Matthew Simmons: Lightning Rod for Gulf Oil Controversy
by Zero Hedge - July 25th, 2010 9:32 pm
Courtesy of George Washington
Matthew Simmons has made a lot of big claims about the oil spill (see videos below).
Because of his background, Simmons has been interviewed repeatedly in television, newspaper and radio media. Simmons was an energy adviser to President George W. Bush, is an adviser to the Oil Depletion Analysis Centre, and is a member of the National Petroleum Council and the Council on Foreign Relations, and is former chairman and CEO of Simmons & Company International, an investment bank catering to oil companies.
People have become polarized around Simmons as a lightning rod. For example, people who believe all of Simmons’ claims believe that anyone who questions any of Simmons’s claims is working for BP. On the other extreme, people who think Simmons has gone senile or is simply talking his book (he’s short BP) tar and feather anyone who questions BP’s version of the Gulf narrative as being a crazy Simmons follower.
So let’s assess Simmons’ claims one-by-one. And – more importantly – let’s refocus the discussion away from one person and towards the Gulf itself (Simmons himself will either be vindicated, proven off-base, or something in between. But that is his personal concern, not ours).
BP’s stock Will Go to Zero
Simmons predicts that BP’s stock will go to zero. he might be right. Fines under the Clean Water Act are $4,300 per barrel of oil spilled into the Gulf of Mexico. And civil and criminal damages could be substantial.
But BP has been doing everything in its power to lowball the amount of oil spilled into the Gulf (and see this), even though it easily could have easily quantified how much oil is spilling. If the government allows BP to get away with lowballing the spill number, the fines won’t bankrupt BP.
Similarly, if the government let’s BP maintain its $75 million liability cap on economic damages, let’s BP hide the extent of the damage to the Gulf (see this and this), to perform only a superficial clean up of the Gulf and fails to press criminal charges (or let’s BP off with a slap on the wrist), then BP might survive by selling assets.
And remember, BP is still one of the largest suppliers of oil to the U.S. military. See this and this.
In…
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With Stocks, It’s Not the Economy
by ilene - July 25th, 2010 9:21 pm
Decoupling between stock prices and the domestic economy – and Zachary Karabell explains why he believes this trend will continue. – Ilene
With Stocks, It’s Not the Economy
By Zachary Karabell, courtesy of TIME
From the beginning of May until late June, stock markets worldwide declined sharply, with losses surpassing 10%. The first weeks of July brought only marginal relief. Ominous voices began to warn that the weakness of stocks was a direct response to the stalling of an economic recovery that has lasted barely a year. Anxiety over debt-laden European countries — most notably Greece — combined with stubbornly high unemployment in the U.S. to create a toxic but fertile mix that allowed concern to blossom into full-bloom fear.
The most common refrain was that stocks are weak because global economic activity is sagging. A July 12 report by investment bank Credit Suisse was titled Are the Markets Forecasting Recession? With no more stimulus spending on the horizon in the U.S., Europeans on austerity budgets and consumer sentiment best characterized as surly, the sell-off in stocks was explained as a simple response to an economy on the ropes.
It’s a good story and a logical one. But it distorts reality. Stocks are no longer mirrors of national economies; they are not — as is so commonly said — magical forecasting mechanisms. They are small slices of ownership in specific companies, and today, those companies have less connection to any one national economy than ever before.
As a result, stocks are not proxies for the U.S. economy, or that of the European Union or China, and markets are deeply unreliable gauges of anything but the underlying strength of the companies they represent and the schizophrenic mind-set of the traders who buy and sell the shares. There has always been a question about just how much of a forecasting mechanism markets are. Hence the saying that stocks have…
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A Bearish Predisposition?
by Zero Hedge - July 25th, 2010 9:19 pm
Courtesy of Leo Kolivakis
From systemic risk of capitalism, we move on to more current events. I had lunch today with Greg Gregoriou, a professor of Finance at SUNY (Plattsburgh) Greg has published many books and articles, and his most recent article with Razvan Pascalau on the optimal number managers in funds of hedge funds has garnered much attention.
Interestingly, while some major funds of hedge funds lost out in the crisis, assets from global pensions remain stable. Moreover, hedge funds are much more focused on meeting institutional demands:
Pension funds globally typically allocated less than 5 per cent of their portfolio to hedge funds or funds of hedge funds (while targeting an allocation of 6-10 per cent), and while this share has increased over the last few years, many expect it to double or triple in the years ahead.
