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Monthly Archives: May 2011

Chinese Burrito Carnage, Year to Date


No. Ticker YTD Return Industry
1 SBAY -77.90 Chinese Burritos
2 CBEH -74.90 Chinese Burritos
3 HEAT -69.70 Chinese Burritos
4 DGW -69.62 Chinese Burritos
5 GFRE -66.04 Chinese Burritos
6 RCON -65.38 Chinese Burritos
7 CVVT -65.17 Chinese Burritos
8 KGJI -63.97 Chinese Burritos
9 KNDI -63.00 Chinese Burritos
10 FEED -62.59 Chinese Burritos
11 SCEI -59.61 Chinese Burritos
12 XNY -59.17 Chinese Burritos
13 CNET -59.16 Chinese Burritos
14 PUDA -57.89 Chinese Burritos
15 CHGS -57.48 Chinese Burritos
16 CSKI -56.53 Chinese Burritos
17 OINK -55.20 Chinese Burritos
18 SIHI -55.17 Chinese Burritos
19 NEWN -54.46 Chinese Burritos
20 HSFT -53.68 Chinese Burritos
21 YONG -52.98 Chinese Burritos
22 BSPM -52.84 Chinese Burritos
23 CIIC -52.72 Chinese Burritos
24 MCOX -51.55 Chinese Burritos
25 CNAM -51.29 Chinese Burritos
26 SHZ -50.95 Chinese Burritos
27 CAGC -49.06 Chinese Burritos
28 SCOK -48.12 Chinese Burritos
29 HOLI -47.96 Chinese Burritos
30 LFT -47.68 Chinese Burritos
31 CHBT -46.46 Chinese Burritos
32 CCSC -45.26 Chinese Burritos
33 LZEN -45.18 Chinese Burritos
34 CIS -44.57 Chinese Burritos
35 AMCN -44.27 Chinese Burritos
36 AOB -44.17 Chinese Burritos
37 DHRM -43.43 Chinese Burritos
38 CCIH -43.08 Chinese Burritos
39 CAAS -42.29 Chinese Burritos
40 CMFO -40.93 Chinese Burritos
41 HPJ -38.60 Chinese Burritos
42 SORL -37.98 Chinese Burritos
43 CGA -37.78 Chinese Burritos
44 GU -37.48 Chinese Burritos
45 XING -37.46 Chinese Burritos
46 MY -36.91 Chinese Burritos
47 CHC -36.67 Chinese Burritos
48 VIT -36.51 Chinese Burritos
49 SUTR -36.11 Chinese Burritos
50 TSTC -35.88 Chinese Burritos

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Only China can tackle its own dodgy accounting $LFT

Only China can tackle its own dodgy accounting

May 24, 2011 16:40 EDT

By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

WASHINGTON — Serious reporting shenanigans have hammered several U.S.-listed Chinese companies — most recently Longtop Financial Technologies. However, American investors and regulators have little redress across the Pacific. They should practice healthy skepticism until China opens and polices its own markets.

Examples of the problem abound. The September 2010 resignation of Duoyuan Printing’s auditor, Deloitte Touche Tohmatsu, was followed by silence, and the company was recently delisted by the New York Stock Exchange for failing to file any reports since May 2010. The same firm just resigned as Longtop’s auditor, citing “falsity” in the company’s financial records and management interference, among other things.

There have been several reports of the overstatement of income through creation of fictitious invoices, and some of businesses that bore no relation to the extensive operations described in annual reports and Securities and Exchange Commission filings. Currently the NYSE and Nasdaq have suspended trading in 14 Chinese companies and, according to an April 27 SEC letter, 24 China-based companies had in the preceding year reported auditor resignations, accounting problems or both.

Part of the trouble has been the use of reverse mergers, where Chinese companies buy listed shell companies and thereby avoid some of the scrutiny from investors that applies to standard initial public offerings. But misdeeds appear in companies that went through regular IPOs as well.

