Tuesday, January 11, 2011

Machines to the Markets - "Exterminate"

From Wired.com:

Last spring, Dow Jones launched a new service called Lexicon, which sends real-time financial news to professional investors. This in itself is not surprising. The company behind The Wall Street Journal and Dow Jones Newswires made its name by publishing the kind of news that moves the stock market. But many of the professional investors subscribing to Lexicon aren’t human—they’re algorithms, the lines of code that govern an increasing amount of global trading activity—and they don’t read news the way humans do. They don’t need their information delivered in the form of a story or even in sentences. They just want data—the hard, actionable information that those words represent.

Lexicon packages the news in a way that its robo-clients can understand. It scans every Dow Jones story in real time, looking for textual clues that might indicate how investors should feel about a stock. It then sends that information in machine-readable form to its algorithmic subscribers, which can parse it further, using the resulting data to inform their own investing decisions. Lexicon has helped automate the process of reading the news, drawing insight from it, and using that information to buy or sell a stock. The machines aren’t there just to crunch numbers anymore; they’re now making the decisions.

That increasingly describes the entire financial system. Over the past decade, algorithmic trading has overtaken the industry. From the single desk of a startup hedge fund to the gilded halls of Goldman Sachs, computer code is now responsible for most of the activity on Wall Street. (By some estimates, computer-aided high-frequency trading now accounts for about 70 percent of total trade volume.) Increasingly, the market’s ups and downs are determined not by traders competing to see who has the best information or sharpest business mind but by algorithms feverishly scanning for faint signals of potential profit.......read on

Facing Wikileaks threat, BofA readies defence

From The Times of India:

NEW YORK: By the time the conference call ended, it was nearly midnight at Bank of America’s headquarters in Charlotte, NC, but the bank’s counterespionage work was only just beginning.

A day earlier, on November 29, the director of WikiLeaks, Julian Assange , had said in an interview that he intended to “take down” a major American bank and reveal an “ecosystem of corruption” with a cache of data from an executive’s hard drive. With Bank of America’s share price falling on the widelyheld suspicion that the hard drive was theirs, executives on the call concluded it was time to take action.

Since then, a team of 15 to 20 top Bank of America officials, led by the chief risk officer, Bruce R Thompson , has been overseeing a broad internal investigation — scouring thousands of documents in the event that they become public, reviewing every case where a computer has gone missing and hunting for any sign that its systems might have been compromised.

In addition to the internal team drawn from departments like finance , technology, legal and communications , the bank has brought in Booz Allen Hamilton, the consulting firm, to help manage the review. It has also sought advice from several top law firms about legal problems that could arise from a disclosure, including the bank’s potential liability if private information was disclosed about clients.

The company’s chief executive, Brian T Moynihan, receives regular updates on the team’s progress, according to one Bank of America executive familiar with the team’s work, who, like other bank officials, was granted anonymity to discuss the confidential inquiry.......read on

China Currency Reserves Rise to Record $2.85 Trillion

From Bloomberg:

China’s foreign-exchange reserves climbed by a record in the fourth quarter and lending exceeded the government’s full-year target, increasing pressure on the central bank to tighten policies to rein in liquidity and inflation.

The currency holdings, reported by the central bank on its website today, increased by $199 billion in the last three months of 2010 to $2.85 trillion, the biggest quarterly gain since Bloomberg data began in 1996. Full-year yuan-denominated lending of 7.95 trillion yuan ($1.2 trillion) compared with a government target of 7.5 trillion yuan.

The central bank may need to raise benchmark interest rates and bank reserve requirements, and allow faster yuan appreciation, economists from Standard Chartered Plc and Credit Agricole CIB said. Policy makers may also experiment with more ways of encouraging outflows of capital, after expanding a program for exporters to park revenue overseas and letting some citizens invest directly abroad.....read on

Gold's run not yet finished

From Mineweb.com:

Despite glimmers of hope for the US economy in particular, the global economy is likely to face further problems and gold prices will go higher.

Author: David Levenstein
Posted: Monday , 10 Jan 2011


Once again gold has proved to be an effective preserver of wealth as well as an outstanding performing asset class. Since 2000, when the bull market in gold began, the price has moved from $250 an ounce to over $1400 an ounce. In 2010 gold was up 30% in US$, 35% in Sterling, 22% in Canadian dollars, 17% in Swiss Francs, 13% in Japanese Yen, 30% in Russian Rubbles, 25% in Chinese Yuan, 16% in South African Rand and $38% in Euro. And the average annual gain for gold in US dollars has been more than 20%, consistently for 10 years.

