+ Jobs report comes in much better than expected with the private sector generating 65,000 jobs, while prior months were revised higher.  This is the nail in the “we are about to enter a double-dip” coffin.  We are only experiencing a soft patch.  The economy will pick up steam in the 2H of 2010 and 2011.

+ Chicago PMI showed continued expansion and came in higher than expected.  New orders came in expansion territory and doesn’t point to contraction in this region in the months ahead, while jobs continue to be created.  This result led to a strong Manufacturing ISM reading which surprised everyone.  Finally, the American Association of Railroad’s weekly report shows the highest carload reading of the year.  These indicators show that the prospect of soft landing and steady growth are not only possible, but likely.  Double dip fears are way overblown.  These factors will buoy consumer confidence and loosen wallets in the months ahead.

+ China PMI comes in better than expected and points to a soft landing in China, followed by steady growth.  Meanwhile, Eurozone GDP rises the most in a year.  The global economic recovery has legs, it’s just taking a breather.  This can be seen from shipping indexes, which have been rising at a healthy clip.  (Link Courtesy of Calafia Beach Pundit)

+ Sentiment continues to side more with the Bulls as analysts are growing exceedingly pessimistic.  Many are expecting a double dip, therefore there’s a growing chance that things aren’t as bad as most believe.  (Link Courtesy of The Big Picture)

+  PCE metric shows that consumption increased more than expected, while August chain store sales rise more than analysts expected.  Why?  The job market is indeed recovering as per the Gallup Job Creation Poll.  It has been steadily increasing over the past three months.  Need more proof?  The ISM Manufacturing employment sub-index hit its highest level since 1983, while jobless claims have been steadily coming back down.

+ Housing prices as per the Case-Schiller index rose more than expected (third positive reading in a row) and points to continued stabilization in housing prices.  This will help consumer confidence and help bank balance sheets.  Meanwhile, pending home sales for July rose 5.2% and shows that the fall in demand from the tax credit has stabilized.

- ECRI Leading Indicator Growth Rate shows continued weakness and is once again below the historically important -10% level, which if broken, has always presaged a recession in subsequent months.  Contrary to bullish news regarding the jobs report, this indicator is leading, not coincident. (Link Courtesy of Zero Hedge)

- The manufacturing sector, which has been responsible for most of the recovery in the economy, is about to falter.  Factory orders rose less than expected coming in at +0.1% for July, while inventories are rising at an accelerating clip, a sign that demand is not as strong as supply, factories will eventually need to reduce production.  Meanwhile, ISM Service Index came in below expectations with most sub-indicies showing weakness.  Employment for this sector, which comprises the bulk of the US economy, showed contraction for the first time since January.  New Orders also showed its weakest reading this year.

- Unit Labor costs were revised up much higher, while productivity has been coming back down.  Most of the rise in earnings has been due to extensive cost cutting (look at the unemployment rate!) — ie margin expansion.  With margins near all time highs, productivity declining and Labor Costs rising, end demand will have to carry earnings growth from here. Survey on end-demand says….

-  …PCE metric shows that income growth continues to struggle.  Slow income growth will anchor consumption growth as there is debt to be repaid and savings to accumulate.  Worse, what’s the unemployment rate at?  High supply of workers vs. low demand for labor points to wage growth crawling or worst case scenario,   contracting.  This could be seen in the Conference Board index of Consumer Confidence as less people expect a wage increase than people who expect a wage cut.  (See link in Bearish point below)

- Consumer spending is slowly decreasing as the Gallup Poll points to a very tepid August (smack in the middle of back-to-school).  The 4 week average for August is down 5%+ from the prior month, which was also down 3%.  Why is this occuring? Look at the Gallup, ABC, and Conference Board (average recession reading = 72 for some perspective) polls.  They show confidence is still in the dumps. There is clearly a trend of reduced/cautious spending.  This is further evidenced in the Goldman and Redbook metrics, which have shown a falling YoY growth rate over the past month as well.

- More signs of a consumer slowdown as the growth rate in auto sales in the US has all but vanished.  New sales rates are lower now than they were in 1990/1991.  If there is no significant growth in end demand soon, the flashy manufacturing numbers are not sustainable, plain and simple. (Link Courtesy of CalculatedRisk Blog)

>  Are problems in China worse than assumed?  Inflation troubles continue to surface, despite the government’s statistical office announcing rather muted CPI readings. One thing is certain, high growth rates in wages are certainly not helping matters for them.  Additionally, we can begin speculating that officials may be a little more forceful in deflating a stubborn real estate market.  However, they need to be careful in their policies as this is delicate process.

> More articles are popping up regarding the Fed’s impotence in battling the recession.  This is something that I was thinking about at the beginning of the year.  While the Fed had helped the banks out with a large interest rate spread, demand for loans has been negligible.  Lack of credit creation and expansion is severely disrupting investment and recovery.  There’s really little the Fed can do in a balance sheet recession.  In general, the consumer is paying back all the debt he/she amassed over the past 2 decades.  Unfortunately, there’s not a quick fix to this problem in my view.  Lowering taxes will certainly help in the healing process, but current consumption would probably increase only marginally as consumers would sock away the extra cash for their retirement as their most important asset, their home, is not what it used to be, especially if the tax cuts were only for a year.  Maybe a massive jobs program similar to the New Deal that put people back to work to rebuild our infrastructure (the Recovery Act didn’t really help).  The problem is that if there is deadlock, can we really count on our politicians to agree and spend on another BIG stimulus package?

> The Democrats are starting to lose control of the election and possibly their majority in congress.  Filibusters will become commonplace and important legislation may not get to a contracting economy on time.