Enthusiastic short-sellers have published reports detailing extensive alleged failings of particular companies. In some cases, these reports have relied on misreadings of SEC reports or misunderstandings of the companies’ business models. But enough have proved accurate to devastate share prices in the sector as a whole.

The problem is partly one of enforcement. Dodgy U.S. filings may cause companies to be de-listed, or allow Chinese management to buy out U.S. shareholders at knock-down prices. But malfeasance in relation to U.S. rules rarely leads to harsh penalties from the Chinese authorities. The incentives therefore exist for bad behavior.

In the long run, China needs to open its markets fully to foreign investors, establish globally accepted accounting standards and enforce them rigorously. Meanwhile, buyers should beware — and legitimate Chinese companies will find American capital harder to get.

Original Article

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Nymex Trader Says Oil Prices Have Gone ‘Just Nuts,’ Blames Goldman: Books $CL_F

Dan Dicker could be forgiven if he hooted in vindication as crude plunged 15 percent in the first week of May. He concluded long ago that petroleum prices have become “just nuts,” as he says in “Oil’s Endless Bid.”

Oil markets are defying the normal laws of supply and demand, he argues in this timely book, and a large share of the blame belongs to Goldman Sachs Group Inc. (GS), Morgan Stanley (MS) and other banks. A longtime floor trader, he brings valuable insights to bear on a contentious subject that affects us all.

Dicker spent 25 years trading crude, natural gas, unleaded gasoline and heating fuel at the New York Mercantile Exchange. Bit by bit, he saw Goldman — “the devil to be feared,” he says — and its Wall Street brethren muscle into a sleepy market that was once dominated by oil companies seeking to hedge the risks of physical assets.

Soon a flood of “dumb money” from investors was gushing into funds pegged to the Goldman Sachs Commodity Index, he says. This high tide of cash, totaling billions of dollars, exerted an upward price pressure on oil that burdens American business and threatens to derail a U.S. economic recovery.

“We are all invested in oil, whether we like it or not,” he writes.

‘Peak Oil’

Dicker understands the prevailing wisdom about high oil prices yet remains unimpressed. Has he noticed how the rise of China and other emerging nations has driven up demand? Yes, he has. Is he ignoring evidence that the planet will one day run out of cheap, easily tapped black gunk? No, he’s not.

He says he believes in “peak oil,” the theory that petroleum production will inevitably peak, plateau and decline. Yet when he examines this and other explanations for recent energy-price spikes — a falling dollar, for example — he concludes that they amount to “a bad alibi.”

His argument, brutally compacted, goes like this: Oil today is overpriced, driven ever higher by the new flow of money funneled through investment banks, energy hedge funds and exchange-traded and index funds. Feeding the frenzy are bets from the same kind of American investors who moan about paying almost $4 a gallon to fill up their SUVs.

This new dynamic has led to wild fluctuations, Dicker says. Remember how oil surged in 2008 to more than $145 a barrel in July, only to plunge to less than $34 by late December?

“Nothing proved a speculative bubble more convincingly than the rapid price collapse we saw then,” he writes.


In swaggering prose, Dicker marches us through momentous changes that began rocking oil markets a decade ago. Chief among them is “the assetization of oil,” his infelicitous term for new instruments — think commodity index funds –that make investing in petro prices as easy as buying stocks.

Dicker frowns on this. Just because everyone can now trade oil — Mom, Pop and Aunt Erma, too — doesn’t mean they should, he argues, determined to dissuade the very people who are most likely to buy his book. The notion that we can invest in oil as if it were a stock or bond is “the single most diabolical source of our pricing problem,” he writes.

Oil isn’t a stock or a bond. You don’t get dividends, interest or a way to reinvest profits and compound returns, he explains. All you get is a wager on oil prices — a futures contract with a short shelf life. Your bet “self-destructs every 30 days,” as Dicker says.

Barrels on Doorsteps

Many people, heeding the growth of emerging nations, peak- oil arguments and the upheaval in Libya, are betting oil will go up. Being accustomed to stocks, they want to buy and hold. The only way to do that, unless you want a contract for 1,000 barrels of oil delivered to your doorstep, is to roll your position over by retiring an old contract and initiating a new one with a later expiration date.

