A massive lending binge over the past couple of years has left major Chinese banks undercapitalized according to a new report from Caing, which has gone through the latest financial reports.
Sure, profits are surging, but the bottom line is that these banks are likely to need 200-300 billion yuan (up to $45 billion est.) in 2010 in fresh capital. To put that into perspective, that's half as much as all the money raised by mainlaind Chinese public companies last year.
Specifically:
Industrial Bank's capital adequacy ratio slipped to 10.63 percent at the end of the first quarter of this year from 10.75 percent at the end of 2009, with its core capital level dimming from 7.91 percent to 7.59 percent. The minimum capital requirement for joint-stock banks was raised to 10 percent by China Banking Regulatory Commission late last year. For six largest banks, it is 11 percent.
China Citic Bank's capital adequacy dropped to 9.34 percent at the end of March, down 0.8 percentage point from the end of last year. The Bank of Ningbao had mixed performance: its core capital level dip from 9.58 percent at the end of last year to 9.07 percent at the end of the first quarter while capital adequacy ratio climbed from 10.75 percent to 10.88 percent during the time frame.
J. Weisenthal
Commercial Chinese Banks Short of Capital
After a lending binge in 2009, many commercial Chinese banks now face capital shortages
(Beijing) - First quarter reports by five joint-stock banks, the second rung of China's bank industry ladder after the five biggest state-owned banks, have revealed that behind the rapid growth in net profits, capital adequacy ratios have fallen. Some banks have dipped below the regulatory capital requirement.
On April 28, China Citic Bank, China Merchants Bank, the Bank of Ningbo, Industrial Bank and Shenzhen Development Bank filed their first quarter report to the Shanghai Stock Exchange.
China Merchants Bank, the country's sixth largest lender, reaped 5.91 billion yuan in net profit, ranking the first among the five joint-stock banks. China Citic Bank posted 4.08 billion yuan, coming second. Industrial Bank registered 4.079 billion yuan, the third, followed by Shenzhen Development Bank with 1.58 billion yuan in net profit and the Bank of Ningbo with 498 million yuan.
In terms of net profit growth rate, China Merchants Bank, Shenzhen Development Bank and the Bank of Ningbao registered over 40 percent quarterly growth compared with the same period in 2009. Industrial Bank's net profit grew 38.68 percent compared with a year earlier while China Citic had the slowest growth pace of 26.5 percent.
Industrial Bank's capital adequacy ratio slipped to 10.63 percent at the end of the first quarter of this year from 10.75 percent at the end of 2009, with its core capital level dimming from 7.91 percent to 7.59 percent. The minimum capital requirement for joint-stock banks was raised to 10 percent by China Banking Regulatory Commission late last year. For six largest banks, it is 11 percent.
China Citic Bank's capital adequacy dropped to 9.34 percent at the end of March, down 0.8 percentage point from the end of last year. The Bank of Ningbao had mixed performance: its core capital level dip from 9.58 percent at the end of last year to 9.07 percent at the end of the first quarter while capital adequacy ratio climbed from 10.75 percent to 10.88 percent during the time frame.
Shenzhen Development Bank fared worst among the five. Its capital adequacy ratio fell to 8.66 percent at the end of the first quarter from 8.88 percent at the end of last year as its core capital dropped to 5.46 percent at the end of the first quarter from 5.52 percent at the end of last year.
The only bank with relatively abundant capital was China Merchants Bank, which saw its capital adequacy ratio rise from 1.08 percent to 11.53 percent in the past three months. In March, China Merchants Bank, the country's sixth-largest bank, raised 22 billion yuan to consolidate its capital base in a rights issue in Shanghai and Hong Kong.
Banking analysts estimated that China's listed banks will have to shore up capital by raising about 200 billion to 300 billion yuan in 2010. The figure was equal to the nearly half of the money raised in the mainland stock markets last year.
The complete Tamla and Motown singles of The Satintones -- the soul, R&B & popular music juggernaut's first male vocal group -- and a treasure trove of rare post doo wop from the end of the 50s/beginning of the 60s! It's fascinating for stuff for the history here -- the group is hugely under-anthologized in a world of myriad Motown compilations -- which is a real shame, as you'll hear in this sweet set -- with numbers that that rely on the doo wop influences and pronounced group efforts as well as tunes more devoted to lead vocal performances -- with a slew of early Berry Gordy productions and compositions. The set includes the then legally challenged Shirelles knockoff/answer song "Tomorrow and Always" Includes "Motor City", "Going To The Hop", "Sugar Daddy", "A Love That Can Never Be", "Foot Stomping Time", My Kind Of Love", "Boogie Woogie Heart", "Because I Love You", "You Can't Beat My Lovin" and many more. 26 tracks in all.