> Barton Biggs is at it again.  “This is not a time where you want to be underinvested.  The odds of a significant slowdown are one in five, pretty remote”.  This guys been flip flopping more than a pancake, and short-term, he’s been wrong at every turn last time I checked. Meanwhile, the most pessimistic on the street right now as far as GDP growth is concerned is Goldman Sachs with a forecast of +1.5% for the rest of the year and a 66% of sustainability in this recovery.  Clearly there hasn’t been capitulation, so we continue on our “slope of hope” IMHO.

> David Rosenberg pointed out this article on the Economist regarding the current US job market’s woes.  After reading it, I decided to check out the jobs section in my Q1 outlook and found that my thoughts were quite similar.  I also wrote this in late 2009, where I mention technological innovation as a cause for recent jobless recoveries.  It appears that I am on the right track.

> What letter does this look like to you?

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Bill Bartmann has known great success, but he is best remembered for losing some $3.5 billion in paper wealth and his status as one of the richest people in the U.S. That was 12 years ago, when his debt-collection company, Commercial Financial Services, collapsed in scandal. But Bartmann has been climbing back, using Bill Bartmann Enterprises first to tell his story through books and on the speaking circuit, then to teach other people how to make money collecting debt the way he did with CFS. And now, at 61, he has yet another big idea.

In October 2008, I was watching television with Kathy, my wife of 38 years. We were watching C-SPAN at the moment Secretary of the Treasury Henry Paulson stood up on a podium and asked Congress for $700 billion. After he said that, we just looked at each other with stupefied looks on our faces that said, “Is this really happening again?”

What Paulson was doing was running the same plays the government did back in the 1980s with the Resolution Trust Corporation after the failure of the savings and loan associations. We had built our company, Commercial Financial Services, at that time by buying up debts from the government on the cheap and then collecting on them. After we experienced that sense of déjà vu, I asked Kathy if she wanted to go do it all again. She said no, that was a lot of work and we’re older now. That’s when we decided to do it a different way. We would show other people how to do it.

We started CFS in 1985. It was phenomenally successful and was a four-time Inc. 500 company. We also had a lot of fun. I once leased 27 Boeing 747 jets to fly our 3,900 employees and their guests to Disney World for a weekend. Another time, I dressed up like Caesar and was carried on a throne into a Las Vegas casino, where I then wrestled Hulk Hogan in front of 6,000 people. In 1997, I was called the 25th richest person in the U.S. Then I lost it all.

CFS ceased to operate after an associate of mine was convicted of a crime. Everything came to light after someone sent an anonymous letter to the credit rating agencies. When I confronted my associate about it, he didn’t deny it. He eventually went to prison for five years, but our reputation was ruined.

You can’t imagine how hard it is as all of your friends start running away from you. The words of those people who accused me and made allegations have faded. But when I think back to the friends who weren’t there — that hurts more than strangers accusing me. It’s easy to forgive strangers since they don’t know any better.

It got worse when the federal government decided to indict me on 58 felony counts. That’s a world-class problem. That’s not like having a bad-hair day or losing a deal with a customer. When the government indicts you, it’s calamity time.

Fortunately, Kathy and I mustered the courage and strength to deal with the adversity. I was innocent of the charges and refused to take the misdemeanor deal they were offering. I challenged them and went through a full-scale trial. Eventually, I was acquitted. I even received an apology from the government for prosecuting me, which rarely happens.

But I was bankrupt, and I wondered why all this bad stuff was happening to me. But what could I do? Blame someone else? Cry in my beer? It wasn’t the first time I had lost everything. I needed to find a way to crawl out from the hole I was in, to come back one more time. I have always gotten back up after someone knocks me down. I grew up in a rough neighborhood and pulled myself up time and time again. I’m not sure why. Maybe I’m still trying to prove something to my third-grade teacher.

I took a good look at my personal inventory by asking questions like, Who am I? What do I know? What am I good at? What am I not good at? From that, I figured out I had a great story to tell about overcoming adversity and challenges. I decided what I should be doing is teaching my story so that when other people suffer their own calamities, my experiences might encourage them. So, I wrote a book and started traveling on a speakers’ tour with people like Steve Forbes and Colin Powell. It was called the Get Motivated! tour. And so I stood onstage in front of 50,000 people and told my story.

I got to tell about what it was like to go broke, something most people don’t like to admit. But I would tell them with a smile that I went from the 25th richest person in America to the 25th brokest person. I let them see that you can survive anything. It is every bit as bad for people suffering from losing jobs and their homes as it was for me to lose $3.5 billion. My job was to give them hope and inspiration that they could overcome their challenges.

But then there was Paulson on C-SPAN. Lo and behold, I recognized the same economic gaps that existed in the 1980s were back. I thought, Wow, this is too coincidental. There must be a purpose to this. At 59 years of age, I didn’t want to build another billion-dollar company. But I could teach other people how to do what we did at CFS, to buy people’s debts for nickels on the dollar and then treat them with dignity and respect. People want to pay their debts, but not everyone has to for you to make money. Now, we teach people how to create their own businesses during these tough economic times, which helps them make money and overcome adversity at the same time.

Our program is like going to school. We offer a two-day seminar in Palm Springs that introduces the topic and the industry. We also offer a five-day program where I’m the instructor. When people pay you money, they want to learn from you, not a surrogate or substitute. We have had more than 2,000 people go through the program.

As we saw how well our students were doing, Kathy and I looked at each other again. And this time, we said, “This is too good an opportunity to pass up. We need to do this.” So, we launched a new company on July 1, 2010, called CFS II. We hired eight former CFS employees to get started and then started talks with hedge funds on raising $400 million, which we will use to build a new debt portfolio.

We are about to see history repeat itself. I see a great future coming out of this bad economy. I really feel bad for all the people on the wrong side of the coin. But if we help those people come out of it and we get paid, that’s a great thing.

Going broke has helped me by providing me with opportunities to succeed. What separates successful people from those who aren’t is the way you deal with problems. And, as an entrepreneur, there will inevitably be problems. It’s the nature of the beast. I do understand that there could be another challenge in front of me, something I accept and embrace. But I do work hard every day to make sure it doesn’t happen. I want my two daughters, who both work in the business, to succeed me and have a thriving business to manage in their lifetimes. You have to be a masochist not to hope for a happy ending this time.

