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As Cold War 2 Starts, Pentagon Says It’s Not Ready

As Cold War 2 between the US and Russia continues to escalate, according to the article below, Pentagon is not ready to fight a war with Russia. Even a cold war. I guess it’s a little bit more difficult than blowing up a 1981 Toyota Pickup full of Taliban fighters

“For years there have been only a handful of people consistently talking about Russia and China building highly advanced systems for use against our ‘Cold-War era’ aircraft, missiles and ships”.

Let me get this straight. The US spends more money on defense than the next 10 countries combined, is expected to spend $1.5 Trillion on new F22/35 fighters and it’s still not ready? Just another illustration how out of sinc our government is. Take a look at this chart….

pentagon expenditure

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As Cold War 2 Starts, Pentagon Says It’s Not Ready  Google

Pentagon Not Ready for Cold War 2

There’s an old saying in the military that we’re always training for the last war, so fixated on the lessons of our most recent conflict that we’re blind to the emerging threat.

For years, that last war was the Cold War, and the emerging threat was the insurgents of Iraq and Afghanistan. Slowly, painfully, eventually, the military reoriented itself. The result? After more than two decades of post Cold War re-alignment, the military is less prepared than it has been in generations for a confrontation with Russia.

No one in Washington is calling for the U.S. to go to war over Crimea and there are plenty of reasons why, at this point, military intervention could be a dangerous and foolhardy course. But if circumstances change and political leaders start looking to the military or the bargaining power that comes from a credible threat of force, they will find their options severely limited.

Over the course of the wars in Afghanistan and Iraq soldiers and marines have trained for maneuvering and fighting in small units over the landscape of the Middle East. Counter-insurgency (“COIN”) doctrine, which stresses engagement with local civilian populations and tactics for fighting loosely organized forces employing light weapons, has become the military’s new bible. It’s about as far away as you can get from the principles used in the Cold War.

According to retired General David Deptula, who served as the Air Force’s top intelligence officer, “we’ve been focused on the far left end of the spectrum of operations,” by which he means the protracted, low-intensity conflicts in Iraq and Afghanistan. But, he says, “if we want to maintain superpower status we need to be prepared to succeed across the full range of operations, not just the left end of it.” 

Even the few strategists that weren’t pre-occupied by Iraq and Afghanistan were planning for the much-touted Asia pivot, envisioning a future, one they’d argue is still looming, defined by Chinese hegemony. Russia, meanwhile, was considered by many to be an historical relic; still big enough to wield real power but no longer capable of threatening U.S. vital interests and a second or third order afterthought when evaluating threats the military needed to plan for

“For years there have been only a handful of people consistently talking about Russia and China building highly advanced systems for use against our ‘Cold-War era’ aircraft, missiles and ships,” Deptula says.

He’s talking about himself and some of his closest confidants at the Air Force, who pushed for continued production of high-end weaponry like the F-22 stealth fighter—right when the Iraq insurgency was at its peak. It made Deptula and his gang seem like Mach 2 dinosaurs, pining for a conflict with an imaginary enemy while the real bad guys were blowing up Marines in Fallujah. Understandably, Robert Gates, the Defense Secretary of the time, wanted the military to focus on the wars America was actually fighting at the moment. And so eventually, many of Deptula’s colleagues—including Gen. Michael “Buzz” Moseley, the Air Force’s top officer—were shown the door when they opposed Gates once too often. According to Deptula, “those people were ignored by [former Defense Secretary] Gates, and some were fired because they had the courage to speak truth to power.

As the White House and Pentagon planners consider what to do if Russia invades Eastern Ukraine or deploys its forces elsewhere in the region, the limited choices available reveal just how profoundly the military has changed since the Cold War.

For half a century, Cold War military strategy focused on containing Russia and winning in clashes between large conventional forces. On the ground, that strategy called for mass formations organized around tanks and heavy weaponry. In the skies it relied on dominance in Top Gun style style air-to-air fighting prowess, radar evading stealth technology, and powerful bombers that could drop massive munitions to destroy enemy armor and fortified installations.

Since the end of the Cold War, that strategy has been completely overhauled. Training and doctrine have focused on small unit tactics while new weapons and vehicles have been designed with squads in mind rather than divisions. Super-sophisticated dogfighters, like the $187 million-a-pop F-22, suddenly seemed too fancy to actually use. Who would fit the bill if one actually went down? Instead, drones costing less than a tenth the price littered the skies over Afghanistan and Iraq.

But those drones are useless against any military with a half-decent system for shooting down enemy aircraft. And Russian has one of the best air defenses on the planet. Suddenly, it’s those iconic Predator drones that seem obsolete.

“Hopefully the situation with Russia and Ukraine will be a bucket of cold water on those who believe all we need to be able to do is counter-insurgency operations,” Deptula told The Daily Beast.

And now, there are signs that the U.S. Air Force’s long-held technological advantage may be eroding.

The new generation of Russian fighter plane, the T-50, isn’t yet fully operational but it “will be produced much sooner that Gates and his crowd predicted,” Deptula says. He adds that “once the T-50s are produced in sufficient numbers there won’t be anything in the NATO fleet that can deal with them except the F-22s and F-35s.”

David Axe, the long-time military tech writer notes that the T-50, which can fire long-range missiles while flying both high and fast, may be able to “exploit critical vulnerabilities in U.S. and allied forces and level the air power playing field for the first time in a generation.”

An independent Australian think tank, Air Power Australia, drew a more severe conclusion.  “If the United States does not fundamentally change its planning for the future of tactical air power, the advantage held for decades will be soon lost and American air power will become an artifact of history.”

While Russian aircraft rely on speed and long flight times, the U.S. fleet is largely built for stealth so it can evade detection and anti-air weapons to engage targets at closer ranges. But the stealth capability, is now being challenged by advances in Russia’s radar detection platforms and anti-aircraft weapons.

“Today,” Deptula said, “the Russians have an extant significant advantage in their surface to air capabilities.” And that with the exception of the U.S.’s small number of highly advanced 5th generation aircraft, “the Russians can conduct area denial of any airspace within range of their defenses if they want to deny access to aircraft.”

Since 2001, the Pentagon has had good reasons for prioritizing spending for troops on the ground in Iraq and Afghanistan over speculative needs for future wars, but a consequence has been that we now have what Deptula calls “a geriatric Air Force and Navy fleet.”

No one, not even Deptula, is suggesting that there’s about to be some all-out showdown between Moscow’s military and Washington. But it’s not at all unlikely, given the new and chilly climate, that American forces and allies could wind up in skirmishes with proxies equipped and trained by Russia. The U.S. used to be able to count on an overwhelming technological advantage. Tomorrow, maybe not.

Foreshadows of this are already being cast. Already, Russia is outfitting the Assad regime in Syria while America runs guns to the rebels there. It’s the Russian side that’s winning.

The change isn’t just about equipment or tactics, though, American forces trained in counter-insurgency who are stationed in Europe could still be deployed to hold the line against Russian advances. But there are drastically fewer forces left in Europe available to be called upon in such an event.

An analysis of Defense cuts published by the conservative American Enterprise Institute in 2013 reported that “the Army alone has closed 100 installations in Europe since 2003 and plans on returning an additional 47 installations to host nations by 2015.” The same report notes, “the Navy has also been consolidating and decreasing its European bases” and “since 1990, the Air Force has reduced aircraft and forces stationed in Europe by 75 percent.” Addressing the future of America’s military footprint in Europe, the paper concludes that the Pentagon is “planning to continue reducing the US presence in Europe by approximately 15 percent over the coming decade.”

