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Bank of America Sets Up War Room, Hires Army of Lawyers

In Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Technology on 22.01.11 at 01:18

Wikileaks, and its founder Julian Assange, has certainly stirred up some murky waters releasing confidential documents and emails on government activities. Recently Assange stated that he has a large batch of confidential documents that could lead to problems for a major bank, and in at least one interview he has identified that bank to be Bank of America. And the bank are taking the possible threat serious – deadly serious! So does the US Securities and Exchange Commission.

“The nation’s largest bank has set up a war room and assembled a S.W.A.T.  team of lawyers.”

FOX Business Network


According to FOX Business, the largest US bank has set up a war room and assembled a S.W.A.T.  team of lawyers and company officials to deal with the matter if anything should arise. And now the US Securities and Exchange Commission (SEC) is focusing in on the case too.

The Securities and Exchange Commission is keeping a close eye on Bank of America’s (BAC) Wikileaks dilemma to determine whether anything that the info-leaking website might release should have already been turned over to regulators who have conducted numerous investigations into the bank’s activities, FOX Business Network has learned.

The same goes for WikiLeaks.

It is, in fact, illegal to withhold information about criminal activities.

See also: Wikileaks Obstruction of Justice?

If and when the document dump occurs, the SEC – Wall Street’s top cop –  will be examining the material to determine if Bank of America has failed to include the emails and other documents in demands for information the commission has made as part of its many investigations into BofA activities.

Bank of America has been the subject of several high-profile probes by the commission, including issues surrounding its Countrywide Financial subsidiary, and its ill-fated purchase of Merrill Lynch during the dark days of the financial crisis in 2008.

Countrywide, which was the largest issuer of so-called subprime mortgages, has been accused of issuing mortgages to people with little if any documentation of work history or  means to repay the loans.

Neither SEC’s spokesman or BofA’s spokesman had no immediate comment, FOX reports.

If Bank of America purposely failed to turn over documents involving an investigation, the bank could face possible criminal charges of obstructing justice.

But so far, BofA has said that despite all the talk about it being a target, it has no evidence that Assange’s organization has documents involving the bank.

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MORE:

Bank of America vs. WikiLeaks, the inside story
WikiLeaks should motivate information security managers
Bove: WikiLeaks bluffing about Bank of America
The Most Sued Companies in America

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Cyber Security Is Waste of Money, OECD Advisers Says

In Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, National Economic Politics, Technology, Views, commentaries and opinions on 18.01.11 at 16:26

Under the pseudonym “Hugo Cornwall”,Peter Sommer published the infamous “Hacker’s Handbook” in 1985. Since then he has become a noted security researcher and expert witness. Now he has co-authored a report for the Organisation for Economic Co-operation and Development (OECD) which warns governments against swallowing wholesale stories about “cyber-war” and “cyber-weapons”.

“Governments should take a calm, disciplined approach and evaluate the risks of each type of attack very carefully rather than be swayed by scare stories.”

Peter Sommer


According to the report “Reducing Systemic Cybersecurity Risk,” published today, a true cyber-war would have the same destructive effects as a conventional war, only that it will be fought exclusively in cyberspace. However, such a war is “highly unlikely” to occur, the OECD report says.

“Governments should take a calm, disciplined approach and evaluate the risks of each type of attack very carefully rather than be swayed by scare stories,” says Peter Sommer of the London

Peter Sommer

School of Economics, one of the two authors of the just released report on cyber security.

Co-authored with computer scientist Ian Brown of the Oxford Internet Institute, UK, the report says online attacks are unlikely ever to have global significance on the scale of, say, a disease pandemic or a run on the banks.

But they say “localized misery and loss” could be caused by a successful attack on the Internets routing structure, which governments must ensure are defended with investment in cyber-security training.

Jay Abbott, security manager at the consultancy PricewaterhouseCoopers, agrees that the routing structure is indeed vulnerable, new scientist.com writes.

“Short of physically cutting the wires, it’s the best way to take down a country from the internet,” he says.

Analysis of cyber-security issues has been weakened by the lack of agreement on terminology and the use of exaggerated language, the report points out.

“Cyber-espionage is not a few keystrokes away from cyber-war, it is a method of spying,” the authors write.

Controversially, the OECD advises nations against adopting the Pentagon’s idea of setting up a military division – as it has under the auspices of the US air force‘s Space Command – to fight cyber-security threats.

“While vested interests may want to see taxpayers’ money spent on such ventures,” says Sommer, “the military can only defend its own networks, not the private-sector critical networks we all depend on for gas, water, electricity and banking.”

Here’s a copy of the report: “Reducing Systemic Cyber Security Risk”

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I just have one question: Who will decide which hardware, computers and software that is “systemically important,” or not?
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Internet Nuke Bomb Ready To Blow (Update)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Quantitative Finance, Technology, Trading software, Uncategorized, Views, commentaries and opinions on 16.01.11 at 20:29

The Swapper have been warning about this since last summer when the mysterious Stuxnet worm was discovered at several critical energy and water supply facilities around the world. However, research by Symantec have later reveled that 60% of the infections are found inside Iranian borders. The threat from cyber space has risen to the top of the list over potential global risks in 2011, alongside pandemic diseases and terrorism. The internet, once seen as the solution to all of mans problems, have instead become one of the most severe threats to all of us.