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Private jobs in the report grew a bit faster-than-expected at 67k, but with some reasonable upward revisions to prior months. There were fewer subtractions for Census workers (which is strange since you would think we should have that number pretty clearly – just call the darn Census Department). Manufacturing employment contracted, but one month of contraction is not much to get exercised about.

The Unemployment Rate rose to 9.642%, as a rebound in the workforce did, as expected, raise the ‘Rate. I wonder if the report would have been considered as much of a positive if the ‘Rate had rounded up to 9.7%? The bottom line there is that with private payrolls growing 50-100k, if indeed it is that strong, the Unemployment Rate shouldn’t decline much if at all (absent the disturbing trend of people leaving the workforce).

The index of hours worked didn’t move, which isn’t the best of news. All in all, this was better-than-expected but still a pretty dismal number for an economy that is supposed to be expanding robustly by now.

I was initially excited to see that the median and average durations of unemployment plunged (see Chart of median unemployment duration). This would be great news…except for the fact that it is artificially lowered by the fact that several hundred thousand workers (the Census workers) have only been unemployed for a handful of weeks. Anyone who likes clean data will be very glad when that elephant has finished passing through the python.

When the number printed it was pretty obviously going to be bearish for bonds and bullish for stocks, but after two days of watching bonds getting beaten up I was surprised to see the 10y Note contract down a full point in the early going. Both stocks and bonds reached their extremes within a few minutes of the report and then retraced some of those extremes. Still, equities rallied to end near the highs, with the S&P recording a 1.3% gain, and 10y yields finished at the somehow-generous-sounding 2.70%. The 5y inflation swap rose to 1.53%; 10y ended at 2.09%.

The VIX declined sharply but – surprising, considering how much equity prices have risen and the fact that some event risk passed – managed to hold recent lows. That seems like non-confirmation to me. I believe I have become tactically bearish with this rally.

While the report holds out hope, it also confuses policymaking in the near future. Again, that might not be a bad thing; we have arguably had too many erstwhile saviors over the last couple of years. However, the particular challenge we confront over the next couple of months does, in fact, beg for someone to do something. At least, I imagine that is how it will be read in Washington. For even if the recent, admittedly short skein of surprisingly bad numbers is what turns out to be the aberration, and not the Employment Report and the ISM report, there is still the issue that next year we’re going to get some very bad fiscal news (on Federal as well as municipal fronts). To the extent that the economic news is not so bad that it forces Congress to extend the Bush tax cuts (which still carries its own risks, don’t forget, because of the burgeoning debt – it makes the Federal Reserve’s job even more urgent.

Extending tax cuts: good (especially if spending is rolled back responsibly). Quantitative easing: bad. But, as I have pointed out before, QE has the virtue of needing no confirming vote of the populace. That is supposed to make the Fed resistant to the unwelcome urges of the proletariat. Ironically, in this case it makes them more exposed to the unwelcome urges of the parliament.

It isn’t only in the units named “proprietary trading” where proprietary trading occurs, though, and that’s where the big effects will be felt. Unless banks feel like relying on the forbearance of the regulators…and that seems a bad idea given that the torches have already been lit and passed around…then proprietary trading that augments market-making activities will also be curtailed.

I began to carefully buy my hedge in the market as we worked on convincing the customer to do the deal. The more of my hedge I got on, the better my quote could be for them (because once the deal hit the screens there was no way I’d ever get the hedge off well, and I’d have to charge for that fact). However, it was clearly my risk (actually, the bank’s risk) that if the deal didn’t happen, I would have to unwind my hedge. I accumulated about a third of the hedge, which took almost two weeks.

Folks, this is “proprietary trading.” I was taking a calculated risk so that I could make an aggressive price – or at least, not a bad price – for the customer and increase the odds that the deal would get done. If I could just manage to break even on my hedge, the bank would make good money underwriting the deal; of course, there was also the possibility that I might actually make money on the deal in the inflation book (although at the time that consideration was secondary). Keep in mind too that in doing these trades, I was also providing liquidity to someone on the other side of the market.

In the event, the deal didn’t happen. The hedge that I had accumulated over two weeks I now had to unwind over the next two weeks. I recall that I lost about a quarter of a million dollars on that round-trip, and felt lucky to have done so.

The postscript is that the client eventually did a similar deal with another bank that had apparently not set up for it. That bank foisted the bonds, and the hedge, in a package together, to a bunch of hedge funds. Several weeks later, the hedge funds wanted to unwind part of their risk … and the bank wasn’t there to provide the liquidity. It was a mess, and lost that bank money, prestige, and probably clients, and damaged the inflation-linked bond market. No large deal has been done in the U.S. inflation market in the half-decade since then, despite the fact that the interbank volume now is multiples of what it was back then.

This sort of trading, which is clearly proprietary risk-taking, happens all the time. Without it, many of those deals don’t happen because the deal requires that all of the liquidity be priced at once and the cost to do so is prohibitive. The banks make money by figuring out the most efficient way to source liquidity, partly through “temporal disintermediation”: spreading the hedge over time. I have seen this happen personally in debt and commodity transactions, and it happens in equity transactions as well. I continue to believe that the Volcker rule will be very destructive to liquidity in many markets, and not just because the JPM and GS of the world shut their prop books. Just wait and see.

FT

The idea is that by having their equipment only metres away from where the operator of the territory’s securities markets handles the trades, those for whom speed is everything can shave milliseconds off the time it takes for a transaction to be completed. It is a far cry from the days when shares were bought and sold by humans on a trading floor.