The military can’t be equally prepared for every threat and if its focus has been on counter-insurgency, that’s because those are the wars we’ve been fighting for the past twelve years.

Generations of veterans who fought in Iraq and Afghanistan have been raised and bled on COIN doctrine but, as combat demands, they have also learned how to be agile. Individual leaders on the battlefield are able to adapt quickly; it’s the military bureaucracy that’s like a tank: a slow, immensely powerful machine that’s only capable of plotting one course at a time. Quick turns are not an option.

Without many viable military options to counter Russian aggression what’s left for U.S. leaders seeking to punish Russia and assure our NATO allies that we’ll protect them? Cunning diplomacy, maybe.

Crimea is Russian now; that’s not changing any time soon. Condemning the invasion and the fixed terms of the referendum have no more bearing on the current situation than the reasons Russia gave for annexing Crimea—some of them legitimate—ultimately had to do with the duplicity and force they used to take it. 

The real question, and the subtext in much of the current talk about Crimea, is whether Russia will stop there or proceed to further conquests. 

Despite it’s show of force in Crimea, Moscow has a lot to lose if the conflict broadens and draws in the U.S. and NATO. Russia has gas to sell to Europe, oligarchs counting on feeling comfortable in their London townhouses, a new middle class looking for normalcy that’s already taken to the streets in protest, and the memory of Chechnya, a brutal war that took thousands of lives, fresh in the national memory.

If U.S. officials can present a deal that satisfies American aims while appealing to Russia’s self-interest, they may be able to prevent a larger conflict. But a new age of competition with Russia? That may be even harder to head off.

The Real Secret Behind Warren Buffett’s Success Is Finally Revealed

warren_buffet

 “I buy expensive suits. They just look cheap on me”
-Warren Buffett

KEY STATISTICS:  (Date of Analysis: November 7th, 2013)

Full Name: Warren Edward Buffett

STARTING CAPITAL: ZERO

NET WORTH NOW: $59 Billion (2013)

  • Date of Birth: August 30th, 1930 (age 83) Omaha, Nebraska
  • Current Residence: Omaha Nebraska
  • Parents: Howard Buffett and Leila Buffett
  • Education: Columbia Business School
  • Occupation: Chairman & CEO of Berkshire Hathaway
  • Family Life: Married to Astrid Menks (2006-present).  3 Children: Susan, Howard, Peter

QUICK SUMMARY:

Warren Buffett was born in 1930 to Howard Buffett a stock broker/US Representative and Leila Howard a housewife in Omaha, Nebraska. Buffett’s early life was unremarkable in many ways. Being born in the midst of a Great Depression to a typical American family and living in the heartland has allowed Buffett to learn American values from an early age. Starting his school in Omaha, Buffett later moved to Washington DC after his father was elected to the United States Congress.

Even from an early age Buffett showed that he had interest in stocks and an Entrepreneurial spirit. He often spend time in his father’s brokerage company trying to learn all that he could about stocks, finally pulling the trigger on his first stock investment at the age of 11. His young entrepreneurial exploits of buying soda, gum, investing in farms and other businesses is well documented as well. In 1950 he entered into a Columbia University Graduate School of Business to study under a well known analyst and investor Benjamin Graham (author of classic “The Intelligent Investor“) and that’s where Buffett’s story really begins.

After getting his graduate degree from Columbia in 1951 Buffett literally begged Benjamin Graham for a job at Graham’s investment firm for 3 years.  At the time Graham didn’t think much of Buffett and turned him down on numerous occasions. That is until he reluctantly agreed to hire Buffett in 1954, most likely because he was sick of Buffett pestering him. Buffett worked for Graham in New York until 1956, the year Graham has decided to close down his business.  

After closure, Warren Buffet moved back to Omaha to start his own investment partnership (aka hedge fund). Starting with a little over $100,000 raised ffamily and friends, Buffett has managed to accumulate a personal net worth of close to $25 Million in just 13 years by investing in undervalued stocks. In 1969 Buffett liquidated his investment partnership and returned all of the capital to investors.  At the same time he kept most of his money invested in various companies, including Berkshire Hathaway, a company that he eventually brought under his control.

Thereafter, through his control of Berkshire Hathaway and through a series of brilliant investments spanning multiple decades Buffett has turned his $25 Million fortune into a $59 Billion mega fortune today. Simply put, Mr.Buffett is a brilliant investor, analyst and an oracle of sorts succeeding beyond belief in one of the most competitive fields in the world. The stock market. What we can learn from him and his approach is priceless.  

FUN FACTS ABOUT WARREN BUFFETT:

  • Warren Buffett, the 3rd richest man in the world, still lives in the $31,500 house he bought in 1957.
  • Warren Buffett gave 85% of his money to charity (mostly to the Bill and Melinda Gates Foundation) to a total of 40.7 billion dollars.
  • Warren Buffett filed his first tax return in 1944, at the age of 14, and took a $35 deduction for the use of his bike and watch on his paper route.
  • In 2010, a lunch with Warren Buffett was auctioned off to a man for $2.63 million dollars
  • If you invested $1000 with Warren Buffett in 1957, you would have amassed upwards of $30 Million today.

WARREN BUFFETT QUOTES:

“If past history was all there was to the game, the richest people would be librarians.”

“Only when the tide goes out do you discover who’s been swimming naked.”

“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

DIFFICULT TIMES & OVERCOMING PROBLEMS:

Being a money manager is one of the most difficult professions in the world. You are constantly dealing with various pressures while trying to perform to the best of your ability. There is no consistency and your world is always volatile (just like the stock market itself). Obviously Warren Buffett has thrived in this environment for many years.

His toughest challenge came in 1991 when Warren Buffett was unwillingly sucked into a huge Salomon Brothers scandal involving the US Government.  Warren Buffett was forced to take over the company as the CEO and manage the company through its darkest days. The company was hours away from being literally destroyed by the US Government and it was only Mr. Buffett’s personal assurance at the time that saved the company. By leveraging his reputation and pushing through the rough times he was able to save Salomon and his own net worth.  

PERSONAL CHARACTER TRAITS:

  • Down To Earth: Even though Warren Buffett is the fourth richest person in the world, he doesn’t show it. He still lives in the house he bought back in 1957 and is not known to splurge on luxury. He lives a simple life to the point where you wouldn’t be able to guess that he is even a millionaire if you see him walking down the street or eating in one of his favorite restaurants in Omaha.  
  • Hard Working: Officially Warren Buffett has been working since 1951 without taking (as far as I know) any real time off. Unofficially, he has been hustling since the age of 8 or for 75 years. Yet, he doesn’t call it work. He has famously said that he tap dances to work every day. Simply put, he loves what he does and its more of a play than work for him.  
  • Fair & Honest: Warren Buffett is famous for saying that rich should pay their fair share of taxes (arguing that they should pay more). He even lobbied the congress to increase taxes. You see the same consistency throughout his business career. He puts a significant amount of premium on his own reputation and believes the only way to get a good one is too be fair and honest in all of his business dealings.
  • A Great Sense Of Humor: Warren Buffett is known for his corky sense of humor and his ability to cut through the bullshit and point out the obvious. His annual report letter to the shareholders is as treasure throve of jokes and incredibly valuable real world advice. It should be on everyone’s reading list.
  • A Masterful Politician:  Even though you wouldn’t think of Warren Buffett as a politician, he is a natural born pro. If you study his career you will never see him take extreme sides of any issue. He is always somewhere in the middle. Even though he knows a lot more than he says, he rarely takes sides either for or against something.

