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You gotta love it how CNBC just takes the SEC’s word as if it was the truth….don’t forget, the trader did not nothing wrong, the system was simply not able to handle the transaction(s) that resulted. Article: How One Trade Set Off Flash Crash

The most surprising revelation in Friday’s report on the May 6 “Flash Crash” is that a single trade, against a backdrop of high volatility and downward price pressure, seems to have been responsible.

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In a Computer Worm, a Possible Biblical Clue – “- Sent using Google Toolbar”

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Doubts over Chinese coal-bed methane

By Leslie Hook in Beijing

Published: August 29 2010 22:22 | Last updated: August 29 2010 22:22

China’s ambitious targets for the commercial production of coal-bed methane need “a reality check”, according to a consultant’s report into the country’s efforts to extract the high-energy gas trapped in coal deposits.

This autumn marks the fifth anniversary of China’s first commercial CBM production, which prompted Beijing to announce aggressive targets – 5bn cubic metres a year by 2010. However, production of the gas is currently just a quarter of that.

China will soon announce ambitious targets of 10bn cubic metres a year by 2015, and double that for 2020, according to a report from Wood Mackenzie.

“A reality check is needed,” the report warns. “CBM is still far from providing another major source of gas supply.”

China has massive reserves of unconventional gas — forms of natural gas such as shale gas and coal bed methane – which could supply as much as 12bn cubic feet per day by 2030, playing a crucial role in meeting China’s huge gas needs. Coal bed methane alone could account for 14 per cent of domestic gas supply by 2030, according to the consultancy.

But key questions remain over how the unconventionals sector will develop, and whether government policies will move fast enough to open up the sector.

China’s oil companies have planned huge investments in the sector, with PetroChina announcing a $1.5bn CBM investment plan this year and ambitions to produce 4.5bn cubic metres of the gas a year by 2015. Sinopec, which announced a new CBM discovery in Shanxi province last month, aims to produce 2.5bn cubic metres of unconventional gas by 2015. And China United Coalbed Methane is planning for 10bn cubic metres a year by 2020.

Some are optimistic that production will soon pick up, thanks to government subsidies and the end of the government-granted monopoly of China United Coalbed Methane in 2008.

“We are bullish on CBM,” said Sharad Apte, head of Bain & Company’s Asia-Pacific Energy practice. “The Chinese government is currently trying to eliminate a lot of the hurdles, particularly regionally, for CBM development.”

But develop of CBM has been challenging over the past five years. Of ten CBM pipeline projects scheduled to be completed this year, only two will be finished and pipeline access is a major issue for non-Chinese producers.

PetroChina and Sinopec have virtual monopolies over China’s pipelines, but “Third-party [pipeline] access is not supported,” the report notes. “As a result, CBM sales from parties such as Asian American Gas and Green Dragon Gas have been restricted to small volumes to the local transportation sector.”

The government-granted monopoly held by China United Coalbed Methane has also held back CBM production. Last year the State Council stripped CUCBM of its monopoly, opening up the sector for direct development by CNPC, which was formerly part of CUCBM.

“PetroChina is emerging as the likely dominant player in the next phase of CBM development,” says Wood Mackenzie.

Now that the dust has settled from the restructuring, China’s miners are set to become more involved with the sector, a natural fit given the presence of methane in coal deposits.

Jincheng Mining corporation acquired several CBM licenses in May, the miner to do so without the involvement of one of the major state-owned oil companies.

Foreign groups have long been involved in China’s CBM industry, providing about 70 per cent of the funding for early CBM exploration. This summer, PetroChina announced a joint effort with BP to look at a CBM field in Xinjiang province. Meanwhile, Shell is working on a site in Ordos, Inner Mongolia.

“Unconventional gas is a very important, cleaner and abundant energy resource for China that requires advanced technology and project management where Shell has rich experiences,” Lim Haw Kuang, executive chairman of Shell Companies in China, said in an e-mail.

China’s total gas demand last year was about 9bn cubic feet per day. By 2015, gas demand is expected to reach 20bn cubic feet per day and import dependency will increase to about 30 per cent, according to Wood Mackenzie. / Companies / Oil & Gas – Doubts over Chinese coal-bed methane

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Lehman art pieces to go under the hammer

By Steve Lodge

Published: August 9 2010 03:39 | Last updated: August 9 2010 03:39

'The Ship Frankfield Off Table Bay' by Samuel Walters
‘The ship Frankfield off Table Bay’ by Samuel Walters

Hundreds of works of art that adorned the offices of Lehman Brothers, the collapsed investment bank – and some of its corporate memorabilia – are to be sold at auction by Christie’s in London next month.