This may expose you to a tax liability, not to mention commissions and fees on two trades (for getting out and getting back in). Imagine, too, what happens when commodity index funds roll their positions all at once, as they do on certain days each month. This mechanical reset is called the Goldman Roll, after the Goldman Sachs Commodity Index. It winds up amplifying any fundamental arguments for higher prices, Dicker says.

Can this be fixed? Yes, says Dicker, though his solution would mean forbidding most individuals from trading oil (and handing some clout back to pros such as himself). If he had his way, commodity index investing would be banned, along with exchange-traded funds that engage in futures.

Nostalgia for “the good old days of oil trading” tinge this book, which is enlivened with memories of “standing shoulder to shoulder with another 120 sweaty, smelly traders.” Yet it’s the future, by this account, that may really stink.

"Oil's Endless Bid"

The cover jacket of “Oil’s Endless Bid: Taming the Price of Oil to Secure Our Economy” by Dan Dicker. Source: Wiley via Bloomberg

Dan Dicker

Dan Dicker, author of “Oil’s Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy.” Source: Wiley via Bloomber#


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All New Cars To Be Mandated With Lojack Black Box

“The National Highway Traffic Safety Administration (NHTSA) is expected to issue new regulations next month, that will require a black box style data recorder be fitted in all new cars.

Similar in concept to the familiar black boxes used in commercial aircraft for decades, the boxes are expected to record information about speed, seat belt use and brake application in the final seconds leading up to an accident, the data can be retrieved for later analysis.

Before you start screaming about government overreach, you should know that almost every new car already has a device like this fitted at the factory. For example, GM has fitted one to almost every new car they’ve built since the early 1990s.”

Full article

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Plant Explosion Could Cut Apples iPad Production by 500k Units

“The explosion at Foxconn’s plant in Chengdu, China Friday night, a manufacturing location for Apple Inc.’s (AAPL) hot-selling iPad tablet computer, could cause a production shortage of 500,000 Apple iPad 2 in Q2’11, based on a new assessment from IHS iSuppli.

Total iPad 2 production volume at the high-tech plant amounts to about 500,000 units per month.

If the explosion translates into a production shutdown until the end of June-which might or might not occur, based on the results of the still-pending investigation–a production stoppage of 500,000 units could result, the firm added. If the production suspension last longer, the effect on production could be even greater, it states.

Apple shares were down $1.03, or less than one percent, to $333.47 in recent trading.”

Full article

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Focus on Gains Not Losses

“Why aren’t companies hiring? Why aren’t homes selling, despite bargain pricing? Why is growth and innovation in some industries so sluggish?

Americans have a well-earned reputation for risk-taking, but these days we are something of a timid lot. Our reluctance to stick our collective neck out has everything to do with the psychology of motivation — specifically, how we think about the goals we pursue. The problem, in a nutshell, is simply this: when making decisions, lately many of us have been focused much more on what we have to lose than on what we might gain.

Whenever we see our goals — whether they are organizational or personal — in terms of what we have to lose, we have what’s called a prevention focus. Prevention motivation is about obtaining security, avoiding mistakes, and fulfilling responsibilities. It’s about trying to hang on to what you’ve already got and keep things running smoothly, and it isn’t at all conducive to taking chances.”

Full article

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Markets Erase Early Opening Gains; Industrials and Banks Lead the Way

“NEW YORK (Reuters) – Stocks edged lower on Tuesday as a rebound in commodity prices failed to offset lingering concerns about a slowdown in industrial growth.

Both U.S. crude and Brent futures rose after Goldman Sachs raised its forecast for oil, citing strong fuel demand growth.

The energy sector, which was one of the weakest on Monday due to anxiety about Europe’s debt crisis, led the day’s gains, while industrials pushed the market down for a second day.

Financial stocks also pressured the market with the KBW bank index (.BKX) down 0.7 percent.

“There isn’t much for the market to get excited (about) at this point, especially going into summer months and the QE coming to an end soon,” said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Texas, Austin.