SUCCESS ANALYSIS:

Warren Buffett’s success is very difficult to analyze. First, he wasn’t involved in one company that made him rich. He has built his fortune over the last 57 years, one day at a time and through acquiring over 50 companies that now reside under Berkshire Hathaway. He did have major scores, but a steady annual compounding of his money is what really did it for him. Second, most of his work is analytical in nature and out of the public eye. He spent most of his time analyzing companies and making investment decisions. That in itself is very difficult to pinpoint. Luckily for you, I do something very similar. Here are the factors that contributed directly to his success.

  • Right Timing: While you might not see a direct connection, Warren Buffett’s timing was perfect. If he would have been born just 5 years later, he wouldn’t be as much of a success as he is today. He would still be rich, but probably not that rich. Here is why. US Financial markets started a major BULL move in 1949 and completed it in 1966. Warren Buffett started his investment firm in 1956, giving him 10 years of one of the fastest BULL markets in history to work with. Yes, he is a great stock picker, but having a BULL market at your back makes one hell of a difference. That’s what helped him to accumulate his initial capital of $25 million. If he would have shown up just 5 years later, I doubt he would have been able to accumulate as much capital in the tough bear market years of 1970’s.  With a smaller nest egg to work with, his net worth would be a lot less today.  
  • Loves To Make Money:  From an early age Warren Buffett loved to make money. Starting with selling gum and soda at his school he quickly transitioned to buying farmland and investing in stocks.  While the money itself is meaningless to him, he uses it to keep score and to make sure he is winning.
  • Highly Intelligent & Analytical: I firmly believe that investment world (and not academia) attracts the best minds in the world. Among those people Warren Buffett is the king. Very few have been able to replicate his success over an extended period of time. This speaks to his high level of intelligence and analytics ability. Is he the smartest guy on the planet? Well, even if he is not, he is not that far behind.    
  • Incredibly Aggressive:  You might view Warren Buffett as this grandfatherly character who is always smiling and is a nice person.  Surely he is, but he is a naturally born predator as well. Case in point, his $5 Billion investment in Goldman Sachs in the darkest days of 2008 financial crisis.  He has done the same thing throughout his career on multiple occasions. You have to be aggressive to do that.  
  • Consistency & Concentration:  Starting at a young age Warren Buffett never really deviated from his original investment strategy. He has always made Value Investing his bread and butter and has spent the last 75 years perfecting his skills. I believe sticking to what he knows and understands the best is what has made him a huge success.
  • Balls Of Steel:  If you have ever been in an investment business you know that at certain points you will be standing on a edge of a cliff looking down into the deep abyss. Just as night follows day, that is unavoidable.  Yet, it is the quality of staying calm while everyone else is freaking out is what separates great investors from everybody else.  Warren Buffett has proved on multiple occasions that he can stand on the brink and whistle without a care in the world. That takes major cojones when billions of dollars are at stake.
  • Great Manager & Motivator:  Delegation and letting his managers run his companies is what has made Warren Buffett so rich.  He is not interested in running day to day operations and he prides himself on finding top management talent, motivating them and letting them do the hard work.
  • Ruthless Shark:  A well known saying in the investment community that is incredibly difficult to follow. As Warren Buffett himself says “Be fearful when others are greedy and be greedy when others are fearful”.  Meaning, one should buy stocks when the blood is running on the streets (Ex: 2007-2009 collapse). Yet, very few investors can do that. Warren Buffett has done so consistently throughout his long career.

CONCLUSION:

While Warren Buffett seems like a friendly Mr. Rogers from a few doors down the road, he is not. He is a ruthless capitalist who loves making money and allocating capital. I do not believe the money itself play an important role in his life, but the process of making it is everything to him.  It is a score card of sorts that shows him how well he has done and in what areas he needs to improve.

Warren Buffett plays to win. It is no accident that he was named the most successful investor of the last century. Yes, investing provides his with a way to show off his intelligence, but it goes much deeper than that.  Warren Buffett has also redefined the game and has shown everyone that it is possible to take it easy and be nice to people while at the same time being one of the most coldblooded capitalist on the face of this earth.

So, what can we learn from Mr. Buffett to help us become Billionaires as well? Taking out factors that we cannot control, here is what you can replicate.  

  1. Do What You Love: In most cases you will not become filthy rich overnight. Most of us will have to build our fortunes over an extended period of time while working incredibly hard. The only way to do that is to find something that you love and stick to it.  As Warren Buffett says, you must love being in the office.
  2. Fall In Loves With The Money:  There is absolutely nothing wrong with loving money.  In fact, if you don’t love money, you will never attract enough of it into your life. Warren Buffett loves money, so why shouldn’t you?  
  3. Become Aggressive:  As we see with most of our Billionaires you must be aggressive and you must play to win in all of your business dealings. Get it through your head and start winning. 
  4. Consistency & Concentration:  A truly important and timeless quality to have. If you are to become an expert in your field you are bound to outperform your competition.  Plus, maintaining consistency helps you get through the hard time without sacrificing your integrity or the integrity of your business.
  5. Grow A Pair:  Listen, you need to grow a big pair if you want to play with the big boys. Simple as that.  
  6. Delegate:  Find great people and delegate as much work as you possibly can to them. This will allow you to concentrate on more important tasks that you love.
  7. Become Ruthless:  Not ruthless enough to take candy from a crying baby, but ruthless enough to make money from the misfortunes of others.  There is nothing wrong with buying assets when others are fearful or filing for bankruptcy. It’s their problem, not yours. Buy low, sell high. Get rich. 

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The Real Secret Behind Warren Buffett’s Success Is Finally Revealed Google

warren_buffet

Millions Of Russians Ask To Be Put On Obama’s Sanction List

Here we go again. Idiot-In-Chief Obama just triggered the next stage of the “Ukrainian” conflict. Thus far, I have been 100% correct on all of the developments associated with Russia/Ukraine/West over the last 4 weeks. In my last post on the subject matter I have said, “Russia is done. It will walk away with Crimea and call it a day. The only thing that will change that is further sanctions against Russia”. While the first round of sanctions was laughable (just as the second one), the second round puts Putin in a position where he MUST respond.

And respond he will. Will Russia now go into east Ukraine, turn off gas or retaliate otherwise is yet to be seen. Based on what Putin said in his speech yesterday, it will be something big. I guarantee you that. And here is what drives me crazy….

Obama noted that the measures were being taken in the full knowledge that the move could be “disruptive to the global economy”.

That’s just exactly what we need. Expect Putin to retaliate shortly. Good job team Obama.

US President Barack Obama.(AFP Photo / Saul Loeb)

US President Barack Obama.(AFP Photo / Saul Loeb)

US puts sanctions on key sectors of Russian economy, top officials, businessmen

US President Barack Obama has announced a new executive order imposing further sanctions on key sectors of the Russian economy and top Russian officials and businessmen. The measures will impact Russian energy, mining, defense and engineering sectors.

We’re imposing sanctions on more senior officials of the Russian government. In addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals,” Obama said.

The new list of sanctioned officials includes 20 names, according to the list published by the US Department of Treasury.

