.

Kind regards,
Andrew T. Maguire

* * *

From: Andrew Maguire
To: Ramirez, Eliud [CFTC]
Sent: Friday, February 05, 2010 2:11 PM
Subject: Fw: Silver today

If you get this in a timely manner, with silver at 15.330 post data, I would suggest you look at who is adding short contracts in the silver contract while gold still rises after NFP data. It is undoubtedly the concentrated short who has “walked silver down” since Wednesday, putting large blocks in the way of bids. This is clear manipulation as the long holders who have been liquidated are matched by new short selling as open interest is rising during the decline.

There should be no reason for this to be occurring other than controlling silver’s rise. There is an intent to drive silver through the 15 level stops before buying them back after flushing out the long holders.

Regards,
Andrew

* * *

From: Andrew Maguire
To: Ramirez, Eliud [CFTC]
Cc: BChilton [CFTC]; GGensler [CFTC]
Sent: Friday, February 05, 2010 3:37 PM
Subject: Fw: Silver today

A final e-mail to confirm that the silver manipulation was a great success and played out EXACTLY to plan as predicted yesterday. How would this be possible if the silver market was not in the full control of the parties we discussed in our phone interview? I have honored my commitment not to publicize our discussions.

I hope you took note of how and who added the short sales (I certainly have a copy) and I am certain you will find it is the same concentrated shorts who have been in full control since JPM took over the Bear Stearns position.

It is common knowledge here in London among the metals traders that it is JPM’s intent to flush out and cover as many shorts as possible prior to any discussion in March about position limits. I feel sorry for all those not in this loop. A serious amount of money was made and lost today and in my opinion as a result of the CFTC’s allowing by your own definition an illegal concentrated and manipulative position to continue.

Bart, you made reference to it at the energy meeting. Even if the level is in dispute, what is not disputed is that it exists. Surely some discussions should have taken place between the parties by now. Obviously they feel they can act with impunity.

If I can compile the data, then the CFTC should be able to too.

I would think this is an embarrassment to you as regulators.

Hoping to get your acknowledgement.

Kind regards,
Andrew T. Maguire

* * *

From: Andrew Maguire
To: Ramirez, Eliud [CFTC]
Sent: Friday, February 05, 2010 7:47 PM
Subject: Fw: Silver today

Just logging off here in London. Final note.

Now that gold is undergoing short covering, please look at market depth right now in silver and evidence the large selling blocks in a thin market being put in the way of silver regaining the technical 15 level, which would cause a short covering rally and new longs being instigated. This is resulting in the gold-silver ratio being stretched to ridiculous levels.

I hope this day has given you an example of how silver is “managed” and gives you something more to work with.

If this was long manipulation in, say, the energy market, the shoe would be on the other foot, I suspect.

Have a good weekend.

Andrew

* * *

From: Andrew Maguire
Sent: Tuesday, February 09, 2010 8:24 AM
To: Ramirez, Eliud [CFTC]
Cc: Gensler, Gary; Chilton, Bart [CFTC]
Subject: Fw: Silver today

Dear Mr. Ramirez,

I hadn’t received any acknowledgement from you regarding the series of e-mails sent by me last week warning you of the planned market manipulation that would occur in silver and gold a full two days prior to the non-farm payrolls data release.

My objective was to give you something in advance to watch, log, and follow up in your market manipulation investigation.

You will note that the huge footprints left by the two concentrated large shorts were obvious and easily identifiable. You have the data.

The signals I identified ahead of the intended short selling event were clear.

The “live” action I sent you 41 minutes after the trigger event predicting the next imminent move also played out within minutes and exactly as I outlined.

Surely you must at least be somewhat mystified that a market move could be forecast with such accuracy if it was free trading.

All you have to do is identify the large seller and if it is the concentrated short shown in the bank participation report, bring them to task for market manipulation.

I have honored my commitment to assist you and keep any information we discuss private,however if you are going to ignore my information I will deem that commitment to have expired.