The concept – known as co-location – is growing fast. Last week, NYSE Euronext completed the move of trading in thousands of New York Stock Exchange-listed companies to a similar data centre in New Jersey. The Hong Kong facility is being built by the local exchange as one of its “strategic business initiatives”. The same is happening in India, where the National Stock Exchange has rented out racks of computer space for traders. In Australia, ASX plans a centre offering co-location by next August.

The speed with which exchanges are building such facilities is a sign of the global spread of a phenomenon gripping the markets: “high-frequency trading” (HFT). The phrase describes a style of electronic dealing that uses algorithms to dip automatically in and out of markets hundreds of times faster than the blink of a human eye.

The practice is controversial. In the US, HFT has chilling associations with the “flash crash” of May 6, when rapid, computer-driven orders were seen as a main culprit in sending the Dow Jones Industrial Average down by 1,000 points in 20 minutes – a fall unprecedented in its depth and speed.

Ted Kaufman, a US senator for Delaware, where many of America’s listed companies are incorporated, wrote to the Securities and Exchange Commission last month arguing that “excessive messaging traffic, the dissemination of proprietary market data catering to high-frequency traders, and order-routing inducements all may be combining in ways that cast doubts on the depth of liquidity, stability, transparency and fairness of our equity markets”.

Regulators such as the SEC are still puzzling over exactly what caused the flash crash. But what is clear is that it exposed fundamental flaws in the mechanics of today’s markets – and, some maintain, in the rules that govern them. High-frequency traders are by and large privately held, have no clients and trade using their own money. That has led, some believe, to a point where there has been a dangerous breakdown in investor trust in the way markets work.

Christian Thwaites, chief executive of Sentinel Investment Companies, a US asset manager, says: “The mystery and mystique of HFT, the lack of clarity and therefore opacity has meant that retail investors – who have obviously been terribly burned over the last few years – look at this and say: ‘this whole Wall Street thing is just rigged against me’.”

But like an invasive species in the natural world, HFT had grown rapidly before the wider public even noticed. Tabb Group, a consultancy, estimates that HFT now accounts for 56 per cent of all equity trades in the US and 38 per cent by value in Europe. Another sign that Asia is the latest growth spot came this week as traders and technology companies gathered for a Hong Kong conference billed as Asia’s first high-frequency trading event.

At the same time, changing regulations and increasing competition have created a complex matrix in the US of nine exchanges and dozens of other types of venue, including networks run by banks and brokers, and “dark pools” set up to handle large blocks of shares away from public markets. Exchanges now compete not only with each other for their order flow but also with bank and broker networks, including dark pools.

In Europe the same pattern has played out thanks to the Markets in Financial Instruments Directive, a European Commission regulation that broke the national monopolies of exchanges. Mifid allowed the emergence of rival platforms such as Chi-X Europe, fragmenting trading across many venues: the London Stock Exchange now accounts for only 55 per cent of trading in the stocks that comprise the FTSE 100 index.

Such fragmentation has been a driving force behind the growth of HFT, since it produces a variety of trading venues each with slightly different trading systems, speeds and fee schedules. This allows traders to exploit these differences by using computer algorithms to trade back and forth from one platform to another.

Concern is therefore growing that the markets may be morphing into little more than a playground for a specialised type of trading that has minimal economic benefit and contributes little if anything to capital formation – the traditional function of stock exchanges.

Established market users – such as the asset managers that take care of pension funds – say HFT, coupled with the fragmentation of trading across venues, makes it harder to rely on one of the most basic functions of the markets: orderly and fair price formation.

“Because of the predatory nature of some participants we have no incentive to post liquidity,” Kevin Cronin, head of equity trading at fund manager Invesco, told a hearing into the flash crash last month. “There are 40 places where stocks are transacted and none of us has clarity of supply and demand on most [equity] issues. These are fundamental issues as to what the value of a securities market is.”

One worry is the use in HFT of algorithms to direct trades automatically, often to several market centres at once. Not only do such algorithms generate huge volumes of trades, but they can – like any machinery – go wrong. The past six months have brought three cases where an algorithm has run amok – and those are only the ones that have been revealed publicly. The latest came last month when the Osaka Stock Exchange handed an “admonition” to Deutsche Bank for not having “a sufficient degree of control” over an algorithm trading Nikkei 225 index futures.

Mr Cronin is not alone in suspecting that certain kinds of algorithms are actually predatory. Analysts at Nanex, a Chicago market data company, say high-frequency traders may be using algorithms to send unusually heavy traffic to exchanges and other platforms in a deliberate attempt to slow down their data systems.

Knowing that a certain exchange’s system is about to run more slowly gives a trader an opportunity to set up a buy or sell order in advance. The process is called “quote stuffing” and is used in a strategy known as “latency arbitrage” – latency referring to the speed at which message traffic moves through a system.

In its analysis of the flash crash, Nanex managed to plot how the bursts of traffic looked visually on graphs. Many appeared as distinct geometric patterns, such as jagged shapes that Nanex dubbed “Bandsaw II”, and another pattern called the “Boston Zapper”. “There’s no economic justification for it,” says Eric Scott Hunsader, founder of Nanex. “If this is OK by everybody, the market is not going to function in a very short period of time.”

Some go further and suggest outright wrongdoing. “When orders get pinged out to multiple trading venues, there is at least circumstantial evidence that there’s quite widespread use of that information to front-run trades,” Jim McCaughan, chief executive of Principal Global Investors, a large US asset manager, told CNBC last month.

Yet for regulators it is hard to figure out who is behind any of the activity. That is because high-frequency traders can operate with minimal supervision. In Britain, for example, all it takes to set up a HFT operation is a company registration and the necessary technology.

Trading systems can be bought off the shelf from a number of specialist companies. Registration with the Financial Services Authority, the UK markets watchdog, is not needed under a long-standing exemption for people trading on their own account – as high-frequency traders do – unless they present themselves as marketmakers. Similarly, in the US some are registered as broker-dealers but many are not. “Some of the people who are doing the really big volumes are completely unregulated,” says one lawyer familiar with the business. “Now, they have become a potential systemic risk. That’s the issue.”

