Is China Buying US-Treasuries via the UK ?

- Is China Secretly Buying US Treasuries via UK Accounts?
- United Kingdom Suddenly Owns Over $500 Billion of US Treasury Securities

NYTimes - Jan 2011\
Data Shows Less Buying of U.S. Debt by China:

It is not easy to see how the Chinese government managed to keep its currency from rising more rapidly against the dollar if it did not continue buying Treasuries in 2010, and there has been speculation that it shifted purchases to accounts managed by British money managers.

If so, such purchases would show up as British purchases. As it turns out, Britain is estimated to have been the largest purchaser of Treasuries over the 12-month period, adding $356 billion to its holdings. That made it by far the largest buyer, followed by Japan. The only other major seller during the period was Russia, according to the government estimates.

If China has been buying through money managers, it may be easier at some point for it to begin selling Treasuries through the British channel without others understanding where the selling pressure is coming from.

BIS 2010 Forex Market Analysis

BIS Page
Actual Report in PDF format

Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2010 - Final results
December 2010
Activity in the Foreign Exchange Market

Every three years, the Bank for International Settlements (BIS) coordinates a global central bank survey designed to yield comprehensive and internationally consistent information on the size and structure of foreign exchange (FX) and over-the-counter (OTC) derivatives markets. By increasing market transparency, the survey aims to help monetary authorities and market participants better monitor patterns of activity and exposures in the global financial system.

Fitch Indicates that US Debt Should Be Downgraded

iMarketNews.com
Wednesday, January 19, 2011 - 13:41
Fitch: US Fiscal Metrics To Be Worst Among 'AAA' Sovereigns
By Yali N'Diaye

WASHINGTON (MNI) - Fitch Ratings Wednesday said it believes "the U.S. fiscal metrics will be the worst of any 'AAA'-rated sovereign," due to the higher-than-expected deficits and debt levels expected following the extension of the Bush era tax cuts.

This despite the expected boost to U.S. GDP this year and in 2012.

And just like their peers at Standard & Poor's and Moody's, analysts at Fitch Ratings warned in their latest Credit Outlook that "the absence of a credible medium-term fiscal consolidation strategy is eroding confidence in the sustainability of public finances and commitment to low inflation, with potentially adverse implications for the U.S. sovereign credit standing."

Still, they note the "higher debt tolerance than for other 'AAA' and highly rated sovereigns" due to the "extraordinary fundamental credit strengths" of the U.S., the flexibility and dynamism of its economy and the status of the greenback as a global reserve currency.
...
This echoed Moody's analysis last week, saying that the U.S., the UK, France and Germany "still possess debt metrics, including debt affectability, that are compatible with their Aaa ratings."


Germany 1. USA -1.

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

2011-02-03
S&P says no plans to cut U.S. rating in medium term:
Ratings agency Standard & Poor's does not have any plans to downgrade the U.S. sovereign debt rating, but it believes credit risk may increase in the long term, a senior official at the agency said on Thursday.

Adjusted Closing Price - Definition

DEFINITION - investopedia

>> A stock's closing price on any given day of trading that has been amended to include any distributions and corporate actions that occurred at any time prior to the next day's open. The adjusted closing price is often used when examining historical returns or performing a detailed analysis on historical returns. <<

CALCULATION - investopedia


>>> When distributions are made, the adjusted closing price calculations are quite simple. For cash dividends, the value of the dividend is deducted from the last closing sale price of the stock. For example, let's assume that the closing price for one share of XYZ Corp. is $20 on Thursday. After close on Thursday, XYZ Corp. announces a dividend distribution of $1.50 per share. The adjusted closing price for the stock would then be $18.50 ($20-$1.50).

If XYZ Corp. announces a 2:1 stock dividend instead of a cash dividend, the adjusted closing price calculation will change. A 2:1 stock dividend means that for every share an investor owns, he or she will receive two more shares. In this case, the adjusted closing price calculation will be $20*(1/(2+1)). This will give you a price of $6.67, rounded to the nearest penny.

If XYZ Corp. announces a 2:1 stock split, investors will receive an extra share for every share they already own. This time the calculation will be $20*(1/(1x2)), resulting in an adjusted closing price of $10. <<<

Einstein on Socialism

Why Socialism
an essay by Albert Einstein

This essay was originally published in the first issue of Monthly Review (May 1949), now a long-running socialist periodical.