Aleksey Gromov, First Deputy Head of the Presidential Administration; Sergey Ivanov, Chief of Staff of the Presidential Executive Office; and Sergey Naryshkin, Speaker of the State Duma, the lower chamber of the Russian Parliament, are among those mentioned.

Prominent businessmen Arkady and Boris Rotenberg are also on the list – as well as the Russian Railways president, Vladimir Yakunin and businessman Gennady Timchenko, head of the Volga Group.

Bank Rossiya identified by the Treasury Department as the sanctioned entity will be “frozen out of the dollar,” Reuters reports quoting US officials. Bank Rossiya, headquartered in St. Petersburg, has some $10 billion in assets. Several senior government officials are known to use the bank, and Kovalchuk, who is its head, has also been sanctioned individually.

The new penalties mark the second round of economic sanctions the US has levied on Russia this week. Obama noted that the measures were being taken in the full knowledge that the move could be “disruptive to the global economy”.

The US president made the announcement just under two hours after the Russian Duma ratified the Treaty for the Accession of Crimea and city of Sevastopol to the Russian Federation.

  

Russian Billionaires Buying Russian Stocks. Should You?

z22Russian stock market has been body slammed over the last few weeks due to Russia’s conflict with Ukraine/West. Losing 25% of its value in just 20 trading days. Yet, over the last 4 trading days the market is up 12%. Russian billionaires are buying hand over fist (see the article below), the valuations are very low and the conflict is likely to be over. Is it time to buy?  

Not yet. I will admit that the Russia stock market is substantially undervalued (unlike it’s American counterpart). The conflict in Ukraine is likely to be over and no real economic sanctions will fly against Russia. Yet, here is what’s stopping me.

  • The RTS Index has been in a technical downtrend since 2011. While we might get a technical bounce from today’s lows it will take a lot more for the bear market to reverse itself. 
  • The RTS collapsed 75% during the financial crisis and the bear market of 2007-09. Our mathematical and timing work indicates that the US will have a severe bear market between 2014-2017. If so, Russian market is likely to continue with its downtrend. 

As such, it is a little too early to invest in the Russian market at this stage. Further downside is highly probable. However, if the market is able to reverse it’s bearing trend, it might make sense to reconsider. Fun fact, the Russian market is still up 2,600% from 1998 crisis bottom. 

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Russian Billionaires Buying Russian Stocks. Should You?  Google

 Russia Billionaires Buying Stock as BofA Says Bottom Near

 Two of Russia’s top billionaires are taking advantage of the bear-market collapse to buy back shares on the cheap.

Vagit Alekperov, chief executive officer at oil producer OAO Lukoil and Russia’s 11th-wealthiest man, has stepped up his purchases of the stock, buying $147 million in the first quarter, according to data compiled by Bloomberg. Mail.ru Group Ltd. (MAIL), the Internet company controlled by Alisher Usmanov, Russia’s richest man, said yesterday it plans to buy $45 million of its own stock.

Lukoil and Mail.ru have each fallen more than 14 percent this year inLondon share trading as President Vladimir Putin’s bid to prise the Crimea peninsula from Ukraine spurred concern Russia’s economic slump will deepen. TheMicex (INDEXCF) Index, the benchmark in Moscow, rebounded 8 percent in the last two days after sliding into a bear market last week. Bank of America Corp. said yesterday that stocks “could be nearing the trough” of the rout.

“Buybacks by Russian companies will be substantial because valuations are extremely attractive and the companies generate a lot of cash,” Mattias Westman, the chief executive officer of London-based Prosperity Capital Management Ltd., which manages about $4 billion in Russia and other former Soviet countries, said by phone. “The market is rallying as it seems Russia has no plans to split up Ukraine. There are still some risks, although further sanctions against Russia will most likely be cosmetic.”

Photographer: Simon Dawson/Bloomberg

OAO Lukoil Chief Executive Officer Vagit Alekperov.

Novatek, Rosneft

Mounting concern that the U.S. and Europe will impose economic sanctions on Russia following its annexation of Ukraine’s Crimea peninsula has sent valuations for the Micex to the lowest since May 2012. Mail.ru plunged 18 percent this year while Lukoil declined 15 percent. Bank of America Corp. said yesterday that “the market could be nearing the trough of the selloff.”

OAO Novatek bought 2.5 million shares between March 11 and March 14, according to a March 17 statement. The company resumed its share buyback program as the “current share price significantly diverges from the intrinsic value,” Chief Executive Officer Leonid Mikhelson said.

OAO Rosneft’s CEO Igor Sechin and top managers bought the oil producer’s shares after the drop, the company’s press service said by phone. Rosneft slumped 3.9 percent last week.

Cheapest Valuations

The Bloomberg Russia-U.S. Equity index of the most-traded Russian shares in the U.S. rallied the most in two weeks, increasing 4.1 percent to 83.44 in New York yesterday. Yandex NV (YNDX), Russia’s biggest Internet company, jumped 6.7 percent to $32.03 and trimmed this year’s decline to 26 percent. The Market Vectors Russia ETF (RSX), the biggest U.S. exchange-traded fund that holds Russian shares, surged 4.7 percent to $23.51, the biggest gain since July.

Photographer: Simon Dawson/Bloomberg

USM Holdings Ltd. Owner Alisher Usmanov.

The Micex decreased 0.7 percent to 1,326.32 by 5:42 p.m. in Moscow, taking its drop this year to 12 percent. The gauge is the cheapest among 21 developing countries monitored by Bloomberg, trading at 4.8 times estimated earnings. That compares with a valuation of 14 for India’s S&P BSE Sensex Index and of 9.1 for Brazil’s Ibovespa.

Mail.ru rallied 11 percent to $36.70 in London yesterday, gaining the most since August 2011, while Lukoil added 3.5 percent to $53.30. Mail.ru traded at 19.7 times estimated earningsyesterday, rebounding from an eight-month low of 17.5 on March 14. Lukoil traded at a multiple of 4.1, up from a 20-month low of 3.8 reached on March 3.

Military Phase

Usmanov, with a net worth of $17.5 billion, ranks 42nd worldwide on the Bloomberg Billionaires Index. Alekperov, with $10.3 billion, ranks 113th globally, according to the gauge.

Oleg Tinkov, founder of consumer bank TCS Group Holding Plc., criticized fund managers in January for acting as “speculators” after his company’s stock plunged 28 percent in the month.

Ukraine’s government said its conflict with Russia has entered a military phase as clashes in the breakaway Crimea region intensified, killing at least one Ukrainian serviceman. Western leaders condemned Putin’s push to annex Crimea and promised further sanctions as early as this week.

“We don’t know what the responses are going to be on the political side, and that creates a lot of uncertainty,” Bryan Carter, portfolio manager at Acadian Asset Management, said in an interview at Bloomberg headquarters in New York yesterday.

Tensions are increasing after Putin signed a treaty annexing Crimea into the Russian Federation yesterday. The Black Sea peninsula in a disputed March 16 referendum voted to leave Ukraine and join Russia.

‘Bottom Fishing’

“There is bottom-fishing going on,” Vladimir Osakovskiy, chief economist for Russia and theCommonwealth of Independent States at Bank of America Corp. in Moscow, said by phone yesterday. “The outlook for the market will depend on the type and intensity of further sanctions. If we are talking real economic sanctions, those that would restrict trade and cut access for Russian companies to international capital markets, then we would see a new bottom. The risk is still there.”

