views on markets, equities, bonds, derivatives, finance, investing, the economy

Revised Wall Street Forecast Still Up

Revised Wall Street Forecast: We're All Going to Be Rich - Businessweek: "Still, Goldman isn’t forecasting a slide soon. In a note sent to investors last week, the bank’s strategy team calls for a further 16 percent rise in the S&P 500 over the next year and a half—a gain that would put the index over 1,900 by 2016. “The market has risen faster than we expected in 2013, but we still forecast considerable upside to the S&P 500 during the next few years,” the note read."

Bloomberg Terminal Snooping

Anyone going to sue?--

Bloomberg Admits Terminal Snooping - "Reporters at Bloomberg News were trained to use a function on the company’s financial data terminals that allowed them to view subscribers’ contact information and, in some cases, monitor login activity in order to advance news coverage, more than half a dozen former employees said. More than 315,000 Bloomberg subscribers worldwide use the terminals for instant market news, trading information and communication . . ."

European economy guide

Economist interactive graphic (updated May 15th 2013) displays the latest economic and fiscal differences across the entire European Union--(go to link below)

European economy guide: Taking Europe's pulse | The Economist: Daily chart: The euro area remains mired in recession. Forecasts from the European Commission in early May showed annual euro-zone GDP shrinking by 0.4% in 2013, following a contraction of 0.6% in 2012. The economic reverse will be much deeper on the periphery of the single-currency club than in its core. Today’s interactive graphic gives an overview of European GDP, debt and jobs. View graphic:

Remember This Moment

Remember This Moment | The Reformed Broker: "Everyone is coding. Everyone is mobile. We walk around with computers in our pocket more powerful than the NASA equipment that first put men into orbit. . . . The Boomers are still working. They are aware of the research about their aging brains - "use it or lose it" say the scientists. They need not retire, we don't want their jobs, we are creating our own. The workforce is adjusting. The very definition of work itself is up for grabs. We are redefining it now. . .. ."

Facebook investors stuck with huge float

Facebook doomed investors with huge float - John Shinal's Tech Investor - MarketWatch: "Facebook, the most high-profile tech stock of 2012, has somehow missed out on a sustained rally in tech stocks. What happened? The short answer is that common shareholders forgot how important the size of a new stock issue is. Facebook flooded the market with so many shares — 421 million on day one and now more than 2.4 billion — that the public markets are still digesting them a year later. It was easy to forget, of course, because all of the profit estimates that Wall Street analysts publish on Facebook, then and now, exclude the costs of stock-based compensation. While Wall Street does this for most tech companies — i.e., pretend that the largest chunk of compensation they pay to their workers simply doesn’t exist — in the case of Facebook it was a very large case of denial. . . ." (read more at link above)

High frequency trading and dark pools are the new normal

High frequency and dark pools are the ‘new normal’ says ASIC’s Medcraft | news | Trading & Execution | Regulation | " . . . ASIC carried out an analysis of equity market trading within ASX and Chi-X from January to September 2012, to try and determine the activity and implications of high frequency trading. They also spoke to both industry participants and regulators abroad to try and spot gaps in existing regulations. "On the whole, we found that some of the public perceptions about high-frequency trading in Australia appear to have been overstated, with no evidence of systematic manipulation by high-frequency traders," said Medcraft. . . .With regard to dark pools, ASIC has suggested a new set of rules about order execution, with the aim of giving investors a measure of choice. "These rules will provide sufficient investor protection from the impact of conflicts of interest and poor transparency that may result from excessive dark trading," said Medcraft. "Excessive dark trading can impact the price investors pay for securities. We have proposed a trigger for a minimum dark order size that will provide an additional safety net for investors." In combination with the new price improvement rule, he thinks this will tackle the risks of excessive dark trading and ultimately provide greater capacity for Australian investors to use dark pools."