All I ask is that you acknowledge receipt of my information. The rest I leave in your good hands.

Respectfully yours,

Andrew T. Maguire

* * *

From: Ramirez, Eliud
To: Andrew Maguire
Sent: Tuesday, February 09, 2010 1:29 PM
Subject: RE: Silver today

Good afternoon, Mr. Maguire,

I have received and reviewed your email communications. Thank you so very much for your observations.

May 6 2010 'Flash Crash' Redux

Thursday March 6 2010, most American equity market indices (S&P500, DOW, NASDAQ) experienced exponential decay, when the price curve started to tend to bankruptcy. The market miraculously recovered at some point, closing only 3.5% down on the day, up from the floor of 10% down - making this one of the single biggest intra-day movement in history ?

Subsequent justifications blame algorithmic trading agents, but the decay curve is smooth, and if you look at the market decay in the leading couple of days, it is clear that this is the climax of a process, not just an on the day event.

The VIX tells a clear story of a period of time, not a single mistake transaction involving mistenly bumping up your order size 3 orders of magnitude.

CNBC shows footage of violent riots in Greece in the period immediately preceding and during the event climax

Asian markets open sharply down, with the Bank of Japan offering additional overnight facilities denominated in, of course, yen - Y2000bn (USD21.6bn), with 75% of this being taken up. This is to cater to the increased demand for Yen that has resulted from the net selling of Euros.

CNBC talking head

max keyser
http://maxkeiser.com/

CNN Money

Business Week

Yahoo

CNBC starts with sentiment damage control

My god, was it a glitch, CYB3R-T3RRORISM, or simply an algo-accelerated rational exit from an overbought point

[Rishi Narang - Inside the Black Box - founder of the hedge fund Telesis Capital]

CNN Money - The Day's Trading in Review

CNBC - Jim Roger's 2 Cents

CNBC - Certain Trades to be Reversed

NYTimes - The Biggest Drops in US Market History

Spreads on US Corporate Paper Increase

Michael A. Yoshikami

High Frequency Trading on the NYSE

CNN Blogs - Markets Turn Wild and Wooly

CNBC - High-Speed Trading Glitch Costs Investors Billions

The Economist - So, About That Crash...

A couple of explanations for the fear of May 6

http://www.reuters.com/article/idUSTRE6471D820100508?loomia_ow=t0:s0:a49:g43:r3:c0.072503:b33799284:z0

Reuters - Global Markets Week Ahead - Greek Crisis Goes Viral

NYT - The Next Day - An Official Explanation Becomes More Candid

Turngin to cosider the role of algo-traders in this event

Thursday’s Talk of New Rules to Prevent Future Stock Free Falls

Should you believe a Cretan who tells you he's lying?

The Monday After

NY-Times REPORT on MONDAY's MARKET RESPONSE

OUT OF PLACE
Dollar Libor Holds Near Nine-Month High After EU Loan Package

>Unsurpisingly, the SEC finds no simple single cause, but is still calling the event market failure instead of a fast-pace market correction.

SEC chairman Mary Schapiro told a Congressional hearing that the markets had "failed" many investors. ... "The sudden evaporation of meaningful prices for many major exchange-listed stocks in the middle of a trading day is unacceptable and clearly contrary to the vital policy objective of maintaining fair and orderly financial markets," Mrs Schapiro said."

This is total bullshit. The market is totally overbought while the global system is under massive pressure. A sell-off was inevitable, its just that the new dominance of algo traders means that a sell-off can now be nastier and more sudden than ever before. What the SEC is saying is that they will manipulate the market until it functions they want it to.

Market Inquiry Focuses on One Trader

Did a Big Bet Help Trigger 'Black Swan' Stock Swoon? - It was actually Taleb's cynicism

Regulators decide that plunge wasn't actually cyber-terrorism after all, whew!

