LSE - Yet another system crash

(Financial Times 2009-11-27) The London Stock Exchange yesterday suffered the double humiliation of being hit by a three-hour trading outage and seeing a sharp drop in its share price as investors fretted over the status of its largest, Dubai-based shareholder.

The halting of its trading system, caused by what the LSE said was "connectivity problems" was the biggest since its system collapsed for eight hours over a year ago.

[...]

The LSE's share of trading in FTSE 100 stocks has fallen below 60 per cent as nimbler platforms such as Chi-X Europe, Turquoise and US-based BATS Europe have offered cheaper and faster trading.

M Rolet said: "We regret the inconvenience that today's disruption to trading has caused for our clients.

"Having resolved the immediate issue, we are working hard to ensure this doesn't happen again."

The LSE recently bought MillenniumIT, a Sri Lankan trading technology company whose systems will replace the LSE's current trading systems early next year.

The LSE said "connectivity issues" had affected two of the "gateways" into the exchange's order books that are used by traders. It put the market into an "auction" mode, where trades are left but cannot be executed.

However, it was not clear whether trading had migrated to rival platforms such as Chi-X Europe and BATS Europe as a result of the outage.

[...]

However Chi-X, controlled by broker Instinet, accused the LSE of preventing orders shifting to other platforms by imposing the auction.

I have been posting about the LSE technology issues for quite some time now, and people interested in my take on that, along with the long brewing story of they failure can read the previous posts below:

• 2009-11-09 Technical incident on the London Stock Exchange (again!)
• 2009-10-07 LSE buys MillenniumIT, moves to Linux/Solaris
• 2009-07-10 Quick follow-up on the LSE - Microsoft fiasco
• 2009-07-05 LSE-Microsoft: what was meant to happen happened

My short answer is that their problems does not result from technological issues but from complete lack of competencies when it comes to managing technology projects and systems. I do hope for them that their acquisition of this Sri Lankan company will solve their issues, but it's unsure for me that actually is going to happen. Wait & Pray

Mission accomplished

As I've mentioned a couple of times on this blog, I have been very busy writing a book for the past many months, and I'm happy to announce that it's finally completed and will get published in January by Pearson.

I'm not going to advertise it here, but wanted to share the happiness and relief that comes with the completion of such a task. Writing a book is really an involving task, and being committed full time on other things does not leave a lot of room for sleeping.

I shall spend the next few days catching up with the markets (lots of news since last Wednesday!) and write longer/deeper posts hopefully.

Champagne in the fridge for tonight as well!

Prime fixed-rate loans are the new subprime

The Mortgage Bankers Association released the most comprehensive report available on third quarter delinquencies. Here some quotes from that report:

The delinquency rate for mortgage loans on one-to-four residential properties rose to a seasonally adjusted rate of 9.64% percent of all loans outstanding as of the end of the third quarter of 2009. The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972. The combined percentage of loans in foreclosure or at least one payment past due was 14.41% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures (on a quarterly basis) from 1.07 percent to 1.42 percent,” said Jay Brinkmann, MBA's Chief Economist.

Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures. The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due but not yet in foreclosure. The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans.

The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve. The seriously delinquent rate, the non-seasonally adjusted percentage of loans that are 90 days or more delinquent, or in the process of foreclosure, was up from both last quarter and from last year. Compared with last quarter, the rate increased 82 basis points for prime loans (from 5.44 percent to 6.26 percent), and 216 basis points for subprime loans (from 26.52 percent to 28.68 percent).”

(From Hussman's weekly market commentary)

Hacker publishes hard data proving global warming is fabricated

Mish is relaying yet another amazing story : some hacker or insider have broken into The University of East Anglia's Climatic Research Unit (CRU) and downloaded 156 megaybytes of data including extremely damaging emails, we now know that data supporting the global warming thesis was completely fabricated.

The emails show that the scientists who were receiving hundreds of millions of dollars worth of grants to conduct those researches were massaging data to obtain the results they wanted and have been deceiving the whole planet with their false research.

Mish has published dozens of those emails, and it's very much worth having a read through them.