“The primary involvement of states in cyber security, as both protagonists and principal targets, fundamentally changes the nature of the risk.”

Eurasia Group


By the end of 2010 McAfee Security counted 60.000 new pieces of malicious software being released on the internet every day, the hacker attacks on Java platforms (used in practically every security system, including online banks and the Pentagon) rose by 1.200% last year, and for the first time ever the value of theft of digital assets exceeded the theft of physical assets. And for Stuxnet; that’s only the beginning.

More than 100 foreign intelligence organizations are trying to break into US networks, Deputy Defense Secretary William Lynn wrote in the September/October issue of the journal Foreign Affairs. Some already have the capacity to disrupt U.S. information infrastructure, he says.

The US government’s main code-making and code-cracking agency now works on the assumption that foes may have pierced even the most sensitive national security computer networks under its guard, Reuters reports.

“There’s no such thing as ‘secure’ any more,” Debora Plunkett of the National Security Agency said last month, amid US anger and embarrassment over disclosure of sensitive diplomatic cables by the web site WikiLeaks.

“The most sophisticated adversaries are going to go unnoticed on our networks,” she said.

Plunkett heads the NSA’s Information Assurance Directorate, which is responsible for protecting national security information and networks from the foxhole to the White House.

“We have to build our systems on the assumption that adversaries will get in,” she told a cyber security forum sponsored by the Atlantic and Government Executive media organizations.

The United States can’t put its trust “in different components of the system that might have already been violated,” Plunkett added in a rare public airing of NSA’s view on the issue.

“We have to, again, assume that all the components of our system are not safe, and make sure we’re adjusting accordingly.”

The NSA must constantly fine tune its approach, she said, adding that there was no such thing as a “static state of security.”


And the US is not the only nation struggling to keep its sensitive data safe.

According to Iain Lobban, head of GCHQ, the UK’s core infrastructure is under constant attack. He says thousands of targeted emails are hitting the systems every month, planting worms that cause “significant disruptions.”

Mr. Lobban’s claims are supported in a national security report, naming cyber attacks as a top threat to the UK, alongside pandemic diseases and terrorism, according to the PC Pro Magazine.

A Global Threat

“Cyberspace is contested every day, every hour, every minute and every second,” the British security expert says.

The international risk analysis company Eurasia Group put cyber security at number 3 amongst the top 10 risks of 2011.

“For the past decade, increasingly technologically capable hackers and organized crime organizations have elevated cyber security as a business risk, but not as a political risk. The centralization of data networks, both in energy distribution (the move to the smart grid) and information technology more broadly (the shift to cloud computing) are now metastasizing the cyber risk, and governments are becoming more directly and actively involved in playing both offense and defense in cyberspace. The primary involvement of states in cyber security, as both protagonists and principal targets, fundamentally changes the nature of the risk. The new roles of governments and their antagonists bring geopolitics and cyber security together in three different ways,” Eurasia writes.

(Link to full report below).

Java Systems Under Heavy Fire

One of the main components in practically every security system today is the Java platform, produced by Oracle.

So it’s no wonder that attacks on the Java system increased by more than thousand percent in 2010.

“The number of attacks against flaws in Java has jumped by 1.000% – even outstripping attacks against vulnerabilities in Adobe PDF’s,” Microsoft says.

The attacks against Java code – not the Java script – rose from 500.000 at the beginning of last year to about 6 million in the last quarter of 2010.

Even if Oracle have manged to patch the vulnerabilities in Java, the have the same problem as Adobe – people forget to update their software.

And on top of that; Java is a piece of software that’s used in almost everything, it runs in the background, making more visible components work, PC Pro Magazine points out.

“How do you know if you have Java installed, or if it is running?” researcher at Microsoft Malware Protection, Holly Stewart rightfully asks.

(If you want to know more about Java, click the link below.)

1 in 3 Companies Exposed To Data Theft

According to the latest issue of Kroll Annual Global Fraud Report, suggest that the theft of digital assets has overtaken that of physical stock for the first time ever in 2010.

A Survey, conducted in cooperation with the Economist Intelligence Unit, indicates that the numbers of companies reporting theft of information has risen sharply – from 18% to 27,3% – in 2010.

“There’s a growing awareness among thieves of the intrinsic value of intellectual property,” Kroll vice president, Robert Brenner explains.

The survey also suggest that 88% of the  participating companies had been victim of some kind of fraud over the past year, nearly half of them are now fearful of expanding globally because of the cyber threat.

The experts emphasize that the numbers probably not are 100% accurate.

However, the message is pretty clear.

(Download the report below)

The Most Scary Thing

I guess most of you have heard about the Stuxnet worm/virus/malware in the news by now, and are familiar with the speculations that the extremely sophisticated malware might be some kind of cyber weapon, developed by government related scientists somewhere.

I sounds like a plot in James Bond movie – but the truth might be even more vicious.