An Ugly Reckoning Coming

It’s not just stocks; everything is overvalued - Rex Nutting - MarketWatch: " . . . . short-term thinking is one reason why private-sector debts have exploded over the past 30 years. In the 25 years between 1982 and 2007, the private sector (excluding banks) added $23.7 trillion to its debt level, while the federal government added $4.1 trillion. For all the recent talk of an unsustainable public debt, it’s the private sector that’s in real trouble. The private sector has had to leverage up massively in order to afford the high prices it’s paying for houses, equities and other assets. What’s the result of all this financialization? Debts are too high compared with underlying economic fundamentals, but so are asset prices. No one’s sure when the reckoning will take place, but it’s likely to be ugly when it does." (read more at link above)

Apple Mobile Payments

Forget Apple TV Or IWatch: Apple's Next Trump Card Is Mobile Payments | Technology | Minyanville's Wall Street: " . . . The difficulties in offering a mobile payment solution is that it requires the same technological implementation at both the handset and retail level, which is largely why Google's mobile payment solutions (Google offers NFC [near field communication] capabilities in its Android Nexus S smartphone) haven't taken off yet," Adam Grunwerg, editor at, tells Minyanville. But Apple already possesses an ultimate trump card over Google and other competitors: the ability to leverage 500 million iTunes accounts with credit cards. "Apple's iTunes platform boasts over 500 million accounts with a credit card on file, and if they can begin offering fingerprint authorization on their new iPhone, which is very likely given their acquisition of [mobile security firm] AuthenTec last year, then they'll have a huge advantage in reducing fraud transactions and activity, which makes up 5-20% of merchants costs," Grunwerg elaborates. "Furthermore, charge backs and fraud activity are the things that have prevented Apple from offering mobile payment solutions in the past, according to Dan Schatt at PayPal. Fingerprint identification would reduce most of these." (read more at link above)

Bloomberg Spying Blowback

Stalk exchange - "A JPMorgan source said that it was galling to the bank to learn (through The Post story) that its initial suspicions were justified and that the practice was widespread. The source added that it was not an acceptable use of the firm’s data. The city’s fast money hedge funds also blasted the revelations. “Yeah, it bothers me — it bothers me a lot,” one executive at a Park Avenue fund said about the revelations. “Imagine the amount of information that could be gleaned by monitoring the searches and key strokes at the mergers and acquisitions departments of the major Wall Street firms? It makes me very queasy,” he says. Without a Chinese wall between its reporting and terminal-selling operations, Bloomberg has put itself into a corner, forcing it to reveal that “limited customer data has long been available to our journalists.”" (read more at link above)

Names of those hide cash offshore

The naming project--

Leaks reveal secrets of the rich who hide cash offshore | UK news | The Guardian: " . . . The names have been unearthed in a novel project by the Washington-based International Consortium of Investigative Journalists [ICIJ], in collaboration with the Guardian and other international media, who are jointly publishing their research results this week. The naming project may be extremely damaging for confidence among the world's wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours. . . ." (read more at link above)

High Frequency Trading video

Computers endlessly engage in high frequency trading--even generating hundreds of thousands of fake orders to fool other computers so that high frequency traders can take advantage of the confusion. (source :Big Think)

1/2 second of trading activity in Johnson & Johnson (symbol JNJ) on May 2, 2013
This video was featured at Wired Business Conference (watch it below)

Notes from Nanex:
The animation tool that created this video was written in "C" using Windows GDI - simple lines, polygons and ellipses. We wrote it to explain to the SEC and CFTC (the regulators) how our markets work. We got the idea after realizing, in face to face meetings with them, they didn't understand market structure or the importance of latency and the consolidated feed. That was several years ago. We still aren't sure if they get it, or are just playing dumb. The bottom box (SIP) shows the National Best Bid and Offer. Watch how much it changes in the blink of an eye.

Watch High Frequency Traders (HFT) at the millisecond level jam thousands of quotes in the stock of Johnson and Johnson (JNJ) through our financial networks on May 2, 2013. Video shows 1/2 second of time. If any of the connections are not running perfectly, High Frequency Traders can profit from the price discrepancies that result. There is no economic justification for this abusive behavior.

Each box represents one exchange. The SIP (CQS in this case) is the box at 6 o'clock. It shows the National Best Bid/Offer. Watch how much it changes in a fraction of a second. The shapes represent quote changes which are the result of a change to the top of the book at each exchange. The time at the bottom of the screen is Eastern Time HH:MM:SS:mmm (mmm = millisecond). We slow time down so you can see what goes on at the millisecond level. A millisecond (ms) is 1/1000th of a second.

