The MasterFeeds: August 2013

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August 23, 2013

No trades busting: If the code is bad then you pay the price. No Mulligan.

traders should bear the full cost of their mistakes. 
If the code is bad then you pay the price. No Mulligan. Article: Guess who just called for ending trades busting?
Myron Scholes, one of the founders of modern option pricing, says the exchanges shouldn't cancel clearly erroneous trades. The traders should bear the full cost of their mistakes.
Full Story:

August 9, 2013

#Corruption in #Venezuela: The billion-dollar fraud | The Economist

The billion-dollar fraud

The Americas

Corruption in Venezuela

Evidence of huge rip-offs at the heart of the “Bolivarian revolution” has unleashed political infighting


WHEN it comes to corruption, Venezuela has long languished near the bottom of the international league table. According to the latest index of perceptions of corruption compiled each year by Transparency International, a Berlin-based watchdog, only eight out of the list of 176 countries were seen as more graft-ridden. Even places like Haiti and Zimbabwe ranked higher. The organisation’s Venezuela chapter found that 65% of respondents in a recent survey thought corruption had worsened in the previous two years. Well over half thought government measures to tackle it were ineffective.
Enter Nicolás Maduro, elected as president in April after Hugo Chávez died of cancer before he could be sworn in for a third six-year term. Mr Maduro, a former bus driver who was Chávez’s foreign minister, has said that fighting corruption is a priority for his government. Several mid-level officials have been arrested.

One of the biggest cases concerns Ferrominera, a state-owned iron-ore miner and processor in the south-eastern state of Bolívar. After years of protests by its workers, some of whom were prosecuted for their pains, Ferrominera’s chairman, Radwan Sabbagh, was arrested in June and accused by Mr Maduro of “bleeding the company dry”. More arrests followed, including that of Yamal Mustafá, a businessman with close ties to Bolivar’s state governor, Francisco Rangel Gómez.
Documents from a military-intelligence investigation, leaked to federal legislators and a local newspaper, revealed scams worth an astonishing $1.2 billion, including sales of ore to intermediaries at a fraction of its real value in exchange for huge kickbacks. It may be even worse. Ricardo Menéndez, the industry minister, recently admitted that there was “much more corruption in Ferrominera than has been made public”. The army colonel sent to investigate the case in 2011 is alleged to have made tens of millions of dollars blackmailing Ferrominera’s managers and Mr Mustafá. He, too, is now awaiting trial.
Even the Ferrominera case pales beside the mountains of cash that may have been swindled from the government’s foreign-exchange regulator, Cadivi. With the black-market rate for the dollar currently more than five times the official rate of 6.3 bolívars, the amount of money that can be made from fraudulent import schemes is colossal. Last year Cadivi handed over $59 billion in all. But Jorge Giordani, the planning minister, and Edmée Betancourt, the Central Bank governor, say up to a third of that could have been funnelled to fake companies. Ms Betancourt put “artificial demand” at $15 billion-20 billion.
Claims of corruption involve some of the most senior figures in Mr Chávez’s “Bolivarian revolution” (named for Simón Bolívar, Venezuela’s independence hero). In an audio tape leaked in May, Mario Silva, a presenter on state television and (it now appears) a Cuban agent, enumerated to his handler the sources of illicit finance he said were available to Diosdado Cabello, speaker of parliament and leader of the ruling socialist party, who is a potential rival to Mr Maduro. They included the tax authority, headed by Mr Cabello’s brother, and Cadivi. Mr Cabello dismissed the audio tape as a fake, the public prosecutor has yet to investigate and Mr Silva lost his job.
Instead, Mr Cabello has gone after the opposition. Claiming that Richard Mardo, an opposition legislator, was guilty of tax evasion and money laundering, he arranged for him to be stripped of his parliamentary immunity. When the opposition protested against political persecution, President Maduro organised a countermarch. He used the government’s power to force all television channels to carry his speeches to brand the opposition as corrupt—without any sense of irony.
Mr Mardo’s case involves a paltry $400,000 or so in what he says were campaign contributions from business. No public money was embezzled: in fact the legislator did not hold public office at the time. Nor has evidence been presented that he evaded tax or that the funds were of illicit origin, despite attempts by the government to compare Mr Mardo to Pablo Escobar, a late drug baron. On the other hand, Mr Cabello has refused to allow any parliamentary debate on several recent multi-million-dollar corruption scandals. One involved managers of PDVAL, a state company which allowed hundreds of thousands of tonnes of food to rot in shipping containers. Three were arrested, but they were later quietly released and given other jobs.
It has been left to the American courts to air several claims of corruption involving Venezuelans. Otto Reich, a former State-Department official, last month sued Derwick Associates, a firm whose partners are Venezuelans. Mr Reich alleges defamation; he also claims that the company paid large bribes to Venezuelan officials to obtain contracts to build power stations. Derwick and its partners deny the allegations. Details of the contracts appeared in the Venezuelan press months ago, but failed to spark an investigation. “There are no untouchables,” declares President Maduro. So far few have been touched.