Davey Winder

According to experts is not unlikely to be a prototype of the first ever cyber-weapon-of-mass-destruction.

Davey Winder, award-winning journalist, business consultant and security expert, explains:

“So what do we know about Stuxnet and the SCADA (Supervisory Control and Data Acquisition) systems?  Well, we know that Stuxnet is designed to be disseminated via USB sticks, and that it was developed to exploit specific zero-day vulnerabilities in the Windows operating system. To expand on that a little, Stuxnet actually exploits no fewer than four zero-day Windows vulnerabilities, a statement that alone should set the hair on the back of any security analyst’s neck prickling. Zero-day vulnerabilities are extremely valuable to the shady world of both hackers – where a zero-day is a kudos-generating device – and to criminals where zero-day equals pay-day. It’s relatively rare to see a single exploit being used in a piece of malware, and totally unheard of to see four expended in such a way.”

“Ask yourself, why would anyone waste three highly valuable zero-day exploits in a single piece of code when one would most likely do the job? Security experts recognize that this isn’t the modus operandi of the average hacker, nor the average criminal,” Winder writes in a recent article.

Personally, I believe that Stuxnet 2.0 is already out there – it just hasn’t been discovered yet.

The Internet Nuke Bomb

According to trend analyst, Gerald Celente, CEO and founder of Trends Research Institute, will cyber wars cause stir and come to fore in 2011.

And. as Eurasia, he is concerned about the government’s involvement.

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Here are some of the other highlights in Mr. Celente’s predictions for the year to come:

  • Every citizen in 2011 will realize that we are in the “greatest depression”
  • In 2011, the game’s gonna run out
  • Digital money, not worth the paper it’s not printed on
  • The youth of the world has mountains of debt to climb, and no way to get to the top
  • The greatest fear that governments have is freedom of speech
  • Your growth industries are the gangs
  • Crackdown on crime will lead to crackdown on liberties
  • Drones flying over your city looking in windows
  • The more government loses control, the harder they crack down

You may not take all of Gerald Celente’s forecasts equally serious, but many of the situations he describes is. in fact, common human behavior, observed in times of crisis since the collapse of the Roman empire thousands of years ago and up to our time.

At the latest count by McAfee Security Lab, about 60.000 pieces of malicious software is released on the internet every day.

And here’s how the last six months of 2010 looked like from the security software producer Kaspersky‘s point of view:

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Perhaps it’s time to upgrade?

 

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Looks Like A Classical Pump&Dump Setup

In Financial Engeneering, Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Technology, Views, commentaries and opinions on 14.01.11 at 22:04

The global stocks markets are reaching for new highs, sending the benchmarks to the highest level since August 2008. Once again it’s the financials that’s leading the race after Wells Fargo raised its rating for large banks on prospects for higher dividends, JPMorgan Chase says it will use some of its reserves to boost earnings and Morgan Stanley says banks and insurance companies will be winners in the stock market this year. Well, it sounds like the same old song and dance routine to me, just like we’ve seen it over and over again for the last two years – a classical pump & dump scheme.

“Companies are sitting on tons of cash. Corporate earnings are coming in very strong. I see a gain of 10 percent to 15 percent for stocks in 2011.”

Philip Dow


Personally, I don’t think there’s many investors who actually believe a word of what the bankers and their stock pushers are saying. But that’s not the point. The point is, however, that the big financials are setting up another stock market rally so they can cash in a couple of billion dollar more before the new regulations takes effect and prohibit them from trading with their own money, shutting down their most lucrative area of business.

This may very well be the biggest opportunity investors will get in 2011. The financial shares have, more or less, controlled the stock market over the last two years – pushing the average prices up, then pulling them down again.

But this is no game for amateurs. You never know when the big players turn around, stop buying and dump the load right in your face. The so-called “swing trade,” where the goal is to figure out exactly when the market turns, is one of the most difficult investment strategies there is. It can also be the most rewarding.

But remember; there is nothing – I emphasize; nothing – that indicates that the problems are over for financial firms. On the contrary; several signs points to more trouble ahead.

The greatest factor of uncertain right now is the European debt crisis. Even if it’s the national governments that is about to go bankrupt, it is the financial industry who’ll get the punch when countries starts to default.

Something the credit market investors have figured out a long time ago.

(Read also: Smart Money Is Not Stupid (Or Is It?))

The second bomb about to detonate is the dodgy foreclosure case.

At the moment, the banks are allowed to accrue interest on non-performing mortgages  until the actual foreclosure takes place, which on average takes about 16 months.

This “phantom interest” is not actually collected, but still it’s booked as income until the actual act of foreclosure.

As a resullt, many bank financial statements actually look much better than they actually are.

This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, and hundreds of other smaller institutions, can report interest due to them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed, according to Forbes.

“Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans,” says Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.

However, the central banks, and the governments will be pumping money into the financial markets as long as they can in order to keep the financial system running. And they might be able to do that for a year or two more (maybe even longer).

“The markets can stay irrational longer than you can stay solvent.”

(John Maynard Keynes)

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Anyway – who gives a shit?