Is it advisable for one who is not an expert on economic and social
issues to express views on the subject of socialism? I believe for a
number of reasons that it is.

Let us first consider the question from the point of view of scientific knowledge. It might appear that there are no essential methodological differences between astronomy and economics: scientists in both fields attempt to discover laws of general acceptability for a circumscribed group of phenomena in order to make the interconnection of these phenomena as clearly understandable as possible. But in
reality such methodological differences do exist. The discovery of general laws in the field of economics is made difficult by the circumstance that observed economic phenomena are often affected by many factors which are very hard to evaluate separately. In addition, the experience which has accumulated since the beginning of the so-called civilized period of human history has—as is well known—been
largely influenced and limited by causes which are by no means exclusively economic in nature. For example, most of the major states of history owed their existence to conquest. The conquering peoples established themselves, legally and economically, as the privileged class of the conquered country. They seized for themselves a monopoly
of the land ownership and appointed a priesthood from among their own ranks. The priests, in control of education, made the class division of society into a permanent institution and created a system of values by which the people were thenceforth, to a large extent unconsciously, guided in their social behavior.

But historic tradition is, so to speak, of yesterday; nowhere have we really overcome what Thorstein Veblen called "the predatory phase" of human development. The observable economic facts belong to that phase and even such laws as we can derive from them are not applicable to other phases. Since the real purpose of socialism is precisely to overcome and advance beyond the predatory phase of human development,
economic science in its present state can throw little light on the socialist society of the future.

Second, socialism is directed towards a social-ethical end. Science, however, cannot create ends and, even less, instill them in human beings; science, at most, can supply the means by which to attain certain ends. But the ends themselves are conceived by personalities with lofty ethical ideals and—if these ends are not stillborn, but
vital and vigorous—are adopted and carried forward by those many human beings who, half unconsciously, determine the slow evolution of society.

For these reasons, we should be on our guard not to overestimate science and scientific methods when it is a question of human problems; and we should not assume that experts are the only ones who have a right to express themselves on questions affecting the organization of society.

Innumerable voices have been asserting for some time now that human society is passing through a crisis, that its stability has been gravely shattered. It is characteristic of such a situation that individuals feel indifferent or even hostile toward the group, small or large, to which they belong. In order to illustrate my meaning, let
me record here a personal experience. I recently discussed with an intelligent and well-disposed man the threat of another war, which in my opinion would seriously endanger the existence of mankind, and I remarked that only a supra-national organization would offer protection from that danger. Thereupon my visitor, very calmly and coolly, said to me: "Why are you so deeply opposed to the disappearance of the human race?"

I am sure that as little as a century ago no one would have so lightly made a statement of this kind. It is the statement of a man who has striven in vain to attain an equilibrium within himself and has more or less lost hope of succeeding. It is the expression of a painful solitude and isolation from which so many people are suffering in these days. What is the cause? Is there a way out?

It is easy to raise such questions, but difficult to answer them with any degree of assurance. I must try, however, as best I can, although I am very conscious of the fact that our feelings and strivings are often contradictory and obscure and that they cannot be expressed in easy and simple formulas.

Man is, at one and the same time, a solitary being and a social being. As a solitary being, he attempts to protect his own existence and that of those who are closest to him, to satisfy his personal desires, and to develop his innate abilities. As a social being, he seeks to gain the recognition and affection of his fellow human beings, to share in their pleasures, to comfort them in their sorrows, and to improve their conditions of life. Only the existence of these varied, frequently conflicting, strivings accounts for the special character of a man, and their specific combination determines the extent to which an individual can achieve an inner equilibrium and can
contribute to the well-being of society. It is quite possible that the relative strength of these two drives is, in the main, fixed by inheritance. But the personality that finally emerges is largely formed by the environment in which a man happens to find himself during his development, by the structure of the society in which he grows up, by the tradition of that society, and by its appraisal of particular types of behavior. The abstract concept "society" means to the individual human being the sum total of his direct and indirect relations to his contemporaries and to all the people of earlier generations. The individual is able to think, feel, strive, and work by himself; but he depends so much upon society—in his physical,
intellectual, and emotional existence—that it is impossible to think of him, or to understand him, outside the framework of society. It is "society" which provides man with food, clothing, a home, the tools of work, language, the forms of thought, and most of the content of thought; his life is made possible through the labor and the
accomplishments of the many millions past and present who are all hidden behind the small word “society.”

