Black 'entitled’ to immediate bail, court filing says Read more: http://www.nationalpost.com/news/Black+entitled+immediate+bail+court+filing+says/324

Conrad Black says he is “entitled” to be released on bail from a Florida prison pending his appeal because most of his fraud convictions have been thrown into question by the U.S. Supreme Court and, thus, his time behind bars could outdistance his ultimate sentence.

In a 19-page filing with the U.S. Court of Appeals for the Seventh Circuit, Lord Black argued yesterday that the circumstances surrounding his bail request have changed dramatically since the first time he applied — and was denied — in 2007, a few months after a Chicago jury convicted him.

“At nearly 66 years of age, he has a particularly strong interest in bringing finality to these proceedings,” his lawyer, Miguel Estrada, argues in the legal brief. The Washington-based lawyer added that any “additional time he spends in prison between now and a favourable ruling can never be returned to him.”

Last month, the U.S. Supreme Court unanimously set aside Lord Black’s three honest services fraud convictions because the controversial statute is limited to bribe or kickback schemes, which were not at issue in his criminal case.

The high court decided that prosecutors erred in using the federal law to convict him, but still remanded the case to a lower appeals court to determine whether his convictions should be overturned.

In his bail brief, Lord Black argues that prosecutors hammered home to the jurors that they could, and indeed must convict on the “honest services” charge alone. The “sheer repetitiveness of the government’s argument ensured that even the most inattentive juror could not miss the point,” the filing says. “It is literally impossible on this record for the government to meet its burden of demonstrating that the verdict was not tainted beyond a reasonable doubt.”

Accordingly, Lord Black has asked the lower appeals court to also overturn what would be his single remaining conviction on obstruction of justice.

“The Supreme Court’s rejection of the government’s fraud theory goes to the heart of the most hotly contested issues at Mr. Black’s trial – whether there was a scheme to defraud and whether Mr. Black ‘corruptly’ intended to obstruct the investigation of this non-crime...”

Lord Black was convicted on one count of obstruction of justice for removing 13 boxes from Hollinger Inc.’s Toronto head office, six days before he was due to be evicted by the company’s new management.

U.S. prosecutors successfully argued at trial that the removal of the boxes was illegal because he was the subject of an investigation.

However, in his bail application, Lord Black argued the “government’s proof of corrupt intent was desperately threadbare,” because it never produced evidence proving he knew that a request for documents had been issued.

As well, his legal filing questioned whether the jury would have convicted Lord Black on the obstruction charge “if it had been aware that the offence Mr. Black was supposedly endeavoring to obstruct was, as he maintained all along, not a crime at all.”

And, the Lord Black’s filing adds, it would be “odd” for the U.S government to now contend, much less prove beyond a reasonable doubt, “that the fraud and obstruction offences had nothing to do with each other.”

Even if the obstruction conviction remains, his lawyer argued, the amount of time Lord Black will likely be sentenced to serve under federal sentencing guidelines is shorter than the time he has already spent at the Coleman Federal Correctional Complex, which he entered in March, 2008.

“With good-time credit, Mr. Black has already served 32 months of his 78-month sentence. If the obstruction count alone remains in place ... the range would drop to 15-21 months,” Mr. Estrada said in the bail application.

National Post

Read more: http://www.nationalpost.com/news/Black+entitled+immediate+bail+court+filing+says/3243438/story.html#ixzz0t00n2DLm

Four beaten-down U.S. stocks to watch

July 06, 2010

John Dorfman

BOSTON — The deafening hiss we’ve been hearing for the past five weeks was the air going out of the U.S. stock market at the end of the second quarter.

For those who still have the nerve to buy equities, I present my quarterly Casualty List—a roster of stocks that have been banged up severely and that I think can recover and go on to new heights.

Microsoft, which I never thought I would see on this list, exemplifies the latest batch of casualties. Many of them are well-known companies with solid balance sheets and long histories of profitability.

The Standard & Poor’s 500 Index, a decent gauge of the overall U.S. stock market, lost 11.4 per cent for the last three months, even after taking dividends into account.