Note how every exchange must process every quote from the others -- for proper trade through price protection. This complex web of technology must run flawlessly every millisecond of the trading day, or arbitrage (HFT profit) opportunities will appear. It is easy for HFTs to cause delays in one or more of the connections between each exchange.

Nanex CEO Eric Hunsader: Flash Trading Detective Work from WIRED on

China's Yuan currency goes global

Year of the yuan: China's explosive currency goes global — RT Business: "As China launches its global currency, European financial centers are hoping to become Europe’s yuan hub. London, Paris, and Zurich have all made very vocal bids for this title. According to Bloomberg, the Bank of England has an inside track to be the first Group of Seven nation to sign a currency-swap with the People's Bank of China. The deal may grant the UK central bank as much as 400 billion yuan ($64 billion) in reserves . . . China and Australia are major trading partners, so an investment in Chinese currency reserves will benefit transactions between the two countries. Now, they can conduct business transactions directly from yuan to Australian dollar, cutting out the middle man, the US dollar or euro. The Chinese yuan is the 13th most-used currency in the world for international payments, according to a February 2013 report by the Society for Worldwide Interbank Financial Telecommunication (SWIFT). It jumped 6 places from the previous year."  read more at link above

London Trading Scene and the Libor Rate-Fixing Scandal

Clubby London Trading Scene Fostered Libor Rate-Fixing Scandal - "In London, the center of the Libor scandal, rules about such favor-trading are looser than on Wall Street. Brokers and traders interviewed by The Wall Street Journal said brokers routinely reward valued traders by returning a percentage of their commissions in the form of entertainment. Brokers have paid for traders to spend weekends in the Alps and Saint-Tropez, and on occasion, have even bought them cocaine or prostitutes, according to people who witnessed such activity. A few years ago, U.S. and British regulators allege, some brokers were so eager to please bank traders that they helped with an illegal Libor-rigging scheme." read more at link above

Sex, Drugs and Libor Traders (video)

Video - Sex, Drugs and Libor Traders - "WSJ’s David Enrich looks at how the London brokerage industry went to great lengths to curry favor with top traders. The brokerage industry’s efforts to woo traders escalated from taking them to fancy dinners to sometimes providing them with cocaine and prostitutes to allegedly helping them manipulate a key global interest rate."  read more at link above

Europe Plays Odd Man Out

Europe Looks Like the Odd Man Out - MoneyBeat - WSJ: "Despite the sovereign debt crisis that has shaken the region to the core, ECB interest rates remain among the highest on offer in the major economies and the central bank has never poured liquidity into its financial markets as the U.S., the U.K. and now Japan have done. If anything, German officials are more scathing than ever about the liquidity that the ECB provided to European banks in an effort to stop the crisis from spreading." (read more at link above)

45 percent of Bitcoin exchanges fail and take users money

Study: 45 percent of Bitcoin exchanges end up closing (Wired UK): "A study of the Bitcoin exchange industry has found that 45 percent of exchanges fail, taking their users' money with them. Those that survive are the ones that handle the most traffic -- but they are also the exchanges that suffer the greatest number of cyber attacks. Computer scientists Tyler Moore (from the Southern Methodist University, Dallas) and Nicolas Christin (of Carnegie Mellon University) found 40 exchanges on the web which offered a service of changing bitcoins into other fiat currencies or back again. Of those 40, 18 have gone out of business -- 13 closing without warning, and five closing after suffering security breaches that forced them to close. Four other exchanges have suffered serious attacks but remain open. . . ."

Investing for the coming bond crash?

10 investing rules for the coming bond crash - Paul B. Farrell - MarketWatch: “The best piece of advice I could give long-term investors today is don’t own bonds. And if you do own them, you probably ought to move out of them,” warns Charles Ellis, acclaimed author of the classic “Winning the Loser’s Game: Timeless Strategies for Successful Investing.” Get it? Do not own bonds. Sell. Move out now. . . " (read more at link above)

Playing Politics With Banks

The Fed: Playing Thug Politics With Banks - Forbes: "That the White House is engaging in Chicago-style retributions is no surprise. But for the Federal Reserve to engage in this kind of Godfather-style activity is appalling." (read more at link above)

Business - Google News

Credit Writedowns

Central Banking