The September 29 sale is expected to raise about £2m. It is timed to be close to the second anniversary of the bank’s downfall in 2008, said PwC, administrators to Lehman’s UK and European arms.

The collection includes modern art – Gary Hume’s Madonna (estimated to sell at £70,000 to £100,000) and a signed etching by Lucian Freud are among the highlights – and works such as The ship Frankfield off Table Bay by Samuel Walters.

Also in the auction is the corporate sign from the bank’s Canary Wharf offices (estimate £2,000 to £3,000) and the commemorative plaque from the 2004 opening of those offices by Gordon Brown, then chancellor of the exchequer (estimate £1,000 to £1,500).

Tea caddies, cigar boxes and Chinese ceramics are also in the sale.

The most valuable piece, Andreas Gursky’s New York Mercantile Exchange 1991 photograph (estimate £100,000 to £150,000) is being sold in a separate auction in October.

The sale proceeds, however, will be tiny in relation to the more than $600bn (£376bn) owed by Lehman at its collapse.

Last week, hedge funds whose money had not been properly ring-fenced when the bank failed won a court ruling in London to share client funds totalling up to $2bn. / Companies / Retail – Lehman art pieces to go under the hammer

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U.S Jobs disappoint for 2nd month- Negative for the US$, Positive for Gold










U.S. nonfarm payrolls fell 131k in July, the second month of losses and a result that was below expectations. Revisions didn’t make this figure look any better. June’s 125k decline is now clocking in at a 221k drop, but May’s 433k rise was revised down just a bit to a 432k increase.


Of course there special factors. After all, a decline was expected and was entirely due to the drop-off in census workers (-143k)……and some more government workers. The private sector created 71k jobs in July, below expected but still encouraging as it shows companies are hiring…..slooooowly. (This was also above the 42k gain reported by the ADP on Wednesday.) This does come as somewhat of a relief, particularly given the startling jump in yesterday’s report on initial claims. All in, there were a number of troubling (yes, I am using that word again) developments, but a sprinkling of good news as well.


The household survey showed a 159k decline (the 2nd in a row), but as the labour force shrank by 181k (not nearly as much as June’s 652k dive), kept the jobless rate from going for another ride. It held steady at 9.5%. The all-encompassing jobless rate held steady as well at 16.5%, down from the 17.4% high reached last October. Fed Chairman Bernanke’s biggest worry, the long-term unemployed, actually improved a tad. The average duration of unemployment slipped to 34.2 weeks from the record 35.2 weeks in June. A very modest improvement indeed, and the first since February, but it is not going to make him any less worried.


As far as those industries that did hire, which ones did the heavy-lifting last month? Factories, again. For the 7th consecutive month, the manufacturing sector added jobs, with the 36k increase supported by the move in the manufacturing ISM component. Retail trade added jobs for the first time in a few months. Health services and education is still going strong (despite what we saw in the nonmanufacturing ISM the other day). Who cut? Construction… surprise there. And for the first time since September 2009, temp jobs were cut. This is an interesting component…….it is typically viewed as a "precursor of more permanent employment" (as Fed Chairman Bernanke said in April of this year) but despite the nine months of gains (until July), we haven’t seen a significant pick up in hiring. This suggests companies are not confident enough to take on the responsibilities associated with a permanent worker, and are only hiring temporary workers to do the job. And now that we saw a drop in July……it will be worrisome if they decline again in August. Try not to derive too much from a one-month decline.


In 1,000s, Change       July    June  (Prev)     May  (Prev)                

in Nonfarm Payrolls    -131    -221    -125     432     433                

Jobless Rate (Pct)       9.5     9.5     9.5     9.7     9.7                


Earnings, Hours of All Private, Non-Farm workers:

                        July    June  (Prev)     May  (Prev)                

Avg Weekly Hours        34.2    34.1    34.1    34.2    34.2                

Manufacturing Hours     40.1    40.0    40.0    40.5    40.5                

Overtime Hours          2.9     2.9     2.9     3.0     3.0                

Earnings/Hour (dlrs)   22.59   22.55   22.53   22.55   22.55                

      Pct change         0.2     0.0                                        


Earnings, Hours of Private, Non-Farm Production workers:

                        July    June  (Prev)     May  (Prev)                

Avg Weekly Hours        33.5    33.4    33.4    33.5    33.4                

Earnings/Hour (dlrs)   19.04   19.02   19.00   19.00   19.00                

      Pct change         0.1     0.1                                        


Non-Farm Month-On-Month Payroll Changes by Industry (1,000s):