Many exchanges say they have ­controls in place that can detect unusual trading patterns before they cause trouble. Rolande Bellegarde, head of European execution at NYSE Euronext, says that a month ago the exchange disconnected the algorithm that a trader was using, after software detected that his dealings deviated significantly from the normal pattern the exchange had observed over time.

F  or their part, the few HFT firms willing to show their face in public are at increasing pains to demonstrate that their business is beneficial to markets in providing liquidity and tighter bid-ask spreads.

Firms such as Getco, based in Chicago and formed by a pair of former pit traders, and peers in Europe including Optiver of the Netherlands, argue that high-frequency trading is a label used too loosely to describe almost any kind of rapid electronic trading, whether beneficial to markets or not. Getco and other US firms – excluding the banks and hedge funds that are equally big in HFT – recently formed an association to make their case more coherently.

Getco rejects allegations that high-frequency traders’ interests are at odds with those of ordinary investors. “While the story line may be a compelling narrative, there is no reliable evidence to suggest that this conflict exists. To the contrary, most retail brokers … intentionally route a majority of their customers’ marketable orders to firms that engage in high-frequency trading.”

Some studies back up their assertions. Woodbine Associates, a Connecticut consultancy, found in a study of US equity markets over 2008-09 that HFT had “improved execution quality”. Matt Samelson, a principal at the company, says that if there are any high-frequency traders “gaming the market”, then “we don’t think that constitutes the majority of HFT”.

But many asset managers remain unconvinced that the liquidity high-frequency traders provide is as valuable as they claim. For one thing, many exited the market during the flash crash. That has led to calls for regulators to impose as yet undefined obligations on marketmakers, including high-frequency traders. According to an online poll on FT Trading Room, a section of the Financial Times’ website focused on market structures, a clear majority (56 per cent) favours the move.

Asset managers worry that their interest in depth of liquidity and making long-term bets on company fundamentals is being crowded out by traders interested only in speed – cheered on by exchanges eager to offer incentives to attract such participants in order to stay ahead of rival platforms in the battle for liquidity. Exchanges have little incentive to discourage HFT since, aside from the fees it generates, they have found a new revenue stream in the rent they charge for rack space in data centres such as the ones emerging across Asia.

However, according to Mr McCaughan, investors are being put off by the volatility that phenomena such as HFT can cause. NYSE volumes were the lowest last week since 2006 – a fact that he attributes in part to a loss of trust in US equity market structures. “Our business is Main Street, not Wall Street,” he says, noting that Principal looks after “millions of people’s” pension schemes.

“We want to be able to look them in the eye and say the market is fair. And unfortunately, at the moment it’s quite difficult to do that.”

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

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12. Medicine in Need or MEND applies emerging and advanced delivery and manufacturing technologies to drug and vaccine candidates for diseases of poverty. MEND believes that the best solutions to the global challenge come from broad and transparent collaboration amongst very diverse groups, including the substantial inclusion of emerging research and capabilities in the developing world.

13. Flexoresearch Group Company Limited was founded in 2007, starting as a technology entrepreneur incubatee of the Thailand Science Park incubator programme, with a vision to become a leading innovative, research and development company, serving Thai pulp, paper, printing and packaging industries. See article.

14. GetJar is the world’s second largest app store with over 1 billion downloads to date, second only to the Apple App Store. Its open market approach allows GetJar to deliver applications for both feature phones and smartphones across all major platforms such as Android, BlackBerry, Windows Mobile, iPhone and Symbian among others.

15. Molecular Partners established a robust platform to discover and develop DARPin-based medicines. Drug candidates targeting indications in ophthalmology, inflammation and oncology are being developed by Molecular Partners, with a lead DARPin in clinical Phase I/IIa.

16. Knewton is developing the industry’s most powerful adaptive learning engine, customizing educational content to meet the needs of each student. Whereas traditional classrooms and textbooks provide the same material to every student, Knewton will dynamically match lessons, videos, and practice problems to each student’s ideal learning arc.

17. Neuronetics, Inc. is a privately held medical device company focused on developing non-invasive therapies for psychiatric and neurological disorders using MRI-strength magnetic field pulses.

18. On-Ramp has developed the first wireless system purpose-built to efficiently connect billions of hard-to-reach devices in metro scale and other challenging environments. Operating in unlicensed spectrum, its innovative signal processing technology finds weak signals even in high noise environments, resulting in extreme coverage, high levels of immunity to interference, and a significantly lower cost to deploy and operate a system.

19. OPOWER is an energy efficiency and Smart Grid software company that helps utilities meet their efficiency goals through effective customer engagement.  Using cutting edge behavioral science and patent-pending data analytics, the OPOWER platform enables utilities to connect with their customers in a highly targeted fashion, motivating reductions in energy use, increased program participation and overall customer satisfaction.

20. NetQin Mobile Inc. or “NetQin” is a global leader in mobile security services – holding 64.8% of the Chinese mobile security market share. delivers proven mobile security solutions based on the cloud-computing model, including anti-virus, anti-malware, anti-spam, privacy protection, data backup and recovery, as well as data management – to more than 55 million users in more than 200 countries and regions worldwide – to protect them against mobile security threats which will result in financial loss and privacy compromise.

21. Ostara has developed a new generation of wastewater treatment systems – a nutrient recovery solution that creates value from waste by recovering nutrients from wastewater and transforming them into revenue-generating, environmentally-friendly commercial fertilizer.

22. Quintas Renewable Energy Solutions Ltd. is a Nigerian company where its energy generations sources come from Solar, Wind, Biomass, small Hydro-Turbines, depending on the appropriate renewable energy sources available in the environment of its clients. It uses the best engineering practices to harness, manage and distribute renewable energy at an affordable cost and with minimal negative impact on the environment.