It is a limited Release edition of only 3000 copies.
Hugh Hendry is not one to mince his words. The outspoken hedge fund specialist, formerly a partner at Odey and more recently a co-founder of investment boutique Eclectica, has previously appeared on Newsnight and presented a Channel 4 documentary on the banking crisis. Here he explains why he has been punished for good performance, why China could be the next Japan, and why he would insure you against the UK defaulting on its sovereign debt
Do you think China is a bubble waiting to burst?
I fear it could be, because it has not demonstrated an ability to create wealth. It has demonstrated an ability to create GDP growth, which is a function of spending money. The priority of economic management at the macro level should be to have a high re-occurring level of household disposable income, which manifests itself in a high level of consumption as a percentage of GDP. The scorecard for China using that metric is really bottom of the class. Over the last 30 years, that ratio has almost halved and we are talking about consumption being 35% of the economy. Now when I say that, people scoff and ask, how can you celebrate the venality of consumption? Isn’t there nobility to building bridges? However, infrastructure projects and steel plants that are publicly commissioned and have very uncertain economic paybacks ultimately require a subsidy from the household sector. If you build a high-speed rail link and anticipate it improving the productivity of the economy over the next 10 years, but actually it does not, it means you will have to raise Government borrowing or tax the population to sustain the negative cashflow.
But is this all about producing more of everything and increasing their economic footprint?
Well, yes. They are pursuing an Asian model and at the forefront of that model is Japan. My interpretation of all of that is, again at the macro level, profit has been displaced by the notion of sovereign power and accumulation.
If you define success on those criteria, they are clearly top of the class. But then we have witnessed Japan fall from being the unquestioned economic superpower – as it was in the 1980s – and it has now suffered two decades of profound reversal. I think the Chinese have to be concerned about that, because it has a portent their model is so similar.
Turning to specifics, will the distortions in Chinese foreign exchange rates based on the renminbi cause much of the pain to come?
Two precedents seem to describe a situation evident in China today. The experience of the US in the 1920s was one of economic disequilibrium and the economy became the world’s largest creditor nation, but at the same time had the ability and the insistence, that it would run persistent trade surpluses.
That does not wash in the world of equilibrium analysis of economics. Trees do not grow to the sky and the fact everyone owes you money means they require the resources and the ability to repay you your money. They can only find that resource to repay you by trading back with you and earning a trade surplus in return.
It takes the world into conflict and typically liquidity is used as a balm to keep an unstable world together. But that balm of liquidity finds its way into speculative asset prices and therefore makes the society vulnerable to reversal. It found its way into Wall Street, which crashed and the US went from first to last. It took 50 years before we saw the world repeat that folly, and that folly was demonstrated in Japan.
2001 is the fulcrum point where things really started to go right in China – they gained entry into the World Trade Organisation [and this coincided] with America really stepping onto the gas with regard to household debt and financing and mortgage market. And that was very much to the benefit of the Chinese.
Looking specifically at those equity markets – they do not appear enormously overpriced at around 20 times earnings do they? Especially if earnings power ahead in the next few years?
This is back to the silly Slater notion of PEG ratio analysis, which has the flaw that it is not predicated on the accumulation of wealth. This saw Next become a retail empire in the 1980s by having not one but three stores in every high street. The same applied to Starbucks. Again it is this mechanistic notion of generating incremental revenue or earnings growth or GDP growth – at the expense of declining returns on marginal investment, which sows the seeds of its own destruction.
Let’s switch now to some of your own funds and what you are doing with them? We hear a lot about your high profile funds but one of your first was your European unit trust, which has in absolute returns terms been a success, but we do not hear much about it.
I set this up in 2005. In 2007 we made 5.5%, which was nothing to write home about to be honest, as the market was up over 10% that year. But in 2008 in sterling terms, our fund only lost 5% and the stock market lost 25%.
In 2009 our fund made 7% – so we went plus five, minus five, plus seven, which is a remarkably robust performance. Yet the assets invested in that fund have fallen from $80m to £3m. So I have been punished but I am not quite sure why I have been punished. The answer to it reveals the malaise that exists in the investment industry.
What has gone wrong with the investment industry in your view?
It is a malaise and the end of an era. We have leveraged society – in the 1970s total debt to GDP in the US was 1.3. Today it is 4. So leverage has gone up a factor of three.
Equities are a real asset and the subject of a very positive spin on that leverage and therefore it is no surprise stock markets have typically gone up in real terms by a factor of nine. That is without precedent in the 400 years of economic history we have of available.