Economists Oppositing Fed audit are on Fed Payroll

Huffington Post has published a report showing that the economists opposing the Fed audit are more or less directly working for the Fed and hence, for the least we can say, a very strong conflict of interest when it comes to Ron Paul's Audit the Fed bill. It's a wonderful world!

As the debate over an audit of the Federal Reserve intensifies in the House, one camp is trotting out eight academics that it calls a "political cross section of prominent economists."

A review of their backgrounds shows they are anything but.

In a letter to the House Financial Services Committee earlier this month, all eight wrote that they support the type of amendment now being introduced by Rep. Mel Watt (D-N.C.). Watt's approach purports to increase Fed transparency while it actually would tighten restrictions on any audits that could go forward.

The letter was sent around Wednesday by Watt's staff to members of the committee in advance of a vote scheduled for Thursday.

Watt's measure is in competition with an amendment cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), which would repeal the restrictions that Watt leaves in place.

But far from a broad cross-section, the "prominent economists" lobbying on behalf of the Watt bill are in fact deeply involved with the Federal Reserve. Seven of the eight are either currently on the Fed's payroll or have been in the past.

The Fed connections are not outlined in the letter sent around to committee members on Wednesday, but are publicly discernible through a review of their resumes, which are all posted online.

In September, Huffington Post reported that the Federal Reserve has accomplished a soft form of effective control over the field of monetary economics simply by employing -- and being the means for career advance -- for an overwhelming proportion of the discipline.

Now that the Fed is locked in a legislative battle on the Hill, it can call on those economists to give their "unvarnished" opinions to lawmakers.

The connections that the seven economists lobbying Congress have to the Fed are not incidental and four of them maintain current positions.

Let's run the traps:

Frederic Mishkin is a former board member, having served from 2006-2008. His career at the Fed stretches back to 1977 and he currently holds two positions: one as a member of the Center for Latin American Economics at the Federal Reserve Bank of Dallas, where he's been since 1996; and another as an academic consultant to the Federal Reserve Bank of New York, where he's been since 1997.

Anil K. Kashyap is currently a consultant with the Federal Reserve Bank of Chicago, a position he's held since 1991. He's also on the economic advisory panel of the New York branch and was a consultant there in 2003. He was a visiting scholar at the division of monetary affairs at the Board of Governors of in1994, 2001 and 2005 and at the division of international finance in 1997.

Pete Klenow was a visiting scholar at the Federal Reserve Bank of Minneapolis from 1994-1999, 2003-2004, 2006 and again this year. From 2000-2003 he was also a senior economist at that branch. He's currently a visiting scholar at the Federal Reserve Bank of San Francisco, a position he's held since 2005. He was a visiting scholar at the Federal Reserve Bank of Kansas City from 2004-2006.

Ricardo J. Caballero was a visiting scholar at Federal Reserve Bank of Boston from 2004-2005 and a visiting scholar at the Federal Reserve Board on multiple occasions.

Robert Hall was a research assistant at the Board of Governors of the Federal Reserve System from 1982-1984 and an economist there from 1988-1991.

Thomas Sargent was an adviser to the Federal Reserve Bank of Minneapolis from 1981 to 1987 and continues to write frequently for Fed-sponsored journals.

Micheal Woodford is currently on the Monetary Policy Advisory Committee of Federal Reserve Bank of New York, a position he's held since 2004. He's also listed as a consultant to the research department there dating back to 2005. In the past, he's been a visiting scholar at the Board of Governors and various regional branches in 1987, 1993-1998 and 2000-present, often at multiple banks in the same year.

Economists with Fed connections strongly reject the notion that being paid by the bank influences their thinking. But Robert Auerbach, who spent years investigating the institution and is the author of "Deception and Abuse at the Fed", says that those economists are simply in denial. "If you're on the Fed payroll there's a conflict of interest," says Auerbach.

The tie between the economists backing Watt's amendment and the Fed doesn't by itself mean that it's bad policy, but it does make clear which amendment is favored by the Federal Reserve. If there's still any doubt, the e-mail from Watt staff notes that former Fed chairs Alan Greenspan and Paul Volcker also support a version of it.

Meanwhile, a broad coalition of liberal organizations is lining up behind the Paul-Grayson amendment, which also has the backing of most Republicans on the committee.