In the US, private sector pension funds look to allocate on average up to 10 per cent of assets to hedge funds, a little ahead of America’s public sector pensions, which target about 8 per cent. In the UK, some of the biggest schemes allocate up to 15 per cent of their portfolio to hedge funds. In continental Europe, the take-up of hedge funds by pensions has been more mixed, but pension funds in some markets, such as the Netherlands, have embraced hedge funds and other alternative investment strategies.
The global economic crisis provided only a temporary interruption in the growth of institutional investments. Investors pulled about $300bn (£197bn, €232bn) out of hedge funds between October 2008 and June 2009, but inflows returned to healthy levels in the second half of 2009. Recent surveys by Credit Suisse and Deutsche Bank suggest the industry may attract $200bn-$300bn of new capital this year. It appears a large part of redemptions that followed the 2008 crunch were from wealthy individuals rather than institutions, and that institutions continued contributing new capital throughout most of 2009.
As part of their own growth and maturation, and in response to greater institutional investor demand, hedge fund managers and firms of all sizes have become more institutionalised in terms of their internal systems, structures and general operational infrastructure. This can be seen in the use of risk management
…
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Cheeky's Futures Charts – July 25
by Zero Hedge - July 25th, 2010 8:17 pm
Courtesy of RobotTrader
Futures are off and kicking….
Indexes
Energy
Metals
Agricultural commodities
Bonds
Currencies
New Zealand
Australia
Japan
Korea
Hong Kong
Dubai
Shenzen Stock Exchange
Shanghai
India
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Cheeky’s Futures Charts – July 25
by Zero Hedge - July 25th, 2010 8:17 pm
Courtesy of RobotTrader
Futures are off and kicking….
Indexes
Energy
Metals
Agricultural commodities
Bonds
Currencies
New Zealand
Australia
Japan
Korea
Hong Kong
Dubai
Shenzen Stock Exchange
Shanghai
India
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Weekly Market Commentary: Pushes Higher
by Chart School - July 25th, 2010 8:15 pm
Weekly Market Commentary: Pushes Higher
Courtesy of Fallond Stock Picks
The S&P closed the week up 3.55% higher but hasn’t yet cleared the highs of the bear flag which lurk at 1,131 but so far the initial decline from 2010 highs has honored Fibonacci retracements
via StockCharts.com
In support, the NYSE Summation Index looks to have flinched and jumped early. A stochastic ‘buy’ is undermined by the lack of the oversold condition in the index itself.
via StockCharts.com
The only S&P breadth indicator to confirm a bottom (so far) is the S&P Percent of Stocks Above the 50-d MA. It has jumped from a low of 5.4% to 66.0% in a number of weeks.
via StockCharts.com
The Nasdaq has pulled further away from its head-and-shoulder reversal neckline but it hasn’t yet reached an oversold condition.
via StockCharts.com
The Percentage of Nasdaq stocks above the 50-day MA matched its S&P cousin with a confirmed ‘buy’ signal.
($NAA50R)
via StockCharts.com
So while the S&P and Nasdaq are pointing more towards a bottom they are not fully confirmed – yet.
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All About Trends Subscriber Weekend Newsletter
by Chart School - July 25th, 2010 7:48 pm
All About Trends Subscriber Weekend Newsletter
Courtesy of David at All About Trends
Friday we said:
So what if the market goes to 1131?
First off we have to get through the 200-day moving average at 1113 which is just a futures related pop at the open on Monday away. By the way these futures related pops at the open are what causes negative RS divergence because there really isn’t any strength per say just an adjustment in price from the prior close via the pop.
Notice the Full Stoh’s are right back to being up where they were every other time we were in the zone for a turn around?
Secondly look at where the 200 day moving average is (1113). Then the 50% fibonacci retracement level off the April highs to July lows is at 1114 too as shown in the chart below. This makes for some headwinds to overcome IF we are plowing higher.
And lastly the red line is the SPIKE HIGH of 1131. We emphasize the spike high of 1131 because it wasn’t there long and the market started giving it back.
So now we’ve got some decent resistance levels just overhead.
Zooming in to a different time frame and frequency we see a closer view of this recent push off the July lows.
Here too Full Stohcastics are right back up into the overbought territory which makes us pause. We’re not going to get cute on the longside here. Sure, we may have to deal with a little inflight turbulence but that ought to be nothing new as we’ve been here before and will be here again during our trading careers.