23. ReputationDefender has grown to be the world’s first comprehensive online reputation management and privacy company. Its goals are to SEARCH out all information about you and your family throughout the Internet and present it to you in a clear, easy-to-understand fashion, provide DESTROY assistance, helping to remove, at your request, inaccurate, inappropriate, hurtful, and slanderous information about you and your family, and deliver CONTROL over how others are able to perceive you on the Internet.

24. TaKaDu provides a Software-as-a-Service solution for monitoring water distribution networks. TaKaDu gives the utility unprecedented control over network events in real time, using state-of-the-art statistical and mathematical algorithms.

25. Tendril is a leading energy management technology provider that provides energy management software, hardware and services for both consumers and utility companies. Its platform gives utilities and their customers the power to solve today’s energy challenges together, consisting of both utility and in-home products and applications.

26. SecondMarket is an online platform with a team of market specialists that helps buyers and sellers transact in illiquid, restricted and alternative assets. It’s free to sign up with more than 15,000 participants, including global financial institutions, hedge funds, private equity firms, corporations and high net worth individuals.

27. Dutch company Topell Energy has developed a cutting edge process for the production of high value solid bio-fuel from woody biomass. This process is generally known as torrefaction and the solid bio-fuel is usually referred to as torrefied biomass.

28. Spotify is a new way to listen to music - any track you like, any time you like – with 8 million tracks and counting. To listen to its live tracks, you need to download its program in your computer or your mobile phone.

29. Transonic is working tirelessly to help solve one of the world’s greatest issues: energy efficiency. It’s mission is to inject super fuel efficiency technology into global vehicle fleets that transform our energy foundation into a low carbon future.

30. Vortex has developed its innovative cash dispensing module that does not use any conveyor belt and hence is much less prone to cash jam problems and also consumes very little power. It is able to provide either the entire solution or only the ATM, based on the customer needs.

31. OpenDNS is the leading provider of free security and infrastructure services such as integrated Web content filtering, anti-phishing and DNS. It enables consumers and network administrators to secure their networks from online threats, reduce costs and enforce Internet-use policies.

Source: The Huffington Post

I wrote this story for Grist, where it first appeared.

A company controlled by the billionaire Koch brothers, who have bankrolled numerous right-wing causes, has donated $1 million to the campaign to pass Proposition 23, the California ballot initiative that would suspend the state’s global-warming law.

The contribution was made Thursday and came from Flint Hills Resources, a Kansas petrochemical company that is a subsidiary of Koch Industries. The Koch brothers were the subject of a recent profile in The New Yorker.

The Koch donation came a day after Tesoro, a Texas oil company that has been bankrolling the pro-Prop 23 campaign, put $1 million into the campaign coffers.

According to the No campaign, 97 percent of the $8.2 million raised by the Yes forces has been given by oil-related interests and 89 percent of that money has come from out of state. Three companies, Koch Industries, Tesoro, and Valero — another Texas-based oil company — have provided 80 percent of those funds.

“There are three companies from out of state that have a very specific economic interest in rolling back our clean energy economy and jobs,” Thomas Steyer, a San Francisco hedge-fund manger who is co-chair of the No on 23 campaign, said during a conference call Friday.

“I am a businessman,” he added. “I believe in the free enterprise system. I believe in profit. But companies have to accept the rules that are placed on them.”

Steyer, founder of Farallon Capital Management, has pledged $5 million of his own money to the No campaign.

As the traditional Labor Day kickoff to the fall campaign season approaches, the No campaign has also been collecting some large donations, albeit from individuals rather than corporations.

A Southern California businesswoman, Claire Perry, contributed $250,000 on Monday. Last Friday, Julie Packard, a daughter of Hewlett-Packard founder David Packard, gave $101,895.

“If the Yes on 23 folks win, we’re going to change the framework for investment here,” said Steyer. “We’re going to change our ability to create new industries. Those industries are going to go elsewhere, probably not in the United States. Probably specifically our biggest competition in this is China.”

Obama claimed the war on Iraq was initially a war to disarm a state. Really? And then “terrorist” Iraqis attacked our troops in their country. Yet if they had done that in our country, I suspect they would still be the terrorists. And then it became a civil war which we were innocently caught up in. Uh huh.

U.S. participants in this crime are heroes, always and everywhere. That’s sacred. The troops’ mission has involved protecting the Iraqi people, and by golly they’ve done a superb job, as long as we don’t mention the complete devastation of Iraq, the million dead, the millions of refugees, and the intense resentment of those remaining toward our country for what we’ve done to theirs.

The Iraqi people now (dead, in exile, in a ruined nation) have a chance that they supposedly didn’t have before we destroyed their country, a country that was actually a better place to live in in every way in 2003 than it is now, and in 1989 than in 2003. To hear President Obama, this war has been for the benefit of the Iraqi people, and these wars have been about al Qaeda and 9-11.

Obama slid into nonsense about al Qaeda after discussing Iraq and before mentioning Afghanistan, a Bushian maneuver if ever I saw one:

“No challenge is more essential to our security than our fight against al Qaeda.”

Never mind that al Qaeda barely existed before these wars became recruiting tools. “We will disrupt, dismantle, and defeat al Qaeda” in Afghanistan, the president promised, even though al Qaeda isn’t there. Troop reductions in Afghanistan will begin next August, he said, although the prepared transcript said July, and will be determined by conditions on the ground, even though Afghanistan is not yet as bad as Iraq is.

Obama modeled the future bloodletting in Afghanistan on the myth of the successful escalation in Iraq, ignoring factors that have contributed to the reduction of violence in Iraq, including the promise of complete withdrawal, the beginning of withdrawal, and prior to those factors the incredible level of death and displacement, negotiations and bribes. The test for a “surge” in Afghanistan failed in Marja, and Obama simply behaves as if it succeeded.