The AFL-CIO and other labor groups, as well as Americans for Financial Reform signed on to a letter posted Wednesday calling for committee members to back the Paul-Grayson approach.

"In creating the Federal Reserve nearly 100 years ago, the Congress envisioned a central bank free from political pressure. But the structure that may have once ensured independence now appears to put the Fed much closer to the financial industry than the American people, who deserve to know who the beneficiaries are," reads the letter.

The Fed, in other words, is not presently independent of political pressure, but that pressure comes from Wall Street banks rather than from the American people through their elected representatives.

It's a distinction that the note from Watt's staff on Wednesday subtly acknowledges, by focusing on legislative and executive branch pressure, rather than financial industry influence. The Paul-Grayson amendment, it warns, "would place the United States well outside of the mainstream of industrialized nations that shield their central banks from political interference by the Legislative and Executive branches of government, with potentially disastrous results to the U.S. economy."

Mish first posted about this HF report, I am just relaying the message.

Congressman Kevin Brady asks Treasury Secretary Timothy Geithner to step down

This is a fantastic video that shows how much politicians lack any sense of honor and integrity.

Tim Geithner, who has been the previous Chairman of the Federal Reserve Bank of New York proclaims that the crisis has had nothing to do with his actions (or inactions, incompetence, lack of understanding of how the real world works) but that him and Obama managed to save the US economy.

As usual, if something goes wrong, it's not their fault, if something goes well, it's thanks to their skills and talent. Kind of revolting and disgusting.

Wasn't Geithner aware of his responsibilities and duties? Let's see what they were:

Wikipedia on the Fed: Its duties today, according to official Federal Reserve documentation, fall into four general areas:

1. Conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system, and protect the credit rights of consumers
3. Maintaining stability of the financial system and containing systemic risk that may arise in financial markets
4. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system

Link to the YouTube video.

The Wave of Protectionism is rising

MacroMan points to several interesting articles showing that Brazil, Taiwan, South Korea and Indonesia are following the path of the US and the UK (and probably many others I haven't spotted yet) into protectionism. This is a trend I have been forcasting for quite some time, and which is going to make things worst for the economy and the people in general:

(FT - 2009-10-20) Brazil’s currency and stocks fell sharply on Tuesday after the government imposed a 2 per cent tax on foreign portfolio investments to stem the rapid rise of its exchange rate.

(Reuters 2009-11-19) - Indonesia's central bank is "studying" possible limits on foreign ownership of short-term debt, but has no plans for controls on capital or the currency.

(Asian Business - 2009-11-19) South Korea announced measures on Thursday aimed at tightening control over foreign exchange liquidity to make the banking system less vulnerable to the capital flight seen during the financial crisis.

(WSJ 2009-11-10)--Taiwan's financial regulator said Tuesday it is banning foreign investors from putting money in time deposits. The ban is effective immediately, and foreign investors can't extend their existing time deposits, the Financial Supervisory Commission said in a statement.

Other related posts here.

1 in 6 Americans has trouble putting food on the table

This is a sad but very real problem in the US now: 15% of Americans have trouble the most basic need of feeding. This unfortunately not surprising though, as we are in the middle of the Greater Depression.

And of course, Obama, following exactly the path of Franklin D Roosevelt, is calling for action. He has already pushed the country that was on the edge of the precipice. Now, as did FDR 80 years ago, he will make sure that the Depression last many many years.

NEW YORK (CNNMoney.com) -- The number of Americans that have trouble putting food on the table shot up last year in an unprecedented spike to a record 17 million households, the government reported on Monday.

The Department of Agriculture report, which has been released annually since 1995, said the number of Americans that were hungry rose to 14.6%. In 2007, 13 million households or 11.1% of Americans had trouble getting enough food.

The one-year jump is all the more significant, given the number of hungry Americans had never been higher than 11.9% since these surveys began.

Of the near-15% of the nation that couldn't secure enough food last year, the USDA said one-third of them had "very low food security," meaning they reduced the amount that they ate or disrupted their eating patterns during the year. That group made up 5.7% of all U.S. households, which was also a record high.

