Dr. Copper is feeling under the weather. But will his ailment prove fatal?

By LIAM DENNING

The charts don’t look good for the metal widely regarded as having a Ph.D. in economic forecasting. Monday’s 3.1% fall in the Comex front-month copper contract, to under $4 a pound, pushed it back below the 200-day moving average, a closely watched support level. Worse, the shorter-term, 50-day moving average has been dropping pretty steadily since late February. The dreaded “death cross” looms, when the short-term average drops below the long-term one, portending sustained weakness.

Bloomberg NewsBeijing’s efforts to rein in inflation should serve to constrain copper demand.

Any prognosis must rely on more than charts, however. Copper’s last death cross, just under a year ago, didn’t bury the metal. By September, the 50-day average had moved back above the 200-day indicator, as copper entered a seven month bull run. By mid-February, the copper price had risen 54% and surpassed its 2008 peak at the height of the precrisis commodities boom.

That last run upward, however, coincided with a couple of things. First, the Federal Reserve’s second round of quantitative easing, or QE, drove U.S. real interest rates decisively lower. By weakening the dollar and reducing the opportunity cost of holding nonyielding assets, this made metals a relatively attractive investment. Second, Chinese inventories of copper were restocked during the second half of 2010, according to Deutsche Bank estimates.

Looking ahead to the summer, further U.S. monetary loosening is a debatable prospect. If QE3 fails to materialize, that would undermine the case for holding commodities.

Chinese demand is also key. Apart from the usual seasonal slowdown, Beijing’s efforts to rein in inflation and deflate a real-estate bubble should serve to constrain copper demand in its biggest market. Monday, HSBC released index data showing Chinese manufacturing expanding at its slowest pace in 10 months. The twist is that, if QE3 does materialize and drives the dollar down again, that would exacerbate China’s inflation problem because of the yuan’s peg to the greenback, putting more pressure on Beijing to tighten.

The doctor may take to his bed for the rest of the year.

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FULL ARTICLE AT WSJ.COM

The blog post accusing Longtop Financial Technologies Ltd. (LFT) of fraud appeared April 26.

The Hong Kong-based maker of financial software, whose 2007 initial public offering was underwritten by Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK) and which had 11 analyst “buy” ratings, was no match for investor skepticism. Shares slumped 31 percent in a two-day rout that left them at the lowest since March 2009. Yesterday, a day after Nasdaq trading was suspended, the company announced it wouldn’t file financial statements on May 23 as previously planned. It didn’t set a new date.

Longtop’s slide suggests that short-sellers’ allegations of accounting irregularities at smaller Chinese companies that bought their way into U.S. listings are now dragging down the market for larger Chinese IPOs. Renren Inc., a Beijing-based social-networking company, and the 11 other firms that completed offerings in New York this year posted an average offer-to-date loss of 6.3 percent compared with a 5.9 percent gain from all U.S. IPOs, according to data compiled by Bloomberg.

Full Article

(Reuters) – Billions of dollars in derivatives will be headed into legal limbo if U.S. regulators don’t create a short-term fix to the market chaos that could be unleashed by missing a July financial reform deadline.

The Commodity Futures Trading Commission, in the midst of writing dozens of new rules, has said it will miss the July 16 deadline for implementing rules that give it oversight of the $600-trillion global over-the-counter derivatives market.

As a result, many of those contracts may lose the legal protection afforded them by a clause in the Commodity Futures Modernization Act of 2000, which created a framework that stated they were not illegal off-exchange futures.

The impact of that legal void may be limited if market participants believe regulators will either set up a short-term bridging measure or simply opt not to enforce the rule; but without greater certainty, compliance officers face some sleepless nights.

“I’m sitting here right now trying to figure out what I have to do to make sure that my firm is in compliance on July 16. And I am struggling, big time. This is a real threat,” said Gary DeWaal, group general counsel for brokerage Newedge.

“We need to deal with this threat as an industry immediately. We cannot wait … because we need to plan.”

OTC trades soared in popularity after swaps were given legal protection, allowing commercial parties looking to offset their risk on interest rate shifts or commodity price swings to enter these deals without fear they would be invalidated or considering gambling.

But the CFTC has said it will miss the deadline for most rules that give it oversight of the $600-trillion global over-the-counter derivatives market.

Facing a gap between the protection regime under the current commodities act and the new rules from Dodd-Frank, market players are scratching their heads and fearing a worst-case scenario involving invalidated contracts, dried-up liquidity, and an Exodus to offshore trading.

LARGELY UNREGULATED

The OTC derivatives market, which includes commodity, interest-rate and foreign exchange swaps, started in the 1980s. In contrast to the futures marketplace, it was largely unregulated before last year’s Dodd-Frank law.