Mail.ru agreed to buy 12 percent of Russia’s biggest social network VKontakte, raising its stake to 52 percent, and started to buy $45 million of its own stock in an employee incentive program, the company said in statements yesterday.

“The volatility in the markets caused by political events allowed the employee benefit trust an opportunity to buy stock at what we consider a good valuation,” Mail.ru’s Chief Financial Officer Matthew Hammond wrote in an e-mail yesterday from Dubai. The program “looks to buy GDRs in the market when we consider it a good price,” he said.

Lukoil Purchases

Alekperov’s purchases of Lukoil stocks in the current quarter compares with a total of $93 million in the same period last year, data compiled by Bloomberg show.

Lukoil’s press service and investment relations department were unable to comment on whether Alekperov plans to further increase his stake in the company when contacted by Bloomberg News by phone and e-mail after normal business hours in Moscow.

The RTS Volatility Index, which measures expected swings in the index futures, decreased 3.1 percent to 45.62 today and RTS index futures rose 0.3 percent to 113,390 in U.S. hours.

Why The FED Will NOT Be Raising Rates Next Year

Janet Yellen spooked the markets on Wednesday by indicating that the FED might start tightening sooner and faster than previously anticipated. Sending the DOW down 200 points in a matter of minutes. Yet, let me ask you this. Will the FED be tightening if the market finds itself below 14K on the DOW and with economic data showing the country is in a recession (or quickly approaching one)? 

I don’t think so. And that is exactly what our timing and mathematical work indicates. If anything, the FED will be trying to figure out a way to pump even more money into out economic system in order to try and re-inflate the markets. Will her comments this week be enough to set the market on a bearish path? Perhaps. If you would like to know exactly when the Bear Market of 2014-2017 starts and its exact internal structure, please CLICK HERE.  

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Why The FED Will NOT Be Raising Rates Next Year  Google

Fed may raise rates as soon as next spring, Yellen suggests

WASHINGTON (Reuters) – The U.S. Federal Reserve will probably end its massive bond-buying program this fall, and could start raising interest rates around six months later, Fed Chair Janet Yellen said on Wednesday, in a comment which sent stocks and bonds tumbling.

Yellen’s remarks at her first news conference as the head of the central bank pointed to a more aggressive path toward higher interest rates than many had anticipated, and bets in financial markets shifted accordingly.

The comments came after a two-day meeting in which Fed officials made another reduction in their bond-buying stimulus and decided to jettison a set of guideposts they were using to help the public anticipate when they would finally raise rates.

The Fed said the change in its rate hike guidance did not mark a shift in its intentions and that it would wait a “considerable time” after shuttering its asset purchase program before pushing borrowing costs higher.

Yellen, who had fielded numerous questions without a hitch, hesitated when asked what the Fed meant by “considerable.”

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Federal Reserve Chair Janet Yellen answers a question …

Federal Reserve Chair Janet Yellen answers a question at a news conference following the March 2014  …

“I — I, you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends — what the statement is saying is it depends what conditions are like.”

Several analysts wondered whether her answer was an unintended slip, given the deliberately vague language of the Fed’s statement.

Either way, the reaction in financial markets was swift and sharp. Prices for U.S. stocks and government bonds added to earlier losses triggered by fresh Fed forecasts that showed policymakers are inclined to raise rates a bit more aggressively than they had been just a few months ago. The U.S. dollar rose.

“The forecast change could be interpreted as a relatively hawkish shift … and as such the general market reaction seems well-founded,” said JPMorgan economist Michael Feroli.

Futures traders moved to price in a first interest rate hike as soon as April 2015. Previously, it was July.

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Federal Reserve Chair Janet Yellen talks at a news …

Federal Reserve Chair Janet Yellen talks at a news conference following the March 2014 Federal Open  …

Most top Wall Street economists, however, continued to see the first rate hike in the second half of 2016, according to a Reuters poll.

MIXED MESSAGES

Yellen sought to use her news conference to emphasize that rates would stay low for awhile and rise only gradually. She also said they could end up staying lower than normal “for some time” even after the jobless rate drops to a healthy level.

The Fed would look not only at how close inflation and unemployment are to its goals, but how fast, or slowly, those measures are approaching those goals, she said.

At 6.7 percent, the unemployment is well above the 5.2 percent to 5.6 percent range Fed officials see as in keeping with full employment. The central bank’s favored inflation gauge is barely more than half of its 2.0 percent target.

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Federal Reserve Chair Janet Yellen sits down before …

Federal Reserve Chair Janet Yellen sits down before she holds a news conference following the March  …

The Fed has held interest rates near zero since late 2008 and has pumped more than $3 trillion into the economy with its bond purchases to try to foster a stronger recovery.

Of the Fed’s 16 policymakers, only one believes it will be appropriate to raise rates this year; 13 expect a first rate hike next year, and two others see the first rate hike coming in 2016, according to the new forecasts.

But once rate hikes start, Fed officials see slightly sharper increases than they did in December, when they last issued forecasts. They now see rates ending 2016 at 2.25 percent, a half percentage point above their December projections. ID:nL2N0MG1AP]

The unease in markets “might be a sign that people think Yellen will tighten sooner rather than later,” said Wayne Kaufman, chief market analyst at Rockwell Securities in New York.

MEASURED WIND DOWN

The central bank proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.

The decision to further scale back its stimulus keeps the Fed on track for the measured wind down laid out by Yellen’s predecessor, Ben Bernanke. The Fed repeated that it plans to continue trimming the purchases in “measured steps” as long as labor conditions continue to improve and inflation shows signs of rising back toward the Fed’s 2.0 percent goal.

The Fed’s assessment of the U.S. economy chalked up recent weakness partly to adverse weather.

It had said since December 2012 that it would not consider raising short-term rates until the jobless rate fell to at least 6.5 percent, as long as inflation looked set to remain contained.

But the unemployment rate has fallen faster than anticipated, and officials dropped the guidance, saying they would look at a range of economic indicators to judge the economy’s readiness for higher rates.

Minneapolis Fed President Narayana Kocherlakota dissented, saying that getting rid of the numerical guidance could hurt the credibility of the Fed’s commitment to return inflation to 2.0 percent.

Junk Bond King Runs Away From Junk. Should You?

According to Merrill Lynch worldwide junk bond market surged from $1 Trillion to $2 Trillion in under 5 years. Instead of being the disease this is yet another symptom of FEDs insanely loose monetary policy. Jeffrey Gundlach is right on target when he says “They’ve squeezed all the toothpaste out of the tube.”  Said spread has now dropped below 400 basis points (4.0 percentage points) to 397 basis points, according to the latest reading on a benchmark Bank of America Merrill Lynch high-yield index.

In June 2007, at the peak of the last credit cycle, it bottomed at an all-time low of 240 basis points; during the depths of the financial crisis, it approached two thousand basis points. The historic average is a bit below 500 basis points, and spreads have held reliably above 400 bps for the past half-decade or so, even as junk bond yields set new historic lows in 2013 and 2014. Again, when the bear market of 2014-2017 starts and accelerates you will see a number of massive Junk Bond blow ups. Buyer beware. The risk does not justify the return. 

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Junk Bond King Runs Away From Junk. Should You? Google

 Junk Bonds at $2 Trillion as Gundlach Pulls Back: Credit Markets

The junk-bond bonanza that’s doubled the market to almost $2 trillion since the credit crisis has Jeffrey Gundlach heading toward the exit.