Commentary: Market Madness

-- SHOULD ADD SECTION AT THE END TO SHOW HOW 1987 CRASH ALSO CLIMAXED IN 3 MINS OF TRADING

http://www.marketwatch.com/story/sec-looks-to-avoid-future-flash-crash-2010-11-08

------------------

Program short sales by Waddell & Reed were deemed to have been the cause of the crash by a congression inquiry.

ZeroHedge:
SEC Releases Final Flash Crash Report - Waddell And Reed Blamed As Selling Catalyst

Huffington Post:
'Flash Crash' Report: Waddell & Reed's $4.1 Billion Trade Blamed For Market Plunge

Reuters:
Single trade helped spark May's flash crash

Lehman Redux

Wikipedia
Bankruptcy of Lehman Brothers:

... Lehman's stock lost roughly half its value and pushed the S&P 500 down 3.4% on September 9, 2008. The Dow Jones lost nearly 300 points the same day on investors' concerns about the security of the bank. The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman.

On September 10, 2008, Lehman announced a loss of $3.9 billion and their intent to sell off a majority stake in their investment-management business, which includes Neuberger Berman. The stock slid 7% that day.

On September 13, 2008, Timothy F. Geithner, then president of the Federal Reserve Bank of New York called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets...

Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The bankruptcy of Lehman Brothers is the largest bankruptcy filing in U.S. history with Lehman holding over $600 billion in assets.

2010-04-13
LOUISE STORY and ERIC DASH @ NYTimes
Lehman Channeled Risks Through ‘Alter Ego’ Firm:

In the years before its collapse, Lehman used a small company — its “alter ego,” in the words of a former Lehman trader — to shift investments off its books.

JSE STOCKS TO BUY AND HOLD

BHP Billiton
Sasol
MTN Group
VODACOM

Market Manipulation in 2009 Q4

Manipulation of equity markets in the last quarter or 2009 ?

From a John Mauldin newsletter:

Before I hit the send button, a brief comment on a very odd market happening. It appears that recently up to 40% of the volume in the NYSE is in just four low-priced financial stocks.

According to Reuters, four beaten-up financial companies - Bank of America (BAC), Citigroup (C), Fannie Mae (FNM), and Freddie Mac (FRE) - have accounted for upwards of 40 percent of the trading volume on the New York Stock Exchange to begin this week.

The stocks are basically churning in price. Why is this? There are a lot of theories, so let me offer one of my own. I think it has a lot to do with flash trading. As I wrote in a previous letter, with high-frequency program trading hedge funds and sophisticated brokers can make as much as 0.5 cents buying and selling a share of stock at breakeven. Supposedly, the exchanges pay these premiums for adding liquidity. But we are seeing liquidity in stocks where none is needed.

The SEC announced this week that they are going to look into halting these programs. Good. It can't come too soon. Allowing certain funds and brokers to basically front-run the average fund or individual because they have their servers on the actual trading floor is just wrong. This must stop. And if program trading is actually driving the
volume in these four names, it needs to be stopped as soon as possible.

Candidly, I have no way of knowing what the true reason for the volume is. Maybe it is something simple and innocent. But I am deeply suspicious. I doubt it's people buying Bank of America, which has seen its volume as high as 238 million shares, or Citi at 973 million shares, in ONE day! This for stocks that are severely financially impaired? Someone needs to be on top of this. As in Monday.

Recent concentration of volume
4 Financials dominate NYSE volume

Monte Carlo Simulation

Wikipedia:
Monte Carlo methods (or Monte Carlo experiments) are a class of computational algorithms that rely on repeated random sampling to compute their results. Monte Carlo methods are often used in simulating physical and mathematical systems. Because of their reliance on repeated computation of random or pseudo-random numbers, these methods are most suited to calculation by a computer and tend to be used when it is unfeasible or impossible to compute an exact result with a deterministic algorithm.

Wikipedia: MCS in Finance

Introduction to Practical MCS:
using MS Excel
using MatLabe