More than 500,000 households that scaled back the amount that they ate were households with children, making up 1.3% of all U.S. homes with children.

The USDA said the main cause of hunger and food insecurity in the country is poverty.

Obama's call to action. President Obama called the report "unsettling," and said more needs to be done.

John Paulson to invest $250 million in his new gold fund

Well, nothing more to add to this Bloomberg report:

Nov. 18 (Bloomberg) -- Paulson & Co., the hedge-fund firm run by billionaire John Paulson, is starting a gold fund that will invest in mining companies and bullion-related derivatives, a person familiar with the plan said.

Paulson will invest as much as $250 million of his own money in the fund, scheduled to begin Jan. 1, according to the person, who declined to be identified because the information isn’t public. John Reade, the former metals strategist at UBS AG in London, will join Paulson & Co. in mid-January, the person said. He was originally going to join Credit Suisse, the bank said Oct. 29. A spokesman for Paulson declined to comment.

Official US outstanding debt above $12 trillion

Just seven months ago, I reported that the total debt of the US had reached $11 trillion. That was in April 2009.

Well, this official figure just passed the $12 trillion milestone on Monday: $12,031,299,186,290.07 and counting... Seems to be about $300,000 per US citizen...

Mauritius Buys 2 metric tons of IMF Gold

Even tiny little countries and paradise-islands like Mauritius are dumping their dollars for gold.

Interestingly, the central banks trend seems to have completely reversed : for the past 20 years they were the major source of gold supply on the markets while they were net sellers (selling at rock bottom prices!) and now, they are becoming net buyers of gold (when the prices are at historical levels!). This is obviously very bullish for gold, even though it would expect a decline when the stock market starts to implode.

Nov. 17 (Bloomberg) -- Mauritius bought 2 metric tons of gold from the International Monetary Fund, underscoring a drive by central banks to boost holdings as the precious metal trades near a record and the dollar slumps.

The $71.7 million sale to the Bank of Mauritius was based on market prices on Nov. 11, the IMF said in an e-mailed statement yesterday. The Reserve Bank of India paid $6.7 billion for 200 tons from the IMF, according to a Nov. 2 statement.

Gold has surged this year as the U.S. currency declines and investors seek to protect their wealth. Emerging-market nations, which have amassed stockpiles of foreign-currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets.

“Investors at different levels feel more comfortable” with some gold in their portfolio, said Albert Cheng, Far East managing director at the World Gold Council.

The purchase more than doubles the amount of gold held by the Mauritian central bank to 5.69 percent of its total foreign exchange reserves, from 2.34 percent at the end of October, the bank said in an e-mailed statement today. The acquisition partially reverses a decline from the 13 percent of reserves that gold accounted for on Dec. 31, 1979.

[...]

The Mauritian purchase is “another signal that emerging- market central banks are looking to increase their foreign- exchange allocation in gold,” Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., said from Sydney.

Next step, China buying the remaining 200 tons of gold on sale at the IMF?

Keynesian Clown Krugman says socialism in needed in the US

“When I picked up my newspaper yesterday, I thought I woke up in France. But no, it turns out socialism is alive and well in America.”, Senator Jim Bunning, Republican of Kentucky. This was in July 2008, when Hank Paulson wanted to take $700 billion worth of wealth from the US Citizens to give it to Wall-Street.

Today, Krugman, is suggesting that the US Government introduces time-sharing at jobs along with subsidies for companies hiring. Oh and of course, he think the previous many stimuluses and bailouts (worth many trillions of dollars, equivalent of handing $100,000 to each person living on the US soil) was not enough :

Just to be clear, I believe that a large enough conventional stimulus would do the trick. But since that doesn’t seem to be in the cards, we need to talk about cheaper alternatives that address the job problem directly. Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce the German-style job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.

The point is that we need to start doing something more than, and different from, what we’re already doing. And the experience of other countries suggests that it’s time for a policy that explicitly and directly targets job creation.

This reminds me of the massive failure of the 35-hour-work week in France, along with the all the subsidies the French socialist goverments are giving to companies, while structural unemployment has never really declined and has been at about 15% for decades. But then, maybe calling it German will make it work?