Corruption in Venezuela: The billion-dollar fraud | The Economist

-- The MasterFeeds

#Ghana #eurobond: the end of cheap #African #debt? - This is Africa

Ghana sold a $750m 10-year eurobond but paid a premium to investors in its second entry into international bond markets, sparking debate about the end of cheap frontier market borrowing costs.

West Africa’s second biggest economy issued the note at a yield of 8 percent, significantly above the 6.6 percent Nigeria paid for its 10-year sovereign bonds earlier this month, or the 6.9 percent paid by the tiny east African state of Rwanda for its first $400m issue in April.

At the height of the emerging market debt rush, Zambia paid only 5.6 percent for its maiden dollar-denominated bond - a lower rate than that on Spain’s 10-year bond at the time, despite the fact that the European country’s credit rating is four times higher.

Read the rest of the story online here: Ghana eurobond: the end of cheap African debt? - News - This is Africa

August 5, 2013

Everyone In #Venezuela Is Into #Arbitrage | The Devil's Excrement

This is how the cookie crumbles in Venezuela. 

FYI the official rate is Bs./USD  6.30; the black market rate is Bs./USD 32+.

Everyone In Venezuela Is Into Arbitrage

arbiWhen Adam Smith suggested or showed that economic self-interest maximizes economic welfare, I don’t think he had in mind the economic self-interest that is promoted by the arbitrages available under the so called Bolivarian revolution.
These pages have recorded billion dollar arbitrages, some with bonds, others with CADIVI; there was SITME, travel dollars, airline tickets, now Sicad and many more without going into much detail today.
What Chavismo/Madurismo has failed to learn throughout these fourteen years, is that the longer these possibilities of arbitrage become available, the more widespread their exploitation becomes. That is what made SITME eventually so inefficient that it had to be scrapped, what makes CADIVI such a nest of corruption and what is making SICAD unworkable in such a short time. People learn fast and exploit the weaknesses of systems to promote their self interest via arbitrage. Every time the Government announces something, people get ready to see how they an make some money off it.
Whenever I visit Caracas, I talk to people trying to find out more about what their reality is like. I mean, with inflation soaring and noticing how everything has gone up every time I come back, I have to wonder how people, particularly the less well to do, can make ends meet.
This week, it was a parking lot attendant I know. We started talking, he complained about the Government and I started asking questions.
For him, let’s call him Profito, things are ok. They are better, because the parallel dollar is very high. He said he makes a little more than minimum salary in his job, which must mean around Bs. 3,000. He sends his mother in Colombia a US$ 300 a month in a “remesa”, which costs him Bs. 1,890, but he sells half in the black market, which gives him Bs. 4,950, for a net of Bs. 3,060, which doubles his salary just like that.
Things are tough, so he decided to send his son to Colombia, it’s too dangerous here, plus the kid could become a malandro (hoodlum), with the neighbors he has. The advantage is that his expenses went down and he can send the kid another US$ 300, give his mother half and net another Bs. 3,090 in the process.
To round it all off, Profito, has also now entered the export business. When he discovered that “perfumeria” items are so much expensive in Colombia, he started shipping about Bs. 5,000 a month in supplies via MRW (a courier) and he makes “casi” (almost) 100% profit a month from this venture.
Oh yeah, he said, I do go once a year to Colombia and ask for the $2,000 dollars for travel, this year he will get less, there will be no money for the kid, but the black market has increased so much that he will make about the same. (Not quite, he will make more, as the parallel rate has doubled since December, but he will only pay once).
Totaling it all up, Profito makes his Bs. 3,000 from his job and from his arbitrage activities he will make this year an additional Bs. 6,180 a month from “remesas” to the family, about Bs. 5,000 (he claims) from his import/arbitrage and an additional Bs. 2,000 or so from his travel allowance, for a grand total of Bs. 16,180 a month, or at least five times the minimum salary. Not a bad monthly income in Venezuela and he has health care. Except only one of those minimun salaries comes from his job. The rest is all thanks to the promotion of self-interest arbitrage by the distortions of the revolution.
And the Government? Fixing the price of SICAD very low to promote arbitrage even more…
This entry was posted on August 4, 2013 at 5:52 pm and is filed under Venezuela

Everyone In Venezuela Is Into Arbitrage | The Devil's Excrement

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