The KBW Bank Index, which tracks 24 US financial companies, was up 13% in the four weeks through Jan. 5, three times the gains of the Standard & Poor’s 500.

And there’s also a third landmine in store for US banks.

According to Forbes, investors are now betting that the GOP-controlled Congress will water down the financial-services overhaul, and the great Wall Street reform will be just a joke, as many have feared.

On paper, the Dodd-Frank financial-services overhaul bill looks like a bank-stock killer.

It restricts how banks can trade for their own accounts, it raises capital requirements and it tightens supervision. By some estimates it will cut big bank profits by $22 billion annually—what the industry makes in a decent quarter.

Yet, bank stocks is rallying like it’s 2009.

Investors are banking that House Republicans will modify the new law, says Terry Haines, a senior analyst Potomac Research Group: “Back in July 2010, when Dodd-Frank became law, investors expected the quick imposition of rules with an immediate impact on the financial sector. But a lot of the key components of Dodd-Frank have not yet been implemented. And now there is a more favorable and moderate political environment as well.”

Note that any statement of just how much of the Dodd-Frank law will be changed by House Republicans is only speculation.

Investors may be overestimating the GOP‘s nimbleness.  The regulatory agencies could, in fact, begin to implement rules before the House Financial Services Committee holds any hearings on the matter, and the republicans may be distracted by efforts to reform the congressionally chartered mortgage giants Fannie Mae and Freddie Mac.

And some of the new regulations will simply not go away by themselves.

Banks will have to adhere to higher capital of some kind – the same goes for liquidity requirements – and the banks’ cost of deposit insurance and regulatory compliance are sure to increase significantly, regardless of what the GOP may accomplish.

“Every page of the law has something that impacts the bottom line,” banking lawyer Thomas Vartanian points out.

(The law is 848 pages long!)

Terry Haines points out that  the  regulators charged with writing regulations under the act will be scrutinized by the House Appropriations Committee as well as the Financial Services Committee.

“The Appropriations committee could limit the funding of controversial regulatory initiatives under Dodd-Frank, or even defund them entirely,” Haines says .

Perhaps. But the republicans could also easily be “Stewartized” into submission (mocked by the Daily Show’s John Stewart). And the general public is still quite upset over the fact that the hot-shots responsible for wrecking the economy still have their jobs and their bonuses, while about 8.5 million American workers lost theirs.

Something is going to hit the banking industry – whatever it will be…

“The people who took a political gamble on the sector in December most likely are traders who will take their money and run at the first sign of wavering by the House GOP,” Forbes writes.

If that’s the truth – the sector is set up for a classic pump and dump scheme.

Bank and life insurer stocks should see the biggest gains in 2011, according to a team of Morgan Stanley analysts. The team says its call is based on low valuations in the sectors, as well as increasing clarity about regulation that has weighed on the shares. An improving economy and the company’s increased capital deployment should drive return on equity.

Property and casualty insurers should also get a boost late in the underwriting cycle.

Morgan Stanley says its favorite names are Bank of America, Comerica and TD, for large cap, mid cap, and Canadian  banks, respectively.

In insurance, Prudential is the team’s pick for life insurers, with Axis Capital as a standout in P&C.

“Bank dividends and M&A activity signal the economy is transitioning from recovery to expansion,” says Philip Dow, director of equity strategy at RBC Wealth Management in a market comment at Bloomberg.com.

“Companies are sitting on tons of cash. Corporate earnings are coming in very strong. I see a gain of 10 percent to 15 percent for stocks in 2011.”

That’s right! Pump, baby. Pump!

 

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So, You Think You Can Blog? (Econotwist’s Greatest Hits 2010)

In Financial Engeneering, Financial Markets, Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, National Economic Politics, Natural science, Philosophy, Quantitative Finance, Technology, Trading software, Views, commentaries and opinions on 09.01.11 at 20:40

Every serious blog is presenting their top lists for 2010 these days, so I better get my lists out there too. Frankly, I’m quite surprised by the response I’ve got. After all this was my first year as a full-time blogger. By summer last year, the econotwist’s blogs – mainly The Swapper and The Econotwist’s – reached 20.000 unique visitors per month. Some articles was also republished by other blogs, or featured on the publishing sites like Scribd. I estimate the top articles of Econotwist’s in 2010 was read by at least 200.000 people. And as usual I managed, completely unintended, to make some people a little bit angry.

“That article is about as credible as me writing about nuclear technology. Off-balance sheet transactions? SPEs? Interest Rate and Currency Swaps? Has that idiot even looked at an Annual report for BP?”

Reader’s response


The quote above was in response to the July 2 post – “So, You Thought BP Was An OIL Company?” I haven’t got that much pepper since I described DnB NOR‘s subsidiary in the Baltic region as at “financial lab rat”. Anyway, I see all feedback, good or bad, as extremely valuable. I have not been able to reply to all comments or requests. For that I apologize, and promise I’ll spend more time on your responses in 2011. As for themes I will be focusing on the technological side of the financial markets in addition to my other specialties – the relations between economy and ecology.