We have created a hunger just to make money, speculative money and damn the consequences almost – we are either all investing in houses or stocks, soon to be Chinese stocks with Anthony Bolton. But, it has also created a Pavlovian response where every crisis was an opportunity to buy more. I think time is receding, it is passing, it is leaving us behind. My difficulty is that I do not sell dreams. I live in the real world.
How does this enthusiasm for debt and equities relate back to your European fund and its relative neglect?
At best we are agnostic with regard to Europe. In my darker moments when I drop my guard, I am profoundly concerned and troubled by the economic model Europe is pursuing, and that makes me a very good gatekeeper for managing European assets. It means I am very quick to sell things and therefore I can protect capital. It means I have to be convinced – I am sceptical.
I think it provides an edge but it not a marketing edge. In fact you cannot sell the European product clearly by saying Europe sucks.
I am keen to understand how you actually invest. Let’s take the European unit trust as an example. What goes on in the engine room?
In the engine room of the fund we develop a prejudice with regard to the colour and direction of the global macro economy. We think those weather patterns, if you will, actually influence companies. With this in mind, how do you pick companies?I am concerned a society that has leveraged three times has therefore created a third presence – debt – within the economy and an inflated sense of the economy. There is a degree to which it has boosted the reputations of perhaps otherwise mediocre businesses.
As we take away this economic module the debt provided, it reveals a more sobering environment where actually it is just tough! So that manifests itself today in the sense we are concerned about the world being profoundly deflationary and therefore are reluctant to take a lot of economic risk. So the businesses we select to buy today are large-cap names, so I can sell them and not be trapped in them. They are businesses that have a lack of economic sensitivity. I have a tremendous amount invested in the tobacco industry. I think it could survive a consumer depression.
Let’s finish by looking again at the bigger, macro, picture. I suppose we could summarise your views thus – deflation is still a very real risk in the West. There is the real chance of asset bubbles, particularly in the East. What about sterling? Should we be selling it because of our indebted state? There is a hysteria concerning sterling with regard to other currencies, especially the euro, which I do not share. Our economy is troubled and thankfully we have an independent monetary policy that does not avail itself to places like Greece. So when people get very concerned about the sovereign credit risk of the UK, and they compare it to Greece, I think they are horribly wrong. If you wanted insurance on the UK defaulting on its debt I would write you that insurance. The UK will not default on its debt. I think it is just a preposterous assumption.
You are asking me about currency however, and sterling continues to look as if it will weaken. Clearly, there is uncertainty with regard to politics – sterling will continue to weaken against the dollar and possibly to parity versus the dollar. The dollar will surprise people by being profoundly strong, but in the context of further deflation and further falls in asset prices.
Everyone’s favourite future bogeyman is inflation. Jonathan Ruffer, in an interview recently, suggested over the medium to long term, there is a real chance of inflation picking up sharply, with the RPI [retail prices index] back above 10% or even 15% – back to the 1970s and stagflation. I am guessing you do not think that will happen given your deflationary views on debt? If you want to create inflation, you will have to do away with free and independent capital markets. It is very hard to create inflation with free and independent capital markets because of people like me and Jonathan.
We have had quantitative easing, what has happened in the UK? Sterling has fallen and the existing stock of Government debt has fallen in price. So rates are going up. That acts as a counter and a check. We now have credit rating agencies, which come in and counter it, so it is very hard.
If you want to create inflation, what you will see is that we will have a ban on short selling. We will have a ban on naked credit default swaps. We will have the re-imposition of exchange controls. I think that could reside in the future.
So, you would put RPI in five years time at 15%?
If all of the things I say come to pass I anticipate having a lot of inflationary traits. But some of the smartest minds in the marketplace have gone for logic rather than irony… what I am saying is you have to respect policy makers. They are wise, educated, hard working, and diligent. None of them wants to be the person who goes down in history as being the architect of hyper inflation. They do not want that. To get them to do it, to go nuclear, you have to press them to the edge and I think the place closest to the edge is Japan.
Japan? Are the risks of hyper-inflation really that great in an economy rocked by deflation?
Japan features prominently in a lot of the positions we are adopting today. Japan will of course reject the notion of overseas finance and therefore likewise could pursue fiscal austerity.
In that environment you would find Japan could print -5%, -6% nominal GDP very, very quickly. In that environment there is a paradox – the yen would appreciate, which runs very counter to most people’s logic. So I think you could have a coincidence of -5%, -6% Japanese GDP, you could have dollar/yen in the low 70s if not in the 60s. That would be an environment in which they would go nuclear.