To me, things seem less grim than many investors think. The European debt crisis of 2010 -- and probably 2011 -- may pass without lasting damage, as did the Asian currency crisis of 1997-1998. That, too, provoked fears of a worldwide financial meltdown. The Gulf of Mexico oil spill is a tragedy for wildlife, shrimpers, fishermen and tourism. Yet its economic impact will be diluted with time.

Investors seem to forget that in the past 70 years we have gone through World War II, a cold war with the Soviet Union, radioactive fallout from nuclear testing, the Vietnam War, the 2001 terrorist attack, the AIDS crisis and numerous recessions.

And yet for the 70 years from 1940 through 2009, the U.S. stock market has provided a compound annual return of 10.8 per cent. We have always had problems, and always will—yet enterprise, innovation and economic progress somehow continue.

Investors are fixated on whether we are about to have a double-dip recession. Double-dips are rare creatures, and not the most likely outcome in my view. If you see stocks such as Microsoft and EBay on the bargain counter, the wise thing in my opinion is to buy.

Microsoft fell 21 per cent last quarter. You can now pick up the shares for 12 times earnings. Over the past 10 years, Microsoft has sold for an average of about 23 times earnings.

I think there is room for positive surprises, as Microsoft benefits from demand for its latest operating system upgrade, Windows 7.

EBay, the online auction firm, is trading for less than $20 (U.S.), down from about $27 three months ago. In recent years, it has lost market share to Amazon.com in online retailing, but still is growing strongly.

The company has become the leading retailer in mobile commerce, in which people order merchandise using Blackberry, iPhone, Droid or similar smartphones, Colin Gillis, a New York-based analyst at BGC Partners said.

The company is debt-free and the stock sells for 13 times earnings.

General Dynamics, down 23 per cent in total return for the quarter, has been slammed as more people become convinced that defense spending will have to be sliced as Congress tries to address the large federal deficit. The military contractor makes planes, ships, weapons and information systems.

I agree that General Dynamics faces a difficult environment, but that is why its stock sells for less than 10 times earnings. The company increased its earnings in eight of the past 10 years; last year they were unchanged at $6.17 a share, a record.

Investors also punished American Eagle Outfitters in the last quarter. The clothing retailer for teen-agers and young adults declined 36 per cent, including dividends.

The stock faltered after American Eagle forecast second-quarter earnings below analysts’ expectations. Yet I would put some faith in the company’s long-term record, including positive earnings for 14 consecutive years.

I also like its international expansion push. It opened stores this year in Dubai, Kuwait and Israel. It plans to enter mainland China and Hong Kong in 2011.

Disclosure note: I own shares of General Dynamics personally and for clients. I have no long or short positions in the other stocks discussed in this week’s column.

John Dorfman is chairman of Thunderstorm Capital in Boston.

Black Box Trading Vs People = Volatility

In electronic financial markets, algorithmic trading or automated trading, also known as algo trading, black-box trading or robo trading, is the use of computer programs for entering trading orders with the computer algorithm deciding on aspects of the order such as the timing, price, or quantity of the order, or in many cases initiating the order without human intervention. Algorithmic Trading is widely used by pension funds, mutual funds, and other buy side (investor driven) institutional traders, to divide large trades into several smaller trades in order to manage market impact, and risk.^[1][2] Sell side traders, such as market makers and some hedge funds, provide liquidity to the market, generating and executing orders automatically. A special class of algorithmic trading is "high-frequency trading" (HFT), in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe.

Algorithmic trading may be used in any investment strategy, including market making, inter-market spreading, arbitrage, or pure speculation (including trend following). The investment decision and implementation may be augmented at any stage with algorithmic support or may operate completely automatically ("on auto-pilot").

A third of all EU and US stock trades in 2006 were driven by automatic programs, or algorithms, according to Boston-based financial services industry research and consulting firm Aite Group.^[3] As of 2009, high frequency trading firms account for 73% of all US equity trading volume.^[4]

In 2006 at the London Stock Exchange, over 40% of all orders were entered by algo traders, with 60% predicted for 2007. American markets and equity markets generally have a higher proportion of algo trades than other markets, and estimates for 2008 range as high as an 80% proportion in some markets. Foreign exchange markets also have active algo trading (about 25% of orders in 2006).^[5] Futures and options markets are considered to be fairly easily integrated into algorithmic trading,^[6] with about 20% of options volume expected to be computer generated by 2010.^[7] Bond markets are moving toward more access to algorithmic traders.^[8]

One of the main issues regarding high frequency trading is the difficulty in determining just how profitable it is. A report released in August 2009 by the TABB Group, a financial services industry research firm, estimated that the 300 securities firms and hedge funds that specialize in this type of trading took in roughly $21 billion in profits in 2008^[9].