                        July    June  (Prev)     May  (Prev)                

Total Private             71      31      83      51      33                

Goods-Producing           33      -3      -8      21      13                

Construction             -11     -21     -22     -29     -30                

Manufacturing             36      13       9      39      32                

Service-Providing         38      34      91      30      20                

Wholesale Trade          8.4     2.2     1.0    -1.0    -2.3                

Retail                   6.7   -20.5    -6.6    -5.8   -10.9                

Transp/warehousing      12.2    15.0    14.6     8.7     9.2                

Information                1     -14      -8      -2      -4                

Financial activities     -17     -12     -15      -9     -12                

Professional/business    -13      23      46      26      25                

Temporary help svs      -5.6    11.2    20.5    30.4    31.1                

Leisure/hospitality        6      21      37     -15      -8                

Government              -202    -252    -208     381     400 

Source: Thomson Reuters


Here’s a few more positive tidbits…..Aggregate hours worked rose 0.4%, and the private workweek climbed. And, average hourly earnings ticked up 0.2%, keeping the y/y increase steady at +1.8%.


The Bottom Line: The economy is growing. And the private sector has been hiring…..for seven months in a row, in fact. So there is demand, and there is job creation. Just not enough to soak up the number of unemployed Americans.




Jennifer Lee

Senior Economist, Vice President

BMO Capital Markets, Economic Research







“With teen unemployment at triple the rate of the already high national average and consumer confidence at its lowest level since February, retail chains posted disappointing July sales numbers, signaling that promotions may intensify for the pivotal back-to-school selling period.”

Forced hedge fund selling knocks some stocks off kilter – MarketWatch:

Forced hedge fund selling crushes some stocks

Hedge favorites Anheuser-Busch, Freeport-McMoran, CSX knocked off kilter

By Alistair Barr, MarketWatch
Last update: 10:35 p.m. EDT Oct. 16, 2008

SAN FRANCISCO (MarketWatch) — Steel Dynamics Inc. has lost more than half its market value in the past month, despite quarterly results that showed the company in ruddy health.
Late Wednesday, the Fort Wayne, Ind.-based steel company (STLD

Steel Dynamics Inc
Sponsored by:

STLD) reported a 92% surge in third-quarter net income and revenue that more than doubled. The results fell short of analyst expectations, but that wasn’t enough to explain the recent collapse in the company’s shares, according to Chief Executive Keith Busse.

“It is simply beyond comprehension why our share price, which is supposed to reflect rational thinking by rational people, is where it is today,” Busse said. “Those who have literally dumped their shares into a grossly oversold market have made some very poor investment decisions.”
“A lot of that has to do with the hedge funds,” he added during a conference call with analysts on Thursday. “They’ve driven this thing to almost a silly level where I think yesterday we were below our actual book value.”
Steel Dynamics may be one of many companies that have seen their share price slump in the past month as the $2 trillion hedge fund industry suffers its worst losses in at least a decade. There are now early signs that such pressure may be easing. See related story.
Steel makers and other commodities companies have been popular holdings for many hedge funds as they bet on a boom in demand from fast-developing countries like China and India.
But hedge fund investors have been asking for their money back in recent weeks. That’s forced some managers to unwind positions to raise cash for redemptions at the end of this year. See story on redemptions.
Investors redeemed about $43 billion from hedge funds in September and more withdrawals are expected through the rest of 2008, TrimTabs Investment Research, which tracks flows of investor money, said on Thursday.
A Goldman Sachs index of 50 stocks that are most heavily owned by hedge funds slumped 19% in September, while the Standard & Poor’s 500 index dropped 9%. Another Goldman index, which monitors stocks that don’t have many hedge fund investors, fell just 2% last month.
“Forced selling to cover redemptions and delevering by hedge funds has put downward pressure on selected stocks,” David Kostin and his colleagues at Goldman wrote in a note to clients earlier this month.
“We expect hedge fund selling/deleveraging to continue,” they added, while telling investors to bet against stocks heavily held by hedge funds and to buy stocks with the fewest hedge funds as shareholders.
Energy company Calpine Corp. (CPN

Sponsored by:

CPN) , coal company Alpha Natural Resources (ANR

Sponsored by:

ANR) and chipmaker Cypress Semiconductor (CY

Cypress Semiconductor Corporation
Sponsored by:

CY) are among companies with the most hedge funds as investors, Goldman noted in its report.

Other well-known companies with lots of hedge fund investors include Google Inc. (GOOG

google inc cl a
Sponsored by:

GOOG) , MasterCard (MA

mastercard inc cl a
Sponsored by:

MA) and Anheuser-Busch (BUD

Anheuser-Busch Companies, Inc
Sponsored by:

BUD) .