And I will have a couple of new prominent contributors joining in, as well as some other surprises…

But right now I want to give my sincere thanks to all of you who’s been cheering me on this year, making my first year as a blogger a definitive success.

To quote one of my favorite artists, (Keith Richards): GOLD RINGS TO YOU ALL !

And here is a summary of the most popular posts and publications by The Econotwist’s Blogs in 2010.

 

TOP POSTS

  1. So, You Thought BP Was An OIL Company?
  2. Mother Earth On Crack
  3. Volcano Ash Can Send The Earth Into “Deep Freeze”
  4. The Worlds Most Contagious Countries – Here’s The List
  5. Cyber Criminals Attack Critical Water, Oil and Gas Systems
  6. More Mysterious “Monster Fish” Comes To Surface
  7. The Ultimate Trading Weapon
  8. Norwegian Day Traders Convicted Of Market Manipulation
  9. Goldman Sachs: “Damn American Bastards!”
  10. Flight to Mystery
  11. The Sun Is Speaking!
  12. Here’s The REAL Norwegian PIIGS Exposure

 

TOP PUBLICATIONS

  1. Goldman Sachs: Global Economics Weekly. June 2010.
  2. Non Performing Loans, Europe June 2010. PriceWaterhouseCoopers
  3. Letter From Geithner
  4. SULTANS OF SWAP: BP Potentially More Devastating than Lehman!
  5. Speech by Mr Ben S Bernanke, Chairman of the Board of Governors of the US Federal Reserve System, at Princeton. 09242010.
  6. Goldman Sachs: “On The Eve of The Bank StressTests”
  7. Tudor Investments Letter October 2010
  8. Saxo Bank. Quarterly Outlook. Q3 2010.
  9. BP Annual Report and Accounts 2009
  10. Bank of International Settlement. Quarterly Report. June 2010
  11. Oslo District Court. Final Verdict In The Case of Market Manipulation by Day Traders. 10122010.
  12. Fitch. Special Report. “CDS Spreads and Default Risk – Interpreting the Signals”- October 2010.

 

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OTHER SMASHING HITS AND PERSONAL FAVORITES

 

BEST PHOTO COMMENTS

The Greatest Conspiracy

 

The Dark Side of The White House

 

Trade Hard - Mega Hard

 

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MOST VIEWED iROCK VIDEOS


 

#1. “Nobody Lnpws The Bubbles I’ve Seen” (By Versusplus.com)

 

#2. “It’s Beginning To Look A Lot More RiskLess” (By Versusplus.com)

 

 

No matter what happens in 2011 – don’t forget to have some fun!

All The Best

Smart Money Is Not Stupid (Or Is It?)

In Financial Engeneering, Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Technology, Views, commentaries and opinions on 08.01.11 at 05:55

The first week of January is often a positive one for risky assets as investors return from their holidays. The pattern looked like it was going to be repeated this week, when spreads tightened on Tuesday, the first full day of trading in 2011. But the credit markets went into reverse on Wednesday. Something doesn’t smell right. The Markit iTraxx SovX Western Europe index soared to a new record wide level of 220 bp’s by Friday’s close, and the peripheral names ended all at,  or near, unprecedented marks.

“It seems likely that there are real fundamental reasons why credit has underperformed this week.”

Gavan Nolan


The senior financials index  broke through 200 basis points on Friday as the investors adjusted to the new reality – that senior debt is no longer sacrosanct. Equities have become accustomed to being wiped out by bailouts, hence the paper had little impact on bank stocks, according to Markit Credit Research. The equity markets are still up on the week, though they have given back some gains Friday.

However:

“It should be pointed out that haircuts under the proposal are a last resort and would not apply to existing bank debt currently in issue,” credit analyst Gavan Nolan at Markit writes in his weekly wrap-up.

But according to Nolan is it likely that this will create a split in the senior bank debt market between outstanding bonds and the new bail-in bonds if and when the plans are implemented. (Probably 2013-2014).

It could also raise the cost of senior unsecured bonds, possibly creating an incentive to issue more covered bonds.

Well, my guess is that the market participants is smelling a rat, and to me that is a sign that fundamentals still rules.  Even if it do not look like it does sometimes. Hopefully, the experienced traders are aware of the fact that a market can stay irrational longer than they can stay solvent.

And it might seem irrational that problems in private financial institutions at the moment, making new funding more difficult and more expensive,  is having a severe impact on the funding of national governments.

But it does.

Spreads in banks based in the euro zone’s periphery continue to hit record levels, particularly those institutions perceived to have weak capital bases, and the turmoil in the bank credit market had a “knock-on effect on sovereign spreads,” Nolan writes.

“Investors are aware that any bail-in mechanism won’t remove the systemic risk surrounding the banking industry, particularly in the near-term.”

You bet they are!

Nor does is seem rational that the stock market is going up while the credit market is going down.

But it does.

Gavan Nolan raises the question if it’s technical or fundamental factors that cause the credit/equity decoupling?

His answer is; probably a combination of both.

“Anecdotal evidence suggests that liquidity in the credit markets is somewhat thin, particularly in single names. Some investors may be deciding to sit out the volatility at this early state in the year, and dealers are reluctant to take on positions going into the weekend,” he writes.