The Dow Jones industrial average (.DJI) was down 12.86 points, or 0.10 percent, at 12,368.40. The Standard & Poor’s 500 Index (.SPX) was down 1.43 points, or 0.11 percent, at 1,315.94. The Nasdaq Composite Index (.IXIC) was down 10.06 points, or 0.36 percent, at 2,748.84.”

Full article

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Chrysler Pays Back Their Bailout Money

“DETROIT (Reuters) – Chrysler Group LLC on Tuesday paid back $7.6 billion in U.S. and Canadian government loans from its 2009 bailout, a move that allows the U.S. automaker to distance itself from an unpopular bailout and deepen its ties with Italian automaker Fiat SpA.

Chrysler said it had made payments of $5.9 billion to the U.S. Treasury and $1.7 billion to the governments of Canada and Ontario to repay loans it received in June 2009.

The repayment puts Chrysler on firmer financial ground and draws it closer to Fiat, two goals investors and bankers have said would make Chrysler more attractive in an initial public offering that could come this year or next.”

Full article

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FDIC: Troubled Banks Grew in Q1

“The number of banks at risk of failing made up nearly 12 percent of all federally insured banks in the first three months of 2011, the highest level in 18 years.

That proportion is about the same as in the October-December quarter last year, though the increase in the number of banks on the Federal Deposit Insurance Corp.’s confidential “problem” list is slowing. The FDIC added only four banks to its list in the January-March quarter.

That brought the total to 888 from 884. Banks on the list are deemed by examiners to have very low capital cushions against risk.

The industry reported its highest earnings as a group in the January-March quarter, $29 billion, since before the financial crisis hit more than three years ago.”

Full article

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CFTC Charges Parnon Energy, Arcadia Petroleum and Arcadia Energy With Manipulating Crude Oil Market

“The Commodity Futures Trading Commission filed a civil enforcement action against Parnon EnergyArcadia Petroleum and Arcadia Energy for manipulating Nymex crude oil futures prices from January to April 2008.

The CFTC also charged James Dyer and Nick Wildgoose for directing the manipulative trading scheme.

“According to the allegations, defendants conducted a manipulative cycle, driving the price of WTI to artificial highs and then back down, to make unlawful profits,” said the commission in a prepared statement.”

Full article

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Fed Governor Elizabeth Duke: Gas prices hurt consumer

On Tuesday May 24, 2011, 10:58 am EDT
By Kristina Cooke

PHILADELPHIA (Reuters) – Consumers are struggling with higher gasoline costs and a weak housing market, Federal Reserve Governor Elizabeth Duke said on Tuesday, in remarks that suggested she is unlikely to be pressing for higher interest rates soon.

Federal Reserve Bank of St. Louis President James Bullard struck a similar tone in a speech late Monday, saying a pause once the $600 billion quantitative easing program ends in June would give the Fed time to assess the strength of the economy. Bullard said U.S. economic growth had disappointed in the first half of the year.

The Fed cut interest rates to near zero in December 2008 and has kept them there since. Bullard said keeping monetary policy on hold signals no change to the Fed’s pledge to hold rates extremely low for an extended period.

Duke’s remarks, while focused primarily on financial literacy, offered a flavor of her views on the economy.

“The financial crisis and the slow recovery from it has obviously had a dramatic impact on the financial decisions made by American families. Many now have fewer financial resources and limited options,” Duke told a conference sponsored by the Boston Fed.

“Many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage.”

After a retreat in crude oil prices, U.S. gasoline costs fell to $3.85 a gallon in the latest week, the lowest level in five weeks, the Energy Department said on Monday. Although prices are down 11.1 cents from the previous week, the national gasoline price is still $1.06 higher than a year ago.