Bears are giving up

The fact that markets have been rising for no reason but irrational exuberance and the belief that the V-shaped recovery is going to bring back jobs and profits to record levels (despite hard data suggesting exactly the opposite) shouldn't surprise anyone who has studied behavioral finance or Elliott Wave theory.

Despite calling a false top a couple of months ago, and getting hurt on my shorts, I still believe Mr. Market is just giving us a formidable opportunity to sell it at highly overvalued price all the securities we want. The pain is less that many bears because I have some longs and hold a lot of precious metals.

This doesn't prevent me from getting annoyed by this straight move up but recently, a couple of the most confident shorters that I've been following seem to be losing patience (who wouldn't!) and getting more annoyed than ever:

Mike, the Sovereign Speculator has not been posting much for the past couple of months...

And Tim Knight, from Slope of Hope is expressing his feelings:

Yesterday

I'm in low spirits right now. I work very hard on my analysis. There are times that this analysis leads to a bonanza, and there are times - like now - where I feel like throwing darts would be more effective. It is profoundly unrewarding to spend countless hours analyzing, preparing, and trading with nothing to show for it.

Today, many assets tagged new highs (either lifetime or for the past year+) - - such as the Dow 30, the S&P, and gold.

Recently, it seems like any time a flicker of hope appears, the bulls just ramp things right back up again. The only silver lining in this entire scene is that the Russell, which is really my mainstay right now, isn't making new highs. And that's cold comfort indeed

Today:

I really twisted myself into an emotional knot yesterday. I kept asking myself: "What's wrong with you? Why are you being so feeble?"

The stone-cold fact of the matter is this: I look at a lot of charts, and maybe I'm just too blinkered to see them, but I have found virtually no compelling bullish setups, whereas the bearish setups seem like manna from heaven. In my experience, the kinds of items I am short are just the kind that tumble swiftly with any market weakness.

The problem is that for the past eight days, there hasn't been any lasting weakness.

But I am not "running scared." At the moment, I have 43.79% of my cash buying power deployed into positions, 100% of them short, with one position - XLU - being, the largest non-leveraged position I've ever had in my life.

Obviously I would hope to look back on this era at market history and pat myself on the back for being stalwart. Of course, I could also look back at this time as simply being right in the middle of an inexorable grind to 50,000 on the Dow. (Kidding, kidding........)

As I'm typing this, two hours before the opening bell, it at least seems that the /ES and EUR are pointing in a good direction. But what I certainly know from recent experience is that these - - errr - - "red shoots" can vanish swiftly.

My comment is: don't give up guys. The simple fact that you are so frustrated is quite telling on how the market is overstretched and how things can roll over sharply. I won't make any forecast though, as any forecast made by anyone has been proven wrong since June...

Robert Prechter at his very best

Gold Seek Radio hosted Robert Prechter about a couple of weeks ago, which in my opinion is the single best interview and speech I have heard from him.

He explains why the markets are going to fall, including commodities, silver and gold, why we are currently in a deflation that probably cannot be reversed after the biggest credit bubble in the history of mankind, that the dollar is going to rally for about 1 to 2 years while the equity and commodity markets collapse. He also mentioned that hyperinflation might happen, but only in many years.

I was so amazed by this interview that I've listened to it 3 times already and will probably listen to it a 4th time.

You can listen to the interview in mp3. Make sure you scroll down to 1:00:00 because Bob only appears at the very beginning of the second hour for about 30min.

Finally, the updated version of his magnum opus, Conquer the Crash, including material up to 2009 is finally available and shipping. You can order your copy from Amazon:

US	UK

Inflation or Deflation - 8

Bernanke is printing like a madman, and has so far added more than $1,000,000,000,000 in the global pool of dallars. We can see that the monetary base had kind of stabilized between $1.6 trillion and $1.8 trillion, but they have recently been printing even more. Just $200 billion, a drop in the bucket of what Bernanke is promising. That's what we call inflation (source: Fed).