But there has been considerable activity in the indices. (Click here for more details).

“It seems likely that there are real fundamental reasons why credit has underperformed this week,” Nolan concludes.

I’m not quite sure if that is a good thing or a bad thing – probably a combination of both…

Anyway – the perhaps most important publication of the week was the EU consultation paper on bank bailouts.

Newspaper reports emerged on Wednesday suggesting that the EU is planning a framework that will include the possibility of senior bank bondholders sharing the burden of future bailouts.

This led to the Markit iTraxx Senior Financials index threatening to breach the 200 bp’s level for the first time since June 2010.

“The EU paper duly appeared late on Thursday, and the predictable widening effect on spreads followed.”

The Markit iTraxx SovX Western Europe index soared to a new record wide level of 220 bp’s by Friday’s close, and the peripheral names were all at or near unprecedented marks.

But the banking burden isn’t the only force driving sovereign spreads wider:

  • Spain, Italy and Portugal are all due to tap the capital markets for funds next week, commencing what will be a busy period for government issuance.
  • Portugal’s 6-month T-bill auction earlier this week was less than impressive, with yields nearly double that of the previous auction in September.
  • The ECB has been buying Portuguese government debt for the first time this year, and it would be no surprise to see it continue its interventions next week.

Conclution: It seems like the Mr. Ben Bernanke‘s favorite expression “unusual uncertainty” will be valid for at least another year.

PS:

When it come to the co-called “smart money,” I did a Google picture search of the term.

The result was a disturbingly number of Paris Hilton photos.

Now, if that’s supposed to be an illustration of smart money, then God help us all!

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Here’s What You Get For Blogging About Chinese Banks

In Health and Environment, High Frequency Trading, International Econnomic Politics, Law & Regulations, Learning, Technology, Views, commentaries and opinions on 03.12.10 at 20:44

I can’t say I’m very surprised as I’ve  been quite busy lately blocking Chinese IP‘s from accessing my computer.

But when I tried to log on to The Swapper just a few minutes ago, I got this:

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Well, I must admire their tireless efforts to plant all kinds of bugs in my system.

However, I really can’t see why?

There must be thousands of bloggers and websites who publish a lot more critical stuff about The Great Red than I do.

So, I suppose I should take it as a compliment…..

Professional hackers know that Chinese and Korean computers are notorious exploiting bad security on many fronts.

This makes other people experimenting with hacking and exploiting prime targets.

However, it can get cumbersome trying to manually find IP’s of computers in these countries.

Here are the ranges of IP’s used in these countries. (Note, not all the IP’s are assigned. Use lower values for more likely hits.)