Hugh Hendry wonders whether professional money managers' infatuation with China could prove unrewarding?
Hugh Hendry warns of investrs' infatuation with China
Robert Prechter, the eminent American observer of social and economic trends, wryly contends that stock markets usually deceive those people who argue for outcomes based on seemingly logical causation.
Could our professional money managers' infatuation with China prove similarly unrewarding? China's economy is certainly on a tear; economic growth has averaged 9pc a year over the past 10 years, compared with a paltry 1.9pc for the British economy. Last year, despite the credit crunch, China posted a remarkable growth rate of 10.7pc against a British contraction of 3.2pc. This is impressive stuff.
The spell cast by a contemporary cult is undoubtedly hard to resist and some brave souls, willing no doubt to extrapolate present trends forward, are even proclaiming that China will usurp the United States as the world's largest economy. Goldman Sachs' chief global economist, Jim O'Neill, even taunts the naysayers, saying, "You either get it or you don't." Such is his conviction.
However, the composition of China's growth has undergone a potentially treacherous change: in the absence of expanding foreign demand for its exports, it has instead come to rely on a massive surge in domestic bank lending to fuel its growth rate.
Indeed, when measured relative to the size of its economy, the 27pc point jump in bank loans to GDP is unprecedented; at no point in history has a nation ever attempted such an incredible increase in state-directed bank lending.
What a turnaround: from an export juggernaut to a credit addict. Who would have thought it necessary back in 2001, the year everything all started to work out for China?
That was the year the Chinese gained entry into the World Trade Organisation. The ascension to the WTO also coincided with the American Federal Reserve's loose monetary policy response in the aftermath of the NASDAQ crash. Exports surged, especially to the US, and China's current account surplus increased from a modest 2pc of its economy to a monumental 11pc, all by 2007.
This appetite for cheap Chinese exports, which had at one point seemed insatiable, means that we in the West have come to owe our largest Asian trading partner quite a hefty sum of money. China has become the world's biggest creditor, after amassing nearly $2.3 trillion of foreign exchange claims on us. However, the spectre of a creditor nation running persistent trade surpluses has ominous historical portents. It has happened only twice before, with the US economy in the Twenties and with the Japanese economy in the Eighties.
Economics is a cruel master and in both of the previous examples a failure to allow exchange rates to adjust to the new reality created a large speculative pool of credit that, in turn, led to overvalued domestic assets and, eventually, an economic crisis. Never forget that in economics, first can become last.
The China bulls assure us that this time it is different. Yes, the banks are lending money at breakneck speed, but look at what they are doing with it! They suggest a new era reminiscent of Protestant Capitalism. They want us to believe the atheist Chinese are prepared to work harder and defer their gratification for longer.
Undoubtedly, China's state planners have favoured investment over consumption. High-speed rail networks, first-class infrastructure projects and the urban migration of 55 million people every year are common explanations for the ability of the nimble Chinese to overcome the frailties of this global economy. But can too much of a good thing be bad for you? The goal of economic policy, after all, is to maximise households' wellbeing and consumption. Unfortunately, unlike in most countries, China's share of consumption within its economy has fallen relentlessly, reaching 35pc of GDP in 2008. Something isn't right.
The ancient ethical system of Confucius is silent on the subject of modernisation. There is no proverb counselling that "wise men not invest in over-capacity". Perhaps there should be: in China, investment spending has tripled since 2001 and the consequences are staggering. A country that represents just 7pc of global GDP is now responsible for 30pc of global aluminum consumption, 47pc of global steel consumption and 40pc of global copper consumption. The overriding problem is that the Chinese model leads to a deflationary spiral that is perpetual in nature. Domestic consumption never grows fast enough to absorb the supply, prompting the planners to commit to ever-higher levels of investment. Over-capacity inevitably plagues many sectors of the economy and Chinese profitability is already low.
Remember, it is one thing to create economic growth, but it is another thing to truly create wealth. If I commit to building a new commercial property in Shanghai I will undoubtedly contribute to GDP growth. However, if I have no tenants and the city already has a vacancy rate of 20pc, then I am probably destroying wealth.
Adam Smith taught us that real wealth comes not from piles of gold or their modern-day equivalent, the foreign exchange reserves amassed from a profitless succession of current account surpluses.
Rather, Smith suggests that real wealth is founded on the skills and productivity of a country's citizens. This is the central concern regarding the sustainability of the Asian economic model. Power without profit can prove ephemeral. This is an axiom the Japanese are all too familiar with. We cannot say we have not been warned.
