Washington, 24 May 2011: Reuters

The U.S. Congress should take steps to limit speculation in oil markets, which has boosted prices as much as 30 percent, a new report from the Democratic staff of a House of Representatives oversight committee said on Monday.

The report, based on data and comments from industry experts, cites comments from Exxon Mobil CEO Rex Tillerson and others that oil should be around $60-$70 a barrel based on the fundamentals of supply and demand.

“Addressing excessive speculation offers the single most significant opportunity to reduce the price of (gasoline) for American consumers,” according to the report, prepared for Democrats on the House Committee on Oversight and Government Reform, which has broad oversight of government policies.

The staff report, which also backs other positions championed by minority Democrats including eliminating oil company subsidies, is unlikely to gain much traction in the Republican-controlled House. It argues that Republicans proposals such as steps to boost domestic offshore drilling, would not achieve the goal of reining in $4 gasoline prices.

With national elections next year, members of Congress have been arguing about the best way to combat high gasoline prices, a top concern of voters. While Republicans have focused on increasing domestic oil production, many Democrats have called for cracking down on market manipulation.

“With gas prices skyrocketing to more than $4 per gallon, it is time to stop focusing on advancing the priorities and profits of oil companies and instead find ways to give American consumers relief at the pump,” said Rep. Elijah Cummings, Maryland Democrat, the ranking committee member.

The report says increasing domestic drilling would “impact prices by only about 1 percent.” It cites data from the U.S. Energy Information Administration, saying drilling on the Atlantic and Pacific coasts of the United States would have little impact on global prices by 2020.

The Oversight Committee, chaired by Republican Congressman Darrell Issa, is set hold a hearing on Tuesday on factors affecting gasoline prices in the world’s largest oil consumer.

RECORD SPECULATION

“In order to make the most significant impact on lowering gas prices, the committee’s primary focus should be on countering the growing impact of excessive speculation, rather than pursuing the oil industry’s priorities of increasing domestic drilling or repealing safety measures put in place after the devastating BP oil spill,” the report said.

Big hedge funds and other speculators had increased their bets on higher prices to an all-time record level at the end of April, according to data from the U.S. Commodity Futures Trading Commission.

Data shows money managers had accumulated contracts equivalent to around 350 million barrels of U.S. crude oil, or four days of global consumption, with a notional value of more than $38.5 billion.

U.S. benchmark crude, known as WTI or West Texas Intermediate , hit a post-2008 high of $114.83 on May 2, before tumbling more than 10 percent in one session three days later.

Many experts said the steep decline on May 5 came as funds liquidated long positions, demonstrating the outsized impact investment flows have on commodity prices.

So far in May, speculative bets on higher oil prices have been reduced by around a quarter, but remain at a level never seen before the start of this year. WTI crude prices have fallen by around 15 percent in May, to trade around $97.50 on Monday. High gasoline prices have cut U.S. President Barack Obama’s approval ratings. He has set up a working group of federal agencies to investigate possible market fraud.

More than a dozen senators, including one Republican, have called on the CFTC to unveil a plan by Monday to impose position limits for speculators in energy futures markets. CFTC chairman Gary Gensler fell short of that goal. In a letter late on Monday to the senators, he said that commission staff will “shortly” complete its review of almost 12,000 comments on the agency’s proposal from January to put position limits on 28 commodities, including crude oil.

“The commission will begin considering a final rulemaking after staff can analyze, summarize and consider comments and after the commissioners are able to discuss the comments and provide feedback to staff,” the letter said.

Gensler did not say in the letter, which was also written on behalf of commissioners Michael Dunn and Scott O’Malia, when a final rule might be issued imposing position limits. Commissioners Jill Sommers and Bart Chilton did not sign on to the letter.

Chilton, an outspoken proponent of position limits, said in a separate letter to the senators late last week that he agreed “wholeheartedly” with their position. “I believe we are fully capable of enacting a position limits rule that does not harm markets, or harm legitimate business activity,” Chilton said.

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FULL ARTICLE LINK

Philipp Hildebrand, president of the Swiss National Bank. Photographer: Adrian Moser/Bloomberg

Swiss National Bank President Philipp Hildebrand may soon have room to raise borrowing costs for the first time in almost four years as the economy defies the franc’s surge.

Policy makers are weighing the threat of near-zero interest rates stoking property prices against the risk that an increase in the benchmark will push up the franc. While the currency has gained about 20 percent against the euro since the SNB cut its benchmark to 0.25 percent in March 2009, there are few signs that the exchange rate is undermining the recovery, with exports increasing and leading indicators signaling quickening growth.