Nearing an end?
However, there may be early signs that Goldman’s suggested trade may be nearing an end. TrimTabs noted on Thursday that many hedge funds may have already raised enough cash to meet expected redemptions.
“They may not be the main source of forced selling anymore,” Charles Biderman, founder of TrimTabs, said in an interview.
Indeed, shares of Steel Dynamics surged 23% to $8.99 on Thursday.
At the end of June, the third-largest shareholder of Steel Dynamics was TPG-Axon Capital, a big hedge fund run by former star Goldman Sachs (GS

Goldman Sachs Group, Inc
Sponsored by:

GS) trader Dinakar Singh, according to FactSet Research.

It’s not clear whether TPG-Axon still holds shares of the steelmaker, but the hedge fund was down 18% this year through the middle of September, according to Bloomberg News. That’s left Singh on course for his first annual loss since he launched the firm in 2005.
Other big investors in Steel Dynamics at the end of June included Jeff Vinik, who left mutual fund giant Fidelity to start his own hedge fund several years ago.
D.E. Shaw, one of the world’s largest hedge fund firms, Tudor Investment Corp., headed by Paul Tudor Jones, and AQR Capital Management were also among Steel Dynamic’s top 20 investors on June 30, according to FactSet.
‘Speculation bust’
Other commodities companies have suffered recently from having hedge funds as large investors.
Shares of Mosaic Co. (MOS

mosaic co com
Sponsored by:

MOS) , a leading fertilizer maker, has slumped 62% in the past month. The company counted D.E. Shaw, Renaissance Technologies and Citadel Investment Group, three of the largest hedge fund firms, among its top 20 investors at the end of June, according to FactSet.

Citadel told investors this week that it lost 26% to 30% this year, through Oct. 10. See full story.
Mosaic is also a favorite stock of Passport Capital, a $4.3 billion hedge fund firm run by John Burbank.
Passport generated big returns last year betting against subprime mortgages. The fund has also been investing in energy and basic materials companies in a bet on global economic growth and rising demand from countries like India.
Other hedge funds took similar positions based on this fundamental idea, betting against financials in the U.S. and against the U.S. dollar while going long energy and other commodities.
But as oil prices soared, Burbank said in a recent speech that there was “massive intervention” by central banks to get crude back down and to boost the U.S. dollar.
“They helped create a huge speculation bust” as hedge funds have had to unwind bets against financial companies and long positions in commodities, he explained. See full story.
Shares of Freeport-McMoran (FCX

Freeport-McMoRan Copper & Gold Inc
Sponsored by:

FCX) , one of the world’s biggest copper producers, have slumped more than 50% in the past month. The company counts leading activist hedge funds Harbinger Capital and Atticus Capital among its top investors.

The Harbinger Capital Partners Offshore Fund I, run by Philip Falcone, lost almost 18% in September, leaving it down more than 5% during the first nine months of 2008, according to investors.
A European fund run by Atticus slumped 15.8% in September, according to investors.
Freeport-McMoran isn’t the only company to be hit by trouble at large activist hedge funds.
Railroad giant CSX Corp. (CSX

CSX Corporation
Sponsored by:

CSX) lost a bitter proxy battle earlier this year with The Children’s Investment Fund, or TCI, a top activist hedge fund run by Christopher Hohn.

TCI won several seats on CSX’s board, but the hedge fund lost more than 15% in September, leaving it down more than 26% in the first nine months of 2008. Meanwhile, CSX shares have slumped 25% in the past month.
Merger arbs unwound
The shares of some companies involved in high-profile mergers and acquisitions have also been disrupted in recent weeks by trouble in the hedge fund industry.
Some hedge funds focus on merger arbitrage, a strategy in which managers bet on the outcome of deals by shorting the stock of the acquiring company and buying shares of the target company. As mergers move closer to completion, the spread between the two shares narrows, generating profit.
As some hedge funds have had to unwind these positions, merger arbitrage spreads have widened.
Anheuser-Busch shares have dropped almost 10% during the past month and now trade below $60. That’s despite an agreement the beer maker has signed to be acquired by InBev for $70 a share.
Rohm & Haas shares (ROH

Rohm and Haas Company
Sponsored by:

ROH) have slipped 4% in the past month, leaving them trading at $70.26 on Thursday. Dow Chemical (DOW

The Dow Chemical Company
Sponsored by:

DOW) agreed to buy the chemicals company for $78 a share in July. End of Story

Alistair Barr is a reporter for MarketWatch in San Francisco.

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