Less than 12 months after saying theFederal Reserve’s stimulus and a plunge in defaults would support the market for speculative-grade debt for another four years, the head of DoubleLine Capital LP is trimming its allocations. With borrowing costs for the least-creditworthy companies approaching a record low, junk bonds no longer provide enough of a buffer from rising Treasury yields as the Fed scales back its bond buying, said Gundlach, whose firm oversees $49 billion.

“They’ve squeezed all the toothpaste out of the tube,” the bond manager said in a telephone interview from Los Angeles. “There is interest-rate risk that’s just being masked by fund flows holding up the prices of junk bonds.”

Without that money moving in, he said, “if they start to suffer losses, you really wonder who’s going to buy them.”

Junk bonds, which have returned 148 percent since the end of 2008, are showing signs of froth as five years of easy-money policies by central banks caused investors to pour unprecedented amounts of money into the high-yield market. That’s helped push the amount of junk bonds worldwide to $1.97 trillion from less than $1 trillion in March 2009, Bank of America Merrill Lynch index data show.

Cutting Allocation

DoubleLine cut its allocation to speculative-grade debt in its $1.8 billion Core Fixed Income Fund to 3 percent at the end of last month, compared with the firm’s expected average of 10 percent, said Gundlach, who last April predicted “junk bonds will do OK” for the next four years. The fund has outperformed 90 percent of its peers in the past three years, a period during which yields on junk bonds globally reached a record-low 5.94 percent last year, according to data compiled by Bloomberg.

Improvements in the job market and economy spurred the Federal Open Market Committee to trim monthly bond purchases by $10 billion in each of its past two meetings. The central bank in January reduced its bond buying to $65 billion.

Investors have deposited more than $27 billion into U.S. funds that buy junk bonds since 2009, according to TrimTabs Investment Research. Even after the inflows slowed last year to the weakest pace during that period, they’ve bounced back this year. After pulling $1.2 billion out in December and January, investors have since funneled $1.4 billion back into the funds, the data show.

‘Very Rich’

“The market’s very rich, valuations are lackluster and there’s very little margin for error,” said Edinburgh-based Steve Logan, the head of high-yield at Scottish Widows Investment Partnership, which manages about $242 billion. “We’ve lightened up, taken profits. Yields and cash prices on the asset class haven’t anywhere much to go now.”

The global market for speculative-grade debt, rated below Baa3 by Moody’s Investors Service and BBB- at Standard & Poor’s, is poised to surpass $2 trillion in a matter of weeks, according to the Bank of America Merrill Lynch Global High Yield Index. That gauge, started Dec. 31, 1997, took 12 years to reach $1 trillion.

Junk-rated companies have issued $59 billion this year, after a record $380.2 billion last year, according to data compiled by Bloomberg.

Default Rate

“When things are rollicking and the market is permitting low-quality issuers to issue debt, that’s when you need a lot of caution,” Howard Marks, the founder and chairman of Oaktree Capital Group LLC, the world’s largest distressed-debt fund, said Feb. 28 in a telephone interview. “We know which way the tide is going, and we know it won’t go that way forever, but we never know when it will turn.”

The speculative-grade global default rate is forecast to reach 2.1 percent in December, down from 2.9 percent at the end of 2013, according to a Moody’s note March 7. Default rates in Europe will fall to 5.2 percent next year, from 5.9 percent at the end of 2013, according to S&P.

At the same time, investors are demanding fewer protections. A measure of covenants on speculative-grade debt in North America were at weakest level in at least three years last month, Moody’s said in a March 11 report. A gauge of covenant quality that increases as investor protections deteriorate climbed to 4.36 last month from 3.84 in January, reversing three months of improvement. The ratings firm measures covenants on a scale of 1 to 5.

‘Lax Underwriting’

“The seeds of the high-yield demise are being sown with some lax underwriting,” said Anthony Valeri, a market strategist in San Diego with LPL Financial Corp. “But that probably won’t be a problem in the form of higher defaults until late this year.”

Yields on dollar-denominated debt rated CCC or below have fallen to 9.7 percent through yesterday, Bank of America Merrill Lynch index data show. That’s 3.7 percentage points below than the average of the past decade, the data show.

Buyers demanded 3.78 percentage points more than similar-maturity Treasuries to own U.S. junk bonds on March 5, the least since 2007, the data show. That’s not enough, according to Martin Fridson, chief executive officer of FridsonVision LLC, a New York research firm specializing in high-yield debt.

“We’re at an extreme over-valuation,” he said in a telephone interview. “When you’re not compensated adequately for the risk, you do tend to get punished for it. If the Fed is still sufficiently energetic about it, they could keep it at an over-valuation through all of 2014.”

Shocking News: 36% Of Americans Have Less Than $1,000 Saved Up

According to Employee Benefit Research Institute 36% of Americans have less than $1,000 in savings that can be used for retirement (excluding primary residence and benefit plans). See full story below. This is quite sad, yet it is indicative of the US Government who is hell bent on destroying the middle class and the American worker for the benefit of the Top 1%. By cutting interest rates into the negative territory and by flooding the market with money the FED shifted attention from productive economic growth to “paper shuffling” (aka..financial speculation). 

The result? Just as it should be. High unemployment, stagnating wages, speculative bubbles, no savings, massive debt, etc…. The worst part is, with the bear market of 2014-2017 just around the corner (according to our highly advanced mathematical and timing work) things are about to get a lot worse for an average American family. Unfortunately, 99.9% of American citizens can’t connect the dots. Hey, is American Idol on tonight? 

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Shocking News: 36% Of Americans Have Less Than $1,000 Saved Up Google

 

Retirement: A third have less than $1,000 put away

Most people have very little tucked away for retirement, and many aren’t even trying to figure out how much they’ll need later in life, a new national survey reveals.

About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a telephone survey of 1,000 workers and 501 retirees from the non-profit Employee Benefit Research Institute and Greenwald and Associates.

Only 44% say they or their spouses have tried to calculate how much money they’ll need to save by the time they retire so that they can live comfortably in their golden years, the survey shows. Workers who have done calculations on what they need to save tend to have higher levels of savings than those who haven’t crunched the numbers.

“There’s an incredible difference between those lucky enough to have a retirement plan and those who don’t,” says Jack VanDerhei, the institute’s research director and co-author of the 2014 Retirement Confidence Survey. “What’s really striking is that 73% of those without a retirement plan, such as an IRA, 401(k) or 403(b), have less than $1,000 in savings and investments.”

The reason defined benefits weren’t included in the total is most people don’t know how much those are worth, he says.

Many people realize that they are not on track in saving for retirement, and the two most important reasons they give for not saving more are cost of living and day-to-day expenses, VanDerhei says.

People’s confidence that they’ll have a comfortable retirement has risen slightly after record lows of the last five years, with 18% of workers in 2014 saying they are very confident they can retire comfortably, up from 13% who were very confident in 2013. Meanwhile, 24% are not at all confident they have enough saved for a comfortable retirement, about the same as 2013.

Retirement confidence is present mostly in people with higher incomes and in those with retirement plans, VanDerhei says.

The survey “highlights the impending retirement crisis that we will face over the next 20 years,” says Mark Fried, president of TFG Wealth Management in Newtown, Pa. “When I see these numbers I have ask the question: How did we get here? We need more financial education in the schools, in the media, in the workplace.”

If possible, people 40 and older should try to save up to 20% of their income, he says. “If you can’t afford to do that right now then set this as a target, and as you get annual raises put aside part of each raise until you reach the 20% number,” Fried says.