“Does the economy really need interest rates near zero?” said David Kohl, deputy chief economist at Julius Baer Group in Frankfurt. “No, it doesn’t. Now is exactly the right time to raise borrowing costs because any increase would only show an impact on the economy in a year,” he said. The recovery is strong enough to weather borrowing costs of 1 percent to 1.5 percent, according to Kohl.

While Swiss rates, the lowest among major global economies after Japan and the U.S., have spurred the economy’s recovery from a 2009 slump, they’re also fueling housing demand. Prices for single-family homes jumped 4.7 percent in 2010, data compiled by real-estate consultant Wueest & Partner AG show. The region of Geneva led the gains, with prices climbing 12 percent.

Mortgage Market

Hildebrand toughened his tone on the mortgage market last month, saying that “imbalances with serious repercussions” can emerge if borrowing costs remain at a “very low level for a long time.” In their March assessment, policy makers said the property market warrants their “full attention.”

“An increase would be the beginning of a normalization,” said Caesar Lack, head of economic research at UBS AG’s Wealth Management Research in Zurich and a former SNB economist. “It wouldn’t have much of an impact on the franc. But the fact that they’ve kept rates on hold for so long indicates that they’re extremely worried about possible implications.”

Five of 23 economists in a Bloomberg survey forecast that the Zurich-based SNB will raise its key rate on June 16, compared with none in March, marking the biggest division since the SNB cut its benchmark rate to near-zero more than two years ago. Among those predicting an increase are analysts at UBS and Bank of America/Merrill Lynch.

Upside Risks

The European Central Bank increased borrowing costs last month for the first time in almost three years, while central banks in Sweden, Norway and Russia also have raised their benchmark rates. Hildebrand has indicated a growing unease about price pressures, saying April 29 that the economy is expanding “more vigorously than anticipated” and “certain upside risks” on inflation “are beginning to emerge.”

The median forecast among economists is for a rate increase in September. The SNB has four regular meetings a year.

The franc was at 1.2422 per euro at 11:17 a.m. in Zurich, after reaching a record of 1.2324 yesterday. The currency, perceived as a so-called safe haven, has risen 6 percent since April 6 as the euro-area’s debt crisis worsened. It was at 88.23 centimes versus the dollar, down from an all-time high of 85.54 centimes on May 4.

SNB Vice Chairman Thomas Jordan told Swiss state television in an interview broadcast last night that while policy makers are “very concerned” about currency developments, exporters have “coped relatively well” with the franc’s appreciation.

“The currency isn’t having any significant impact on the economy,” said Dirk Schumacher, an economist at Goldman Sachs Group Inc. in Frankfurt. The SNB “clearly risks being behind the curve,” he said.

Overcoming Appreciation

Data suggest the recovery can withstand a policy tightening just as it has overcome the currency appreciation. Strengthening global growth has boosted demand for goods ranging from Swatch Group AG (UHR) watches to ABB Ltd. (ABBN) turbochargers, with exports surging 9.8 percent in the first quarter from a year ago when adjusted for inflation and work days. Unemployment is at 3.1 percent, the lowest since February 2009, and KOF leading indicators rose to the highest in almost five years last month.

The Swiss economy may expand 2.4 percent this year and 1.9 percent in 2012, the BAK Basel Economics research institute said. That’s above the SNB’s forecast of about 2 percent for 2011. In 2010, gross domestic product rose 2.6 percent. In the euro region, GDP may advance 1.6 percent this year, the European Commission said.

Foreign sales continued to grow even as the real effective exchange rate rose 10 percent in the past year, according to Jan Amrit Poser, the chief economist at Bank Sarasin in Zurich. Such an appreciation usually translates into a 15 percent plunge.

‘Export Miracle’

This “can only be described as an export miracle,” Poser said. “It appears that exports are less susceptible to prices than generally thought. We expect that the SNB will undertake its first tentative interest-rate hike in June.”

For Alexander Koch, an economist at UniCredit Group in Munich, the SNB can afford to keep borrowing costs on hold until its September meeting. Inflation was 0.3 percent in April, compared with 2.8 percent in the euro area, partly as the franc’s gain softened the impact of rising oil prices.

“The economic situation has improved further and exports have resisted the franc’s strength,” Koch said. “Still, as long as inflation remains subdued, there’s no need for the SNB to raise rates anytime soon.”

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.

