August 25th, 2011
07:01 PM GMT
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Is it easy to understand why investors are getting paranoid. On any given day this summer stock markets seem to rally or plummet hundred of points in the matter of minutes for no apparent reason. Today it was the German DAX. Who is to blame? Market veterans increasingly say high frequency traders. This group use super fast, sophisticated computers that chart stock relationships and look for an opportunity to profit. They trade thousands of stocks each day, holding them for only minutes at a time. Fund managers say this churn and reliance on super-computers is feeding the outsized volatility that is spooking all of us and wrecking havoc on our retirement funds.

Or is it?

I went to New Jersey to speak to one of the few high-frequency traders who will talk to the press, Manoj Narang of Tradeworx. He says the idea that high-frequency firms are behind the huge moves is ludicrous. By definition high-frequency traders buy and sell the same amount of stocks each day. They do not make big bets in one direction. If a stock, like a bank stock for example, does sell off substantially it is very likely their computer programs would most likely guess the stock is statistically more likely to rebound and trigger buying of the stock, thereby providing liquidity.

So if they aren’t to blame who is? Narang does acknowledge technology is playing a bigger role and that the changes are disruptive and at times unnerving. But computer-driven trade should not be confused with high-frequency trading strategies. Everyone, including hedge funds and standard pension funds, relies on computers. It appears regulators are not keeping up with what can happen when sell orders cascade.

Narang has voluntarily sat down with the SEC and other regulators to try and clear the air. He says regulators have been receptive, but he worries the environment of blame is counter-productive. As for the fund managers who are pointing the finger of blame his way? "The oldest trick on Wall Street is to find a scapegoat when you can’t explain your own performance."

August 25th, 2011
03:21 PM GMT
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(CNN) Libya's National Transitional Council is moving swiftly to get access to much needed funds in anticipation of taking full control of the country. There is an intense level of shuttle diplomacy underway in countries that backed the rebel movement early on – Qatar, the United Arab Emirates, Turkey, Italy and France.

At the core of this effort is the desire to avoid an “Iraq-like” situation where the country collapses and the Libyan rebel movement is without funds to pay government salaries, provide urgent medical care and food – the staples of day-to-day living.

At a press conference in Dubai this week, Aref Ali Nayed, Libya’s Ambassador to the UAE and Operations Coordinator for the Libya Stabilization Team said they want to “achieve stability and peace as quickly as possible and to achieve a normality of life in all sectors of life.”

To that end Mahmoud Jibril, head of the NTC's executive committee, was originally seeking to get a commitment for $2.5 billion before this weekend. After meetings of Contact Group officials in Doha, the ante has reportedly been doubled.


August 25th, 2011
11:58 AM GMT
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(CNN) There is nothing swashbuckling about Somali piracy. The pirates are not romantic anti-heroes with a parrot on their shoulder. Instead, they are recognized as lawless, dangerous criminals who roam East Africa’s waters terrorizing the shipping industry.

The direct impact of the criminality off the Somalia coastline is being felt on the mainland, where critical food aid is not getting through to famine-struck Somalis because 80 to 90% of humanitarian relief arrives by sea, according to a recent report by the African Development Bank (AfDB).

Few ships and aid organizations are willing to take the risks involved in delivering tons of food aid, says the AfDB report. Owners and aid workers fear the ships will be seized and crews kidnapped for ransom. For now, despite the dangers, some humanitarian agencies still operate, often with protection from NATO warships.

The critical needs of feeding Somalis today, as well as the long-term implications of creating a sustainable agriculture sector, are often discussed by political scientists and economists. What to do about the state of anarchy in the failed state that is Somalia?

It is a question that has been debated for many years now, and I fear is not about to be imminently solved, even as African Union troops continue to do a brave job in defending Mogadishu against Al-Shabaab militias.

The issue of piracy, though, is not a purely hopeless problem, because its roots lie in the collapse of the fishing industry in Somalia.

A confluence of events in 1991 created a vacuum that laid the ground for the birth of Somali piracy. As the Siad Barre regime collapsed and plunged the country into civil war it left the Somali coastline unprotected. Around the same time the EU tightened fishing controls in Europe, pushing some fishing ships to look for new waters.

So fleets from Europe and Asia - many operating illegally - moved into the open East African waters to fish. And fish they did, ­ plundering, according to many reports, the oceans of fish stocks. The ripple effect was enormous, decimating the livelihoods of many Somali fishermen.

Many of these formerly destitute Somali fisherman “took matters into their own hands,” according to the AfDB, and turned to hijacking ships to make up for lost income.

The new “industry” was quickly co-opted by the Somali warlords and is now an organized, hierarchical gang-like operation.

However, the AfDB and other observers still point to the many ships that continue to fish illegally in East African waters.

There is concern that this root cause of the Somali piracy issue has been badly managed by the international community. For example, NATO warships that police the passageway of the Gulf of Aden are not tasked with shutting down these offshore fisheries that continue to operate without jurisdiction, say observers. Allowing fish stocks to replenish, some say, might just mitigate the need for Somalis to earn a living out of piracy.

Others say this is just naïve, that the Somali coastline is a dangerous but strategic piece of maritime real estate, which will continue to destabilize the region no matter the state of fishing stocks.

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