Here, My Dear (expanded 2CD edition) (Japanese paper sleeve edition) - Marvin Gaye
CD 2CD gatefold - Motown/Universal (Japan)
Wonderful stuff --it was initially a commercial failure, while receiving some critical favor from music writers. However, critical recognition of the album has improved significantly following further examinations by critics and compact disc-reissues. In 2003, the album was ranked number 462 on Rolling Stone magazine's list of the 500 greatest albums of all time
This is the legendary two-record set that Marvin wrote and recorded as an alimony payment to his ex-wife Anna Gordy
(the story's pretty long, and you can get into it here http://en.wikipedia.org/wiki/Here,_My_Dear-- suffice it to say that when stars get a divorce, watch out!) Although the album was thought of as a no-brainer quickie at the time -- and predicted to fail so that Anna wouldn't get any cash from it -- the record is an extremely well-crafted one, filled with extremely personal songs that also have a warm soulful finish, in the style of Marvin's work on the LP I Want You (which is kind of a nice bookend to this one -- as it was an extended love poem to the young girlfriend that caused him to split up with Anna!) Hard and soulful, the record's a searing testimony to the relationship between Marvin and Anna, and a painful document of the troubles between them-- set to some mellow grooves that are easily some of Marvin's greatest of the 70s! The set's filled with great "lost" Marvin Gay songs, too -- like "Sparrow", "When Did You Stop Loving Me", "Anger", "You Can Leave, But It's Going To Cost You", and "Time to Get it Together". Expanded CD features the famous 12" instrumental version of "A Funky Space Reincarnation" -- plus a full set of 12 bonus alternate mixes produced by the likes of Mocean Worker, Easy Mo Bee, Leon Ware, Marcus Miller, Prince Paul, Bootsy Collins, Slaam Remi, and The Randy Watson Experience -- including "Anger (alt extended)", "Here My Dear (alt mix)", "Time To Get It Together (alt extended mix)", "Falling In Love Again (alt version)", "I Met A Little Girl (alt version)", "Sparrow (alt version)", and "Anna's Song (inst -- alt version)". (SHM CD pressing!)
Robert Citron: The man who brought California to its knees with 292% leverage.
In 1994, Robert Citron was Treasurer-Tax Collector and the only Democrat to hold office in Orange County, California. Through a series of highly-levered deals that included repo agreements and floating rate notes, Citron was able to at one point achieve leverage of 292%. The funds he managed were worth around $8 billion and if interest rates went up, he stood to lose big time due to his collateral which consisted almost primarily of US Treasury bonds.
Well guess what? Interest rates rose and as a result, Citron lost Orange County lost a boatload of money. From Wikipedia:
"The county's finances were not suspect until February 1994. The Federal Reserve Bank began to raise US interest rates, causing many securities in Orange County's investment pools to fall in value. As a result, dealers were requesting extra margin payments from Orange County. These extra margin payments were funded in part by another bond issue made by Orange County; the size of that bond issue was $600 million. However, this fix proved to be only temporary. In December 1994, Credit Suisse First Boston (CSFB) realized what was going on and blocked the "rolling over" of $1.25 billion in repos ("rollover" essentially means issuing of another repo when the previous one ends, but, at the new prevailing interest rate).
At that point Orange County was left with no recourse other than to file for bankruptcy."
Late last year, we created a presentation on some of the greatest trades of all time. It featured men who had achieved billions of dollars through their financial aptitude, brilliant investment strategies, and some luck.
However, with every winning trade comes a loss to another party, and today we focus on... the losers.
Here are the individuals and institutions that lost hundreds of millions, to billions, of dollars. All by letting one group or individual gamble with their money.
Be it excessive leverage, poor decision-making, or outright illegal activity, this is a story of epic failure.
Robert Citron: The man who brought California to its knees with 292% leverage.
In 1994, Robert Citron was Treasurer-Tax Collector and the only Democrat to hold office in Orange County, California. Through a series of highly-levered deals that included repo agreements and floating rate notes, Citron was able to at one point achieve leverage of 292%. The funds he managed were worth around $8 billion and if interest rates went up, he stood to lose big time due to his collateral which consisted almost primarily of US Treasury bonds.
Well guess what? Interest rates rose and as a result, Citron lost Orange County lost a boatload of money. From Wikipedia:
"The county's finances were not suspect until February 1994. The Federal Reserve Bank began to raise US interest rates, causing many securities in Orange County's investment pools to fall in value. As a result, dealers were requesting extra margin payments from Orange County. These extra margin payments were funded in part by another bond issue made by Orange County; the size of that bond issue was $600 million. However, this fix proved to be only temporary. In December 1994, Credit Suisse First Boston (CSFB) realized what was going on and blocked the "rolling over" of $1.25 billion in repos ("rollover" essentially means issuing of another repo when the previous one ends, but, at the new prevailing interest rate).