Bernanke decided about 2 years ago to pay interest on the money that depositary institutions keep at the Fed. The fact that those institutions borrow the money at 0% from Bernanke and who then pays them to store it at the Fed doesn't seem to chock anyone. Nonetheless, it took about 2 years of accrued interest on those reserves, and the introduction of Mark-to-Fantasy to replace Mark-to-Market to recapitalize by 50% the banks. With the losses on Option-ARMs and CRE coming now, chances are that this chart is going to spike up very soon (source: Fed)

Notice that there is about $9 trillion worth of bank credit today, and that there were about $9.5 trillion a few months ago. Also look at the trend that has been broken. Credit moved from litterally nothing to about $10 trillion between 1975 and 2007. This broken trend is highly deflationary (source: Fed).

The phantom excess reserves of banks keeps growing.

Three reasons for that:

1. those reserves are not real as mark-to-market has been replaced by mark-to-phantasy
2. the money that banks have is deposited at the Fed where it stays liquid, risk free, and yet bring interest thanks to the good will of Bernanke
3. banks are not lending (and for good reasons!) to insolvent people and companies.

This is again, highly deflationary(source: Fed)
The two following charts are really the same one, but with different scales: the first is in nominal terms while the second percentage. It just shows how quickly the credit river dried out and credit contraction took place (source: Fed & Fed)

Related posts:

1. Inflation or Deflation - 1 (07/12/2008)
   
2. Inflation or Deflation - 2 (10/12/2008)
3. Inflation or Deflation - 3 (24/01/2009)
4. Inflation or Deflation - 4 (26/01/2009)
5. Inflation or Deflation - 5 (15/02/2009)
6. Inflation or Deflation - 6 (2009-07-14)
7. Inflation or Deflation - 7 (2009-09-11)

Have you met Kirby Daley?

This is the nice surprise of the day. I came accross discovering Kirby Daley while watching this video with Jim Rogers.

It's the first time I ever hear about him but his points are absolutely brilliant. He holds all the opposite points of view of Jim Rogers, and yet somehow, I think he is right. Jim Rogers thinks long term, but Kirby short terms points are that:

• we are in deflation (check)
• the dollar will rebound (check)
• commodities, including gold, will fall in value (check)
• the markets are toping (check)
• China is going to crash (check)

Also, he thinks that agricultural commodities are not such a great idea on the short term.
These videos are definitely worth watching.

Is the USD really undervalued?

This just another one of these random and meaningless real-life tests that I like to conduct every now and then.

The real-life value of a currency is what it's going to buy, and having leaved in the UK for too long now, I knew the GBP was highly overvalued compared to the EUR simply because everything that cost X pounds in the UK, cost X euros in the France (which is actually among the most expensive countries of the Eurozone).

I had been thinking about buying the G10 for quite some time, and then changed my mind and decided to hold off for an updated version. And it appears that the updated version just came out a few days ago : the Canon PowerShot G11.

Here's some prices grabbed on various Amazon web sites:




As you can see, $499 becomes £439!

Worse! Here are the recommended prices:

• $499
• €589
• £569
  

So, is the USD really going to crash in the short term? Has it lost a lot of value in the real-world? Does it buy you a lot less than what a Euro or a Pound would buy you?

Technical incident on the London Stock Exchange (again!)

Yet another major technical incident is currently affecting trading:

The London Stock Exchange Group is continuing to investigate an issue impacting our trading and information platforms.

This issue continues to impact 1/12 of London Instruments. An affected instrument list is provided here.

Customers should refrain from entering orders on affected stocks.

Customers should be aware that the trading of affected stocks will NOT be resumed this evening.

A closing auction will NOT take place for the affected stocks detailed above.

Closing price values for order book securities will be calculated manually and will be published in due course. No closing prices for the affected quote-driven securities will be provided tonight.

An update will be provided within 15 minutes.

According to the file they have published, more than 2000 instruments are currently affected by this issue.

I do not know if they have moved to their new system yet, thought it's likely to be still the good old TradElec. Even so, I had previously written that I did not think the new one would be the panacea :

[My comment: Yes, sure. I wouldn't bet too much on that neither. I hope they succeed, but I will follow this story, as the outcome is not so clear to me. Also, my experience is that it's very difficult to work with non-collocated teams. So if you add the time difference, culture clash, take over issues to the distance, the outcome is less than clear.]