61.28.0.0 – 61.28.63.255  China
61.32.0.0 – 61.43.255.255  Korea
61.48.0.0 – 61.55.255.255  China
61.72.0.0 – 61.87.255.255  Korea
61.96.0.0 – 61.111.255.255  Korea
61.128.0.0 – 61.191.255.255  China
61.232.0.0 – 61.237.255.255  China
61.240.0.0 – 61.243.255.255  China
61.248.0.0 – 61.255.255.255  Korea
128.134.0.0 – 128.134.255.255  Korea
129.254.0.0 – 129.254.255.255  Korea
132.16.0.0 – 132.16.255.255  Korea
134.75.0.0 – 134.75.255.255  Korea
137.68.0.0 – 137.68.255.255  Korea
137.189.0.0 – 137.189.255.255  Chinese Unv of Hong Kong
141.223.0.0 – 141.223.255.255  Korea
143.248.0.0 – 143.248.255.255  Korea
147.6.0.0 – 147.6.255.255  Korea
147.43.0.0 – 147.43.255.255  Korea
147.46.0.0 – 147.47.255.255  Korea
150.150.0.0 – 150.150.255.255  Korea
150.183.0.0 – 150.183.255.255  Korea
150.197.0.0 – 150.197.255.255  Korea
152.99.0.0 – 152.99.255.255  Korea
152.149.0.0 – 152.149.255.255  Korea
154.10.0.0 – 154.10.255.255  Korea
155.230.0.0 – 155.230.255.255  Korea
156.147.0.0 – 156.147.255.255  Korea
157.197.0.0 – 157.197.255.255  Korea
158.44.0.0 – 158.44.255.255  Korea
159.226.0.0 – 159.226.255.255  China
161.122.0.0 – 161.122.255.255  Korea
161.207.0.0 – 161.207.255.255  China
162.105.0.0 – 162.105.255.255  China
163.152.0.0 – 163.152.255.255  Korea
163.180.0.0 – 163.180.255.255  Korea
163.239.0.0 – 163.239.255.255  Korea
164.124.0.0 – 164.125.255.255  Korea
165.132.0.0 – 165.133.255.255  Korea
165.141.0.0 – 165.141.255.255  Korea
165.186.0.0 – 165.186.255.255  Korea
165.194.0.0 – 165.194.255.255  Korea
165.213.0.0 – 165.213.255.255  Korea
165.229.0.0 – 165.229.255.255  Korea
165.243.0.0 – 165.244.255.255  Korea
165.246.0.0 – 165.246.255.255  Korea
166.79.0.0 – 166.79.255.255  Korea
166.103.0.0 – 166.104.255.255  Korea
166.111.0.0 – 166.111.255.255  China
166.125.0.0 – 166.125.255.255  Korea
167.139.0.0 – 167.139.255.255  China
168.78.0.0 – 168.78.255.255  Korea
168.115.0.0 – 168.115.255.255  Korea
168.126.0.0 – 168.126.255.255  Korea
168.131.0.0 – 168.131.255.255  Korea
168.154.0.0 – 168.154.255.255  Korea
168.160.0.0 – 168.160.255.255  China
168.188.0.0 – 168.188.255.255  Korea
168.219.0.0 – 168.219.255.255  Korea
168.248.0.0 – 168.249.255.255  Korea
169.140.0.0 – 169.140.255.255  Korea
192.5.90.0 – 192.5.90.255  Korea
192.83.122.0 – 192.83.122.255  China
192.100.2.0 – 192.100.2.255  Korea
192.104.15.0 – 192.104.15.255  Korea
192.124.154.0 – 192.124.154.255  China
192.132.15.0 – 192.132.15.255  Korea
192.132.247.0 – 192.132.251.255  Korea
192.188.170.0 – 192.188.170.255  China
192.195.39.0 – 192.195.40.255  Korea
192.203.138.0 – 192.203.146.255  Korea
192.245.249.0 – 192.245.251.255  Korea
192.249.16.0 – 192.249.31.255  Korea
198.17.7.0 – 198.17.7.255  China
198.97.132.0 – 198.97.132.255  China
198.178.187.0 – 198.178.187.255  Korea
202.0.110.0 – 202.0.110.255  China
202.0.160.0 – 202.0.179.255  China
202.4.128.0 – 202.4.159.255  China
202.4.252.0 – 202.4.255.255  China
202.6.95.0 – 202.6.95.255  Korea
202.14.88.0 – 202.14.88.255  China
202.14.103.0 – 202.14.103.255  Korea
202.14.165.0 – 202.14.165.255  Korea
202.14.235.0 – 202.14.238.255  China
202.20.82.0 – 202.20.86.255  Korea
202.20.99.0 – 202.20.99.255  Korea
202.20.119.0 – 202.20.119.255  Korea
202.20.120.0 – 202.20.120.255  China
202.20.128.0 – 202.20.255.255  Korea
202.21.0.0 – 202.21.7.255  Korea
202.22.248.0 – 202.22.255.255  China
202.30.0.0 – 202.31.255.255  Korea
202.38.0.0 – 202.38.15.255        China
202.38.32.0 – 202.38.47.255  China
202.38.64.0 – 202.38.138.255  China
202.38.140.0 – 202.38.156.255  China
202.38.158.0 – 202.38.161.255  China
202.38.164.0 – 202.38.176.255  China
202.38.184.0 – 202.38.255.255  China
202.90.0.0 – 202.90.3.255  China
202.90.252.0 – 202.91.3.255  China
202.91.128.0 – 202.91.131.255  China
202.92.0.0 – 202.92.3.255  China
202.92.252.0 – 202.93.3.255  China
202.93.252.0 – 202.93.255.255  China
202.94.0.0 – 202.94.31.255  China
202.95.0.0 – 202.95.31.255        China
202.95.252.0 – 202.122.39.255  China
202.122.128.0 – 202.122.128.255  China
202.127.0.0 – 202.127.63.255  China
202.127.128.0 – 202.127.255.255  China
202.130.0.0 – 202.130.31.255  China
202.130.224.0 – 202.130.255.255  China
202.131.208.0 – 202.131.223.255  China
202.136.252.0 – 202.136.255.255  China
202.189.128.0 – 202.189.191.255  Korea
202.192.0.0 – 202.207.255.255  China
203.81.16.0 – 203.81.31.255  China
203.87.224.0 – 203.88.3.255  China
203.89.0.0 – 203.89.3.255  China
203.90.0.0 – 203.90.3.255  China
203.91.0.0 – 203.91.3.255  China
203.92.0.0 – 203.92.3.255  China
203.93.0.0 – 203.94.31.255  China
203.95.0.0 – 203.95.7.255  China
203.128.128.0 – 203.128.159.255  China
203.184.0.0 – 203.184.3.255  China
203.192.0.0 – 203.192.31.255  China
203.196.0.0 – 203.196.3.255  China
203.207.64.0 – 203.208.19.255  China
203.212.0.0 – 203.212.15.255  China
203.222.192.0 – 203.222.207.255  China
203.223.0.0 – 203.223.15.255  China
203.224.0.0 – 203.255.255.255  Korea
210.5.0.0 – 210.5.31.255  China
210.5.128.0 – 210.5.143.255  China
210.12.0.0 – 210.13.255.255  China
210.14.160.0 – 210.15.191.255  China
210.21.0.0 – 210.22.255.255  China
210.25.0.0 – 210.47.255.255  China
210.51.0.0 – 210.53.255.255  China
210.72.0.0 – 210.78.255.255  China
210.79.224.0 – 210.79.255.255  China
210.80.96.0 – 210.80.111.255  Korea
210.82.0.0 – 210.83.255.255  China
210.90.0.0 – 210.127.255.255  Korea
210.178.0.0 – 210.183.255.255  Korea
210.192.96.0 – 210.192.127.255  China
210.204.0.0 – 210.207.255.255  Korea
210.211.0.0 – 210.211.15.255  China
210.216.0.0 – 210.223.255.255  Korea
211.32.0.0 – 211.63.255.255  Korea
211.64.0.0 – 211.71.255.255  China
211.80.0.0 – 211.103.255.255  China
211.104.0.0 – 211.119.255.255  Korea
211.136.0.0 – 211.167.255.255  China
211.168.0.0 – 211.255.255.255  Korea
218.0.0.0 – 218.31.255.255  China
218.36.0.0 – 218.39.255.255  Korea
218.48.0.0 – 218.55.255.255  Korea
218.56.0.0 – 218.99.255.255  China
218.104.0.0 – 218.108.255.255  China
218.144.0.0 – 218.159.255.255  Korea
218.192.0.0 – 218.205.255.255  China
218.232.0.0 – 218.239.255.255  Korea
218.240.0.0 – 218.247.255.255  China
219.72.0.0 – 219.72.255.255  China
219.128.0.0 – 219.159.255.255  China
219.216.0.0 – 219.219.255.255  China
219.232.0.0 – 219.235.255.255  China
219.236.0.0 – 219.237.255.255  China
219.240.0.0 – 219.241.255.255  Korea
219.242.0.0 – 219.247.255.255  China
219.248.0.0 – 219.255.255.255  Korea
220.64.0.0 – 220.92.255.255  Korea
220.112.0.0 – 220.115.255.255  China
220.160.0.0 – 220.191.255.255  China