What amazes me is that there are still investors out there who continue to denigrate gold as an investment simply because it does not pay a dividend. Yet, even a person who has the most rudimentary understanding of mathematics and who can manage to add a few prime numbers together can surely comprehend the following:

If you invested $100,000 in gold in 2000, the value of that gold is now worth around $560,000. If on the other hand you invested the same amount into bonds yielding say 8% per annum, on a compounded basis, the value of that investment is now worth around $216,000. (Yes, you may have gotten higher yields from some broken country but these higher yields come with a risk of a default. Recently, interest rates soared in the Eurozone; Greece 12.5%, Ireland went above 9%). Anyhow, back to the calculation...which is the greater of these two numbers?.....read on

GATA: Judge orders Fed to deliver gold records for her review

From GATA.org:

GATA today scored a small but perhaps auspicious victory over the Federal Reserve in our lawsuit seeking access to the Fed's secret gold files. The judge presiding over GATA's federal freedom-of-information lawsuit in U.S. District Court for the District of Columbia, Ellen Segal Huvelle, granted GATA's motion to order the Fed to produce in complete form for the judge's private review 20 gold-related documents the Fed has sought to keep secret. The judge ordered the Fed to deliver the documents by Friday.

Through its lawyers, William J. Olson P.C. of Vienna, Virginia -- www.LawAndFreedom.com -- GATA has argued that the Fed's production of gold-related documents has been so inadequate and the Fed's arguments for keeping them secret so weak that the court should review the documents acknowledged by the Fed and order the Fed to answer 25 questions from GATA about the Fed's search for relevant information.

While Judge Huvelle still could grant at any time the Fed's motion to dismiss GATA's lawsuit, her ruling today at least implies a little skepticism about the Fed and its tactics. Combined with today's statement by U.S. Rep. Ron Paul, the new chairman of the House Financial Services Committee's Subcommittee on Monetary Policy (http://www.gata.org/node/9495), Judge Huvelle's ruling gives hope that the Fed's enormous secret power to rig markets and bestow the most fantastic patronage on a parasitic financial elite can be brought to account eventually.....read on

Martin Armstrong's views on 2011

Cycles guru Martin Armstrong looks ahead to 2011.....read his report here

Gerald Celente: 2011 The Year of the Cyberwar

Stock market plunge in Bangladesh causes riots

From The Financial Express (of Bangladesh)
By: ANM Hamidullah

The rot started many months ago, the market finally crumbled Sunday. Between Sunday and Monday, the Bangladesh stock market lost more than 15%. For a small economy such as Bangladesh, a loss of wealth of almost US$ 7.5 billion, even on paper, is remarkable. Given the fact that many small investors flocked into the market lured by easy profit, the ripple effects would be wide-spread.

In 2010 alone, the market appreciated by 100%. In the three years (2007-2010), the average return was over 50%. The market appreciated so fast lately that the inactivity during the first part of the decade was overshadowed by the performance of the last three years, resulting in an average annual return of over 30% during this decade. Despite the current corrections, the magnitude of the return is still stupendous. In other words, nothing to feel sorry about the last two days' loss. After all in a market-based Lassiez Faire economy, nobody has the right to determine how others invest on their free own will.

However, last two years has brought in clueless investors in the market. These are investors with limited capital, limited knowledge and limited risk-taking capacity. Most diverted their funds from essential or productive activities. Most left their day jobs to ponder in the market. In other words, these people had no business partaking in this risky game. We shall keep hearing about the plight of the retired government officials, days together in the future.....read on

Gold for Oil - India may pay for Iranian oil with gold

From The Times of India:

NEW DELHI: India is determined to ensure steady crude oil supplies from Iran and is even considering settling payments with gold in the short term before the two countries agree on a mutually accepted currency and a bank to clear the transactions.

"We have written a letter to NIOC ( National Iranian Oil Company )) asking it to suggest a bank where US sanctions are not applicable," a government official involved in the matter said requesting anonymity.

Another official said India could settle crude oil import transaction using gold in the short term, while efforts to resolve the deadlock continue. An Indian delegation, including officials from ministries of external affairs, finance and petroleum, will visit Tehran next week to thrash out the payment issue, officials said.

India's crude oil imports from Iran faced an impasse after the Reserve Bank of India declared that a regional clearinghouse that involved the Iranian central bank could no longer be used to settle oil and gas transactions between the two countries.

Oil industry officials are keenly awaiting a solution as India imports 80% of the 184 million tonne of crude oil it refines every year, and Iran accounts for 16% of these purchases, making it the second-biggest supplier, after Saudi Arabia.....read on