It is evident, therefore, that the dependence of the individual upon society is a fact of nature which cannot be abolished—just as in the case of ants and bees. However, while the whole life process of ants and bees is fixed down to the smallest detail by rigid, hereditary instincts, the social pattern and interrelationships of human beings
are very variable and susceptible to change. Memory, the capacity to make new combinations, the gift of oral communication have made possible developments among human being which are not dictated by biological necessities. Such developments manifest themselves in traditions, institutions, and organizations; in literature; in
scientific and engineering accomplishments; in works of art. This explains how it happens that, in a certain sense, man can influence his life through his own conduct, and that in this process conscious thinking and wanting can play a part.

Man acquires at birth, through heredity, a biological constitution
which we must consider fixed and unalterable, including the natural
urges which are characteristic of the human species. In addition,
during his lifetime, he acquires a cultural constitution which he
adopts from society through communication and through many other types
of influences. It is this cultural constitution which, with the
passage of time, is subject to change and which determines to a very
large extent the relationship between the individual and society.
Modern anthropology has taught us, through comparative investigation
of so-called primitive cultures, that the social behavior of human
beings may differ greatly, depending upon prevailing cultural patterns
and the types of organization which predominate in society. It is on
this that those who are striving to improve the lot of man may ground
their hopes: human beings are not condemned, because of their
biological constitution, to annihilate each other or to be at the
mercy of a cruel, self-inflicted fate.

If we ask ourselves how the structure of society and the cultural
attitude of man should be changed in order to make human life as
satisfying as possible, we should constantly be conscious of the fact
that there are certain conditions which we are unable to modify. As
mentioned before, the biological nature of man is, for all practical
purposes, not subject to change. Furthermore, technological and
demographic developments of the last few centuries have created
conditions which are here to stay. In relatively densely settled
populations with the goods which are indispensable to their continued
existence, an extreme division of labor and a highly-centralized
productive apparatus are absolutely necessary. The time—which, looking
back, seems so idyllic—is gone forever when individuals or relatively
small groups could be completely self-sufficient. It is only a slight
exaggeration to say that mankind constitutes even now a planetary
community of production and consumption.

I have now reached the point where I may indicate briefly what to me
constitutes the essence of the crisis of our time. It concerns the
relationship of the individual to society. The individual has become
more conscious than ever of his dependence upon society. But he does
not experience this dependence as a positive asset, as an organic tie,
as a protective force, but rather as a threat to his natural rights,
or even to his economic existence. Moreover, his position in society
is such that the egotistical drives of his make-up are constantly
being accentuated, while his social drives, which are by nature
weaker, progressively deteriorate. All human beings, whatever their
position in society, are suffering from this process of deterioration.
Unknowingly prisoners of their own egotism, they feel insecure,
lonely, and deprived of the naive, simple, and unsophisticated
enjoyment of life. Man can find meaning in life, short and perilous as
it is, only through devoting himself to society.

The economic anarchy of capitalist society as it exists today is, in
my opinion, the real source of the evil. We see before us a huge
community of producers the members of which are unceasingly striving
to deprive each other of the fruits of their collective labor—not by
force, but on the whole in faithful compliance with legally
established rules. In this respect, it is important to realize that
the means of production—that is to say, the entire productive capacity
that is needed for producing consumer goods as well as additional
capital goods—may legally be, and for the most part are, the private
property of individuals.

For the sake of simplicity, in the discussion that follows I shall
call “workers” all those who do not share in the ownership of the
means of production—although this does not quite correspond to the
customary use of the term. The owner of the means of production is in
a position to purchase the labor power of the worker. By using the
means of production, the worker produces new goods which become the
property of the capitalist. The essential point about this process is
the relation between what the worker produces and what he is paid,
both measured in terms of real value. Insofar as the labor contract is
“free,” what the worker receives is determined not by the real value
of the goods he produces, but by his minimum needs and by the
capitalists' requirements for labor power in relation to the number of
workers competing for jobs. It is important to understand that even in
theory the payment of the worker is not determined by the value of his
product.