At that point Orange County was left with no recourse other than to file for bankruptcy."
Jerome Kerviel: Derivatives arbitrage totaling over $60 billion
Kerviel made headlines last year as the trader at "a french bank," which ended up being Societe Generale, He lost approximately $6.5 billion just like Leeson and others in this list through arbitrage of equity derivatives. Unauthorized trades totaled as high as $66.7 billion. Kerviel was ultimately charged with creating fraudulent documents and making attacks on an automated system.
Nick Leeson: Wiped out the world's oldest bank, Barings
Leeson is most likely the most popular guy on the list. He started his career trading derivatives at Barings Bank and was eventually moved to Singapore where he enjoyed a lavish lifestyle and made plenty of money. That is, because he hid mounting losses in a special account known as the "five eights" account. He was eventually caught and sentenced to five years in a Singaporean prison where he acquired cancer and his wife left him.
Tim Geithner: Plowed $6.6 billion into a dead, unpopular automaker
Consider this: when was the last time Chrysler made a car you would actually buy? I'm dead serious. Who buys a new Chrysler, excluding the Jeep brand? Treasury Secretary Tim Geithner must not have thought of this when he wrote Chrysler a check for $6.6 billion to keep the company afloat via a new company.
This isn't the first time Chrysler has needed help. In 1979, then-President Jimmy Carter approved a $1.5 billion loan package for the automaker called the Chrysler Corporation Loan Guarantee.
Since 2009, Chrysler has yet to fully recover and continues to be a money-losing business. Kyle Bass once said that this country needs to consolidate its auto industry. There is no longer room for three major players and perhaps, not even two. Ford will stick around, but it remains to be seen if Chrysler and GM can survive despite their divine intervention.
John Rusnak: Lost $691 million and thousands of jobs trading FX
Rusnak was a currency trader at Allfirst Bank who placed bets he couldn't handle. He was sentenced to 7.5 years in prison for bank fraud and lost Allfirst a total of $691 million. As a result, Allfirst was sold by parent company AIB Group to M&T Bank. Over 1000 employees lost their jobs as a result of the case.
Joseph Jett: The hacker who lost it all
After GE purchased investment firm Kidder Peabody, it ended up finding out the company was more trouble than it was worth. Joe Jett, an MIT and Harvard Business School graduate, worked for Kidder in its fixed income department. He exploited a weak computer system to emulate trades to appear as if he was making sums of money. He appeared to have made $264 million when in reality, he had $75 million in losses that he covered up.
After becoming a rising star in the company, he was fired for reportedly causing over $250 million in losses according to then-GE CEO Jack Welch. As a result, the SEC charged him with record-keeping violations and ordered him to forfeit $8.2 million in bonus pay in addition to a $200,000 fine.
John Meriwether: The hedge fund that almost blew up the entire global economy.
This story is one that's appeared in many a book about finance. It goes something like this:
Back in 1998, John Meriwether's hedge fund, Long-Term Capital Management, had levered up 100:1 on Russian bonds. Russia defaulted and as a result, the fund lost $4.8 billion in a matter of months. A consortium of Wall Street banks was brought together by the New York Fed in order to bail out the hedge fund and save the economy. Firms like Goldman Sachs and Credit Suisse were all forced to post hundreds of millions of dollars to keep the firm afloat. Over $1.9 billion in principal was completely wiped out, making Meriwether the laughing stock of The Street.
Yasuo Hamanaka: Attempted to corner the copper market and lost
This Japanese copper trader used to be employed by the Sumitomo Corporation, which was one of the larger trading firms in Japan. Back in 1996, Mr. Hamanaka attempted to corner the copper market and was unsuccessful. At stake? $1.8 billion in authorized trading with losses as high as $2.6 billion. He was sentenced to eight years in prison and was released in 2005.
Andy Fastow: Enron's CFO Cooks The Books, Funnels Money, And Cheats His Way To Riches
The downfall of Enron will forever be known as one of the greatest crimes (and tricks) in modern finance. As Enron's Chief Financial Officer, Fastow was responsible for unloading balance sheet debt into special investment vehicles, including the famous JLM and Raptor vehicles. He also set up off shore entities, directed traders on how they should make money, and lied to investors all in the name of Enron.
When the government went after Enron, he was able to cop a plea agreement that required him to serve a maximum 10-year prison sentence and forfeit $23.8 million in assets. He got six years and is awaiting release in 2011. His losses? Billions of dollars, wiping out shareholders completely, and costing thousands their jobs.