And here at home “it is time to turn the page.” Never mind the commission of the supreme international crime of aggression. Never mind the mass murder. Obama said he talked with George W. Bush earlier in the day. Obama lied that the two of them had never agreed on the war, a war Obama voted to fund repeatedly in the Senate. And he lied that Bush was committed to U.S. security, knowing full well that this war has made us all less safe.

“There were patriots who supported this war, and patriots who opposed it. And all of us are united in appreciation for our servicemen and women, and our hope for Iraq’s future.”

Except for the majority of Americans who believe the war never should have begun, that it should be immediately ended, and that its architects — starting at the top with Bush, not the bottom with the troops — must be held criminally accountable. Participation in this crime is not a service to anyone.

The most honest part of the speech was this:

“We have spent over a trillion dollars at war, often financed by borrowing from overseas. This, in turn, has short-changed investments in our own people, and contributed to record deficits. For too long, we have put off tough decisions on everything from our manufacturing base to our energy policy to education reform. As a result, too many middle class families find themselves working harder for less, while our nation’s long-term competitiveness is put at risk.”

That’s a remarkable point for the president to dare to make. But there was no mention of the hundreds of billions yet in the works to be wasted in Iraq and Afghanistan, not to mention Pakistan and numerous other countries deserving of our favors.

The big lie, of course, is that the combat mission is, once again, completed. The soldiers in Iraq and the mercenaries and contractors are there for combat. That there are fewer soldiers is movement very much in the right direction, and very much to be applauded, but pretending that those remaining are something else is not accurate. Many of them may see less combat, but I’ll believe they’re not there for combat when their weapons are taken away.

The big question, of course, is what will be done about the deadline of December 31, 2011. Here’s what Obama said on this key point:

“Going forward, a transitional force of U.S. troops will remain in Iraq with a different mission: advising and assisting Iraq’s Security Forces; supporting Iraqi troops in targeted counter-terrorism missions; and protecting our civilians. Consistent with our agreement with the Iraqi government, all U.S. troops will leave by the end of next year. As our military draws down, our dedicated civilians — diplomats, aid workers, and advisors — are moving into the lead to support Iraq as it strengthens its government, resolves political disputes, resettles those displaced by war, and builds ties with the region and the world. And that is a message that Vice President Biden is delivering to the Iraqi people through his visit there today. This new approach reflects our long-term partnership with Iraq — one based upon mutual interests, and mutual respect. Of course, violence will not end with our combat mission.”

Violence will not end. We just won’t call it combat. It’ll be an overseas contingency. But what about all U.S. troops leaving by the end of next year? Obama doesn’t seem to hedge on this the way he does later in the speech on a future withdrawal from Afghanistan, saying that will be “subject to conditions on the ground.” And that’s a good thing. The same day as this speech, the war-loving Washington Post printed a column by Ryan Crocker, U.S. ambassador to Iraq from 2007 to 2009, which pushed for a longer occupation with these words:

“And it may be that a new Iraqi government will request a U.S. military presence beyond the end of 2011. If so, I hope we will listen carefully.”

Maybe we should start listening very careful right now. The president speaks of a long-term partnership with Iraq. How do you have that if you’re gone? The answer may be that you aren’t gone, that you maintain a significant military force in the country consisting of mercenaries employed by the State Department.

Here’s what the Bush-Maliki Unconstitutional Treaty says:

“All U.S. forces are to withdraw from all Iraqi territory, water and airspace no later than the 31st of December of 2011.”

However, the same document, as Raed Jarrar pointed out to me, carefully defines U.S. forces to allow exceptions:

“Definition of Terms . . .

‘U.S. Forces’ refers to the entity that includes all the personnel of the American Armed Forces, the civilian personnel connected to them and all their possessions, installations and equipment present on Iraqi territory.

‘Member of the U.S. Forces’ refers to any person that belongs to the army of the United States, its navy, air force, marine force or coast guard.

‘Civilian element member’ refers to any civilian working for the U.S. Department of Defense. And this term does not include the personnel usually resident in Iraq.”

The trick is that not all imaginable U.S. forces have to work for the so-called Department of Defense. If they work for any other department, they’re in the clear. But Iraqis are in their gun sights.

Application Form Link For Recruitment: http://www.nabl-india.org/nabl/asp/users/proccessDownload.asp?ID=30&mod=jobs&fileType=doc

Last Date For Receipt of Applications: 17.9.2010

Fund Spy: Morningstar’s Inside Secrets to Selecting Mutual Funds that Outperform http://ping.fm/U6ndA

Yesterday we showed you five tips for fabulous freebies from Kiplinger Personal Finance. Today, we bring you the last final five freebies on the list:

Is It Time to Sell Your Mutual Fund? http://ow.ly/2xRVN

I am a business guy who is looking to live a long health life. Including with the healthy living is a ways and means to make income the less stressful as possible. I have worked in the corporate grind for many years, with the stress, and lack of credible opportunity.

This is what has brought me to the internet, for business and pleasure.

I started with my appearance, and at the top. Yes my hair. I got most of it back. Here is where I went. Check it out:

www.newhairgrowing.com

(This will probably be my most contentious post to date, given how strongly some people feel about Atlas Shrugged, both positively and negatively. I welcome and encourage all comments.)

I first read Ayn Rand‘s Atlas Shrugged, interestingly enough, in largely socialist Stockholm, Sweden. I was spending the summer of 2005 as an intern at the Stockholm Environmental Institute, and had brought along Atlas Shrugged to see what all the hype was about. Between being too poor to go out to bars/clubs/restaurants and the amount I was enjoying the book, I devoted all of my non-working hours (and, to be honest, more than a few working hours) to reading. I finished the book in about a week, though I had to skim the last bit (probably 20 pages or so) of John Galt’s speech.* Since then, I have re-read it a number of times.