Private capital tends to become concentrated in few hands, partly
because of competition among the capitalists, and partly because
technological development and the increasing division of labor
encourage the formation of larger units of production at the expense
of smaller ones. The result of these developments is an oligarchy of
private capital the enormous power of which cannot be effectively
checked even by a democratically organized political society. This is
true since the members of legislative bodies are selected by political
parties, largely financed or otherwise influenced by private
capitalists who, for all practical purposes, separate the electorate
from the legislature. The consequence is that the representatives of
the people do not in fact sufficiently protect the interests of the
underprivileged sections of the population. Moreover, under existing
conditions, private capitalists inevitably control, directly or
indirectly, the main sources of information (press, radio, education).
It is thus extremely difficult, and indeed in most cases quite
impossible, for the individual citizen to come to objective
conclusions and to make intelligent use of his political rights.

The situation prevailing in an economy based on the private ownership
of capital is thus characterized by two main principles: first, means
of production (capital) are privately owned and the owners dispose of
them as they see fit; second, the labor contract is free. Of course,
there is no such thing as a pure capitalist society in this sense. In
particular, it should be noted that the workers, through long and
bitter political struggles, have succeeded in securing a somewhat
improved form of the “free labor contract” for certain categories of
workers. But taken as a whole, the present day economy does not differ
much from “pure” capitalism.

Production is carried on for profit, not for use. There is no
provision that all those able and willing to work will always be in a
position to find employment; an “army of unemployed” almost always
exists. The worker is constantly in fear of losing his job. Since
unemployed and poorly paid workers do not provide a profitable market,
the production of consumers' goods is restricted, and great hardship
is the consequence. Technological progress frequently results in more
unemployment rather than in an easing of the burden of work for all.
The profit motive, in conjunction with competition among capitalists,
is responsible for an instability in the accumulation and utilization
of capital which leads to increasingly severe depressions. Unlimited
competition leads to a huge waste of labor, and to that crippling of
the social consciousness of individuals which I mentioned before.

This crippling of individuals I consider the worst evil of capitalism.
Our whole educational system suffers from this evil. An exaggerated
competitive attitude is inculcated into the student, who is trained to
worship acquisitive success as a preparation for his future career.

I am convinced there is only one way to eliminate these grave evils,
namely through the establishment of a socialist economy, accompanied
by an educational system which would be oriented toward social goals.
In such an economy, the means of production are owned by society
itself and are utilized in a planned fashion. A planned economy, which
adjusts production to the needs of the community, would distribute the
work to be done among all those able to work and would guarantee a
livelihood to every man, woman, and child. The education of the
individual, in addition to promoting his own innate abilities, would
attempt to develop in him a sense of responsibility for his fellow men
in place of the glorification of power and success in our present
society.

Nevertheless, it is necessary to remember that a planned economy is
not yet socialism. A planned economy as such may be accompanied by the
complete enslavement of the individual. The achievement of socialism
requires the solution of some extremely difficult socio-political
problems: how is it possible, in view of the far-reaching
centralization of political and economic power, to prevent bureaucracy
from becoming all-powerful and overweening? How can the rights of the
individual be protected and therewith a democratic counterweight to
the power of bureaucracy be assured?

Clarity about the aims and problems of socialism is of greatest
significance in our age of transition. Since, under present
circumstances, free and unhindered discussion of these problems has
come under a powerful taboo, I consider the foundation of this
magazine to be an important public service.

POMO - Permanent Open Market Operation

a POMO, is not a queer p, but a Permanent Open Market Operation, a P-OMO - a direct intervention in the market by the US monetary authority.

NY Fed: Permanent OMOs

The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).

On March 18, 2009, the FOMC announced a longer-dated Treasury purchase program with a different operating goal, to help improve conditions in private credit markets.

On August 10, 2010, the FOMC directed the Open Market Trading Desk at the Federal Reserve Bank of New York to keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.

On November 3, 2010, the FOMC decided to expand the Federal Reserve's holdings of securities in the SOMA to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

SHIBOR - Shanghai InterBank OverNight Rate

Wikipedia:
The Shanghai Interbank Offered Rate (or Shibor, 上海银行间同业拆放利率) is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Shanghai wholesale (or "interbank") money market. There are eight Shibor rates, with maturities ranging from overnight to a year. They are calculated from rates quoted by 16 banks, eliminating the two highest and the two lowest rates, and then averaging the remaining 12.

http://www.shibor.org/
google translation

Current Quote & Interactive Chart @ Bloomberg

Market Overview @ China Daily

2011/01/05 @ ZeroHedge:
Here is Morgan Stanley's explanation of what is happening in China:

SHIBOR surged: As multiple RRR hikes have started to take effect, market liquidity has become very tight. Compounded with the year-end liquidity shortage and heightened expectation of further rate hikes, large banks have almost stopped lending into the interbank market. In this context, the SHIBOR has surged in the past two weeks, with the 7-day, 1-month and 3-month rates jumping 269bps, 187bps, and 74bps, respectively.