You can also see that we broke the red downtrend channel to the upside but we’ve already talked about that being a possibility last week. Another interesting point is the ABC up swing we’ve just seen (on negative RS divergence we might add). This also makes it time for our favorite question:
Is it going to be a 3 waves up affair and that’s it? If so, ABC123 is currently showing and we are there in the zone.
OR
Is it going to be 5 waves up to the…
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My Life as a White-Collar Criminal
by Insider Scoop - July 25th, 2010 7:39 pm
My Life as a White-Collar Criminal
Courtesy of Sam Antar at White Collar Fraud
Last Friday evening, Marcia MacMillan from CTV News Channel (a 24-hour news network in Canada) interviewed me and asked me what it’s like to be a white-collar criminal and what role, if any, did morality play in my decisions to commit crime.
You can watch the interview by clicking on this link.
Reflecting on my own white-collar criminal mind leaves no doubt that money is not the only motivating force compelling hardcore criminals to commit crimes. There was also a passion for the act, a sense of accomplishment, that made me enjoy committing my crimes. It is perhaps the same positive feelings of success that law-abiding citizens experience for a legitimate job well-done.
To better understand the behavior of white-collar criminals, take morality out of the equation. During my years at Crazy Eddie, we never had a single conversation about the morality of our actions. We did not give a damn about right and wrong.
Hardcore criminals don’t question their unethical and immoral conduct. Laws, morality, and ethics are weaknesses of other people. They don’t factor in except by limiting society’s behavior. In our society, morality dictates that people are entitled to the benefit of the doubt. Ironically, the “benefit of a doubt” limits the behavior of law-abiding citizens while giving criminals greater opportunity to commit their crimes. After all, no one likes to be called "a paranoid" or "impolite."
Our late President Ronald Reagan used to say "trust, but verify." That initial trust gives criminals the freedom to take steps to evade detection. For example, Joseph T. Wells, founder of the Association of Certified Fraud Examiners, described certain steps I took during Crazy Eddie’s audit to successfully execute my crimes:
Crazy Eddie’s auditors were provided a company office during their examination. They had a key to lock the desk—which they kept in a box of paperclips on top of the desk in full view. After the auditors left for the day, Eddie’s cohorts would unlock the desk, increase the inventory counts on the work-papers and photocopy the altered records. Were the auditors stupid? No, just too trusting. After all, no one wants to think the client is a crook. But it happens all too often. That’s why the profession requires auditors to be skeptical.
I took advantage of our auditor’s initial trust of management and rigged…
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Investor Sentiment: I Am a Squirrel
by Zero Hedge - July 25th, 2010 7:25 pm
Courtesy of thetechnicaltake
Glenn Holderreed of Quacera Capital Management and the QPM Radar sent me an email the other day describing the market:
“Charting this market is similar to tracking the moves of a squirrel crossing a busy street. Quickly moving to the middle, no better turn back, no, no, I can make it across, oh no I better go back, shucks I can make it across. Sometimes they make it, but many get flattened. I think there are a few flattened in this market.”
{To view larger images just click on the graphs}
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LBMA Closes Off Public Access To Key Bullion Bank Trading Data
by Zero Hedge - July 25th, 2010 6:49 pm
Courtesy of Tyler Durden
Is something (abnormally) fishy in the state of precious metals manipulation? GATA’s Adrian Douglas (recently famous for facilitating the emergence of whistleblower Andrew Maguire) seems to think so, after his observation that the LBMA has decided to block “access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members.” His conclusion: “There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA’s move to secrecy as a sign that the opportunity to get real metal is closing fast.” Read on for his argument…
From GATA’s Adrian Douglas
The LBMA joins the gold squeeze cover-up, via GATA
The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members. (See http://www.lbma.org.uk.)
I have recently written a series of exposes of the LBMA (see References 1-4 below) using the association’s own data to show that the LBMA’s bullion banks are operating on a “fractional reserve” basis. My analysis indicates that the bullion banks are holding only 1 real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent
At the March 25 public hearing of the U.S. Commodity Futures Trading Commission on precious metals futures markets I cited the LBMA’s own statistics to label the “unallocated gold” accounts of the bullion banks as a Ponzi scheme. (See Reference 3 below.) There were bullion bank representatives at the hearing but no one expressed an objection. That hearing was videotaped and posted at the CFTC’s Internet site but the bullion banks have not made any public statement rebutting what I said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group, acknowledged that what is widely called the “physical market” is in reality a largely “paper market” trading gold and silver as if they are financial assets and not physical metals. Christian stated that 100 ounces of paper gold are traded for every 1 ounce of physical…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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