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Today’s Biggest Winners and Losers

No. Ticker % Change
1 YNDX 43.04
2 SIFY 39.84
3 FPIC 28.82
4 REVU 25.00
5 HRZ 23.33
6 RVI 16.41
7 DSW 16.32
8 SQNS 15.09
9 LMLP 15.07
10 TNE 14.86
11 CCIH 13.24
12 MRNA 13.04
13 NEWN 12.28
14 LEXG.OB 11.50
15 BTM 10.31
16 REDF 10.04
17 OMEX 9.91
18 ZA 9.03
19 HDY 8.85
20 PWRD 8.85
21 CNTF 8.55
22 BPHX 8.21
23 NZT 7.62
24 HSOL 7.47
25 OGXI 7.47
No. Ticker % Change
1 MCOX -22.98
2 CNET -15.53
3 INVE -14.46
4 CHBT -13.53
5 ANO -9.71
6 MOBI -9.61
7 CBRL -9.58
8 LPHI -8.99
9 CWTR -7.69
10 OPXT -7.34
11 HOLI -7.11
12 LCAV -6.99
13 VIT -6.81
14 VICL -6.81
15 FRO -6.72
16 HSWI -6.58
17 ANCI -6.21
18 RP -6.16
19 CBAK -6.06
20 PPHM -6.05
21 LNET -5.95
22 HTWR -5.88
23 CIS -5.80
24 OSG -5.76
25 PWAV -5.74

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Feds Allow Companies To Police Themselves

“When it comes to investigating corporations of bribery and other crimes, the federal government prefers to save money—and allow suspects to conduct their own probes—than perform their own snooping from start to finish.

Whether the concern is foreign or domestic corruption by U.S. companies, the Department of Justice and Securities and Exchange Commission have increasingly allowed corporations to hire teams of lawyers and accountants to interview employees, gather electronic records and sift through documents, according to The Washington Post. Then, federal investigators review the results and decide whether to step in and probe the situation themselves or if they should indict anyone.

For corporations, conducting the internal investigations is not cheap. Diebold, which makes ATMs, spent $16 million, Avon more than $130 million and Siemens about $950 million. However, if the Siemens figure seems impressive, it is worth noting that it was still cost-effective for the company. In addition to the $950 million, Siemens paid fines of $800 million. But the $1.7 billion total was still less than the $2.7 billion that it could have been fined for bribing foreign officials. And not a single Siemens executive or employee had been prosecuted by the Justice Department.”

Full article

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Manufacturing Revival Amidst Near Record Real Low Trade Deficits

“Many economists are racing to declare a ‘manufacturing revival.’  The latest to join the bandwagon is Paul Krugman. In his latest column, Krugman writes (my emphasis added)

Manufacturing is one of the bright spots of a generally disappointing recovery…..Crucially, the manufacturing trade deficit seems to be coming down. At this point, it’s only about half as large as a share of G.D.P. as it was at the peak of the housing bubble, and further improvements are in the pipeline…one piece of good news is that Americans are, once again, starting to actually make things.

Oh, how I wish Paul was right.  Unfortunately,  I still don’t see it in the trade numbers. In fact, the real trade deficits in capital and consumer goods are both nearing all-time (negative) records. Meanwhile, the real trade deficit for industrial supplies and materials has improved in large part because of an enormous surge in real exports of energy products, including coal, fuel oil, and other petroleum products (yes you read that right) and a sharp decline in imports of building materials. I don’t find either of these convincing proof of a resurgence of manufacturing….”

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Growth Cuts Lining Up For the S&P

“The Federal Reserve will execute a gentle, staged exit strategy that won’t begin until the end of this year at the earliest and will put the Fed Funds rate just 50 basis points higher 13 months from now, according to the latest CNBC Fed Survey.

The 62 participants in the survey actually lowered their outlook for the Funds rate in June 2012 to an average of 75 basis points, down from 90 basis points in the April survey.

Even in December 2012, the Funds rate only rises to an average of 1.37 percent, compared with 1.67 percent in the April survey.

Respondents, who include economists, fund managers and strategists, also cut their outlook for growth and the level of the S&P 500. They now see growth of just 2.77 percent this year, compared with a 3.07 percent forecast in April. The S&P is seen hitting 1367 in December, about 2.7 percent lower than the prior forecast.”

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