Wait & Prey...

Related posts:
LSE buys MillenniumIT, moves to Linux/Solaris
Quick follow-up on the LSE - Microsoft fiasco
LSE-Microsoft: what was ment to happen happened

JPMorgan’s Dimon Hires His Father

OK, it's Saturday, I deserve some relaxation after all the depressing and horrifying news I've been reading and spreading around. So here's some late Saturday type of news:

Nov. 7 (Bloomberg) -- If Jamie Dimon ever needs fatherly advice, he can turn to his newest employee: Dad.

Theodore “Ted” Dimon, the 78-year-old father of JPMorgan Chase & Co.’s chief executive officer, quit Bank of America Corp.’s Merrill Lynch unit yesterday to join his son’s firm [...].

The elder Dimon and his five-member broker team will join Bear Stearns Private Client Services, a unit acquired by his son in the March 2008 takeover of the failed investment bank. He will report to Michael Lee, head of the unit’s New York office.

More in the full report.

Tent cities growing everywhere in the US

While Bush, Obama, Bernanke, Geithner are bailing out all the financial institutions and transfering trillions of dollars worth of wealth from the people to the bankers, tent cities are growing everywhere in the US and it's getting worse and worse everyday.

It's very sad, and even sadder if you think of all the people you could have helped with those $800 or $2000 billion. If they really had to take by force those billions from the people and spend it, there are a lot of better use than providing bonuses to fat cats on Wall Street.

If you thought the recession is over, think twice. We are already two years into the Greater Depression.



Other video reports worth watching here and here

Paul Tudor Jones turns bullish on gold

Babak at Trader's Narrative has posted a summary of Tudor Jones latest quarterly letter, where he explains that "gold is 20% undervalued over the next 24 months".

It's an interesting read, even though readers of my blog won't find much news here.

Gold is kind of overbought on the short run, as are the stock markets. The USD being deeply oversold, I would be surprised to see a reajustment with USD rising, stocks declining.

But... I wouldn't be surprised to the medium term (let's say a 6-18 month window), to strength in gold, irrelevant of what the USD is doing.

Fannie Mae files a $15.8 Billion claim in Lehman bankruptcy

It seems like Fannie Mae made every single mistake that was possible to make. And here's the latest one:

Nov. 6 (Bloomberg) -- Fannie Mae [...] said it has $15.8 billion in claims against bankrupt securities firm Lehman Brothers Holdings Inc. that it will at best partially recover.

“Based on Lehman Brothers’ financial condition, we believe we will only receive a portion of these claims,” Washington- based Fannie Mae said in a filing with the Securities and Exchange Commission yesterday. The announcement came as the company posted its ninth-straight quarterly loss, of $18.9 billion, and said it will need $15 billion more in federal aid.

This is the first time Fannie Mae has quantified its exposure to derivatives and trading agreements with New York- based Lehman, an underwriter of mortgage bonds that succumbed to the subprime home-loan crisis Sept. 15, 2008 [...]

Fannie Mae loses $19b in Q3, requests another $15b from Treasury and offers to buy back your home with tax-payer's money

You can see that things are improving... the US Government via the companies they created (Fed, Fannie, Freddie, FHA, etc.) managed to create the biggest credit bubble in the history of mankind.

The goal of Fannie and Freddie was to create "affordable housing". Not only was that a big failure with housing reaching historically high prices, but now, their unofficial role is to prevent house prices from declining.

From the financial results press release:

Fannie Mae reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. [...] As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency submitted a request for $15.0 billion from Treasury on the company’s behalf.
[...]
Total nonperforming loans in our guaranty book of business were $198.3 billion, compared with $171.0 billion on June 30, 2009, and $119.2 billion on December 31, 2008. The carrying value of our foreclosed properties was $7.3 billion, compared with $6.2 billion on June 30, 2009, and $6.6 billion on December 31, 2008.

From the Deed for Lease Program press release:

Fannie Mae is implementing the Deed for Lease™ Program under which qualifying homeowners facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender.
[...]
The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

Yet again, the government sponsored agency is tapping into the savings of people who behaved rationally and didn't take part in this credit binge to reward those who didn't. Here, they are rewarding the least possible category of people : those who do not even qualify for any other loan-workout solutions, such as modifications.