It has been an opaque marketplace dominated by a few dealers such as Wall Street giants JPMorgan Chase (JPM.N) and Goldman Sachs (GS.N). Some have said OTC derivatives worsened the 2008 financial crisis, as credit default swaps exposed major financial firms to each other’s riskiness.

To prevent another meltdown, the Dodd-Frank financial reform package requires that as many of these trades as possible be rerouted through central clearinghouses and trade on exchanges or other open venues rather than kept as private negotiations between counterparties.

Industry watchers are worried that with the impending legal uncertainty, contracts could be voided, and it could become easier for someone to walk away from a deal if terms turn sour.

“I don’t think the government can eliminate provisions like this and then not provide some type of comfort to transactions that are already done and in place,” said Greg Mocek, a former enforcement chief at the CFTC and now a partner at law firm Cadwalader Wickersham & Taft.

“There’s billions of dollars of contracts in existence and the CFTC should think about the negative impact the legal uncertainty could have on commerce,” he said.

“WE KNOW IT IS A PROBLEM”

As the July deadline gets closer, Republican CFTC commissioner Jill Sommers is pushing regulators to provide guidance for traders outlining what they plan to do.

“The whole idea behind legal certainty is to give the market certainty, and without some type of guidance at this point we’re not going to have it”, Sommers told Reuters.

“We know it is a problem but I am not sure if we plan to address it. Repealing certain provisions without having the replacement rules in place leaves a gaping hole and it is no doubt a flaw within the bill,” she said.

Those who follow the CFTC, including former CFTC officials, believe the agency’s general counsel, Dan Berkovitz, and his staff are considering not only what action is appropriate but what they can do under their legal purview.

Michael Philipp, a partner in Winston & Strawn’s financial services practice group that represents clients in futures and securities transactions, said it’s hard to quantify how much impact a failure to act could have on the industry.

He said if people continue to trade based on the assumption that regulators will not bring enforcement action, then the impact could be limited.

If people are concerned, it could reduce the number of OTC trades or could cause more transactions to move overseas.

The result could threaten liquidity, making markets thinner and more volatile.

“If they had the authority, (the best option) would be to simply preserve the status quo until the new regime comes into place, but I’m not sure that they’re going to conclude that they have the ability to do that,” said Philipp.

(Reporting by Christopher Doering in Washington, with additional reporting by Jonathan Spicer in New York; Editing by David Gregorio)

Article

THE Australian dollar has overtaken the Canadian dollar as the major currency most closely linked to broadly buoyant investor sentiment, leaving it overvalued and susceptible to a “vicious” decline, HSBC has warned.

In a research note, the British bank said the currency had been supported by a generally upbeat view among investors on the prospects for global economic recovery, drawing on the country’s large commodities exports.

Last week’s abrupt sell-off in commodity markets had a limited impact on the currency, but the high correlation between risk sentiment and the Australian dollar gave cause for concern, according to HSBC.

“We believe the valuation of the Australian dollar is extreme and any move to a risk-off scenario could see a vicious unwind in the (currency),” the bank said in a note to clients.

FULL ARTICLE HERE

Bank of Canada hints at stronger Canadian dollar

Earlier this week, Bank of Canada governor Mark Carney gave a remarkable speech entitled “Canada in a Multi-Polar World”.

In a relatively short address, Mr. Carney covered a myriad of topics, centered on the theme of Canada’s place in a changing world. The global economy is in the midst of a powerful transformation, with the pace of change accelerated by the recent financial crisis.

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One of the key challenges for Canada lies in the outlook for the value of the Canadian dollar. I believe the new paradigm outlined by Mark Carney implies that the Canadian dollar will not only remain above par, but will strengthen further. Mr. Carney outlines four factors that will support Canadian dollar strength.

Firstly, we are in the midst of a commodity price super cycle — there will be fluctuations in prices but the cycle could proceed for some time reflecting fundamental Asian demand. Capital flows are also critical. Foreign central banks have already begun the process of diversifying their massive reserves away from the U.S. dollar and in to free floating currencies like the Canadian dollar.

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FULL ARTICLE

A Munich Re unit hosted about 20 prostitutes at a party thrown in Budapest to reward the insurer’s high-performing agents, a spokesman said.

The incident in the summer of 2007 was a “clear violation” of company policy, said Alexander Becker, a spokesman for the Ergo Versicherungsgruppe subsidiary, in a telephone interview today. Senior management involved in organizing the event are no longer employed at Ergo, he said.

Ergo hosted the party for about 100 guests at the historic Gellert spa, Handelsblatt reported in a preview of an article to be published tomorrow. Women wore color-coded armbands, the newspaper said, citing unidentified guests, with red for hostesses, yellow for those available for sexual favors and white for women reserved for executives and top agents. After each trip to beds set up near the thermal baths, a woman would receive a stamp on her forearm, the paper reported.