And here’s a list of my recent Chinese coverage (and let’s se how long it’ll take them to crash this site again):

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Cover Your Shorts, Baby!

In Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Views, commentaries and opinions on 02.12.10 at 03:53

Credit spreads bounced back Wednesday, driven by a strong short covering rally in sovereigns. The strong tightening of spreads was triggered by comments from ECB president Jean-Claude Trichet at the European Parliament yesterday, where he hinted that the central bank’s bond purchase programme could be extended. The markets are aware that the EU’s policy levers are limited, and are looking for the ECB to do more.

“The expectation that it will do so at its governing council meeting tomorrow led to many investors scrambling to cover their short positions.”

Gavan Nolan


The Securities Markets Programme (SMP), launched in May, has been sterilised by extracting liquidity out of the system elsewhere, and it is highly unlikely that this policy would change. But a significant increase in the scope of the programme – along with a possible extension of unlimited 3-month ECB funding into next year – would be welcomed by investors.

“The expectation that it will do so at its governing council meeting tomorrow led to many investors scrambling to cover their short positions,” credit analyst Gavan Nolan writes in Wednesday’s Markit Intraday Alert.

A “better-than-expected” Portuguese T-bill auction also helped support the rally.

The sovereign sold $500 million of 12-month bills and the bid-to-cover ratio of 2.5 could be seen as a relatively healthy, given the volatile conditions.

However, the sovereign had to pay a higher yield but that was to be expected.

Aside from the now ubiquitous sovereign turmoil, investors were also focused on several important economic releases.

European markets woke up to another strong HSBC/Markit Manufacturing PMI. The headline index was up to 55.3 in November, with new orders up to a seven-month high.

“On the negative side, input price inflation was the fastest since July 2008, stoking fears of further monetary tightening,” Gavan Nolan writes.

Leading indicators in Europe also pointed towards a strengthening in growth.

“The Markit Eurozone Manufacturing PMI rose to a four-month high of 55.3 in November, slightly below the earlier flash estimate but still well above the neutral 50 level. However, the data showed that this is a recovery led by the core of Germany and France, with the peripherals lagging well behind,” Nolan points out.

Adding: “The equivalent PMI for the UK was even more impressive. The index rose to 58 in November, its highest level since September 1994 and significantly above the 55.4 reading last month. The coalition government will have been pleased by the expansion in exports, though whether this can be maintained over next year is open to question.”

The US ISM Manufacturing index completed the picture. The November report showed the index rising to 56.6, down from last month but still firmly in expansion territory.

“Economic data is likely to take a back seat tomorrow as investors await the ECB’s announcement,” Gavan Nolan concludes.

Spreads tightened sharply in late trading on further short covering.

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  • Markit iTraxx Europe 112.5bp (-5), Markit iTraxx Crossover 503.5bp (-22)
  • Markit iTraxx SovX Western Europe 190.5bp (-12)
  • Markit iTraxx Senior Financials 161.5bp (-10)
  • Sovereigns – Greece 925bp (-31), Spain 315bp (-52), Portugal 475bp (-71), Italy 228bp (-43), Ireland 570bp (-44), Belgium 190bp (-14), France 95bp (-10)

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