...High-frequency trading In the U.S., high-frequency trading firms represent 2% of the approximately 20,000 firms operating today, but account for 73% of all equity trading volume.^[19] As of the first quarter in 2009, total assets under management for hedge funds with high frequency trading strategies were $141 billion, down about 21% from their high.^[20] The high frequency strategy was first made successful by Renaissance Technologies.^[21] High frequency funds started to become especially popular in 2007 and 2008.^[20] Many high frequency firms say they are market makers and that the liquidity they add to the market has lowered volatility and helped narrow spreads, but unlike traditional market makers, such as specialists on the New York Stock Exchange, they have few or no regulatory requirements.

High-frequency trading is quantitative trading that is characterized by short portfolio holding periods (see Wilmott (2008), Aldridge (2009)). There are four key categories of high-frequency trading strategies: market-making based on order flow, market-making based on tick data information, event arbitrage and statistical arbitrage. All portfolio-allocation decisions are made by computerized quantitative models. The success of high-frequency trading strategies is largely driven by their ability to simultaneously process volumes of information, something ordinary human traders cannot do. Various types of high-frequency strategies are covered in Aldridge, I., "High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems" (Wiley, 2009).

Source

Double Dip Recession or Not? Maybe the Bond Market Knows

Looking back at the start of this year, the markets began the year with good cheer and likely a fair dollop of complacency. Fast forward to the second quarter, and all of a sudden the PIIGS group of countries, double dip recession, and stubbornly high unemployment began to gain investor attention.

As has been commented upon in this space before, the bond market tends to be a better prognosticator of the economy’s direction than the equity markets - most of the time. In general, rising bond yields have correlated with rising equity markets and falling bond yields (i.e. falling interest rates) come about as economic uncertainty gives rise to fear and panic.

So much effort is often expended on trying to predict market direction or how much the economy will grow (often turning out to be a fruitless endeavor) that all too often the obvious is missed. From our perspective, we have been keeping a keen eye on the 10 year Treasury yield (i.e. the level of interest investors are “charging” to be lenders to the US Treasury).

Even the 2 Year Treasury yield has come down to record lows as the bond market begins to price in an economic slowdown and the potential for deflation to set it in. At this point, perhaps it is too much too soon. Markets (including bond yields) never go up or down in a straight line. But since April, our line in the sand was drawn as we watched investors run for the safety of the bond market. This line in the sand was drawn at the 3.10% level. As we can see from the chart below, the line in the sand has been breached.

Read more: http://business.financialpost.com/2010/06/30/double-dip-recession-or-not-maybe-the-bond-market-knows/#ixzz0sQnDZ7mY

At these levels, the bond market has discounted little fear of inflation. The gold bugs have been pounding the table for years about the coming inflationary crisis that will be fueled by the printing of money by the world’s central banks.

From the most recent data from the US Federal Reserve and the European Central Bank (ECB) it would seem that all of the monetary grease that they have put into the economy is not making its way into the economy – and this will be the case so long as the banking system globally is not running at optimal efficiency.

It is hard to argue inflation when US GDP numbers are being revised lower (not higher) for the last two quarters, Europe is undergoing spending cuts and tax increases, and even the Canadian economy has seemingly hit a rough patch for the month of April – surprising many an economist. Yet if they would bother to pay attention to the bond market (above chart), an economic deceleration has been slowly getting priced in.

However, that slowdown scenario does not presage yet another recession or double dip. A double dip recession is an infrequent occurrence – happening only once since the Great Depression. However, for many individuals looking to recover from the last recession or to get back into the labor force, the words “double dip” or “economic slowdown” are just semantics – the impact is real.

AJ Sull, CFA, MBA, CMT