Peter Young: 80,000 investors get cheated
Young was a fund manager at Deutsche Morgan Grenfell (DMG) and had access to quite a bit of capital. He was known for making big, speculative bets in European markets. He set up shell companies so that he could circumvent financial regulation and place big bets on specific companies. After these bets, regulators came looking for answers and trading was shut down temporarily. Parent company Deutsche Bank was forced to offer DMG a $300 million cash infusion, only to have $400 million withdrawn from its funds in the ensuing weeks.
DMG was forced to pay a $1 million fine and investors profits were cut short after the bank announced to 80,000 investors that money was lost due to trading irregularities. Together, the three European funds Young managed were worth a combined $2.5 billion.
Bernard Madoff: The greatest Ponzi scheme of all time
You know the story by now, so let's review:
Former head of NASDAQ starts up Madoff Securities in mid-1980s.
For years showed investors great returns, told them to keep their money in the fund.
Turned out he didn't have anywhere near as much money in the fund as he claimed he did, bilked investors out of billions when it was discovered he was running a Ponzi scheme.
Goes to jail for the rest of his life, assets and cash divested to claimants in case.
New York Post has a field day with its headlines.
David Lee: An explosive natural gas play
Image: Wikipedia
Lee, a natural gas trader for Bank of Montreal, ended up losing his bank $237 million due to his trading in natgas derivatives. He originally lost up to $853 million using a scheme to disguise his losses - a recurring theme in our presentation.
"Lee overvalued the positions on BMO's books by regularly recording inflated values that were then purportedly validated by Optionable Inc," the SEC suit said.
It said the three Optionable traders "schemed with Lee to have Optionable simply rubber-stamp whatever inflated values Lee recorded."
Somali Pirates Say They Are Subsidiary of Goldman Sachs
Could Make Prosecution Difficult, Experts Say
NORFOLK, VIRGINIA – Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs.
There was an audible gasp in the courtroom when the leader of the pirates announced,
“We are doing God’s work. We work for Lloyd Blankfein.”
The pirate, who said he earned a bonus of $48 million in dubloons last year, elaborated on the nature of the Somalis’ work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted.
“We were functioning as investment bankers, only every day was casual Friday,” the pirate said.
The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the more relaxed regulations governing bankers as opposed to pirates, “plus to get our share of the bailout money.”
In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law.
“There are lots of laws that could bring these guys down if they were, in fact, pirates,” one government source said. “But if they’re bankers, our hands are tied.”
The Letter/Neon Rainbow is an album by American Blue Eyed Soul band Box Tops, released in 1967. Following The Letter reaching number one on the singles charts, The Letter/Neon Rainbow was quickly assembled for a follow up. The album peaked at number 87 on the Billboard Pop Albums charts in 1968. Most of the backing tracks were performed by session musicians, however the original group played the hit The Letter. The session musicians likely consisted of guitarists Reggie Young and Bobby Womack, bassist Tommy Cogbill, pianist and organist Bobby Emmons, and drummer Gene Chrisman. Although lead singer Alex Chilton (16 at the time) had already written a number of songs, none were included on the Box Tops' debut LP, perhaps due to his relative inexperience with songwriting. Chilton later had a significant songwriting role in the cult power pop band Big Star, and after the dissolution of the group continued to develop his career as a solo artist. The Letter/Neon Rainbow was re-released in 2000 on the Sundazed label with four additional tracks. These included the mono single versions of The Letter and Neon Rainbow, the 1969 single Turn on a Dream and a previously unreleased track Georgia Farm Boy.
01 The Letter
02 She Knows How
03 Trains and Boats and Planes
04 Break My Mind
05 A Whiter Shade of Pale
06 Everything I Am
07 Neon Rainbow
08 People Make the World"
09 I'm Your Puppet
10 Happy Times
11 Gonna Find Somebody
12 I Pray for Rain
13 Turn on a Dream
14 The Letter
15 Neon Rainbow
16 Georgia Farm Boy
The weekly chart ADX has begun falling and now is below its 20's which is confirming the absence of trend in this market. Though both the Stochastic and the MACD remain negative, price has initially fallen below the lower Bollinger Band which would make a great short signal, but it managed to closed back up above it. Since the weekly chart ADX is telling us this market is "un-tradable", so we would have to concentrate on the daily chart.
As almost always in a listless market, there will be many false breakups or breakdowns. Last week, the market gaped down below its recent range as marked out by 2 horizontal lines but with no follow through action. And on last Friday, the market again reversed and went back and closed above the lower Bollinger Band by which you should closed off short positions. During the breakdown on last Monday, the D- did not break above its prior peak, thus offering no complimentary confirmation on the down move.