—————–

FULL ARTICLE AT WSJ.COM

The New $AIG IPO, Yandex, Mango ($MSFT new OS), and more…

No. Ticker % Change
1 CVOL 9.75
2 CZI 8.65
3 DPK 6.98
4 TVIX 6.80
5 EDZ 6.34
6 SOXS 6.29
7 BXDC 6.03
8 LHB 5.51
9 TZA 5.42
10 SQQQ 5.25
11 SCO 5.11
12 SRTY 5.04
13 EPV 4.90
14 FXP 4.85
15 ERY 4.49
16 TYP 4.27
17 MWN 4.24
18 EFU 4.23
19 FAZ 4.09
20 EEV 4.05
21 INDZ 3.76
22 BGZ 3.67
23 SJH 3.65
24 TWM 3.58
25 DTO 3.56
—————————
No. Ticker % Change
1 CZM -7.99
2 DZK -7.04
3 SOXL -6.24
4 EDC -6.15
5 BRIL -5.54
6 TNA -5.47
7 UCO -5.18
8 JJN -5.07
9 XPP -4.58
10 JJT -4.53
11 ERX -4.51
12 FCGL -4.41
13 TQQQ -4.41
14 TYH -4.40
15 MWJ -4.29
16 FAS -4.14
17 UKK -3.99
18 EET -3.94
19 BDD -3.89
20 XIV -3.79
21 GAF -3.78
22 TAN -3.75
23 EWY -3.70
24 EIDO -3.66
25 INDL -3.64

The CFO and auditor resigned after Citron Research alleged the company of fraud. To make matters worse, the SEC has begun an accounting audit.

Note: Goldman was a big advocate of the shares.

Indices are down about 1.5% across the board.

Things will get exponentially worse should the ECB raise rates.

It’s being reported that Greece has less than 2 months worth of cash left. On that news, the euro is cratering.

Copper is down 1.4%
Crude is down 1%
Gold is down 0.33%
Platinum is down 0.68%

Related: S&P Futures are 11 points below fair value and the dollar is up 0.7%

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

School is in session.

Full Article

Michael Collins is out.

Full article

Full Article

Due to various allegations of fraud, investors are pumping and dumping Chinese related shares with reckless abandon. Here are some weekly percentage moves that would drive any investor crazy.

No. Ticker 1-week Return % Change Industry
1 LONG 80.85 4.77 Chinese Burritos
2 FFHL 36.68 7.43 Chinese Burritos
3 DATE 33.83 19.17 Chinese Burritos
4 NEWN 26.87 -5.48 Chinese Burritos
5 CISG 23.02 -0.06 Chinese Burritos
6 QIHU 12.60 3.96 Chinese Burritos
7 ATAI 12.15 -0.29 Chinese Burritos
8 SINA 10.17 -0.32 Chinese Burritos
9 DHRM 9.25 0.00 Chinese Burritos
————————————————————
No. Ticker 1-week Return % Change Industry
1 JGBO -36.22 -2.78 Chinese Burritos
2 CCSC -27.84 3.59 Chinese Burritos
3 SIHI -27.81 -4.55 Chinese Burritos
4 BSPM -24.73 -2.84 Chinese Burritos
5 TPI -24.49 -2.13 Chinese Burritos
6 YONG -22.22 6.25 Chinese Burritos
7 FXCM -21.82 0.96 Chinese Burritos
8 CCIH -18.88 -7.34 Chinese Burritos
9 VIT -18.44 0.16 Chinese Burritos
10 GRRF -17.80 1.20 Chinese Burritos
11 HEAT -17.21 -4.86 Chinese Burritos
12 NQ -17.20 2.67 Chinese Burritos
13 CHBT -16.96 -9.53 Chinese Burritos
14 CYD -14.72 -13.92 Chinese Burritos
15 CIS -14.29 1.69 Chinese Burritos
16 COGO -14.08 -3.34 Chinese Burritos
17 RCON -13.44 -1.83 Chinese Burritos
18 ALN -13.27 -4.39 Chinese Burritos
19 CNET -13.21 -10.85 Chinese Burritos
20 BORN -13.19 -7.56 Chinese Burritos
21 KONG -12.50 5.50 Chinese Burritos
22 CHLN -12.33 1.08 Chinese Burritos
23 CHC -12.27 -3.59 Chinese Burritos
24 HSFT -11.72 0.67 Chinese Burritos
25 CTFO -10.69 0.00 Chinese Burritos

Net Revenues in Q1 2011 Increased by 53.4% Year-Over-Year

General Merchandise Revenue in Q1 2011 Increased by 161.6% Year-Over-Year… Read more

(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

Q1 adj profit $0.35/ADS vs est. $0.39; Rev up at $527.3 mln vs est. $567.5 mln. Read more

BKS getting a $17 bid. It sure beats bankruptcy protection.