Full story at Bloomberg

Cougars Inc.: The Lady Predator Lifestyle

The phenomenon of older women dating younger men has expanded beyond the Web to a transcontinental economy around conventions, travel agencies, love coaches, marketing firms, and other profit-seekers

arryn Russo goes by “Jerzee” and refuses to divulge her age. She also has a very dark, unhealthy-looking tan. On Apr. 29, Jerzee—who appears to be in her mid-40s and, not surprisingly, hails from New Jersey—was at the Manhattan nightclub Greenhouse in an extremely short tie-dyed skirt adorned with peace symbols. When younger men stopped to talk, Jerzee started to dance. “She’s a cougar,” crooned the rapper on stage, “I think I love her, I put no one above her.”

Jerzee was one of more than 30 contestants vying for the title of Miss Cougar America, the marquee event of the third annual National Cougar Convention. And she appeared to be the odds-on favorite until the pageant’s emcee, Rich Gosse—donning a black shirt, a yellow and orange paisley tie, and a thick, unmanicured mustache—announced the shocking news: The crown had gone to Aalsa Lee of Palm Springs, Calif. “We was robbed!” yelled a crestfallen Jerzee supporter who paid the $20 admission fee. Lee, who does not make a secret of her age, is 73.

In the decade since Valerie Gibson published Cougar: A Guide for Older Women Dating Younger Men, the very notion of older women dating younger men has gained acceptance in popular culture, in part, due to the emergence of high-profile women—such as Demi Moore, Katie Couric, and the fictional character Samantha Jones on Sex and the City—who have no qualms about dating younger partners. “There is a new archetype that’s emerging,” says Amy Luna Manderino, the reigning Miss Cougar International. “There have always been free-thinking, vital women over the age of 40. The difference today is our numbers have reached a critical mass.” Christine Lehtonen, a principal at Asterix Group, a marketing and advertising agency in San Francisco, says there are more women in the U.S. aged 51 than any other single age. “Can you imagine what could happen,” she says, “if all these women were marketed to?”

Read the full article at Business Week

(Reuters) – Former California Governor Arnold Schwarzenegger has acknowledged that he fathered a child more than ten years ago with a member of his household staff, the Los Angeles Times reported on Tuesday.

In a statement made in response to questions from the newspaper, Schwarzenegger said: “After leaving the governor’s office I told my wife about this event, which occurred over a decade ago.”

“I understand and deserve the feelings of anger and disappointment among my friends and family. There are no excuses and I take full responsibility for the hurt I have caused. I have apologized to Maria, my children and my family. I am truly sorry.”

FULL STORY HERE

Pacific Investment Management Co., which runs the world’s largest bond fund, said “deteriorating debt dynamics” will stoke faster inflation and financial repression in the U.S. as well as at least one sovereign-debt restructuring in Europe.

In a report aimed at establishing a worldview for investors in the next three to five years, Pimco Chief Executive Officer Mohamed El-Erian raised the prospect of U.S. policy makers trying to force savers to accept returns below the rate of inflation as the government grapples with a budget deficit the White House reckons will reach $1.6 trillion this year.

“It is a world where several governments in advanced economies, and the U.S. in particular, opt for financial repression and mild inflation as the major way to accommodate their deteriorating debt dynamics,” Newport Beach, California- based El-Erian wrote in a report published today on the firm’s website. “It is a world that heals slowly and unevenly and remains structurally impaired.”

Full news story here

Pimco report (pdf)

The problem facing euro zone policy makers as we head into what could be another eventful summer for the global markets is surprisingly simple, yet very unpalatable.

Angela Merkel, Jean-Claude Trichet and to a lesser extent Nicolas Sarkozy have to answer the following question: do we bailout the banks or do we throw more money at highly-indebted nations like Ireland, Portugal and more urgently, Greece?

Since January the euro zone debt crisis has been overshadowed by events in the Middle East, Japan and fears over the health of US finances but over the coming months the problems facing the euro zone will have to be addressed, or – if history teaches us anything – at least fudged.

Full article

(Reuters) – Annual inflation hit a 2-1/2 year high last month and core prices rose at a record pace, deepening the policy dilemma for the Bank of England as it keeps interest rates low to support a sluggish economy.

Consumer prices rose a bigger-than-expected 4.5 percent year-on-year, the fastest pace on increase since October 2008, propelled by soaring travel costs around Easter and higher duty on alcohol and tobacco.

Full article

Speculators cut bets on copper

Seems financial investors have become far less optimistic on copper in recent weeks:

Full article at FT Tilt here

Selloff Scares Away Few Bulls

Hedge Funds Mostly Maintain Bets on Rising Commodities Prices After Plunge

NEW YORK—Hedge funds and other investors still have large bets that commodity prices will continue to rise, even after one of the steepest selloffs in years.