2011-01-21 @ ZeroHedge:
Today, the 7 day SHIBOR (and repo rate) has just surged to new multi-year highs and has literally exploded from 2.5% to 7.3% in a few short days.

SecondMarket

SecondMarket Site

WikiPedia:

SecondMarket (formerly Restricted Stock Partners) is an online marketplace for buying and selling illiquid assets, including auction‐rate securities, bankruptcy claims, limited partnership interests, private company stock, restricted securities in public companies, structured products, and whole loans.

SecondMarket's participants include global financial institutions, hedge funds, private equity firms, mutual funds, corporations and other institutional and accredited investors.

The website was created in 2004

Market Signals - OverBought - Paul Hickey @ Bespoke

2011-01-01 - Edward Krudy @ Reuters
Hangover or afterparty for stocks?

An array of technical factors show the market may be at the top end of its recent trading range, but strongly trending markets often produce false signals.

"There is no denying the fact that the market is overbought," said Paul Hickey, an analyst at Bespoke Investment Group in Harrison, New York. "The entire month of December the S&P 500 has closed in overbought levels everyday."

Hickey considers the S&P 500 overbought when it moves one standard deviation above its 50-day moving average. But looking at prior months where that has occurred he found performance the next month was above average instead of reverting to the mean.

"Momentum tends to carry the market further," he said.

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Update 2015/12/15

Oil Price History - Cushing Futures, NYMEX Weekly Close

West Texas Intermediate for delivery @ Cushing OK
2001 to 2015

WTI $/barrel 2001 - 2015

West Texas Intermediate for delivery @ Cushing OK
2006 to 2015

West Texas Intermediate for delivery @ Cushing OK
2011 to 2015

West Texas Intermediate for delivery @ Cushing OK
2014 to 2015

Benoit Mandelbrot on his Set

Benoit Mandelbrot relates some thoughts on the eponymous Mandelbrot Set he investigated and popularised, in a foot-note (note # 146, p 293) to his commentary The MisBehaviour of Markets :

The Mandelbrot set starts with an old problem... The problem concerns so-called iterated functions, a kind of mathematical feedback loop that keeps operating on its own outputs again and again.

[ Definition of the Fractal Generator - An Iterated Function ]

z_1 = (z_0)^2 + c

where

z_0 is the starting value of the process
c is a constant
z_1 is the first output

Then repeat the operation,

z_2 = (z_1)^2 + c

and

z_3 = (z_2)^2 + c

If you keep doing this forever with starting numbers c like 3 or 4, the sequence (irrespective of z_0) will soar off into infinity. But if you say z and c are complex numbers, with the imaginary i [= square root of -1] in them, then the story gets more interesting... Sometimes the series will veer off into infinity, but sometimes it will not. And the precise pattern is exquisitely intricate.

With the Mandelbrot set, you start off by setting z_0 equal to 0, and then see what happens to the sequence when you try different values of c. If the sequence does not run off to infinity, then [the point] c is said to be in the Mandelbrot set. If it does, then c is not in the set.

Black and white illustrations of the set typically assign a computer-screen pixel to every value of c being tested, then paint it black if the pixel is inside the Mandelbrot set, and a variety of other colours if it is not. Different colours are often used to denote how quickly the series soars to infinity.

The surprising thing is that as you look at smaller and smaller scales - say, zoom in on values of c in a tenth of the screen, rather than the whole screen - you find the pattern of what is in the set and what is not becomes far more complicated than it first appeared. Zoom again, and yet more fine detail emerges. You can do this forever, and at each stage get an entirely different picture...

[Chaotic Nature]

The Mandelbrot set belongs to both fractal geometry and chaos theory. A chaotic system, far from being disorganised or non-organised, starts with one particular point, and cranks it through a repeating process, the outcome is unpredictable if you do not know the process - and it depends heavily on the starting point...

The basic idea is that if you stand a pencil on its point, and let it fall through the force of gravity, exactly where it lands depends on where it began, and whether it was leaning infinitesimally on one direction or another.