On a personal level, Rand’s ideas about the sanctity of one’s own mind and decision-making resonate very strongly with me. Galt’s speech in Atlas Shrugged identifies the following virtues (pp. 946 – 949**, heavily excerpted for length):

However, significant problems arise if you try to expand Rand’s philosophy to a societal level, for one reason: markets are full of inefficiencies, and there is widespread disagreement about the extent of those inefficiencies.*** This, to me, is really the only difference between my political views and those of the staunchest conservative. I was an Econ major in school (which apparently already makes me conservatively inclined), and there are few things as elegant as market solutions to market inefficiencies. The prime example of this for me, as someone who has been particularly focused on environmental economics, is the success of emissions trading programs under the Clean Air Act Amendments of 1990 in achieving real reductions in acid rain. The Environmental Defense Fund (hardly a conservative think tank) says that “[t]he market-based approach enshrined in the U.S. Acid Rain program has demonstrated that environmental protections need not compete with economic well-being“, while the Economist calls it “[t]he greatest green success story of the past decade” (behind the paywall).

So in my ideal world, the only role of the state would be to figure out how to send the proper market signals and then to sit back and watch as the economy hummed along, all transactions were based on a mutual agreement between two parties, and we erected a giant statue of Ayn Rand next to the Washington Monument. But I think, unlike Rand and many members of the Conservative party, that the market failures are too significant and too complicated to ever achieve that goal. That belief has pushed me firmly into the “liberal” camp.

That’s why it annoys me to see characterizations of liberals as “statists,” who are interested in the expansion of government because they want to “take away freedoms” or because they want to “control every aspect of your life.” In a post on “Ideological Positioning“, Matt Yglesias writes (h/t the Daily Dish):

As I said above, I think that Rand’s rejection of anything that approximates a small step in the direction of socialism or increased governmental role is a reaction to her view of Russia as shown in We the Living. But I think at this point, in the wake of the financial crisis, even some of her most prominent disciples are allowing for possible cracks in that framework. From the 10/23/08 House Committee on Oversight and Government Reform hearing, we have this exchange between Chairman Henry Waxman (D-CA) and Alan Greenspan, a member of Rand’s inner circle in the 1950s:

* John Galt’s speech is right up there in terms of “passages that cry out for an editor” alongside Victor Hugo’s discussion of argot, the language of criminals, in Les Miserables. The argot discussion in Les Mis made me give up on the book as a whole. Luckily, Galt’s speech was so close to the end that I felt ok skipping the last part and moving on with the book.

** I only have access to an electronic version of Atlas Shrugged right now, so page numbers are approximate based on the location in the eBook and an assumed print length of 1088 pages.

Catch a glimpse of what it's like at PODIUM.

I’ll admit, right off the bat that I haven’t been involved in this game for very long.  The crowdsourcing/crowdfunding world seems to be exploding and gaining traction day by day. I’m learning, day by day and step by step, I’m learning.  Since I have been involved I’ve been absolutely blown away by what is available and becoming available in the industry and the possibilities it presents.

Where this ramble is going is me eventually getting to the point of explaining this post. To highlight something that has absolutely acted as a game-changer for me with regards to crowdsourcing/crowdfunding.

For me this absolutely trumps everything else from an investment standpoint. The one thing that has me so enamoured with crowdfunding, and with the way PODIUM is set up (www.podiumfunds.com), is that you can actively make your investment work for you.

The concept behind this is mind blowing for me. Take PODIUM for example. I invest my $5000 and now I’m a Shareholder. As a Shareholder I get to vote on deals (companies that have come forward looking for funding) and decide which deals my money is going to be invested in.

So let’s assume there’s a restaurant that is looking for funding (funny, there is, www.tmdish.com) or in this hypothetical example, let’s actually assume it has gone forward and is getting funding. My money is being invested in this company. It becomes in my best interest to actively go to this restaurant. The more I support the restaurant the better it is going to do. But we can even go one step further than this, I can begin activating my network. I can Tweet about my experiences at this restaurant. I can foursquare my location and leave tips like “Try the beef dip!” or “$.25 wings on Wednesday” or whatever it may be.

The idea is that I am actively supporting my investment, in every sense of the word I am making my money work for me.  And that is absolutely mind blowing.

If I gave my money to a mutual fund I have no idea where it’s going. Heck I could be protesting the oil sands and unknowingly have money directly linked to them. That’s the risk I take. But here I have the ability to channel my money where I want it to go and once it’s there, well I have the drive and capacity to make that work for me.

And here’s the kicker, that’s just me.

Imagine if there were 50, 500, 5000 people that are investors in PODIUM. Imagine each of these investors care about making money and supporting local companies (novel idea I know). Each of these people have a network, be it 1 person or hundreds. It intrinsically becomes in their best interest to drive themselves and their friends and family to this restaurant. To not only support their investment, but to support a local entrepreneur.

September 3, 2010 at 3:15 pm

I’ve been thinking about what comfort, wealth and luxury mean to me lately, and I’ve come to semi-despise it. Don’t get me wrong, there’s nothing wrong with granite counter tops filled with a matching set of KitchenAid appliances, Frette sheets on a Tempurpedic mattress, spontaneous trips to Napa, New York or Naples, sporting the latest Lulu Lemon to Bikram classes, etc.

I just hate how I love the feeling of being comfortable. I also hate how I’ve enjoyed having an image that I am materially wealthy (I felt complimented when people call me a “Bellevue Girl”…).

Along the way, lots of things have reconfirmed to me the importance for me to stop being so dang comfortable and bougie. For example…

Aside from the yucky feeling, I think that being so comfortable is hindering my personal growth. So, here’s my plan to get rid of the yucky feeling of loving comfort and materialism. I’m going to do things that make me uncomfortable.

I think this might be a fun adventure… I’m curious as to what will happen.

To be honest, now I feel even more bougie because I just called a less privileged lifestyle “fun”. It’s like calling poverty cute. My gosh, I have a lot to learn!!