Money managers cut their net-long position in crude-oil futures by 10% on the New York Mercantile Exchange during the week ended Tuesday, according to data released Friday by the Commodity Futures Trading Commission. The decline left speculative investors holding 233,569 more long contracts that anticipate rising prices than short contracts wagering on a decline. A week earlier, these traders held 258,668 more long contracts.

View Full Image

ReutersTraders work in the crude-oil and natural-gas options pit on the floor of the New York Mercantile Exchange in April.

Copper saw some of the steepest declines in money managers’ bets on rising prices, with the category cutting their net-long position in the metal by 59% to 6,076 contracts, from 14,942 a week earlier. Traders shed 6,247 bets on higher prices and added 2,619 bets on lower prices as copper futures tumbled below $4 a pound.

The CFTC, which regulates futures and other derivatives, provides weekly reports on outstanding commodity futures contracts that are closely watched for clues about speculators’ positions.

Read the rest of the article in full here

Just your everyday liquidation sale in Dubai:

Stock cars come under the hammer for UAE racing fans

Race fans dreaming of owning their own 620 horsepower stock car have a chance to fulfil their fantasy.

All the equipment from the defunct Speedcar racing series, an attempt to bring Nascar-style racing to Dubai’s Autodrome, are on the auction block. The sale includes spare engines, tools, telemetry systems and shipping containers, in addition to 27 cars capable of speeds of about 225km an hour.

Full article and video here

TRUMP’S “DEAN SCREAM”: The Donald Loses His Cool On CNBC

Donald Trump was just on CNBC responding to allegations over his property dealings made by the New York Times. He blasted the paper for its report, and its reporter for refusing to appear on TV to defend his claims.

The New York Times reports that more than 300 people are suing Trump after he removed his name from properties they purchased. Those involved in the lawsuit allege there was no disclaimer that Trump was not the developer of the properties, but rather just “rented his name” to the actual developers.

Trump ended up going on a multi-minute rant in which he insulted CNBC anchor Simon Hobbs and slammed the New York Times.

Full story with video here

Rumor: Amazon has an “entire family” of Android devices coming this holiday

Amazon’s Android tablet is both the best and worst kept secret in the mobile industry. Everyone knows that Amazon is working on an Android device, but few know any of the specific details about its hardware or software. I recently took a break from blogging, but I had to come out of retirement for this post because it’s the most interesting Android topic that still remains a mystery. Read on after the jump to see what details I have dug up.

The Rumor

Amazon has an “entire family” of Android devices that will launch this holiday shopping season.

READ MORE

America’s waiting times are the worst in the developed world

Any discussion of waiting times must begin with the observation that France, Germany, Switzerland and many other developed nations manage to combine universal access to care with rapid access to care. It’s an unfortunate quirk of international health-care policy that Canada and England, the two countries that do struggle with waiting times, happen to be the two nearby, English-speaking countries in the sample, and so our impressions of government-run health-care systems are disproportionately influenced by their experiences.

That said, it’s important to understand that America also struggles with waiting times. Someone who can’t afford to go to the doctor, or can’t afford to purchase an elective surgery, waits. In some cases, they wait forever. In some cases, they’re killed by the delay. But we don’t count them as having “waited” for care, and so they don’t show up in measures of American waits. But which would you prefer? A three-month delay for an elective surgery? Or no surgery at all?.

Read the full article with charts here

Facebook is scared, says Chris Soghoian, the man who uncovered its Google smear campaign

This week’s revelation that Facebook has been running a smear campaign against Google has already caused a storm on this side of the Atlantic.

The tactic employed by Facebook, which has said it hadn’t intended a smear campaign, also sheds some light on the often unseen lobbying technology giants use

Multinational manufacturers Moving back to America

The dwindling allure of building factories offshore

“WHEN clients are considering opening another manufacturing plant in China, I’ve started to urge them to consider alternative locations,” says Hal Sirkin of the Boston Consulting Group (BCG). “Have they thought about Vietnam, say? Or maybe [they could] even try Made in USA?” When clients are American firms looking to build factories to serve American customers, Mr Sirkin is increasingly likely to suggest they stay at home, not for patriotic reasons but because the economics of globalisation are changing fast.

Labour arbitrage—taking advantage of lower wages abroad, especially in poor countries—has never been the only force pushing multinationals to locate offshore, but it has certainly played a big part. Now, however, as emerging economies boom, wages there are rising. Pay for factory workers in China, for example, soared by 69% between 2005 and 2010. So the gains from labour arbitrage are starting to shrink, in some cases to the point of irrelevance, according to a new study by BCG.

“Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,” says Mr Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.

KEEP READING HERE