Also, old news, but still noteworthy:FHA Delays Fiscal Report

S&P 500's PER for October month end is 138

I have been posting about this since the greatest stock market bubble of all time began late 2008.

As of the 30th of October 2009, the PER of the S&P is 138. And I'm not talking about the Operating-PER, which is meaningless. I am talking about the actual profits of the 500 top cap public companies in the US. And I am talking official figures from Standard And Poor's. [update on the 2009-11-30: S&P have changed their web site and don't seem to report that number anymore. I will have to calculate it myself from now on...]

So basically, the previous month chart and analysis still apply:

Is that the final equity bubble? Are we close to the end? Nobody can know for sure, but the odds are highly skewed toward a major collapse in the equity markets.

At the current PER (about 140) the value of the stock market would need to be divided by 20 — or decline by 95% — to reach a normal bottom on a bear market (that would mean the S&P 500 trading at about 50 !) or the total earnings of the 500 biggest US companies need to rise by 2,000%. Or anything in between.

For example you should have a decline of about 50% if the US companies increase their earnings 10 fold (i.e. by 1,000%). This is how realistic the current market is.

Also note that all the "better than expected profits" and V-shaped recovery didn't help reduce the PER. The effect of smoke and mirrors won't last forever. It is going to crash down in an ugly way.

You can read the previous posts from this link.

Gold closes at record high with IMF selling 200 tons of gold to the Indian central bank

Nothing much to add. I predicted that China would buy IMF's gold, but I forgot about India!

According to the reports, India paid $6.7 billion for 200 metric tons, which is equivalent to $1042 per troy ounce. This is quite a good deal, as it would impossible to buy that amount of gold on the market without driving the price extremely high. On the flip side, this is also a great deal for the IMF, since it would have been impossible to sell those on the market without sinking the price of gold.

I'm guessing that China is now getting quite nervous and is probably looking into snapping the remaining 203 tons on sale...

Nov. 3 (Bloomberg) -- Gold jumped to a record after India’s central bank bought 200 metric tons of the metal from the International Monetary Fund, heightening speculation that there may be more official purchases.
[...]
The Reserve Bank of India paid $6.7 billion for the bullion, which it bought from Oct. 19 to Oct. 30. It was “the biggest single central-bank purchase that we know about for at least 30 years in such a short period,” said Timothy Green, the author of “The Ages of Gold.”
[...]

Peter Schiff has a video comment on this event.

UBS, RBS, Lloyd hit the wall of reality

Nothing much to say except that European banks — not sure they are allowed to mark to fantasy or whether they are compelled to mark to market — remind us that the recession is not over, but rather that the Greater Depression is taking hold:

Nov. 3 (Bloomberg) -- Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc will receive 31.3 billion pounds ($51 billion) in a second bailout from the U.K. taxpayer as the two banks agreed to cap bonuses.

The Treasury will inject 25.5 billion pounds of capital into RBS, for a total of 45.5 billion pounds, making it the costliest bailout of any bank worldwide. The government will fund about a quarter of Lloyds’s 21 billion-pound fundraising. Both banks said they won’t pay cash bonuses to workers earning more than 39,000 pounds this year.

Nov. 3 (Bloomberg) -- [...] UBS declined 1 franc, or 5.8 percent, to 16.35 francs. The Zurich-based bank said today that outflows at its wealth management units totaled a net 26.6 billion francs ($25.8 billion), up from 22.3 billion francs in the second quarter.

Chief Executive Officer Oswald Gruebel, who joined in February, is trying to halt redemptions by rich clients and rebuild the investment bank after more than $50 billion of losses and writedowns tied to the financial crisis. Earnings at the wealth management and Swiss bank unit, the biggest profit contributor, slumped 52 percent to 792 million francs in the third quarter from a year earlier, the bank reported.

Nov. 3 (Bloomberg) -- Stocks in Europe declined to a one- month low after UBS AG reported a wider-than-estimated loss [...]
UBS sank the most in two months as Switzerland’s largest bank posted its fourth consecutive quarterly loss.