Invest in your company’s retirement account up to the match. One of the best ways to increase your retirement savings is to take advantage of your employer match if you have one, he says.

John Piershale, a certified financial planner at Piershale Financial Group of Crystal Lake, Ill., says: “Try to imagine how much you are going to need to have saved up to last you 20 to 30 years during retirement. The only way you can figure that out is do some retirement calculations. We help clients figure this out.”

If people are way behind in saving for retirement, they may need to work longer at their current job or get a second job to help fill the savings gap. Piershale says. “If you had the idea that you were going to retire at 62 or 65, and you don’t have enough saved up, then you have to keep working.”

Other survey findings:

• Debt is weighing heavily on many people, with 58% of workers and 44% of retirees saying they have a problem with their level of debt.

• Like workers, many retirees are also short on funds, with 58% of them having less than $25,000 in savings and investments, not counting their primary residence or defined benefits plans (traditional pensions); and 29% having less than $1,000.

• Although 65% of workers plan to work for pay in retirement, only 27% of retirees say they are working for pay during their golden years.

Total savings and investments reported by workers, not including value of primary residence or defined benefit plans such as a traditional pension.

Less than $1,000, 36%

$1,000 to $9,999, 16%

$10,000 to $24,999, 8%

$25,000 to $49,999, 9%

$50,000 to $99,999, 9%

$100,000 to $249,999, 11%

$250,000 or more, 11%

Total savings and investments reported by retirees, not including value of primary residence or defined benefit plans such as traditional pensions:

Less than $1,000, 29%

$1,000 to $9,999, 17%

$10,000 to $24,999, 12%

$25,000 to $49,999, 8%

$50,000 to $99,999, 7%

$100,000 to $249,999, 11%

$250,000 or more, 17%

Source: 

What You Ought To Know About High Frequency Trading

This is a complex issues…….

Computer-driven trades can be executed in about 300 microseconds, according to one study. At that speed more than 1,000 trades can be made in the blink of a human eye, which lasts 400 milliseconds. At their peak, algorithms shot out about 323,000 stock-trading messages each second in the U.S. last year, compared with fewer than 50,000 for the busiest period in 2007, according to data compiled by the Financial Information Forum.

Not…..This should be illegal. Plain is simple. 

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What You Ought To Know About High Frequency Trading Google

High-Speed Trading Said to Face N.Y. Probe Into Fairness

New York’s top law enforcer has opened a broad investigation into whether U.S. stock exchanges and alternative venues provide high-frequency traders with improper advantages, a person with direct knowledge of the matter said.

Attorney General Eric Schneiderman is examining the sale of products and services that offer faster access to data and richer information on trades than what’s typically available to the public, according to the person. Wall Street banks and rapid-fire trading firms pay thousands of dollars a month for these services from firms including Nasdaq OMX Group Inc. and IntercontinentalExchange Group Inc.’s New York Stock Exchange.

More from Bloomberg.com: WWE Free-for-All Awaits If Founder Sets Sale: Real M&A

The attorney general’s staff has discussed his concerns with executives of Nasdaq and NYSE and requested more information, said the person, who asked not to be named because the inquiry hasn’t been announced. Schneiderman’s office is also looking into private trading venues, known as dark pools, and the strategies deployed by the high-speed traders themselves.

“This new breed of predatory behavior gives a small segment of the industry an enormous advantage over all other competitors and allows them to use new technologies to reap huge profits based on unfair advantages,” according to a draft of Schneiderman’s speech to be delivered today at New York Law School. A copy was obtained by Bloomberg News.

More from Bloomberg.com: Obama Says Putin Must Pull Back on Crimea Annexation

Disrupting Strategy

The investigation threatens to disrupt a model that market regulators have openly permitted for years as high-speed trading and concerns about its influence have grown. Trading firms pay to place their systems in the same data centers as the exchanges, a practice known as co-location that lets them directly plug in their companies’ servers and shave millionths of a second off transactions. They also purchase proprietary data feeds, which are faster and more detailed than the stock-trading information available on the public ticker.

“We publicly file with the SEC for each and every one of these services, and we’re always engaged with government officials around the world,” Robert Madden, a spokesman for New York-based Nasdaq, said in a phone interview, referring to the U.S. regulator. He and Eric Ryan, a spokesman for NYSE, declined to comment on Schneiderman’s investigation.

More from Bloomberg.com: Ocean Off Perth Called Diverted Malaysian Plane’s Most Likely Last Position

Dark pools, including Goldman Sachs Group Inc.’s Sigma X and Credit Suisse Group AG’s Crossfinder, operate without the same regulatory oversight as the public exchanges and disclose little about their trading or the participants. Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment, as did Drew Benson, a spokesman for Zurich-based Credit Suisse.

Mounting Concern

Special services have helped fuel high-frequency trading, in which computer programs execute orders in a fraction of a second and take advantage of fleeting discrepancies in security prices across trading venues. High-frequency activity represented more than half of all U.S. stock trading in 2012, according to Rosenblatt Securities Inc.

Critics including some regulators and market participants say that such trading, which captured the spotlight in the May 2010 flash crash in U.S. equities, serves little purpose, may distort the market and may leave retail investors at a disadvantage.

Computer-driven trades can be executed in about 300 microseconds, according to one study. At that speed more than 1,000 trades can be made in the blink of a human eye, which lasts 400 milliseconds. At their peak, algorithms shot out about 323,000 stock-trading messages each second in the U.S. last year, compared with fewer than 50,000 for the busiest period in 2007, according to data compiled by the Financial Information Forum.

Some Advantages

Andrew Brooks, head of U.S. equity trading at Baltimore, Maryland-based T. Rowe Price Group Inc., told a Senate hearing in late 2012 that the quest for speed has threatened the market.

Proponents say that high-speed trading actually increases the availability of shares in the market and that interfering with such programs would lead to higher costs and be harmful to financial stability. Indeed, the rise of computers in stock trading has helped squeeze out specialists and market makers, who had long facilitated transactions.

The current market structure, which has led to more participants, has lowered the cost of trading for investors, said Peter Nabicht, a spokesman for Modern Markets Initiative, an industry group formed last year by firms including Quantlab Financial LLC, Hudson River Trading and Global Trading Systems.

“Speed of decision-making and execution, often associated with high-frequency trading, gives traders more confidence in their interaction with the market, which allows them to efficiently make more competitive prices” and better meet investor demands, Nabicht said.

‘Tremendous Victory’

Schneiderman has previously voiced disapproval of services that cater to high-speed traders and give them a potential edge. When Business Wire, the distributor of press releases owned by Warren Buffett’s Berkshire Hathaway Inc., said last month it would stop sending the statements directly to high-frequency firms, Schneiderman called it “a tremendous victory.”

Taking his concerns public may help Schneiderman push the exchanges to alter practices, as Business Wire did, even without enforcement action. Among the powerful tools at his disposal is the Martin Act, an almost century-old law that gives him broad powers to target financial fraud in the state.

Exchanges Vulnerable

Targeting the exchanges could be the most straightforward way to deal with any ill effects of speedy trading, said James D. Cox, a securities law professor at Duke University in Durham, North Carolina.

“The exchanges are much more vulnerable to state and federal regulatory enforcement than the market participants,” Cox said. “They have a broad statute to maintain orderly markets and to do so in an ethical manner.”