As at present, the immediate situation tends to put back the favor to the bulls as the Stochastic has crossed up and the MACD has also followed suit. For the more bravehearted traders, you may engage some long positions and keep 2494 as stop. As the ADX has begun to drop, indicating the prior down cycle may has ended, but the D- still dominate over the D+, you would want to be careful with long trades.
Since there are contradicting readings in the daily and weekly chart, so you should keep your trading time parameter short term. Pay attention to the Stochastic, be ever ready to take profit or cut loss when it turns. We would have to wait again to see whether this will develop into something big or would this be just another small of those 3-5 days kind of trades.
This market is caught in another one of those range bounding situation. Prices is contained within the upper and lower Bollinger Band which the falling ADX is offering their confirmation. While the MACD continues to fall with the gap with its moving average is still widening, the Stochastic has already staged a positive cross up. With 2 contradicting indicators, it is again offering another confirmation to a sideway market.
If you are still holding onto the previous long contracts, then place stop at 1346. At this time, you should not trade big as there is no trend yet. Use the red horzontal line I have marked out on the D+ recent peak, any D+ or D- break above that level would warrant for new or additional decision. The Bollinger Band has started to tighten and the current price consolidation are telling us this market is preparing itself for a sizable move is ahead. So you should sit up and keep both your eyes wide open.
The weekly chart flat ADX is confirming the lack of trend in the daily chart. The Stochastic remains positive and rising. The MACD, though positive, maybe is making its turning soon. But as long as price maintains above the upper Bollinger Band, I cannot find any concretely bearish about the chart.
So you can either maintain your earlier shorts positions until it hits the stop or you may want to decide close them off until another a more solid signal appears on the scene. But overall, the earlier discussed bearish bias should be maintained unless the divergence is erased.
其次是政治上對自由的扼殺。沒有言論自由、學術自由、表達自由就沒有創意。愛爾蘭作家 George Moore( 1852-1933)說過一句話:「你畫多糟沒有關係,只要不和別人糟得一樣。」創意來自個人自由的獨創性,多糟的創意也是獨創,也值得鼓勵。而在沒有自 由的社會,北韓十萬人演出的《阿里郎》也是不具創意之作。
LOS ANGELES, April 21 (Reuters) - Satirical animated TV show "South Park" beeped out the words Prophet Muhammad and plastered its Wednesday episode with the word "CENSORED" after being issued a grim warning by a U.S. Muslim group.
The irreverent comedy show on Comedy Central also substituted a controversial image seen last week of the Prophet Muhammad in a bear outfit with one of Santa Claus in the same costume.
It was not immediately clear if the move was a bid to tread carefully following the warning against the "South Park" creators, or if they were poking fun at the fuss.
The little-known group RevolutionMuslim.com posted a message on its website earlier this week warning creators Matt Stone and Trey Parker "that what they are doing is stupid and they will probably wind up like Theo Van Gogh for airing this show."
The website posted a graphic photo of Van Gogh, a Dutch filmmaker who was killed in 2004 by an Islamic militant over a movie he had made that accused Islam of condoning violence against women. It also posted a link to a news article with details of a mansion in Colorado that Parker and Stone apparently own.
Most Muslims consider any depiction of the founder of Islam as offensive.
The website warning followed the first in a two-part episode of "South Park" a week ago in which Prophet Mohammad was depicted in a bear outfit.
"South Park" has a history of biting satire against politicians, celebrities and the media. The two Colorado filmmakers are known to often work on "South Park" until just before they air, enabling them to react to current events.
In Wednesday's new episode, Jesus Christ was depicted watching pornography and Buddha was portrayed snorting cocaine.
The head of Revolution Muslim, Younus Abdullah Muhammad, 30, defended the Web posting by his group.
"How is that a threat?," he told Reuters earlier on Wednesday. "Showing a case study right there of what happened to another individual who conducted himself in a very similar manner? It's just evidence."
An ex-business owner who turned private trader applying technical analysis to trade major FX pairs and indies, commodities and KL futures. He used to write a weekly column in a Chinese daily on local futures markets. A self confessed stern supporter of the Far Right and nothing apologetically about it.
Tun Marvin is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities you should buy or sell for themselves. I may hold positions in the financial instruments discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading all financial instruments. I assume no responsibility or liability for your trading and investment results. Factual statements on this blog site are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these postings will be profitable or that they will not result in losses. Past results of any trading systems published are not indicative of future returns by that systems, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of discussions are provided for informational and educational purposes only and should not be construed as investment advice. All set-ups are not solicitations of any order to buy or sell.