The 1934 securities law that set up regulatory oversight of the U.S. financial markets specifies that exchanges enact rules to protect investors and the public’s interest, to promote equitable practices and to prevent fraud and manipulation.

Regulators have signaled concerns in recent years on how U.S equity markets operate. After the Dow Jones Industrial Average briefly lost almost 1,000 points in the flash crash, the chairman of the Securities and Exchange Commission, Mary Schapiro, said she planned to increase scrutiny of high-frequency traders.

In an effort to avoid another flash crash, the SEC worked with exchanges to create price curbs designed to prevent losses in a single stock from snowballing into a marketwide rout. The current chairman, Mary Jo White, said in January the SEC would soon publish a review of research on high-frequency trading.

Regulator’s Dilemma

Cox, the Duke professor, said New York’s attorney general is the only law enforcement body or regulator likely to target the exchanges.

“The SEC wants to protect investors, but also strengthen and promote U.S. capital markets,” Cox said. “These twin functions conflict with each other, which is why they have so far turned a blind eye on this issue.”

Some in the trading business, like Joe Saluzzi, a partner and co-head of equity trading at Themis Trading LLC in Chatham, New Jersey, have called for restraining services. Saluzzi said he’s wary of the private feeds because they’re far more detailed than public data, showing when and how a stock order was changed or canceled, which can give an insight into a particular strategy.

“Inside these data feeds is information which allows folks to read it and re-engineer the behavior of others,” Saluzzi said. “A lot of high-frequency strategies are built on modeling the behaviors of someone else.”

Price Discrepancy

The private feeds also reach traders more quickly than the public-quote system because they are sent directly from each exchange to paying customers. Public feeds build in an additional step: Price data from dozens of venues where U.S. stocks change hands are sent to a central place for processing before that information is publicized. Bloomberg LP, the parent of Bloomberg News, provides its clients with access to some proprietary exchange feeds.

A study published in January co-authored by Terrence Hendershott, associate professor of finance at the University of California, Berkeley, found the average time difference was 1.5 milliseconds between calculating a stock’s price using the exchange’s proprietary data and waiting for the public information. That’s more than enough time for a speedy trader to recognize an advantageous price and execute a trade against someone using the slower feed.

Policing Profits

The draft of Schneiderman’s speech refers to an academic paper that suggests segmenting the trading day into thousands of auctions in an effort to prevent the quickest firms from jumping ahead of others.

The paper’s co-author, Eric Budish, associate professor of economics at the University of Chicago’s Booth School of Business, told Bloomberg News in February that non-stop markets create a race between speed traders.

Operating different data feeds has led to past disciplinary action. NYSE Euronext agreed to pay the SEC $5 million in September 2012 to resolve claims it violated rules by giving some customers a head start on trading information. NYSE sent data through proprietary feeds to paying customers before relaying the same information to the public feed, regulators said. The exchange said the incident was “not from intentional wrongdoing.”

The exchanges have a variety of duties and responsibilities not just to the public, but to members and shareholders. NYSE and Nasdaq are required to police their members’ activities. In the past decade, they have moved from member-owned utilities to publicly traded companies with an eye on generating returns for shareholders.

European Crackdown

Nasdaq said in an investor presentation last week that it had close to $40 million in revenue from U.S. proprietary market data in the fourth quarter last year. The company does not reveal how much it receives from co-location of servers.

The use of high-frequency trading strategies has come under scrutiny outside the U.S.

European Parliament lawmakers reached a draft deal with national governments to curb high-frequency trading as part of tougher rules for the bloc’s financial markets, said the chief legislator working on the plans in October. The draft requires algorithms to be tested and authorized by regulators and calls for circuit breakers, among other measures.

“The negotiation team achieved a significant breakthrough on this issue,” Markus Ferber, the lawmaker leading the measures, said in an e-mail at the time. “The area of high-frequency trading is lacking suitable regulation

Seriously…..Who Is Killing The JP Morgan Bankers?

According to the New York Times, a 28-year old Manhattan associated with JP Morgan investment banker has died in an apparent suicide, police sources said. Kenneth Bellando, who worked at Levy Capital since January, was found dead on the sidewalk outside his East Side building on March 12 after allegedly jumping from the sixth-story roof, sources said. Bellando, was former investment bank analyst at JPMorgan. 

My condolences go out to the Bellando family. I know what it is like to face suicide due to financial/market losses, but what the hell is going on here. This is the 11th financial professional to commit suicide since the start of the year and the 5th directly associated with the JP Morgan Chase. I understand if the market were crashing, but they are close to all time highs. 

Previous Post: From February 21st, 2014

As they say, real life is sometimes stranger than fiction. If you haven’t been paying attention, a number of high profile bankers have committed “suicide” over the last 30 days. Mostly, by “jumping” from the rooftops of their office towers. Seven of them to be exact (please see the list below) With three of them being from the JP Morgan Chase.

So, is there something in the air that is forcing these otherwise young and wealthy bankers at the prime of their career to commit suicide? Did we have a 1929 style market crash or is that a new termination policy at the major banks? Am I missing something here? 

Any notion that all of the said bankers have committed suicide is laughable. Take Richard Talley for instance, who ended up shooting himself 8 times with a nail gun in both torso and head. How is that even possible?  Plus, with multiple connections between the dead bankers, particularly those working at JP Morgan Chase, something doesn’t add up.  

Recently Madoff acknowledge that top brass at JP Morgan knew about his Ponzi scheme for over 10 years. Letting it go on and collecting massive fees in the process. This was part of a $2 Billion settlement JPM reached a few months back. So, is JPM terminating its own employees or is this a hit ordered by someone? 

Here are my two cents. I don’t think JPM has anything to do with this, but I do believe the people in question have found themselves on the wrong side of a trade or they have screwed someone. Big time. Perhaps an organized crime group, maybe a government. Basically, they took someone’s money (whether legitimately or not) and that someone put a hit on them. Simple as that. Just another point of reference that Wall Street is turning into a war zone. 

The lesson for Wall Street bankers is as follows. Next time you screw most of the world out of billions of dollars (mortgage backed meltdown), there might be people, organizations or governments out there crazy enough to put a hit out on you.

One thing is for sure, dead bankers don’t talk. 

jpmorgan_man on ledge

List of dead bankers

-Li Jie – 33 year old investment banker at JP Morgan jumped to his death from the roof of the bank’s headquarters in Central Hong Kong yesterday. Witnesses said the man went to the roof of the 30-storey Chater House in the heart of Hong Kong’s central business district and, despite attempts to talk him down, jumped to his death.

 
 

– On January 26, former Deutsche Bank executive Broeksmit was found dead at his South Kensington home after police responded to reports of a man found hanging at a house. According to reports, Broeksmit had “close ties to co-chief executive Anshu Jain.”

 

– Gabriel Magee, a 39-year-old senior manager at JP Morgan’s European headquarters, jumped 500ft from the top of the bank’s headquarters in central London on January 27, landing on an adjacent 9 story roof.

 

– Mike Dueker, the chief economist at Russell Investments, fell down a 50 foot embankment in what police are describing as a suicide. He was reported missing on January 29 by friends, who said he had been “having problems at work.”

 

– Richard Talley, 57, founder of American Title Services in Centennial, Colorado, was also found dead earlier this month after apparently shooting himself with a nail gun.

 

– 37-year-old JP Morgan executive director Ryan Henry Crane died last week.

 

– Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, although the circumstances surrounding his death are still unknown.

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Seriously…..Who Is Killing The JP Morgan Bankers? Google